Veren of Lood biedt u op zondag wekelijks een inkijkje in (minstens) 10 belangrijke of informatieve artikelen en interviews die de voorafgaande 7 dagen op economisch terrein verschenen op onafhankelijke sites.

De kop is de link naar het oorspronkelijke artikel, waarvan de samenvatting of de eerste (twee) alinea’s hier gegeven zijn.

Sinds begin december 2015 nemen we ook een paar extra links op naar artikelen die minder specialistische kennis vereisen. Deze met *** gemerkte artikelen zijn ons inziens ook interessant voor lezers met weinig basiskennis van economie.

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The nature and effectiveness of central-bank communication – Stephen Hansen, Michael McMahon
3 februari
In addition to setting interest rates, central banks also communicate with the public about economic conditions and future actions. While it has been established that communication can drive expectations, less is known about how it does so. This column attempts to shed light on this question. Applying novel measures to the content of Federal Reserve statements, it shows that forward guidance is a more important driver of market variables than disclosure of information about economic conditions.
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How the Blockchain and Gold Can Work Together – Thorsten Polleit
1 februari
A look into monetary history shows that people, when given freedom of choice, opted for precious metals as money. This doesn’t come as a surprise. Precious metals have the physical properties a medium must have to serve as legal tender: They are scarce, homogenous, durable, divisible, mintable, and transportable. They are held in high esteem and represent considerable value per unit of weight. Gold fulfills these requirements par excellence, and this is why it has always been peoples’ first choice in terms of money. Gold has proven its merits as money for millennia; it is the ultimate means of payment.
More recently, gold has been replaced by the state’s unredeemable fiat money — for reasons rather more political than economic. The state prefers money whose value can be altered at will — say, to influence overall demand, redistribute income, and to benefit some at the expense of the many. Gold money stands in the way of such machinations. Fiat money doesn’t. On the contrary, fiat money can simply be printed up; can be created out of thin air.
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Negative-Interest-Rate Effect already Dead, Central Banks Lost Control over Stocks – Wolf Richter
5 februari
And there’s a bitter irony.
The Bank of Japan’s surprise Negative-Interest-Rate party for stocks set a new record: it lasted only two days.
Today a week ago, the Bank of Japan shocked markets into action. As the economy has deteriorated despite years of zero-interest-rate policy and Quantitative and Qualitative Easing (QQE) – a souped-up version of QE – the BOJ announced that it would cut one of its deposit rates from positive 0.1% to negative 0.1%.
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*** Why We Won’t Have a “Lehman Moment” in the 2016 Crash – Charles Hugh Smith
3 februari
What the central banks cannot do is create productive places to invest the credit they’ve generated in such excess, or force qualified borrowers to swallow more unproductive debt.
One way to lose a war is to focus on preparing to fight the last war. Preparing to fight the last war is a characteristic of losing generals, militaries and nations. The same is true of finance and economies.
General Grant’s difficulties in breaking the trench warfare around Petersburg, VA in the last year of the American Civil War (1864 to early 1865) telegraphed the future of trench warfare to astute observers. Few took heed of the lessons of the “first modern war,” and many of the same strategies of 1864 (digging a tunnel under enemy lines and filling the tunnel with explosives to blow a hole through their defenses, for example) were repeated in the Great War of 1914-1918 fifty years later.
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The Cozy Relationship between the Treasury and the Fed – David Howden
4 februari
Last year was a tough one for investors. Gold was down 10 percent. The Dow Industrials fell 2.5 percent, and most bond indexes finished down by at least that much.
One institution that performed remarkably well in 2015 was the Federal Reserve. It just finished its most profitable year on record. The $100 billion in net income earned last year was a slight improvement over the previous year. That total was also roughly three times higher than the Fed’s income from 2007, the last year before it initiated its Quantitative Easing programs in the wake of the financial crisis.
Since the Fed does not exist to generate profits, some may be confused as to how it could have such a great year at doing so.
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Foreign currency corporate debt in emerging economies: Where are the risks? – Julián Caballero, Ugo Panizza, Andrew Powell
5 februari
The increase in the debt of emerging market non-financial firms has been large. This column argues that to understand the risks, if any, it is important to know the state of corporate balance sheets and what firms have actually been doing. In some cases external debt has been issued to substitute more expensive local debt, in others to finance real investment, and in several countries it has been used to exploit carry trade opportunities. In virtually all cases, however, good information on corporate currency mismatches is hard to obtain. There needs to be better information and better reporting if we are to make headway.
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CCC-Rated Junk-Bond Yields Blow Past Lehman Moment, hit 20%, as Consensual Hallucination Fades – Wolf Richter
4 februari
Late yesterday was a propitious moment. And today, when the index was updated, it became official: The average yield of junk bonds rated CCC or below, the bottom tier of the rating scale, hit 20%.
Yields soar when bonds get crushed. The last time the average yield of those bonds jumped to 20%, on September 30, 2008, all heck had already broken loose. Lehman Brothers had gone bankrupt 15 days earlier. Liquidity had dried up. Banks were lining up to be toppled. Panic was breaking out.
Today, there’s no panic.
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The Continuing Demonization of Cash – Paul-Martin Foss
3 februari
The insidious nature of the war on cash derives not just from the hurdles governments place in the way of those who use cash, but also from the aura of suspicion that has begun to pervade private cash transactions. In a normal market economy, businesses would welcome taking cash. After all, what business would willingly turn down customers? But in the war on cash that has developed in the thirty years since money laundering was declared a federal crime, businesses have had to walk a fine line between serving customers and serving the government. And since only one of those two parties has the power to shut down a business and throw business owners and employees into prison, guess whose wishes the business owner is going to follow more often?
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The Chart of Doom: When Private Credit Stops Expanding… – Charles Hugh Smith
5 februari
Once private credit rolls over in China and the U.S., the global recession will start its rapid slide down the Seneca Cliff.
Few question the importance of private credit in the global economy. When households and businesses are borrowing to expand production and buy homes, vehicles, etc., the economy expands smartly.
When private credit shrinks–that is, as businesses and households stop borrowing more and start paying down existing debt–the result is at best stagnation and at worst recession or depression.
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Central Counterparties: The New Locus of Systemic Risk? – Yves Smith
1 februari
John Dizard of the Financial Times sounded an alarm over the weekend. Central clearinghouses, also known as central counterparties (“CCP”), which were implemented on a large-scale basis to reduce the risk of clearing standard derivatives, may not be working as advertised.
The high concept was that by having dealers all interact with a single counterparty, it would reduce the opacity and complexity of counterparty risk, thus making it easier to manage.* This chart which the Chicago Fed cribbed from the Reserve Bank of Australia illustrates how the world of central clearing is perceived to be an improvement over the old regime:
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So Just How Bad is the Revenue and Earnings Recession? – Wolf Richter
1 februari
By now, 40% of the companies in the S&P 500 index have reported earnings for the fourth quarter, including eight of the top 10 by weight. The S&P 500 companies, accounting for about 80% of market capitalization, are a good sample for what’s going on in corporate America. And what is going on is the first revenue and earnings recession since 2008/2009.
Revenues on a blended basis – actual revenues for companies that have already reported, and estimated revenues for companies that haven’t yet reported – fell 3.5% in Q4 from a year ago, according to FactSet. Revenue declines are stretching across four quarters in a row, a feat that has been accomplished for the last time during the depth of the Financial Crisis: Q4 2008 through Q3 2009.
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***The Opaque Process of Collapse – Charles Hugh Smith
3 februari
The ultimate cost of protecting the privileges of the few at the expense of the many is the dissolution of the social order that enabled the rule of the privileged few.
When I write about the demise of unsustainable systems, readers often ask me to describe the collapse I see as inevitable. This is a tough assignment, as there are as many kinds of collapse as there are systems: fragile ones can collapse suddenly, and resilient ones can decay for years or even decades before finally imploding or withering away.
Another way of describing collapse is: complex systems become much less complex.
Certain features of modern life could collapse without affecting everyday life much–for example, the derivatives markets could stop working and the impact would be enormous on those playing financial games and those who entrusted money to the gamblers, but the consequences would be extremely concentrated in the gambler/speculator class. Despite the usual cries that financial losses in the gambler/speculator class will destroy civilization, the disruptions and losses would be widely dispersed for the economy as a whole.
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New York Times’ Bank-Boosting, Neoliberal-Excusing Story of the Global Debt Hangover – Yves Smith
4 februari
The lead story at the New York Times today, Toxic Loans Around the World Weigh on Global Growth by Peter Eavis, gives a one-sided view of the problem of too many bad loans around the world that have yet to be recognized and resolved. It’s an economically warped account that leaves important policy options off the table.
The big tell is that the article has nary a mention of the idea of restructuring loans, which is the time-honored way that banks deal with problem loans. A former McKinsey partner who was in charge of workouts at General Electric, which had a huge financial services arm and a boatload of drecky debt in the early 1990s, named one of his conference rooms “Triage” and the other “Don Quixote”. And in some sense, that illustrates the poles of how to deal with an underwater borrower: see if they can survive or not, and deal with them accordingly, or engage in various “extend and pretend” strategies. Another bankers’ saying is “A rolling loan gathers no loss,” meaning you can keep making a hopeless borrower look viable, sort of like propping up a corpse and putting enough perfume on it to hide the stink, by giving new loans so they can keep paying interest (see Greece as a textbook case).
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Disclaimer: De VoL-redactie selecteert deze artikelen op interessante inzichten, of naar wij denken nuttige informatie. Wij kunnen echter geen enkele aansprakelijkheid aanvaarden voor de gevolgen van beslissingen die op grond hiervan door lezers zijn genomen, zakelijk zomin als privé.