Economische aanraders: Veren of Lood biedt u op zondag wekelijks een inkijkje in (minstens) 15 belangrijke of informatieve artikelen en interviews die vooral 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 worden. Er zijn in deze rubriek altijd verschillende economische scholen vertegenwoordigd, en we streven er naar die diversiteit te handhaven.

We nemen wekelijks 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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There Is No “Optimum” Growth Rate for the Money Supply – Frank Shostak
1 februari
Most economists hold that a growing economy requires a growing money stock on the grounds that growth gives rise to a greater demand for money that must be accommodated. Failing to do so, it is maintained, will lead to a decline in the prices of goods and services, which in turn will destabilize the economy and lead to an economic recession or, even worse, depression.
Since growth in money supply is of such importance, it is not surprising that economists are continuously searching for the right, or the optimum, growth rate of the money supply.
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Hyperinflation Can Happen Much Faster Than You Think – Jim Rickards
2 februari
There’s no universally agreed-upon definition of hyperinflation. But one widely used benchmark says hyperinflation exists when prices increase 50% or more in a single month. So if gasoline is $3.00 per gallon in January, $4.50 per gallon in February and $6.75 per gallon in March and the prices of food and other essentials are going up at the same pace, that would be considered hyperinflationary.
It also tends to accelerate once it begins, meaning the monthly 50% increase soon becomes 100%, then 1,000%, etc., until the real value of the currency is utterly destroyed. Beyond that point, the currency ceases to function as a currency and becomes litter, good only for wallpaper or starting fires.
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DoubleLine Warns Events Are In Motion To Remove Dollar As Reserve Currency – Bill Campbell
6 februari
For every action, there is an equal and opposite reaction. In the case of international trade and global payments, the U.S. made aggressive use of sanctions and tariffs. With some merit, Washington has argued that these actions level the playing field for global trade or punish bad global actors. But a series of equal and opposite reactions are occurring as nations move to remove the role of the U.S. dollar at the center of global trade and finance.
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Misunderstanding Negative Yields & Why Low Rates Don’t Justify High Prices – Blackbeard Research
4 februari
The Misunderstood Dynamics Of Negative Yields
I submit to you that there is a difference between “money” and “currency.”
What is the purpose of currency? Currency is the medium by which an economy can transmit economic value between its agents and standardize the exchange of unlike items; that is, currency establishes a system that improves upon barter economics.
In its truest sense, currency is a voucher of retained economic productivity. When a person does labor that brings economic value, or transfers items of economic value, the currency they receive serves as “verification” economic contributions have been accumulated or transferred to another party.
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“It Can’t Happen Here” – James Rickards
2 februari
The Federal Reserve printed $4 trillion in the years following the 2008 crash, expanding its pre-crisis balance sheet of about $900 billion to roughly $4.5 trillion. Many people thought, if hyperinflation were ever going to happen in the U.S., it would have already.
Well, it never happened. Today, in response to the pandemic and the economic lockdowns that followed, the Fed has cranked up the printing press to even higher levels. It’s printed almost as much money in one year as it printed in the several years after the financial crisis.
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The Old Mantra Of “Too Big To Fail” Is Exposed As A Lie… – Brandon Smith
4 februari
It is a general rule that corrupt economies tend to operate on faith and not on fundamentals. And to be clear, it’s not so much about naive faith that the system is stable or functional. No, it’s more about the masses having faith that the corruption and instability will never be derailed. Most people are not as stupid as the establishment and central bankers think they are – Almost everyone knows the system is broken, they just refuse to consider the possibility that the fraud will be disrupted, or that it will be allowed to fail.
The old mantra “too big to fail” is a lie. NOTHING is too big to fail, and that includes the US economy, the dollar and the elaborate Kabuki theater that keeps them both afloat. All it takes is a single moment, an epiphany that the Ponzi scheme is unsustainable rather than unstoppable.
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Money creation, bank profits, and central bank digital currency – Dirk Niepelt
5 februari
The role of central bank digital currency is increasingly being discussed, both in terms of its utility in monetary policy as well as the controversy of bank-level profit from money creation. This column presents a method for quantifying the funding cost reduction enjoyed by banks, highlighting that money creation substantially contributes to profits. This raises important questions for policymakers to address as they seek to optimise the deployment of digital currencies within financial institutions.
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Chief Economist: The Unprecedented Scale Of US Fiscal Stimulus Will Lead To Epic 2023 Bust – Joseph Carson
5 februari
Suppose Congress passes something close to Biden’s Administration stimulus proposal of $1.9 trillion. In that case, that will lift the cumulative amount of fiscal stimulus in the past 12 months to $5 trillion—three tranches $2.2 trillion, $900 billion, and $1.9 trillion.
In the past year, nominal GDP totaled $21 trillion, so the cumulative injection of fiscal stimulus amounts to almost 25%.
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Government’s Money Monopoly and the “Great Reset” – Thorsten Polleit
1 februari
The unbacked paper money system is an economically and socially destructive system—with far-reaching and harmful economic and social consequences beyond what most people would imagine. Fiat money is inflationary; it benefits some at the expense of many others; it causes boom-and-bust cycles; it corrupts the morality of society; it will ultimately end in a major bust; and it leads to overindebtedness.
The Institute of International Finance (IIF) estimates that global debt climbed to $277 trillion by the end of 2020, amounting to a staggering 365 percent of world gross domestic product (GDP). As the graph below shows, global debt versus GDP has risen in recent years, suggesting that the increase in debt has outpaced the rise in GDP. This buildup of excessive debt, the path to overindebtedness, results from an unbacked paper money system.
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Central bank digital currencies risk becoming a gigantic flop – Peter Bofinger, Thomas Haas
1 februari
Central bank digital currencies are increasingly being discussed, mainly in relation to monetary policy and financial stability, but with less focus on their fundamentals. This column provides a comprehensive taxonomy for categorising central bank digital currency design options, and evaluates these options based on their allocative efficiency and attractiveness for users. The analysis shows that digital cash substitutes cannot be justified from either perspective. Instead, there is huge potential for central bank digital currencies in a retail payment system organised by the central bank, but without a new, independent payment object.
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Silver Swans, Maginot Lines and the Unforeseen Risks of Collapse – Charles Hugh Smith
1 februari
Our Nobility’s assessment of risk and their war-gaming of vulnerabilities are fatally deficient.
Many people have heard of Nassim Taleb’s black swan but fewer understand how few events qualify as black swans. Per Wikipedia, a black swan is an unpredictable or unforeseen event, typically one with extreme consequences, an event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight.
Taleb’s black swan theory refers to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences.
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“The Fed’s Monetary Punchbowl Is Fueling Rampant Home Price Appreciation”: AEI – Wolf Richter|
2 februari
“There is no justification” for continuing the purchases of mortgage-backed securities. The Fed is “misdiagnosing its impact on the housing market.” Pressure rises on the Fed to back off, in face of market craziness.
During the press conference following the FOMC meeting last week, Fed Chair Jerome Powell was asked by different reporters about the craziness going on in the stock market, the chaotic thingy with GameStop, corporate debt, and the housing market.
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Monetary Inflation and Price Inflation – Robert P. Murphy
3 februari
This chapter explains the connection between the quantity of money and the height of prices quoted in that money. The chapter therefore deals with the phenomenon of “inflation,” but as we shall see, the very meaning of this word changed during the twentieth century. (For clarity, we will distinguish the two concepts by using the more specific terms “monetary inflation” and “price inflation.”) We will summarize some of the famous episodes of hyperinflation throughout history, showing the disaster that results when governments run the printing press too aggressively.
Finally, we will highlight the Austrian criticism of the so-called equation of exchange, nowadays usually written as MV = PQ. Although the equation is a tautology, this framework encourages thinking of money and prices in a mechanistic fashion rather than using the tools of subjective value theory. Although it is important to recognize that massive price inflation is always the result of massive monetary inflation, there isn’t a stable relationship between the two; it’s not the case that, say, a 50 percent increase in the quantity of money necessarily leads to a 50 percent increase in prices.
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Exchange rates, invoicing, and prices: Lessons from the Swiss franc surge of 2015 – Raphael Auer, Ariel Burstein, Sarah Lein
3 februari
In 2015, the Swiss National Bank discontinued the minimum exchange rate of the Swiss franc relative to the euro, prompting a large and sudden appreciation of the franc. This column describes how the episode affected border prices, retail prices, and consumer expenditure. It shows how cross-sectional variation in border price changes by currency of invoicing carried over to consumer prices and allocations. This episode can help inform estimates of the sensitivity of retail prices to border prices and the sensitivity of import expenditures to relative price movements.
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The State of American Debt Slaves: Q4 2020. Consumer Borrowing in Weirdest Economy Ever – Wolf Richter
6 februari
Amid enormous shifts and distortions in consumption and trillions of dollars handed out by the government and the Fed.
American consumers – those hundreds of millions of mythical creatures whose sole job is to consume more than they make – have paid down their credit cards again. In December, the crucial month for overspending with borrowed money, credit card balances and other revolving credit ticked down 0.3% from the prior month, to $976 billion, seasonally adjusted (green line in the chart below), according to the Federal Reserve Friday afternoon. This was down 10.8% year-over-year, the steepest year-over-year decline ever.
On a not seasonally adjusted basis (red line), credit card balances normally spike in December during the holiday shopping melee. But last December they didn’t spike nearly enough and fell 10.8% from the prior year, also the steepest year-over-year percentage drop, to $976 billion, a balance first reached in the good old days of September 2007.
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As COVID rages, bankruptcy cases fall – Simeon Djankov, Eva (Yiwen) Zhang
4 februari
Bankruptcies have fallen sharply in OECD economies because of the array of COVID-related support available to businesses, as well as imposed moratoria on bankruptcy filings. This column argue that this situation won’t last, and that governments should start planning for a surge by the end of 2021 – ideally by reforming their bankruptcy laws, as the UK has done, and lessening the burden on courts.
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Gold Could Offer a Way out of Switzerland’s Failing Inflationist Experiment – Brendan Brown
6 februari
Never mind that the US Treasury’s indictment late last year of Switzerland as a currency manipulator rested on some flawed evidence and does not identify the crime. The clash between Washington and Berne marks another episode in this alpine nation’s dark history of trucking with foreign repression rather than developing its potential as a global haven and beacon of freedom. Occasionally there have been bright interludes but none so far with respect to the last quarter century of growing monetary repression as led by the US and now prevalent throughout the world.
The Trump administration’s Treasury based its indictment of Switzerland on crossing the three boxes on the ridiculous checklist for manipulation inherited from the Obama Treasury—current account surplus, bilateral trade surplus with the US, and foreign exchange intervention during the past year all above the permitted ceilings. There was no mention of the strongest basis for the charge of manipulation—failure to reverse huge past intervention and the deepest subzero interest rates in the world. The smugness of the top Swiss monetary bureaucrat’s response to the indictment, declaring that the Swiss National Bank (SNB) would continue with its massive interventions as appropriate, seems to have impressed markets where the Swiss franc (CHF) is well below its pandemic high point against the euro. The bureaucrats may yet have to eat humble pie if the Swiss government is serious about striving for a free trade deal with the US.
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***The Top 10% Is Doing Just Fine, The Middle Class Is Dying on the Vine – Charles Hugh Smith
4 februari
Please study these charts as a means of understanding the inevitability of economic stagnation and a revolt of the decapitalized middle class.
I’ve been covering the decline of America’s middle class for over a decade with charts, data and commentary on the social depression that has accompanied the decline.
While there are many mutually reinforcing dynamics in this 45-year decline–demographics, global energy costs, financialization and globalization, to name a few– one term describes the accelerating erosion of America’s middle class: decapitalization.
To understand decapitalization, we need to start with the fundamentals of any economy between labor (wages) and capital and between investment and speculation. Although it’s tempting to oversimplify and demonize one or the other of these basics (speculators bad! etc.), they each provide an essential role in a healthy economy, one which is in dynamic equilibrium, a state analogous to a healthy ecosystem with constantly changing interactions of numerous species, individuals and inputs (weather, etc.). This variability enables the order of fluctuations (to use Ilya Prigogine’s profound phrase), a dynamic stability / equilibrium.
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Wage risk, and government and spousal insurance – Mariacristina De Nardi, Giulio Fella, Gonzalo Paz-Pardo
7 Februari
The optimal size and structure of government benefit programmes crucially depend on households’ income risk and their ability to self-insure against it. This column demonstrates that in the UK, earning dynamics, such as income risk and shock persistence, differ substantially depending on age and position in the income distribution. Taking these dynamics into account when evaluating benefit policies is of crucial importance, as it dramatically changes the estimated welfare improvements. When the dynamics are incorporated, the 2016 reform of the UK’s benefit system is found to have been welfare-improving on average.
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***Despite Terrible US Economy in 2020, Workers of Mexican Descent Sent Most Dollars Ever Back to Mexico – Nick Corbishley
4 februari
Against expectations, the feared plunge in remittances, as during the US Housing Bust, did not occur. For interesting reasons. Weirdest Economy Ever.
The total amount Mexico received in “remittances” — transfers of money by workers of Mexican descent mostly in the US but also other countries to individuals in Mexico — surged by 11.4% in 2020 to $40.6 billion, the highest ever, and the eighth year in a row of increases, according to data released by the Bank of Mexico.
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The impacts of unemployment benefits on job match quality and labour market functioning – Ammar Farooq, Adriana Kugler, Umberto Muratori
7 februari
Economists have long debated whether extensions to unemployment insurance benefit durations help or hinder the labour market. Using US administrative microdata, this column shows that the generosity of unemployment insurance benefits has a positive effect on the labour market by improving job match quality. Importantly, these benefits are greater for women as well as for minority and less educated workers. In light of the current economic crisis, giving ideally suited workers and firms sufficient time to find each other can be part of the healing.
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Germany’s Inflation Tax and the Rising Cost of Living – Karl-Friedrich Israel
2 februari
Since the introduction of the euro, officially measured consumer price inflation in Germany has not made any great leaps. It has averaged 1.5 percent per year. It reached its highest value in 2008 at 2.8 percent and its lowest value just one year later at only 0.2 percent. In 2020, it has been negative for certain months but was 0.4 percent for the entire year. Do these figures provide a representative picture of the general price trends?
It is not surprising that the answer to this question remains controversial, because price inflation measurements are used to make subjective variables of economic life appear objective. How does the standard of living of citizens change? How much higher is real income today compared to twenty years ago? How much more expensive is a basket of goods of the same quality in one year compared to another? But just what equal quality even means in the course of technological progress and innovation cannot be determined objectively. Therefore, this question will never be answered conclusively.
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Effectiveness of national expenditure rules: Evidence from EU member states – Cristiana Belu Manescu, Elva Bova
7 februari
Expenditure rules are recognised as one of the most effective tools to manage budgetary aggregates, and many EU members have recently chosen to add an expenditure rule to their national frameworks. In many cases, the 2012 introduction of the expenditure benchmark at the EU level was a major catalyst. Against this background, this column takes stock of the current design of national expenditure rules across EU member states and provides new evidence on their effectiveness in reducing the procyclicality bias of fiscal policy.
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Wall Street Outsiders versus the Hedge Funds – Mark Hendrickson
2 februari
The investment world was convulsed last week when at least one hedge fund (Melvin Capital) lost billions of dollars. The sudden, massive losses happened when a tidal wave of independent individual investors, spearheaded by posts on Reddit.com, triggered a short squeeze that torpedoed the hedge fund.
For those of you unfamiliar with a “short squeeze,” let me explain. Most stock market investors “go long.” That means that they buy a stock and then hope to sell it later at a higher price. Short sellers do the same thing except in reverse sequence—that is, they sell first, hopefully at a high price—and then buy later, hopefully at a lower price. Whereas “long” investors make money when the price rises, short sellers make money when it falls.
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***Helicopter money in another pandemic recession: Venice, 1630 – Charles Goodhart, Donato Masciandaro, Stefano Ugolini
4 februari
‘Helicopter money’ is an often-evoked concept in macroeconomics, but the occurrence of helicopter money, strictly speaking, is exceedingly rare in history. This column describes one episode that actually provides a concrete illustration of this policy: the monetary financing of the pandemic recovery plan put in place by the Republic of Venice during the bubonic plague of 1630.
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***A modest proposal for vaccine rationing – John H. Cochrane
5 februari
A mid-20s child of a good friend just got the vaccine. Why? He runs a micro-brewery, which his state deemed “essential,” because it’s “manufacturing.”
WSJ reports
After nursing-home residents and health-care workers, the CDC says priority should go to those over age 75 and an expansive list of “frontline essential workers.”,
…“essential workers” … include those who “work in transportation and logistics, food service, housing construction and finance, information technology, communications, energy, law, media, public safety, and public health.
media! Economics blogging should count, no?
What happens when a good is rationed? It is given out politically.
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From truth to reconciliation: Lessons from Iceland – Thorvaldur Gylfason
6 februari
Trust is a crucial norm in any democratic system. And respect for the truth, as well as support for the institutions that uphold it, are fundamental for a functioning market economy. This column argues that recent controversies in the US, as well as the UK, have seen this norm begin to erode, and that this may have negative effects for democracies and economies worldwide. Citing evidence from Iceland, the author argues that unless reforms are implemented soon, advocates for democracy may see greater power slide into the hands of those who propagate mistruths for their own material gain.
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