Economische aanraders 07-03-2021
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.
Is Money a Creation of Government? – Frank Shostak
By some theories such as the Modern Monetary Theory (MMT), money originated on account of the government decree. Money according to the MMT is what the State decides it is going to be.
Following the ideas of the German economist, Georg Knapp, the Modern Monetary Theory (MMT) regards money as a token. For instance, when an individual places a coat in the cloakroom of a theatre, he receives a tin disc or a paper receipt. This receipt or a disc is a proof that the individual is entitled to demand the return of his coat.
According to the MMT, the material used to manufacture the tokens is irrelevant – it can be gold, silver, or any other metal or it can even be paper.
What academics think of central banks’ current inflation targets and other objectives – Gene Ambrocio, Andrea Ferrero, Esa Jokivuolle, Kim Ristolainen
Central banks often have inflation targets at the centre of their monetary policy regimes. This column presents survey data from 613 leading economists to explore their views on these inflation targets and wider policies within their countries of residence. The results suggest that maintaining the prevailing inflation target (for central banks that have one) has more support than changing it does. But more respondents are pessimistic about central banks’ ability to meet these targets, particularly in the euro area.
***What “Normal” Are We Returning To? The Depression Nobody Dares Acknowledge – Charles Hugh Smith
Perhaps we need an honest national dialog about declining expectations, rising inequality, social depression and the failure of the status quo.
Even as the chirpy happy-talk of a return to normal floods the airwaves, what nobody dares acknowledge is that “normal” for a rising number of Americans is the social depression of downward mobility and social defeat.
Downward mobility is not a new trend–it’s simply accelerating. As this RAND Corporation report documents, ( Trends in Income From 1975 to 2018) $50 trillion in earnings has been transferred to the Financial Aristocracy from the bottom 90% of American households over the past 45 years.
Why The Gold Price Is Sinking – Jan Nieuwenhuijs
The gold price is inversely correlated to the “real interest rate,” as derived from the 10-year Treasury Inflation Protected Security (TIPS). The 10-year TIPS is a U.S. government bond that protects the owner from consumer price inflation. If the TIPS interest rate, for example, is 1% and annual inflation 3%, the owner of the bond receives 4% interest (1% + 3%). The owner of the bond is always protected against inflation.
Europe productivity — and US too – John H. Cpchrane
In the top graph you get the impression that German and French workers are using up to date technology, including both machines, firm organization, opportunities to trade in a wide market, etc. but that they simply choose to, are incented to, or forced to work fewer hours than US workers. Italy and UK are still plodding along 20% or so inside the frontier.
The bottom graph points a bleaker picture. I’m not an expert, but if labor productivity is high and total productivity is low, that means that the productivity of other inputs must be atrocious. Chad (amazing expert on all things growth) “It is stunning to me that Spain and Italy have had negative TFP growth for 20 years.”
I remember when real business cycles came out, and many were incredulous at the idea of negative productivity shocks. How can you forget how to do things? Well, maybe not for business cycles, but a society clearly can forget, and retrench. For centuries, remember, Italians looked up in wonder at the cupola of the Pantheon, the arches of the dry aqueducts, and wondered how they had been built.
Stagflation Cometh – Doug French
A gentleman who does work for us sent me a text recently saying the price of his supplies has increased 20 percent, so he wants to increase his monthly fee 10 percent. It was a nice way to ask, and I said sure, especially given that he’s willing to take a haircut on his labor to make the increase more palatable.
Chairman Jerome Powell would be happy to hear this story, as the Federal Reserve prints mightily to push the CPI (Consumer Price Index) to 2 percent and beyond. Though perhaps Chairman Powell would prefer my tradesman to pass a full 20 percent price increase to me.
In a town with a double-digit unemployment rate, price increases are hard to pass on. Although I noticed while shopping for Thanksgiving that a small bag of pine nuts was a full $2 more than the unused, but unfortunately stale, bag I had purchased a year ago.
Firms’ exporting behaviour to countries under sanctions – Matthieu Crozet, Julian Hinz, Amrei Stammann, Joschka Wanner
Sanctions are imposed on a target country to exert political and economic pressure. But there is little evidence on how exporting firms regard trade with the sanctioned country. This column uses detailed monthly customs data from French firms to investigate the extensive margin of trade in episodes of sanctions-use against Iran, Russia, Cuba, and Myanmar. It finds the impact of sanctions is heterogeneous along firm dimensions and advises caution in the use of a policy tool with imprecise and unpredictable results.
***“It’s Systemic” – Coffee Consumers Face Soaring Prices As Shipping Costs Surge – TYler Durden
Shipping bottlenecks created by the virus pandemic have disrupted global supply chains. There’s currently an imbalance of shipping containers around the world that has resulted in steep transportation costs. The latest industry to complain about sharp shipping inflation are US coffee processors who warn retail prices may have to rise, according to Reuters.
Coffee processors of all sizes are alarmed about higher freight costs. Mid-sized and smaller roasters could be particularly hit the hardest. Even large firms like Peet’s and JM Smucker Co said they are battling with rising costs.
Taxation through a Rothbardian Lens – Tate FegleyKristoffer Mousten HansenKarl-Friedrich Israel
All students of economics will sooner or later be confronted with the standard neoclassical analysis of deadweight loss from taxation. The point of this analysis is not to clarify what the government’s tax revenues should be used for, but rather how and where the government should tax in order to minimize distortions in the market structure—in a sense, in a way that hurts the least. Ideally, the tax should be “neutral.”
Murray Rothbard was a pioneer in analyzing taxation from an Austrian or causal-realist standpoint.1 He also penned an important critique of the standard analysis of welfare economics. However, he never engaged the standard theory of deadweight loss from taxation, although his insights contain the seed for its refutation. This article draws on Rothbard’s key insights and develops the Austrian analysis of taxation further toward this end
Oil markets, fracking, and the global economy – Gideon Bornstein, Per Krusell, Sérgio Rebelo
Oil markets have long been central to discussions of the global economy, and fluctuations in oil prices frequently gain widespread attention. This column explores the impact of the rising use of fracking on how oil markets are best conceived within modern macroeconomic theory. The author’s model predicts that as fracking accounts for an increasingly sizeable fraction of the world oil supply, it may herald a new era of lower, more stable oil prices.
Consumers Paid Down Credit Cards Again! By Most Ever. But Cash-Out Refis Spiked to Highest since 2005/6 Peaks. What Gives? – Wolf Richter
They’re not the same consumers.
There is no monolithic American consumer. Each does their own thing. And the folks with credit card debts and other revolving credit such as personal loans – all of it high-interest rate debt – paid them down by record amounts in January, possibly using their stimulus money to do so.
And in the opposite direction, the folks who own homes have been extracting cash from their homes via cash-out refinancing their mortgages at a clip in Q4 not seen since the peak of the good old days before the housing bust in 2005 and 2006, and at record low mortgage rates while they lasted. But those two groups may not be the same people.
Kroger Opens Fully-Automated Ohio Fulfillment Center As Fears Mount Of Rising Technological Unemployment – Tyler Durden
With demand for shipped products soaring during the COVID-19 pandemic and foreseeable future, the transition to warehouse automation is already underway – likely to displace warehouse workers and result in rising technological unemployment.
Supermarket chain Kroger opened its first automated warehouse in Bulter County, Ohio, last week, reported Hamilton JournalNews. The massive 335,000-square-foot customer fulfillment center is entirely run by robots and artificial intelligence that can put together an order of about 50 items in six minutes compared with 30 to 45 minutes it takes a Kroger employee to pick items from shelves.
How institutional investment funds’ reach for yield intensifies asset price volatility – Alexandru Barbu, Christoph Fricke, Emanuel Moench
Institutional funds manage the majority of the assets under management of all German investment funds. This column documents that institutional funds act in a strongly procyclical manner, by actively investing in higher-yielding, longer-duration and lower-rated assets as yield spreads compress. The authors show that this intensifies asset price volatility and highlight reasons behind this procyclical investment behaviour.
The True Cost of Taxation Is Much Higher Than Your Tax Bill – Gary Galles
Taxes have a long reign near the top of discussion topics. But it can be striking how much nonsense and confusion is both advanced and accepted about taxation.
A good way to understand some of the basics of taxation better is by analogy to the game of dodgeball.
In the game of tax dodgeball, government is the one doing the ball throwing. Those in government always insist they don’t want to hit/hurt anyone, but their desire for tax revenue leads them to throw the burdens at citizens anyway. They have no resources of their own to finance what they want to do, only what they extract from their people. Of course, that means politicians’ constantly expressed intent to only help citizens becomes meaningless, because they hurt others anyway.
r < g – John H. Cochrane
A situation that the rate of return on government bonds r is less than the economy’s growth rate g seems to promise that borrowing has no fiscal cost. r ——————————————————————————————————
Information sharing and the geography of banking – Shusen Qi, Ralph De Haas, Steven Ongena, Stefan Straetmans
Digitalisation, FinTech, and the expansion of mobile banking have changed the way in which many banks operate on a day-to-day basis, including where they choose to have physical branches. This column explores the effect of digitalisation on the geography of banks, testing the effects of digital information-sharing on branch locations in Europe. findings suggest that information sharing has a strong positive effect on branch clustering, with banks more likely to open new branches in areas where they do not yet operate but where other banks are already present.
The Global Financial End-Game – Chafrles Hugh Smith
The over-indebted, overcapacity global economy an only generate speculative asset bubbles that will implode, destroying the latest round of phantom collateral.
For those seeking a summary, here is the global financial endgame in fourteen points:
1. In the initial “boost phase” of credit expansion, credit-based capital ( i.e. debt-money) pours into expanding production and increasing productivity: new production facilities are built, new machine and software tools are purchased, etc. These investments greatly boost production of goods and services and are thus initially highly profitable.
2. As credit continues to expand, competitors can easily borrow the capital needed to push into every profitable sector. Expanding production leads to overcapacity, falling profit margins and stagnant wages across the entire economy.
US business dynamism rises – Simeon Djankov, Eva (Yiwen) Zhang
Steep falls in entrepreneurial activity were recorded in early 2020 across G7 economies. In the US, however, the creation of US startups shot up by 24% relative to the previous year. This column uses data on new company applications in the US since 2004 to show that firm birth generally accelerates in the aftermath of economic crises and that this pattern was particularly pronounced in 2020, fuelled by the government assistance provided to small businesses. It also shows that US firm births are estimated to have surpassed firm deaths in 2020, unlike in the aftermath of the previous financial crisis.
***Looking on the Bright Side of Brexit, 60 Days In – Nick Corbishley
The hard Brexit has compounded pressures on many UK industries, but some key positives have started to emerge.
This article is the second installment of a two-part series. The first installment explored some of the darker sides of Brexit that have emerged so far. This second part takes a look at a few of the bright spots that are beginning to shine through.
As British companies grapple with the fallout of Brexit, at the same time as having to contend with the economic pain of yet another lockdown, the benefits of Brexit remain largely elusive. This is to be expected: Brexit, it’s worth repeating, is a process, not an event. It will take time for many of the benefits of leaving the EU to materialize — or at least be felt by the companies or people on the ground in a tangible way. These benefits include being able to make one’s own laws, negotiate trade deals directly with other nations, control one’s own borders, and having greater leeway to support domestic industries.
***Africa’s manufacturing puzzle: Evidence from Tanzanian and Ethiopian firms – Xinshen Diao, Mia Ellis, Margaret McMillan, Dani Rodrik
Before Covid-19 struck, many economies in sub-Saharan Africa were expanding rapidly – faster than at any time since independence. Yet African growth accelerations were anomalous when viewed from the perspective of comparative development patterns; structural changes were accompanied by declining within-sector productivity growth in modern sectors. This column explores this anomaly in the context of African manufacturing using newly created firm-level panel data for Tanzania and Ethiopia. In both countries, there is a sharp dichotomy between larger firms that exhibit superior productivity performance but do not expand employment much, and small firms that absorb employment but do not experience any productivity growth. These patterns appear to be related to technological advances in global manufacturing which are making it more capital intensive.
***Movie Theater Business Isn’t Going Back to Normal: Disney CEO – Wolf Richter
Are multiplex theaters even viable in the era of streaming and affordable big screen TVs, if studios crush the “theatrical window?”
Disney will release “Raya and the Last Dragon” this Friday in 2,000 theaters and simultaneously on its streaming service Disney+ for an additional $29.99 fee, on top of the monthly subscription fee. In September last year, Disney released “Mulan” directly on Disney+ for $29.99. In December, it released its Pixar animated movie, “Soul,” on Disney+ instead of in theaters. The entire family or a group of friends can watch those flicks when they premier, for $30, on a big screen in their living rooms. Any efforts by a studio to pull this off before the Pandemic would have caused all movie theater chains to boycott the release.
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