Economische aanraders 08-01-2017
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 worden.
Sinds 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.
Mainstream macroeconomics in a state of ‘intellectual regress – William Mitchell
At the heart of economic policy making, particularly central bank forecasting are so-called Dynamic Stochastic General Equilibrium (DSGE) models of the economy, which are a blight on the world and are the most evolved form of the nonsense that economics students are exposed to in their undergraduate studies. Paul Romer recently published an article on his blog (September 14, 2016) – The Trouble With Macroeconomics – which received a fair amount of attention in the media, given that it represented a rather scathing, and at times, personalised (he ‘names names’) attack on the mainstream of my profession. Paul Romer describes mainstream macroeconomics as being in a state of “intellectual regress” for “three decades” culminating in the latest fad of New Keynesian models where the DSGE framework present a chimera of authority. His attack on mainstream macroeconomics is worth considering and linking with other evidence that the dominant approach in macroeconomics is essentially a fraud.
When Assets (Such as Real Estate) Become Liabilities – Charles Hugh Smith
27 december 27
It will be the middle class that accepted the notion that “real estate is the foundation of family wealth” that will be stripmined by higher taxes on immobile assets such as real estate.
Correspondent Joel M. submitted an article that struck me as a harbinger of the future: In Greece, Property Is Debt:
“At law courts throughout Greece, people are lining up to file papers renouncing their inheritance. Not necessarily because some feckless uncle left them with a pile of debt at the end of his revels; they are turning their backs on what used to be a pillar of Greece’s economy and society: real estate.
Growing personal debt, declining incomes and ever higher taxes as Greece’s depression grinds on have turned property and the dream of easy money into dread of a catastrophic burden.
Do Central Bankers Know a Bubble When They See One? – Peter Schmidt
Between 2000 and 2008, two of the largest financial bubbles in history — in technology stocks and housing, respectively — suffered spectacular collapses. Opinions vary, but some market commentators believe at the peak of the tech bubble, total stock market capitalization exceeded 180% of US GDP. To put this in perspective, the tech stock bubble was over twice the size of the 1920s stock bubble!1 As large as the bubble in tech stocks was, it was child’s play compared to the housing bubble. When the US housing bubble collapsed, the credit losses were so large the entire worldwide banking system was considered to be in mortal danger.
Weekend Reading: The Beginning Of The Ending – Lance Roberts
A few week’s ago I discussed the post-election surge in the market based on rather optimistic outlooks as opposed to the technical underpinnings that currently exists. As I specially stated in the weekend newsletter entitle “Dow 20,000” the market was beginning to take on an eerily similar feeling:
The Thing in the Jobs Report that Gives the Fed the Willies – Wolf Richter
The Fed reacts much more quickly to wage inflation than consumer price inflation. But it never reacts to asset price inflation.
In the jobs report today, there’s one figure that the Fed has riveted its collective eyes on. Sure 156,000 jobs were created, below average for 2016, and way below average for the prior two years. And the unemployment rate ticked up to 4.7%. And there were other ups and downs in the data which covered the volatile holiday period, and therefore was subject to notoriously big seasonal adjustments, and that’s all cute as far as the Fed is concerned, and they’re going to glance at it, but there’s one number they fret about: wage increases.
And not in the sense that Fed Chair Yellen occasionally inserts into her comments, but in the opposite sense.
***Rum and Socialism Don’t Mix – John Martin, Chris Calton
In 1862, José Arechabala y Aldama arrived in Havana, Cuba at the age of fifteen. At thirty-one, he founded Arechabala Industries, a small distillery in Cárdenas, Cuba, which was then a small but rapidly growing seaport city with a bustling port and budding railroad industry.
In 1888, this city was devastated by a hurricane. Don José’s company suffered $50,000 in damages (roughly $1.3 million in 2015 dollars), but it survived and continued to grow. In 1921, Don José incorporated the company as José Arechabala, S.A., and two years later, he died. His family was driven back to Spain after a series of tragedies (one of his son-in-laws was murdered by kidnappers), and the company was taken over by Don José’s thirty-six-year-old godson Josechu.
***Prosperity = Abundant Work + Low Cost of Living – Charles Hugh Smith
An economy that only serves the prosperity of the protected top 5% is an economy doomed to rising inequality, stagnation and widespread social discontent.
If we seek a coherent context for the new year, we would do well to start with the foundations of widespread prosperity. While the economy is a vast, complex machine, the sources of widespread prosperity are not that complicated: abundant work and a low cost of living.
When work is abundant, there are opportunities for many skill levels, and employers must bid for the most productive, reliable workers. This supports wages and widespread employment.
When the cost of living is low, even low-wage households can not only get by but put a little aside if they are prudent and thrifty.
Money-Supply Growth Accelerates in Late 2016 – Ryan McMaken
The supply of US dollars accelerated during late 2016 with October’s year-over-year percentage increase in the money supply hitting a 46-month high of 11.2 percent. The YOY growth rate fell slightly to 10.3 percent in November.
This comes after a long period of relatively sedate growth in the money supply through most of 2013, 2014 and 2015.
The recent surge in money supply growth suggests that the likelihood of an economic contraction in the near future has been reduced, with the next downturn being pushed out further into the future.
***Power & Profit Fuel War on Cash in Europe – Don Quijones
In the wake of the attack on the Christmas market in Berlin in December, the European Commission granted customs and police authorities sweeping new powers to seize cash or precious metals carried by “suspect individuals” entering the EU. People carrying more than €10,000 euros in cash already have to declare this at customs when entering the EU. The new rules would allow authorities to seize money (or precious metals or bitcoin) below that threshold “where there are suspicions of criminal activity.”
It was the latest step in the War on Cash. The powers that want to kill off cash include private and central banks, fintech firms, Silicon Valley magnates like Tim Cook and Bill Gates, telecom behemoths, credit card giants, assorted NGOs, a bewildering alphabet soup of UN agencies and many national governments. They all have their own disparate motives for taking out physical money.
Doves, hawks … and pigeons: Why central bankers like monetary policy inertia – Donato Masciandaro
The discussion of the delayed lift-off in US monetary policy is just the latest episode in a long-lasting debate over the causes of inertia in monetary policy. This column approaches the issue by assuming that psychological drivers can influence the decisions of central bankers. Loss aversion is one source of behavioural bias which can explain delays in changing the stance of monetary policy, including the fear of lift-off after a recession.
Why Profits Are Faltering – Charles Hugh Smith
Profits are faltering for structural reasons that are not easily resolved..
The bedrock assumption of the Bull market is that corporate profits will keep rising indefinitely. Hiccups are allowed, but current stock market valuations are implicitly based on profits expanding.
The fly in the ointment here is corporate profits have been stagnating since 2014. Here is the St. Louis Federal Reserve (FRED) chart of pre-tax corporate profits:
The Oil Supply Glut Is Here To Stay In 2017 – Irina Slav
It has become painfully obvious that the much-hyped OPEC agreement to reduce global oil production by close to 2 million bpd won’t have the effect that its initiators had hoped for. True, crude has jumped above US$50 but failed to pass the US$55 barrier and move closer to US$60, which would have solved a lot of problems for some of the world’s biggest producers.
This price increase, however, has spurred optimism among some producers and motivated them to plan output ramp-ups, which will in turn dampen the upward potential of crude more effectively than growing doubts about top producers’ willingness to stick to their commitments under the historical agreement.
Will automation make us poor? – Aaron Bailey
Automation has become a huge concern in recent years. With computer algorithms getting more and more sophisticated, machines are becoming increasingly able to do jobs that are many people’s bread and butter.
Driverless cars have been tested on our roads for years. Although they aren’t commercially available yet, they eventually will be. Once that happens, they’ll replace cab drivers, as well as people currently contracted by rideshare companies like Uber and Lyft. After all, if employers can remove the expense of paying drivers, they can provide their services for much cheaper while still retaining a greater net profit. Automated vehicles will also replace commercial freight drivers.
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.