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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Why Asset Bubbles Involve So Much More Than Just Rising Prices – Frank Shostak
4 november
According to the Financial Times from October 18, 2020, senior Federal Reserve officials are calling for tougher financial regulation to prevent the US central bank’s low interest rate policies from giving rise to excessive risk taking and asset bubbles in the markets.
Eric Rosengren, president of the Federal Reserve Bank of Boston, told the Financial Times that the Fed lacked sufficient tools to “stop firms and households” from taking on “excessive leverage” and called for a “rethink” on “financial stability” issues in the US.
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The reversal interest rate: A critical review – Rafael Repullo
4 November
The ‘reversal interest rate’ is defined as the rate at which accommodative monetary policy reverses its intended effect and becomes contractionary for lending. The idea is that excessively low monetary policy rates lead to a reduction in the value of banks’ capital, which reduces bank lending. This column shows, however, that that lower rates can only lead to a contraction in bank lending if the bank is a net investor in debt securities, a condition typically only satisfied by high deposit banks. Thus, when it exists, the reversal rate will depend on bank-specific characteristics.
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Rothbard’s Refutation of the Quantity Theory of Money – Fabrizio Ferrari
5 februari
In chapter 11 of Man, Economy, and State [1962] (2009), Rothbard sets out his theory of money and its influences on business fluctuations. Among the many insights Rothbard provides, we find a compelling and cogent refutation of Irving Fisher’s equation of exchange (in section 13)—which underlies the monetarist quantity theory of money.
The idea behind the equation of exchange (EoE) is trivial: given the total quantity of money (M), the alleged “general (or average) price level” (P), the total physical quantity (Q) of goods and services exchanged within the economy, and the so-called velocity (V) at which money is exchanged between agents, the relation M*V = P*Q must hold.
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Patent screening, innovation, and welfare – Mark Schankerman, Florian Schuett
6 November
In the last years, there has been substantial pushback against the patent system. Critics claim that patent rights are becoming an impediment to innovation, and an instrument to extract rents through patent litigation. This column develops a framework to quantitatively assess the effectiveness of the current US patent system and the welfare impact of reforms. It finds that the current system generates positive social value, and that the recent introduction of the Patent Trial and Appeal Board increased welfare. Intensifying patent office examination and imposing antitrust limits on patent licensing agreements would yield additional welfare gains.
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A Historical Divide: A 160-Year View Of The Gold-Oil Ratio – Tyler Durden
6 november
2020 has ushered in a new era of prices for two historically significant assets – gold and oil.
The market has driven the pair in polar opposite directions breaking historical patterns. This year, as Visual Capitalist’s Aran Ali notes, gold brushed above $2,000 an ounce, while oil futures even went temporarily negative in the spring. The gold-oil ratio tells us how many barrels of West Texas Intermediate (WTI) are needed to buy an ounce of gold, serving as a price-based indicator of the relative value of these two important assets.
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Why Socialism Won’t End Worker “Exploitation” – Bradley Thomas
3 november
A belief still commonly held today by not just Marxists and socialists, but progressives of many stripes, is the insistence that employers are “stealing” part of their workers’ labor because the wage workers receive from their employer are less than the contribution of their labor to the final value (i.e., selling price) of the finished good.
Profit to the employer, the argument goes, is akin to theft from the workers. Profit is “surplus value” created by the worker but taken by the capitalist, they say.
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The Rescues Are Ruining Capitalism – Lance Roberts
6 november
I want to discuss a recent WallStreet Journal article by Ruchir Sharma entitled “The Rescues Ruining Capitalism.”
We talk much about the bailouts and stimulus programs related to the economic shutdown and pandemic. However, the bailouts began back in 2008 when the Federal Reserve intervened with the insolvency of Bear Stearns.
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***Here’s Our Historical Analogy Menu: Rome, the USSR or Revolutionary France – Charles Hugh Smith
5 November
The core dynamic is ultimately the loss of social cohesion within the ruling elites and in the social order at large.
There’s a definite end of days feeling to the euphoria that the world didn’t end on November 3. And what better way to celebrate the victory of what passes for normalcy with a manic stock market rally?
It’s as if everyone knows there is no returning to the good old days of a well-oiled Imperial machine chewing through any and all obstacles, and this realization is so frightening that the need to pretend everything is fine, just fine, overwhelms the last remaining ties to reality.
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Why the Free Market Liberals Underestimated the Socialists – Ludwig von Mises
7 november
[A selection from Human Action.]
The masses, the hosts of common men, do not conceive any ideas, sound or unsound. They only choose between the ideologies developed by the intellectual leaders of mankind. But their choice is final and determines the course of events. If they prefer bad doctrines, nothing can prevent disaster.
The social philosophy of the Enlightenment failed to see the dangers that the prevalence of unsound ideas could engender. The objections customarily raised against the rationalism of the classical economists and the utilitarian thinkers are vain. But there was one deficiency in their doctrines. They blithely assumed that what is reasonable will carry on merely on account of its reasonableness. They never gave a thought to the possibility that public opinion could favor spurious ideologies whose realization would harm welfare and well-being and disintegrate social cooperation.
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State of the American Debt-Slaves, Q3 2020: The Stimulus & Forbearance Phenomenon – Wolf Richter
7 november
Auto loans jump after historic price spikes. Credit cards still in stimulus wonderland. Student-loan borrowers count on debt forgiveness, mmmkay.
Consumers have undertaken an astounding project instead of consuming: Paying down their credit cards. In September, outstanding balances of credit cards and other revolving credit ticked down by a tad to $949 billion, not seasonally adjusted, the lowest since July 2017.
Credit card balances spike in December during the shopping season and then decline during credit-hangover season in January and February. In March, they start rising again. But not this year.
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What We Don’t Elect Matters Most: Central Banking and the Permanent Government – Charles Hugh Smith
4 November
We’re Number One in wealth, income and power inequality, yea for the Fed and the Empire!
If we avert our eyes from the electoral battle on the blood-soaked sand of the Coliseum and look behind the screen, we find the powers that matter are not elected: our owned by a few big banks Federal Reserve, run by a handful of technocrats, and the immense National Security State, a.k.a. the Permanent Government. These entities operate the Empire which hosts the electoral games for the entertainment and distraction of the public.
The governance machinery controlled by elected representatives is tightly constrained in what it can and cannot do. It can’t do anything to stop the debasement of the nation’s currency, which is totally controlled by the Politburo of the Fed, nor can it do much to limit the Imperial Project, other than feel-good PR bits here and there.
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***Corruption in public procurement – Erica Bosio, Simeon Djankov, Edward Glaeser, Andrei Shleifer
5 November
Discretion in public procurement allows public officials to pursue socially and economically optimal procurement outcomes, but it also increases the possibility of corruption. This leads to a trade-off between allowing greater discretion and preventing corruption in public procurement. Using survey data on public procurement law and practices from 187 countries in 2019, this column investigates this trade-off. It finds that regulation is helpful when government efficiency is low, and harmful when it is high.
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Picture Emerges of Weird Recovery to Historically Awful Level – Wolf Richter
6 november
Jobs not galore. And the target keeps moving.
In October, there were 142.4 million employees on the payroll at “establishments” – businesses, non-profits, governments, etc., but not counting gig workers. That was up by 638,000 employees from the prior month, and still down by 10.1 million employees from February (152.5 million), based on surveys of these establishments by the Census Bureau, released by the Bureau of Labor Statistics this morning. At the low point in April, there had been 22.2 million fewer employees at these establishments than there had been in February. In other words, these establishments recovered 12.1 million of the 22.2 million lost jobs. In percentage terms, employment in October at these establishments was still down 6.1% from a year ago.
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Digitization Fueled by Easy Money and Covid Lockdowns Is a Form of Malinvestment – rendan Brown
3 november
Dr. Pangloss in the present global health emergency is not the poor philosopher of Voltaire’s Candide but a storyteller of the bubble in “pandemic stocks.” The optimistic message is the same—even when disaster strikes, that is for the best in the best of all possible worlds. The bubble’s narrators maintain that the pandemic has powered an acceleration of technological progress, most of all digitalization. Innovatory changes which otherwise would have taken years, in fact decades, to unfold are now occurring within months or less. We should all celebrate.
This makes no sense on two levels.
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For Stocks, Any Election Outcome is Now the Best Outcome, Disputed Election, Long Legal Mess, Split Government Without Stimulus, Whatever…- Wolf Richter
4 november
This is funny in terms of stock-market “narratives” during these crazy times.
At first, long ago, the narrative was that a Trump victory would boost stocks. And then when this became more uncertain, the narrative was that a Biden victory would also boost stocks, and that a “Blue Wave” would boost stocks hugely because it would trigger the mother of all stimulus packages, which would spread trillions of dollars directly and indirectly to these companies, which would be good for stocks.
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Stimulating entrepreneurial activity: The role of local government – Piotr Danisewicz, Steven Ongena
7 November
Entrepreneurship is a key driver of economic activity, so entrepreneurial activity is one of the central points of focus for policymakers and academics. Using information on fiscal transfers in Poland, this column documents beneficial effects of local government funding as a mechanism to alleviate entrepreneurial constraints and spur firm formation. In addition, the observed impact of transfers is stronger in regions with higher political competition and accountability, and in regions with more positive historical attitudes toward entrepreneurial activity.
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Socialists Have Never Shown How They Could Increase the Standard of Living – Ludwig von Mises
3 november
[A selection from Nation, State, and Economy. Editor’s note: When Mises refers to “liberals” or “liberalism” he means the ideology of laissez-faire, sometimes now called “classical liberalism.”]
Marxism sees the coming of socialism as an inescapable necessity. Even if one were willing to grant the correctness of this opinion, one still would by no means be bound to embrace socialism. It may be that despite everything we cannot escape socialism, yet whoever considers it an evil must not wish it onward for that reason and seek to hasten its arrival; on the contrary, he would have the moral duty to do everything to postpone it as long as possible. No person can escape death; yet the recognition of this necessity certainly does not force us to bring about death as quickly as possible. Marxists would have to become socialists just as little as we must become suicides if they were convinced that socialism would be bound to bring about no improvement but rather a worsening of our social conditions
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Family and government insurance: Wages, earnings, and income risks in the Netherlands and the US – Mariacristina De Nardi, Giulio Fella, Marike Knoef, Gonzalo Paz-Pardo, Raun van Ooijen
6 November
Understanding the source of fluctuations in earnings, and how workers insure themselves against those fluctuations, is key to evaluating labour laws. This column uses administrative data from the Netherlands to compare the role played by households to the tax and transfer system in mitigating shocks to individual earnings. It then compares those findings to data from the US – a country with a substantially smaller welfare state – and finds that hours, not wages, account for most of the variability in earnings for workers in the bottom two deciles of the earnings distribution.
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***Marxism in Africa: Why So Many African Economies Failed after Independence – Eric Coffie
4 november
“As far as I am concerned, I am in the knowledge that death can never extinguish the torch which I have lit in Ghana and Africa. Long after I am dead and gone, the light will continue to burn and be borne aloft, giving light and guidance to all people.” ~ Dr. Kwame Nkrumah
September 21 marks the birthday of Kwame Nkrumah, Africa’s Marxist revolutionary and first president of the republic of Ghana. The day is celebrated as a public holiday in Ghana to commemorate the significant role Nkrumah played to free the Gold Coast from colonial rule. Nkrumah was born on September 21, 1909, at Nkroful, in what was then the British-ruled Gold Coast, the son of a goldsmith. After his graduation from Achimota College in 1930, he traveled to the United States to pursue his master’s degrees at Lincoln University and the University of Pennsylvania, where he was influenced by Marxist ideologies and pan-Africanist ideas, and especially Marcus Garvey, the black American nationalist leader of the 1920s. Eventually, Kwame Nkrumah came to describe himself as a socialist and a Marxist, a leading proponent of African socialism, the offshoot of pan-Africanism.
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The impact of public employment: Evidence from West Germany’s post-war capital Bonn – Sascha O. Becker, Stephan Heblich, Daniel Sturm
3 November
Raising the level of public employment is a frequently used policy instrument to support economically lagging regions. This column evaluates the impact of changes in public employment on private sector activity using the creation of the West German government in Bonn as a source of exogenous variation. It finds that relative to a control group of cities, public employment increased substantially in Bonn, but this led to only a modest increase in private sector employment. This suggests that public sector jobs may not be a magic bullet to kickstart local economies.
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