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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The Quality of Money – Philipp Bagus
7 februari
The economics profession has recently neglected the connections between the purchasing power and the quality of money. In order to cover this gap, I will analyze the quality of money and how its changes affect the purchasing power of money. I will argue that changes in the quality of money can be far more important for the value of money than changes in its quantity. This conclusion is in line with the subjectivist approach of the Austrian school. In fact, the quantity of money is an objective and measurable aggregate. The quantity theory of money is the heart of neoclassical monetary theory, but does not reconcile well with the Austrian approach. In contrast, the quality of money is a subjective concept and should stand at the center of a monetary theory based on human action. Money serves people in attaining their subjective ends more efficiently and it fulfills certain functions for people. The better these functions of money are fulfilled in the eyes of actors the higher they value money. The quality of money is, consequently, defined as the capacity of money, as perceived by actors, to fulfill its main functions, namely to serve as a medium of exchange, as a store of wealth, and as an accounting unit. Hence, the theory of the quality of money maintains that the demand for money does depend on the quality of money. In fact, the quality of money is one of the important factors, along with uncertainty, financial innovations (credit cards, ATM machines, MMMFs), frequency of payment, etc. that affect the reservation or cash-balance demand for money. The theory of the quality of money, thus, contrasts with a one-sided quantity theory of explaining the price level.
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Digital money and central bank digital currency: An executive summary for policymakers – Dirk Niepelt
3 februari
Central banks already issue digital money, but only to a select group of financial institutions. Central bank digital currency would extend this to households and firms. This column examines the proposal for such currency and assesses the opportunities and risks. It argues that while preparations for the launch of Libra have not proceeded according to plan, it has become clear that for central banks, maintaining the status quo is not an option.
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New Paper — the fiscal roots of inflation – John H. Cochrane
5 februari
I recently finished drafts of a few academic papers that blog readers might find interesting. Today, “The Fiscal Roots of Inflation.”
The government debt valuation equation says that the real value of nominal debt equals the present value of surpluses. So, when there is inflation, the real value of nominal debt declines. Does that decline come about by lower future surpluses, or by a higher discount rate? You can guess the answer — a higher discount rate.
Though to me this is interesting for how to construct fiscal theory models in which changes in the present value of government debt cause inflation, the valuation equation is every bit as much a part of standard new-Keynesian models. So the paper does not take a stand on causality.
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***When China’s Supply Chains Break, so Will the Delusion the U.S. Economy Is Invulnerable – Charles Hugh Smith
5 februari
Was it ever plausible that China’s economy could grind to a halt and there wouldn’t be any consequences for the U.S. economy? No.
Many commentators talk about supply chains in China, but how many have actually visited factories in China, other than carefully choreographed PR visits to suitably high-tech facilities? I’ve visited many factories in China, and not with a staff of minders who swiftly guide the visitors through the happy story of high-tech wonderland.
I’ve visited some high-tech facilities but also many low-tech factories, where most of the supply chain originates, usually with one or two bored local government functionaries. You get a much less distorted view of the supply chain on the ground, away from the carefully guided tours.
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***Visualizing The 700-Year Fall Of Interest Rates – Tyler Durden
8 februari
How far can interest rates fall?
Currently, many sovereign rates sit in negative territory, and, as Visual Capitalist’s Dorothy Neufeld notes, there is an unprecedented $13 trillion in negative-yielding debt.
This new interest rate climate has many observers wondering where the bottom truly lies.
Today’s graphic from Paul Schmelzing, visiting scholar at the Bank of England (BOE), shows how global real interest rates have experienced an average annual decline of -0.0196% (-1.96 basis points) throughout the past eight centuries.
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The Pandemic Isn’t Ending, It’s Just the Beginning of Global Disorder and Depression – Charles Hugh Smith
7 februari
When you’ve been lied to, you’ve been betrayed. Betrayal has consequences.
Unsurprisingly, denying the pandemic is unstoppable and consequential is the order of the day: authorities everywhere are terrified these realities might leak through all their oh-so-obviously desperate firewalls and filters. Why are they terrified? Because they know the entire global economy, including the linchpin Chinese and U.S. economies, was extremely fragile before the pandemic arose: why else the panic-stimulus and panic-repo policies of the Federal Reserve and the People’s Bank of China in the pre-pandemic months of Q4 2019?
And so everything is covered up, and if that doesn’t work, then outright denial is the default policy. The number of cases globally is absurdly understated, the number of deaths in China is absurdly under-reported, and so on.
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The Next “Minsky Moment” Is Inevitable – Lance Roberts
7 februari
In 2007, I was at a conference where Paul McCulley, who was with PIMCO at the time, was discussing the idea of a “Minsky Moment.” At that time, this idea fell on “deaf ears” as the markets, and economy, were in full swing.
However, it wasn’t too long before the 2008 “Financial Crisis” brought the “Minsky Moment” thesis to the forefront. What was revealed, of course, was the dangers of profligacy which resulted in the triggering of a wave of margin calls, a massive selloff in assets to cover debts, and higher default rates.
So, what exactly is a “Minsky Moment?”
Economist Hyman Minsky argued that the economic cycle is driven more by surges in the banking system, and in the supply of credit than by the relationship which is traditionally thought more important, between companies and workers in the labor market.
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More (or less) economic limits of the blockchain – Joshua Gans, Neil Gandal
6 februari
Cryptocurrencies such as Bitcoin rely on a ‘proof of work’ scheme to allow nodes in the network to ‘agree’ to append a block of transactions to the blockchain, but this scheme requires real resources (a cost) from the node. This column examines an alternative consensus mechanism in the form of proof-of-stake protocols. It finds that an economically sustainable network will involve the same cost, regardless of whether it is proof of work or proof of stake. It also suggests that permissioned networks will not be able to economise on costs relative to permissionless networks.
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How Keynesian Ideas Weaken Economic Fundamentals – Frank Shostak
3 februari
Whenever there are signs that the economy is likely to fall into an economic slump most experts advise that the central bank and the government should embark on loose monetary and fiscal policies to counter the possible economic recession. In this sense, most experts are following the ideas of the English economist John Maynard Keynes.
Briefly, John Maynard Keynes held that one could not have complete trust in a market economy, which is inherently unstable. If left free, the market economy could lead to self-destruction. Hence, there is the need for governments and central banks to manage the economy.
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WeWork Debris Hits Bystanders: Two More Real-Estate Mutual Funds “Gated,” This Time in Ireland. Fitch Warns of Contagion – Nick Corbishley
7 februari
“We regard liquidity mismatches as a major structural flaw.”
Two Irish commercial real-estate mutual funds, with a combined value of around €1.4 billion, have blocked redemptions after sustaining heavy outflows, leaving thousands of investors twisting in the wind. This has stoked fears that the liquidity issues that have dogged the UK’s mutual fund industry over the past year, beginning with the high profile gating of the £3.7 billion Woodford Equity Income fund (WEI), have now spread to another European economy. According to U.S. ratings agency, Fitch, contagion is now a very real danger.
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Inflation in a changing economic environment: Insights from a conference at the ECB – Michael Ehrmann, Marek Jarociński, Christiane Nickel, Chiara Osbat, Andrej Sokol
5 februari
Inflation in advanced economies fell by less than expected in the wake of the financial crisis, while more recently, measures of slack and underlying inflation in the euro area have seen a disconnect. These and other inflation developments since the Global Crisis have surprised policymakers, practitioners, and academics alike. This column outlines the evidence presented at a recent ECB conference which aimed at enhancing collective understanding of the drivers and dynamics of inflation.
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***The State of the American Debt Slaves, Q4 2019 – Wolf Richter
7 februari
Consumer credit rose to 19.3% of GDP, the highest ever.
Consumer debt – student loans, auto loans, and revolving credit such as credit cards and personal loans but excluding housing-related debts such as mortgages and HELOCs – jumped by $187 billion in the fourth quarter 2019, compared to a year earlier, or by 4.7%, to a record $4.2 trillion, according to Federal Reserve data released Friday afternoon
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Shhhh: Repo Operation in Process – Doug French
5 februari
In a bit of holiday news no one will care about, the Treasury announced it would return to selling twenty-year treasury bonds to aid in funding the nation’s trillion-dollar deficit. It was 1986 when the Treasury last issued twenty-year paper. Of course the question is: who or what will be the buyers?
Daniel R. Amerman, CFA, is keeping a steady eye on the Treasury and Fed’s operations and has come to the conclusion,
In just the last four months, the U.S. government has spent $457 billion—almost half a trillion dollars—more than it has taken in. In that same time and using monetary creation, the Federal Reserve has created and put $457 billion in new cash into the financial system, either buying U.S. Treasuries or funding the ownership of those Treasuries by others.
A few folks are aware of the repo tantrum which occurred last September. Overnite rates for money secured by US debt popped to 10 percent, signaling a collateral crises or at least a financial plumbing problem due to the financial mandarins trying to sneak away from the party with $100 billion that was in the Fed’s bottomless punch bowl.
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Capital flows at risk: Taming the ebbs and flows – Gaston Gelos, Lucyna Gornicka, Robin Koepke, Ratna Sahay, Silvia Sgherri
4 februari
Capital flows to emerging markets have continued to be highly volatile since the Global Crisis. This column uses a new framework to show that country characteristics and policy responses matter for risks to future capital flows. It finds that good institutions support stable capital flows over the medium horizon, and while foreign exchange interventions seem to help mitigate downside risks to inflows caused by worsening global conditions, a tightening of capital flow measures in response to an adverse global shock is found to be counterproductive.
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A Phillips curve for the euro area – Laurence Ball, Sandeep Mazumder
4 februari
Inflation did not fall as much as the textbook Phillips curve would predict during Europe’s recessions of 2008 and 2011, and it has not risen as much as the theory would predict during recovery. This column argues that adapting the Phillips curve to use a weighted median of industry inflation rates results in a much better fit with observed inflation. Adding the effect of headline inflation shocks improves the fit further.
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South Korea’s Neo-Mercantilist Growth Engine Has Stalled – Mihai Macovei
4 februari
Capital accumulation and productivity growth are the outcome of free market investment and not of government spending. This is well known to Austrian school economists. Rothbard1 argued that only the free market can ensure an efficient allocation of factors of production whereas government sponsored investment is “either malinvestment or not investment at all, but simply waste assets.” Mises2 explained how restricting market competition shifts production to places with less favorable conditions, resulting in lower labor productivity and standards of living. Nevertheless, this point still needs to be understood by countries such as South Korea, whose growth model driven by state-led and export-oriented industrialization appears to have reached its limits.
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Ford Better Figure Out How to Sell Vehicles, And I Mean Globally & Pronto, Before it’s Too Late – Wolf Richter
6 februari
Ever since it got sidetracked by its “Smart Mobility” dream and blew billions on it, sales in its biggest markets have spiraled down. Not just in the US and China. Here are the ugly charts by market.
In a moment, we’ll venture into the bitter reality and ugly charts of how the number of vehicles Ford sells in the US, China, Europe, Canada, Australia, South America, Russia, Turkey, and other markets has been dropping – or plunging – year after year to where its global sales are now down 19% from the peak in 2016, as Ford disclosed when it filed its Annual Report (Form 10-K) with the SEC on Wednesday.
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***Socialism Always Fails – William L. Anderson
8 februari
The Nation, which enthusiastically has supported every totalitarian communist regime that has existed in the past century (and that includes Pol Pot’s Cambodia and North Korea) is now firmly riding the Bernie Sanders bandwagon. This article, entitled “Why American Socialism Failed—and How It Could Prevail Today,” unwittingly gives away the mentality of American socialists which claims all economic issues as being “solved” by the implantation of socialism—regardless of the actual economic outcomes.

Three years ago, I wrote “The End of Socialists is Socialism, Not Prosperity,” and this article follows some of the same themes. In that article, I argued that socialists do not necessarily believe that socialism produces better economic outcomes than capitalism—indeed, one would have to be willfully blind to fail to recognize the differences—but that socialists believe it doesn’t matter. Socialism is a moral imperative, and the only thing holding back the implementation of this system in the USA has been the failure of socialists to present a plausible alternative—something that socialists claim now is being done.
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How services boost goods exports – Andrea Ariu, Florian Mayneris, Mathieu Parenti
6 februari
Many large and successful firms sell both goods and services; yet economists and policymakers continue to consider the two as distinct sectors subject to their own market adjustments and specific policies. Based on Belgian data, this column argues that the most successful manufacturing firms thrive through selling services that are associated with their goods. Services increase the appeal of a firm’s products, thus allowing it to sell more and at higher prices in international markets. Considering goods and services separately in trade agreement negotiations is likely to miss part of the business and welfare gains and losses.
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***The Economy Is Not a Factory — Nor Should We Try to Make It One – Per Bylund
8 februari
A common issue with economists and political economists from left to right is that they misunderstand the market economy as simply being a set of production processes. We see this in Lenin’s statement that the Soviet Union should be run like one big factory. We see it in market socialists from Frederic Taylor to Oskar Lange attempting to respond to (and resolve) Mises’s argument that socialist economic calculation is impossible. And we see the same thing in the efficiency (and market failure) nonsense of Chicago school economists. The misconception is the same: that a working (and progressing) economy is about the management of existing production.
To be fair, if the economy is truly a matter of simply maintaining production processes, then it is certainly possible to rationally plan the whole thing. It may take more computing power than was possible in the 1920s and 1930s, but the data are all there. The problem is here only of a practical nature: to collect the data and to make sure the algorithms run smoothly enough to not cause delays in adjusting the central plan.
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Leverage risk and investment: The case of gold clauses in the 1930s – Joao Gomes, Mete Kilic, Sebastien Plante
9 februari
A joint resolution of US Congress in June 1933 invalidated gold clauses, which allowed for repayment in gold as well as paper, in public as well as private debt contracts. A series of lawsuits ensued, but in 1935 a complex and confused ruling by the Supreme Court determined that Congress’s action, while invalid, could be maintained. This column argues that about one-third of the dramatic drop in the aggregate investment of public firms over 1933 and 1934 is explained by these events. By 1936 nearly all of the, now positive, net investment is accounted for by the elimination of these leverage risks to corporate balance sheets.
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