Economische aanraders: Veren of Lood biedt u op zondag wekelijks een inkijkje in 22 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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Investors Do Not See “Transitory” Inflation – Daniel Lacalle
2 mei
The Federal Reserve and European Central Bank repeat that the recent inflationary spike is “transitory”. The problem is that investors do not buy it.
Inflation is always a monetary phenomenon, and this time is not different. What central banks call transitory effects, and the impact of supply chains are not the real drivers of inflationary pressures. No one can deny certain supply shock impacts, but the correlation and extent of the increase in prices of agricultural and industrial commodities to five-year highs as well as the abrupt rise of non-replicable goods and services to decade-highs have monetary policy to blame. Injecting trillions of liquidity makes more funds chase fewer goods and the rise in the real inflation perceived by citizens is much larger than the official CPI.
Take food prices. The United Nations Food Price Index is up 30% in the past five years and up 10% year-to-date (April 2021). The rise in food prices already caused protests all over the world in 2018 and it continues to reach new highs. The correlation in the price increase of most agricultural goods also shows that it is a monetary effect.
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Monetary Pumping and Idle Resources – Frank Shostak
5 mei
As a result of the recent stimulus policies employed by the US government and the Fed, most commentators are of the view that the risk of a deepening slump in the US economy on account of the covid-19 pandemic has now receded.
Some other commentators are not so certain that the risk has declined, arguing that the economy is still heading towards difficult times ahead. These commentators are of the view that to prevent the possible economic difficulties ahead authorities should continue with easy fiscal and monetary policies until the economy safely placed on the trajectory of stable economic growth.
Most commentators are of the view that by failing to act swiftly, authorities are running the risk of raising the cost of an economic slump in terms of idle or unutilized resources such as labor and capital.
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***Covid Has Triggered The Next Great Financial Crisis – Charles Hugh Smith
5 mei
What’s left are the ‘fatal synergies’ of soaring debt and leverage, diminishing returns on stimulus, the substitution of credit for savings and the coming deflationary tsunami that pops all the speculative bubbles.
Imagine a once modest but sturdy home built near a cliff to maximize the vistas. Over the decades, the foundation slowly degraded and the house moved imperceptably closer to the unstable edge of the cliff. Those who observed the slippage and the potential for eventual disaster were either derided as alarmists or ignored.
Given the enviable location and views, the home rose in value and a series of increasingly gaudy additions were added, completely obscuring the once-modest exterior with cheap imitations of long-lasting, time-tested materials (plastic trim and brittle fake-marble veneers). The foundations of these ostentatious additions were slapdash, shallow and poorly made, as the goal was not durability but appearance.
The low-quality additions accelerated the slide to the unstable cliff edge, and in 2019 the viewing deck broke away and crashed into the canyon below. The repairs were hasty and the residents were assured all was well–in fact, better than ever.
In 2020, the weak foundation of the gaudiest, lowest-quality addition crumbled. The response of the owners was to fill the widening crack in the decaying structure and spray on a new coat of paint. There–good as new, the residents were told.
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Bank runs and central bank digital currency – Eric Monnet, Angelo Riva, Stefano Ungaro
1 mei
One of the concerns in the debate on central bank digital currency is whether the ability for depositors to hold an account at the central bank could trigger a run on the banking system. This column looks back to the French Great Depression of 1930-1931, when savers had a safe alternative to banks in the form of government-backed savings institutions, and shows that the existence of safe deposits other than banks can play a substantial role in triggering bank runs. The study also provides insights into two elements of the current discussion: ceilings on safe deposits and interest rates.
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Rising Bond Yields Threaten Financial Market Stability – Alasdair Macleod
6 mei
There is a growing recognition in financial circles that price inflation will increase significantly in the near future, and official estimates that it will be a temporary phenomenon limited to an average of 2% are overly optimistic. There is, therefore, increasing speculation about the need for interest rates to rise.
The bond yield on 10-year US Treasuries has already more than doubled over the last year. It is in the nature of market cycles for equity and other financial assets to continue to rise in value during an initial increase in bond yields. It is the second increase that can be expected to turn bullish optimism about the economic outlook into the beginning of a bear market. Financial markets, already dislocated from fundamental realities, appear to be acutely vulnerable to such a change in sentiment.
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The Fed Embraces Its Inner Zimbabwean – Doug French
6 mei
May is on its way, and the old investment saw, “Sell in May and go away,” will be tested once again. Jared Blikre, writing for Yahoo Finance, provides the history behind what may or may not be good advice. “The full axiom was originally, ‘Sell in May and go away, and come on back on St. Leger’s Day,’” he explains. “It has its roots in the City of London. Financial professionals would go on holiday in May for approximately four months to escape the summer heat and return for the St. Leger derby in mid-September.”
While we’re told there’s a pent-up demand for travel, people’s phones and trading apps will still be close by, begging for attention in the summer sun. Robinhood and Coinbase alerts won’t hide from the weary traveler parked under an umbrella, toes in the sand, piña colada in hand.
Dogecoin will not get the hell out of Dodge this summer. The cryptocoin, created as a joke, is surprisingly not obscure. My newest doctor and I, while he drained the goo from a ganglion cyst on my wrist, discussed the trading action of dogecoin after I mentioned I had done some work on booms and busts.
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US inflation: Set for take-off? – Laurence Ball, Gita Gopinath, Daniel Leigh, Prachi Mishra, Antonio Spilimbergo
7 mei
How high is the ongoing US fiscal expansion likely to push inflation? This column presents new evidence that underlying (weighted median) CPI inflation has so far steadily declined since the start of the COVID-19 crisis, broadly as predicted by its historical Phillips curve relation. If the ongoing fiscal expansion reduces unemployment to 1.5-3.5%, as some predict, underlying inflation could rise to about 2.5-3% by 2023. If the fiscal expansion is temporary and monetary policy remains clearly communicated and decisive, there is little risk of a 1960s-type inflationary spiral.
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Beijing’s Elusive Bid for Pricing Power on Rare Earths – Damien Ma
5 mei
From ventilator and chip shortages to what kind of ships traverses through which canals, the linkages and nodes of the global economy have rarely been in the spotlight as much as they have over the last 12 months. Many of these disruptions are short-term ones, but they have also brought attention to longstanding challenges of supply chain resilience and dependence.
One of those challenges is that of China’s grip on rare earth elements (REEs), a key input in permanent magnets that are in everything from smart phones and wind turbines to electric vehicles and missile guidance systems.
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US Chamber Of Commerce Urges Biden To End Pandemic Handouts: “Paying People Not To Work” Is Killing The Recovery – Tyler Durden
7 mei
Update (1055ET): Right on cue, just after Minneapolis Fed chief Neel Kashkari admitted that expanded unemployment insurance was keeping workers out of the labor market, contributing to Friday’s disappointing employment number, the US Chamber of Commerce released a statement calling for ending the $300 weekly supplemental benefit.
Executive Vice President and Chief Policy Officer Neil Bradley released the following as a statement, saying that while there might have been a time when the benefit was needed, that time has now passed. “Paying people not to work is dampening what should be a stronger jobs market” and is hurting the overall recovery, he said
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The Dark Side of Yield Curve Control Policy – Thorsten Polleit
3 mei
The Bank of Japan has been pursuing a monetary policy of “yield curve control” (YCC) since 2016, with which it keeps short and long-term interest rates for Japanese debt securities at around 0 percent. To do this, it buys massive amounts of government bonds. The Central Bank of Australia has been proceeding in a very similar way since March 2020. It keeps the three-year interest rate at 0.1 percentage points through bond purchases. The European Central Bank (ECB) seems to be increasingly warming up to the idea of not only controlling short-term but also long-term interest rates or imposing a cap on them.
The idea of controlling interest rates is not new. It has already been practiced in the United States of America: from April 1942 to March 1951, the US central bank set short-term interest rates at three-eighths of a percent and long-term interest rates at 2.5 percent. The reason: the Americans financed their World War II expenditures primarily by issuing new debt, which was bought to a large extent by the US central bank and thus monetized; to keep the financing costs low, interest rates were capped. When the Treasury Accord terminated interest rate control, the purchasing power of the greenback was reduced by almost 40 percent.
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***What’s Behind the WTF Spike in Used-Vehicle Prices? My Gut Says, it Can’t Last. But if it Lasts, It’s Scary-Crazy Inflation – Wolf Richter
7 mei
And if it doesn’t last after the stimmies are gone, dealers will sit on massively overpriced collateral, which could get messy.
This has been going on for months: Used-vehicle prices spiking from jaw-dropper to jaw-dropper, and just when I thought prices couldn’t possibly spike further, they do.
Prices of used vehicles that were sold at auctions around the US in April spiked by 8.3% from March, by 20% year-to-date, by 54% from April 2020, and by 40% from April 2019, according to the Used Vehicle Value Index released today by Manheim, the largest auto auction operator in the US and a unit of Cox Automotive.
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The “Miracle Recovery” Narrative: We’ll Just Print Our Way to Prosperity – Claudio Grass
3 mei
Over the last few weeks, we’ve been constantly bombarded by news reports and “expert” analyses celebrating an incredible global economic recovery. They’re not even presented as projections or expectations anymore, but as a fact, as though the return to vibrant growth were already underway. Stock markets certainly seem to agree, going from record high to record high while all the political and institutional leaders congratulate themselves on a job well done.
Although this is largely the consensus in most Western economies, this jubilant, victorious mood feels most bizarre in Europe. Celebrating a recovery during a third round of total lockdowns, closed shops, travel bans, and millions out of work seems like cognitive dissonance at best, or barefaced political hypocrisy at worst. France, Italy, Germany, Austria, they’ve all launched yet another round of business shutdowns and heavily restricted social activities and freedom of movement. And they did that to combat what they labeled a terrible, deadly third wave of infections and hospital overcrowding. In fact, to convince the public of the dire need to go back into lockdown, they painted postapocalyptic visions of a virus-overrun nation and sounded the alarm on the imminent collapse of their public health systems. Under these extreme conditions, these existential threats, closely resembling a state of national emergency, it is really quite challenging to see how the economy might be flourishing.
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High-speed rail may hurt intermediate places: The role of long-haul economies – Hans Koster, Takatoshi Tabuchi, Jacques-François Thisse
9 mei
Modern transportation infrastructure can help foster cheaper travel and a better-connected economy. This column shows that improvements in transportation can affect the location choices of firms in ways that are often beneficial to large regions, but may be detrimental to small intermediate regions through job losses. Using data from Japan’s high speed rail network, the authors confirm that ‘in-between’ municipalities that are connected to the network witness a sizeable decrease in employment.
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Consumer Credit Explodes Higher As Americans Rediscover Their Love For Credit Cards – Tyler Durden
7 mei
Just yesterday, we showed that only a few quarters after banks effectively shut down, refusing to give out C&I, credit card or auto loans and mortgages to virtually anyone as a result of record Draconian credit standards, credit standards saw a complete U-turn and as of April, lending standards for credit cards and autos were the loosest on record.
This was not lost on US consumers who after suffering through a miserable 12 months in which they dutifully repaid their credit card debt like total idiots who acted responsibly (instead of doing what US corporations are doing and loading up on even more debt to ensure they all get bailed out during the next crisis), in March aggregate consumer credit surged by $25.8BN, smashing expectations for the 2nd month in a row (as a reminder February was the biggest beat on record) and barely slowing down from last month’s massive $26.1BN increase.
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The reversal interest rate: A new motive for countercyclical macroprudential policy – Matthieu Darracq Pariès, Christoffer Kok, Matthias Rottner
2 mei
The prolonged period of negative interest rates in advanced economies has raised concerns that further monetary policy accommodation could produce contractionary effects. Using a non-linear macroeconomic model fitted to the euro area economy, this column demonstrates that the risk of hitting the ‘reversal interest rate’ depends on the capitalisation of the banking sector. Consequently, the possibility of the reversal rate creates a novel motive for macroprudential policy, such as a countercyclical capital buffer. The new motive emphasises the strategic complementarities between monetary and macroprudential policy.
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***Unemployment Crisis, “Labor Shortage,” or Out-of-Whack Labor Market – Which Is It? – Wolf Richter
7 mei
The bizarre phenomenon of companies complaining about “labor shortages” amid dropping job applicants, while 9.8 million are “unemployed,” and 16.2 million people claim unemployment benefits.
Employers of all types – companies, governments, and nonprofits – reported that they added only 266,000 workers to their payrolls in April, according to the Bureau of Labor Statistics today. This contrasted with the ADP Employment Report yesterday that found that 742,000 private sector jobs had been created, based on payroll data. The total number of jobs at these establishments, at 144.3 million, was still down by 8.2 million from February 2020 (green line).
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How Trillions in Newly Printed Money Created a Labor Shortage – Ryan McMaken
3 mei
If you’re tired of binge-watching Netflix, there are likely a few restaurants in your neighborhood who would love to hire you. A job might help relieve the boredom.
On the other hand, why work when one can just be one of the more than 6 million former workers now collecting “pandemic unemployment insurance”? Those millions are in addition to the 3.6 million former workers collecting ordinary unemployment insurance. For many workers, these benefits now total $300 per week. In March, President Biden extended the program until September.
And then there are the many millions more who have recently received a piece of the third round of stimulus payments. All three bailouts combined to total around $460 billion in checks mailed out to Americans.
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Why rich parents have rich children – Sreevidya Ayyar, Uta Bolt, Eric French, Jamie Hentall MacCuish, Cormac O’Dea
5 mei
The children of rich families tend to go to better quality schools, have higher cognitive skills, and complete more years of schooling. This column exploits unique data from the National Child Development study to determine these early childhood factors go on to have long-run impacts on an individual’s lifetime earnings, perpetuating a cycle of wealth. These results suggest that policies that equalise investments, such as improving school quality, could promote income mobility.
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***If Robots Are Replacing People, Why Is There A Labor Shortage – Tyler Durden
9 mei
After Friday’s bizarro jobs report, which was the 2nd biggest miss to expectations on record as a result of millions not looking for work thanks to Biden’s trillions in stimmy checks which pay unemployed Americans more for sitting on their ass than having a job, two seemingly contradictory stories are circulating in capital markets according to BofA’s Ethan Harris. One is about relatively widespread labor shortages in the US. The other is about the robotics revolution and machines replacing people. How will this play out?
According to the BofA economist, the short answer to the question above is that we need to be clear about the time frame. While the COVID crisis has likely sped up structural changes in the labor market, these multi-decade changes are much slower than the dynamics of the business cycle. For example, economists from MIT and Boston College estimate that robots could replace 2 million workers in manufacturing by 2025. That could mean about 400,000 jobs displaced each year. To put that in perspective, BofA expects US job growth to average more than 500,000 per month this year and next.
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Political Competition vs. Market Competition – Gustave de Molinari(+1912)
III. The Natural Law of Competition For a Subsistence
1. Animal Competition.—A struggle to acquire the means of living has been called competition for a subsistence. It invariably appears so soon as the natural supply of material ceases to suffice for the demands of every member of the community, the weak and strong alike. Early man, as yet uninstructed in artificial production, depended solely upon the provision of nature, and the consequences of a deficit were soon felt in a society living on the products of hunting and the natural fruits of the earth. The more effective members, the fleet hunter and skilled forager, excelled and lived; the feeble and less fitted for these tasks languished and passed away. Hence the original struggle, first manifestation of a principle which rules all created things, and which we have named Animal Competition.
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Hey Fed, Explain Again How Making Billionaires Richer Creates Jobs – Charles Hugh Smith
7 mei
Despite their hollow bleatings about ‘doing all we can to achieve full employment’, the Fed’s policies has been Kryptonite to employment, labor and the bottom 90%–and most especially to the bottom 50%, the working poor that one might imagine most deserve a leg up.
As wealth and income inequality soar to new heights thanks to the Federal Reserve’s policies of zero interest rates, money-printing and financial stimulus, the Fed says its goal is to create more jobs. Really? OK, let’s look at how the Fed’s doing with that.
I’ve assembled a chart deck to display the consequences of Fed policies on debt, wealth inequality and employment. Recall what Fed policies actually do:
1. Zero interest rate policy (ZIRP) destroyed the low-risk return on savings and money market funds, stripping everyone not in the Fed-privileged rentier-speculator-financier class of safe, real returns on capital.
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***Insights into Risk: Taleb and Tyson – Charles Hugh Smith
3 mei
Events that devastate the majority financially greatly enrich the few who bet on non-linear dynamics.
I see the same question in forums, threads, articles and emails: what can I do to protect myself and my family from whatever lies ahead?
Given the uncertainties and extremes that are so evident, recognizing risk is a useful first step, a recognition that is very much out of fashion. If we glance at the charts of margin debt (loans taken against one’s stock portfolio) which is at record highs, and short interest (bets that stocks will drop) which is at record lows, it seems the primary risk on investors’ minds is FOMO (fear of missing out) of all the fat, juicy guaranteed gains just ahead.
For the few still asking about the source of risk, the general answer takes one of two paths: inflation leading to hyper-inflation or a deflationary collapse of defaults and popping asset bubbles.
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OPENing up military innovation: The causal effects of ‘bottom up’ reforms to US defence research – Sabrina Howell, Jason Rathje, John Van Reenen, Jun Wong
8 mei
In recent decades, US defence R&D seems to have lost its lustre. To combat the declining innovation, in 2018 the US Air Force reformed its contracting procedures to allow applicants more freedom to suggest projects with potential military benefits. This column uses data on applications and winners from such competitions to assess the effects of the reform. It finds that the ‘open’ programme attracts new and younger firms, increases future venture capital investment, and increases patenting. Government R&D could thus benefit from more bottom-up, decentralised approaches to promote innovation in the public sector.
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