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 Fed Has No Choice But to Return to Ultra-Low Interest Rates – Thorsten Polleit
4 juni
The current boom is heavily built on credit. This is because in today’s fiat money regime central banks, in close cooperation with commercial banks, increase the quantity of money by extending loans – loans that are not backed by ‘real savings’. The artificial increase in the supply of credit pushes market interest rates downwards – that is, below the levels that would prevail had there been no artificial increase in bank credit supply.
As a result, savings decline, consumption increases and, investment takes off, and a “boom” gets going. However, such a boom can only last so long. Its continuation rests on more and more credit being fed into the system, provided at ever lower interest rates. The last ten years provide a good illustration: The Fed’s lowering of interest rates and monetary expansion in the financial and economic crisis 2008/2009 has helped the banking industry to get back to its business of churning out more and more credit
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Futures forecasts – John H. Cochrane
7 juni
The market is almost always wrong about what the FED will do.
Torsten Slok at DB updates this lovely graph on occasion. Here’s what it means. Fed fund futures are essentially bets on where the Federal funds rate will be at various points in the future. Thus, you can read from the dashed lines the market’s guess about where the federal funds rate will go — assuming that the bets are priced to have an even chance of winning or losing.
Reading it that way, the market was systematically wrong from 2009 to 2016. It’s something like springtime in Chicago — this week, 40 degrees and raining. Next week, 75 and sunny. Week after week after week. In 2017, the market finally changed expectations to say, no, fed funds rates are not rising — just in time to miss the actual rise in federal funds. Now, as in the blue line, market forecasts say there will be a big decline. But, as Torsten points out, why would the market be right today?
So what does this graph mean? Are market practitioners really that dumb? After all, there is a lot of money to be made here. When the graph is upward sloping — as the entire yield curve was upward sloping from 2009-2016 — and so long as rates don’t rise, you can make a fortune borrowing short and lending long. And vice versa. In short, the difference between forward rate (right end of dashed lines) and spot rate (current fed funds rate) does a lousy job of forecasting where the spot rate will go — and thus, mechanically, is a good signal of the extra return, positive or (lately) negative you will get by holding long-term bonds.
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Is the Tech Bubble Bursting? – CHarles Hugh Smith
5 juni
There are two other trends that don’t attract quite the media attention that soaring profits do.
Is the decade-long tech bubble finally popping? Tech bulls are overlooking the fundamental reality that the drivers of Big tech’s phenomenal growth–financialization and expansion into mobile telephony– are both losing momentum.
A third dynamic–Big Tech monetizing privately owned assets such as vehicles and homes– has also reached saturation and is now facing regulatory barriers.
Let’s start with market saturation: of the 5.3 billion adults on earth over 15 years of age, 5 billion now have a mobile phone and 4 billion have a smartphone: The end of mobile (Benedict Evans). As for teens between 10 and 15, only the truly impoverished don’t have a mobile phone of some kind.
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US Cleanest Dirty Shirt Among Manufacturing Giants: Germany at Crisis Level. China, Japan, South Korea Contract – Wolf Richter
3 juni
Exports-at-all-costs for economic growth comes home to roost.
Manufacturing in the biggest manufacturing countries, particularly those focused on exports, has hit various levels of malaise, ranging from slowing growth to panic-inducing decline, according to the manufacturing Purchasing Managers Indices for May released on Monday. The PMI data shows that in the US, manufacturing is growing more slowly, but it’s still growing, and so the US continues to be the cleanest dirty shirt in this bunch.
The US Manufacturing PMI released by the Institute of Supply Management for May, released this morning, showed that economic activity in the US manufacturing sector expanded in May, but at a slower rate. As with all these PMIs, a value over 50 indicates expansion, and the more the value is above 50, the faster the pace of expansion.
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The ECB Continues to Incentivize Reckless Behavior – Daniel Lacalle
8 juni
The European Central Bank continues to disproportionately inflate the debt bubble of the Eurozone, while the economic slowdown of the main European economies worsens. What was designed as a tool for governments to buy time in order to carry out structural reforms and reduce imbalances, has become a dangerous incentive to perpetuate the excessive spending and increase debt under two very harmful and wrong excuses: That there is no problem as long as debt is cheap and that there’s no inflation.
Cheap borrowing is not an excuse to increase debt. Japan has a very low cost of debt and the cost of servicing Japan’s public debt is almost half of the state’s tax revenues. Japan’s debt is 15 times higher than the tax revenue collected by the government in 2018.
The Eurozone official inflation since 2000 shows an increase of 40% in CPI while productivity growth has been negligible and salaries and employment remain depressed.
Monetary policy has gone from being a tool to support reforms to an excuse for not implementing them.
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Fiscal sustainability in Japan: What to tackle – Selahattin İmrohoroğlu, Sagiri Kitao, Tomoaki Yamada
7 Juni
Japan leads the advanced economies in the speed and magnitude of demographic ageing and has the highest debt-to-output ratio. Rising social insurance expenditures are projected to far outpace revenues and to create a fiscal burden. This column presents sobering projections for Japanese government debt in the absence of reform, but argues that a combination of policies, including policies to encourage greater labour participation by women and to enhance productivity, could achieve sustainability.
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China Abandoned Hard-Core Socialism — So Progessives Abandoned China – William L. Anderson
6 juni
In September 1972, the late John Kenneth Galbraith, who served as his generation’s Paul Krugman, visited China for a few weeks and wrote a book, “A China Passage,” effusively praising the communist state for its alleged economic achievements. That Mao’s China at the time was gripped in the destructive Cultural Revolution apparently did not discourage Galbraith from claiming that U.S. society should be more like that of China.
To be honest, Galbraith was not a “ useful idiot,” since he was a full-blown socialist who (like Krugman) believed that intelligent men like him should be in charge of western economies, and especially that of the USA. (Such viewpoints, in light of what we know about socialism, certainly are idiotic, but I doubt they are useful.) Thus, he could declare that people in China were economically better off than his American counterparts because the Mao suits worn by nearly everyone represented a better dress than what he said he observed on American college campuses. Medical care in China, he said, was superior to that of what existed in the United States. How could he know that? He could know that because he was John Kenneth Galbraith.
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Fitch Cuts Pemex to Junk, on Track for Largest “Fallen Angel” in History. Cuts Mexico to Near Junk – Don Quijones
7 juni
President of Mexico not amused: “In three years there was no investment in exploration, no investment in drilling wells, and they rated Pemex very highly. Now that there is investment, they downgrade Pemex.”
After months of firing warning shots, one of the big three ratings agencies, Fitch Ratings, has downgraded to “junk” (BB+) about $80 billion of Pemex debt — much of it denominated in US dollars and held externally — and maintained its ‘negative’ rating outlook, meaning another downgrade is likely. The company is owned by Mexico.
The day before, Fitch downgraded Mexico’s sovereign debt to ‘BBB’ — only a couple of notches above junk.
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Two Years After Trump’s Exit from the Paris Agreement, It’s Proven To Be a Farce – Robert P. Murphy
5 juni
Two years ago, President Trump announced he would begin the formal process of withdrawing the United States from the Paris Climate Agreement. At the time, the media and climate alarmists went ballistic—for example, famed physicist Stephen Hawking said Trump’s action would push Earth “over the brink.” And yet, as I’ll show in this article, the Paris Agreement has always been a giant exercise in symbolism over substance; it wouldn’t come close to solving the climate “problem,” even on the terms of the alarmists. Whether one thinks climate change is a minor issue to watch, or a full-blown existential crisis, either way Trump’s action should be welcomed. By challenging the reverence for the Paris Agreement, Trump’s pullout gave permission for scientists and others to think about alternative approaches rather than globally-coordinated political control over energy and transportation.
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The price of capital goods: A driver of investment under threat – Weicheng Lian, Natalija Novta, Evgenia Pugacheva, Yannick Timmer, Petia Topalova
7 Juni
The dramatic decline in the relative price of capital goods has been an important – but overlooked – driver of real investment. This column analyses cross-country price data to establish that deepening trade integration and productivity growth have both contributed to this decline. The erosion of support for international trade and sluggish productivity growth may limit further declines in relative prices of capital goods, which could negatively affect real investment rates.
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Interest rates, time-preference and gold – The interest rate fallacy – Alasdair MacLeod
30 mei
There is a widespread assumption that interest rates represent the cost of borrowing money. In the narrow sense that it is a rate paid by a borrower, this is true. Monetary policy planners enquire no further. Central bankers then posit that if you reduce the cost of borrowing, that is to say the interest rate, demand for credit increases, and the deployment of that credit in the economy naturally leads to an increase in GDP. Every central planner dreams of consistent growth in GDP and they seek to achieve it by lowering the cost of borrowing money.
The origin of this approach is mathematical. William Stanley Jevons in his The Theory of Political Economy, first published in 1871, was one of the three discoverers of the theory of marginal utility and became convinced that mathematics was the key to linking the diverse elements of political science into a unified subject. It was therefore natural for him to treat interest rates as the symptom of supply and demand for money when it passes from one hand to another with the promise of future repayment.
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The Popular (and Wrong) Interpretation of the “Industrial Revolution” – Ludwig von Mises
4 juni
It is generally asserted that the history of modern industrialism and especially the history of the British “Industrial Revolution” provide an empirical verification of the “realistic” or “institutional” doctrine and utterly explode the “abstract” dogmatism of the economists.1
The economists flatly deny that labor unions and government prolabor legislation can and did lastingly benefit the whole class of wage earners and raise their standard of living. But the facts, say the antieconomists, have refuted these fallacies. The statesman and legislators who enacted the factory acts displayed a better insight into reality than the economists. While laissez-faire philosophy, without pity and compassion, taught that the sufferings of the toiling masses are unavoidable, the common sense of laymen succeeded in quelling the worst excesses of profit-seeking business. The improvement in the conditions of the workers is entirely an achievement of governments and labor unions.
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Institutionalized nonsense – John H. Cochrane
6 juni
When, last week, the Treasury issued its currency manipulation report, I thought it was a joke. Treasury put Germany and Italy on its “monitoring list” of countries suspected of “currency manipulation.”
Germany and Italy are, of course, part of the Euro, the whole point of which is that they cannot, individually, “manipulate” their currencies, whatever that means. It is precisely this inability to devalue — to “manipulate” the Drachma to regain “competitiveness” (another meaningless term) — that conventional wisdom bemoaned of Greece.
I had a little chuckle, envisioning some frustrated mid-level Treasury economist bemoaning the trade and currency idiocy floating around Washington, putting this little message in a bottle to see if anyone noticed the reductio ad absurdum. If so, hello there, somebody noticed.
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Here’s Why the 1998-99 Melt Up in Stocks is Not an Appropriate Analog – Bryce Coward
7 juni
As expectations for a Fed easing cycle have gained momentum, we’ve seen an abundance of comparisons between the current period and the late 1990s. In that period the Fed cut rates and stocks simultaneously levitated into the stratosphere. If we are to follow the logic that the rate cuts in 1998 caused the stock market to rise, then it follows that rate cuts today will cause the stock market to rise. We think that comparison is dangerously off base and will explain why in this post.1997 and 1998 was a busy time for financial market news flow. Over that period the Asian financial crisis was unfolding full steam ahead, Russia had defaulted on its debt and the ruble lost 70% of its value, and in September of 1998 Long Term Capital Management (LTCM) failed, requiring a bailout from private lenders. Amid all that turmoil US stocks lost 19% of their value between July and October of 1998. LTCM was the last straw for the Fed and they began cutting the Fed Funds rate at the end of September. Stocks bottomed two weeks later and then staged a 48% rally into the summer of 1999. Economic activity was extremely strong over the period.
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Want More Investment and Entrepreneurship? Protect Private Property – Kaycee Ikeonu
3 juni
The principles of economic thought tells us that investments would flow to places with less capital accumulation, the reason being is that there would be less competition, thus a higher rate of return on investments. Indeed, as Adam Smith noted in the Wealth of Nations, capital accumulation would be the inevitable hindrance to economic growth.
However, this not as we have it in the real world. Many countries, especially those in the Global South, have very little capital, but yet aren’t flooded with investments. The reason for this is simple: there is no assurance that their property and investment would be protected by the law.
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***A ‘’Gusher Of Red Ink’’ for US Shale – Nick Cunningham
8 juni
Over 170 shale companies have declared bankruptcy since 2015, affecting $100 billion in debt, including 8 bankruptcies already this year.
Oil prices are off more about 20 percent in the last two weeks on growing fears of a brewing economic recession. Commodities of all types have been hammered by the pessimism.
“Fear of global economic growth slowing,” said Peter Kiernan, lead energy analyst at the Economist Intelligence Unit (EIU), according to Reuters, “afflicting the entire energy complex with worries that demand growth will be bearish this year.” Prices for coal, natural gas and LNG, and crude oil have plunged.
“The continued escalation in trade tensions and broad-based fall in manufacturing…suggest that the downside risks to growth are becoming more prominent,” Morgan Stanley analysts said in a note.
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In Africa, Poverty Grows Because of the Elites’ Anti-Capitalism – Ferghane Azihari
5 juni
The flagship African Union (AU) project, the African Continental Free Trade Area (AfCFTA), has finally come into force this week. At last.
Global expansion of the market economy has generated unprecedented prosperity for all of humanity. Now, Africans want to build on these gains. The benefits have been clear. Nearly 80% of human beings lived in extreme poverty during the early 20th century, compared to just over 10% today. By the end of the Second World War, half of the world’s population was still suffering from undernourishment. But now this scourge now affects “only” 10% of individuals worldwide.
Generally speaking, humanitarian indicators worldwide continue to improve. Life expectancy is progressing. Infant mortality is falling. Fewer and fewer children have to work to survive. Illiteracy is becoming the exception.
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What Would It Take to Spark a Rural/Small-Town Revival? – Charles Hugh Smith
7 juni
Recent research supports the idea that this under-the-radar migration is already under way.
The decline of rural regions and small towns is a global phenomenon, and the causes are many but boil down to two primary dynamics:
1. Cities and megalopolises (aggregations of cities, suburbs and exurbs) attract capital, infrastructure, markets and talent, and these are the engines of job creation. People move to cities to find jobs.
The San Francisco Bay Area megalopolis of roughly 8 million people in 9 counties and 101 cities offers an example of this dynamic. The region added over 400,000 new jobs since the 2008-09 Global Financial Crisis and over 1 million additional residents since the early 2000s.
In effect, the region absorbed an entire new city with 400,000 jobs and 1 million residents. Roads and public transport did not expand capacity, and housing construction lagged. As a result, traffic is horrific, homelessness endemic and housing costs are unaffordable to all but the favored few.
Rural / small town regions cannot match these employment opportunities and so people move, reluctantly or enthusiastically, to overcrowded, horrendously costly urban zones to find jobs.
2. Globalization has lowered the cost of agricultural commodities by exposing every locality to globally set prices (supply and demand).
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Three Ways Capitalists Make Workers Better Off – Bradley Thomas
7 juni
For several generations now, one of the loudest criticisms of capitalism is summed up by dismissively characterizing the working class under free markets as being “free to starve.”
For instance, this 2017 Socialist Worker article described Marx’s critique of capitalism as a system in which “workers are free in a ‘double sense’— free to work or free to starve.”
In other words, workers face no choice other than to sell their labor to owners of capital to ensure their own survival.
Socialists rally behind this critique as if it is a unique feature of a capitalist economic system for people to be compelled to work to avoid starvation.
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