Economische aanraders 09-10-2016
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.
The CETA Trade Pact Will Add to the Groundswell of Discontent: Why We Need More Informed Decision-Making – Servaes Storm, Pierre Kohler
Things have changed. Until just a few weeks ago it was easy for economists and trade policymakers to discard the massive waves of protest across European countries against two controversial transatlantic free trade agreements as mere “irrational”, “protectionist” or “dangerously populist” impulses. But not so anymore. About the same time when hundreds of thousands of concerned German citizens took to the streets to protest against the Transatlantic Trade and Investment Partnership (TTIP) and the Comprehensive Economic and Trade Agreement (CETA), a growing chorus of senior policymakers started urging governments to heed the rising discontent, anxiety and economic insecurity among the vast majority of the populations in the advanced world.
Most prominently, in a speech titled “Making Globalisation Work For All” given in Canada on September 13th, I.M.F. managing director Ms. Christine Lagarde stated that many people felt they “lack control” in a “system [that] is somehow against them” and that growing inequalities have “added to a groundswell of discontent, especially in the industrialized world.” Lagarde’s plea for boosting support for low-income workers and reducing inequality came on exactly the same day Mr. Mario Draghi, the president of the E.C.B. stated —in his Premio De Gasperi lecture in Trento, Italy—that the E.U. should pay greater attention to “the demands of those left behind by a society built on the pursuit of wealth and power”, and do more to help globalization’s losers by moderating its outcomes. Globalization has certainly caused dislocation and hardship, as the recent McKinsey report titled “Poorer than Their Parents? Flat or Falling Incomes in Advanced Economies” found: 65 to 70% of households in 25 advanced economies had experienced no real income growth between 2005 and 2014, up from just 2 percent of households with stagnant incomes during 1993-2005. This was known, of course, but McKinsey’s report helped publicize the facts.
Uncle Sam May Tip Deutsche Bank Over the Edge – Justin Murray
On September 16, 2016, the US Justice Department threatened Deutsche Bank with a $14 billion fine for bond sales practices from before the 2007 Financial Crisis. Predictably, the share price immediately collapsed 8% and the financial markets went into a tizzy over equity holders losing value. This also rippled into other parts of the banking sector, for example hitting share prices of the Royal Bank of Scotland by 4%. For reference, the total market valuation as of this writing, September 29, 2016, for Deutsche Bank is 16 billion Euros, meaning the penalty the Justice Department is seeking is 88% of the total valuation of the bank and the announcement has wiped out 20% of the market value since the beginning of September.
*** Heavy Truck Orders Plunge, Worst September since 2009 – Wolf Richter
Orders for Class 8 trucks – the rigs crisscrossing the US highway system that keep the nation supplied – plunged 27% in September to 13,791, according to FTR Transportation Intelligence. It was the worst September since 2009.
The year 2014 had been great. Nearly 300,000 Class 8 trucks were built. 2015 started out even stronger, and the industry anticipated – in what has become a series of false hopes inspired by QE-nurtured optimism about capital expenditures – that 327,000 heavy trucks would be ordered, which would have been a record.
But then the trucking industry began to sputter as the goods producing economy was swooning, and soon trucking companies, beset by overcapacity, began to curtail their purchases from heavy-truck dealers, and dealers with inventories piling up, began to cut orders to manufacturers. As 2015 wore on, orders continued to fall. Despite the strong beginning, orders ended the year down 5.3% from 2014, to 284,000 trucks.
Africa’s trade finance market: Facts and challenges – Eugene Bempong Nyantakyi, Mouna Ben Dhaou, Lamin M Drammeh, Mouhamadou Sy
Boosting Africa’s intra-regional and international trade requires a good understanding of the African trade finance landscape, including the identification of markets where the need is greatest. This column presents some of the major patterns of the market in Africa using primary survey data from commercial banks. Banks intermediate almost a third of trade activities across the continent, but still reject a significant value of trade finance applications mainly due to weak client creditworthiness and inadequate collateral.
Central Banks Sheepish as Savers Keep Saving – Victor Xin
How to Get a Higher Return for Savers and Find a Path Toward Higher Investment
The rise in the personal saving rate following the Great Recession was an unexpected development in light of the Federal Reserve’s effort to foster stronger consumer spending via ultra-accommodative monetary policies. From the perspective of some policymakers, a higher saving rate exerts downward pressure on the “neutral interest rate” (i.e., a short-term real rate r* where monetary policy is neither contractionary nor expansionary) and increases the risk of secular stagnation.
Concerned over prolonged low growth and below-target inflation despite years of policy stimulus, recent proposals have advocated aggressive measures to boost demand, such as raising the Fed’s inflation objective above 2%, or to discourage saving via fiscal measures.
However, there are growing signs that higher saving is not an economic anomaly but a product of the very policies designed to spur growth and inflation. That is, higher saving is a product of the public’s response to an arduous path toward saving goals with rates near the zero lower bound. From this perspective, future policies should be mindful of the low rates’ diminishing returns. Instead of forcing a reluctant public to spend on the premise of substitution effect, a more normal rates regime would likely be effective to induce higher investment by aligning policy with the public’s interest to meet future obligations.
Fed Vice Chair Fischer Admits Fed is Waiting for Godot – Wolf Richter
In his keynote speech on the usual suspects of central-bank topics at the Institute of International Finance’s big shindig in Washington DC today, Fed Vice Chair Stanley Fischer nevertheless managed to develop a new theory for a fourth Fed mandate.
This new mandate would come on top of the third mandate: inflating asset bubbles at all costs (unlimited asset price inflation). The other two mandates are “full employment” (whatever that means) and “price stability,” which is ironically defined as consumer price inflation, the way the Fed counts it, of at the moment 2%, and a lot more in most people’s real-life experience.
Rethinking Macroeconomic Theory Before the Next Crisis – Marc Lavoie
While many countries throughout the world have faced severe financial crises over the last decades, and while the Japanese stagnation and the 1997 Asian financial crisis did induce some additional interest for the introduction of banking and finance in macroeconomic theory, it is only with the advent of the US subprime financial crisis that macroeconomic and monetary theories put forward by mainstream economists have started to be questioned.
Still, there are at least two views about the role played by economic theory in generating the Global Financial Crisis, which, depending on one’s opinion, can be ascertained to having started at any of the three following times: when real estate prices in the US started to decline in the summer of 2006, when interbank money markets first froze in Europe during the summer of 2007, or when it was announced that the Lehman Brothers investment bank declared bankruptcy on the 15 th of September 2008. If we take the earlier date, then we can say that the financial crisis and its aftermath have been going on for nearly ten years.
The IMF and All The Other Losers – Raúl Ilargi Meijer
I read a lot, been doing it for years, about finance and affiliated topics (a wide horizon of them), which means I’ve inevitably seen a wholesale lot of nonsense fly by. But for some reason, and I think I know why, Q3 2016 has been gunning for a top -or bottom- seat in that regard, and Q4 is looking to do it one better/worse.
Apart from the fast increasingly brainless political ‘discussions’ that don’t deserve the name, in the US and UK and beyond, there are the transnational organizations, NATO, IMF, EU and all those things, all suffocating in their own hubris, things I’ve dealt with before in for instance Globalization Is Dead, But The Idea Is Not and Why There is Trump. But none of it still seems to have trickled through anywhere that I can see.
The end of growth exposes the stupidity and ignorance of all but (and even that’s a maybe) a precious few (of our) ‘leaders’. There is no other way this could have run, because an era of growth simply selects for different people to float to the top of the pond than a period of contraction does. Can we agree on that?
*** The Great Debt Unwind: Business Bankruptcies Soar 38% – Wolf Richter
Something funny happened on the way to the bank: In August, commercial and industrial loans outstanding at all banks in the US fell for the first time month-to-month since October 2010, which had marked the end of the collapse of credit during the Financial Crisis.
In October 2008, the absolute peak of the prior credit bubble, there were $1.59 trillion commercial and industrial loans outstanding. As the Great Recession chewed into the economy, C&I loans plunged. Many of them were cleansed from bank balance sheets via charge-offs. But then the Fed decided what the US needed was more debt to fix the problem of too much debt, thus kicking off what would become the greatest credit bubble in US history. By July 2016, C&I loans had surged to $2.064 trillion, 30% above their prior bubble peak.
Why Hillary Clinton Wants You To Like The EU – Bill Wirtz
After the UK Brexit, politician Nigel Farage appeared at a Donald Trump rally in Mississippi. Hillary Clinton lashed out at Farage and the campaign to the leave the European Union. She accused the opposition to the European Union of “having fuelled anti-immigrant sentiments” and “being a brand of extreme nationalism.”
Regardless of whether or not these accusations are even true, there are many reasons why people like Hillary Clinton wants us to like the European Union: it embodies in itself all the aspects of government growth and overreach that mainstream politicians are pushing for.
How not to build a state: Evidence from Colombia – Daron Acemoglu, Leopoldo Fergusson, James Robinson, Dario Romero, Juan F. Vargas
A major problem in many poor countries is lack of state capacity to control violence, enforce laws, tax and regulate economic activity, or provide public services. This column uses the example of Colombia to assess the effectiveness of top-down state-building strategies that prioritise military objectives ahead of all others. Such approaches may not only fail to develop other crucial aspects of state capacity, but may also lead to deteriorations in these incipient capacities.
“Sharing Economy” Reveals that Licensing Laws Are Really About Shutting Down the Competition – Brittanny Hunter
The sharing economy has completely reshaped the way we do business with each other as well as expanded opportunities for those looking to go into business for themselves. While the rest of the world is celebrating the accessibility and affordability that the sharing economy has brought to numerous sectors, there are those who see this emerging market as “highly disturbing.”
Armand Lauzon was frustrated as he watched his cousin struggling to make it in the “brick and mortar” world of nail care. In the salon where Lauzon’s cousin worked as a manicurist, it was typical for the owners to take a 50-85 percent cut of its employee’s earnings. Additionally, the salon also enforced a strict scheduling policy that did not always provide convenient options for its employees.
Saddened to see so many of his cousin’s coworkers strive towards the American Dream with hardly anything to show for it, Lauzon decide to take matters into his own hands.
*** Norway Announces Massive Withdrawals From Sovereign Wealth Fund To Cover Deficits – Tyler Durden
Back in August, we noted that, for the first time since it’s creation in 1996, the Norwegian government had started raiding its sovereign wealth fund to cover government deficits. Now, as noted by Bloomberg, the Nordic country has revealed plans to massively increase withdrawals by over 25% in 2017, to $15 billion. The money would be used to cover Norway’s budget hole that’s expected to be roughly 8% of GDP.
Of course, Norway’s ultimate GDP potential, and therefore budget deficits, are heavily dependent on oil prices so any further weakening of crude could result in even more withdrawals. Moreover, given the substantial YoY increase, it’s important to recall that there are fiscal limits imposed on fund withdrawals equal to 4% of assets, or roughly $36 billion, which could come into play at some point in the future if oil prices remain “lower for longer.”
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.