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 Eurozone Banks’ Trillion-Euro Timebomb – Daniel Lacalle
6 december
Eurozone banks have fallen dramatically in the stock market despite the results of the stress tests carried out by the ECB, and the EU Banks Index is down 25% on the year despite year-long bullish recommendations from almost every broker. This should not surprise anyone because we have seen in the past that these tests are only a theoretical exercise. Moreover, stress tests’ results are widely challenged, and rightly so, because the exercise starts with the most ridiculous premise in economics: Ceteris Paribus, or “all else remaining equal”, which never happens. Every asset manager knows that risk builds slowly and happens fast.
Disappointing earnings, rising risk in the eurozone as well as in their diversification markets such as emerging economies, weak net income margins and low return on tangible equity are factors that have contributed to the weak performance of European banks. Investors are rightly suspicious about consensus estimates for 2019 with expectations of double-digit EPS growth rates. Those growth rates look impossible in the current macroeconomic scenario.
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Fed’s QE Unwind Reaches $374 Billion – Wolf Richter
6 december
But how low might the Fed’s balance sheet go?
The Federal Reserve shed $54 billion in assets over the five weekly balance sheet periods that encompass the calendar month of November. This reduced the assets on its balance sheet to $4,086 billion, the lowest since January 15, 2014, according to the Fed’s balance sheet for the week ended December 5, released this afternoon. Since the beginning of the QE unwind — or “balance sheet normalization,” as the Fed calls it — in October 2017, the Fed has now shed $374 billion:
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Is There Really A Corporate Debt Bubble That’s Ready To Burst? – Jeffrey J. Peshut
3 december
Over the past several months, media headlines have been awash with dire warnings of a looming corporate debt bubble that is about to burst.
From the perspective of Austrian Business Cycle Theory. this post will explore the questions of whether there really is a corporate debt bubble — and, if there is, when we can expect it to burst. But first, let’s define corporate debt.
According to Federal Reserve Statistical Release Z.1, Financial Accounts of the United States, the non-financial “corporate business debt” sector consists of all private for-profit domestic non-financial corporations. S Corporations, which have 35 or fewer stockholders and are taxed as if they were partnerships, are included in this sector. Corporate farms are also included. Holding companies and equity real estate investment trusts (REITs), which are considered financial businesses, are excluded from this sector.
Aanvullend: zie hier.
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Leverage-induced fire sales and stock market crashes – Jiangze Bian, Zhiguo He, Kelly Shue, Hao Zhou
9 december
Excessive leverage and subsequent deleveraging-induced fire sales have been major contributors in past financial crises. This column explores the behaviour of two types of margin investors– brokerage-financed and shadow-financed – during a tumultuous period for the Chinese stock market. Results show that for accounts with exposure to fire sale risk, shadow-financed accounts account for a much higher proportion of the total stock market capitalisation than brokerage-financed accounts.
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Balanced-Budget Baloney – Laurence M. Vance
8 december
It wasn’t that long ago (1987) that the entire budget of the federal government was “only” a trillion dollars. It reached the $2 trillion mark in 2002, and didn’t exceed $3 trillion until 2009. Even after a long series of budget deficits, the national debt didn’t exceed $1 trillion dollars until 1982 and $5 trillion until 1996.
The first budget that Donald Trump proposed soon after taking office was $4.094 trillion, even though federal government receipts were projected to be only $3.654 trillion. Now the federal budget is well over $4 trillion a year, the budget deficit is approaching $1 trillion a year, and the national debt is more than $21 trillion. Even worse, the Congressional Budget Office (CBO) projects federal spending to grow by $329 billion from fiscal year 2018 (which began on Oct. 1, 2017) to fiscal 2019 (which begins on Oct. 1, 2018). The CBO also projects federal spending to grow by approximately $3 trillion over the next 10 years, for an average annual spending increase of about $300 billion. Total federal debt is projected to top $30 trillion by 2028.
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***You are needed but not your skills: Challenges to manufacturing workers in the wake of globalisation – Hâle Utar
06 december
The impact of trade shocks on labour market shifts is usually studied in the context of re-training and social welfare frictions. Using evidence from Denmark, this column shows how workers can experience long-run reductions in earnings no matter how easy it is to change sector. A sudden and obligatory shift toward a new sector may, by its nature, generate some worker dissatisfaction.
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The Myth of the Neutral Interest Rate – Frank Shostak
8 december
In his speech to the Economic Club of New York on November 28 2018, the Federal Reserve Board Chairman Jerome Powell said that the US central bank’s policy interest rate is just below the neutral rate. This prompted many commentators to suggest that a tighter interest rate stance of the Fed is likely coming to an end. At the end of October the fed funds rate target stood at 2.25%.
It is widely held that by means of suitable monetary policies the US central bank can navigate the economy towards a growth path of economic stability and prosperity. The key ingredient in achieving this is price stability. Most experts are of the view that what prevents the attainment of price stability are the fluctuations of the federal funds rate around the neutral rate of interest.
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ECB Just Launched “Better Than Blockchain” Instant Payments System – Don Quijones
3 december
But will the big banks play along?
On Friday the ECB launched, with minimal fanfare, a brand new system aimed at enabling banks to settle payments instantaneously across Europe, helping them to compete with PayPal and other global tech giants. Developed in little over a year, the ECB’s not-for-profit TARGET Instant Payment Settlement (TIPS) system will let people and businesses in Europe transfer euros to each other almost instantly, at extremely low cost, and irrespective of the opening hours of their local bank.
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***Are We in a Recession Already? – Charles Hugh Smith
7 december
The value of declaring the entire nation in or out of recession is limited.
Recessions are typically only visible to statisticians long after the fact, but they are often visible in real time on the ground: business volume drops, people stop buying houses and vehicles, restaurants that were jammed are suddenly sepulchral and so on.
There are well-known canaries in the coal mine in terms of indicators. These include building permits, architectural bookings, air travel, and auto and home sales.
Home sales are already dropping in most areas, and vehicle sales are softening. Airlines and tourism may continue on for awhile as people have already booked their travel, but the slowdown in other spending can be remarkably abrupt.
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Why China Should Remove All Trade Tariffs – Alasdair MacLeod
8 december
It is widely understood by economists of most theoretical persuasions that trade tariffs are a bad idea, but President Trump has laid out his stall. The political class, prodded usually by the vested interests of crony capitalists, always fall for trade protectionism. President Trump’s tariff war is just the latest example that coincidently stretches back to the introduction of central banks. I shall address this coincidence later in this article.
It also surprising that the Chinese leadership enters a tariff war when it professes to defend free trade. Perhaps it doesn’t fully understand why tariff-free trade matters, and like Trump, thinks that a trade surplus is simply a function of cheaper prices. This misconception confuses how trade balances arise with the profitability from lower costs in foreign jurisdictions. That is a different issue. China would be far better to respond to Trump’s tariffs by removing all theirs, and in effect challenging American corporations to see if they can capture market share in China against local manufacturers and service providers.
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Going the extra mile: Distant lending and credit cycles – João Granja, Christian Leuz, Raghuram Rajan
4 december
Risk taking was pervasive during the Global Crisis even in the most unlikely areas, such as stretching to lend at a distance. Using US data, this column examines the degree to which competition amongst lenders interacts with the cyclicality in lending standards using a simple and policy-relevant measure, the average physical distance of borrowers from banks’ branches. It finds that distances widen considerably when credit conditions are lax and shorten considerably when credit conditions become tighter. A sharp departure from the trend in distance between banks and borrowers is indicative of increased risk taking.
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The Wild East: Airlines in South & Southeast Asia – MC01
8 december
Huge aircraft orders, booming traffic, dozens of upstarts with easy mega-funding, fierce competition, already a big collapse, and allegations of shady business.
As of October 31, Airbus had 6,245 members of the A320neo family on order, of which around 250 had already been delivered. Even taking into account the large discounts which are the norm for large orders, the estimated value for this order book alone was in the region of about US$705 billion. Boeing had 4,783 members of the 737MAX family on order, with 241 already delivered, and an estimated order book value for this family of aircraft alone of US $526 billion.
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Canadian Debt – John H. Cochrane
7 december
Corey Garriott, Sophie Lefebvre, Guillaume Nolin, Francisco Rivadeneyra and Adrian Walton at the Bank of Canada have issued a thoughtful and crisply written proposal for restructuring Canadian government debt, titled Alternative Futures for Government of Canada Debt Management.
Their third and fourth ideas are the most radical and attractive to me: Replace all government debt with 1) a set of zero-coupon bonds issued on a fixed schedule and/or 2) a long perpetutity, a long indexed perpetuity, and fixed-value, floating-rate short term debt, essentially the same as interest-paying central bank reserves or a money market fund. (Naturally I like it, since it draws on my “new structure for Federal Debt”)
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Markets, banks, and shadow banks – David Martinez-Miera, Rafael Repullo
8 december
The current financial system is characterised by the coexistence of direct market finance, regulated banks, and shadow banks. This column looks at what gives rise to each of these sources of finance as well as the effect of bank capital regulation on the financing that flows through them. High ‘flat’ (or risk-insensitive) capital requirements shift intermediate-risk entrepreneurs from regulated banks to shadow banks, while high risk-based requirements do the same for high-risk entrepreneurs, increasing the risk of the corresponding loans. This result highlights the need to take into account the existence of shadow banks when designing bank capital regulation.
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Why California’s Housing Market is in for Serious Trouble – Wolf Richter
4 december
Homebuilder Toll Brothers just said it out loud. High-end homebuilder Toll Brothers, when it announced earnings this morning, made some peculiar comments.
Not so peculiar was the plunge in new orders in its fourth quarter, ended October 31: New orders dropped 13.3% from a year ago to 1,715 units. In California, Toll Brothers’ largest market by revenue, new orders plunged 39.4% to just 226 units. Toll Brothers also slashed its guidance for home sales in its fiscal year 2019. This is not so peculiar because I already reported on the drop in new home prices across the US, amid unsold inventory of new homes that has ballooned to 7.4 months supply, the highest since February 2011, toward the end of Housing Bust 1.
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Drivers of commodity price booms and busts in the long run – David Jacks, Martin Stuermer
7 december
There is a lack of consensus on the importance of various drivers of long-run commodity prices. This column analyses a new dataset of prices and production for 15 commodities, including metals, agricultural goods, and soft commodities, between 1870 and 2015. Demand shocks due to rapid industrialisation and urbanisation have driven a substantial amount of variation in commodity price booms. While demand shocks have gained importance over time, commodity supply shocks have become less relevant.
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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.

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