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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Former Central Banker Says US Economy Already In Recession – Tyler Durden
9 oktober
In his latest note, SocGen’s Albert Edwards made an ominous – if obvious – comparison: “as energy prices surge with a backdrop of central bank tightening it’s starting to feel a bit like July 2008” referring to that moment of “unparalleled central bank madness as the ECB raised rates just as oil prices hit $150 and the recession arrived.” Then, looking at the dire impact that higher yields would have on the economy and markets which are still convinced the inflation (and in the case of European energy, hyperinflation) is transitory, he warned that not only has stagflation arrived, but that investors should “think hard about the likelihood that higher energy prices and bond yields will trigger a ‘wholly unexpected’ recession. For that is where the biggest risk might lie for investors.”
For once, Albert’s doomsday grumblings may be behind the curve, because according to former BOE central banker during the 2008 financial crisis and current Dartmouth College professor, David Blanchflower, and Alex Bryson of University College London, despite rising employment and wages, the US is already in a recession according to the recent plunge in consumer expectations. In a paper published on Thursday titled “The Economics of Walking About and Predicting US Downturns”, the establishment economist duo concluded that consumer expectations indexes from the Conference Board and University of Michigan tend to predict American downturns 18 months in advance.
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Why Does Money Have Value? Not Because the Government Says It Does – Frank Shostak
6 oktober
Why does the dollar bill in our pockets have value? According to some commentators, money has value because the government in power says so. For other commentators the value of money is on account of social convention. What this implies is that money has value because it is accepted, and why is it accepted? … because it is accepted! Obviously, this is not a good explanation of why money has value.1
The difference between Money and Other Goods
Now, demand for a good arises from its perceived benefit. For instance, people demand food because of the nourishment it offers them once consumed. This is not so with respect to money. According to Murray N. Rothbard,
Money, per se, cannot be consumed and cannot be used directly as a producers’ good in the productive process. Money per se is therefore unproductive; it is dead stock and produces nothing.2
Why, then, is there demand for money? Why do individuals desire to have something which cannot be consumed and produces nothing? To provide an answer to this one must go back in time to establish how money emerged.
In trying to improve their lives and well-being, individuals discovered that by replacing direct exchange, where individuals exchange one good for another good, with indirect exchange they could enhance the marketability of their produce. The introduction of indirect exchange means that the produce of an individual is exchanged for some more marketable good and then this good is exchanged for the produce of another individual.
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An all-weather economic policy framework for the euro area – Ángel Ubide
8 Oktober
The euro area’s economic policy framework was created in the early 1990s, when neutral interest rates were positive and the main risk was excessive inflation. This column argues that today’s world is very different from the 1990s, and thus requires a new economic policy framework where monetary and fiscal policy can work together effectively to support inflation and growth. The author identifies flaws in the current euro area fiscal framework and suggests how these could be fixed and complemented with a simple, state-contingent fiscal policy rule that achieves the right balance between supporting growth and inflation and ensuring debt sustainability.
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Risk Was Never Low, It Was Only Hidden – Charles Hugh Smith
4 Oktober
The vast majority of market participants are about as ready for a semi-random “volatility event” as the dinosaurs were for the meteor strike that doomed them to oblivion.
Judging by euphoric gambler–oops I mean “investor”–sentiment and measures of volatility, risk of a market drop has been near-zero for the past 18 months. But risk was never actually low, it was only hidden. When it emerges, it’s a surprise only to those who mistakenly thought risk had vanished.
As Benoit Mandelbrot explained in his book The (Mis)behavior of Markets, crashes are an intrinsic feature of systems like stock markets. These risks are not generated by specific human actions or sentiment but by the system itself.
Just as humans make subconscious decisions and then conjure up quasi-rational justifications for their choice after the fact, market participants always conjure up some event or decision as the cause of the crash. Favorites include central bank policy error, black swan events (“bolts from the blue”), earnings surprises, technical levels were breached, and so on.
Mandelbrot’s insights reveal why markets crash without any policy error or other fabricated- after-the-fact justification: as those who witnessed the collapse of Japan’s massive credit-asset bubble in 1989-1990 observed, markets just stopped going up and started falling.
Risk is a reflection of many dynamics, but the key dynamic few participants seem to understand is the inherent instability of complex systems: surface tranquility is not an accurate reflection of the actual state of stability or risk, no mater how long the period of tranquility stretches.
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Government Spending Cannot “Stimulate” The Economy – Patrick Barron
5 oktober
Government economic policy is completely backwards. We are told that massive deficit spending, interest rates driven to zero, and now higher taxes on the “rich” will bring the American economy out of the doldrums or whatever fake malady seems to be popular. It is hard to imagine an economy in the doldrums when unemployment, the scourge of mankind for decades, is so low that businesses cannot attract enough workers. That’s number one; i.e., is the US economy really so bad? I admit that it always could be better, but we are not in the Great Depression of the 1930s, in which one-fourth of those seeking work could not find a job. At least not yet. Stay tuned, though.
But let’s get back to the main point: Whether or not the US economy is underperforming, can government spending help? That has been the mantra since Keynesianism swept the economic and then government hallways shortly after World War II. So, we may ask ourselves, just how does government stimulus spending work? Well, from what I can conclude, the government sells its debt to the Fed (called monetizing the debt, which increases the monetary base), spends it on all kinds of programs, some (but not all) of us get more money in our pockets and spend it. So, we can see that, from government’s perspective, spending is the key. More spending MUST mean that the economy is doing better. Keynesian economists call this increasing aggregate demand, just a fancy name for more spending.
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Office Slump Gets Even Uglier in Q3: Houston, San Francisco, Los Angeles, Chicago, Washington DC, Seattle, Manhattan – Wolf Richter
4 oktober
Sky-high availability rates. The gap between “asking rents” and “effective rents” widened further amid hefty concessions, free rent, and lower “taking rents.” Tenants have negotiating power.
Office markets had issues before the pandemic. For example, the Oil Bust made Houston the worst office market in the US starting in 2015. And a construction boom across the US put large amounts of office space on the market, under the calculus of insatiable demand. But during the pandemic, companies determined they wouldn’t need that much office space under their hybrid work-from-home models and dumped empty office space on the sublease market.
These companies are continuing to pay rent but want to cut their carrying costs, and they try to sublease the space to some other company, and they undercut landlords that are trying to direct-lease competing office space. Huge sublease inventories are the hallmark of this office market crisis.
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No brainers and low-hanging fruit in national climate policy – Francesco Caselli, Alexander Ludwig, Rick van der Ploeg
8 Oktober
The target for global warming agreed on in the 2015 Paris Agreement implies that effective policies must be implemented to reduce emissions for the whole planet as soon as possible and reach net zero in the second half of the 21st century. The contributions in a new CEPR eBook aim to identity, for each of the featured nations, which climate change policies will have the fastest and/or largest cumulative impact, and which are the most technically, financially, or politically feasible. Although the low-hanging fruit in climate policy vary across countries, this does not mean that one country cannot learn from the debates taking place in another.
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“Shortages” Aren’t Causing Inflation. Money Creation Is – Mihai Macovei
7 oktober
For central bankers and mainstream analysts the recent inflation outburst is only a transitory phenomenon which has nothing or very little to do with the massive monetary and fiscal stimuli unleashed during the pandemic. Although the Fed has recently conceded that price pressures are persisting longer than expected, the surge of inflation is allegedly due to supply bottlenecks caused by the pandemic. This superficial diagnosis serves as a convenient excuse for politicians to keep in place damaging growth stimuli and draconian public health measures.
Inflation Is Not Driven by a Shortage of Supply
Mainstream economists define inflation as an increase in consumer prices which occurs when the growth of money supply outpaces economic growth.1 In other words, too much money is chasing too few goods. If the recent surge in inflation were driven by a shortage of goods rather than an increase in the money supply, then aggregate output would be shrinking. But this is not the case, because global economic output is projected by the Organisation for Economic Co-operation and Development to grow by 5.7 percent in 2021 after having dropped by 3.4 percent in 2020. This year, the output lost during the pandemic is expected to be recovered in both advanced and emerging economies, including in the US (graph 1). As a matter of fact, inflation was accelerating this year at the same time that industrial production was recovering to prepandemic levels in both the US and the EU (graph 2). The alleged shortage of supply at an aggregate level appears to be a myth.
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Reallocation effects of the minimum wage – Christian Dustmann, Attila Lindner, Uta Schӧnberg, Matthias Umkehrer, Philipp vom Berge
7 Oktober
In January 2015, Germany introduced a uniform minimum wage of €8.50. Many economists and media outlets predicted that this would have dire consequences for the German economy and result in substantial job losses. This column shows that, in fact, the introduction of the minimum wage boosted pay for low-wage workers without lowering their employment prospects. It also prompted a reallocation of staff towards more productive firms. Overall, the minimum wage helped reduce wage inequality while improving the quality of firms operating in the economy.
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The Ugly Math: GM, Ford, other Legacy Automakers Throw Hundreds of Billions at EVs, Only Auto Segment that’s Growing. Tesla Made Them Do It – Wolf Richter
6 oktober
It’s a zero-sum game that’s eating up a huge amount of cash. But Electric Utilities are loving it.
In the press release for its investor conference today, GM said that it plans to double its annual revenues by the end of the decade as it transitions to EVs. In terms of the math, 8% in price increases a year for nine years would do that without having to jump through the hoops of selling more vehicles. GM’s average transaction price in Q3 in the US jumped by 20% year-over-year. So… I don’t see this statement as sign of an increase in volume, but an increase in prices.
GM confirmed that logic by pointing out that it expects its margins to increase as it transitions to EVs. It said that half its manufacturing capacity in North America and China will be capable of producing EVs by 2030.
Sales growth in this industry is obtained by selling higher-priced vehicles. But volume growth, in terms of the number of vehicles sold, is hard to come by in the auto industry. There are some developing economies where sales are still growing. But there has been no growth in developed economies in two decades.
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Why Shortages Are Permanent: Global Supply Shortages Make Fantastic Financial Sense – Charles Hugh Smith
6 Oktober
The era of abundance was only a short-lived artifact of the initial boost phase of globalization and financialization.
Global corporations didn’t go to all the effort to establish quasi-monopolies and cartels for our convenience–they did it to ensure reliably large profits from control and scarcity. Not all scarcities are artificial, i.e. the result of cartels limiting supply to keep prices high; many scarcities are real, and many of these scarcities can be traced back to the stripping out of redundancy / multiple suppliers of industrial essentials to streamline efficiency and eliminate competition.
Recall that competition and abundance are anathema to profits. Wide open competition and structural abundance are the least conducive setting for generating reliably ample profits, while quasi-monopolies and cartels that control scarce supplies are the ideal profit-generating machines.
The incentives to expand the number of suppliers, i.e. increase competition, are effectively zero. America’s corporations spent $11 trillion buying back their own stocks over the past decade; that’s equal to the combined GDP of Japan, Germany and Italy. If adding new suppliers to the global supply chain were profitable, some of that $11 trillion would have exploited those vast profits.
The financial reality is attempting to compete with an established cartel that has captured regulatory and political mechanisms is a foolhardy waste of capital. If firing up a new supplier of essential solvents, etc. was so captivatingly profitable, the why wouldn’t Google and Apple take a slice of their billions in cash and go make some easy money?
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How Fiat Money Made Beef More Expensive – Kristoffer Mousten Hansen
4 oktober
In my article on the gold standard published in the Journal of Libertarian Studies back in May, I suggested that the destruction of the gold standard led to changing consumption patterns, specifically to a drop in the consumption of beef. The eminent economist George Selgin was kind enough to suggest that this was a novel argument, although in truth, in that essay I did no more than hint en passant at a possible connection between fiat money and changing consumption patterns, without explaining what the causal factors at work are. Therefore, I think the thesis bears restating and expanding upon.
The change in meat consumption was a global phenomenon, but for present purposes, I will focus on the American case, although the same causal factors are at work, and probably to a greater extent, in the rest of the world. The US Department of Agriculture’s Economic Research Service (ERS) compiles and publishes copious data on food availability, that is, how much of various foods are available to the American consumer. Various kinds of meat are partial substitutes for each other, as are, of course, other foodstuffs; however, it seems a fair assumption to say that, in general, people would consider beef, pork, and poultry (the top three meats) the closest substitutes. Only in extreme cases would one consider, say, soy a substitute for tasty beef.
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Simpler approaches to a global tax plan – Simeon Djankov
8 Oktober
More than 130 countries have lined up in favour of a global redesign of corporate taxes. The redesign calls for multinational giants to pay their ‘fair share’ of taxes rather than running off to tax havens. This column argues that as popular as this goal may be, finding practical ways to achieve it remains problematic. Simpler approaches have a better chance of succeeding.
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Life’s a Beach Until the Tsunami Hits: Four Waves Nobody Cares About–Yet – Charles Hugh Smith
8 Oktober
Four monster waves are about to crash onto the Fed’s beach party and sweep away the unwary revelers.
Hey, is the water in the bay receding? Never mind, free drinks are on the Federal Reserve, so party on, life’s a beach, asset bubbles will never pop, we’re safe. Of course you are. The Fed is all-powerful and would never let a rogue wave turn all its precious phantom wealth into broken detritus.
The water is fast receding and a wave is visible if you care to look, but nobody cares to look. Why bother? The Fed is invincible, that’s all you need to know to mint another fortune.
Just to keep life interesting, let’s look anyway. Gordon Long and I discuss four monster waves that are about to crash onto the Fed’s beach party and sweep away the unwary revelers:
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Evidence on the effects of work requirements in safety net programmes – Colin Gray, Adam Leive, Elena Prager, Kelsey Pukelis, Mary Zaki
4 Oktober
Proponents of work requirements for social safety net programmes argue that they promote self-sufficiency by encouraging work, while opponents contend that they reduce benefits for the most vulnerable recipients in times of need. This column looks at the impact of the reinstatement of work requirements for the Supplemental Nutrition Assistance Program in the US following a hiatus during the Great Recession. The authors find that work requirements do not appear to improve economic self-sufficiency, while substantially reducing benefits paid to programme recipients.
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***Biden Bizarrely Claims That Government Spending Is Costless – Richard M. Ebeling
10 oktober
There is only one way to describe the fiscal mindset of those in the White House and in Congress who are proposing new federal budgetary expenditure and taxing increases in the trillions of dollars: a fantasy land of financial irrationality.
The Biden administration insists on additions to the already bloated American welfare state that will see an expansion in entitlement programs and increased societal dependency on government largess not implemented since Lyndon Johnson’s Great Society programs of the 1960s. But to show just how much Joe Biden’s mind seems to operate in some alternate universe, he has recently informed us that the $3.5 trillion of additional government spending over the next several years will cost “nothing.”
Why nothing? Because over $2.1 trillion will be covered by taxing the rich and large corporations. The remaining difference between $3.5 trillion of greater spending and $2.1 trillion of increased taxes will materialize through some magic formula of government investing in infrastructure, alternative energy sources, and people.
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People Not Looking for Work, Labor Force Drops. But Households Report Strong Gains in Jobs & Self-Employment – Wolf Richter
8 oktober
Big drop in government jobs (education) blamed on seasonal adjustments gone awry.
The two big components in the jobs report today – the data from surveys of 60,000 households and the data from surveys of 144,000 employers at 697,000 individual worksites – diverged further: Households reported strong gains in jobs, and this includes the self-employed; but employers (businesses, governments, and nonprofits) reported slim gains in their payrolls, dragged down by a sharp decline in government jobs.
Households said that the number of people working, including the self-employed, jumped by 526,000 in September, according to the Bureau of Labor Statistics today, after having jumped by 509,000 in August, and by 1.04 million in July. Over the past three months combined, 2.1 million additional people were working, either in regular jobs or self-employed (red line).
But employers –including governments – said that they added only 194,000 folks to their payrolls in September. The figures for July were revised up by 38,000 to 1.09 million, and for August by over one third, by 131,000, to 366,000. Over the past three months combined, employers added 1.7 million jobs (green line)
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Why Businessmen Make Such Unimpressive Politicians – Connor Mortell
5 oktober
In 2016, we watched time and time again as polls stated that people liked Donald Trump because he is a businessman and came from outside the world of politics. Dozens of factors led to his election but there is no doubt that among voters this mindset of the potential for a savvy businessman in charge was at play. However, looking at it in hindsight, can we really say that a savvy businessman was ever in charge? Perhaps the most successful libertarian there has ever been, the great Dr. Ron Paul, wrote explaining that when it comes to spending the argument was always “Trump vs. Trump.” He’d speak seeking to cut taxes and then would ask for raises on spending and print money to close the gap. Dr. Paul goes as far as to say, “Following the President’s constantly changing policies can make you dizzy.” So why is it that this businessman would come into office and then act in direct opposition to the business-oriented nature he claimed he’d demonstrate? The easy answer would be that it turned out that he was never really a good businessman to begin with. There may or may not be merit to this argument. But it does not matter whether or not he was a competent businessman, because the minute he took his oath of office, he became part of a bureaucracy and any expectations of fiscal or monetary responsibility were immediately lost. This is because it is impossible to run a government “like a business.” There’s no economic calculation and no way of measuring profit.
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Forget Silver, Nevada Is Now The Lithium State – Tyler Durden
9 oktober
Lithium is one of the most in-demand commodities in the world today.
With the ongoing shift to electric vehicles (EVs) and clean energy technologies, governments and EV manufacturers are rushing to secure their supply chains as demand for lithium soars.
But, as Visual Capitalist notes, while the US is lagging behind in the global lithium race, it is only now starting to realize the need to catch up to China’s strong foothold. This infographic from Scotch Creek Ventures highlights the rising demand for lithium and the need for a domestic supply chain in the United States.
What’s Driving the Demand for Lithium?
Global lithium production more than doubled in the last four years to 82,000 metric tons in 2020, up from 38,000 metric tons in 2016. Here are some of the factors driving the lithium rush:
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