Economische aanraders 10-11-2019
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.
Can Crypto Revive Swiss Banking? – Pascal Hügli
The crypto phenomenon is global. Public blockchain networks are neither controlled by any state nor by companies. Rather, they connect the most diverse people across national borders.
Yet despite all of this non-centrality, some government are trying to align their national interest to crypto and create points of contact, in order to provide a home for this new decentralized blockchain technology. Above all there is Switzerland. At the beginning of 2018, former Minister of Economic Affairs, Johann Schneider-Ammann, proclaimed Switzerland as a “crypto-nation”. He urged universities, industry and government to make this small country into one of the world’s most important crypto hubs.
The impact of negative interest rates on banks and firms – Carlo Altavilla, Lorenzo Burlon, Mariassunta Giannetti, Sarah Holton
Economists and policymakers continue to question the effectiveness of monetary policy when an economy faces near-zero or sub-zero interest rates. Sceptics argue that central banks cannot stimulate lending, and may indeed decrease the loan supply, by setting negative interest rates. This column shows that negative rates do not impede the transmission of monetary policy from banks to deposit holders because firms do not withdraw cash in response to negative rates the way households might. In fact, sub-zero rates may even stimulate the economy by encouraging firms to invest.
Does Milton Friedman’s “Plucking Model” Refute Austrian Business Cycle Theory? – Robert P. Murphy
Noah Smith has a new Bloomberg column titled, “Milton Friedman Got Another Big Idea Right.” Specifically, Smith points to a new paper that apparently confirms Friedman’s famous “plucking model” of recessions. Here’s how Smith contrasts Friedman’s theory from others, including the Misesian theory of boom-bust:
Some [business cycle] theories hold that booms cause busts, because good times allow bad investments to build up in the financial system. According to these theories, the larger the boom, the larger the crash that follows.
Then there’s the so-called plucking model. Proposed by the legendary economist Milton Friedman, it holds that the economy is like a string on a musical instrument — recessions are negative events that pull the string down, and after that it bounces back. Just as a string snaps back faster if you pull it harder, this theory holds that the deeper the recession, the faster the recovery that follows. But you can only pluck the economy in one direction; bigger expansions don’t lead to bigger recessions.
A digital euro to save EMU – Thomas Mayer
The desire to avoid credit and investment boom-bust cycles has led some to advocate replacing money creation through bank credit extension with direct money issuance by the central bank or a private entity, or linking money to an existing asset. This column, part of the Vox debate on euro area reform, argues that relaunching the euro as digital central bank currency could help reduce the debt of the euro states and end the sovereign-bank doom loop. It would also create a formidable competitor for other global digital currencies likely to emerge in the intermediate future.
Negative Yielding Bonds Turn into Punishment Bonds – Wolf Richter
After peak negative-yield-absurdity in August, bond prices fell – the “bond bloodbath” – and the mountain of bonds with negative yields has plunged by $5 Trillion, or by 30%, despite rate cuts.
The 10-year US Treasury yield rose on Friday to 1.94%. That’s still very low, and below inflation as measured by core CPI (2.4%), but it’s up nearly 50 basis points from the lows at the end of August. During this time, the Fed has cut its interest rate target twice, by a total of 50 basis points, and short-term Treasury yields have fallen by about that much. With the one-month yield now down to 1.56% and the 10-year yield up at 1.94%, the yield curve has un-inverted and steepened.
***No Recession Ever Again? The Yellowstone Analogy – Charles Hugh Smith
Just as forestry management’s policy of suppressing forest fires insured uncontrollable conflagrations, so central banks’ attempts to eliminate recessions insure a financial conflagration that will burn down the entire global financial system.
The first task of those at the levers of neoliberal global capitalism is to deny that global capitalism is in crisis. One manifestation of this is the no recession ever again policy that is the implicit goal of central banks and governments globally.
Any hint of global slowdown draws an immediate and overwhelming deluge of credit and currency as central banks slash interest rates, buy bonds and stocks to push markets higher and unleash a tsunami of fresh credit so corporations can buy back billions of dollars of their own shares and consumers can continue to buy vehicles, houses and other goodies.
Neoliberal global capitalism has one unstated law: credit must always expand or the system dies. The rate of credit expansion can increase or decrease but it must continue expanding forever.
The Economics and Politics of Zoning – Ash Navabi
Both economic decisions and political decisions involve choices and tradeoffs. The difference is that economic decisions are ultimately informed and rely upon monetary prices, revenues and costs. Political decisions, meanwhile, do not depend on market outcomes—they can be based on love, legacy, favors, or establishing power relations.
Zoning is the practice of governments controlling the type, size, and population density of buildings. (Zoning should not be confused with building codes, which control the building materials and other design aspects of buildings.) The purpose of zoning has been to create separate regional “zones” of building types: broadly, these categories typically include residential, industrial, retail, and parks. The zones are then broken down into more minute categories, like low, medium, and high density homes, different kinds of retail businesses, and so on.
Anchored or de-anchored? That is the question – Francesco Corsello, Stefano Neri, Alex Tagliabracci
Concerns about the anchoring of long-term inflation expectations to the ECB Governing Council’s aim have re-emerged since early 2019. Using data from the ECB’s Survey of Professional Forecasters, this column argues that long-term inflation expectations have de-anchored from the ECB’s inflation objective. They have not returned to the levels that prevailed before the 2013-14 period of disinflation, and their distribution is still skewed towards lower inflation levels. Moreover, long-term expectations have become sensitive to short-term ones and to negative inflation surprises.
The State of the American Debt Slaves, Q3 2019 – Wolf Richter
Paying the University-Corporate-Financial Complex and the big bifurcation.
Student-loan balances jumped by 5.1% in the third quarter compared to Q3 last year, or by $80 billion, to a new horrifying record of $1.64 trillion, having skyrocketed by 120% in the 10 years since Q3 2009, according to Federal Reserve data released Thursday afternoon. Over the same 10-year period, when student loans soared 120%, the Consumer Price Index has increased 19%. Student loan balances are 7.6% the size of GDP, up from 5.1% in 2009.
***The Economics Behind the Fall of the Berlin Wall – Ryan McMaken
Friday marks the thirtieth anniversary of the fall of the Berlin Wall. Like most historical events that are commemorated as if they took place on a single day, the fall of the Berlin Wall on November 9, 1989, was just one of many interrelated events that led to the end of the system of Soviet client states in Eastern Europe, and the end of the Soviet Union itself, in December of 1991.
The Gamification of Bitcoin – J.P. Koning
Eleven years ago, Satoshi Nakamoto announced the bitcoin whitepaper to the world. Coinbase, a large cryptocurrency exchange, recently celebrated this milestone with a retrospective.
I’m going to remix Coinbase’s narrative to tell a different account of bitcoin’s last 11-years.
The thing that fooled us all for a while, myself included, is that we all thought bitcoin was solving a monetary or payments problem. It was labelled a coin, after all, and coins fall within the realm of monetary economics. To further complicate matters, Satoshi told his story using phrases like “electronic cash system” and “non-reversible transactions”. Perhaps we deserve to be forgiven for not seeing bitcoin’s underlying nature. After all, tearing down the existing monetary system and building a new one was a fresh and exciting narrative.
What Is the Free Market? – Murray N. Rothbard
Herpublicatie per 4 november
The Free Market is a summary term for an array of exchanges that take place in society. Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or nontangible services. Thus, when I buy a newspaper from a news dealer for fifty cents, the news dealer and I exchange two commodities: I give up fifty cents, and the news dealer gives up the newspaper. Or if I work for a corporation, I exchange my labor services, in a mutually agreed way, for a monetary salary; here the corporation is represented by a manager (an agent) with the authority to hire.
***The Middle Class Is Now The Muddle Class – Charles Hugh Smith
The net result is the muddle class has the signifiers but not the wealth, power, capital or agency that once defined the middle class.
The first use of the phrase The Muddle Class appears to be The rise of the muddle classes (Becky Pugh, telegraph.co.uk) in January 2007. The “muddle” described the complex nature of defining “the middle class,” which includes education, class origins, accents, and many other financial, social and cultural signifiers.
Comedian Jason Manford claimed to have coined the term in June 2013: “I’ve invented a new term; ‘Muddle Class’. When you find yourself being working class AND middle class at the same time.”
The costs of using a regional trade agreement – Kazunobu Hayakawa, Naoto Jinji, Toshiyuki Matsuura, Taiyo Yoshimi
Why don’t all firms utilise regional trade agreement schemes that offer lower tariff rates? This column argues that firms need to incur both variable and fixed costs to comply with rules of origin, which isn’t always worth the benefits. It develops a simple new method to quantify these costs, and finds that reducing fixed costs can be more effective and feasible in enhancing the utilisation of regional trade agreements than a decrease in variable costs.
What Heavy Trucks Are Saying – Wolf Richter
“I do believe that in North America it is a cyclical downturn”: Cummins COO.
Orders for heavy trucks, after the historic boom in 2018, plunged this year, but they may have finally bottomed out. In October 2019, truck makers in the US received about 22,072 orders for Class-8 trucks, according to preliminary estimates by FTR Transportation Intelligence. While up by about 10,000 orders from the dismal levels in September, and the highest number so far this year, orders were still down 51% from October last year ago, “signifying a subdued beginning to the traditional start of the ordering season,
***Does the inflow of precious metals from the New World really explain the ‘Great Inflation’ in renaissance Europe? – Anthony Edo, Jacques Melitz
Economists mostly argue that the Great Inflation in renaissance Europe was caused by an inflow of silver. Historians counter that it was caused by population growth. The column uses long-run economic data to argue that the historians’ position is credible for England’s economy. On this evidence, both contributed equally to inflation during this period.
The IMF Wants the World to Embrace Sweden’s Ineffective Carbon Tax – Robert P. Murphy
The IMF recently released a new study pushing for governments around the world to implement “a global carbon tax” that would rise to $75/ton by 2030, in order to limit global warming to at most the “safe” ceiling of 2 degrees Celsius. In order to reassure the alarmed reader that such a carbon tax is feasible, the IMF’s blog post on the new study explained, “Sweden has set a good example. Its carbon tax is $127 per ton and has reduced emissions 25 percent since 1995, while the economy has expanded 75 percent since then.”
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