Economische aanraders 11-09-2016
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 begin 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.
Deutsche Bank: The US May Now Be In A Recession – Tyler Durden
Three months ago, we presented an analysis which showed something disturbing: according to Deutsche, the “current business cycle is already the fourth longest in the post- WWII period, and the corporate debt-to-GDP ratio suggests that imbalances are building”, and that worse, as a result of soaring corporate debt and rolling-over profit margins, “a recession could hit as soon as the second half.”
Overnight, and three months since its last such analysis, Deutsche Bank has published an update. It shows that, as illustrated in the chart below, profits per worker have generally trended higher over time. This is a function of productivity gains and inflation. However, this has changed in recent years. “In the current business cycle, margins peaked at $18,752 per worker in Q4 2014. This compares to a ratio of $16,487 per worker as of Q2 2016. Margins have fallen because corporate profits have declined -6.3% annualized over the past six quarters, while private sector job growth over this period has been very steady at around 2.1%.”
Sorry, Krugman: Austerity Is Good for the Economy – Kai Weiss
Paul Krugman again went after Germany on August 26 in his New York Times column, “Germany’s Drag.” After the German government posted a 1.2 percent of GDP fiscal surplus for the first half of 2016 — way above the IMF forecast of 0.3 percent — it seems as if Krugman couldn’t contain himself anymore. He claimed that “what we’re seeing in elite circles is a very belated but still welcome realization that monetary policy badly needs an assist from fiscal expansion.” However, there are two evil opponents of more government spending: The Republican Party in the US, led by Paul Ryan (the “hard-line, Ayn Rand-loving and progressive-tax-hating conservative”), and Germany.
Fed Dove Frets about Asset Bubbles, Wall Street Freaks out – Wolf Richter
The Fed hawks don’t matter. The doves do!
Doubtlessly, the Fed will flip-flop in its elegant manner about rate increases as it has been for over two years, but this time a reliable dove flipped. That itself is scary to the markets. And the reason he mentioned for flipping sent cold chills down their spine.
He named one of the biggest and riskiest asset bubbles, commercial real estate. It doesn’t plateau. But it either booms, driven by cheap credit, lots of liquidity, and endless hype. Or it crashes. And he worried that banks and coddled investors, including holders of commercial-mortgage backed securities, will get hit by the shrapnel.
When Boston Fed governor Eric Rosengren, a voting member of the Federal Open Markets Committee, where monetary policy is decided, shared some aspects of his worries on Friday morning, markets tanked instantly.
Former IMF Economist Declares War on Cash – Tho Bishop
The War on Cash continues to gain momentum within the circles of the politically influential.
Bloomberg yesterday posted an article on a new book titled The Curse of Cash, written by Kenneth Rogoff former chief economist of the International Monetary Fund and current Harvard University economist.
Though the Bloomberg piece unfortunately accepts at face value the weak argument that eliminating cash will make it harder for criminals to operate, it does focus on the real goal of people like Rogoff, to give more power to central bankers:
Structural reforms in difficult times: The priorities – Aida Caldera, Alain de Serres, Naomitsu Yashiro
Structural reforms can have adverse effects in the short run if implemented under weak macroeconomic conditions. This column argues that prioritising reform measures that bring short-term benefits even in a bad conjuncture, and packaging them to benefit from reform complementarities across product and labour markets, remains the most promising growth strategy, especially in the post-Global Crisis context
***The Great Debt Unwind Beneath the Surface: US Commercial Bankruptcies Soar – Wolf Richter
Not that you would have guessed from the stock market, hovering at all-time highs, or from soaring junk bonds, even the riskiest paper: CCC-and-below rated junk bonds skyrocketed since their February 12 low as their average yield plunged from 21.6% to 13.5%. Even the S&P US Distressed High Yield Corporate Bond index has soared 57% since February 12.
Those are miracles to behold.
At the slightest squiggles of the market, the Fed goes into bouts of by now embarrassing flip-flopping on rate increases that demonstrate to the world that they have absolutely nothing else in mind than keeping the stock market inflated and keeping the biggest credit bubble in US history from unceremoniously imploding.
The true costs of helicopter money – Biagio Bossone
Some economists see helicopter money as a free lunch, because it can prompt growth without requiring higher debt financing. This column argues that if there are costs associated with the permanent injection of cash into the economy, they would diminish its effectiveness.
The False Promises Behind Quantitative Easing – Claudio Grass
It has been almost eight years since former U.S. President George W. Bush warned the world that “without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.” The government’s response to the crisis was a $700 billion rescue package that would prevent U.S. banks from collapsing and encourage them to resume lending, which was soon to be followed by a series of Quantitative Easing (QE) packages injecting money into the economy. The rationale of government intervention was to boost spending, restore confidence in the market and revamp economic growth to everyone’s benefit — but did it succeed in doing so?
Is Fiscal Policy for Prosperity Back in Place of Austerity? – Philip Arestis
Fiscal policy has not been taken seriously by policymakers since the Great Financial Crisis (GFC) of 2007-2008, with some exceptions over the period 2009-2010, notably after the G20 meeting in London (April 2009). The GFC prompted significant government and central bank interventions, both to restore confidence in the financial system and to contain the impact of the crisis on the real economy. Monetary and fiscal policy responses became very accommodative in many countries. Central banks responded by flooding the financial markets with liquidity, while fiscal authorities attempted to deal with the decline in the solvency of the banking sector. Those policies before 2010 had helped to avoid a complete collapse of the financial system and the real economy after the emergence of the GFC. Subsequently “unorthodox” monetary policies have been implemented, which have not been successful in terms of producing and maintaining healthy growth in the economy. Fiscal policy has increasingly been concerned with “balancing the budget” and “expansionary austerity” rather than being genuinely expansionary.
There are several reasons for such a change in terms of fiscal austerity going out of fashion. An important one being the failure of the austerity policies to bring about significant recovery despite the claims made for “expansionary fiscal consolidation.”
German Exports Plunge 10% Overall, 14% to Non-EU Countries – Wolf Richter
Germany’s export-focused economy has been showing some signs of weakness, but no signs of an outright Financial-Crisis type collapse. So this data set released today by the German Statistical Agency doesn’t match those trends, and it doesn’t fit into the scenery. It could be an outlier, a statistical quirk, something that will be adjusted out of the way later. Or it could be a very unpleasant warning sign.
The German Statistical Agency today reported that, based on preliminary data, exports in July plunged 10% compared to July last year (not seasonally adjusted), to €96.4 billion.
And imports dropped 6.5% (not seasonally adjusted) year over year, to €76.9 billion. This slashed Germany’s trade surplus for July by 21% to €19.5 billion.
Exports to the 28-member European Union plunged 7.0% to €56.3 billion, while imports from EU countries dropped 4.5% to €51.3 billion.
EU regional funding: When the party is over – Guglielmo Barone, Francesco David, Guido de Blasio
EU regional policies aim to lead regions onto a path of self-sustaining growth. Fully successful interventions should imply a higher growth rate, not only during the treatment (when the region benefits from the transfers), but also after the expiry of the programme (when the financing terminates). This column uses evidence from the Abruzzi region in Southern Italy to document that when the party is over and the funding ends, growth may slow down significantly.
Economic Reality Matters More than “Expectations” – Frank Shostak
To gain an insight into future economic conditions, many economists follow a variety of consumer and business surveys.
The rationale for conducting surveys is that the knowledge regarding future economic conditions is dispersed, so the chances of any one particular individual obtaining an accurate picture of the economy are very low.
A large group of people selected randomly is therefore likely to yield the most accurate picture possible. Or so it is believed.
In these surveys, randomly selected consumers and businessmen are asked to provide their views about where the economy is heading.
If a survey shows that the majority are optimistic, this is supposed to be good news for the economy.
***The Bahamas tax haven – a (re-)emerging global menace? – Outis Philalithopoulos
Update: as it happens, The Economist has just published an excellent story about the Bahamas, subtitled The Bahamas Cocks a Snook at the War on Tax Dodgers. (Our only beef with that subtitle is that this is about so much more than just tax.)
We’ve periodically remarked on the Bahamas as a secrecy jurisdiction of great concern. Like Panama, it’s generally had a greater tolerance of dirty money than most modern offshore centres: more of a willingness to turn a blind eye and to overlook noncompliance by Bahamas-based actors of its own rules and laws.
The purpose of this blog is to flag up the Bahamas in a more pointed way: as a major wrecking-ball threatening global efforts to clamp down on cross-border financial secrecy.
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.