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 Next Financial Crisis – Daniel Lacalle
10 november
We have been reading numerous comments recently about a forthcoming recession and the next crisis, particularly on the tenth anniversary of the collapse of Lehman Brothers.
The question is not whether there will be a crisis, but when. In the past fifty years, we have seen more than eight global crises and many more local ones, so the likelihood of another one is quite high. Not just because of the years passed since the 2007 crisis, but because the factors that drive a global crisis are all lining up.
What drives a financial crisis? Three factors.
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Europe’s Banks – John H, Cochrane
8 november
My visit to Europe resulted in many interesting conversations. There was a stark contrast between the complex regulatory vision of formal presentations and papers, and the lunch and coffee discussion reflecting experience of people involved in actually regulating banks. They seemed to be quite frustrated by the state of things. Disclaimer: this is all completely unverified gossip, and remembered through a fog of jet lag. If commenters have better facts, I’m hungry to hear them.
Risk weights are ungodly complex, and not many people actually understand them, or the layers of buffers and how they are applied.
Risk weights are suspiciously low. Big banks are allowed to use their own models, calibrated on 10 years of data. That means the data have, now, 10 years of stable growth and very low default. Look, say the banks, our investments are nearly risk free.
“Micro” regulators who look at the specifics of an individual bank are prone to offset the “systemic” and “macro-prudential” efforts. Look, say the banks, we have to fulfill all these macro-prudential rules, give us a break. Regulators do.
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The State of the American Debt Slaves, Q3 2018 – Wolf Richter
7 november
Consumers are being lackadaisical again with their plastic.
Consumer debt – or euphemistically, consumer “credit” – jumped 4.9% in the third quarter compared to the third quarter last year, or by $182 billion, to almost, but no cigar, $4 trillion, or more precisely $3.93 trillion (not seasonally adjusted), according to the Federal Reserve this afternoon. As befits the stalwart American consumers, it was the highest ever.
Consumer debt includes credit-card debt, auto loans, and student loans, but does not include mortgage-related debt
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European Central Bank In Panic Mode as Economy Stalls – Andrew Moran
9 november
The eurozone could not borrow from the momentum of the U.S. economy in the third quarter as economic growth slumped to a tepid 0.2% , the slowest rate in more than four years. With the 19-nation currency bloc beginning to stagnate, and the heavyweights failing to post significant gains, Brussels is in panic mode, likely leaning on the European Central Bank (ECB) for further stimulus.
Economists originally anticipated growth of 0.4%. But global trade woes, tumbling business confidence, Italian distress, and the gradual dissipation of an accommodative monetary policy all contributed to the poor numbers in the July-September period.
Italy fell into stagnation, failing to record any growth. Rome has been contending with a debt crisis, sending the yield (interest rates) on government bond prices higher. Officials are embroiled in a contentious battle with the EU because their borrowing plans violate the trade bloc’s rules. There is now talk of a Keynesian-style fiscal stimulus to rev up the national economy.
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Home Prices Are Now Plummeting In These 8 Major Cities – Tyler Durden
10 november
In late September, we outlined how Bank of Ameria called it: “The Peak In-Home Sales Has Been Reached; Housing No Longer A Tailwind.”
Then in October, we noticed how existing home sales data retreated in September, dropping to the lowest level in nearly three years.
All the while, an affordability crisis remains widespread in most cities across the US, but could not have come at the worst time, regarding the Federal Reserve’s monetary tightening program that is forcing mortgage rates to cycle highs.
So, you must be asking: What does this all mean? Well, the American real estate market could be at a significant turning point.
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Turn Off, Tune Out, Drop Out – Charles Hugh Smith
5 november
An unknown but likely staggeringly large percentage of small business owners in the U.S. are an inch away from calling it quits and closing shop.
Timothy Leary famously coined the definitive 60s counterculture phrase, “Turn on, tune in, drop out” in 1966. (According to Wikipedia, In a 1988 interview with Neil Strauss, Leary said the slogan was “given to him” by Marshall McLuhan during a lunch in New York City.)
An updated version of the slogan might be: Turn Off, Tune Out, Drop Out: turn off mobile phones, screens, etc.; tune out Corporate Media, social media, propaganda, official and unofficial, and drop out of the status quo economy and society.
Dropping out of a broken, dysfunctional status quo in terminal decline has a long history.
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Less dynamic growth amid high uncertainty: The Commission’s Autumn 2018 Forecast – Marco Buti, Björn Döhring
8 november
GDP growth has become more uneven globally, and has shifted into a lower gear in Europe. So it is unsurprising that commentators have started warning about a more severe downturn. The Commission’s autumn 2018 European Economic Forecast is no exception in highlighting an unusual amount of uncertainty clouding the economic outlook. The predominance of downside risks implies that macroeconomic outcomes could ex post be worse than our central scenario. This column discusses, on the basis of concrete examples, different types of uncertainty surrounding the still benign forecast baseline. Prudence requires economic policy to prepare for the eventuality of worse outturns.
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Why Chinese Authorities Are Freaking Out – Jeffrey P. Snider
9 november
It’s always a fine line for authorities. There are times when avoiding intervention is more effective than intervention. That’s particularly true when the efficacy of whatever proposed policy is in doubt. If you don’t know for sure that it will work, maybe don’t do it. There are often grave risks associated with plunging forward recklessly.
In other words, officials can and do just make things worse. By pushing the envelope rather than calm markets or the economy they can further enflame them. Crises are never so binary – until they are over. Heading into one, there is so much ambiguity that can either work for you or against you.
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The “Nightmare Scenario” For Beijing: 50 Million Chinese Apartments Are Empty
– Tyler Durden
10 november
Back in 2017, we explained why the “fate of the world economy is in the hands of China’s housing bubble.” The answer was simple: for the Chinese population, and growing middle class, to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth would keep rising. However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing as three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US, with the remainder invested financial assets.
Beijing knows this, of course, which is why China periodically and consistently reflates its housing bubble, hoping that the popping of the bubble, which happened in late 2011 and again in 2014, will be a controlled, “smooth landing” process. For now, Beijing has been successful in maintaining price stability at least according to official data, allowing the air out of the “Tier 1” home price bubble which peaked in early 2016, while preserving modest home price appreciation in secondary markets.
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***Bank Shares in Mexico (and Beyond) Plunge as Incoming Government Threatens Core Business: Fee Gouging – Don Quijones
9 november
Part of a global trend, as exasperated consumers are squealing, but no country has threatened to do what Mexico proposed.
Mexico’s stocks are plummeting, with the S&P/BMV IPC index down 5.8% on Thursday — the worst drop in seven years — and another 2.8% by midday on Friday. The dollar-denominated ETF, iShares MSCI Mexico [EWW], plunged 11% over the past three days and is down 22% since August 8:
What happened? Mexican stocks, which had been caught up in the sell-off in October and the cancellation of the mega-airport and corruption project at the end of October, bounced a little in November, but then took another hit on Thursday when a senior Mexican senator from the president-elect’s party proposed a bill that would ban or curb banks from charging commissions for many services.
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Cryptocurrencies: Financial stability and fairness – Jon Danielsson
9 november
Cryptocurrencies are primarily held today for speculative reasons and see little economic use outside of that. This column argues that if private cryptocurrencies were to find widespread economic use, either coexisting with or fully displacing fiat money, the result would be increased financial instability, inequality, and social instability.
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Half of Health Spending in the US Is Now Government Spending – Ryan McMaken
8 november
US states continue to expand Medicaid, and it’s happening even in so-called “red states.” CNBC, for instance, reports how voters in “red states” Utah, Nebraska, and Idaho all approved ballot issues to expand Medicaid under new Obamacare provisions. Meanwhile, the voters in these states also handed control of state government to Republican governors and legislators.
At the state level at least, the expansion of government healthcare has now become pretty much a given in nearly all states outside of the South.
It continues to be a big issue in state-level elections, such as in Colorado, where the Republican candidate — who lost the election — spent much of his campaign condemning expansion of “government-run” healthcare.
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Billions for Planes, Billowing Losses – MC01
10 november
The Long-Haul “Low-Cost Carrier” Business Model in a world awash in cheap money.
In 1967, Icelandic airline Loftleiðir started offering cheap tickets on Transatlantic flights. Loftleiðir used a lot of what today would be called “funny business practices” to offer such low fares, such as flying the Canadair CL-44, an unsuccessful cargo plane converted into an all-passenger configuration, and not being exactly concerned with punctuality or speed. It was an instant success.
Loftleiðir did not survive the 1970’s, being absorbed by Flugfélag (now Icelandair), but the seed had been sown: the low-cost carrier (LCC) had been born.
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Carbon Tax – John H Cochrane
9 november
“The carbon tax is dead; long live the carbon tax” is the headline of Tyler Cowen’s Bloomberg column on the failed (again) Washington State carbon tax. And rather decisively, per the picture on the left.
“Maybe its failure on the ballot in Washington state will inspire economists to come up with better arguments” challenges the subhead. I can’t resist.
The key question for a carbon tax is, what do you get in return? What do you do with the money? Washington’s carbon tax would have, according to the Seattle Times,
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Crowding out risk: Sovereign debt, banks, and firms’ investment in Italy – Pierluigi Balduzzi, Emanuele Brancati, Fabio Schiantarelli
9 november
The Italian government has decided to pursue an expansionary fiscal policy, with increased welfare spending as its focus. This column uses evidence from the 2010-2012 sovereign debt crisis to explore the potential negative effects of this policy on private investment. It finds that an increase in a bank’s credit default swap spreads leads to lower investment and employment for younger and smaller firms and in the aggregate. These findings suggest the planned fiscal expansion could substantially crowd out private investment.
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***Accelerating Toward “Peak Oil Demand” – Dwayne Purvis
5 november
Now even growth engines China and India.
The drumbeat towards peak oil demand is accelerating, but since much of the acceleration is happening outside of the United States, its cadence is muted.
To be clear, the developed world passed peak oil demand a decade ago and has for years been forecast to continue reducing its demand. Increasing demand in industrializing countries, particularly China and India, each with a population tantamount to that of the OECD, slightly overpowers declines in the developed world, and as a result, global demand continues to increase.
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Sovereign bond pricing in the euro area: When legal clauses matter – Marcos Chamon, Julian Schumacher, Christoph Trebesch
6 november
Do investors care about the legal characteristics of sovereign debt? Focusing on the euro area, this column compares sovereign bonds issued under domestic law to those issued under a foreign jurisdiction, which are harder to restructure in a debt crisis since they are out of reach of the borrowing country’s legislature. This legal protection means that foreign law bonds trade at a premium (with lower yields), but only in situations of severe distress such as Greece or Portugal in 2011/2012. In the midst of a crisis, governments can borrow more cheaply by issuing in foreign law.
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How Capitalists Created a “War on Waste” – Chris Calton
8 november
Perhaps the most commonly referenced historical image invoked by people who wish to demonstrate the need for government interventions to protect the environment from private industry is that of the Chicago River in the nineteenth century. By the end of the Civil War, Chicago had the largest stock yard in the country, the Union Stock Yard, where hogs and cattle were butchered, portioned into marketable cuts of meat, packaged, and distributed to the rest of the country for sale. But much of the animal was unusable, so each slaughtered animal had wasteful byproduct that businesses had to deal with. Their initial answer was to dump the waste into the Chicago River, leading to the infamous descriptions of the stench of death and the bubbling water left by visitors to the city.
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