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 Impact of a SWIFT Ban on Russia and the World – Daniel Lacalle
27 februari
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the global financial system that allows immediate and secure transfers of money across borders. It is the web that verifies all financial transactions. It links 11,000 banks and institutions in more than 200 countries, with 40 million messages a day. Using SWIFT ensures that transactions happen in seconds in a secure way. Around 1% of those messages involve Russian payments, according to the BBC.
As part of the West sanctions against Russia, its banks have been banned from the SWIFT system. Additionally, the United States and the European Union have announced restrictions on the Russian central bank that block access to more than $600 billion in reserves. The Bank of Russia reports that only 22% of its international reserves are US Dollars, while gold accounts for 23%.
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Important questions unasked of the Fed – John H. Cochrane
22 februari
This weekend’s WSJ essay “How the Fed Averted Economic Disaster” by Nick Timiraos finally brings into public discussion the second question we should all be asking of the Fed. What happened in the grandest bailout of all time in the covid crisis, and, more importantly, having done it twice, how are we going to avoid massive bailouts becoming the normal state of affairs? (The first question, of course, is “how did you miss inflation so drastically and when are you going to do something about it?”)
They were offering nearly unlimited cheap debt to keep the wheels of finance turning, and when that didn’t help, the Fed began purchasing massive quantities of government debt outright.
Translation: When dealer banks weren’t buying treasury debt fast enough, the Fed lend the banks money to buy the debt, and quickly bought up the massive amount of debt themselves.
The Fed followed by bailing out money market funds, buying state and local government debt, buying exchange-traded funds that held junk corporate debt, and announcing a do whatever it takes pledge to keep corporate bond prices high. It worked.
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Will Inflation Turn into Stagflation? – Peter St. Onge
21 februari
Will inflation turn into stagflation? With inflation hitting 40-year highs, it’s the question of the hour.
Currently, Wall Street and the Fed are saying no, forecasting a respectable 3.7% real for 2022, 2.7% for 2023, and 2.3% for 2024. These aren’t epic prints, but they’re also nowhere near recession.
Of course, that same dream team of Wall Street and Fed missed inflation to an epic degree last year: in mid-October of 2021 the Wall Street Journal’s survey of economists were predicting 5.25% inflation by December—just two months later. Actual CPI in December was an annualized 9.5%, and it was 7.1% on a year-on-year basis. That’s pretty embarrassing for a two-month prediction of a large aggregate like inflation.
Incidentally, in that same survey the median economist predicted supply chains will be cleared by June this year—just 4 months to go. So we’ll see if they’re similarly deluded or, like the prodigal monkey throwing darts, they get one right.
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Even the Fed’s Lowball Inflation Measure Goes WOOSH: Fodder for 50-Basis-Point Rate Hike in March – Wolf Richter
25 februari
The most reckless Fed ever is still just watching – and fueling – the consequences of 23 months of policy errors as the Inflation Monster gets bigger and bigger.
The Fed’s official yardstick for inflation, the “core PCE” price index, which excludes food and energy and is the lowest lowball inflation measure the US government produces and which understates actual inflation more than any other inflation measure, spiked by another 0.5% in January from December, and by 5.2% year-over-year, the worst inflation spike since April 1983, according to the Bureau of Economic Analysis today.
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Geopolitics and Degrowth – Charles Hugh Smith
25 februari
The Geopolitics of Degrowth holds that real power flows not from waste, centralization and coercion but from decentralization, relocalization and the free flow of value.
Conventional geopolitics is all about more: more military power, more sanctions, more coercion, more influence.
The Geopolitics of Degrowth is all about the the power of less: wasting less, consuming less, needing less from other nations, reducing dependence on rivals, reducing coercion and centralized over-reach.
Conventional geopolitics concentrates wealth and political power in a giant dam on the biggest river. Centralized control of massed power is considered the acme of geopolitical strength. Everyone is coerced into funding and relying on the dam.
But this has it backwards: when the centralized dam bursts, the nation is in ruins. This vulnerability isn’t power, it’s weakness. The Degrowth model of strength is to make local use of every rivulet, stream and tributary, carefully shepherding its sustainability and use.
Unbeknownst to the mainstream, the world has entered an era of scarcity. The current abundance is a temporary flush of the last of the cheap-to-extract resources. Once this illusory abundance has been consumed, all that’s left is hard-to-extract, costly resources.
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Economic Knowledge Is Qualitative, Not Quantitative – Frank Shostak
23 februari
According to the popular way of thinking, our knowledge of the economy is elusive. Consequently, the best that we can do is to attempt to ascertain some facts of economic reality by applying various statistical methods to the so-called macro data.
For instance, an economist is of the view (i.e., he has a theory) that consumers’ outlays on goods and services are determined by personal disposable income and the interest rate. The personal disposable income and the interest rate, according to the economist’s view, are the driving variables of consumer outlays.
By means of a statistical method, the economist then converts this view into an equation. The established equation in turn is employed in the assessment of the future direction of consumer outlays.
If the equation generates accurate forecasts, then it is regarded as a good tool to ascertain the facts of reality. If it fails to produce accurate forecasts, then it no longer helpful in the establishment of the facts of reality. In this case, the theory must be abandoned or modified.
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***Inflation Ate their Lunch, But Americans Made Heroic Efforts to Spend – Wolf Richter
25 februari
Personal Income and Spending under Red-Hot Inflation and Omicron.
Not adjusted for inflation, the personal income of all Americans combined, from all sources – from wages, salaries, interest, dividends, rental income, unemployment compensation, stimulus checks, Social Security benefits, etc. but not including capital gains – was essentially flat (seasonally adjusted) in January from December, fell by 2.1% from the stimulus-inflated January 2021, and rose by 11.5% from January 2020, according to the Bureau of Economic Analysis today.
But, in “real” terms, meaning adjusted for the raging inflation, personal income from all sources fell by 0.5% in January from December, and fell by 7.7% from the stimulus-inflated January 2021 and was up only 3.7% from January 2020. But wait… this was for all consumers combined, and the population has grown.
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Global financial risk factors and sovereign risk – Simon Gilchrist, Bin Wei, Vivian Yue, Egon Zakrajšek
26 februari
The interconnections between the balance sheet of a sovereign and those of global financial institutions can lead to a widening of sovereign spreads unrelated to country-specific fundamentals. This column explores this financial-sovereign risk nexus and documents that a substantial portion of the co-movement among sovereign spreads can be accounted for by changes in global financial risk. Specifically, an increase in global financial risk causes a large and persistent widening of sovereign spreads, with the spillover effects especially pronounced for speculative-grade sovereign debt.
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***Canada’s Freezing of Protesters’ Finances Shows How the “War on Cash” Ends – Robert Fellner
26 februari
The Canadian government is now freezing the bank accounts and personal assets of those who donated to support the Freedom Convoy, which is an organized political protest of the vaccine mandates. The deputy prime minister announced that they will retain these so-called emergency powers permanently going forward and will also seek to implement additional measures to further restrict the ability of political protestors to raise funds or otherwise use the banking system.
This highlights the need to eliminate the state’s control over money, at least in societies that wish to remain free. As articulated in a fascinating Twitter thread, constitutional rights become utterly meaningless if there are no practical means to exercise them. Free speech rights and the right to assemble are of little use to those who have no ability to access their money. Organizing an assembly requires being able to afford the costs associated with travel. Exercising free speech rights, at least if one wishes to do so effectively, requires at least some funds to ensure that the message reaches a large audience.
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The intergenerational transmission of cognitive skills – Eric Hanushek, Babs Jacobs, Guido Schwerdt, Rolf van der Velden, Stan Vermeulen, Simon Wiederhold
22 februari
Parents influence their children in many ways, but which family features actually cause the strong intergenerational linkages that we observe? This column presents the first causal evidence on cognitive skill transmission in the family. Using Dutch survey and registry data, the authors show that parents’ maths and language skills strongly affect the same skills in their children, and that skills within dynasties are not just genetically determined but are significantly affected by educational experiences. This highlights the importance of good educational environments in alleviating persistent inequalities.
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The Steep Cost of Sanctions for Europe and Russia – Daniel Lacalle
21 februari
The escalation of tension in Ukraine has reminded us of something many investors seemed to have forgotten: geopolitical risk. Sanctions and the inevitable drop in trade have proven to generate a significant negative impact on the different economies involved. We know from the 2014 Ukraine crisis that the economic hit is severe and persistent.
The economic hit of sanctions is undoubtedly highest for Russia. The International Monetary Fund (IMF) estimated in 2015 that “Western sanctions and Russian countersanctions reduced Russian real gross domestic product (GDP) initially by 1–1.5% and that prolonged sanctions would lead to an even larger cumulative output loss. In 2019, the IMF estimated that sanctions reduced Russia’s growth rate by 0.2 percentage points every year in 2014–2018,” as reported in the New Atlanticist.
The impact on Russian citizens is wide even when these sanctions are targeted at individuals and state banks. The most obvious impact is the the local currency’s loss of purchasing power, which has plummeted against the US dollar, reducing salaries and savings in real terms.
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***Historical gender discrimination does not explain comparative Western European development – Nuno Palma, Jaime Reis, Lisbeth Rodrigues
27 februari
The comparatively slow economic growth of Southwestern Europe since the Middle Ages is often attributed to gender discrimination and the idea that women had more agency in England and the Low Countries, which kept fertility levels low and human-capital formation high. This column combines a dataset from six centuries of archival sources with a qualitative discussion of comparative social norms to show that women in Portugal were no more discriminated against than women in other parts of Western Europe, which suggests that other factors must be responsible for the divergence in incomes.
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Inflation, market power, and price controls: Views of leading economists – Romesh Vaitilingam
25 februari
With sharply rising US inflation prompting debate about the potential role of powerful firms in driving up prices and whether antitrust interventions and/or price controls may be an effective policy response, the IGM Forum at Chicago Booth invited its panel of leading US economists to express their views. As this column reports, few think that dominant corporations in uncompetitive markets are a significant factor in rising prices; and asked whether antitrust interventions could reduce inflation, more than four in five experts disagree. A smaller majority disagrees with the proposition that 1970s-style price controls could reduce inflation, but even those who say that they might work don’t necessarily think that reintroducing them should actually happen.
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Buyers’ Strike Sets in: Used-Vehicle Supply Balloons, First Dip in Crazy Prices. But New-Vehicle Shortages Persist – Wolf Richter
21 februari
Will CPI inflation back off as used-vehicle prices partially unwind? Ha, here come the massive CPI measures for rent that have begun to soar. Inflation Whac-A-Mole.
This has been developing in the used vehicle market since November: After prices spiked into the stratosphere, more potential buyers became reluctant to overpay ridiculous amounts for a used vehicle, and sales began to dip, and the underlying dynamics in the wholesale market began to weaken in November and weakened further in December, and then in January wholesale prices were flat for the first time since August seasonally adjusted. And not seasonally adjusted, prices fell.
By the beginning of February, supply was above average. And over the first two weeks in February, prices have begun to dip even on a seasonally adjusted basis. So here we go, charting the turning point of a market gone nuts.
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Our Financial System Is Optimized for Sociopaths and Exploitation – Charles Hugh Smith
23 februari
Let’s call this financial system what it really is: the MetaPerverse, a conjured world of self-serving cons.
We live in a peculiar juncture of history in which truth has been banished as a threat to the maximization of private gain, i.e. the hyper-pursuit of self-interest. Evidence that supports a causal chain has been replaced by cherry-picked data that supports a self-serving narrative: both the evidence and narrative are manufactured to serve the interests of the few at the expense of the many.
In this juncture of history, evidence is easily disputed because the process of manufacturing self-serving evidence has been perfected. Indeed, self-serving evidence is now a commodity which can be purchased wholesale: rig the sample size, massage the data statistically, conjure up a context that serves to frame the evidence in a slippery self-interested fashion, omit disinterested evidence and contexts, top with arcane math and voila, evidence and narrative are presented as “facts” rather than what they really are, an elaborate, well-staged con designed to maximize the private gains of the few by exploiting the many.
Organizing the entire system to serve the pathological greed of the few is best served by devaluing truth to mere opinion and causal chains to mere narratives. In this juncture of history, truth has been revealed as a chimera; there is only opinion, and all opinions are equal. Opinions are beliefs, and all beliefs are equal. All narratives are equal. All questions boil down to values: values are all equally detached, free-floating and of the same value: zero.
This con has reached perfection in our financial system, which is now optimized for exploitation and sociopaths. As Nassim Taleb has explained (referencing Adam Smith), markets only function if there are rules which are imposed equally on all participants. In our financial system, there are two sets of rules: one which we can summarize as anything goes for the super-wealthy and the well-connected, and another set for everyone else.
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The cross-border effects of environmental regulation: Evidence from battery recycling in the US and Mexico – Shinsuke Tanaka, Kensuke Teshima, Eric Verhoogen
21 februari
Press accounts of dirty activities springing up in developing countries, in part to evade stricter environmental regulations in developed ones, are all too common. But previous academic research has found little systematic evidence of such pollution-haven effects between the global North and South. This column looks at the recycling of lead-acid batteries in the US and Mexico, and finds that tightened US regulations around lead increased exports of batteries to Mexico for recycling, worsening health outcomes for locals, especially the poor.
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