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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Why Monetary “Stimulus” Won’t Prevent an Economic Bust – Frank Shostak
9 juni
The increase in the growth rate of the Consumer Price Index (CPI) has fueled concerns that if the rising trend were to continue the Fed is likely to tighten its interest rate stance. Observe that the yearly growth rate in the CPI climbed to 4.2 percent in April from 2.6 percent in March and 0.3 percent in April 2020.
We hold that because of massive increases in the money supply, it is likely that the growth momentum of prices is going to follow a rising trend.
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It Gets Ugly: Dollar’s Purchasing Power Plunged at Fastest Pace since 1982. It’s “Permanent” not “Temporary,” Won’t Bounce Back – Wolf Richter
10 juni
But it’s a lot worse than it appears.
The Consumer Price Index jumped 0.6% in May, after having jumped 0.8% in April, and 0.6% in March – all three the steepest month-to-month jumps since 2009, according to the Bureau of Labor Statistics today. For the three months combined, CPI has jumped by 2.0%, or by an “annualized” pace of 8.1%. This current three-month pace of inflation as measured by CPI has nothing to do with the now infamous “Base Effect,” which I discussed in early April in preparation for these crazy times; the Base Effect applies only to year-over-year comparisons.
On a year-over-year basis, including the Base Effect, but also including the low readings last fall which reduce the 12-month rate, CPI rose 5.0%, the largest year-over year increase since 2008.
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Centralised bank supervision and the composition of firm investment – Miguel Ampudia, Thorsten Beck, Alexander Popov
11 Juni
The trade-off between stability and growth has long been a subject of policy debate and informs views on the extent to which the supervision of banks should be centralised. This column presents analysis of the ECB’s Single Supervisory Mechanism, using the announcement of the mechanism and its implementation as a quasi-natural experiment. It finds that centralised bank supervision is associated with a decline in lending to firms, which is accompanied by a shift away from intangible investment and towards more cash holdings and higher investment in easily collateralisable physical assets.
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The Sources of Rip-Your-Face-Off Inflation Few Dare Discuss – Charles Hugh Smith
9 juni
We’re getting a real-world economics lesson in rip-your-face-off increases in prices, and the tuition is about to go up–way up.
Inflation will be transitory, blah-blah-blah–I beg to differ, for these reasons. There are numerous structural sources of inflation, which I define as prices rise while the quality and quantity of goods and services remain the same or diminish. Since the word inflation is so loaded, let’s use the more neutral (and more accurate) term decline in purchasing power: an hour of your labor buys fewer goods and services of lesser quality than it did a decade ago or a generation ago.
While the conventional discussion focuses on monetary inflation, i.e. expansion of money supply, the real rip-your-face-off sources have nothing to do with money supply. The rip-your-face-off sources are scarcities that cannot be filled by substitution or globalization.
Consider skilled hands-on labor as an example. Let’s say some essential parts in essential infrastructure require welding. There is no substitute for skilled welders. But wait, doesn’t economic dogma hold that whenever costs rise, a cheaper substitute will magically manifest out of a swirl of dust? That dogma is false in cases such as skilled labor.
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Bitcoin Is De-dollarization. Ethereum Is DeFi-nancialization – Mark Jeftovic
11 juni
Lately I have been thinking a lot about the difference between Bitcoin and Ethereum while at the same time the world is witnessing the inexorable move to crypto in realtime. Some may question the latter half of that assertion, given that the latest FUD cycle against cryptos has been one of the most intense that I’ve witnessed since getting involved in the space in 2013.
Behind the FUD we see actions. We see Russia dumping dollar assets (can you blame them?).
We hear Munger making almost childishly uninformed remarks on crypto, yet BRK is investing in one of the world’s most crypto friendly banks.
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We see El Salvador as the first country in the world to make Bitcoin legal tender.
Bitcoin’s El Salvador Option – Kristoffer Mousten Hansen
11 juni
Saturday last, the president of El Salvador, Nayib Bukele, shook the bitcoin world when he announced he would make bitcoin legal tender in his country. The hype after that was unbelievable, as the hodlers went into overdrive. There were some more intelligent takes, as from Caitlin Long on Twitter and Peter St. Onge, but in general the impression was that we were on the cusp of the brand-new world of bitcoinization.
Well, we now have the concrete law before us and can see exactly what Salvadoran bitcoinization means. To put it in the words of Horace: Parturient montes, nascetur ridiculus mus. The mountains labor—and give birth to a ridiculous mouse! Let’s examine the law and its implications.
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The end of “the end of inflation” – John H. Cochrane
10 juni
This spring’s spurt of inflation clearly already means one thing: The end of “the end of inflation.”
For 25 years inflation has seemed stuck on a downward trend. Those of us who worry about it seemed like end-of-the-world sign-holders that couldn’t leave the 1970s behind. It’s hard to buck the trend. A famous economist advised me to give up studying inflation — inflation is 2%, he said, that’s all you need to know. Apparently a new constant of nature.
Well, apparently not. Inflation can happen, and there is an economics of inflation. Right now it’s pretty obvious — supply constraints both natural and artificial, coupled with rampant demand.
Nobody is really sure where it will go. See the IGM survey for a good indication of how wide sensible consensus is on the issue. Maybe these are just temporary shocks, supply bottlenecks, a one-time price level rise from stimulus. Maybe it is the beginning of the 1970s, when exactly the same excuses were offered.
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“Crime and Punishment”: How Russian banks anticipated and dealt with global financial sanctions – Mikhail Mamonov, Anna Pestova, Steven Ongena
10 Junei
Financial sanctions against Russia’s state-owned and controlled banks were imposed consecutively between 2014 and 2019, allowing banks that would potentially be targeted in the future to adjust their international and domestic exposures. This column explores the informational effects of financial sanctions, showing that compared to similar private banks, ‘not yet sanctioned’ financial institutions immediately reduced their foreign assets while, rather unexpectedly, expanding their foreign liabilities. These informational effects crucially depend on geography, with targeted banks located further from Moscow decreasing their foreign assets by more and raising foreign liabilities by less than those located near the Kremlin.
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The Countries with the Most Monstrous Business Debts: US in 22nd Place Despite Massive Spike During the Pandemic – Wolf Richter
7 juni
China and the tax havens rule!
The debt of US nonfinancial businesses had already surged in recent years, but when the Pandemic hit, businesses went on a borrowing binge as the Fed has repressed interest rates to record lows even for the riskiest corporate borrowers.
These debts of nonfinancial businesses – including corporations and businesses that are not incorporated – jumped by 9.1% year-over-year to $17.7 trillion in Q4 2020, according to the Fed’s Financial Stability Report. This amounts to 82.4% of nominal GDP. The Fed has been ruminating in its financial stability reports about the risks posed by corporate debt.
These debts are from nonfinancial businesses and exclude banks, nonbank lenders, insurance companies, and other lenders because lenders borrow and then lend, and including their debts would lead to some double-counting.
But what is happening in the USA pales compared to what is happening in some other countries, such as the corporate tax havens and financial centers of Luxembourg, Ireland, and Hong Kong, and of course in China, according to the data released today by the Bank for International Settlements (BIS) for Q4 2020. It leaves the USA in ignominious 22nd place!
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Why Keynes Was Wrong about Unemployment – Robert Blumen
10 juni
Large-scale unemployment is another name for a surplus in the labor market. Equilibrium is a state which markets will naturally move toward as buyers and sellers look for mutually advantageous exchanges. Firms can always get some value from additional labor, even under pessimistic forecasts of sale prices and quantities. Workers earning zero wages can improve their situation by accepting a job—even if they do not accept the first offer. Therefore, a labor market in surplus will absorb unemployed labor at a lower wage. When a market is in surplus, the direction the price must go toward equilibrium is down.
Or so it was thought before Keynes. Keynes’s notion of unemployment equilibrium was a break with prior theory, which held that markets clear through price and quantity adjustments. When there is a surplus, a lower price is needed to clear a greater quantity of employment.
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Why “Wild Swings” In Crypto Prices are Not Really a Problem – Doug French
7 juni
“If the market continues to see wild swings based on Elon Musk tweets, it’s going to be a big setback for this asset class,” Matt Maley, chief market strategist for Miller Tabak + Co. told Bloomberg. “The fact that it sees such wild swings to the tweets from one person takes away the legitimacy of the asset class.”
Reminds a bit of a financial planner who told me bitcoin is “manipulated” and followed up with the ultimate smear “unregulated.” Yikes. Then the Chinese government made all sorts of threats concerning the mining and holding of crypto’s top brand. A wag on Twitter responded with words to the effect that when the Chinese banned Google in 2010 it didn’t seem to slow down the company.
Weston Nakamura in an interview with Real Vision’s Jack Farley made the trenchant point, “This is what markets look like when you don’t have global central banks artificially suppressing volatility, intervention of central banks buying every dip, putting a safety net under every single slight tremor or taper tantrum or whatever it may be, this is what happens.”
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Eurosclerosis update – John H. Cochrane
12 juni
All pre-covid. European GDP per capita fell in the decade following the financial crisis. US growth was nothing to write home about, but things could be worse. The we-should-be-more-like-Europe crowd has some explaining to do. (The Word Bank’s software misplaced the UK label; it is the red line on the top of the European group.) From the World Bank, HT Marginal Revolution.
The graph is in dollars, so part of the effect is that the dollar got more valuable relative to the euro.
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***Post-Pandemic Metamorphosis: Never Going Back – Charles Hugh Smith
7 juni
People caught on that the returns on the frenzied hamster wheel of “normal” have been diminishing for decades, but everyone was too busy to notice.
The superficial “return to normal” narrative focuses solely on first order effects: now that people can dispense with masks and social distancing, they are resuming their pre-pandemic spending orgy with a vengeance, which augurs great profits for Corporate America and higher tax revenues. Yea for “return to normal.”
This superficial narrative ignores second-order effects of the pandemic. Recall that first order effects: every action has a consequence. Second order effects: every consequence has its own consequence. We can also think of these as direct (first order) and indirect (second order) effects.
The pandemic’s first order effect was to shut down the frenzied hamster wheel of American life. The consequence of the pandemic–shutdown–had its own consequence: people had the opportunity to experience life outside the frenzied hamster wheel, and ask themselves why they tolerated the dead-end purposelessness, demeaning rigidity and life-draining stress of the whole spinning contraption.
For a great many people and dynamics, the pandemic was a transformative catalyst, and there is no going back to pre-pandemic “normal.” Many people experienced a liberty and expansiveness they’d either never experienced or forgot that such things even existed. This experience triggered a Metamorphosis, and they’re never going back to pre-pandemic “normal” because “normal” was a nightmarish landscape of exploitation, drudgery, pathology and meaningless servitude.
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With Reverse Repos, The Fed Is Now Trying to Clean up Its Own Mess – Doug French
12 juni
This spring Scott Pelley of 60 Minutes asked Fed chair Jerome Powell, “And you believe the system, because of the oversight of the Fed, has the wherewithal to stand a significant shock to the markets?”
After pointing out that the markets survived a 25 percent drop in GDP and the loss of 30 million jobs last covid spring, Powell admitted that “some parts of the financial system had to be bailed out again. These were really, though, nonbank places like money market funds and things like that, where we had to step in again and provide liquidity.”
Money market funds (MMF) are what most investors consider cash. How could anything go wrong with cash? One wonders why the Fed would be forced to provide liquidity to shore up liquidity.
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Fed’s Reverse Repos Hit $503 Billion. Liquidity Drain Undoing over 4 Months of QE – Wolf Richter
9 juni
New York Fed’s Williams prepares markets for “technical adjustments” to the Fed’s “administered interest rates” to get a handle on this phenomenon.
The Fed sold a record $503 billion in Treasury securities this morning via overnight “reverse repos” (RRP) to 59 counterparties, and thereby took in $503 billion in cash from the counterparties. These overnight RRPs will mature and unwind tomorrow. Yesterday’s record $497 billion in overnight RRPs matured this morning and were replaced by this new and even larger flood.
“Reverse repos” are the opposite of “repos.” They drain cash from the market and are liabilities on the Fed’s balance sheet – money the Fed owes the counterparties.
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Gold: “Heads You Win, Tails You Don’t Lose” – James Rickards
28 mei
Boring. I never thought I would say that about gold prices, but the gold price action for the last nine months has been boring.
And that’s actually a good thing. Why?
After beginning with the boring part, I’ll explain. Let me unpack this…
Gold prices hit an all-time high of $2,069 per ounce on August 6, 2020.
The yield-to-maturity on the 10-year Treasury note hit an interim low of 0.508% on August 4, 2020. The near simultaneity of those two benchmarks is no coincidence.
The interest rate on the 10-year note has been practically the sole determinant of the dollar price of gold since that August convergence of low rates and high gold prices.
But that isn’t always the case…
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Large trade shocks and economic crises: The case of the Finnish-Soviet trade collapse – Adam Gulan, Markus Haavio, Juha Kilponen
10 Juni
In December 1990, the Soviet Union withdrew from its bilateral trade agreement with Finland. This was followed by a dramatic collapse in Finnish-Soviet trade and a deep economic crisis in Finland. This column re-assesses the role of the trade collapse in causing the Finnish Great Depression in the early 1990s. The trade shock had a strong negative effect on the Finnish economy but explains less than one-third of the cumulative GDP loss. Domestic factors, including a financial boom and bust, exerted a much larger negative effect.
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Biden’s Budget Plan: Weaker Growth and Fewer Jobs – Daniel Lacalle
9 juni
The first thing any economist should do when reading a budget proposal is to analyze the basic macro assumptions and the results presented by the administration. When both are poor, the budget should be criticized. This is the case of the Biden Budget Plan.
Same growth, a lot more debt and less employment.
According to the administration, the impact on growth of this budget will be negligible, as their own—and optimistic—estimates see no change in the slowdown of the US economic growth trend.
The CBO (Congressional Budget Office, in The Budget and Economic Outlook: 2021 to 2031) estimates a 1.7 percent average real growth in GDP between 2020 and 2030, the same average they forecast for the 2025–30 period. This is lower than the potential real GDP growth of the US economy but driven by much higher debt … with lower employment.
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***Group Of Seven Illustrates Existential Global Problem Not Solution – The Strategic Culture Foundation
12 juni
The G7 represents much about the world order that is totally unsustainable: elite wealth promoting false conflicts among nations instead of implementing genuine cooperation and peace.
Posing as problem-solvers of the globe’s ills, the leaders of the so-called Group of Seven (G7) nations are gathered in an English seaside resort this weekend for an annual summit. It’s a spectacle that has lost any illusion of luster. Indeed, the gathering of such an elitist and effete group looks ridiculous against the backdrop of urgent global needs for cooperation and development.
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Real Interest Rates Suggest It’s A Good Time To Buy And Hold Gold – Mike Shedlock
11 juni
Let’s investigate the relationship between real interest rates and the price of gold.
Real means inflation adjusted.
I calculated the real interest rate by subtracting year-over-year CPI from the current 3-month T-bill yield.
One could also use the Fed Funds Rate or 1-month T-Bill rate as the yields are all about the same.
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***Fossil Fuels Aren’t Dying, They’re Shifting To National And State Backed Companies – Tyler Durden
12 juni
Despite the activist shareholder battles, calls for ESG changes and just outright negative press about fossil fuels, it looks like rumors of oil’s death have been greatly exaggerated. Fossil fuels aren’t dying – rather, their output is just being shifted to national and state owned companies.
Even as the supermajor oil companies shrink in size and adhere to incessant criticism, fossil-fuel demand holds strong, according to Yahoo Finance. Activists have been the busiest they have been in years…
Recent weeks saw Exxon and Chevron rebuked by their own shareholders over climate concerns, while Shell lost a lawsuit in the Hague over the pace of its shift away from oil and gas.
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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.

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