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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We’re Headed toward Stagnation—Unless the Fed Reins In Its Money Printing – Frank Shostak
8 september
The US Fed is considering lifting its inflation target above 2 percent in order to revive the economy. Contrary to the accepted practice, the Fed is not expected to raise an alarm if the measured price inflation begins to rise. The US central bank is not expected to counter this increase with a tighter monetary stance as in the past. In fact, the idea is to continue robust monetary pumping until the economic data points toward a strong economy.
According to most experts, when an economy falls into a recession the central bank can pull it out of the slump by pumping money. This way of thinking implies that money pumping can somehow grow the economy. The question is, How is this possible? After all, if money pumping can grow the economy, then why not pump plenty of it to generate massive economic growth? By doing that central banks worldwide could have already created everlasting prosperity on the planet.
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***Inflation Is Stealth Austerity – Charles Hugh Smith
9 September
Rather than decry austerity, which demands an open political discussion of trade-offs, we should decry inflation’s stealthy reduction of purchasing power.
Austerity–bad. Inflation–good. Oh wait–they’re the same thing: both are a reduction in purchasing power. The only difference is a reduction via austerity is upfront while inflation is a stealth reduction, obfuscated by “official” distortions and Federal Reserve mumbo-jumbo.
Consider $1,200 in wages, unemployment, stimulus, Social Security payment, etc. If this payment gets cut by 10%–$120–as a result of austerity, pay cut, reduction in hours worked, etc., recipients scream bloody murder.
But if inflation reduces the purchasing power of the $1,200 by 10%, nobody does anything but grumble that “prices keep rising while my income stays the same.” This is the classic boiled frog syndrome: inflation is like the heat being turned up so gradually that the poor frog doesn’t realize he’s about to expire.
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Bankruptcies Rise Despite Trillions in New Liquidity – Daniel Lacalle
7 september
Misguided lockdowns have destroyed the global economy and the impact is likely to last for years. The fallacy of the “lives or the economy” argument is evident now that we see that countries like Taiwan, South Korea, Austria, Sweden, and Holland have been able to preserve the business fabric and the economy while doing a much better job managing the pandemic than countries with severe lockdowns.
One of the most alarming facts about this crisis is the pace at which bankruptcies are rising. Despite an $11 trillion liquidity injection and government aid in 2020, stocks and bonds at all-time highs, and sovereign as well as corporate yields at all-time lows, companies are going bust at the fastest pace since the Great Depression. Why? Because a solvency crisis cannot be disguised by liquidity.
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What really drives inflation – Itamar Drechsler, Alexi Savov, Philipp Schnabl
11 September
In a recent speech, Federal Reserve Chair Jerome Powell laid out the Fed’s new monetary policy framework, under which it will allow inflation to run above its 2% target in order to boost employment. This column presents a historical analysis of US monetary policy, arguing that the new framework marks a departure from the perceived wisdom of the 1970s. It is now argued that the real driver of inflation is centred on the financial system, instead of Fed credibility alone. The zero lower bound is also considered in light of the historical restrictions imposed by inflation ceilings.
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The Fed’s New Policy Risks a Return of the 1970s – Mark A. DeWeaver
10 september
On August 27, the Federal Reserve released an important revision to its monetary policy strategy, replacing 2 percent price inflation targeting—initially adopted in 2012—with a new approach in which the Fed will target an average inflation rate instead. To quote the Fed’s statement, “following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.” The idea is thus to allow inflation to move above 2 percent until it averages 2 percent over some unspecified number of prior periods rather than to aim for a consistent 2 percent level.
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The Millennials Are Coming For The Boomers’ Money: One Bank Sees Generational Conflict Breaking Out This Decade – Tyler Durden
12 september
Late last week, we published the executive summary from Jim Ried’s latest must read long-term asset return study titled “Age of Disorder” in which the author makes the case that Economic cycles come and go, “but sitting above them are the wider structural super-cycles that shape everything from economies to asset prices, politics, and our general way of life” Having identified five such cycles over the last 160 years…
The first era of globalisation (1860-1914)
The Great Wars and the Depression (1914-1945)
Bretton Woods and the return to a gold-based monetary system (1945-1971)
The start of fiat money and the high-inflation era of the 1970s (1971-1980)
The second era of globalisation (1980-2020?)
The Age of Disorder (2020?-????)
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“Prolonged Period of Risk to Institutional and Retail Investors of Further – Possibly Significant – Market Corrections” – Nick Corbishley
7 september
European Market Regulator flags big issues, including the “decoupling of financial market performance and underlying economic activity.”
The European Securities and Markets Authority (ESMA) warned of a “prolonged period of risk to institutional and retail investors of further – possibly significant – market corrections and very high risks” across its jurisdiction.
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***The role of prostitution markets in the surge of domestic violence during Covid-19 – Giovanni Immordino, Maria Berlin, Francesco Russo, Giancarlo Spagnolo
13 September
Domestic violence appears to have surged during the Covid-19 crisis in almost all countries. This column argues that dwindling prostitution markets during the lockdown might be partly responsible for the surge. Analysing the effects of the one-sided criminalisation of prostitution introduced in Sweden in 1999, it finds that the law reduced street prostitution but increased domestic violence against women outside the prostitution market. This evidence suggests that the freeze of sex markets caused by the Covid-19 crisis might have contributed to the observed spike in domestic violence.
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***The Welfare State Did What Slavery Couldn’t Do – Wendy McElroy
9 september
The welfare state has done to black Americans what slavery couldn’t do….And that is to destroy the black family. –Walter E. Williams, the Wall Street Journal
On August 14, the Commission on Social Status of Black Men and Boys Act was signed into law. It establishes a nineteen-member panel within the Commission on Civil Rights to examine social problems that disproportionately affect black males.
The act is a conscious response to the death of George Floyd, with the opening section of the bill being subtitled the “George Floyd and Walter Scott Notification Act.” Floyd died on May 25 after a white police officer knelt on his neck for several minutes. Walter Scott died on April 4, 2015, after being shot by a white police officer who had stopped him for a broken brake light. Both have become symbols of police brutality against black males. Invoking them indicates that the new commission will focus on the disparity with which law enforcement and the court system treat black males.
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Measuring the cost of living in Mexico and the US – David Argente, Chang-Tai Hsieh, Munseob Lee
13 September
Cross-country price indexes are an essential tool for comparing living standards in different countries. But those indexes are constructed from data that does not always account for heterogeneity in shopping behaviour, the uneven quality of products, and variety availability. This column compares barcode-level data on prices and quantities for consumer packaged goods in the US and Mexico, and finds that Mexican real consumption relative to the US is larger than previously estimated. It highlights the importance of addressing sampling, quality, and variety biases in international price comparisons.
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Former Thiel Macro Head Warns “China Is A Legitimate Threat” To Dollar’s Reserve Status – Tyler Durden
12 september
Featured in this week’s episode of MacroVoices is Mike Green, portfolio manager at Logica Capital, which he joined in January 2020 after serving as portfolio manager for Thiel Capital, the investment firm that manages the Peter Thiel’s private equity, which is currently led by managing director Eric Weinstein.
Fresh off an appearance with Grant Williams and Bill Fleckenstein in a series of podcasts discussing the US equity market “Endgame”, Green spent a solid slice of the interview with MV’s Erik Townsend discussing the long-term ramifications of the Fed’s historically accommodative monetary policy, and what’s starting to seem like to an inexorable slide into MMT.
But Green’s research doesn’t focus so much on the actions of the central bank, but on investors’ reaction to central banks’ money printing. There’s still a mechanism for how capital filters into the financial markets. What is it?
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Inflation, Deflation, & Other Fallacies – Alasdair MacLeod
10 september
There can be little doubt that macroeconomic policies are failing around the world. The fallacies being exposed are so entrenched that there are bound to be twists and turns yet to come.
This article explains the fallacies behind inflation, deflation, economic performance and interest rates. They arise from the modern states’ overriding determination to access the wealth of its electorate instead of being driven by a genuine and considered concern for its welfare. Monetary inflation, which has become runaway, transfers wealth to the state from producers and consumers, and is about to accelerate. Everything about macroeconomics is now with that single economically destructive objective in mind.
Falling prices, the outcome of commercial competition and sound money are more aligned with the interests of ordinary people, but that is so derided by neo-Keynesians that today almost without exception everyone believes in inflationism.
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The EU’s Drive toward Political Centralization Will Doom Its Economy – Antonis Giannakopoulos
8 september
In the wake of the economically disastrous covid-19 shutdowns, the political class has desperately tried to save the failing euro system. On July 21 European leaders agreed on what they called a “historic” deal. It was nothing more than a multitrillion euro stimulus package. However, it is more probable that the “recovery fund” will delay any chance of a much-needed economic restructuring taking place. What it will do is waste scarce resources and capital while setting Europe up for another financial and debt crisis. Another even more important issue is the dangerous path toward political centralization the EU is heading down as a result of the crisis. The European Parliament is very much dominated by procentralization forces and contains few individuals who defend the principles of decentralization and economic freedom while seeing with great concern the ever growing power of Brussels.
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Junk-Bond Frenzy Set Records in August, as Everyone Tried to Front-Run the Fed – Wolf Richter
11 september
But seeing the frenzy, the Fed has stepped away.
For the US junk bond market, August was the month of superlatives and records. Companies issued a total of $52.9 billion in high-yield bonds, by far the most ever for any August, which is normally a slow month, and the second highest amount for any month, behind only June, which had set the all-time record at $59.9 billion, according to S&P Global.
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How US consumers use their stimulus payments – Olivier Coibion, Yuriy Gorodnichenko, Michael Weber
8 September
A major component of the 27 March CARES Act in the US was a one-time transfer to all qualifying adults of up to $1200, with $500 per additional child. Using a large-scale survey of US consumers, this column studies how these large transfers affected individuals’ consumption, saving and labour supply decisions. Most respondents report that they primarily saved or paid down debts with their transfers, with only about 15% reporting that they mostly spent it. On average, individuals report having spent or planning to spend only around 40% of the total transfer. The payments appear to have had no meaningful effect on labour-supply decisions from these transfer payments, except for 20% of the unemployed who report that the stimulus payment made them search harder for a job.
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How Capitalists Improve Human Productivity – Fabrizio Ferrari
7 september
To quote the last paragraph of this 2008 article by Robert Murphy, when asked why Austrian school economics should be studied, the best answer is: “the Austrian theory of capital is the best one you can find if you really want to grasp how the economy actually works—beyond sterile mathematics and static timeless analysis.”
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The impact of global economic disruption is as big a threat to low-income countries as the direct effects of COVID-19 – Christopher Adam, Mark Henstridge, Stevan Lee
8 September
The small open economies of sub-Saharan Africa are substantially constrained in their ability to respond to the COVID-19 shock through fiscal adjustment. The scale of contraction in external demand, combined with limited fiscal space, means that without substantial external support, feasible policy packages in many of these countries translate to austerity programmes. This column uses a dynamic general equilibrium model calibrated to data from Uganda to characterise the macroeconomics of the pandemic and its aftermath in sub-Saharan Africa. It finds that the recovery depends significantly on how the public finances are restored to sustainability, and may be accelerated with external support.
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Unprecedented Stimulus Is Fueling an Explosion of Fraud, Governments Begin to Admit – Nick Corbishley
10 september
“If you discover at a later stage that there was Mafia involvement, how do you undo what you’ve already done?”
The British government acknowledged on Tuesday that it may end up paying out as much as £3.5 billion of taxpayer funds in fraudulent or wrong claims for its job retention scheme, which covers up to 80% of an employee’s salary while they are on furlough. That’s the equivalent of 10% of all the money disbursed by the furlough program by mid-August.
“We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%,” Jim Harra, the top civil servant at HM Revenue & Customs (HMRC), told members of parliaments on the Public Accounts Committee, adding that an academic study had estimated that the level of fraud and error could be even higher than 10%.
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Immigration and the welfare state – João Guerreiro, Sérgio Rebelo, Pedro Teles
9 September
Immigration policy has become a hot-button issue in both Europe and the US, with questions concerning optimal policy as well as the welfare state dominating discussions. This column revisits the idea of the immigration surplus, exploring a number of possible scenarios in terms of how policymakers should address the challenge. Correctly configuring fiscal policy so as to capture the benefits of both high- and low-skill immigrant (and native) workers is at the heart of optimal policy design and may help to address the swelling anti-immigrant sentiment that continues to exist in many countries today.
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