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 United States Infrastructure Plan May Be Hugely Inflationary – Daniel Lacalle
7 november
What is the worst thing a government can do when there is high inflation and supply shortages? Multiply spending on energy and material-intensive areas. This is exactly what the US infrastructure plan is doing and -even worse- what other developed nations have decided to copy.
If you thought there were problems of supply and difficulties to access goods and services in the middle of a strong recovery, imagine what will happen once central banks and governments turn the printing machine to maximum level to spend on white elephants.
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The EU fiscal framework: A flanking reform is more preferable than quick fixes – Niels Thygesen, Roel Beetsma, Massimo Bordignon, Xavier Debrun, Mateusz Szczurek, Martin Larch, Matthias Busse, Mateja Gabrijelcic, Laszlo Jankovics, Janis Malzubris
10 november
The policy responses to the Covid-19 pandemic underscored two interlinked issues in the EU fiscal surveillance framework: the failure or difficulty on the part of some member states to build fiscal buffers in good times, followed by the tendency to find new often improvised forms of flexibility in the implementation of the EU fiscal rules or through new elements of risk sharing when times turn bad. The latest European Fiscal Board annual report proposes a reform to the EU fiscal framework based on (1) a medium-term debt anchor; (2) an expenditure rule as the main policy instrument; and (3) a single escape clause applied on the basis of independent analysis.
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How Asset Price Inflation Is Different from Goods Price Inflation – Brendan Brown
0 november
There has been no constant concept of asset price inflation through the modern age of fiat money even amongst those who recognize the condition. The term has become most popular in the present period of inflation targeting coupled with the use of radical monetary tools. The historian of economic thought could doubtless find some common threads through the evolving concept going back into the nineteenth century or earlier (indeed the first big example is the Dutch monetary inflation of the 1630s featuring tulip mania, the bubble in stock of the Dutch East India Company and Amsterdam real estate). Even so he or she would have to confront much perplexity.
How could Milton Friedman and Anna Schwartz have described the years 1922–28 as the heyday of the Federal Reserve—doing everything right apparently—whilst von Hayek (2008), Rothbard (2002), Robbins (2002), and many others viewed the same Federal Reserve during the same years as responsible for a huge credit boom and asset price inflation culminating in bust and great depression?
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The Contrarian Trade of the Decade: The Dollar Refuses to Die – Charles Hugh Smith
10 november
Which is more valuable: Wall Street’s debt/asset bubbles or the global empire? You can’t have both, so choose wisely.
The consensus makes sense: the U.S. dollar is doomed because the Federal Reserve and the Treasury will conjure trillions of new dollars out of thin air to prop up the status quo entitlements, monopolies, cartels and debt/asset bubbles, and since little of this issuance actually increases productivity, all it will accomplish is the dilution / devaluation of the currency.
Put simply, the dollar will lose its purchasing power as the inevitable result of the need to print and borrow ever-increasing sums to pay interest on existing debts, fund Bread and Circuses to keep the masses placated and keep inflating the asset bubbles in stocks, housing, bat guano, etc. to maintain the illusion of prosperity.
This destruction of the dollar is TINA writ large: there is no alternative. The only way to keep the status quo from imploding is to print as many trillions as are needed, and this inevitably devalues the currency to the point of worthlessness.
OK, we get it: TINA so the dollar dies. But let’s consider TINA from the perspective of the Deep State. Destroying the purchasing power of the dollar destroys the engine of America’s power, which is the ability (“exorbitant privilege”) to conjure “money” out of thin air and be able to trade this “money” for cobalt, steel, semiconductors, etc. supplied by other nations.
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Why having more women/diverse economists benefits us all – Rigissa Megalokonomou, Marian Vidal-Fernandez, Duygu Yengin
11 November
Women are now more likely to pursue a university degree than men, but the proportion of women graduating in economics has decreased or remained stagnant over the past two decades. This column examines the representation of women in undergraduate economics degrees in 25 European countries during 2014–2018. The ratio of women to men in economics, controlling for gender differences in enrolment, has been around 0.6 on average and is stable or decreasing. Increased representation of women economists is important for more balanced policy recommendations, and the authors discuss how this might be achieved.
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Dollar Purchasing Power Plunges. Inflation +6.2%. For Urban Wage Earners +6.9%, Highest in 40 years, Most Monstrously Overstimulated Economy Ever – Wolf Richter
10 november
Fed still printing money and repressing “real” interest rates to negative 6%, new vehicle prices spike by most since 1975, housing CPI jumps, food & energy soar.
The broadest Consumer Price Index (CPI-U) spiked 0.9% in October from September, and by 6.2% from a year ago, the highest since November 1990 (6.3%) and since 1982, according to data released by the Bureau of Labor Statistics today.
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***Further up the Producer Price Pipeline, Inflation Rages at over 20%, Heading for Consumers – Wolf Richter
9 november
Massive price increases now building up in the pipeline.
A lot of price increases at various stages of production are coming down the pipeline that haven’t flown into consumer prices yet. These are input costs for industries that will try to pass them on to the next company in line, which will try to pass them on until the consumer gets to eat them. We’ll go up that pipeline in a moment.
At the front of the pipeline: Producer Price Index for Final Demand.
The PPI Final Demand covers the input prices for consumer-facing industries whose prices then enter into the Consumer Price Index. The PPI Final Demand jumped by 0.6% in October from September and pushed the year-over-year increase to 8.6%, same as in September, the biggest such jumps in the data going back to 2010 (red line).
The Core PPI Final Demand, without food and energy rose by 0.5% for the month and by 6.8% from a year ago, same as in September, the highest readings in the data, according to the Bureau of Labor Statistics today (green line).
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Pre-2020 Prices Are Gone Forever – MN Gordon
12 november
Price inflation is completely out of hand. You know this. Your dog knows it too.
Still, President Joe Biden wants you to believe he’s got it all under control. Last month, for example, White House Press Secretary Jen Psaki insisted inflation is decreasing. What a crock!
That was about the time White House chief of staff Ron Klain – an absolute goober – endorsed Jason Furman’s claim that America’s inflation and supply chain problems only affect a small part of the U.S. population. Furman, a former Obama administration economist and economics professor at Harvard University, also tweeted that “most of the economic problems we’re facing … are high class problems.”
Ivory tower thinking like this has turned Washington into a land of idiots. The elites are completely detached from reality. And their policies are wreaking havoc on working class and middle class Americans. We can’t change this. But we can revel in what it represents…
You see, one of the unspoken delights of the 21st century American experience is zeroing in on the precise moments when reality can no longer be covered up with lies. Like when America invaded Iraq and didn’t find weapons of mass destruction. Or when Fed Chair Ben S. Bernanke said impacts from problems in the subprime market were likely to be contained and then Lehman Brothers went belly-up.
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Get Ready for the Socialist Calculation Debate Redux – Per Bylund
12 november
It has been just over a century since Ludwig von Mises started the socialist calculation debate, one of the main contenders for fight of the century in economic theory. The debate raged primarily throughout the 1930s, but was also active in the 1920s and 1940s. Although Austrians started and comprised the one side of the debate, historians of economic thought have typically concluded that they ultimately lost.
Austrians disagree and maintain that the responses, primarily by Taylor (1929) and Lange (1936, 1937) missed the point. Specifically, they forced Mises’s argument into a general equilibrium framework within which a solution was readily available. But Mises’s actual argument is fundamentally based in entrepreneurship: the value-creative undertakings of imaginative, uncertainty-bearing promoters and producers seeking to make profits from satisfying consumers’ future wants.
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Americans Blow Off Fed Propaganda Inflation is “Temporary” – Wolf Richter
8 november
Inflation expectations are now totally unanchored.
Americans, as they struggle with the meaning of the Fed’s terms “transitory” and “temporary,” expect that inflation one year from now will rise to 5.7%, the 12th month in a row of relentless increases, the highest in the data going back to 2013, creating a beautiful record spike (red line), according to the New York Fed’s Survey of Consumer Expectations released today. And consumers expect inflation in three years to be at 4.2% (green line).
The Fed keeps saying in its FOMC statements that it wants “longer‑term inflation expectations” to remain “well anchored” at 2%. And they’re now totally unanchored and spiking to high heaven.
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Cronyism, Not Welfare, Is China’s Big Problem – Mihai Macovei
9 november
After three decades of promarket reforms, extreme poverty in China has been virtually eradicated. So President Xi Jinping now has the leverage to shift his attention to reducing the wealth gap in Chinese society. In a speech to the Chinese Communist Party in August, Xi touted “common prosperity” for all Chinese as an essential requirement of socialism and modernization.
Western pundits have welcomed China’s drive for more income redistribution and consumption, but have also interpreted Xi’s move as an indicator of a possible descent into welfarism and a tightening of the regime’s control over the private sector. But this is not necessarily the case. Rather the Chinese regime has shown a reluctance to sizably increase the size of its welfare state, even if its economy remains mired in cronyism. Moreover, in an economy where the ruling party also controls enormous portions of the economy, attempts to redistribute some of that state-owned wealth don’t necessarily mean a tightening of the screws on the private sector.
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Bureaucracy and development – Tim Besley, Robin Burgess, Adnan Khan, Jonathan Old, Guo Xu
8 November
How does bureaucracy matter for development? Over the last years, an enormous interest in this question has created a large body of research, mostly focused around evidence from field experiments and micro-level administrative data. This column reviews this recent literature and embeds it in the broader discussion on how bureaucracies contribute to economic development. The authors argue that this recent evidence matters, but also encourage future research to study bureaucracies as systems, and to analyse their systemic relations to politics, citizens, firms, and NGOs.
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Thanks to Bailouts, Wall Street Banks Are More Fragile than Ever – Doug French
8 november
The financial covid crash of 2020 came and went in a month as the US government threw every monetary and fiscal trick it had at the government-imposed flash panic. We’ll never know which malivestments would have been cleansed. We live on with goods and labor shortages and with higher prices we’re assured by experts are transient. Supply chain issues, we’re told constantly, with no mention of the Federal Reserve’s balance sheet having doubled since the 2020 crash.
In 2008, Hank Paulson was a less, shall we say, flexible Treasury secretary than today’s person at the Treasury, Janet Yellen. Sure, Paulson oversaw a $700 billion Troubled Assets Relief Program (TARP) bank bailout. But, that amount seemed quaint as I was reminded of it reading A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers.
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Social insurance policies in turbulent times: Short-time work versus unemployment insurance – Giulia Giupponi, Camille Landais, Alice Lapeyre
12 November
While the US aggressively extended generosity of unemployment insurance in the face of the Covid-19 pandemic, Europe heavily subsidised reductions in hours worked and temporary layoffs through short-time work or similar schemes. This column presents a framework for determining the relative welfare costs and benefits of the two labour market policies during economic downturns. In countries with already generous unemployment insurance and/or strong employment protection, like those in Europe, strong cyclical short-time work programmes can be an extremely valuable complement to unemployment insurance to respond to recessions.
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***Eight Reasons Scarcities Will Increase Rather Than Evaporate – Chalres Hugh Smith
8 November
Who knew it would be so easy? All we have to do is collect urine and we’ll be flying our electric air taxi tomorrow!
While the private-jet crowd is busy selling a future of 1 billion electric vehicles, 1 billion windmills, 1 billion solar arrays, hundreds of thousands of electric aircraft, thousands of new nuclear power plants and trillions more in “wealth” accumulating in their bloated ledgers, reality is intruding on their technocratic fantasies.
The primary assumption of the private-jet crowd is that the developed world will continue to have a free pass to strip developing-world nations of their mineral wealth at the low, low cost of a bribe to the current kleptocrats in power and low, low wages paid to local workers. The profits will naturally flow to the private-jet crowd–it’s the Divine Right of Capital.
Knowledgeable readers assure me that the technologies of extracting resources have reached such heights that resources will continue to be low-cost. I have no doubt that technological advances have lowered the costs of extraction and opened access to deeper deposits, but I also have no doubt that the biosphere, physics, chemistry and geopolitics continue to set limits that no technological advancement can circumvent.
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On the effectiveness of the Next Generation EU funds – Fabio Canova, Evi Pappa
9 November
In light of last year’s launch of the Next Generation EU funds, understanding the effectiveness of the EU’s use of structural funding has become even more important. This column examines the role of the European Regional Development Fund and the European Social Fund over time. While both have contributed to job creation and economic recovery, the former had a more short-term direct effect and the latter a more medium- to long-term indirect impact. There is significant regional heterogeneity in these impacts, driven by location, level of development, EU tenure, and euro area membership.
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China’s Financial Bubbles Remind Us of Scams like Britain’s South Sea Bubble – Joseph Solis-Mullen
11 novmber
Following the Treaty of Utrecht, which concluded the War of the Spanish Succession, both England and France found themselves hopelessly mired in public debt. Both, it turned out, hit upon a similar solution for trying to magic it away, and in the process sparked two of the more famous speculative crashes in world economic history. While the particulars in each case varied, however slightly, in both the South Sea and Mississippi Bubbles it was privately chartered banks that obtained charters for commercial companies in exchange for a basic debt-to-equity swap with their respective governments, which led to the financial frenzies that ensued. These cases illustrate the dangers of public-private partnerships, implicit or expected government guarantees, and the speculative booms easy credit conditions so often incite, all of which have their modern parallels, as we will see.
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***Place-based policies and the geography of corporate investment – Cameron LaPoint, Shogo Sakabe
8 november
Growing spatial inequality has led policymakers to offer firms tax breaks to attract investment and jobs to economically peripheral regions. This column examines a place-based bonus depreciation scheme in Japan which granted high-tech manufacturers immediate cost deductions from their corporate income tax bill. The policy generated big gains in employment and investment in building construction and in machines at pre-existing production sites. This response was driven by firms which rely on costly but long-lived capital inputs like industrial machines. How firms react to spatially targeted tax incentives ultimately depends on their internal network and their composition of intermediate capital inputs.
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How Nigeria’s Central Bank Inflates the Money Supply – Tam AlexAdedamola Ogunbewon
8 november
In April 2021 the governor of Edo State, Godwin Obaseki, said that the federal government printed an additional NGN 60 billion (60 billion naira) to be shared between all the states at the Federation Account Allocation Committee (FAAC). This was denied by the minister of finance, Hajia Zenab Ahmed. The Central Bank of Nigeria (CBN) governor, Godwin Emefiele, was a bit more forthright. He said, “That is our job. To print is about lending money. So, there is no need of putting all the controversy about printing of money as if we go into the factory, print the naira and start distributing on the streets…. It’s very inappropriate for people to give colouration to printing of money as if it’s some foreign words coming from the sky.”
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