Economische aanraders: Veren of Lood biedt u op zondag wekelijks een inkijkje in (minstens) 10 belangrijke of informatieve artikelen en interviews die 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.

Sinds december 2015 nemen we 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 EU is Rotting (and Its Banks are Insolvent) – Alasdair Macleod
16 juni
The EU as a political construction is in a state of terminal decay. We know this for one reason and one reason alone: its core principal is the state is superior to its people. A system of government can only work over the longer term if it recognises that it is the servant of the people, not its master. It matters not what electoral system is in place, so long as this principal is adhered to.
The EU executive in Brussels does not accept electoral primacy. It shares with Marxist communism a belief in statist primacy instead. The only difference between the two creeds is Marx planned to rule the world, while Brussels is on the way to ruling Europe.
The methods of satisfying their objectives differ. Marx advocated civil war on a global scale to destroy capitalism and the bourgeoisie, while Brussels has progressively taken on powers that marginalise national parliaments. Both creeds share a belief in an all-powerful executive. The comparison with Marxism does not flatter the EU, and suggests it has a limited life and that we may be on the verge of seeing the EU beginning to disintegrate. Despite economic evolution in the rest of the world, like Marxian communists Brussels is stuck with a failing economic and political creed.
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Who the Heck Bought $1.2 trillion in New US Treasuries over the past 12 Months? – Wolf Richter
15 juni
Russia, Japan, and the Fed dumped. So who bought?
China’s holdings of US Treasury bonds, notes, and bills, after rising in February and March, fell by $5.8 billion in April to $1.18 trillion. Thus, China’s holdings have remained within the same range since August 2017, despite threats of a trade war and rumors that it would dump US Treasuries. China remains the largest holder, a position it had lost during its era of peak capital-flight from October 2016 through March 2017.
Japan has been systematically reducing its Treasury holdings. In April, it disposed of another $12.3 billion, according to the Treasury Department’s TIC data released Friday afternoon. Over the past six months, it shed $63 billion.
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What’s Wrong with the Economy: 9 Toxic Dynamics – Charles Hugh Smith
12 juni
These nine dynamics are mutually reinforcing.
Beneath the surface signals of an eternally rising stock market and expanding GDP, we all sense something is deeply, systemically wrong with the U.S. economy. These nine structural dynamics generate secondary dynamics, all of which are toxic to social mobility, sustainable prosperity, accountability and democracy:
1. The financialization of the economy, which transformed services, credit, risk and labor into commodities that could be traded globally. Financialization generates enormously asymmetric returns: those with access to low-cost credit, global markets and expertise in finance collect the lion’s share of gains in income and wealth.
2. The technological transformation of the economy, which has placed a substantial scarcity premium on specific tech/managerial/communication skills and devalued ordinary labor and capital. As a result, the majority of gains in wealth and income flow to those with the scarce skills and forms of capital, leaving little for ordinary labor and capital.
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The Italian mini-BOT debate – Silvia Merler
13 juni
Talks of parallel currency are not new in Italy. But one of the proposals – the so called mini-BOT – has made it into the government contract that underpins the current League-M5S coalition. We review what has been said about these proposals.
In the Italian context, Bossone and Cattaneo proposed in 2016 the “Tax Credit Certificate” (TCC), which they equated to a “helicopter tax credit”. Much as helicopter money is evocatively distributed across the economy for free, TCCs as helicopter bonds would be assigned free of charge by the government to households and enterprises. Bossone and Cattaneo argue that the Tax Credit Certificate system is projected to accelerate Italy’s recovery and will likely be sustainable. It also provides a tool to avoid the breakup of the Eurosystem and its potentially disruptive consequences.
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Cross-subsidies – John H. Cochrane
12 juni
Cross-subsidies are an under-appreciated original sin of economic stagnation. To transfer money from A to B, it would usually be better to raise taxes on A and to provide vouchers or otherwise pay competitive suppliers on behalf of B. But our political system doesn’t like to admit the size of government-induced transfers, so instead we force businesses to undercharge B. Since they have to cover cost, they must overcharge A. It starts as the same thing as a tax on A to subsidize B. But a cross-subsidy cannot withstand competition. Someone else can give A a better price. So our government protects A from that competition. That ruins the underlying markets, and next thing you know everyone is paying more for less.
This was the story of airlines and telephones: The government wanted to subsidize airline service to small cities, and residential landlines, especially rural. It forced companies to provide those at a loss and to cross-subsidize those losses from other customers, big city connections and long distance. But then the government had to stop competitors from undercutting the overpriced services. And as those deregulations showed, the result was inefficiency and high prices for everyone.
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In Hiking Interest Rates, Jerome Powell is Living Dangerously – Alasdair Macleod
14 juni
Since Hayek’s time, monetary policy, particularly in America, has evolved away from targeting production and discouraging savings by suppressing interest rates, towards encouraging consumption through expanding consumer finance. American consumers are living beyond their means and have commonly depleted all their liquid savings. But given the variations in the cost of consumer finance (between 0% car loans and 20% credit card and overdraft rates), consumers are generally insensitive to changes in interest rates.
Therefore, despite the rise of consumer finance, we can still regard Hayek’s triangle as illustrating the driving force behind the credit cycle, and the unsustainable excesses of unprofitable debt created by suppressing interest rates as the reason monetary policy always leads to an economic crisis. The chart below shows we could be living dangerously close to another tipping point, whereby the rises in the Fed Funds Rate (FFR) might be about to trigger a new credit and economic crisis.
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How to forecast an economic meltdown – Dee Gill
3 september 2015
Economic downturns are notoriously difficult to forecast, as evidenced by the 2007–10 financial crisis that surprised most of the world’s top economists. It has been difficult to identify indicators that consistently flag brewing recessions in time for policy-makers to take preventive action. If we hope to stave off crises with improved monetary policy, we could use a better warning system.
By combining indicators used to measure financial-sector risk, Chicago Booth’s Stefano Giglio and Bryan T. Kelly, with Arizona State’s Seth Pruitt, created a more sensitive alarm: a systemic-risk index that they argue is capable of forecasting widespread economic distress. Their statistical model appears to have predictive powers beyond any of its individual components.
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Economics Is Not Rocket Science — It’s Even More Complicated – Gary Galles
15 juni
Over the years, I have heard multiple different things described as “not rocket science.” The implication was always that rocket science was just about the hardest thing to do, making virtually everything else easy by comparison. As an economics professor over many of those years, I have increasingly come to object to that characterization. I think the questions of social coordination that economics addresses may not require “rocket science,” but are in many ways much more complex and difficult, especially when it comes to imposing control. After all, we have successfully sent rockets to many places in our planetary neighborhood, demonstrating a tolerable ability to solve enough of the relevant problems, yet economic policies remain known for causing more harm than help. As Peter Boettke once led off a post, “Political economy ain’t rocket science. But it is a discipline that forces one to focus on ideas and the implementation of ideas in public policies.” And the more one tries to control, the more those ideas and implementation issues stack up against the possibility, much less the probability, of effectiveness.
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Macroprudential tools, capital controls, and the trilemma: Insights from the Bretton Woods era – Eric Monnet
13 juni
In the Bretton woods system, capital controls ensured the independence of monetary policy. This column argues that it is impossible to understand how they worked without understanding their role in supporting credit controls at the time, which were used to fight inflation without raising the domestic interest rate. This may be relevant today in emerging markets in which central bank instruments still resemble those used under Bretton Woods.
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Big Tech’s Numbers Game Hides Many Sins – Brendan Brown
13 juni
Demand for financial engineers rises and falls with asset inflation. So there is nothing odd about these professionals now enjoying a good market for their services. But why is Big Tech such a large recruiter?

The art (not science) of financial engineering – camouflaging a rise in leverage which boosts present and future earnings for the purpose of sustaining a bull equity run – is most sought after when irrationality in capital markets is at its strongest. That occurs in a monetary inflation featuring virulent asset inflation as its most obvious symptom. Hunger for yield or irrational exuberance means that sober rational cynicism which would help investors spot the engineers’ camouflage is abnormally weak.
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Next Mortgage Default Tsunami Isn’t Going to Drown Big Banks but “Shadow Banks” – Wolf Richter
17 juni
As banks pull back from mortgage lending amid inflated prices and rising rates, “shadow banks” become very aggressive.
In the first quarter 2018, banks and non-bank mortgage lenders – the “shadow banks” – originated 1.81 million loans for residential properties (1 to 4 units). In the diversified US mortgage industry, the top 10 banks and “shadow banks” alone originated 260,570 mortgages, or 14.4% of the total, amounting to $75 billion. We’ll get to those top 10 in a moment.
Banks are institutions that take deposits and use those deposits to fund part of their lending activities. They’re watched over by federal and state bank regulators, from the Fed on down. Since the Financial Crisis and the bailouts, they were forced to increase their capital cushions, which are now large.
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Differences in consumption baskets across households and the distributional consequences of monetary policy – Javier Cravino, Ting Lan, Andrei Levchenko
16 juni
Monetary policy shocks can affect different types of agents differently. These distributional effects can have important consequences for policy effectiveness. Using US data, this column explores how shocks differentially affect the prices faced by households with different incomes. The results suggest that middle-income households’ consumption baskets have more volatile prices than those of high-income households, and they are therefore more exposed to monetary policy shocks.
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***Subjective Value Is not Arbitrary Value – Frank Shostak
16 juni
In the Austrian view, every individual is seen as employing the resources or means at his disposal in order to secure various ends. The use of resources is not done haphazardly but in accordance with an individual’s priorities. The individual ranks various ends or goals that he wants to attain.
The Menger Explanation of How Valuations Are Formed.
According to Carl Menger, the founder of the Austrian School of Economics, the heart of an individual’s valuations is his life. An individual assigns values to goods in accordance to the importance of those goods to his life maintenance. Various ends that an individual finds important to his life maintenance are then valued accordingly in a descending ranking.
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***Humans Need Not Apply: AI to Take Over Customer Service Jobs – Don Quijones
10 juni
“With Amelia, we graduate into automating the knowledge worker, the customer service agent.”
The last ten years have been a rough time for many bank employees in Spain. The country’s lenders have laid off 89,500 workers on the back of narrowing margins, industry consolidation, mass closures of branches and gathering digitization. In 2008, when the financial crisis struck, Spain was home to some 278,000 banking professionals; today there are just 195,000. Another 3,000 redundancies are expected in the coming months, as Santander and Bankia plan to further streamline their businesses, pushing the total number of layoffs close to 95,000.
The job losses are unlikely to end there. In fact, they could accelerate, especially if a potential new threat to traditional branch and front-office jobs materializes: artificial intelligence (AI). As Finextra reports, BBVA, Spain’s second largest banking group, is on the verge of enlisting AI “agent” Amelia, developed by New York-based IPsoft, for many of its customer support functions:
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A ‘new neutral’ world: Global debt and equilibrium interest rates – Nicola Mai
14 juni
The rise in global debt has continued unabated following the Global Crisis. This column argues that elevated debt levels will continue to put downward pressure on equilibrium interest rates across the world’s major economies, constraining central bank efforts to normalise rates and supporting the thesis that global equilibrium interest rates have fallen.
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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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