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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Suddenly, “De-Dollarization” Is A Thing – John Rubino
16 september 16
For what seems like decades, other countries have been tiptoeing away from their dependence on the US dollar. China, Russia, and India have cut deals in which they agree to accept each others’ currencies for bi-lateral trade while Europe, obviously, designed the euro to be a reserve asset and international medium of exchange.
These were challenges to the dollar’s dominance, but they weren’t mortal threats.
What’s happening lately, however, is a lot more serious. It even has an ominous-sounding name: de-dollarization. Here’s an excerpt from a much longer article by “strategic risk consultant” F. William Engdahl:
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Housing Bubble Symmetry: Look Out Below – Hugh Charles Smith
12 september
Housing markets are one itsy-bitsy recession away from a collapse in domestic and foreign demand by marginal buyers.
There are two attractive delusions that are ever-present in financial markets: One is this time it’s different, because of unique conditions that have never ever manifested before in the history of the world, and the second is there are no cycles, they are illusions created by cherry-picked data; furthermore, markets are now completely controlled by central banks so cycles have vanished.
While it’s easy to see why these delusions are attractive, let’s take a look at a widely used measure of the U.S. housing market, the Case-Shiller Index:
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The Chilling Fact “Record Median Household Income” is Hiding – Wolf Richter
14 september
Or Why Consumer Spending Has Been Dragging for Years.
One more thing about the new Census Bureau’s Income and Poverty report for 2016, which found to the great excitement in the media that median household income, adjusted for inflation (via CPI), rose 3.2% in 2016 to $59,039 – finally a tad above where it had been 17 years ago.
We already found buried in it that inflation-adjusted earnings from wages, salaries, etc. for full-time employed men have fallen 4.4% since 1973.
So now, we’ll look at another data set buried in the Census Bureau’s report, which is based on respondents at 98,000 addresses across the US. We want to know which households were the lucky ones – and turns out, there weren’t very many.
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In a Great Recession, the case for flexible exchange rates is alive and well – Giancarlo Corsetti, Gernot Müller, Keith Kuester
16 september
The classic rationale for flexible exchange rates was that policymakers would be unconstrained by currency targets. The Great Recession, however, saw numerous central banks constrained instead by the zero lower bound. This column considers which exchange rate regime is best for small open economies in a global recession. The model suggests that if the source of the shock is abroad and foreign interest rates become constrained at their zero lower bound, then flexible exchange rates do provide a great deal of insulation to the domestic economy.
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The Cardinal Sin Of Investing: Permanent Impairment Of Capital – Adam Taggart
15 september
Last week we presented a parade of indicators published by Grant Williams and Lance Roberts that warned of an approaching market correction as well as a coming economic recession.
The key message was: When smart analysts independently find the same patterns in the data, it’s time to take notice.
Well, many of you did, by participating in this week’s Dangerous Markets webinar, which featured Grant and Lance.
In it, both went much deeper into the structural fragility of today’s financial markets and the many reasons why economic growth will remain constrained for years to come.
The excessive build-up of debt in the system — and the absolute dependence on its continued expansion to keep the economy from imploding — is, of course, seen as the prime risk to future growth.
As Lance demonstrates here with several of his excellent charts, so much leverage has been taken on that its servicing is increasingly stealing capital that would otherwise go to savings, consumption and productive investment. Going forward, the demands of the debt service will simply result in less and less capital available left over to grow the economy:
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Market liquidity after the financial crisis – Tobias Adrian, Michael J. Fleming, Or Shachar
14 september
The potential adverse effects of regulation on market liquidity in the post-crisis period continue to receive significant attention. This column shows that dealer balance sheets have continued to stagnate and that various measures point to less abundant funding liquidity. Nonetheless, there is little evidence of a wide-spread deterioration in market liquidity. Liquidity remained resilient even during stress events like the 2013 ‘temper tantrum’.
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“You Should Take the Fed at Their Word” – Wolf Richter
13 september
Flip-flopping killed its credibility. That’s a problem for the markets.
“They’re getting more worried about the negative consequences of QE”: Fitch Chief Economist
The markets have been brushing off the Fed and have done the opposite of what the Fed has set out to accomplish. The Fed wants to tighten financial conditions. It’s worried about asset prices. It’s worried that these inflated assets which are used as collateral by the banks, pose a danger to financial stability. It has mentioned several inflated asset classes by name, including commercial real estate, which backs $4 trillion in loans heavily concentrated at regional banks.
And yet, markets have loosened financial conditions since the Fed started its tightening cycle in earnest last December. Markets are hiding behind “low” inflation, when the Fed is focused on asset prices.
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From Credit Risk to Pipeline Risk: Why Loan Syndication is a Risky Business – Max Bruche, Frédéric Malherbe, Ralf R Meisenzahl
11 september
Syndicated loan issuance has grown dramatically over the last 25 years. Over the period, the syndicated loan business model has evolved, affecting the nature of the associated risks that arranging banks are exposed to. This column introduces the concept of ‘pipeline’ risk –the risk associated with marketing the loans during the syndication process. Pipeline risk forces arranging banks to hold much larger shares of very risky syndicated term loans, which results in reduced lending by the arran­­ging bank not only in the syndicated term loan market, but in others as well.
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Why Is the Euro Still Gaining Against the Dollar? – Daniel Lacalle
12 september
The primary purposes of the incorrectly named “unconventional monetary policies” are to debase the currency, stoke inflation, and make exports more competitive. Printing money aims to solve structural imbalances by making currencies weaker.
In this race to zero in global currency wars, central banks today are “printing” more than $200 billion per month despite that the financial crisis passed a long time ago.
Currency wars are those that no one admits to waging, but everyone wants to fight in secret. The goal is to promote exports at the expense of trading partners.
Reality shows currency wars do not work, as imports become more expensive and other open economies become more competitive through technology. But central banks still like weak currencies — they help to avoid hard reform choices and create a transfer of wealth from savers to debtors.
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>Headline inflation measures shouldn’t ignore costs of home ownership – Mojmir Hampl, Tomas Havranek
12 september
Seven out of every ten Europeans live in their own homes, yet Europe’s most important inflation measure excludes the costs associated with owner-occupied housing. This column argues that including the costs of home ownership would prove beneficial to the conduct of monetary and macroprudential policy. It would also bring the measure closer to what most people consider inflation to be.
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Deutsche Bank: “This Is The $2.5 Trillion Question” – Tyler Durden
16 september
Next Wednesday, the Fed is widely expected to officially launch its balance sheet reduction or “normalization” process, as a result of which it will gradually taper the amount of bonds its reinvests in the process modestly shrinking the Fed’s balance sheet.
Very modestly. As shown in the chart below, the Fed’s $4.471 trillion balance sheet will shrink by $10 billion per month in October and November, or about 0.4% of its total AUM. Putting this “shrinkage” in context, over the same time period, the Bank of Japan and the ECB will continue adding new liquidity amounting to more than $400 billion. As a result, in Q4 net global liquidity will increase by “only” $355 billion, should Yellen begin “normalizing” in October following a September taper announcement as expected.
That much is known, however there are quite a few unknown aspects about the Fed’s upcoming QE unwind, and as a result, Deutsche Bank writes that “the Fed is about to become hugely important for financial assets.”
Assuming it all goes well, DB forecasts smooth sailing ahead, manifested by “nominal core rates will be relatively stable and the dollar gently weaker. 10s might trade a sustainably lower range 1.8-2.3 percent. There will be more of a gradual risk asset rotation favoring US (growth) equities, EM, some commodities at the expense of (value) equities, Eurostoxx, NKY with credit somewhere in between.”
But, as Deutsche Bank’s chief strategist Dominic Konstam writes, “There is a good chance it does not go well.”
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***The Terrible Facts about Real Earnings of Men – Wolf Richter
12 september
The income data from the Census Bureau is here. Men, sit down.
On the surface, the data looks benign, with trends improving. And this is what you will see when you look at the media coverage of the Census Bureau’s Income and Poverty report (PDF) released today:
Median household income, adjusted for inflation (via CPI), rose 3.2% between 2015 and 2016 to $59,039, the second year in a row of annual increases.
For “family households,” the median income rose 2.7% to $75,062. For “nonfamily households,” it rose 4.5% to $35,761.
The official poverty rate (weighted average threshold for a family of four = $24,563) inched down from last year to 12.7%, about the same as in 2007, before the Financial Crisis made a mess of people’s lives. In total, 40.6 million people live in poverty by this definition.
The poverty rate for families fell to 9.8%, from 10.4% a year earlier, affecting 8.1 million families.
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***Rule by Experts? – Peter G. Klein
10 september
The populist sentiment behind the Brexit vote, the election of Donald Trump, increasing skepticism of the mainstream media, distrust of higher education institutions, and similar phenomena has given rise to a worry among experts that society no longer values expertise.
Tom Nichols, author of the recent book The Death of Expertise, thinks the increasingly skeptical attitude among the general public poses grave harm to society. Writing in Politico, he worries that
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