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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Printing Money Can’t Replace Real Savings – Frank Shostak
13 april
Between January 1970 and December 2020 on average changes in money supply preceded changes in real economic activity by fourteen months, as depicted by real gross domestic product (GDP). Based on this it is tempting to suggest that a strengthening in the growth rate of money supply will result in the strengthening of real economic growth. Conversely, a weakening in the growth rate of money supply will set in motion a decline in real economic activity.
The relationship between the growth rate of money supply and the growth rate of real GDP presented in the graph above is a display of historical information. But history as such cannot confirm that increases in the money supply growth rate can set in motion real economic growth. According to Ludwig von Mises, in Human Action,
History cannot teach us any general rule, principle, or law. There is no means to abstract from a historical experience a posteriori any theories or theorems concerning human conduct and policies.
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Inflation in the aftermath of wars and pandemics – Kevin Daly, Rositsa D. Chankova
15 April
The economic consequences of Covid-19 are often compared to a war, prompting fears of rising inflation and high bond yields. However, historically, pandemics and wars have had diverging effects. This column uses data extending to the 1300s to compare inflation and government bond yield behaviour in the aftermath of the world’s 12 largest wars and pandemics. It shows that both inflation and bond yields typically rise in wartime but remain relatively stable during pandemics. Although every such event is unique, history suggests high inflation and bond yields are not a natural consequence of pandemics.
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Dollar’s Purchasing Power Drops Sharply to Record Low, But It’s a Lot Worse than CPI Shows – Wolf Richter
13 april
If the homeownership component in CPI mirrors the Case-Shiller Home Price Index, CPI would jump 5.1%! Not to speak of new & used vehicle prices, which I nevertheless speak of.
The Consumer Price Index jumped 0.6% in March compared to February, the sharpest month-to-month jump since 2009, according to the Bureau of Labor Statistics today, and was up 2.6% from a year earlier, after the 1.7% rise in February.
The infamous Base Effect, which I discussed last week in anticipation of what is now coming, was responsible for part of it: CPI had dipped in March last year, which created a lower base for today’s year-over-year comparison. Over the 13 months since February last year, which eliminates the Base Effect, CPI rose 2.3%.
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If You Don’t See Any Risk, Ask Who Will “Buy the Dip” in a Freefall? – Charles Hugh Smith
17 April
Nobody thinks a euphoric rally could ever go bidless, but as Greenspan belatedly admitted, liquidity is not guaranteed.
The current market melt-up is taken as nearly risk-free because the Fed has our back, i.e. the Federal Reserve will intervene long before any market decline does any damage.
It’s assumed the Fed or its proxies, i.e. the Plunge Protection Team, will be the buyer in any freefall sell-off: no matter how many punters are selling, the PPT will keep buying with its presumably unlimited billions.
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A solution to the mystery of excess trade balances – Gabriel Felbermayr, Yoto Yotov
14 April
Whether or not large bilateral trade imbalances are a signal of non-reciprocal (or ‘unfair’) trade costs has been the subject of debate for some time, and was brought to the fore during President Trump’s time in office. This column argues that if the trading partners’ average trade costs with the whole of the world are taken into account, then the ‘unfair trade’ argument does not hold up. Using standard gravity modelling, the authors find that up to 88% of the variance in bilateral balances can be explained without making any reference to asymmetries in bilateral trade costs.
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Inflation levels – John H. Cochrane
13 april
March inflation is up. The CEA delivered a historic tweetstorm. It starts with
temporary factors: base effects, supply chain disruptions, and pent-up demand, especially for services
I’m glad for once to have nailed a forecast: That Fed and Administration’s first response to inflation would be to invoke “temporary” factors, just as in the 1970s. We’ll see how that pans out.
The CEA goes on to “base effects,”
In the near-term, we and other analysts expect to see “base-effects” in annual inflation measures. Such effects occur when the base, or initial month, of a growth rate is unusually low or high..
This unusually large price decrease early in the pandemic made April 2020 a low base.
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The Interesting Case of the Zaïre—the Question MMT Cannot Answer – Eric Nies
16 april
The zaïre lived an interesting life.
The zaïre was the basic unit of currency for the Democratic Republic of the Congo and the Republic of Zaire (it’s back to the Democratic Republic of the Congo; I’ll just call it Zaire for ease) from 1967 until 1997. Seventy-three of the 79 series of zaïre banknotes featured Ziarian dictator, CIA stooge, and world champion kleptocrat Joseph-Desire Mobuto.
For its first two decades, the zaïre was surprisingly stable as far as Sub-Saharan currencies go. Between 1967 and 1987, the inflation vis-à-vis the dollar was only 98 percent. But then, things took a turn.
The Zairian economy had managed to stay afloat during decades of kleptomania, nepotism, and military spending by Mobuto and his cronies due to Western Aid and high prices for the various minerals mined in the Eastern Congo basin. Beginning around 1990, the combination of the collapse of the Soviet Bloc, falling copper prices, and deeper administrative ineptitude buffeted the economy.
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More Signs of Cooling Demand: Mortgage Applications to Purchase a Home Drop Below 2019 for First Time in Pandemic Housing Craziness amid Higher Interest Rates – Wolf Richter
14 april
And refinance mortgage applications plunged by over half from spike last year.
The index for mortgage applications to purchase a home in the week ended April 9 fell by 3.7% for the week, and by 20% from peak-frenzy in January this year, and thereby edged below the same week in April 2019 for the first time since this Pandemic housing boom started, according to the Mortgage Bankers Association
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***When Measured by Real-World Outcomes, Capitalism Delivers – Lipton Matthews
14 april
Nathan Robinson is an erudite socialist who frequently argues for the superiority of socialism over capitalism. He is the editor of Current Affairs and is the author of Why You Should Be a Socialist (All Points Books, 2019). He’s made quite a lucrative career out of pushing for socialism. More specifically, he argues that socialism outperforms markets by nearly every measure, most especially including environmental preservation, income growth, and female empowerment. Yet, if we actually examine the record of markets versus socialist regimes, we find that markets perform much better. Here are a few examples.
Environmental Quality
There is a positive relationship between environmental quality and income over the long term referred to as the Kuznet curve. Higher incomes reduce the incentive to engage in environmentally destructive activities. People in affluent countries are exposed to a wider variety of jobs, so they are less likely to resort to unsustainable practices. According to a 2006 report released by the Proceedings of the National Academy of Sciences of the United States of America, national wealth is linked to forest growth. Wealth affords countries the opportunity to prioritize the environment. In fact, forestation is on the increase in richer countries, however the story in poorer countries is one of recession.
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The longer-term impact of the African Growth and Opportunity Act – Ana Fernandes, Alejandro Forero, Hibret Maemir, Aaditya Mattoo
14 April
Under the African Growth and Opportunity Act in 2001, the US allowed duty-free entry of apparel products from eligible African countries. However, the end of the Multi-Fiber Arrangement in 2005 re-exposed African countries to significant international competition from Asia. This column finds that countries in Southern Africa and firms in Kenya that boomed during the period of high initial trade preferences went bust when the Multi-Fiber Arrangement expired. Subsequent growth was driven by new countries, notably Ethiopia, and by new firms in Kenya. These results are consistent with the complementary role of domestic reforms rather than the ‘infant industry’ benefits of trade preferences alone.
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The Retail WTF Charts of the Year, Powered by $1,400-Stimmies and Massive Price Increases – Wolf Richter
15 april
The government better not ever stop dousing consumers with free money.
The latest wave of stimmies, this time $1,400 a pop, began to wash over our dear consumers in March, and they went out and spent it on everything in sight, except at grocery stores, as they’re still trying to use up their three-year supply of pasta and toilet paper. A few weeks ago, when I reported on consumer spending that had dropped in February as the $600-stimmies from December-January had run out, I predicted: “Waiting for a $1,400-stimmie WTF spike in March.” And what a doozie we got today.
Retail sales in March spiked by 9.8% from February to a huge record $619 billion, seasonally adjusted, according to the Census Bureau this morning.
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US Financial Markets Have Become A Giant Mirage Built On A Foundation Of Fraud – Michael Snyder
15 april
Would you pay more than 100 million dollars for a single deli in rural New Jersey that had less than $36,000 in sales during the last two years combined? I know that sounds like a completely ridiculous question, but the stock market apparently thinks that deli is worth that much. On Thursday, the Dow Jones Industrial Average closed above 34,000 for the first time in history, and investors all over the country cheered. But this financial bubble is not real. It is a giant mirage that is built on a foundation of fraud.
Investors have lost all touch with reality, and in this sort of euphoric environment a small deli in rural New Jersey can literally be valued at more than 100 million dollars…
The Paulsboro, New Jersey-based Your Hometown Deli is the sole location for Hometown International, which has an eye-popping market value despite totaling $35,748 in sales in the last two years combined, according to securities filings.
“Someone pointed us to Hometown International (HWIN), which owns a single deli in rural New Jersey … HWIN reached a market cap of $113 million on February 8. The largest shareholder is also the CEO/CFO/Treasurer and a Director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing,” Einhorn said in a letter to clients published Thursday.
For young people getting ready to graduate from high school and go to college, don’t waste your time.
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***The “Helicopter Parent” Fed and the Fatal Crash of Risk – Charles Hugh Smith
12 April
All the risks generated by gambling with trillions of borrowed and leveraged dollars didn’t actually vanish; they were transferred by the Fed to the entire system.
The Federal Reserve is the nation’s Helicopter Parent, saving everyone from the consequences of their actions. We all know what happens when over-protective Helicopter Parents save their precious offspring from any opportunity to learn from mistakes and failures: they cripple their child’s ability to assess risk and learn from failure, guaranteeing fragility and catastrophically blind-to-risk decisions later in life.
Helicopter Parents generate a perfection of moral hazard, defined as there is no incentive to hedge risk because one is protected from its consequences. Moral hazard perversely increases the incentives to take on more risk because Mommy and Daddy (the Fed) will always save me / bail me out.
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Income inequality in the EU: General trends and policy implications – Stefano Filauro, Georg Fischer
17 April
Inequality in the EU has traditionally been analysed either at the individual country level or in terms of the average of country trends, but attention is now shifting to the analysis of inequality between all citizens across individual member states. Using income survey data, this column shows that that inequality among EU citizens is significantly lower than among US citizens, but slightly higher than in countries with established welfare models such as Australia and Japan. This and other findings may be useful in identifying the most effective policy path to address inequality at the EU level.
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The Next Economic Crisis – Will Your Wealth Survive? – Bruce Wilds
17 april
The greatest wealth transfer in history has already begun and the next crisis will only accelerate the process.
As the printing presses continue cranking out more and more money, looking forward to a time when the markets pause or another economic crisis consumes the world is an issue we all should think about. How much wealth will escape the next large financial reset is very important because it will set the bar that determines the rate of inflation or deflation in coming years. If you believe we did not solve many of our financial problems after 2008 but merely masked them with a huge amount of newly printed money you are likely to embrace this concept.
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Bitcoin Beats Gold: Saylor-Giustra Debate Prep – Vince Lanci
17 april
Wednesday April 21st Michael Saylor will be debating Frank Giustra on the Merits of Bitcoin versus Gold. Here are the broad strokes
Likely Debate Topics and Format
Specific debate topics and questions are being kept under wraps and are still ongoing. They are likely a topic of debate themselves. We believe the general topics will follow actual debate guidelines and not be a puff piece as so many of these can be. Topics will include but not be limited to: Asset performance, Risk factors, Demand and Supply factors, Market Trends, and straight up asset comparisons.Subtopics will likely be tailored to a specific aspect of the respective investment instruments.
The debate format most likely used will be similar to the standard presidential type. Sandwiched between opening and closing statements opponents will field questions written by Ms Cambone on the agreed upon subjects. We also expect, like in presidential debates, the two gentlemen will use their extra time when answering to pivot back and re-address comments previously stated by their opponent. We expect they will be more presidential than politicians.The format will likely be a question asked by the moderator followed by a 5 minute response. This will be followed by a 1 minute rebuttal by the opponent. Opening and closing statement will likely by 5-6 minutes in length with no interruptions or rebuttals.
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Fed’s Bond Purchases Won’t Save all Mall CMBS from Defaulting – Marc Joffe
15 april
Subsidizing CMBS impedes the necessary market adjustment away from commercial property and toward residential redevelopment.
Massive federal intervention has softened—or maybe just postponed—a feared meltdown in the market for Commercial Mortgage-Backed Securities (CMBS), bonds backed by loans on offices, hotels, retail centers and other non-residential properties. But not all of these bonds were created—or rated—equally, and some supposedly gilt-edged CMBS backed by shopping mall mortgages are unlikely to pull through the COVID-19 downturn.
When financial markets seized up last March, Congress, the Administration and the Federal Reserve took a series of aggressive measures that levitated falling securities prices. Since the beginning of the crisis, Congress passed and Presidents have signed $6 trillion in relief bills, including stimulus checks and unemployment benefit enhancements that have helped the general public to keep shopping.
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Is God a Capitalist? – Doug French
17 april
Popes normally stick to their bailiwick, faith and worship. But Pope Francis’s criticisms of capitalism came early and often, escalating since the beginning of the covid pandemic. The pontiff describes free market thinking as “magic theories.”
“The fragility of world systems in the face of the pandemic has demonstrated that not everything can be resolved by market freedom,” Francis wrote in his encyclical late last year. “It is imperative to have a proactive economic policy directed at ‘promoting an economy that favours productive diversity and business creativity’ and makes it possible for jobs to be created, and not cut.”
Roger McKinney doesn’t see eye to eye with the pope. In his book God Is a Capitalist: Markets from Moses to Marx, McKinney “shows how Biblical economic principles answer the most vexing problems the world faces today, such as poverty, inequality and pollution.”
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The Ugly Truth About Printing-Press Money – MN Gordon
16 april
Weeping and gnashing of teeth shall come…
We don’t know when, exactly. But we do know a certain catastrophe’s approaching. In fact, we can see it on the horizon.
Does anyone in Washington give a rip the nation’s beyond broke? Does anyone in Congress care that outright money printing is what’s financing their stimulus bills? Does House Financial Services Committee Chair Maxine Waters think it’s all a real hoot?
Surely, someone in the legislature is aghast at federal spending that’s gone completely out of control.
Are you aghast?
We are. But there’s nothing we can do to stop it. Nearly all remnants of fiscal conservatism have been quarantined from federal government.
The majority of the electorate have voted for generous gifts from the public treasury. They want free education, free food, free phones, free transportation, and free drugs. They want debt forgiveness. Most of all, they want free money.
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Critics Claim Bitcoin Is a Threat to the Environment. They’re Wrong. – Peter St. Onge
12 april
One popular critique of bitcoin is energy cost per transaction. This doesn’t begin to capture bitcoin’s massive energy savings compared to fiat currency.
Bitcoin’s cost per transaction is well known, and often critiqued; one article in Wired magazine called bitcoin “[a] big middle finger to earth’s climate.” This is because bitcoin’s security, redundancy, and architecture are more energy intensive than traditional payments relying on a single point of failure.
Comparing the energy of a single transaction barely scrapes the surface of the dollar’s carbon footprint, which includes the entire financial infrastructure supporting fiat—8.4 percent of GDP in the US alone, slightly behind manufacturing. This includes 80,000 bank branches, 470,000 ATMs in the US alone, and forests of skyscrapers towering over most cities on earth.
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A tale of hours worked for pay from home before and after the Great Recession: Learning from high-frequency diaries – Arie Kapteyn, Elena Stancanelli
17 April
The COVID-19 pandemic has meant that more people are working from home and women are disproportionately losing paid work. This column uses daily activity diaries from the American Time Use Survey to look back at the impact of the unemployment benefit extensions that were triggered by the Great Recession on hours worked from home. The overall picture is one of increased gender inequality in the labour market, with women but not men increasing work hours and effort in response to the Great Recession and the consequent changes in the duration of unemployment benefits.
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