Economische aanraders 19-02-2017
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.
When the IMF evaluates the IMF – Charles Wyplosz
The IMF has just released its self-evaluation of its Greek lending, in which it admits to many mistakes. This column and argues that the report misses one important error – reliance on the Debt Sustainability Analysis – but notes that the IMF’s candour should be a model for the other participants in the lending, namely, the European Commission and the ECB.
Biggest EU Banks Embark on the Mother of All Debt Binges – Don Quijones
14 februari 2017
A hot new bail-in-able debt cooked up by financial engineers in France.
Spain’s three biggest banks, Banco Santander, BBVA and Caixa Bank, have got off to a flying start this year having issued €8.6 billion in new debt, seven times the amount they sold during the same period of last year. The last time they rolled out so much debt so quickly was in 2007, the year that Spain’s spectacular real estate bubble reached its climactic peak.
Debt Isn’t a Problem — Easy-Money Policies Are the Problem – Frank Shostak
According to the flow of funds data published by the Fed, the US debt to GDP ratio remains at a lofty level. Non-financial sector debt as a percentage of GDP stood at 251.7% in Q3 2016 against 230.1% in Q1 and 184.3% in Q1 2000.
Consumer credit as a percentage of GDP also remains at a record high — it stood at 19.9% in Q3 2016 against 15.8% in Q1 2000.
Most economic commentators regard these high ratios as alarming. Following in the footsteps of economist Irving Fisher, it is held that a very high level of debt relative to GDP runs the risk of setting in motion deflation and in turn a prolonged and severe economic slump. According to Fisher the high level of debt can trigger the following nine stages of events that culminate in a severe economic slump.1
There’s Not Nearly Enough Growth To Keep Growing – Raul Ilargi Meijer
It’s amusing to see how views start to converge, at the same time that it’s tiresome to see how long that takes. It’s a good thing that more and more people ‘discover’ how and why austerity, especially in Europe, is such a losing and damaging strategy. It’s just a shame that this happens only after the horses have left the barn and the cows have come home, been fed, bathed, put on lipstick and gone back out to pasture again. Along the same lines, it’s beneficial that the recognition that for a long time economic growth has not been what ‘we’ think it should be, is spreading.
But we lost so much time that we could have used to adapt to the consequences. The stronger parties in all this, the governments, companies, richer individuals, may be wrong, but they have no reason to correct their wrongs: the system appears to work fine for them. They actually make good money because all corrections, all policies and all efforts to hide the ne
Worse Than a Decade of Stagnation – Wolf Richter
Retail sales are held up by only two sectors. The rest are sinking.
There are two components of “retail and food services sales” that have been booming over the past few years through the fourth quarter 2016. And then there’s all the rest combined – 71% of total retail sales – that has been in decline since the third quarter of 2008. That’s the tough reality of retail sales in the US.
Economies in reverse – John H Cochrane
How can economies forget? How is it that once we have learned to do something better, that knowledge can be lost and economies move backward? How can productivity decline? Viewing productivity as knowledge, it would seem almost impossible for it to do so — and real business cycle theory was often derided on that point. Yet middle ages eurpoeans lost the recipe for concrete, and time after time we have seen economies get worse. How can our own productivity be growing so slowly overall when so much we see around us is progressing so fast?
Global trade: Drivers behind the slowdown – Aqib Aslam, Emine Boz, Eugenio Cerutti, Marcos Poplawski-Ribeiro, Petia Topalova
A growing literature aims to understand the remarkable slowdown in global trade growth in recent years. This column discusses a chapter in the IMF’s October 2016 World Economic Outlook on the drivers of the trade slowdown, and compares the findings to those of other recent studies. It argues that a variety of factors have contributed to weak trade growth, with widespread anaemic economic activity and the change in its composition being among the key drivers.
Political Consensus Is Splintering into Class Wars – Charles Hugh Smith
16 february 16
In years past, we spoke of class war between the haves and the have-nots. It’s no longer that simple. Now the traditional political consensus is splintering into multiple class wars between overlapping camps of the protected and the unprotected, those who’ve been promised entitlements and privileges that are no longer affordable and those expected to pay more taxes.
In the modern era, the phrase Class War is rooted in the socialist/Marxist concept that the conflict between labor (the working class) and capital (owners of capital) is not just inevitable—it’s the fulcrum of history. In this view, this Class War is the inevitable result of the asymmetry between the elite who own/control the capital and the much larger class of people whose livelihood is earned solely by their labor.
*** Global Shipping Meltdown Mauls German Banks, Retail Investors, Taxpayers – Wolf Richter
Germany holds 25% of global shipping loans as industry collapses.
When Commerzbank, Germany’s second largest bank, reported earnings on Thursday, it made another groan in direction of the collapsing maritime shipping industry. It raised its loan loss provisions to €900 million, as it said, “in timely response to the deterioration in the shipping markets.” It warned that its losses on shipping loans alone could reach €600 million in 2017 after having nearly doubled to €559 million last year.
At one point, Commerzbank had €18 billion in shipping loans. Over the years, as the shipping crisis worsened, it has whittled down its shipping loan portfolio to €5 billion.
***Donald Trump Is the Least of Latin America’s Worries – José Niño
Donald Trump’s election has sent the mainstream media and intellectual circles in the United States into complete disarray.
Not only that, but international outlets and the intelligentsia are also at a loss for words at Trump’s unexpected ascent to the American presidency.
The most notable of these international outlets are Spanish-language-oriented ones like Univision, who constantly branded Trump as a threat to Hispanics and even argued that his policies would bring Latin American style underdevelopment to the United States. In the same vein, other experts contend that Trump’s rhetoric and policies will lead to economic malaise throughout Latin America.
For starters, Latin America’s underdevelopment is indicative of the failure of socialist/mercantilist style policies that have been fixtures of the majority of these countries long before Trump came into office. Unlike Latin America, the United States has generally avoided falling into this economic abyss, and will continue to do so to a large extent, thanks to the nature of its political institutions.
Why shocks to large banks cause big GDP swings – Mary Amiti, David Weinstein
We are living in a world in which banks are large relative to the economies they serve. This column uses comprehensive data on Japanese banks from 1990 to 2010 to examine how the fates of individual banks matter for aggregate performance. Much of the fluctuation in Japanese aggregate investment appears to be driven by the idiosyncratic successes and failures of a limited number of institutions, and there is good reason to believe that the situation is similar in many developed countries.
This Is How the Status Quo Unravels: As the Pie Shrinks, Everybody Demands Their Piece Should Get Bigger – Charles Hugh Smith
Fragmentation, discord, discontent, class war: this is the inevitable result of a shrinking pie.
The politics of the past 70 years was all about horsetrading who got what share of the growing pie: the “pie” being cheap energy, government revenues and consumption, sales and profits.
Horsetrading over a growing pie is basically fun. There’s always a little increase left for the losers, so there is a reason for everyone to cooperate in a broad political consensus.
Horsetrading over a shrinking pie is not fun. Everybody is shrilly demanding their piece of the pie should either grow or be left untouched; any cuts must come out of someone else’s slice.
Everyone turns on their most compelling emotion-based defense: “we wuz promised” is a reliable standard, as is “we need more money to defend the nation from the rising threat of XYZ.” “Help those in need” plays the heartstrings effectively–as long as the “help” comes out of somebody else’s pocket.
Everyone sharpens their knives, the better to carve a slice off somebody else’s slice of the pie. A passive-aggressive free-for-all ensues as everyone reacts with aggrieved defensiveness to any attempt to diminish their slice, even as they launch shrill attacks on everyone else’s defense.
*** The “New Normal” of Ultra-Low Interest Rates – Mark Thornton
After nine years of outrageous, unwarranted and irrational monetary policy, some people are taking the current monetary regime as normal and natural — the new normal. You can see this on corporate ballot sheets, bank leverage, and the low personal savings rate.
However, even the “man on the street” is beginning to believe in this “new normal.” During a recent radio interview, I was attacking the ultra low interest rate policy of the Federal Reserve and other central banks. A caller to the program asked why we shouldn’t have very low interest rates. It seemed to be a good idea to him.
He argued that things like oranges are much less expensive today than they were a century ago when adjusted for inflation. If the modern economy produces low prices for oranges and bananas, why can’t we have low interest rates too? Why can’t we have cheap credit?
The Art And Pseudoscience Of Monetary Policy – MN Gordon, annotated by s Pater Tenebrarum
Everyone’s got a plan for sale these days. In fact, there are so many plans out there we cannot keep up with them all. Eat celery sticks and lose weight. Think and grow rich. Stocks for the long run. Naturally, plans like these run a dime a dozen.
All social engineers who get to impose their harebrained schemes on the rest of the world through the coercive powers of the State, as well as all armchair planners regaling us with their allegedly “better plans”, should have this highly perceptive quote by Robert Burns tattooed on their foreheads. In case you’re wondering, “gang aft a-gley” is slightly old English for “usually turn out to be total crap”. The second part that points out that as a rule, we get nothing but grief and pain instead of promised joy, is applicable to interventionism in general; the so-called “unintended consequences” of interventions almost always turn out to be their main feature and defining characteristic.
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.