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.

——————————————————————————————————
We Can’t Just “Restart” the Economy Where We Left Off – Frank Shostak
18 april
The imposition of lockdowns to counter the spread of the infection from the coronavirus is likely to severely damage the real economy. As a result of these lockdowns, economies have ground to a total halt. The production of goods and services has stopped while at the same time the enhancement and improvement of productive infrastructure has been terminated.
Does it make much sense to counter the damage caused by the virus by stopping the economy? It is akin to trying to fix a headache by chopping one’s head off.
——————————————————————————————————
A Hyperinflationary Depression Has Always Been The Inevitable Endgame – Egon von Greyerz
8 april
A Hyperinflationary Depression has always been the inevitable end to the biggest financial bubble in history. And this time it will be global. Hyperinflation will spread from country to country like Coronavirus. It could start anywhere but the most likely first countries are the US and the EU or ED (European Disunion). They will quickly be followed by many more like Japan and most developing countries. Like CV it will quickly jump from country to country with very few being spared.
Ever since the last interest cycle peaked in 1981, there has been a 39 year downtrend in US and global rates from almost 20% to 0%. Since in a free market interest rates are a function of the demand for credit, this long downtrend points to a severe recession in the US and the rest of the world. The simple rules of supply and demand tell us that when the price of money is zero, nobody wants it. But instead debt has grown exponentially without putting any upside pressure on rates. The reason is simple. Central and commercial banks have created limitless amounts of credit out of thin air. In a fractional banking system banks can lend the same money 10 to 50 times. And central banks can just print infinite amounts.
——————————————————————————————————
Negative interest rate policy in the post COVID-19 world – Andrew Lilley, Kenneth Rogoff
17 April
In the aftermath of the Global Crisis, conventional monetary policy has been constrained by low interest rates in many major economies. This has spurred debates on the possibility of introducing negative interest rates in the monetary policy toolkit. This column uses evidence from the US to show that not only do the markets expect the low interest rates to persist into the future, but they also expect the use of negative interest rates down the line. Moreover, markets no longer believe that even quantitative easing can bring inflation to target, which leaves very few alternatives for monetary policy apart from negative interest rates.
——————————————————————————————————
Massive Stimulus May Boost Inflation The Wrong Way: Stagflation – Daniel Lacalle
12 april
All over the world governments and central banks are addressing the pandemic crisis with three main sets of measures:
Massive liquidity injections and rate cuts to support markets and credit.
Unprecedented fiscal programs aimed at providing loans and grants for the real economy.
Large public spending programs, fundamentally in current spending and relief measures.
However, as well-intentioned as these measures may be, they may cause deeper problems than what they aim to solve. When governments try to artificially boost debt and demand in a supply shock, the risk is to create a massive deflationary spiral driven by debt saturation that is followed by stagflation when supply chains start to be insufficiently flexible.
——————————————————————————————————
Financial pandemic – John H. Cochrane
14 april
The headlines are on the disease, the shutdown, and the hoped-for safe reopening. It’s time to pay some attention to the financial side of the current situation, and the Federal Reserve’s immense reaction to it.
Disclaimer: do not read in this post criticism of the Fed. Maybe the world would have ended if they had done things differently. But it is important for us who study such things to understand what they did, what beneficial and adverse consequences there are, and how the system might be set up better in the future.
Big picture: We face an extremely severe economic downturn, of unknown duration — it could be a V, U, or L. If it is not a V shaped in months, there will be a wave of bankruptcies from personal to corporate, and huge losses all over the financial system. Well, earn returns in good times and take losses in bad times, you may say, and I do, more often than the Fed does, but for now this is simply a fact.
——————————————————————————————————
There’s a Significant Risk of Cascading Defaults in Form of a “Debtors’ Strike” – Karen Parker Feld
17 april
The bailouts are better described as organized protection racket run by banks, hedge funds, private equity investors & large corporations.
The Fed has used the coronavirus crisis to double down on a failed strategy of supporting financial markets while the real economy declines. Our latest Quarterly Market Outlook & Strategy letter describes the consequences that are likely to result. It’s called, “Through the Looking-Glass,” because whenever Alice (aka Karen) peers through the mirror at our financial markets, she sees that everything is reversed. We are definitely running the Red Queen’s Race now.
——————————————————————————————————
Goldman Now Sees A 123% Plunge In Q2 S&P Earnings, $850BN Drop In Corporate Cash Spending – Tyler Durden
18 april
With 9% of S&P 500 firms having already reported Q1 earnings including all of the major banks, results have generally disappointed relative to already tepid expectations. 43% of companies have missed consensus expectations, on pace for the highest rate since at least 1998 with earnings set to drop by 15% Y/Y, but it’s Q2 where the real pain will be with Goldman now expecting S&P 500 to plunge by a record 123% plunge.
As a result, the very same Goldman which last week announced it no longer expects the S&P to retest the lows and pulled its S&P to 2,000 base case while predicting that stocks will surge to 3,000, which would make forward PE multiples just shy of a bizarro-world 30x, now forecasts S&P 500 cash spending will decline by an annual record 33% during 2020 as firms prioritize liquidity in a worsening economic environment.
——————————————————————————————————
Preface to Anatomy of the Crash – Tho Bishop
18 april
[This is the preface for the Mises Institute’s new online book Anatomy of the Crash: The Financial Crisis of 2020.]
“End the Fed!” Three small words became one of the most improbable and powerful political chants in modern politics thanks to the presidential campaigns of Dr. Ron Paul. With the backdrop of a global financial crisis, the congressman from Texas was able to use the microphone of modern politics, forever changed by the internet and social media, to wake up a generation of Americans to the threat posed by central banks and fiat money. Ideological gatekeepers in Washington and the corporate press found themselves forced to recognize and attack a previously obscure school of economic thought that was now being talked about by college students, activists, and even the odd politician.
——————————————————————————————————
Overcapacity / Oversupply Everywhere: Massive Deflation Ahead – Charles Hugh Smith
16 April
The price of a great many assets will crash, out of proportion to the decline in demand.
Oil is the poster child of the forces driving massive deflation: overcapacity / oversupply and a collapse in demand. Overcapacity / oversupply and a collapse in demand are not limited to the crude oil market; rather, they are the dominant realities in the global economy.
Yes, there are shortages in a few high-demand areas such as PPE (personal protective equipment), but across the entire spectrum of global supply and demand, there is nothing but a vast sea of overcapacity / oversupply and a systemic decline in demand as far as the eye can see.
——————————————————————————————————
EU state aid policies in the time of COVID-19 – Massimo Motta, Martin Peitz
18 April
State aid is essential to reduce long-run harm to the EU economy as a result of the Covid-19 crisis. However, non-harmonised programmes across EU member states generate serious risks to the functioning of markets, particularly if they go beyond short-term liquidity provision or employment support. This column suggests imposing strict conditions on state aid for recapitalisation of firms and argues in favour of an EU-wide programme for critical sectors. Such a programme would prevent harmful market distortions and maintain a level playing field for EU companies.
——————————————————————————————————
The “Best” Economy Ever? Neither Before, Nor After Coronavirus – Joe Carson
17 april
The strong rebound in equity prices since mid-March suggests investors are banking on a fast rebound in the economy once government eases the restrictions on work-life, travel and social and recreational gatherings. Reopening regions or sectors of the economy will undoubtedly produce a statistically powerful rebound; triggering a race among analysts to revise up growth estimates as fast as they raced to reduce them.
But “boomerang” statistics on jobs and GDP does not mean a return to the “best” economy for the simple it was not the best before. Here’s why.
Corporate Profits: In 2019, operating profits for US companies totaled $2.075 trillion, essentially unchanged from the prior year. That flat performance represents the fifth consecutive year of no growth in corporate profits. It would be flat out wrong to characterize the economy’s recent performance as the “best” when corporate profitability has stalled for 5 consecutive years.
——————————————————————————————————
The US Labor Market Will Heal Faster Than the European One – Daniel Lacalle
16 april
The jobless claims figures of the past two weeks have been unprecedented and alarming. However, knowing that the data will continue to be concerning, we need to analyze how quickly the economy can can heal and go back to the previous path of record job creation.
The United States economy starts from a comparatively stronger base. Unemployment reached a five-decade low in February, and, despite the extremely weak March jobs figure, it stood at 4.4 percent in the first week of April. This compares to a 7.3 percent unemployment figure in the euro area and 6.5 percent in the European Union. In countries such as Spain and Greece, unemployment stood at 13 and 16 percent, respectively.
——————————————————————————————————
On the legacy of financial crises: Lessons from Mexico’s sudden stop history – Gianluca Benigno, Andrew Foerster, Christopher Otrok, Alessandro Rebucci
19 April
Borrowing constraints can amplify business cycle dynamics and create significant challenges for countries facing negative economic shocks. Based on a new estimated model of sudden stop crises, this column argues that financial crises are often followed by a quick but partial rebound. Thereafter, economies can experience a very protracted period of stagnation. A similar trajectory may be likely for the current COVID-19 crisis, as many countries will face financial frictions in responding to the economic downturn.
——————————————————————————————————
Will it be an Inflationary or Deflationary Depression? – Doug Casey
17 april
At some point, the economy is no longer controlled by individual citizens in the marketplace but by government “planners,” who find they have only one of two alternatives: stop “stimulating” and permit a full-scale credit collapse, or continue stimulating until the dollar loses all value and society breaks down.
Depending on which they choose, we will have a depression characterized by deflation or by hyperinflation.
This is the 1929-style depression, where huge amounts of inflationary credit are wiped out through bank failures, bond defaults, and stock and real-estate crashes.
——————————————————————————————————
***Farm-Labor Crisis under COVID-19 Sends Countries Scrambling – Nick Corbishley
13 april
Miserable, crowded living conditions of Europe’s foreign farm workers put them at much greater risk. And they’re staying away.
In one of the many paradoxes of the new world we live in, Western European countries that have seen millions of jobs wiped out in a matter of weeks are now facing an acute shortage of agricultural laborers.
Farmers in Germany, France, Italy, Spain, the UK and other parts of Western Europe have come to rely on huge numbers of cheap labor from Eastern Europe, North Africa, and Sub-Saharan Africa. Now, those workers are either no longer able to make it to the farms or are choosing to stay with their families in their home countries.
——————————————————————————————————
COVID-19 & The Collapse Of Cash – Steven Guinnesss
16 april
In my last article I referred to how since fears of Covid-19 in the UK took root in March, cash usage has fallen dramatically. Whilst the drop off has been substantial, the trend of cash payments being in decline is long established. Based on early evidence, the coronavirus pandemic has exacerbated this decline.
For context, in March 2019 an Access to Cash Review was published which detailed the precarious state of Britain’s cash network. The review, funded by Link (the UK’s biggest cash machine network) showed that over the past decade cash payments had fallen from 63% of all payments to 34%. To quote the report directly, ‘a straight-line trajectory of current trends would see an end of cash use by 2026‘.
——————————————————————————————————
Stable coins don’t inflate crypto markets – Richard K Lyons, Ganesh Viswanath-Natraj
17 April
Does stable coin issuance have an inflationary effect on cryptocurrency prices such as Bitcoin? This column argues that aggregate stable coin issuance does not drive crypto prices, in contrast to claims from previous studies. Instead, it claims that issuance behaviour can be explained as maintaining a decentralised system of exchange rate pegs and acting as a safe haven in the digital asset economy. The latter can be demonstrated by the significant stable coin premiums during the COVID-19 panic of March 2020.
——————————————————————————————————
“A Bad Global Precedent” – Chinese GDP Collapses More Than Expected, Worst Since At Least 1992 – Tyler Durden
17 april
So, the question is – just how ‘manufactured’ will this smorgasbord of Chinese macro data be? As v-shaped as the incredible ‘survey’ data? Or as realistic as the traffic and pollution numbers suggest?
The red oval is the ChiNext stock index’s reaction to the worst of China’s virus impact… green is PMI and red is the macro surprise index (which will be smashed one way or the other tonight)…
Of course the big one tonight is Chinese GDP growth. The median forecast of economists surveyed by Bloomberg was for a 6% contraction in the first three months of the year, when the coronavirus outbreak forced an unprecedented lockdown of factories, stores and schools across the country (ING Bank saw a +3.6% print and at the other end of the spectrum, Capital Economics forecast a 16.0% contraction in GDP).
——————————————————————————————————
This Isn’t Your Usual Demand-Shock Recession – Michael J. Hoffman
15 april
In the last month, the coronavirus pandemic, known officially as COVID-19, has caused social and economic havoc in the US and the rest of the world. Last month, the US economy lost a total of 701,000 jobs while the unemployment rate shot up to 4.4 percent from 3.5 percent. The decade-long trend of job gains has come to an end, but one question remains: are these signs of a typical recession? The answer is complicated, unfortunately.
Austrian economists have long warned that a recession has been inevitable ever since the Federal Reserve began its quantitative easing program following the 2008 financial crisis. However, while we may be in the midst of a reduction in what mainstream economists call “aggregate demand,” we are also seeing a significant supply-side shock. The former typically has deflationary tendencies, while the latter causes price inflation. A supply shock is simply an event which impedes the ability for supply chains, or the structure of production, to maintain the allocation of capital and labor so that they can produce a given level of output.——————————————————————————————————
Wall Street & Main Street ‘Rescues’ Look Increasingly Disconnected From One Another – Matt Taibbi
17 april
Take a look at some contrasting sets of headlines. First, from planet earth:
Weekly Jobless Claims Hit 5.425 Million, Raising Monthly Loss To 22 Million Due To Coronavirus (CNBC)
Worst Case Fears Of 20%-Plus U.S. Jobless Rate Are Now Realistic (Bloomberg)
Then from Wall Street:
Private Equity-Owned Companies Sell New Bonds in Credit Rally (Bloomberg Law)
Fed’s Historic Move Spurs Rally in Junk Bonds: 6 ETF Picks (Nasdaq.com)
As we head into the second month of pandemic lockdown, two parallel narratives are developing about the financial rescue.
In one, ordinary people receive aid through programs that are piecemeal, complex, and riddled with conditions.
——————————————————————————————————
Tech in Fin before FinTech: The importance of technology in banking during a crisis – Nicola Pierri, Yannick Timmer
18 April
Technology adoption in lending can enhance financial stability through the production of more resilient loans. Motivated by the recent surge of FinTech lending, this column analyses the implications of lenders’ information technology adoption for financial stability. Banks that adopted IT more intensely before the Global Crisis were significantly more resilient when the shock hit. These banks had significantly fewer non-performing loans, and issued more loans during the crisis itself. Loan-level analysis indicates that high IT adoption banks issued mortgages with better performances and did not offload low-quality loans.
——————————————————————————————————
Week Four of the U.S. Labor Market Collapse – Wolf Richter
16 april
These layoffs are gut-wrenching and gigantic. But six states reported “fewer layoffs” in some industries – as there are not that many people left to lay off?
It’s a previously unimaginable and gut-wrenching magnitude: Over the past four weeks, including today’s report, 22.03 million initial unemployment claims have been processed.
——————————————————————————————————
***COVID-19 Is Forcing Governments to Admit Their Regulations Aren’t Really Necessary – Tyler Curtis
16 april
It’s no exaggeration to say that most of the blame for the world’s poor response to the coronavirus pandemic can be laid squarely at the feet of politicians and bureaucrats.
Even as it became clear that the virus was becoming increasingly dangerous, politicians around the world were quick to downplay its severity. The Chinese state attempted to silence those trying to broadcast warnings, while American political leaders actually encouraged folks to go out and party in crowded public areas. When coronavirus cases were finally confirmed within the United States, many realized that burdensome regulations were preventing private firms from taking measures to fight the pandemic.
——————————————————————————————————
***The art of central bank communication: Old and new – Yosuke Takeda, Masayuki Keida
17 April
Communication strategies are increasingly seen as an important tool for central bankers to guide expectations. This column applies statistical natural language processing algorithms to press conferences given by two different governors of the Bank of Japan during a time without any formal changes in institutional arrangements for communication policy at the Bank. Communication strategies are found to differ vastly across the two governors, with one governor focusing on the topic of ‘discretion’ and the other on the topic of ‘policy goals’.
——————————————————————————————————
Between a Rock and a Hard Place: Pandemic and Growth – Charles Hugh Smith
April 18
There is no way authorities can limit the coronavirus and restore global growth and debt expansion to December 2019 levels.
Authorities around the world are between a rock and a hard place: they need policies that both limit the spread of the coronavirus and allow their economies to “open for business.” The two demands are inherently incompatible, and so neither one can be fulfilled.
The problem is the intrinsic natures of the virus and the global economy. This virus is highly contagious during its asymptomatic phase, which is long (5 to 20 days), and therefore impossible to control with the conventional tools of identifying people with symptoms and isolating them, and tracking their contacts with others.
——————————————————————————————————
U.S. Oil Drilling Grinds to Halt at Key Shale Hotspots – by Nick Cunningham
15 april
The sudden declines in production illustrates the fatal flaw in the shale business model.
Oil and gas production in the United States has peaked and is already in decline. The latest data from the EIA’s Drilling Productivity Report sees widespread production declines across all major shale basins in the country. The Permian is set to lose 76,000 bpd between April and May, with declines also evident in the Eagle Ford (-35,000 bpd), the Bakken (-28,000 bpd), the Anadarko (-21,000 bpd) and the Niobrara (-20,000 bpd).
——————————————————————————————————

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.

Eerdere afleveringen van dit wekelijkse overzicht vindt u hier.