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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Inflation: This Time Is Different – Alasdair Macleod
18 juli
Bank lending is contracting, and it is important to understand why. At this stage of the credit cycle, which began expanding following the aftermath of the Lehman crisis over a decade ago, a sharp contraction of bank credit to nonfinancials is normal. It is what drives periodic recessions, slumps, and depressions, and monetary stimulus by central banks is intended to help commercial bankers recover their mojo and resume lending.
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Coronavirus panic fuels a surge in cash demand – Jonathan Ashworth, Charles Goodhart
17 Juli
Despite regular reports in the media over the past decade on the imminent death of cash amid rapid innovation in payment technologies, cash in circulation has actually been growing strongly in many countries. Perhaps unsurprisingly given coronavirus-related health concerns, there have recently been renewed calls to abandon cash and some observers have argued the virus will accelerate its demise. This column argues that the data so far indicate that currency in circulation has actually surged in a number of countries. While the economic shutdowns and increased use of online retailing have recently been diminishing cash’s traditional function as a medium of exchange, it seems that this has been more than offset by panic-driven hoarding of banknotes.
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Modern Monetary Theory’s Connection to Soviet-Era Money – Mark A. DeWeaver
15 juli
Adherents of modern monetary theory (MMT) argue that money is “a creature of the state,” as the economist Abba Lerner famously put it back in 1947. As they see it, money initially comes into existence as a result of government spending and derives its value from the fact that it can be used to discharge the public’s obligations to the government. The policy implication—that we don’t need to worry about the budget deficit, because it can be financed through money printing—has led many to imagine that a panacea for all our economic problems has at last been found.
But is the dollar really a creature of the state in the way these economists imagine? There are two serious problems with this idea.
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This Is a Financial Extinction Event – Charles Hugh Smith
15 juli
The lower reaches of the financial food chain are already dying, and every entity that depended on that layer is doomed.
Though under pressure from climate change, the dinosaurs were still dominant 65 million year ago–until the meteor struck, creating a global “nuclear winter” that darkened the atmosphere for months, killing off most of the food chain that the dinosaurs depended on. (See chart below.)
The ancestors of modern birds were one of the few dinosaur species to survive the extinction event, which took months to play out.
It wasn’t the impact and shock wave that killed off dinosaurs globally–it was the “nuclear winter” that doomed them to extinction. As plants withered, the plant-eating dinosaurs expired, depriving the predator dinosaurs of their food supply.
This is a precise analogy for the global economy, which is entering a financial “nuclear winter” extinction event. As I’ve been discussing for the past few months, costs are sticky but revenues and profits are on a slippery slope.
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Predictable financial crises – Robin Greenwood, Samuel G. Hanson, Andrei Shleifer, Jakob Ahm Sørensen
15 Juli
There is a long-standing debate on whether financial crises can be predicted. This column draws on a chronology of past financial crises and data on credit and asset prices for a panel of 42 countries between 1950-2016 and finds that if there is a large credit expansion with an asset price boom, then financial crises are highly predictable. These results are used to motivate a simple indicator that identifies periods of potential credit-market overheating. The indicator is shown to predict past crises in advance, suggesting that policymakers have time to act and take prophylactic policy interventions.
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What Happens If Most Businesses & Consumers Tighten Their Belts at the Same Time? – Nick Corbishley
12 juli
Europe may be about to find out. 128 days with my Mother-in-Law.
As market players cling to the hope that a V-shaped economic recovery is still possible in Europe, to match the central-bank engineered rebounds of benchmark indexes such as Germany’s DAX and the Netherlands’ AEX, the reality on the ground continues to get worse for many families and businesses. On Tuesday, the Bank of Italy published the findings of a survey of Italian households on the impact of the lockdown. As you’d expect, most of the findings were pretty bleak:
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COVID-19: A new challenge for the euro area – Anne-Laure Delatte, Alexis Guillaume
17 Juli
There was a risk of another euro crisis in Spring 2020. Yet, after a massive sell-off of peripheral bonds, the markets have stabilised. This column analyses the impact of events over the last months on euro area sovereign bond spreads. It finds that differences in healthcare capacity are reflected in bond prices, markets prefer fiscal transfers to loans-based financial assistance programs, and that ECB speeches have stronger effects than deeds during the crisis episode. Of all the euro area members, Italian spreads benefited most from the recent policy interventions.
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Value Is Dead. Long Live Value-Investing – Michael Lebowitz
17 juli
Value (investing) is dead. Long live value investing. Such certainly seems to be the mantra as investors continue to pile into growth stocks while rationalizing valuations using methodologies which historically have not worked well.
However, as with all things when it comes to investing, be careful when declaring any asset or investment strategy dead. Such was a point made recently by Research Affiliates. The media has a long history of declaring sectors, markets, or strategies “dead” based on past performance. From August 1979 — when Business Week declared the “death of equities” — to July 2019, when the Financial Times questioned whether emerging markets investments make sense anymore.
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It Starts: Mortgage Delinquencies Suddenly Soar at Record Pace – Wolf Richter
14 juli
OK, it’s actually worse. Mortgages that are in forbearance and have not missed a payment before going into forbearance don’t count as delinquent. They’re reported as “current.” And 8.2% of all mortgages in the US – or 4.1 million loans – are currently in forbearance, according to the Mortgage Bankers Association. But if they did not miss a payment before entering forbearance, they don’t count in the suddenly spiking delinquency data.
The onslaught of delinquencies came suddenly in April, according to CoreLogic, a property data and analytics company (owner of the Case-Shiller Home Price Index), which released its monthly Loan Performance Insights today. And it came after 27 months in a row of declining delinquency rates. These delinquency rates move in stages – and the early stages are now getting hit:
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Liquidity crisis: Keeping firms afloat during Covid-19 – Fabiano Schivardi, Guido Romano
18 Juli
The COVID-19 crisis has induced a sharp drop in cash flow for many firms, possibly pushing solvent but illiquid firms into bankruptcy. This column presents a simple method to determine the number of firms that could become illiquid, and when. The authors apply this method to the population of Italian businesses and find that at the peak, around 200,000 companies (employing 3.3 million workers) could become illiquid due to a total liquidity shortfall of €72 billion euros. It is essential that policymakers shelter businesses by acting quickly, especially if there is a ‘second peak’ after the summer.
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The Problem with Africa’s Protectionism – Germinal G. Van
17 juli
During the postcolonial period, most of the African countries which had opted for socialism as their economic system also adopted protectionism as an economic measure to favor certain politically preferred industries. Policymakers wanted to protect domestic industries from foreign competition through tariffs, subsidies, import quotas, or other restrictions or handicaps on the imports of foreign competitors. For example, today Tanzania is one of the top exporters of agricultural commodities in Africa. It mainly exports tobacco ($248.8 million), coffee ($181.6 million), and oilseeds ($230 million). Interestingly, those products are not primarily exported to other African countries. In fact, Switzerland is the main importer of Tanzanian agricultural commodities, purchasing 16.2 percent of Tanzanian agricultural production, and India is the second-largest importer of its goods. But Tanzania does not trade much with its African neighbors.
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***Welcome to the Crazed, Frantic Demise of Finance Capitalism – Charle Hugh Smith
17 juli
The cognitive dissonance required to ignore the widening gap between the real economy and the fraud’s basic machinery–speculation funded by “money” conjured out of thin air–has reached a level of denial that can only be termed psychotic.
When scams start unraveling, the scammers become increasingly frantic to maintain the illusion of legitimacy and the delusion of guaranteed gains that are the lifeblood of every scam. One sure sign that the flim-flam is about to collapse is the manic rise of FOMO, fear of missing out, as the scammers jam the Ponzi scheme’s stellar returns to new extremes.
What greedy human can resist guaranteed gains, especially of the enviously grandiose variety?
The greatest scam of the past century is unraveling before our eyes. I’m calling it finance capitalism as a general descriptor of the dominant form of what’s called “capitalism” because calling it what it actually is–a fraud that’s destroyed the foundations of our economy and society–is, well, a much more difficult sell than “capitalism,” which still has some faint echoes of the open markets, etc. that characterized traditional capitalism, which I call naive capitalism because it is incapable of differentiating between the parasitic, predatory finance version cloaking itself as “capitalism” and actual capitalism, in which capital is put at risk, markets are transparent, etc.
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Getting funds to those in need and enabling access to money during COVID-19, part 3: Central bank digital currencies and other instruments – Biagio Bossone, Harish Natarajan
15 Juli
Governments and economists are now focused on the macroeconomic policies that can support economies during the Covid-19 pandemic. Yet, for policies to be effective and economies to function, payment systems and services must operate efficiently, reliably, and securely. The third column of this series analyses the role that a central bank digital currency can play in this context, and outlines the key steps required for its successful implementation. In addition, the column proposes improvements to the existing payments infrastructure to ensure continued operability, especially in times of emergency.
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***Well-Intentioned Policies That Make Life More Expensive – Walter Block
15 juli
Demand curves slope in a downward direction. This means that the higher the price, the less of an item, or good, or service will be sought. The more roadblocks, hurdles, thumbtacks, placed in the way of any given action, the less likely it will occur. Economists do not agree on many things, but on this insight there will be nary a dismal scientist who will not acquiesce.
Yet there are several public policies in place that are incompatible with this commonsense understanding.
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Stock Market Crash 2020: Welcome To The End Game – Clem Chambers
16 juli
If this chart doesn’t make you think the crash is coming soon, then probably nothing will:
The Nasdaq is going vertical
The Nasdaq is on its final run and is going vertical, a classic end of bubble move. This is trader heaven and turns into speculator hell for those who think that markets do grow to the skies. It could go up a long way in price but it won’t go for long in time. It could last to Christmas, it could fold tomorrow, but my feeling is that unless this bubble is cut down by the Fed, the final move will be large and quick.
You can refer to the dotcom crash for the general shape of what looks possible next.
The attempts by the government to pump up the economy with new money is resulting in it going straight into equities and straight into the tip of the equity spear, the giant high beta story stocks. This is a malfunction of the QE mechanism that supports asset prices and slowly trickles the benefits of this support down the pyramid of wealth. Now the game is up because the new money is going straight into this bubble of financial assets that are spiralling up out of control.
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Tverberg: Why A Great Reset Based On Green Energy Isn’t Possible – Gail Tverberg
17 juli
It seems like a reset of an economy should work like a reset of your computer: Turn it off and turn it back on again; most problems should be fixed. However, it doesn’t really work that way. Let’s look at a few of the misunderstandings that lead people to believe that the world economy can move to a Green Energy future.
[1] The economy isn’t really like a computer that can be switched on and off; it is more comparable to a human body that is dead, once it is switched off.
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The Lost Boys? The White Working Class Is Being Left Behind – Christopher Snowdon
16 juli
You can argue about the merits of pulling down statues, but it’s hard to make the case that mass protests serve no useful purpose. At the very least, they provoke debate and draw attention to uncomfortable topics that it might otherwise be easier to ignore. The recent protests have forced everyone to have difficult discussions about race, class, poverty and attainment. Any serious examination of the statistics shows that we’re pretty far from equal, but what the figures also show is that it’s wrong-headed and damaging to lump very different groups together. In these discussions politicians often lazily assume that all BAME (Black, Asian and Minority Ethnic) people are the same, and that all white groups are equally privileged. But a proper look at the data shows not just that there are striking difference within BAME groups, but that the very worst-performing group of all are white working-class boys — the forgotten demographic.
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JPMorgan: “Central Banks Have Created A Collective Hallucination Where Valuations Are Entirely Fabricated” – Tyler Durden
18 juli
Over a decade ago we were mocked and ridiculed for saying that the Fed was manipulating and rigging stock markets, pushing risk assets higher (either singlehandedly or via Citadel) and its only mandate was to prop up consumer confidence by preventing a stock market crash when instead all it was doing was creating a record wealth and income divide which has now morphed into “Trump”, populism the likes of which have not been seen since WWII, the BLM movement, and a country so torn apart it is unlikely it can ever be put back together again.
Fast forward to today when things are very different, and everyone from SocGen, to Rabobank, to Bank of America trashes the joke that is the Fed, and whose devastating money-printing fetish – just to keep stocks elevated – has become so conventionally accepted that the only ones who can’t see it are either idiots or those whose paycheck depends on not seeing it.
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The Pound’s Future In A Dollar Collapse – Alasdair Macleod
16 juli
In recent articles for Goldmoney I have pointed out the dollar’s vulnerability to a final collapse in its purchasing power. This article focuses on the factors that will determine the future for sterling.
Sterling is exceptionally vulnerable to a systemic banking crisis, with European banks being the most highly geared of the GSIBs. The UK Government, in opting to side with America and cut ties with China, has probably thrown away the one significant chance it has of not seeing sterling collapse with the dollar.
A possible salvation might be to hang onto Germany’s coattails if it leaves a sinking euro to form a hard currency bloc of its own, given her substantial gold reserves. But for now, that has to be a long shot.
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