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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The Destructive Power of Keynesian Spending Plans – Frank Shostak
17 maart
According to John Maynard Keynes,
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.
The power of Keynesian ideas is on display in the present world. Whenever there are signs that the economy is likely to fall into an economic slump most experts advise that the central bank and the government should embark on loose monetary and fiscal policies to counter the possible economic recession. In this sense, most experts are following the ideas of John Maynard Keynes.
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Scarred consumption – Ulrike Malmendier, Leslie Sheng Shen
15 maart
Economic crises have prolonged consequences on consumer behaviour, beyond effects captured by standard economic variables. Standard life-cycle consumption channels often fail to explain these lasting effects. This column argues that economic downturns ‘scar’ consumers in the long run. Consumers who have lived through times of high unemployment remain pessimistic about the future financial situation, spend less in future years, and accumulate more savings, controlling for income, wealth, and employment. These results suggest a novel micro-foundation of fluctuations in aggregate demand and imply long-run effects of macroeconomic shocks.
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Crying Wolf on (Hyper)Inflation? – Robert P. Murphy
19 maart
In the early years of QE, many economists—including the present author1—warned that the Fed’s unprecedented monetary inflation would cause a significant increase in consumer prices. Some pundits went so far as to warn of actual hyperinflation, reminding Americans of the terrible experiences of Weimar Germany and modern Zimbabwe. Yet years passed by without the “inflation time bomb” exploding. This led the proponents of the Fed’s policies to mock the warnings as crying wolf.
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Inequality benchmark incomes: A neglected tool for analysing income distributions – Laurence Roope
18 maart
Nearly all income inequality measures are associated with a benchmark income or position, above which income gains increase inequality, and below which income gains decrease inequality. Looking at ten contrasting countries, this column finds that the benchmark incomes associated with the Gini coefficient ranged from the 62nd percentile to the 85th percentile. Knowledge of benchmark incomes could be used to predict the impact on inequality of subsidies to incomes in particular parts of the distribution, or to identify the richest person for whom it might be deemed fair to subsidise income financed by taxation and the poorest person for whom it is just and fair not to subsidise income.
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MMT Is Fake Economics – Daniel Lacalle
15 maart
In this era of monetary fiction, one tends to read all types of undocumented and misguided views on monetary policy. However, if there is one that really is infuriating is the MMT (modern monetary theory) science fiction.
One of its main principles is based on a fallacy.
“A country with monetary sovereignty can issue all the debt it needs without default risk”
First, it is untrue. A report by David Beers at the Bank Of Canada has identified 27 sovereigns involved in local currency defaults between 1960 and 2016 (database here).
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Our Dead Money Economy – Charles Hugh Smith
17 maart
The U.S. stock and bond markets and its entire financial system now teeter on the edge of collapse if there is even a slight hint that 1) the Fed won’t give more free candy to Wall Street or 2) the Fed has lost control of the Dead Money Economy it has created.
Take a quick glance at these depictions of Dead Money: while the broad measure of the money supply in the U.S., M2, has gone up 12-fold since the start of 1981, the velocity of money–how many times it changes hands over a period of time–has collapsed.
What does this tell us about the U.S. economy and what lies ahead? The Federal Reserve’s FRED database provides a definition of M2 that’s a good starting place.
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Back to the 60’s – John H. Cochrane
17 maart
Marginal revolution links to a great read on contemporary macroeconomics from J.W. Mason. It’s mostly wrong, I think, but very thoughtfully puts together the wrong ideas behind contemporary policy macroeconomics.
Briefly, debt doesn’t matter and there are no effective supply constraints. Borrow, spend without limit is the key to prosperity.
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Biden’s Rescue Plan Won’t Reduce Poverty – Bradley Thomas
19 maart
Imagine thinking the government can reduce poverty.
For most readers of this website, the thought is laughable. And for good reason. The government has no resources of its own. Every dollar it spends it must first either tax, borrow, or print. Taxing and borrowing redirect money from the voluntary, productive sector of the economy to the hands of politicians. Printing new money erodes the value of currency already held by citizens, harming low-income households disproportionately, while distorting important market signals like interest rates that are vital to coordinating the economy’s complex patterns of production and exchange.
Nevertheless, the Urban Institute—a highly influential and deep-pocketed left-leaning think tank—just released a report claiming that the recently passed American Rescue Plan will reduce the poverty rate by one-third in 2021.
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Stock Market Leverage Spikes in Historic Manner: Another WTF Chart of a Zoo that Has Gone Nuts – Wolf Richter
17 maart
In an investment environment where nothing matters anymore – until it suddenly does.
In the current craze that encompasses everything from sneakers and NFTs to stocks, where valuations don’t matter because of widespread certainty that valuations will be even greater in a few days, and where folks are chasing lottery-type returns, supported by the Fed’s interest rate repression and $3 trillion in asset purchases, and by the government’s trillions of dollars of handouts and bailouts – well, in this perfect world, there is a fly in the ointment: Vast amounts of leverage, including stock market leverage.
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Technological progress reduces the effectiveness of monetary policy – Robin Döttling, Lev Ratnovski
19 maart
Technological progress increases the importance of corporate intangible assets such as research and development knowledge, organisational structure, and brand equity. Using US data covering 1990 to 2017, this column shows that the stock prices and investment of firms with more intangible assets respond less to monetary policy shocks. Similarly, intangible investment responds less to monetary policy compared to tangible investment. The key channel explaining these effects is a weaker credit channel of monetary policy, as firms with intangible assets use less debt.
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***Two-Thirds Of Manhattan White-Collar Workers Will Not Return To Office Full-Time, Survey Says – Tyler Durden
20 maart
“Working from home” or at least some sort of the “hybrid” work model (a combination of work-at-home and office) could be the “new normal,” according to a new study of Manhattan’s largest employers.
Despite COVID-19 vaccine rollouts and virus-related infections, hospitalizations, and deaths declining in recent months, the Partnership for New York City released a survey this week that found 22% of Manhattan’s most prominent employers would require workers to return to the office on a full-time basis.
About 66% of respondents said they would adopt a hybrid work model, where employees will bounce between home and office during the workweek. 9% of respondents said workers would not be required to return to the office.
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If Bitcoin Didn’t Exist, We’d Have To Invent It Right Now – Mark Jeftovic
19 maart
The conventional take on Bitcoin and crypto-currencies in general from the mainstream skeptics is that it’s some sort of speculative bubble. The recent mania in NFTs seemingly adds credence to this argument. However, the NFT craze, as unfathomable as it is, even to somebody like myself, has precedents that show it doesn’t invalidate the crypto thesis.
Coming up in the domain and DNS business, I’ve seen this movie before. I’ve also made the point back in the 2017 crypto cycle that the Tulipmania analogy for Bitcoin was a bad one for many reasons, and that it was a more accurate comparison to the domain name aftermarket of the 2000’s era. When companies and speculators were paying millions of dollars for strings of words from the dictionary with “.com” appended to them, that was a speculative mania and it was akin to Tulipmania. And from our vantage point in the present we can draw the comparison to NFTs.
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A $15 Minimum Wage Would Be a Huge Blow to the Small Business Economy – J.R. Vidueira
17 maart
Opening and running a business has never been easy, but this past year has been particularly challenging for the nation’s entrepreneurs—those who represent the “driving force” of our economy, as Ludwig von Mises once described them.
Just months after the American economy began shutting down in the wake of the coronavirus pandemic, more than one hundred thousand businesses had already shut their doors. Many of the small businesses that were strong enough to survive the past year’s lingering public fears and government lockdowns, are turning razor-thin profits. And now the congressional Democrats and the new administration in Washington have announced plans to more than double the federal minimum wage from $7.25 to $15 an hour—therefore firing the first salvo in what JP Morgan Chase economists Michael Feroli and Daniel Silver predict will be the “mother of all economic debates.”
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When agriculture drives development: Lessons from the Green Revolution – Douglas Gollin, Casper Worm Hansen, Asger Mose Wingender
20 maart
The Green Revolution was a crucial episode of agricultural innovation based on the application of modern crop-breeding techniques and high-yielding crop varieties. This column studies the economic effects of agricultural productivity growth in the context of the Green Revolution across the developing world. It finds positive but unevenly distributed effects of agricultural productivity on food crop yields, GDP per capita, schooling, and life expectancy across different countries. In the face of climate change, further investments in agricultural science targeting the developing world may have the potential to sustain these gains in the decades ahead.
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***Testimony on financial regulation and climate change – John H. Cochrane
18 maart
I had the honor of testifying at the Senate Committee on Banking, Housing and Urban Affairs, on Protecting the Financial System from Risks Associated with Climate Change Full video at the link, I start at 48:30 with slightly abridged version of these remarks.
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Does sustainability reduce the cost of capital? – Alex Edmans
17 maart
It is often taken for granted that sustainability reduces a company’s cost of capital. This column argues that the relationship is significantly more complex and depends on a number of factors. It highlights an important distinction between the ‘cost of capital’ and ‘expected cash flow’ channels, which may lead to similar final outcomes but imply different underlying mechanisms. Additional factors, such as the level and nature of systemic risk, the amount of risk aversion, and the cyclical behaviour of public trust in business, are also crucial in determining whether sustainable companies enjoy a lower cost of capital.
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America’s Upside-Down Economy Just Took Another Bizarre Turn – Michael Snyder
18 maart
Is this a good economy or a bad economy? Well, that all depends on who you are talking to.
For most Americans, economic conditions have been absolutely horrible ever since the COVID pandemic first arrived. More than 100,000 businesses have permanently shut down, approximately 10 million Americans are in danger of being evicted from their homes, and weekly unemployment claims have been above the old record set in the early 1980s every single week for nearly an entire year. Meanwhile, the absolutely insane polices that the Federal Reserve and our politicians in Washington have been pursuing have made the wealthy far wealthier than ever before. In early 2020, M1 was sitting at about 4 trillion dollars, and now it is up to 18 trillion dollars. Much of that money has ended up in the pockets of the ultra-wealthy, and now they are spending it is some pretty odd ways.
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Debunking Piketty and the Left’s Celebrity Economists – Shane J. Coules
29 maart
If you were to browse the economics section of the majority of bookstores here in my home city, Dublin, you would find something of an odd phenomenon: these businesses which essentially exist because of free enterprise and voluntary exchange—i.e., because of capitalism—stock very few books by promarket/procapitalism economists.
To be sure, when looking through the shelves, the most frequently encountered names include Karl Marx, John Maynard Keynes, Paul Krugman, and David McWilliams (the latter being Ireland’s most famous economist—a fellow at the Sanders Institute who believes housing and education should be free). Having paid close attention to this over the past few years when in these bookstores, I can say with absolute honesty that I have never seen books by F.A. Hayek, Thomas Sowell, James M. Buchanan, Murray N. Rothbard, Walter E. Williams, Ludwig von Mises, or even one of the best-known and least radical, relatively promarket economists, Milton Friedman. And I have rarely seen them in independent or secondhand bookstores here.
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Gross Profits For House Flippers Hits Record As Fed Turbocharges Real Estate Bubble – Tyler Durden
20 maart
The housing boom unleashed by the Federal Reserve during the virus pandemic was built on historically low mortgage rates, low inventory, city-dwellers moving to rural areas, and remote-work phenomenon. Housing prices in all 20 major US cities have been rising at the fastest pace since 2014. A red hot market has lured house flippers who are pocketing record profits.
Research firm Attom Data Solutions’ latest note specifies homes flipped in 2020 generated a gross profit of $66,300 nationwide (the difference between the median sales price and the median amount initially paid by investors). 2020’s gross profits were up 6.6% from a year earlier and were at the highest levels since the housing boom in 2005.
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Shock-and-Awe Rate Hikes Begin in the Emerging Markets amid Surging Inflation – Wolf Richter
18 maart
“A front-loaded and strong additional monetary tightening.”
In a shock-and-awe move, the Central Bank of Turkey today jacked up its policy rate, the one-week repo rate, by two full percentage points, from 17% to 19%. Economists had expected a rate hike of half that magnitude.
The Monetary Policy Committee said in its press release that, considering the inflation developments – the inflation rate had jumped to 15.6% in February – it “has decided to implement a front-loaded and strong additional monetary tightening.”
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***Language training and refugees’ success – Mette Foged, Linea Hasager, Giovanni Peri
20 maart
The labour market integration of refugees and immigrants is key to their ability to contribute to the economy of the receiving country and to enhancing the fiscal sustainability of more open immigration policies. Using the quasi-random assignment of Danish refugees to language training, this column shows that language acquisition significantly increased the lifetime earnings of refugees. Refugees with language training became more likely to work in communication-intensive jobs and obtained additional education. The positive effects are transmitted to the next generation in terms of improved schooling outcomes for male children of refugees.
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What the Shipping Container Shortage Reveals about US-China Trade – Weimin Chen
16 maart
Despite the record unemployment rate, widespread hardship to businesses, strains on the healthcare system, political turmoil, and general disruption to daily life in 2020, US consumers have managed to ramp up their habit of buying things. Demand for physical goods replaced some of the previous demand for in-person service-related experiences and much of that demand was met with a surge of imports from China as domestic production slowed down due to lockdown measures. Up until recently, global supply chains managed to find their footing and could meet demand, but news has emerged that reveals stresses on the world’s shipping infrastructure and uncovers clues about the economic outlook.
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How We Stumbled to the Edge of the Cliff – Chrles Hugh Smith
19 maart
Oops. Looks like the Fed’s magic (and our luck) have finally run out.
Now that we’re teetering on the edge of the cliff, it might be a good idea to retrace how we stumbled down to this crumbling, precarious ledge. As I’ve discussed for the past 15 years, there are a handful of systemic forces that have taken us to the point of no return.
1. Demographics have reversed from tailwinds to headwinds. All sorts of extravagant promises could be made back when there were 10 workers paying taxes to support each retiree/state dependent. Now that we’re down to less than 2 full-time workers for each retiree/state dependent, the promises are impossible to keep, with the one exception of printing the trillions of dollars that were anticipated to be paid in taxes–that is, creating near-infinite sums of funny-money out of thin air and hoping the rest of the world will continue to accept it. History doesn’t have any examples of that working, but hey, we’re special and this time it’s different. Oh, right…
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Debt, natural disasters, and special drawing rights: A modest proposal – Avinash Persaud
17 maart
For the countries on the frontline in the war against climate change, there is a nasty nexus between climate change and debt. The cost of environmental damage, the loss of revenues from a natural disaster, and the high price of building back better all contribute to higher debt. This column proposes three ways to break this climate–debt nexus: (1) redistribute special drawing rights using a new classification of vulnerability; (2) incorporate natural disaster clauses into multilateral development banks’ lending arrangements; and (3) use the unused special drawing rights of the world’s strongest countries to recapitalise regional development banks to finance resilience in the vulnerable countries without adding to their debt.
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