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 End of the Gold Standard. Fifty Years of Monetary Insanity – Daniel Lacalle
21 augustus
This year marks the fiftieth anniversary since Nixon suspended the convertibility of the US dollar into gold. This began the era of a global fiat money, debt-fueled economy. Since then, crises are more frequent but also shorter and always “solved” by adding more debt and more money printing.
The suspension of the gold standard was a catalyst for massive global credit expansion and cemented the position of the US dollar as the world’s reserve currency, as it de facto substituted gold as the reserve for the main central banks.
Thus, since the breakdown of the gold standard, financial crises are more frequent but also shorter than before.
The level of global debt has skyrocketed to more than 350 percent of GDP, and what is mistakenly called “the financial economy,” which is actually the credit-based economy, has multiplied.
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The euro area Phillips curve: Damaged but not dead – Elena Bobeica, Benny Hartwig, Christiane Nickel
20 Augustus
The initially muted reaction of euro area inflation to the recent recession suggests that the Phillips curve is flat or may have flattened during the pandemic. This column argues that the assessment of the Phillips curve has become more complicated due to numerous confounding factors. It discusses evidence that underlying inflationary pressures have been dampened by the build-up of slack, and that models accounting for tail events reveal more stable Phillips curve parameters. Despite the many confounding factors, it seems that the Phillips curve is still at play – even if it is hard to pin down precisely.
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Why we don’t write more papers on political finance – Thorsten Beck, Orkun Saka
15 Augustus
Despite the commonly held views of economists on regulatory capture, our profession has been much more hesitant in recognising similar conflicts of interests that may exist in economics research. This column reports on the related discussions and research presented at the second London Political Finance (POLFIN) workshop, including work on the interaction between political power and corporate favouritism, the influence of partisanship on international capital flows, and political polarisation in financial news as well as in corporate boards. It lays out some of the important takeaways and suggests directions for further research that can shed light on the remaining issues.
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The Demise of the Gold Standard – Mark Thornton
17 augustus
This is the fiftieth anniversary of the demise of the gold standard and the beginning of the current fiat paper standard. Many will say “good riddance” to gold and “thank goodness” for the “good ole greenback”! Reflection, however, produces an alternative conclusion.
To be sure, the opinion of current experts places great weight on paper money. Economists, bankers, and central bank bureaucrats are so universally in support of paper and in opposition to gold that a person would be hard pressed to think otherwise. However, Larry White has shown that monetary and macroeconomists are biased by the professional incentives they face.
In contrast, history has much to say in support of commodity monies, such as gold. Paper monies have lost value over time, with price inflation, as more and more paper money has been created. Paper money economies have also experienced instability in the form of business cycles and economic inequality, including the Great Depression and the post-1971 experience. In the limit, economies have resulted in hyperinflation or have facilitated war, most especially World War I and subsequent wars.
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Predicting inflation using cumulative wage gaps – Liviu Voinea, Prakash Loungani
16 Augustus
Over the past three decades, post-crisis inflation in OECD economies has only picked up once the gap between current wages and peak pre-crisis wages has closed. This column explores the role of the cumulative wage gap in driving inflation, with a particular focus on Covid-19. The authors argue that the increase in inflation in recent months, which appears driven by one-off increases in income and supply bottlenecks, will not be sustained, as long as the as cumulative wage gaps remain wide.
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The End of the Sound Economy – Doug French
16 augustus
Murray Rothbard made the point to us in his US Economic History class at UNLV that economic downturns used to be called “panics.” But, the government believed that word to be too scary for the general public, so, “depression” began to be used to describe downturns. Then, the word “depression” was felt to be, well, too depressing, so “recession” was substituted in and is now employed, and as was the case of 2008, “great recession” was rolled out. The March 2020 economic belly flop was the “pandemic recession,” only lasting two months.
Raoul Pal of Real Vision makes the point in describing the events of last March, “So, you get this weird world where we just had the shortest recession in all recorded history which happens to be the biggest recession in all recorded history because they stopped it by throwing money at it.”
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***Why the Wheels Are Coming Off – Charles Hugh Smith
20 augustus
Is that the scent of smoke? What’s that red glare? Must be nothing.
Why are the wheels coming off the American Project? Afghanistan is front and center in the news flow for obvious reasons, but since I have no expertise on that nation or America’s role there, I am stipulating these are general comments from a systemic perspective.
By the American Project I mean 1) global hegemony in both hard and soft power and 2) American Exceptionalism, the belief that America is not just uniquely strong but uniquely right in terms of holding the high moral ground.
1. If you don’t understand the problem, you can’t possibly arrive at a solution. It’s long been painfully obvious that U.S. presidents would be best served by their closest advisors being anthropologists with long in-country experience in whatever nation the U.S. is engaging.
Any anthropologist with experience in Vietnam would have dismissed the idea of an American “victory” by any means as a possibility. The same can be said of Iraq and Afghanistan. Unfortunately, American presidents don’t listen to anthropologists, they listen to advisors with no real understanding of the nation and people the U.S. is engaging. Lacking a grasp of the situation, every characterization of the “problem” will necessarily be completely misguided and the proposed “solutions” cannot but fail miserably.
Rather than seek a deep understanding the nation and its people, U.S. presidents and their advisors see everything through the distorting lens of great-power rivalries, geopolitical juggling, American prestige and power and a profoundly parochial, provincial view of other cultures and societies. The resulting ignorance of U.S. policy is stupefying.
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Bretton Woods and the Spoliation of Europe – Kristoffer Mousten Hansen
19 augustus
Having marked the quinquagenary of the destruction of the gold standard Sunday, August 15, it is natural to be a little nostalgic for the Bretton Woods system. After all, it might not have been the classical gold standard, but at least it wasn’t as bad as the fiat standard that succeeded it. As sites such as wtfhappenedin1971.com document, that year indeed looks to be a turning point in the economic history of the West. However, the suspension of convertibility of dollars into gold was simply the logical outcome of the system. The PhD standard was not an arrangement that emerged by default in 1971, as governments tried desperately to patch up the international monetary system before its final breakdown in 1973; Bretton Woods was itself the original ideal of government controlling and carefully managing monetary affairs scientifically.
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How Nixon and the Rockefellers Teamed Up to Destroy the Dollar – Patrick Newman
16 augustus
August 15 marks a special date in American history: it commemorates the fiftieth anniversary of President Richard Nixon’s suspension of Bretton Woods. With this decision, the United States stopped redeeming foreign governments’ and banks’ dollars for gold. Consequently, the world economy transitioned to unconstrained central bank discretionary monetary policy, an unprecedented era in monetary affairs.
The traditional justification for such a momentous decision utilizes highfalutin rhetoric and appeals to the public interest: the gold constraint restricted the ability of wise economic planners to fine-tune the economy. However, as I document in Cronyism: Liberty versus Power in Early America, 1607–1849 (forthcoming, Mises Institute, October 2021), the actual reasons for government policies are due to self-interested politicians rewarding themselves and favored business interests at the expense of the public. Bretton Woods is no exception: Nixon suspended gold convertibility to enhance his 1972 reelection chances and benefit the Rockefeller-dominated Chase Manhattan Bank and other expansionary banking interests at the cost of higher inflation. When it comes to government, privileged interests always come before the public.
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Two Percent Inflation Is a Lot Worse Than You Think – Sammy Cartagena
18 augustus
With June 2021 CPI growth being at a thirteen-year high, inflation has been on a lot of people’s minds lately. You can’t blame them, seeing as over 23 percent of all dollars in existence were created in 2020 alone. Although future inflation is certainly an important concern, in this article I instead focus on the chronic inflation this country has faced for over a century.
Under normal circumstances, when most people think about inflation, they likely think of a gradual rise in prices averaging out to 2 percent per year. Most people think nothing of this inflation and simply consider it a part of life, or a necessary part of a growing economy. I am here to argue that not only is this 2 percent inflation number a lie, but also that a more harmful aspect of inflation is often ignored: the price deflation that never comes to be.
For the past few decades, the Fed has historically sought to achieve a 2 percent yearly inflation target. They measure this target through the Consumer Price Index (CPI), a weighted basket of consumer goods used to estimate overall price levels for the “average” consumer. There are several problems with using CPI as a metric.
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Inflation drivers: Before and after the Global Crisis – Philipp F. M. Baumann, Enzo Rossi, Alexander Volkmann
20 Augustus
After bouts in the 1970s and 1980s, consumer price inflation has been trending downward since the 1990s. Recently, voices fearing a pick-up in inflation have become more numerous and louder. This column describes the main forces acting on inflation in 122 countries over the last two decades, with the aim of informing the current debate. While energy prices act strongly on inflation, factors such as central bank independence or inflation targeting have little explanatory power.
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Why the Global Economy Is Unraveling – Charles Hugh Smith
16 Augustus
Global supply chain logjams and global credit/financial crises aren’t bugs, they’re intrinsic features of Neoliberalism’s fully financialized global economy.
To understand why the global economy is unraveling, we have to look past the headlines to the primary dynamic of globalization: Neoliberalism, the ideological orthodoxy which holds that introducing market dynamics to sectors that were closed to global markets generates prosperity for all.
This is known as Neoliberalism, as liberalizing markets means opening up sectors that had previously been restricted. Neoliberalism holds that global market forces introduce efficiencies and opportunities that then pave the way for growth. Global market forces include not just new buyers and sellers of goods and services but the introduction of vast new markets for credit and risk that far exceed what was available in local marketplaces.
So far so good: opening markets creates efficiencies and prosperity, blah blah blah. But the real dynamic behind this happy-story shuck-and-jive is unprecedented prosperity for those with access to low-cost credit generated out of thin air by central banks.
In other words, introducing market forces leads to the dominance of those who control those forces –banks and corporations. Once a local economy is exposed to global capital, those with the most expansive access to the lowest-cost credit can outbid local buyers, snapping up the most productive assets and dominating the local economy to their own benefit.
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Monetary policy and inequality – Ethan Ilzetzki
18 August 2021
By most measures, income inequality has increased in the UK in the past several decades. The July 2021 CfM survey asked the members of its UK panel to evaluate the impact of central banks on inequality and whether the Bank of England should consider income and wealth distribution in its monetary policy decisions. The majority the panel thinks monetary policy has only a small impact on wealth and income inequality. A larger majority of nearly 90% of the panel believes that inequality should play a minimal role or no role in the Bank of England’s monetary policy decisions.
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How Nixon and FDR Used “Crises” to Destroy the Dollar’s Links to Gold – Jonathan Newman
21 augustus
Since August 15, 1971, the US dollar has been completely severed from gold. President Richard Nixon suspended the most important component of the Bretton Woods system, which had been in effect since the end of World War II. Nixon announced that the US would no longer redeem dollars for gold for the last remaining entities that could: foreign governments. Gold redemption had been made illegal for everybody else, so this action finally ended any semblance of a gold standard for the US dollar.
In Crisis and Leviathan, Robert Higgs showed how in the twentieth century the US government grew in size and scope primarily during crisis periods like wars or economic depressions. The powers gained during those periods were often advertised as “temporary,” but history shows that governments rarely relinquish powers. This “ratchet effect” applies to the way Nixon “temporarily” suspended gold redemption in 1971—the resulting regime of unbacked fiat dollars remains in effect today.
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Trade liberalisation and taxation – Rabah Arezki, Alou Adesse Dama, Grégoire Rota-Graziosi
17 Augustus
The empirical evidence on the relationship between trade orientation and growth in developing countries has been hotly contested for over half a century. This column focuses on the dynamic effects of trade liberalisation on tax revenue. Using a worldwide panel dataset, it shows a statistically negative effect of liberalisation on (non-resource) tax revenues in the short term and no significant effect in the medium term. Implementing a VAT prior to liberalisation mitigates its negative effects on tax revenues.
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The Smart Money Has Already Sold – Charles Ugh Smith
18 Augustus
Generations of punters have learned the hard way that their unwary greed is the tool the ‘Smart Money’ uses to separate them from their cash and capital.
The game is as old as the stock market: the Smart Money recognizes the top is in, and in order to sell all their shares, they need to recruit bagholders to buy their shares and hold them all the way down. Once the catastrophic losses have been taken by the bagholders, then the Smart Money slowly builds up positions amidst the wreckage.
It’s easy to become a bagholder; all you need is greed. Been there, done that, for the siren songs luring bagholders to their ruin are compelling and numerous. The Smart Money doesn’t have to mislead anyone; all they do is let the strident super-Bulls talk up the riches to be had by all those who buy today and hold indefinitely, and human greed does the rest.
Siren songs to lure the unwary greedy include these classics:
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The Secret Ronald Reagan Told Me about Gold and Great Nations – Ron Paul
19 augustus
Today [August 15] marks 50 years since President Richard Nixon closed the “gold window,” ending the ability of foreign governments to exchange United States dollars for gold. Nixon’s action severed the last link between the dollar and gold, giving the U.S. a fiat currency.
America’s experiment with fiat has led to an explosion of consumer, business, and—especially—government debt. It has also caused increasing economic inequality, a boom-bubble-bust business cycle, and a continued erosion of the dollar’s value.
Nixon’s closure of the gold window motivated me to run for office. Having read the works of the leading Austrian economists, such as Ludwig von Mises and Murray Rothbard, I understood the dangers of abandoning gold for a fiat currency and wanted a platform to spread these ideas.
When I first entered public life, support for restoring a gold standard, much less abolishing the Fed, was limited to so-called “gold bugs” and the then tiny libertarian movement. Even many economists who normally supported free markets believed the fiat system could be made to work if the Federal Reserve were forced to follow rules.
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