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 intellectual spoils of war: How government spending on defence research benefits the private sector – Enrico Moretti, Claudia Steinwender, John Van Reenen
18 december
Defence R&D is a major component of government-sponsored R&D in many developed economies, and the effect of defence R&D expenditures on private sector innovation and economic growth has been a hotly debated topic for many years. This column presents a systematic analysis across all OECD countries which suggests that a 10% increase in defence R&D results in a 4% increase in private R&D. It also reveals evidence of spillovers between countries, with increases in government-funded R&D in one country appearing to increase private R&D spending in the same industry in other countries.
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Good Economic Theory Focuses on Explanation, Not Prediction – Frank Shostak
18 december
In order to establish the state of the economy, economists employ various theories. Yet what are the criteria for how they decide whether the theory employed is helpful in ascertaining the facts of reality?
According to the popular way of thinking, our knowledge of the world of economics is elusive — it is not possible to ascertain how the world of economics really works. Hence, it is held that the criterion for the selection of a theory should be its predictive power.
So long as the theory “works,” it is regarded as a valid framework as far as the assessment of an economy is concerned. Once the theory breaks down, the search for a new theory begins.
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Default “Chain Reaction”, Top Central Bank Advisor Warns – Tyler Durden
21 december
Just days after China’s “moment of reckoning” in the dollar bond market arrived, when China was rocked by not only the biggest dollar bond default in two decades but also the first default by a massive state-owned commodities trader and Global 500 company, when Tianjin’s Tewoo Group announced the results of its “unprecedented” debt restructuring which saw a majority of its bondholders accepting heavy losses, and which according to rating agencies qualified as an event of default, last week a top adviser to China’s central bank warned of a possible “chain reaction” of defaults among the country’s thousands of local government financing vehicles after one of these entities nearly missed a payment this month.
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Here’s What Gets Me about the Fed’s Warnings of “Excesses and Imbalances that Are Hard to Deal with Later” – Wolf Richter
17 december
We got another one today, warning about all the right things. And then they do the opposite.
Here is what gets me. It happened again today. These Fed guys and gals are wandering about the land – armed with solid data – flailing their arms to warn about corporate debt that is at historic highs, and about credit spreads between certain types of junk-bond yields and investment-grade yields that are the tightest in history, where investors no longer effectively distinguish between higher and lower risk, and about commercial real estate with “cap rates” that have hit historic lows, indicating out-of-whack prices.
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2020: The Futility Of Predictions & Understanding The Risk – Lance Roberts
21 december
We can’t predict the future. If we could, fortune tellers would win all of the lotteries. They don’t, we can’t, and we are not going to try to.
However, we can analyze what has happened in the past, weed through the noise of the present, and discern the possible outcomes of the future. The biggest problem with Wall Street, both today and in the past, is the consistent disregard of the unexpected and random events they inevitability occur.
There was once a study done of the accuracy of “predictions.” The study took predictions from a broad range of professions from psychics to weathermen. The study came to two conclusions. The first was that “weathermen” are the MOST accurate predictors of the future. The second conclusion was that the predictive ability was only accurate out to 3-days. Beyond 3-days, and the predictive ability was no better than a coin flip.
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Macroeconomic frameworks – Alan Auerbach, Yuriy Gorodnichenko, Daniel Murphy
18 december
Despite decades of research, there still is no consensus over whether neoclassical, New Keynesian, or other frameworks accurately capture the underlying sources and mechanisms of economic fluctuations. The column uses new empirical data on demand shocks to evaluate the predictions of these models for labour share, labour wedge, wage and price response, and multipliers. Each model tends to do well by some metrics but poorly by others.
2020: The Futility Of Predictions & Understanding The Risk
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Is China A Better Trading Partner For Latin America Than The US? – Daniel Lacalle
15 December
Part of the economic debate in Latin America, particularly in Argentina after the elections, focuses on what type of financial and trade relationship is most convenient for the region, and several discussions talk about the merit of strengthening relations with China instead of the United States
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Bank lending under negative policy rates – Florian Heider, Farzad Saidi, Glenn Schepens
17 december
In recent years, several central banks have steered policy rates into negative territory for the first time in their history. The novel nature of negative rates raises several questions about how monetary policy operates in such non-standard territory. This column summarises recent research that focuses on the impact of negative policy rates on bank credit supply and bank risk-taking in the euro area. The findings point to a crucial role for bank deposits in the transmission mechanism of negative rates.
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The Economic Consequences Of The Peace: 100 Years Later – Edward Fuller
20 december
This week is the hundred-year anniversary of The Economic Consequences of the Peace by John Maynard Keynes. This work has been described as “one of the most influential books of the twentieth century.” It made Keynes the most famous economist in the world, and it was the basis of his massive influence on twentieth-century economics. Many of Keynes’s harshest critics view it as his one good book. However, the case can be made that The Economic Consequences of the Peace is his worst book. On its centenary, it is proper to reassess the work and its influence.
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The Strongest Seasonal Advance in Precious Metals Begins Now – Dimitri Speck
18 december
You are probably already getting into the holiday spirit, perhaps you are even under a little stress. But the turn of the year will soon be here – an occasion to review the past year and make plans for the new one. Many people are doing just that – and their behavior is creating the strongest seasonal rally in the precious metals markets.
Silver is seasonally cheap in mid December
First let us look at the seasonal chart of silver. The chart shows the average moves in silver prices in the course of a calendar year over the past 69 years. The horizontal axis shows the time of the year, the vertical axis depicts price information.
With the help of this chart, seasonal trends can be identified at a glance. Note: the seasonal pattern does not end at the turn of the year, but actually continues at the beginning of the year (i.e., on the left hand side of the chart).
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***Why So Many Scholars Are Wrong About Consumer Psychology – Per Bylund
19 december
A recent paper in the Journal of Consumer Psychology (JCP) has started a debate on the accuracy of “loss aversion,” the idea that people are driven by fear of losses more than they are by the potential for gain. Core to behavioral economics, this idea has been rather universally accepted and been part of the awarding of two economics Nobel Prizes, in 2002 to Daniel Kahneman and in 2017 to Richard Thaler.
One of the authors of the JCP article, Professor David Gal at the University of Illinois at Chicago, summarizes their findings in the Scientific American and concludes, “Our critical review of loss aversion highlights that, even in contemporary times, wrong ideas can persist for a long time despite contrary evidence.”
The inserted “even in contemporary times” is symptomatic of the ignorant hubris of modern-day social scientists.
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***My “Pickup Truck Price Index” Crushes “CPI for New Vehicles” – Wolf Richter
15 december
A total mind-blower. Actual prices skyrocket even as CPI for new vehicles has been flat for 22 years.
I started stirring the pot a few weeks ago with the Toyota Camry, the best-selling car in the US. I compared Camry LE prices for the model years from 1990 through 2020 (now in showrooms) and found that the base MSRP increased by 70% while the CPI for new vehicles increased by only 22%, and more disturbingly, that this 22% increase happened entirely between 1990 and 1997, and that since then, the CPI for new vehicles has been flat with a dip in between. Now I’m going to do the same analysis with the best-selling vehicle of all times in the US, the Ford F-150 pickup truck. And you know what is coming: a total mind-blower.
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A “Market” That Needs $1 Trillion in Panic-Money-Printing by the Fed to Stave Off Implosion Is Not a Market – Charles Hugh Smith
16 december
It was all fun and games enriching the super-wealthy but now the karmic cost of the Fed’s manipulation and propaganda is about to come due.
A “market” that needs $1 trillion in panic-money-printing by the Fed to stave off a karmic-overdue implosion is not a market: a legitimate market enables price discovery. What is price discovery? The decisions and actions of buyers and sellers set the price of everything: assets, goods, services, risk and the price of borrowing money, i.e. interest rates and the availability of credit.
The U.S. has not had legitimate market in 12 years. What we call “the market” is a crude simulation that obscures the Federal Reserve’s Socialism for the Super-Wealthy: the vast majority of the income-producing assets are owned by the super-wealthy, and so all the Fed money-printing that’s been needed to inflate asset bubbles to new extremes only serves to further enrich the already-super-wealthy.
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Pensions and intra-generational equity: A proposed solution – Svend E. Hougaard Jensen, Gylfi Zoega
21 december
Everyone contributes equally to government-run pension schemes, but not everyone will spend the same number of years in retirement – blue-collar workers, for instance, do not live as long as their white-collar counterparts. Rather than pooling the resources of a heterogeneous group of workers, this column proposes that each worker receive a lump sum at a certain age, which they can then give to an occupational pension fund better informed about the life expectancy of its own participants.
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That Which Is Seen, and That Which Is Not Seen – Claude Frédéric Bastiat
18 december
In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause — it is seen. The others unfold in succession — they are not seen: it is well for us if they are foreseen. Between a good and a bad economist this constitutes the whole difference — the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favorable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.
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Young People Still Crushed by Housing Bust, Banking & Economic Crisis: Bank of Spain – Nick Corbishley
21 december
The contrast with retirees could not be starker.
Over the past five years, Spain’s economy has grown at a faster rate than almost any other in the Eurozone. But not everyone has benefited. And a new report by the Bank of Spain confirms, no one has paid as heavy a price as the generation that came of age in the years immediately before and after the collapse of Spain’s insane housing bubble and the banking crisis that followed.
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How home value shocks drive spending – Henrik Yde Andersen, Søren Leth-Petersen
20 december
House prices and aggregate spending move together, but little is known about the underlying mechanism linking the two. This column introduces a test to discriminate between the housing wealth effect hypothesis, which says that homeowners consider home value changes as windfalls, and the collateral effect hypothesis, which says that a home value increase generates additional collateral that can be borrowed against. Homeowner behaviour in response to home value rises when they are close to their collateral borrowing constraint, suggesting that the collateral effect is important for explaining the link between house prices and spending.
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***The Disaster of Zimbabwe’s Price Controls – Tam Alex
16 december
Prices are essential signals for coordinating the distribution of goods in an economy. Prices tell us where scarce resources are most needed. F. A. Hayek’s insights on this have been summarized by Peter Leeson:
Market prices, he [Hayek] argues, signal to producers and consumers the relative scarcity of resources. They tell producers how to combine resources in the ways that produce the most value for consumers, and tell consumers when they should expand or contract their consumption of various goods and services.1
So, what would happen if prices were controlled by government policy? The answer: bad things.
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Skyrocketing Costs Will Pop All the Bubbles – Charles Hugh Smith
18 december
The reckoning is coming, and everyone who counted on “eternal growth of borrowing” to stave off the reckoning is in for a big surprise.
We’ve used a simple trick to keep the status quo from imploding for the past 11 years: borrow whatever it takes to keep paying the skyrocketing costs for housing, healthcare, college, childcare, government, permanent wars and so on.
The trick has worked because central banks pushed interest rates to zero, lowering the costs of borrowing more as costs continued spiraling higher.
But that trick has been used up. The next step–negative interest rates–has failed to spark the “growth” required to pay for insanely overpriced housing, healthcare, college, childcare, government, etc.
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Three Arguments Debunking Marx’s Labor Theory of Value – Bradley Thomas
21 december
Though widely dispensed with in the field of economics, the notion of “wage slavery” is still common among progressives and socialists of many stripes.
It is not uncommon, especially on social media, to run into people insisting that employers are “stealing” part of their labor because the wage they receive from is less than the contribution of their labor to the final value (i.e., selling price) of the finished good.
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