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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U.S. Stimulus Has Created a Boom–in China – Charles Hugh Smith
19 mei
Maybe maximizing corporate profits isn’t all that matters. Maybe national security and resilience matter, too, and if they do, then reshoring critical supply chains should be a higher priority than Corporate America’s (mostly tax-free) profits.
As America’s trade deficit explodes higher and the costs of offshoring supply chains mount, the apologists for globalization are out in full force, attempting to shout down reality with their usual specious claims about how amazingly wunnerful globalization has been for America.
Allow me to tote up the real-world cost savings:
Cost of cheap ill-fitting jeans dropped $10.
Cost of low-quality TV that will only last a few years dropped $50.
Cost of healthcare, annual increase: $3,000 per household
Cost of rent, annual increase: $1,200 per household
Cost of child care, annual increase: $1,300 per household
Cost of college tuition and room and board, annual increase: $1,500 per household
So while domestic costs rose $6,000 annually due to predatory cartels, over-regulation, taxes, etc., we saved $60 by offshoring supply chains. Excuse me for being underwhelmed by the wunnerfulness of offshoring jobs and supply chains
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Investors Won’t Buy the “Transitory” Inflation Line – Daniel Lacalle
18 mei
The Federal Reserve and European Central Bank repeat that the recent inflationary spike is “transitory.” The problem is that investors do not buy it.
Inflation is always a monetary phenomenon, and this time is not different. What central banks call transitory effects, and the impact of supply chains are not the real drivers of inflationary pressures. No one can deny certain supply shock impacts, but the correlation and extent of the increase in prices of agricultural and industrial commodities to five-year highs as well as the abrupt rise of nonreplicable goods and services to decade highs have monetary policy to blame. Injecting trillions of liquidity makes more funds chase fewer goods and the rise in the real inflation perceived by citizens is much larger than the official CPI.
Take food prices. The United Nations Food Price Index is up 30 percent in the past five years and up 10 percent year to date (April 2021). The rise in food prices already caused protests all over the world in 2018 and it continues to reach new highs. The correlation in the price increase of most agricultural goods also shows that it is a monetary effect.
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Why global uncertainty is declining – Hites Ahir, Nicholas Bloom, Davide Furceri
18 mei
The latest update of the World Uncertainty Index indicates that global uncertainty has fallen back to its long-run average after reaching a historical high in 2020. This column describes how this is driven by a significant decline in two key drivers of global uncertainty over the last few years: US–China trade tensions and Brexit negotiations. A sub-index of the World Uncertainty Index, the World Pandemic Uncertainty Index, reveals that uncertainty related to COVID-19 is also starting to subside, especially in developed countries where vaccines rollout has started to pick up. Given this, and because US–China trade and Brexit tensions impacted developed countries more, the authors observe a more salient decline in uncertainty in developed countries than in developing ones.
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Four Myths About Money That Ought To Die Forever – Robert Murtphy
19 nei
With the possible exception of international trade, no topic in economics contains more myths than monetary theory.
Wall Street Bounces, After Selloff Fed Boosts Liquidity
SoftBank Said to Plan $14 Billion Sale of Alibaba Shares
China’s Companies Have Worst Quarter on Record, Beige Book Says
U.S.-Saudi Oil Alliance Under Consideration, Brouillette Says
ETF Volumes Surge in Current Market Environment
Investors Have Given Up on a V-Shaped Recovery, BNY’s Young Cautions
In the present article I address four popular opinions concerning money that suffer from either ambiguity or outright falsehood.
One: “Money represents a claim on goods and services.”
Although there is a grain of truth in this view, it is quite simplistic and misconceives what money really is. Money is not a claim on goods and services, the way a bond is a legal claim to (future) cash payments or the way a stock share is a claim on the net assets of a company. On the contrary, money is a good unto itself. If you own a $20 bill, no one is under any contractual obligation to give you anything for it.
Now of course, in all likelihood people will be willing to exchange all sorts of things for your $20 bill; that’s why you yourself performed labor (or sold something else) to obtain it in the first place. Nonetheless, if we wish to truly understand money, we must distinguish between credit liabilities on the one hand, and a universally accepted medium of exchange (i.e., money) on the other.
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Fed Drains $351 Billion in Liquidity from Market via Reverse Repos, as Banking System Creaks under Mountain of Reserves – Wolf Richter
20 mei
This is the first time I’ve seen Wall Street banks clamor for the Fed to back off QE. The Fed is struggling to keep the liquidity it created from going haywire.
In the fall of 2019, when the repo market blew out, the Fed stepped in and bought Treasury securities and MBS and handed out cash via repurchase agreements. When these repos matured, the Fed got its money back, and the counterparties got their securities back. The Fed also did this during the market rout in March 2020. But by July 2020, the last repos matured and were unwound.
Now the Fed is doing the opposite, with “reverse repos.” Repos are assets on the Fed’s balance sheet. Reverse repos are liabilities. With these reverse repos, the Fed is now massively selling Treasury securities to counterparties and taking their cash, t
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What Does “Seasonally Adjusted” Mean? – Frank Shostak
19 mei
According to mainstream thinking, economic slumps are caused by various shocks. This means that these slumps are caused by unexpected events, which by implication are not known beforehand. Obviously if causes behind various shocks cannot be known in advance, it makes sense to look at various symptoms of the emerging economic slump. Based on the symptoms, experts could introduce measures to prevent the economy from declining into an economic recession.
It is however, held that it is not always possible to establish the conditions of the economy by just inspecting the data as a whole. What is required is to break the data into its key components. This, it is argued, will enable the economist to identify the possible sources of the economic illness.
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The rich, the poor, and the others: How monetary policy affects the distribution of income – Niklas Amberg, Thomas Jansson, Mathias Klein, Anna Rogantini Picco
23 mei
Fully understanding the distributional consequences of monetary policy requires looking at its impact over the entire income distribution and not simply at summary inequality measures like the Gini coefficient. Using uncensored administrative income data for Sweden, this column shows that while a monetary policy loosening substantially affects incomes across the entire income distribution, it does so relatively more in the tails, providing a U-shaped response pattern. The effects in the bottom are primarily driven by changes in labour income, whereas the effects in the top are mainly due to disparities in capital income.
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Citi U.S. Economic Surprise Index Turns Red For First Time In A Year – Tyker Durden
22 mei
Days ago, we wrote that the Citi U.S. Economic Surprise Index was “about to turn red” for the first time since last June.
As of Thursday, the index – which measures the degree to which economic data is either beating or missing economists’ expectations – went red. The last time this happened was right around the time when lockdowns were ending in June 2020.
Besides a flurry of disappointing economic data points, including the recent hotter than expected CPI report, housing starts declined in April, and the Federal Reserve Bank of Philadelphia’s manufacturing survey, which missed expectations, the surprise index dove into the red. The index is not an imperative measure of growth, but it does provide a view into the strength of the economic recovery.
Going red isn’t a terrible thing for the surprise index, neither does it mean the recovery is falling off a cliff – all it suggests is that data points are no longer beating forecasters’ estimates to the upside.
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The End Of Paper Gold & Silver Markets – Alasdair Macleod
20 mei
This article looks at the likely consequences of the Bank for International Settlements’ introduction of the net stable funding requirement (NSFR) for bank balance sheets, insofar as they apply to their positions in gold, silver and other commodity markets.
If they are introduced as proposed, banks will face significant financing penalties for taking trading positions in derivatives. The problem is particularly important for the London gold market, as described in last week’s article on this subject. Therefore they are likely to withdraw from providing derivative liquidity and associated services.
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Inflation Is Great If You’re Already Rich – Doug French
19 mei
The 4.2 percent Consumer Price Index (CPI) bounce for April sent a chill through some traders and financial commentators who had expected a tamer number like a 3.6 or 3.9 percent from last year’s covid price level air pocket.
The MarketWatch headline screamed, “U.S. Inflation Soars in April to Thirteen-Year High, CPI Shows, and Reveals Fresh Stress on the Economy.” Barron’s was slightly more relaxed: “Surging Inflation Is Hammering the Stock Market. Why It Isn’t Time to Panic Just Yet.” Then there was Nobel laureate Paul Krugman, who tweeted, “So, the inflation report wasn’t a nothingburger, but it was sort of a White Castle slider—not a very big deal.”
Before the 4.2 percent print, John Authers posted a piece on Bloomberg, “Markets Give Powell a Break. It May Be Transitory.” “It” being CPI. “Transitory” being a term Powell uses often, a.k.a., “don’t worry, be happy, this too will pass.”
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Economic growth as the ultimate constraint: EU fiscal policies in 2020 – Martin Larch, Janis Malzubris, Stefano Santacroce
19 mei
In 2020, EU member states launched massive fiscal measures to mitigate the economic and social fallout of the Covid pandemic. The activation of the severe economic downturn clause of the Stability and Growth Pact, coupled with a decisive intervention of the ECB, offered member states the flexibility to stage their fiscal response. As this column reveals, however, a closer look through the lens of an expenditure benchmark highlights important cross-country differences reflecting deeper issues. Countries with very high debt and/or high sustainability risks are bound by their meagre growth prospects. If unaddressed, future reviews of the EU fiscal rules may buy time, but not solve the underlying issues.
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Known Stock Market Leverage Hits WTF High. Out the Other Side of its Mouth, the Fed Warns about Hidden Leverage that Blew up Archegos – Wolf Richter
18 mei
Margin debt is just the visible tip of the iceberg of leverage, and it reached the zoo-has-gone-nuts level.
Stock market margin debt jumped by another $25 billion in April, to a historic high of $847 billion, according to FINRA data. It has exploded by $188 billion in six months, and by 61% year-over-year, and by 55% from February 2020:
Excess leverage is the precise and predictable result of the policies the Fed is promoting out of one side of its mouth with its interest rate repression and asset purchases.
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Does Bitcoin Use “Too Much” Electricity? – Allan Stevo
20 mei
US senator Elizabeth Warren claimed last week that bitcoin uses too much electricity. In doing so, she makes a judgment about the “correct” amount of electricity use. But it raises the question of who is entitled to make such a judgment.
It’s fine for Warren to judge for herself, but it’s not fine for her to try to foist that opinion on others through government force or coercion.
A follow-up question from a decent reporter might be, “Is there really not enough available energy?”
At least two centuries of oil exist underground at current levels of usage. It’s not a question of whether it exists; it’s a question of how costly it is to get to. Uranium supplies will last longer than that.
Energy is abundant and easy to provide in a free market environment. However, a free market environment can be hard to come by, for government won’t let a free market for energy exist. Governments around the world are so eager to control energy generation and distribution that the mechanism of supply and demand can’t do its job. Instead, we are left with a bunch of impractical government stipulations by know-it-all politicians and bureaucrats.
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Growing like Germany: How high local public debt and local public banks crowd out private investment – and what the debt brake has to do with it – Mathias Hoffmann, Iryna Stewen, Michael Stiefel
22 mei
Germany’s current account surplus and corporate savings have both been increasing in the last decade. This column shows that German private investment has been low because it has been crowded out by local public bank lending to municipalities. Banks’ statutory public lending requirements and the debt brake have both played a role in this, exacerbating the contractionary effect of fiscal consolidation.
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Why the Misuse of the Word “Efficiency” Is Such a Problem – GGary Galles
21 mei
An important impediment to understanding valuable insights economists have to offer is that they have trained people to ignore their pronouncements on efficiency. Economists’ common use of a standard of efficiency known as “potential compensation,” which is at odds with a more important concept in which efficiency is advanced whenever there is a Pareto improvement (named after Vilfredo Pareto), is a major reason.
Say there were a policy that supposedly produced $100 in benefits for Adam and imposed $40 in costs on Eve. In that situation, Adam could conceivably compensate Eve with something between $40 and $100. If such compensation was actually arranged and voluntarily agreed to, both parties would reveal their beliefs that the result was efficient because both expected to benefit. That would make such an arrangement a Pareto improvement, because those whose rights were involved were made better off, and no one was harmed. This is what happens in voluntary market transactions. However, in public policy, compensation is not generally paid to the losers, so “potential compensation” is a misleading guide, because some lose, violating the Pareto standard.
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Spiking Inflation, Rate Hikes, and Debt Defaults in Latin America – Nick Corbishley
15 mei
Mexico and Brazil, having seen the economic destruction that high inflation can wreak, don’t want to see it again.
Latin America will soon be hit by a wave of business bankruptcies and defaults, according to Jesús Urdangaray López, the CEO of CESCE, Spain’s biggest provider of export finance and insurance. CESCE insures companies, mainly from Spain, against the risk of their customers not paying due to bankruptcy or insolvency. It also manages export credit insurance on behalf of the Spanish State.
CESCE’s biggest clients are large Spanish companies with big operations in Latin America. For many of those companies, including Spain’s two largest banks, Grupo Santander and BBVA, Latin America is its biggest market. CESCE’s three biggest shareholders are the Spanish State and, yes, Spain’s two largest banks, Grupo Santander and BBVA.
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Financing climate change: International agreements and lending – Yener Altunbaş, David Marques-Ibanez, Alessio Reghezza, Costanza Rodriguez d’Acri, Martina Spaggiari
21
The Paris Agreement explicitly recognises the need to “make finance flows compatible with a pathway toward low greenhouse gas emissions and climate-resilient development”. This column looks at the impact of the agreement on bank lending and finds that following the agreement, European banks reallocated credit away from polluting firms. In the aftermath of President Trump’s 2017 announcement of a US withdrawal from the agreement, lending by European banks to polluting firms in the US decreased even further. The findings suggest that the announcement of green policy initiatives can have a significant impact combating climate change via the banking sector.
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How Monetary Expansion Creates Income and Wealth Inequality – Jonathan Newman
17 mei
“Every change in the money relation alters … the conditions of the individual members of society. Some become richer, some poorer.” – Mises, Human Action, p. 414.
New money enters the economy at a particular point. It does not enter in the form of a proportional and simultaneous increase in everybody’s incomes. This means that there are uneven effects of monetary expansion, including exacerbated income and wealth inequality. When we trace the consequences of monetary expansion, we notice that it creates winners and losers as resources are shifted toward the first receivers and spenders of new money.
This idea is an old one. It goes back to Richard Cantillon, who in the mid-eighteenth century outlined the step-by-step process that new money works its way into an economy, causing some prices and incomes to rise before others. Rothbard summarized these “Cantillon effects” in his history of economic thought text:
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How to improve tax compliance: Evidence from population-wide experiments in Belgium – Jan-Emmanuel De Neve, Clément Imbert, Johannes Spinnewijn, Teodora Tsankova, Maarten Luts
20 mei
Tax compliance lies at the heart of well-functioning societies, but the US and Europe spend vast sums annually to enforce it. This column discusses the results of population-wide experiments run in collaboration with the Belgium tax authority beginning in 2014. It finds that simplifying communication from tax administrators can improve tax compliance, nudge taxpayers to pay on time, and make late filers comply more swiftly. Communication – an inherent part of any tax administration – merits more attention from the policy community.
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Monetary and Fiscal “Stimulus” Is Undermining the Global Recovery – Mihai Macovei
22 mei
Expansionary monetary and fiscal policies have gone into overdrive all over the world since the beginning of the pandemic. This raises the obvious question of how long they can last before another crash follows. In its latest World Economic Outlook, from April 2021, the International Monetary Fund (IMF) is also concerned about rising macroeconomic vulnerabilities, noting that both governments and corporations are emerging from the pandemic overindebted, while financial vulnerabilities have surged. Nevertheless, the IMF’s policy recommendation remains almost unchanged: growth stimulus is indispensable and should continue to support an “inclusive recovery.” Government support should just be better targeted in order to reduce financial and macroeconomic risks. This article shows why the IMF’s recipe will not work.
Growth at Any Cost
The IMF claims that without the “unprecedented” policy support deployed during the pandemic, the contraction of the global economy by 3.3 percent last year would have been three times worse. Moreover, the government stimulus has allegedly prevented another systemic financial crisis. With an effective stimulus in place, the IMF is optimistic that the global economy will recover strongly, by 6 percent in 2021 and by 4.4 percent in 2022, and continue growing by about 3.3 percent over the medium term.
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