Economische aanraders: Veren of Lood biedt u op zondag wekelijks een inkijkje in (minstens) 10 belangrijke of informatieve artikelen en interviews die 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.

Sinds december 2015 nemen we 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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Credit growth in China is causing jitters –
20 juli
“COASTER through the Clouds” in Nanchang, a city in the southern province of Jiangxi, is China’s tallest and fastest rollercoaster (see picture). It carries terrified customers up to heights of 78 metres and down again at speeds reaching 130kph. The ride towers above an amusement park built by Dalian Wanda, a Chinese property-and-entertainment conglomerate, which has aspired to outdo Disney’s resort in Shanghai.
But this month the group said it was selling 13 such projects and 77 hotels to rival developers. It would use the proceeds, its owner said, to repay loans. Last month China’s regulator asked banks to provide more details about their overseas loans to Wanda. Standard & Poor’s said it would reassess the group’s credit rating, noting that the abrupt sale of assets had raised questions about Wanda’s strategy and finances.
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Bank of America Pulls Ripcord on Chinese Conglomerate HNA. – Wolf Richter
20 juli
Bank of America suddenly pulled back from doing business with HNA Group, a privately held Chinese conglomerate that has been on the forefront of highly leveraged, opaque Chinese conglomerates out on a mind-boggling debt-funded acquisition binge around the world.
“We simply don’t know what we don’t know, and are not prepared to take the risk,” Bank of America president for Asia Pacific, Matthew Koder, wrote in an internal email, dated June 28 that was leaked to The New York Times. “Given the importance of maintaining rigorous client selection standards, we have decided not to be involved with transactions with the HNA Group at this point in time.”
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Thornton on interest rate humility – John H. Cochrane
19 juli
Dan Thornton has an interesting essay, “The Limits of Monetary Policy: Why Interest Rates Don’t Matter.’’
Just why do we think that the Fed raising and lowering interest rates has a strong effect on output (or inflation)? Just why does the Fed control short-term interest rates rather than the money supply, or something else?
Dan’s essay is a nice quick tour through the history of this question. No, there is not as much logic and evidence behind this hallowed belief as you might think, and yes, people did not always take the power of interest rates for granted as they seem to do now. Dan’s historical tour is worth keeping in mind.
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Here’s the True Definition of a Recession — It’s Not About GDP – Frank Shostak
19 juli
According to the National Bureau of Economic Research (NBER), the institution that dates the peaks and troughs of the business cycles,
A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough.
In the view of the NBER dating committee, because a recession influences the economy broadly and is not confined to one sector, it makes sense to pay attention to a single best measure of aggregate economic activity, which is real GDP. The NBER dating committee views real GDP as the single best measure of aggregate economic activity.
We suspect that on the back of the NBER’s much more general definition, the financial press as a shortcut introduced the popular definition of a recession as two consecutive quarters of a decline in real GDP. Also, by following the two-quarters-decline-in-real-GDP rule, economists don’t need to wait for the final verdict of the NBER, which often can take many months after the recession has occurred.
Regardless of whether one adopts the broader definition of the NBER or the abbreviated version, these definitions are actually failing to do the job.
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The ECB Morphs into the Mother of All “Bad Banks” – Don Quijones
20 juli
As part of its QE operations, the ECB continues to pour billions of freshly created euros each month into corporate bonds – and sometimes when it buys bonds via “private placements” directly into some of Europe’s biggest corporations and the European subsidiaries of non-European transnationals. Its total corporate bond purchases recently passed the €100 billion threshold. And it’s growing at a rate of roughly €7 billion a month. And it’s in the process of becoming the biggest “bad bank.”
When the ECB first embarked on its corporate bond-buying scheme in March 2016, it stated that it would buy only investment-grade rated debt. But shortly after that, concerns were raised about what might happen if a name it owned was downgraded to below investment grade. A few months later a representative of the bank put such fears to rest by announcing that it “is not required to sell its holdings in the event of a downgrade” to junk, raising the prospect of it holding so-called “fallen angels.”
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Credit misallocation during the European financial crisis – Fabiano Schivardi, Enrico Sette, Guido Tabellini
18 juli
There is a widespread perception that under-capitalised banks can prolong crises by misallocating credit to weaker firms and restraining credit to healthy borrowers. This column explores the extent and consequences of credit misallocation in Italy during and after the Eurozone Crisis. Bank undercapitalisation may have been costly in terms of misallocation of capital and productive efficiency in the medium term due to the higher exit of healthy firms, but it had at best a limited role in aggravating the recession induced by the Eurozone Crisis.
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The Death Spiral of Financialization – Charles Hugh Smith
20 juli
Each new policy destroys another level of prudent fiscal/financial discipline.
The primary driver of our economy–financialization–is in a death spiral. Financialization substitutes expansion of interest, leverage and speculation for real-world expansion of goods, services and wages.
Financial “wealth” created by leveraging more debt on a base of real-world collateral that doesn’t actually produce more goods and services flows to the top of the wealth-power pyramid, driving the soaring wealth-income inequality we see everywhere in the global economy.
As this phantom wealth pours into assets such as stocks, bonds and real estate, it has pushed the value of these assets into the stratosphere, out of reach of the bottom 95% whose incomes have stagnated for the past 16 years.
The core problem with financialization is that it requires ever more extreme policies to keep it going. These policies are mutually reinforcing, meaning that the total impact becomes geometric rather than linear. Put another way, the fragility and instability generated by each new policy extreme reinforces the negative consequences of previous policies.
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***The effects of decentralisation and competition on hospital management and performance in France – Laurent Gobillon, Carine Milcent
21 juli
It is widely believed that the goal of keeping health expenditures under control while increasing the quality of the healthcare system can best be achieved by giving a greater role to market forces. This column evaluates the effect of a pro-competition reform implemented in France over 2004-2008 on hospital quality. It finds that the impact on quality depends on the managerial autonomy of hospitals. And due to the French healthcare market structure, the overall effect of the reform has been limited.
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Can Japan End its Easy-Money Addiction? – Brendan Brown
16 juli
The shock landslide defeat of PM Shinzo Abe’s Liberal Democratic Party (LDP) in the recent Tokyo metropolitan elections — and the triumph there of Tokyo Governor Koike’s new party (Tomin First) — has lit a faint hope that the radical Japanese monetary expansion policy could be on its way out. The flickering light though is not strong enough to soothe the mania in Japan’s carry trades and so the yen continued to slide in the aftermath of the elections. Between mid-June and early July the Japanese currency depreciated by some 5% against the US dollar and 10% against the euro.
The perception in currency markets is that Japan will not be embarking on monetary normalization this year or next, in contrast to Europe where ECB Chief Draghi has hinted that the train (to monetary normalization) will start next year, even though the journey promises to be very slow. The US train to normalization continues at a glacially slow pace including some periods of reverse movement. Moreover the monetary climate prior to the journey commencing is even more extreme in the case of Japan than in Europe or the US.
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What next for US-Europe trade policy? – Nikhil Datta, Swati Dhingra
16 juli
The economies of Europe and the United States are inextricably linked and in an ideal world, a number of factors motivate a trade deal such as the Transatlantic Trade and Investment Partnership. This column, taken from a recent VoxEU eBook, argues, however, that given the Brexit referendum in the UK and the election of Donald Trump as US president, as well as a number of other pre-existing complications, achieving such agreements will be highly contentious.
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***David Rosenberg: “This Is The Single Most Important Thing For The Market Over The Next Decade” – Tyler Durden
22 juli
Several years ago, Gluskin Sheff’s superstar economist (previously at Merrill), David Rosenberg (in)famously flipped from bear to bull, predicting what amounts to a victory for the Fed: a jump in (wage) inflation, a burst in economic growth, and an overall selloff in that most deflation-dependent asset, the US Treasury. None of those happened, and while we (gently) mocked Rosie’s transformation at the time, recently Rosenberg himself admitted that our skepticism was accurate, when he reverted to his bearish bias over the past year, predicting that deflation would end up winning after all.
Today, in his latest market musings chartpack, we present the key reasons why Rosenberg has never been more convinced that all those calling for an end to the secular bond bull market, are wrong and why despite the Fed’s best intentions to create the impression that the global economy is stabilizing, what is about to be unleashed on the global economy is at least 5 years of accelerating deflationary pressures.
As the main catalysts for his gloomy outlook, Rosenberg lists the obvious ones, debt and deflation, but by far the most important factor that prompted Rosenberg to revert to the “dark side”, the one about which Rosie says “nothing is more important than this if you are looking at what will fundamentally influence the financial markets for the next decade-plus”… is demographics.
“The first of the boomers turned 70 this past year, that 80 million proverbial pig-in-the-python in North America, and 1.5 million will be doing so each year for the next fifteen years.”
That fact, Rosenberg believes, will be the single most important driver of returns over the next decade.
Below, he explains why those seeking to understand market moves and inflationary forces over the coming ten years, should first and foremost focus on demographics. Everything else will follow.
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***What’ll Happen to US Commercial Real Estate as Chinese Money Dries Up? – Wolf Richter
17 juli
In the second quarter in Manhattan, Chinese entities accounted for half of the commercial real estate purchases with prices over $10 million. By comparison, in 2011 through 2014, total cross-border purchases from all over the world (not just from China) were in the mid-20% range.
“At a time when domestic investors have pulled back, foreign parties have ramped up their holdings in Manhattan,” according to Avison Young’s Second Quarter Manhattan Market Report.
This includes the $2.2 billion purchase in May of 245 Park Avenue by the Chinese conglomerate HNA Group, the sixth largest transaction ever in Manhattan. And at $1,282 per square foot, it was “among the highest price per pound for this type of asset.”
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***How OPEC Became Irrelevant – Olav Dirkmaat
17 juli
The large traditional oil-producing countries — both OPEC and non-OPEC — are still catching up with the new reality. After deciding to extend the production cuts — agreed upon half a year ago — for another nine months, oil prices plunged below $50/barrel. Not quite the effect these oil giants were hoping for, but nothing out of the ordinary. After all, the fact is that supply and demand dynamics in the oil market have changed for good, something you can read in more detail in UFM Market Trends’ latest report on crude oil.
What happened after the first production cut that began in January this year?
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Capital accumulation, private property, and inequality in China, 1978-2015 – Thomas Piketty, Li Yang, Gabriel Zucman
20 juli
Between 1978 and 2015, China moved being from a poor, underdeveloped country to the world’s leading emerging economy. But relatively little is known about how the distribution of income and wealth within the country changed over this period. This column presents the first systematic estimates of the level and structure of China’s national wealth since the beginning of the market reform process. The national wealth-income ratio increased from 350% in 1978 to 700% in 2015, driven mainly by the increase of private wealth.
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Disclaimer: De VoL-redactie selecteert deze artikelen op interessante inzichten, of naar wij denken nuttige informatie. Wij kunnen echter geen enkele aansprakelijkheid aanvaarden voor de gevolgen van beslissingen die op grond hiervan door lezers zijn genomen, zakelijk zomin als privé.