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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Why “Price Stability” Policies Fail – Frank Shostak
17 augustus
One of the duties that a central bank is expected to fulfill is to keep the general level of prices in the economy stable. The whole idea of price stability originates from the view that volatile changes in the price level prevent individuals from clearly seeing market signals as conveyed by the changes in the relative prices of goods and services.
For instance, as a result of an increase in the demand for apples relative to potatoes, the prices of apples increases relative to the prices of potatoes. This relative price increase pushes businesses to lift the production of apples versus potatoes.
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“It’s Just Absolutely Incredible”: What’s Going On In The Corporate Bond Market Is Stunning – Tyler Durden
22 augustus
In a recent report from hedge fund giant Brevan Howard, the investor pointed out the biggest flaw in the policy response to the covid pandemic: “Many businesses face solvency risks that are not addressed by borrowing; a debt overhang cannot be cured by more borrowing no matter how cheap it may be.”
While that statement is absolutely true, and it applies not only to the aftermath of the covid shutdowns but everything that has happened in the past decade, it hasn’t stopped both government and corporations from going on a historic borrowing spree, in the former case thanks to “helicopter money” whereby central banks now directly monetize all the debt government treasurys have to sell, and in the latter as company CFOs take advantage of record low rates to borrow as much as possible before the window closes. This can be seen in the Goldman chart below which shows that both investment grade and high yield leverage is at all time high levels:
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The Global Jobless Recovery – Daniel Lacalle
9 augustus
The United States added 1.76 million Jobs in July 2020, compared to a consensus estimate of 1.48 million. Unemployment fell to 10.2 percent versus the 10.6 percent expected. It is true that the rate of job creation is slowing down and labor force participation rate remains at 61.4 percent, but we need to compare the figures with those of the rest of the world, where we are witnessing a worrying “jobless recovery.”
Headline official unemployment rates are misleading due to different subsidies and furloughed jobs. If we use comparable figures, the United States’s inactive share of the labor force is significantly smaller than the same figure in the eurozone. In the eurozone, those who are unemployed, in subsidized jobless schemes, and furloughed account for more than 23 percent of the labor force, according to Morgan Stanley. This compares with the United States’s 16.5 percent sum of unemployed plus not at work plus excess dropouts. It is a particularly important difference that shows that the United States is outperforming in the recovery. It also shows something that many commentators ignore: massive entitlements and government spending plans have not helped the eurozone improve its job market in the recovery.
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A Poor Understanding of Monetary Theory Leads to Disastrous Government Policies – Patrick Barron
22 augustus
Austrian school economists know that unsound money has been at the heart of disastrous government policies since time immemorial. The greater the ignorance of money, the greater the monetary debasement in order to fund government’s latest folly.
Monetary debasement always ends badly, but end it will. Robert L. Shuettinger and Eamon Butler, cofounder and director of the Adam Smith Institute, wrote Forty Centuries of Wage and Price Controls: How Not to Fight Inflation (2009), a very readable short book that covers a vast expanse of time. In The Ethics of Money Production, Jörg Guido Hülsmann outlined all the various schemes used over the millennia by those in government to counterfeit the lifeblood of the economy for their own purposes. But Professor Hulsmann, who wrote the book in 2010, probably could not have predicted the scale of today’s money expansion. What is the point of all this?
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Is The Stock Market Now Too Big To Fail? – Sven Henrich
22 augustus
This week the headlines declared the bear market over as the S&P 500 joined the Nasdaq to make new all time highs. A new bull market has begun so the celebratory narratives. It is true these indices have made new all time highs, but the actual market hasn’t. Not even close. These indices have made new all time highs as 6-7 stocks are experiencing the largest and most aggressive market cap expansion in human history distorting everything.
Yet perception is reality and the bullish narratives keep mounting as key tech stocks and their oversized weight are contributing to the main indices relentlessly drifting higher so let me at least provide some perspective as to what’s going on with the larger market.
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Alarm Bells Ring over Refinance Mortgage Boom: Why Refis Are so Risky – Wolf Richter
16 augustus
Mortgage lobby throws hissy-fit over Fannie Mae’s & Freddie Mac’s new 0.5% “Adverse Market Refinance Fee,” which was a “result of risk management and loss forecasting precipitated by COVID-19 related economic and market uncertainty.”
The mortgage industry is in uproar over the surprise announcement by Fannie Mae and Freddie Mac (the GSEs) Wednesday night that they would charge a 0.5% “adverse market refinance fee” on refinance mortgages that they buy – “a result of risk management and loss forecasting precipitated by COVID-19 related economic and market uncertainty,” said Freddie Mac’s statement sent to lenders.
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***Our Systemic Drift to Collapse – Charles Hugh Smith
19 Augustus
Thus do the lazy complacent passengers drift inexorably toward the cataracts of collapse just ahead.
The boat ride down to the waterfall of systemic collapse is not dramatic, it’s lazy drifting: a lazy complacency that doing more of what worked in the past will work again, and an equally lazy disregard for how far the system has drifted from the point when things actually worked.
In my analysis, decoherence refers to the loss of systemic coherence between narratives, values, processes and systems. Simply put, stuff no longer works and it no longer makes sense, but we’ve lost sight of this disconnect because the systemic drift has been so gradual that the memory of a time when things actually worked has been eroded to the point of total loss.
What remains is a limbic tropism to keep doing more of what’s failed spectacularly because it once worked and therefore should work. In other words, our system has lost the ability to adapt to changing circumstances; the only menu of responses to a novel challenge is the same old menu of policies designed 50 or 75 years ago.
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As the Bubble Slowly Pops, the Economic Chain Reaction Is Now in Progress – Max Rangeley
18 augustus
Much has been written about the economic consequences of covid-19, yet, just as in many of the analyses of the Great Depression and the 2008 crisis, the years of accumulating debt preceding the event do not attract the attention they deserve. Covid-19—or to be more precise, the lockdown—has initiated a cascading liquidation of the debt bubble that has been building for a generation. From the early 1980s, each recession has been responded to with iteratively lower interest rates. Following the bursting of the late 1980s credit bubble, Greenspan inaugurated the loosest monetary policy for a generation, creating the dotcom bubble. When this burst in 2000, it was responded to with even lower interest rates, reaching 1 percent from 2003–04, generating the housing bubble. When this burst in 2007/8, the response was 0 percent interest rates, turning a $150 trillion global debt bubble as it was then—already the largest In history—into a $250 trillion global debt bubble.
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How Negative Interest Rates Sap Consumer Spending by an Ever Larger Part of Consumers – Nick Corbishley
19 augustus
Over-65s, a large and growing demographic in Europe, are cutting their spending at worst possible time as NIRP eats into savings, pensions, investments, and annuities.
With the coronavirus crisis upending the global economy, leaving all manner of mayhem in its wake, many of the economic trends that predate the pandemic’s arrival continue apace. Some are accelerating. They include the erosive impact zero and negative interest rates have on savings, investments, annuities, and pensions of European retirees, of which there are an ever larger number, given the aging populations. This has been decimating their spending power, which in turn saps consumer demand, and thereby the broader economy.
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Roberts: March Was A Correction, Bear Market Still Lurks – Lance Roberts
21 augustus
As we have been discussing, this past week, the S&P 500 index set an all-time high. Importantly, the breakout to all-time highs confirms the 35% decline in March was only a correction and not a bear market. The implications are important as the change of definition suggests a bear market still lurks for the full-market cycle to complete.
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How Fear and Uncertainty Drives Demand for Gold – Darren Brady Nelson
19 augustus
Even those in the nonfinancial media have noticed the skyrocketing price of gold this year. Some partially identify, but don’t quite understand, some of the many (and more measurable) intermediary effects in the chain of causation such as a “weakened US dollar” and “low bond yields.” Those in the financial press add to these factors ones like “central bank reserves” management, along with mining production and “jewelry and industrial demand.” One mainstream headline surprisingly hit closest to the mark regarding the few (and less measurable) underlying causes: “Fear and Cheap Money Send Gold Price Soaring.”
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The evolution of US manufacturing – Teresa Fort, Justin Pierce, Peter Schott
18 Augustus
Although it is well documented that US manufacturing employment has been falling since 1979, the causes of this trend are still unclear. This column argues that examining how and where the decline in US manufacturing employment occurs provides important insights in this regard. Using US Census Bureau’s Longitudinal Business Database, it highlights three important trends post 1979 which suggest substantial increases in labour productivity, and an evolution of US manufacturing in line with US comparative advantage.
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‘These’ Are The Real Huge Jobs Numbers, And They Will Make Your Blood Run Cold – Jeffrey Snider
21 augustus
There is simply no way to spin these figures as anything good. Not just the usual ones were talk about here, but more so some new data that you probably haven’t seen before.
Beginning with the regular, it doesn’t matter that the level of initial jobless claims has declined substantially over the past few weeks. The fact of the matter is after 22 weeks of dislocation, at least eleven of them under reopening, these continue to rip along at around 1 million per week.
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Is The Stock Market Now Too Big To Fail? – Sven Henrich
22 augustus
This week the headlines declared the bear market over as the S&P 500 joined the Nasdaq to make new all time highs. A new bull market has begun so the celebratory narratives. It is true these indices have made new all time highs, but the actual market hasn’t. Not even close. These indices have made new all time highs as 6-7 stocks are experiencing the largest and most aggressive market cap expansion in human history distorting everything.
Yet perception is reality and the bullish narratives keep mounting as key tech stocks and their oversized weight are contributing to the main indices relentlessly drifting higher so let me at least provide some perspective as to what’s going on with the larger market.
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***How Slavery Reparations Turned into Just Another Welfare Program – Ryan McMaken
21 augustus
The idea that former slaves and their descendants ought to receive reparations for the wrongs committed against them is not new. Having grasped the fact that slavery is nothing less than kidnapping and theft committed against the enslaved, abolitionists long advocated for some form of redress for freed slaves.
The most famous early attempt to create a reparation program of sorts is likely General Sherman’s Field Order #15. Issued as a wartime measure, Sherman’s order—which never became widespread policy—divided plantations along the Atlantic Coast into forty-acre parcels to be distributed to forty thousand emancipated workers. Sherman’s motivation was likely military expediency rather than an attempt to compensate victims. Nonetheless, the idea that former slaves would receive “forty acres and a mule” became a symbol of an unfulfilled promise to provide compensation for lives of forced servitude. This variety of reparations, of course—as noted by Murray Rothbard—is morally and legally desirable:
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Who Bought the Gigantic $4.5 Trillion in US Government Debt Added in the Past 12 Months? Everyone but China? – Wolf Richter
18 augustus
Someone had to buy the Incredibly Spiking US Gross National Debt. Here’s who.
Remember the ridiculous and quaint charade around the “Debt Ceiling” in Congress and the White House? Me neither. But those were the Good Times. So what we now have is the Pandemic Economy with the Incredibly Spiking US Gross National Debt, which spiked incredibly by $4.45 trillion over the past 12 months, to $26.5 trillion. WHOOSH go the trillions, flying by.
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Big Tech, Monopoly and the Pretense of Capitalism – Charles Hugh Smith
21 Augustus
All those who believe the ‘privatized totalitarianism’ of Big Tech ‘platform plantations’ are ‘capitalism’ have been brainwashed into servitude by Big Tech’s pretense of capitalism.
What do you call an economy of monopolies without competition or any regulatory restraints? An economy of monopolies that control both the buying and selling in the markets they control? Monopolies with the power to commit legalized fraud and the profits to buy political influence? Monopolies whose black box algorithms are all-powerful but completely opaque to public scrutiny?
Call it whatever you want, but it certainly isn’t Capitalism, which requires competition and market transparency to price capital, labor, risk, credit, goods, services, etc.
Black Box Monopoly is the death of Capitalism as it eliminates competition and market transparency.
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***Growth and Income Inequality in Africa – Germinal G. Van
19 augustus
Income inequality is today perceived by many as the root cause of poverty all around the world. Many governments have declared fighting income inequality to be a priority. Of course, too much economic inequality could potentially lead to social upheaval, causing criminality, social resentment, and cultural backwardness. However, none of this shows that economic inequality causes poverty, or that markets cause economic inequality.
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Managing volatile capital flows in emerging and frontier markets – Reinout De Bock, Dimitris Drakopoulos, Rohit Goel, CFA, Lucyna Gornicka, Evan Papageorgiou, Patrick Schneider, Can Sever
19 Augustus
The COVID-19 pandemic caused an unprecedented sharp reversal of portfolio flows in emerging and frontier markets, triggering concerns about financial stability and consequently, strong policy responses. This column uses a novel analytical framework, the capital-flows-at-risk methodology, to show that changes in global financial conditions tend to influence portfolio flows more during surges and reversals than in normal times. Furthermore, stronger domestic fundamentals do not necessarily lead to surges in portfolio flows but help mitigate outflows. Hence, the weaker growth outlook for emerging markets due to COVID-19 will worsen local currency flows, while global financial conditions will affect hard currency flows.
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Why Smarter Computers Won’t Make Socialism More Workable – 0Mark A. DeWeaver
18 augustus
Austrian economists have traditionally argued against central planning on the grounds that much of the economically relevant knowledge in society could never be made available to a single planning authority. But today, with an unprecedented and ever increasing volume and variety of data now potentially accessible to the planner, it seems that an omniscient government may be possible after all. Has the big data revolution rendered the promarket arguments of Ludwig von Mises and Friedrich von Hayek obsolete?
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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.

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