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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18 Trillion (And 9) Reasons To Fear The Global Recession – Tyler Durden
22 december
The last three months have been a shock to many global investors as equity markets refused to obey the BTFD mantra that has made gurus out of idiots for a decade. Quite a slew of massive point plunges (and no Plunge Protection Team)…
Leaving December (for now), the worst end to the year for stocks since The Great Depression…
“You feel like you leave here you’ve been in a boxing match all day,” said Bradshaw, a portfolio manager at Hodges Capital Management.
“We’re kind of dumbfounded by the huge sell-off in the market versus what we’re hearing from companies…”
And while Friday was a ‘quad witch’, which tends to see trading activity elevated, NYSE volumes exploded to their highest since Brexit as US equity markets collapsed – failing to respond to Fed’s Williams’ efforts to talk it up…
As US markets catch down to the rest of the world…
But, it’s not just US stocks that are suffering. World Stock Market Capitalization has collapsed by $18,281,024,000,000 (just over 18 trillion dollars) since the peak in January.
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The Problem with “Velocity of Money” – Frank Shostak
17 december
Some commentators are of the view that when the velocity of money rises, all other thing being equal, the buying power of money declines, (i.e., the prices of goods and services rise). The opposite occurs when velocity declines.
If, for example, it was found that the quantity of money had increased by 10% in a given year, while the price level as measured by the consumer price index has remained unchanged it would mean that there must have been a slowing down of about 10% in the velocity of circulation.
If the quantity of money had remained unchanged, but there has been a 10% increase in the price level in a given period, it would mean that there must have been an increase in the velocity of circulation of money of 10% in that period. It would appear therefore that velocity is an important determinant of the purchasing power of money.
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***How the future of work may unfold: A corporate demand-side perspective – Jacques Bughin
23 december
Advances in artificial intelligence have led to fears of job losses. This column uses a global survey covering more than 3,000 executives across 14 sectors and ten countries to examine the impact of AI on the demand side of the labour market. Ultimately, the effect on employment will depend on whether companies choose to use current forms of AI for innovation or pure automation, and whether they foresee a return from it.
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$1.3 Trillion “Leveraged Loan” Boom Comes Unglued – Wolf Richter
21 december
The Fed has warned about them, and investors fear a run-on-the-fund.
The $1.3 trillion “leveraged loan” boom is coming unglued: Not because the junk-rated, highly leveraged, cash-flow-negative companies that issued these loans are massively defaulting – they’re not yet – but because investors are fleeing these instruments that had been super-hot for years, until October. They’re fleeing from loan mutual funds that hold these loans because they want to grab the “first-mover advantage” in an illiquid market; they want to be the first out the door before they get caught in a run-on-the-fund – with potentially catastrophic consequences for their cherished money.
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The Monetary Base Never Returned to “Normal” After the Great Recession – Patrick Barron
21 december
There are three money supply statistics that every citizen should understand. They are the monetary base, M1, and M2.
The Monetary Base. Sometimes called “standard money” or “high powered money”, the monetary base is that monetary unit beyond which there is no further claim. It is composed of two parts: (1) cash, whether located in bank vaults or outside bank vaults (this is important later) and (2) bank reserve balances held at the Federal Reserve Bank. Bank reserves held at the Fed may be exchanged for cash upon demand; in other words, bank reserve balances are a mere convenience for banks to relieve them of the burden of holding masses of cash in their vaults and shipping it to other banks to settle normal bank clearings. The following link will lead to the Federal Reserve Bank’s site of the monetary base:
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Where are the Chinese economists? The surprising disparity between the economy and economists – Bruno S. Frey
20 december
China’s GNP is close to, or larger than, that of the US and the per-capita income gap between the countries is closing. Despite this, Chinese economists are absent from the rankings of top academic economists and none has received the Nobel Prize in Economics. This column offers several potential reasons for this, and also argues that the situation is likely to change in the future. Young scholars in particular may be well advised to take this into account, as their careers are likely to benefit if they link up to the Chinese academic market.
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*** Retail Melts Down Before Christmas in the UK, Spreads to Continent – Don Quijones
18 december
After “the worst-on-record unbelievably bad” November, even e-commerce gets hit, not just brick & mortar, on fears Christmas sales could be terrible.
With just one week left before Christmas, Europe’s fashion retail sector is showing little sign of yuletide cheer. On Monday, the shares of UK-based online fashion and cosmetics retailer Asos Plc plunged 37% to £26.14 after the company warned that Christmas shopping on its web platform had got off to a disastrous start. The stock rout, the company’s worst in almost five years, wiped more than £1.4 billion of its value and raises fears that Europe’s high street malaise may be spreading from bricks-and-mortar stores to e-commerce. Since its peak in January 2018, shares the stock has plummeted 65%.
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***“Yellow Vests” and the Downward Mobility of the Middle Class – Charles Hugh Smith
16 december
Capital garners the gains, and labor’s share continues eroding. That’s the story of the 21st century.
The middle class, virtually by definition, is not prepared for downward mobility. A systemic, semi-permanent decline in the standard of living isn’t part of the implicit social contract that’s been internalized by the middle class virtually everywhere: living standards are only supposed to rise. Any decline is temporary.
Downward mobility is the key context in the gilets jaunes “yellow vest” movement in France. Taxes and prices rise inexorably while wages/pensions stagnate. The only possible outcome of this structural asymmetry is a decline in the standard of living.
This structural decline in the standard of living of the middle class is complex. One of the definitive identifying characteristics of the middle class is that is supposed to be largely immune to the insecurity and precariousness that characterize much of the working class.
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Partisan professionals: Evidence from credit rating analysts – Elisabeth Kempf, Margarita Tsoutsoura
21 december
Partisanship in the US is on the rise. With growing disagreement across voters of different political parties on key issues, understanding the potential implications of this trend for the US economy is of first-order importance. This column examines the degree to which partisan ideology affects the decisions of financial analysts. Using a novel dataset that links credit rating analysts to party affiliations from voter registration records, it shows that analysts who are not affiliated with the US president’s party are more likely to downward-adjust corporate credit ratings.
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Nothing Goes to Hell in a Straight Line, Not Even Stocks – Wolf Richter
22 december
But a whole generation of investors has never been through a Nasdaq-bubble unwind, and they’re shocked.
I just dug out my “Dow 20,000” hat, but I might not need it for a while because nothing goes to hell in a straight line. And I still have my “Dow 10,000” hat somewhere just in case, though I doubt I’ll need to go look for it anytime soon for the reasons I’ll explain in a moment.
I have to admit, this was a beauty of a Santa rally. We were promised a Santa rally by the buy-buy-buy hype organs on Wall Street, so here we go with our Santa rally:
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The ECB Creates Jobs for Central Bankers Instead of Safeguarding Financial Stability – Karl-Friedrich IsraelGunther Schnabl
18 december
The ECB’s zero and negative interest rate policy continues despite the economic upswing. An interest rate hike is not expected before autumn 2019. The extensive purchases of government and corporate bonds will have reached €2,600 billion by the end of the year. The ECB’s financial market supervision as part of the Single Supervisory Mechanism (SSM), which was created in 2014 in response to the crisis, is proliferating. Most recently, ECB vice president Luis de Guindos has expressed the intention to monitor the investment fund sector.
Between 1999 and 2017, the ECB’s total annual expenditure rose from €132 million to €1,086 million. Since 2012, it expanded at an average annual rate of 12.4%. The cost of the ECB’s luxurious new building, amounting to €1.3 billion, is not included in these figures. As a share of the gross domestic product of the eurozone, the total operating expenses of the ECB have grown by 9.2% per year on average over the entire time span (Israel 2018).
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An Entire Generation Of Investment Professionals Has No Idea What’s Coming – Keith Decker
22 december
Asymmetrical Risk-Return Relationships
Want to know why the house always wins in Vegas? It’s because the odds, or probable outcomes are always in favour of the house, or put another way – the gambler always has the deck stacked against him. This concept is called the asymmetrical risk-return relationship, and it also exists in the investment world.
The average investor is told that stocks always go up over the long-run.
Although the long-run is rarely defined, and it’s never the same for every person or every market; this expression is effectively trying to describe an asymmetrical risk return relationship. This relationship is one where the expected positive returns from the stock market significantly exceed the expected negative returns from the stock market.
The same is also true for the bond market.
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***The decline of African-American and Hispanic wealth since the Great Recession – Edward Wolff
23 december
Unlike income inequality, wealth inequality along racial lines in the US has received relatively little attention. This column presents new evidence on the changing landscape of relative wealth among whites, blacks, and Hispanics between 1983 and 2016. Using an augmented measure of wealth, it highlights how cuts to social security will disproportionately affect minorities.
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Deutsche Bank Death Spiral Hits Historic Low. European Banks Follow – Wolf Richter
20 december
Bottom fishers were taken out the back and shot.
It just doesn’t let up with Deutsche Bank — or with European banks in general. A new day, a new scandal, a new historic low in the share price that has been in a death-spiral for over 10 years. Deutsche Bank shares plunged 7% today in Frankfurt, to a new historic low of €7.00, after briefly threatening to close at an ignominious €6.99. Its market cap is now down to just €14 billion. The stock has plunged 56% so far this year:
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*** The Soviet economic collapse: New evidence on the potentially harmful effects of state breakup – Marvin Suesse
17 december
While much has been written on why states disintegrate, we know little about the consequences of state breakup. Using data from the breakup of the Soviet Union, this column studies the short-run economic costs of its collapse. It demonstrates how political disintegration can lead to the dissolution of trade links, and to a correspondingly large fall in output. In the Soviet case, this mechanism helps to explain the disappointing performance of its successor states in the 1990s. The uncertainty surrounding secessions is an important driver of the fall in present output.
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“Equality of Opportunity” Is Overrated – Ryan Griggs
22 december
It’s become quite fashionable for members of the so-called Intellectual Dark Web (IDW) like Dave Rubin, Ben Shapiro, and Jordan Peterson to decry equality of outcome as a thinly veiled guise for tyranny and oppression. However, in pleading against the doctrine of equality of outcome, these digital intellectuals inevitably defend the insidious doctrine of equality of opportunity.
What?! How could you be against equality of opportunity! Isn’t America the land of the free?! Isn’t equality of opportunity the literal meaning of freedom?
No.
In fact, to stand for equality of opportunity is to stand against what economist Ludwig von Mises called “the fundamental social phenomenon:” the division of labor.
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