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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Central Bank Machinations with No Exit: ECB Leaks New Thingy, It’s Doing Yield Spread Control – Wolf Richter
19 januari
This is not your grandmother’s “yield curve control.” There is only one thing that could force this ECB absurdity to end: a big bout of inflation.
The ECB, which is already infamous for imposing negative interest rates, has been doing something new, something no other central bank has done before or even needed to do before. Sources familiar with the matter told Bloomberg that the ECB is controlling the yield spread between the government bonds of the 19 euro states, for example the spread between German and Italian government bond yields. According to one of these sources, the ECB has specific ideas about what yield spreads are appropriate. And to heck with any kind of market.
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Time Preference, Interest Rates, and Stagflation – Frank Shostak
20 januari
A common conception is that the central bank is a key factor in the determination of interest rates. In this way of thinking, the key role of the central bank is to make sure that the so-called economy is placed on a trajectory of stable economic growth and stable inflation. If for whatever reason the economy appears to deviate from the specified trajectory, then it is the responsibility of central bank policy to ensure the economy remains on this path. This is attained, so it is held, by means of influencing the short-term interest rate, in the US the federal funds rate.
The central bank influences the short-term interest rates by influencing monetary liquidity in the markets. While asset buying by the US Fed raises the money supply, its selling of assets produces the opposite effect. Thus, by buying assets the Fed adds to the monetary liquidity, thereby lowering rates, while by selling assets the exact opposite is taking place.
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Minimum wages. People are not all the same – John H. Cochrane
20 januari
The ancient argument over the minimum wage (WSJ) is heating up, another of economics’ many perennial answers in search of a question.
Does the job allow flexible hours? Does it provide other benefits — transportation, employee parking, uniforms? How hard do you have to work? Which workers get the jobs, not how many get jobs overall?
A near universal fallacy is to treat people in any group as identical, to have one stereotype in mind and apply that to the entire category. Minimum wages advocates often paint a picture of the sole breadwinner of a family valiantly struggling to provide on the low wages. Doesn’t she deserve more? Well yes, we all deserve more, but that emotional appeal does not make the minimum wage a good idea.
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Policy responses to the corporate solvency problem in the ongoing Covid-19 crisis – Andrew Bailey, Douglas J. Elliott, Victoria Ivashina
21 januari
As the Covid-19 crisis continues, policymakers need to address a growing corporate solvency problem and the wider economic harm it could create. The true scale and broader implications of this issue are likely to be substantial. This column recommends three devices to support policymakers in addressing this solvency challenge: a set of guiding principles, a kit of policy tools, and a decision-making framework. These will help policymakers in taking the hard decisions necessary to prepare their business sectors for future growth and resilience.
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***Eurostar Near Collapse, Asks for Bailout, Becomes Hot Potato – Nick Corbishley
23 januari
Traffic down 95%. To run out of money by April.
Eurostar, the company that operates the cross-Channel train service that connects the UK with France, Belgium and the Netherlands, is on the brink of collapse, the company’s management warned this week. With passenger numbers down 95% in the final quarter of 2020 and revenues down over 80% over the course of 2020, it is now “on a drip” and in desperate need of extra cash, says Christophe Fanichet, a senior executive of France’s state SNCF railways, which is the majority shareholder of Eurostar. “I’m very worried about Eurostar. The company is in a critical state, I’d even say very critical,” he said.
In 2019, Eurostar shuttled 11 million passengers — including many businessmen and women — from London St Pancras to Paris, Brussels, and Amsterdam. While generally more expensive than budget air fares, it is quicker, more comfortable, and drops off passengers in the center of their chosen city of destination.
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Portfolios for long-term investors – John H. Cochrane
20 januari
How should long-term investors form portfolios in our time-varying, multifactor and friction-filled world? Two conceptual frameworks may help: looking directly at the stream of payments that a portfolio and payout policy can produce, and including a general equilibrium view of the markets’ economic purpose, and the nature of investors’ differences. These perspectives can rationalize some of investors’ behaviors, suggest substantial revisions to standard portfolio theory, and help us to apply portfolio theory in a way that is practically useful for investors.
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US Economy Set To Overheat As Households Are Flooded With $2 Trillion In Excess Savings – Tyler Durden
23 januari
Something unprecedented happened in the immediate aftermath of the passage of the $2.2 trillion CARES act: as a result of the unprecedented transfer of wealth from the government to consumers in the form of countless stimulus measures, personal incomes soared and personal spending plunged (as the economy was largely shut down especially for spending on services), resulting in what we showed in May was an explosion in the annualized amount of Personal Savings, which soared by a mindblowing $4 trillion in May, rising from $2.1 trillion to $6.1 trillion…
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Unintended Consequences: Some Problems with National Income Accounting – David Howden
20 JANUARI|
It is trivial to say that any cardinal number can be added to another to answer the question of “how many” or “how much” of something there is. The trick lies in teasing some relevance out of the resultant sum. The relevant tradeoff in constructing any aggregate is between the advantage of reduced complexity of a unique figure summarizing data and the disadvantage of the information lost from any individual figure within the set.
This realization was what Friedrich Hayek had in mind as he reviewed John Maynard Keynes’s 1930 Treatise on Money. Disappointed with the turn that he saw economics taking, Hayek lamented that “Mr. Keynes’ aggregates conceal the most fundamental mechanisms of change” (1931: 277).
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A Few Notes on Deflation/Inflation – Charles Hugh Smith
18 januari
The consensus is that asset inflation is unstoppable and forever. History begs to differ.
Not unsurprisingly, people want a binary option: do we get deflation or inflation? Unfortunately, reality is messy.
Broadly speaking, globalization is deflationary as capital seeks the lowest cost labor, parts and materials, the least stringent environmental standards and the most corrupt governance to maximize profits by any means available (in this case, exploitation and corruption).
Wages lose purchasing power as every labor force competes with the cheapest available pool of global labor, and domestic companies must lower prices or face obliteration by the global corporations.
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Inflation Is Spreading Broadly into the Economy. Amid Surging Costs, Companies Raise Prices, and Customers Pay them, Despite Weak Economy, 10 Million Missing Jobs – Wolf Richter
22 januari
“Not only have the last two months seen supply shortages develop at a pace not previously seen in the survey’s history, but prices have also risen due to the imbalance of supply and demand.”
The signs of inflation building up in the economy are now everywhere. IHS Markit, in its release of the Flash PMI with data from companies in the services and manufacturing sectors, added to that pile of evidence.
For companies, inflation happens on two sides: what they are having to pay their suppliers, and what they can get away with charging their own customers, which may be consumers, governments, or other companies.
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Bond returns in sovereign debt crises: The investors’ perspective – Jochen Andritzky, Julian Schumacher
18 januari
For countries experiencing a debt crisis, the restructuring of government bonds is a possible resolution tool. For investors, however, the literature highlights the short-term losses of such operations. This column provides evidence on investment returns over the longer run and finds that bond returns over the longer run – capturing both pre- and post-crisis times – do not differ significantly between crises with and without debt restructuring. What matters more is bondholders’ investment strategy during crises episodes. Conditional on a debt crisis, debt restructuring can even be financially rewarding for creditors investing in distressed bonds.
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The Dangerously Diminishing Returns on Monetary and Fiscal Stimulus – Charles Hugh Smith
20 januari
Allow me to translate the risible claims of Jay Powell and Janet Yellen that their stimulus policies haven’t boosted wealth inequality to the moon: “Let them eat cake.”
The euphoria of ever greater monetary and fiscal stimulus overlooks the diminishing returns and higher risks generated by near-exponential increases in stimulus. I prepared a chart that graphically displays the extraordinary increases in stimulus and the declining results in the primary goals of economic policy: broad-based opportunity to get ahead and reducing systemically destabilizing wealth inequality.
Looking back on this era, the fatal irony that all this stimulus has rocket-boosted wealth and income inequality while gutting the bottom 90% will be glaringly obvious. It’s actually glaringly obvious right now to those not blinded by euphoria. Consider this excerpt from the current issue of Foreign Affairs magazine, an article entitled Monopoly Versus Democracy (paywalled):
Like their forebears in the early twentieth century, today’s Americans have experienced decades of growing inequality and increasing concentrations of wealth and power. The last decade alone witnessed nearly 500,000 corporate mergers worldwide. Ten percent of Americans now control 97 percent of all capital income in the country. Nearly half of the new income generated since the global financial crisis of 2008 has gone to the wealthiest one percent of U.S. citizens. The richest three Americans collectively have more wealth than the poorest 160 million Americans.
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COVID-19 outbreak: Assessment of risks and policy responses – Lilas Demmou, Sara Calligaris, Guido Franco, Dennis Dlugosch, Müge Adalet McGowan, Sahra Sakha
22 januari
Many countries have now entered a second wave of the Covid crisis, forcing firms to deplete even further their cash and equity buffers and to raise new financing. This column investigates the likelihood of firms’ insolvency and the potential implications of debt overhang following the outbreak. It foresees that around 7-9% of otherwise viable companies would become distressed, accompanied by an increase in firms’ leverage ratio of about 6.7 to 8 percentage points. In turn, the latter would decrease investments of the median firm by approximately 2 percentage points. The column also outlines some policy options to flatten the curve of crisis-related insolvencies through recapitalisation and to establish efficient insolvency procedures.
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Keynesians Going All-In – Alasdair Macleod
21 januari
Mainstream economists are celebrating Joe Biden’s election as US President. For Keynesians, the outlook is for a reaffirmation of economic management by the state, and of reflationary monetary policies to restore economic growth, following the damage caused by covid lockdowns.
This article points out the fallacies in the Keynesian argument. It shows how key economic statistics have been manipulated and misrepresented to conceal the delusions behind state interventions. And based on inflationary programmes only announced so far, we can expect the US budget deficit in fiscal 2021 to rise to over $5 trillion. Furthermore, the twin deficit hypothesis suggests that when the temporary increase in the savings ratio unwinds, the US trade deficit will also increase accordingly.
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Americans Are Suffering Through The Most Painful Economic Crisis Since The Great Depression – Michael Snyder
21 januari
I warned that an economic collapse was coming, and an economic collapse is exactly what we got. 2020 was a “personal financial disaster” for 55 percent of all Americans, approximately 12 million U.S. renters are “at least $5,850 behind in rent and utilities payments”, the Aspen Institute is projecting that up to 40 million people could be facing eviction when the rent and mortgage moratoriums finally end, and more than 70 million new claims for unemployment benefits have been filed since the COVID pandemic began.
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