Economische aanraders 25-09-2016
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 begin 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.
***The invisible American – Jim Clifton
I’ve been reading a lot about a “recovering” economy. It was even trumpeted on Page 1 of The New York Times and Financial Times last week.
I don’t think it’s true.
The percentage of Americans who say they are in the middle or upper-middle class has fallen 10 percentage points, from a 61% average between 2000 and 2008 to 51% today.
Ten percent of 250 million adults in the U.S. is 25 million people whose economic lives have crashed.
What the media is missing is that these 25 million people are invisible in the widely reported 4.9% official U.S. unemployment rate.
This is Why the Job Market Stinks, but No One is Talking about it – James Murray
Anyone who pays any attention knows that something unusual is happening to employment. Good full time jobs are disappearing, being replaced by lower paying and part time jobs. Experts and especially politicians have explanations and excuses: Offshoring to lower labor countries, excessive rules and regulations, illegal aliens, lack of education in the workforce…. The list goes on and on.
What I rarely hear: automation. When most people hear “automation,” they think “robots.” Most robots are dedicated and expensive and don’t replace that many people.
Trade effects of customs union on a third country: New EU members’ trade with Australia after 2004 – Richard Pomfret, Patricia Sourdin
Joining a customs union is supposed to reduce trade with third countries. But after 2004, the largest EU accession countries actually increased their trade with Australia, especially their exports. This column argues that new regional value chains made accession country industries more competitive, especially in the auto industry. Trade with Australia has also been facilitated by a drop in the costs of bilateral international trade.
The Post-Brexit Boom is Baffling Elites – George Pickering
Can the Bank of England Really Take Credit for the Post-Brexit Boom?
In the months leading up to June’s Brexit referendum, the British public found themselves bludgeoned by a series of increasingly dire warnings concerning the consequences of a vote to leave the European Union. The campaign of scaremongering, quite self-consciously engaged in by supporters of the EU, ran the gamut from concerns that the UK might be excluded from the Eurovision Song Contest, to warnings by then Prime Minister David Cameron that Brexit could trigger the start of World War Three. Far more commonplace, however, was a seemingly ceaseless procession of warnings that a vote to leave the European Union would cause a recession in the British economy.
The private debt crisis – Richard Vague
Why does the IMF keep badly missing its global growth forecast? And what does that have to do with the 2016 presidential election?
In the years since the 2008 global crisis, when the world’s growth rates tumbled, the IMF has dutifully printed forecast after forecast predicting rebounding growth rates. But in reality, rates have fallen well short of these predictions, as seen in Chart 1.
One of the key and largely overlooked reasons for this disappointing growth is hiding in plain sight: the increasing global burden of private debt—the combination of business debt and household debt. Even though government debt grabs all the headlines, private debt is larger than government debt and has more impact on economic outcomes. In the United States, total nonfinancial private debt is $27 trillion and public debt is $19 trillion. More telling, since 1950, U.S. private debt has almost tripled from 55 percent of GDP to 150 percent of GDP, and most other major economies have shown a similar trend. [See Chart 2.] Since GDP is largely the sum of all the spending, and thus income, of households and businesses in an economy, if aggregate private debt to GDP has tripled, that means that average businesses and households have three times more debt in relation to their income. Both private debt and government debt matter, and both will be discussed here, but of these two, it is private debt that has the larger and more direct impact on economic outcomes, and addressing the issues associated with private debt is the more productive path to economic revival.
Indoctrination: 35 Years of the US Department of Education – Carol A. VanceLoyd S. Pettigrew
Since 1980, during the Carter Administration, America’s K-12 education system has come under increasing control by the dictates of the federal Department of Education (DOE) with failing results, taxing states and filtering the money through Washington to return a portion of it back to the states. In 2002, the Bush Administration approved the No Child Left Behind (NCLB) Act creating punishing amounts of federal paperwork and bureaucracy for local schools, requiring a $1B grant in special funding to help state and local education systems comply. In 2015 Congress enacted new legislation, Every Student Succeeds Act (ESSA), to allegedly overcome the NCLB federal intervention. The Heritage Foundation’s Lindsey Burke says, “ESSA does not accomplish these critical policy priorities” to reduce the interference and excessive hours of standardized testing time. The 2016 DOE budget is $70.7B excluding a Presidential request for an additional $75B mandatory funding over ten years for Pre-K education.
Time to “Be Alarmed” about Emerging Market Debt: UN – Don Quijones
It seems like only yesterday that a cacophony of voices — our own included — was warning about the dire threat posed to global economic stability by unraveling hard currency-denominated emerging market debt. Then, roughly six months ago, everything went quiet.
And the debt began growing again.
So far this year $153 billion of new EM corporate foreign currency debt has been issued, according to Citigroup. That’s 7% higher than the same period last year. No reason to worry, say Citi’s analysts W.R. Eric Ollom and Ayoti Mittra. So-long as the appetite for high-risk debt remains unabated, indefinitely, EM companies should be able to handle their need to roll over their foreign currency bonds and loans.
Infrequent but long-lived zero-bound episodes and the optimal rate of inflation – Marc Dordal i Carreras, Olivier Coibion, Yuriy Gorodnichenko, Johannes Wieland
Models that estimate optimal inflation rates struggle to accurately account for interest rates reaching the zero lower bound, due to the lack of historical data available. This column suggests periods of hitting the zero lower bound are longer than previously thought, and models the optimal inflation rate target on this. Given the uncertainty associated with measuring the historical frequency and duration of such episodes, the wide range of plausible optimal inflation rates implies that any inflation targets should be treated with caution.
The end of U.S.-led Economic Globalisation? – Jayati Ghosh
There is much angst in the Northern financial media about how the era of globalisation led actively by the United States may well be coming to an end. This is said to be exemplified in the changed political attitudes to mega regional trade deals like the Trans Pacific Partnership Agreement (TPP) that was signed (but has not yet been ratified) by the US and 11 other countries in Latin America, Asia and Oceania; and the Trans-Atlantic Trade and Investment Partnership Agreement (TTIP) still being negotiated by the US and the European Union.
President Obama has been a fervent supporter of both these deals, with the explicit aim of enhancing and securing US power. “We have to make sure America writes the rules of the global economy. We should do it today while our economy is in the position of global strength. …We’ve got to harness it on our terms. If we don’t write the rules for trade around the world – guess what? China will!”, he famously said in a speech to workers in a Nike factory in Oregon, USA in May 2015. But even though he has made the case for the TPP plainly enough, his only chance of pushing even the TPP through is in the “lame duck” session of Congress just before the November Presidential election in the US.
***Recession Watch: US Freight Drops to Worst Level since 2010, “Excess of Capacity” Crushes Rates – Wolf Richter
“Overall shipment volumes are persistently weak.”
When FedEx announced its quarterly earnings today, it included some telling tidbits. In its largest segment, FedEx Express, domestic shipping volume edged up merely 1%. In its smaller FedEx Ground Segment, shipping volume jumped 10%, “driven by e-commerce and commercial package growth.”
Sales by e-commerce retailers jumped 15.8% year-over-year in the second quarter, according to the Census Bureau, and companies involved in getting the packages to consumers and businesses have seen growth in those segments. For the rest, not so much – as the goods-based economy is getting bogged down.
How to regulate CEO pay (and how not to do it) – Alex Edmans
During political campaigns, candidates often set their sights on CEO compensation as a target for potential regulation. This column considers the various arguments for regulating CEO pay and questions whether it is a legitimate target for political intervention. Some arguments for regulation are shown to be erroneous, and some previous interventions are shown to have failed. While regulation can address the symptoms, only independent boards and large shareholders can solve the underlying problems.
Deja vu: Fannie and Freddie Lower Lending Standards – Tho Bishop
Stop me if you’ve heard this one before, but Fannie Mae and Freddie Mac are lowering mortgage standards. On Monday, the two government-backed housing giants revealed a new program designed to boost mortgage origination among first time buyers and those with low to medium incomes. The new program, which will initially be limited two non-bank lenders, will allow borrowers to include the income of residents that aren’t actually on the mortgage, as well as make it easier for borrowers to include income from second jobs.
While these changes may strike some as sensible, anyone who has seen The Big Short would have valid concerns in the oversight of these looser lending standards – especially when you consider that the companies responsible for mortgage origination will not be the ones holding the mortgages, Fannie Mae and Freddie Mac will. It’s always easier to make loans when you know the taxpayers are the ones that will be holding the risk.
Not only does this program increase taxpayer risk, it does nothing to solve the real issues in the housing market.
What If We’re in a Depression But Don’t Know It? – Charles Hugh Smith
If it isn’t a Depression, it’s a very close relative of a Depression.
Just for the sake of argument, let’s ask: what if we’re in a Depression but don’t know it? How could we possibly be in a Depression and not know it, you ask? Well, there are several ways we could be in a Depression and not know it:
1. The official statistics for “growth” (GDP), inflation, unemployment, and household income/ wealth have been engineered to mask the reality
2. The top 5% of households that dominate government, Corporate America, finance, the Deep State and the media have been doing extraordinarily well during the past eight years of stock market bubble (oops, I mean boom) and “recovery,” and so they report that the economy is doing splendidly because they’ve done splendidly.
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.