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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New ICMB/CEPR Report: Bail-ins and Bank Resolution in Europe – Thomas Philippon, Aude Salord
22 maart
Failed financial firms should not be bailed out by the taxpayers. Europe, unfortunately, has a weak track record of following this principle of good governance and sound economic policy. The banking union, with its new approach to supervision and resolution, is meant to improve this matter. This column introduces a new Geneva Special Report on the World Economy which reviews the resolution side of the banking union.
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ECB Hands Banks $250 Bn Today, Floats all Markets – um, Briefly – Wolf Richter
23 maart
Thursday morning, 474 European banks grabbed with “greater than expected” gusto €233 billion ($251 billion) in totally free (and possibly even better) money that the ECB held out to them within its Longer Term Refinancing Operation (LTRO), one of the special programs with which it douses the markets with liquidity to perform miracles.
The amount that banks took today was more than double than what had been expected. This money is a four-year loan from the ECB that carries 0% interest. If certain lending growth targets are met – because this money is supposed to be lent out – the interest rates can become negative and drop as low as -0.4%. In other words, under these conditions, the ECB would pay the banks to take this money and lend it out.
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***Dear America: Better Read the Fine Print on Your Credit Card Statement – Charles Hugh Smith
21 maart
What will replace the current system after it self-destructs? That’s the question.
You know those disclosures on your credit card statements? That it will take 27 years to pay off your balance if you only make the minimum payment each month, and so on?
You might not be aware of it, but America’s “credit card”–our national debt–comes with its own disclosure statement:
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How Solid are Canada’s Big Banks? – Peter Diekmeyer
22 maart
The World Economic Forum consistently ranks Canada’s banks among the world’s safest. Competent regulators have overseen stress tests, tightened lending standards and delinquency rates are low. Demographics are good and the country’s diversified economy is backed by a treasure of oil, wood, gold and other natural resources.
So the experts say.
Institutional investors, relying on the work of Jeremy Rudin, Canada’s chief bank regulator, agree. In fact, Canadian financials accounted for 35.5% of the market capitalization of the benchmark exchange (NBF February).
However this façade hides major uncertainties. Key concerns stand out, which if unaddressed, could spark solvency and liquidity issues in one or more of Canada’s Big Six banks.
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Understanding Money Creation and the Trade Balance – Frank Shostak
21 maart
According to conventional analysis, a key factor in exchange rate determination is the state of the balance of payments. It is held that as long as the US continues to run a large trade account deficit, which stood at $48.5 billion in January 2017, this is likely to keep pressure on the US dollar exchange rate against other currencies.
Following this logic, an increase in imports gives rise to an increase in a demand for foreign currency. To obtain the foreign currency importers will sell the domestic currency for it. Obviously, this will lead to the strengthening in the exchange rate of the foreign currency against the domestic currency, so it is held.
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Trade illusion and disillusion: A cyclical phenomenon – Alessandro Borin, Virginia Di Nino, Michele Mancini, Massimo Sbracia
23 maart
Recent global trade growth is even more disappointing than global GDP growth. This column argues that this unexpected weakness of trade relative to GDP is related to the high volatility and pro-cyclicality of real trade flows, and that cyclical forces are the main drivers. It also shows that the accuracy of existing trade forecasts can be improved using real-time data on business conditions.
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Bank Normalization Would Look Like, In One Chart – Tyler Durden
25 maart
AS a result of countless failures by central banks to normalize monetary policy over the past 7 years, the market – especially bonds and rates – has become openly cynical and outright skeptical regarding the possibility of a successful renormalization of policy by global central banks. After all, Japan has been trying to do that for over 30 years and has yet to succeed; the ECB hiked in 2011 resulting in near collapse of the Eurozone. Ironically, the recent Trumpflation trade – which few expected as a result of the “shocking” Trump election victory – has emerged as the most credible catalyst to prompt inflation not only in the US but around the globe, resulting in two Fed rate hikes in rapid succession.
Still, now that Obamacare repeal has failed, and questions are rising whether Trump will be able to implement his proposed Tax reform, the market has aggressively faded not only the broader Trumpflation trade, but also all of the recent dollar strength since the US election: in short, bets on a “bening” global reflation are rapidly fading, suggesting that the latest push to normalize monetary policy will once again result in failure.
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The Fed’s Half-Hearted Attempt at Monetary Tightening – Thorsten Polleit
20 maart
On 15 March, the Federal Reserve (Fed) raised the federal funds rate by 0.25 basis points, bringing the band of the official rate to 0.75 – 1.00 percent. The move was widely expected. However, the market seemed surprised when the Fed reaffirmed that it would stick to its plan to raise rates no more than three times this year because inflation has already taken off. In February, the consumer price index was up 2.7 percent compared to last year, while the “core inflation rate” stood at 2.2 percent — well above the 2 percent mark typically seen as the level of “targeted” inflation. As a result, the current short-term interest rate in the US, when adjusted for current inflation, stands at around minus 1.7 percent.
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Exchange rate implications of border tax adjustment neutrality – Willem Buiter
22 maart
A border tax adjustment from origin-based taxation to destination-based taxation is under consideration for corporate profit tax in the US. This column investigates the implications of such an adjustment for the nominal exchange rate, assuming the real equilibrium of the economy is unchanged. While conventional wisdom is that the currency of the country implementing the adjustment will appreciate by a percentage equal to the VAT or corporate profit tax rate, a depreciation of the same magnitude is just as likely.
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The Mechanical Turn in Economics and Its Consequences – Douglass Carmichael
20 maart
In the age of Adam Smith, an economics that masqueraded as natural science and excluded the human condition actually suited the interests of the landed and the wealthy
With Adam Smith, and hints before in Ricardo and others, economics took the path of treating the economy as a natural object that should not be interfered with by the state. This fit the Newtonian ethos of the age: science was great, science was mathematics; science was true, right and good.
But along the way the discussion in, for example, Montaigne and Machiavelli — about the powers of imagination, myth, emotions, sentiment, human relations and community — was abandoned by the economists. (Adam Smith had written his Theory of Moral Sentiments 20 years earlier and sort of left it behind, though the Wealth of Nations is still concerned with human well-being.) Gibbon’s Decline and Fall of the Roman Empire was published in 1776, the same year as Smith’s Wealth, but hardly read today by most economists.
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China has regained economic stability, but clues are in the weeds of finance – George Magnus
21 maart
There’s a cute expression that last did the rounds after Lehman went belly-up. As the destruction of balance sheets tore through the the financial system, the black cry rang out that ‘there’s nothing right on the left side of the balance sheet, and nothing left on the right’. Eventually we recovered. But fast forward to 2017 and what about China, which according to the New York Fed, has accounted for a half of all new credit created globally since 2005?
China’s credit situation has been on most people’s radar screen for a little while now, but there’s been no closure, no validation of imminent demise from when Ordos (ghost town) was first noticed to last year’s financial stress. Indeed, for a year now, there’s been every indication that China’s leaders wanted and have achieved stability (at all costs) in 2017. But this isn’t the time to lose the scent, for the clues as to what happens next are still in the finance sector, and in places that many analysts don’t look. For these reasons, this blog is more essay.
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***Central Bank Shell Game: What Sweden’s Negative Interest Rates Do to Consumers – Nick Kamran
20 maart
Sweden’s welfare state supposedly allows for success while providing a safety net for those unable to keep up with the market. In principle, it is an ideal, utopian-like state. However, Sweden’s touted economic success has come at the expense of its currency, the Krone (SEK), and long-term sustainability. Riksbank, the Swedish Central Bank, like its European contemporaries, has undertaken experimental policy, driving real and nominal interest rates below zero.
Not All Growth is Equal
Since 2014, Swedish deposit rates have been negative. Not only has overall negative real interest rate policy affected housing, but it also drove Swedish consumers deeper into debt. Embarking on the dual mandate policy may have staved off recession, but it created greater problems for the future.
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Covered Interest Parity – John H. Cochrane
20 maart
Here’s how covered interest parity works. Think of two ways to invest money, risklessly, for a year. Option 1: buy a one-year CD (conceptually. If you are a bank, or large corporation you do this by a repurchase agreement). Option 2: Buy euros, buy a one-year European CD, and enter a forward contract by which you get dollars back for your euros one year from now, at a predetermined rate. Both are entirely risk free. They should therefore give exactly the same rate of return, by arbitrage. If european interest rates are higher than US interest rates, then the forward price of the euro should be lower, enough to exactly offset the apparent higher return. If not, then banks can (say), borrow in the US, go through the european option, pay back the US loan and receive an absolutely sure profit.
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***Is this the Sound of the Bottom Falling Out of the Auto Industry? – Wolf Richter
21 maart
Let’s hope that the problems piling up in the used vehicle market — and their impact on new vehicle sales, automakers, $1.1 trillion in auto loans, and auto lenders — is just a blip, something caused by what has been getting blamed by just about everyone now: the delayed tax refunds.
In its March report, the National Association of Auto Dealers (NADA) reported an anomaly: dropping used vehicle prices in February, which occurred only for the second time in the past 20 years. It was a big one: Its Used Car Guide’s seasonally adjusted used vehicle price index plunged 3.8% from January, “by far the worst recorded for any month since November 2008 as the result of a recession-related 5.6% tumble.”
The index has now dropped eight months in a row and hit the lowest level since September 2010. The index is down 8% year over year, and down 13% from its peak in 2014.
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Competition from China reduced innovation in the US – David Autor, David Dorn, Gordon Hanson, Gary P. Pisano, Pian Shu
20 maart
The discussion of the decline in US manufacturing during the 2016 presidential election campaign largely focused on job losses. This column examines the effects of Chinese import competition on another metric for the health of the US manufacturing sector – innovation. Firms whose industries were exposed to a greater surge of Chinese import competition from 1991 to 2007 experienced a significant decline in their patent output as well as their R&D expenditures. While politicians’ ‘obsession’ with manufacturing is primarily due to job losses, an accompanying reduction in innovation may well affect economic growth in the longer term.
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***There Will Be Those Who Perish In the Next Crisis, And Those “Who Survive In Underground Luxury” – Mac Slavo
24 maart
Ultimately, no one can stop what is coming.
The haves and have nots of the next, gritty era of aftermath will be those who have the means to survive when the system has failed, and those who do not.
For the wealthy, and prepper minded elite, hidden fortified layers purchased for insurance will preserve most of the luxuries of life above ground, and in the cities, even as society crumbles and burns to the ground.
Others, without the means to purchase these luxuries, may have still set aside the necessary materials to live and thrive after a great collapse, where anything and everything from the electric grid, to the fuel supply to the food supply will fail.
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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.