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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This Bust Wasn’t Caused by a Virus – Mark Thornton
24 april
On February 10 the stock markets were at all-time highs, with the Dow 30 at almost 30,000. The unemployment rate was at an all-time low and interest rates around most of the world were at all-time lows.
With interest rates near zero for an entire decade, the value of stocks, bonds, real estate, land, and virtually any asset was artificially inflated. As a result, total household net worth doubled, increasing from $60 trillion to $120 trillion!
People were saying that things were too good to be true. Everything from giggling about personal finances at the gym to people embarking on unlikely business projects, and business owners being shocked when told it would not last, and even record-breaking skyscrapers. Things were too good to be true.
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Forecasting recoveries is difficult: Evidence from past recessions – Zidong An, Prakash Loungani
26 april
Forecasters expect a recession this year in major economies and a rebound in economic activity in 2021. This column asks how credible such forecasts of recovery are. The past record is not inspiring: forecasters have had little ability to tell in advance whether a recession will end in a rebound or continue on for another year. Policy choices, particularly on fiscal stimulus, are better guided by worse-case scenarios than by the baseline forecasts of recovery.
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Central Banks and the Next Crisis: From Deflation to Stagflation – Daniel Lacalle
22 april
All over the world, governments and central banks are addressing the pandemic crisis with three main sets of measures:
Massive liquidity injections and rate cuts to support markets and credit.
Unprecedented fiscal programs aimed at providing loans and grants for the real economy.
Large public spending programs, fundamentally in current spending and relief measures.
However, they may cause deeper problems than those they aim to solve.
When governments try to artificially boost debt and demand in a supply shock, the risk is the creation a massive deflationary spiral driven by debt saturation that is followed by stagflation when supply chains start to become insufficiently flexible.
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Is there deflation or inflation in our future? – Olivier Blanchard
24 april
Will falling commodity prices, stumbling oil prices, and a depressed labour market bring low inflation and perhaps even deflation, or will very large increases in fiscal deficits and central bank balance sheets bring inflation? This column argues that it is hard to see strong demand leading to inflation. Precautionary saving is likely to play a lasting role, leading to low consumption, and uncertainty is likely to lead to low investment. The challenge for monetary and fiscal policy is thus likely to be to sustain demand and avoid deflation rather than the reverse.
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No, This Is Not Another 1929, 1973, 1987, 2000, or 2008 – Charles Hugh Smith
24 april
Basing one’s decisions on analogs from the past is entering a fool’s paradise of folly.
Like addicts who cannot control their cravings, financial analysts cannot stop themselves from seeking some analog situation in the past which will clarify the swirling chaos in their crystal balls. So we’ve been swamped with charts overlaying recent stock market action over 1929, 1987,2000 and 2008–though the closest analogy is actually the Oil Shock of 1973, an exogenous shock to a weakening, fragile economy.
But the reality is there is no analogous situation in the past to the present, and so all the predictions based on past performance will be misleading. The chartists and analysts claim that all markets act on the same patterns, which are reflections of human nature, and so seeking correlations of volatility and valuation that “worked” in the past will work in 2020.
Does anyone really believe the correlations of the past decade or two are high-probability predictors of the future as the entire brittle construct of fictional capital and extremes of globalization and financialization all unravel at once?
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Unprecedented Pace Of Corporate Debt Issuance Has Crippled Corporate Fundamentals – Tyler Durden
25 april
When the Fed breached a monetary taboo even Ben Bernanke did not violate when Jerome Powell announced last month he would buy investment grade bonds, it was clear that the Fed’s only solution to avoiding the bursting of the corporate debt bubble was to make it even bigger. And sure enough, the Fed’s explicit backstop of the bond market has meant the supply of IG bonds has set a record pace in 2020. According to Morgan Stanley, IG supply has totaled $693 billion through mid-April, up a staggering 63% y/y…… with $435 billion pricing since the beginning of March alone. March supply set an all-time record at $264 billion, breaking the prior record by over $80 billion and a further $170 billion in the first half of April. To put that in perspective, the March total surpasses the prior record for the busiest month (January 2017) by over $80 billion. Issuance just in the first half of April already ranks in the top five busiest months on record. Four of the top 10 busiest weeks on record have occurred since the beginning of March, with the week of March 30 ranking as the busiest ever, at $118 billion of issuance.
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Anatomy Of A Fiat Currency Collapse – Alasdair MacLeod
23 april
This article asserts that infinite money-printing is set to destroy fiat currencies far quicker than might be generally thought. This final act of monetary destruction follows a 98% loss of purchasing power for dollars since the London gold pool failed. And now the Fed and other major central banks are committing to an accelerated, infinite monetary debasement to underwrite their entire private sectors and their governments’ spending, to prop up bond markets and therefore all financial asset prices.
It repeats the mistakes of John Law in France three hundred years ago almost to the letter, but this time on a global scale. History, economic theory and even common sense tell us governments and their central banks will rapidly destroy their currencies. So that we can see how to protect ourselves from this monetary madness, we dig into history for guidance to see who benefited from the Austrian and German hyperinflations of 1922-23, and how fortunes were made and lost.
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In 2020 Oil-Exporters’ Income Will Plunge By Over $1 Trillion, Forcing Widespread Stock Liquidations – Tyler Durden
25 april
While any other time the plunge of WTI prices into negative territory last Monday would have been the story of the year, the fact that the financial press has already moved on and is focusing on whatever 100-sigma event du jour has hit, merely shows just how insane 2020 has been as a decade of central planning slowly comes unglued thanks to a black swan bat trigger that has shut down the global economy and cash flows while keeping stocks just shy of all time highs.
However, before we relegate the historic oil move that sent the May WTI future as low as -$40 on Monday to the dustbin of history, there are some critical considerations that have to be considered, namely what are the implications of much lower oil prices this year for other asset classes? To address this question we will revisit some prior analyses on the shifts in flows and incomes resulting from oil price changes, especially those looking at the consequences stemming from the collapse of petrodollar mercantilism in 2016 when oil exporting nations saw their oil-linked income crater.
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A Global Backlash Is Coming… In Mostly Good Ways – Jeffrey Tucker
24 april
Two months ago, it had been mandatory in my local grocery to use only shopping bags brought from home. Plastic bags were illegal by local ordinance.
Then the virus hit. Suddenly the opposite was true. It was illegal to bring bags from home because they could spread disease. Plastic bags were mandatory. As a huge fan of plastic bags, I experienced profound Schadenfreude.
It’s amazing how the prospect of death clarifies priorities.
Before the virus, we indulged in all sorts of luxuries such as dabbling in dirtiness and imagining a world purified by bucolic naturalness. But when the virus hit, we suddenly realized that a healthy life really matters and that natural things can be very wicked. And then when government put everyone under house arrest and criminalized freedom itself, we realized many other things too. And we did it fast.
Lots of people are predicting how life will fundamentally change in light of our collective experience this last month. I agree but I don’t think it will turn out quite as people think. This whole period has been an unconscionable trauma for billions of people, wrecking lives far beyond what even the worst virus could achieve. I’m detecting enormous, unfathomable levels of public fury barely beneath the surface. It won’t stay beneath the surface for long.
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Central bank digital currency: Central banking for all – Jesús Fernández-Villaverde, Daniel Sanches, Linda Schilling, Harald Uhlig
25 april
The possibility and logistics of developing a central bank digital currency for the general public has attracted significant attention. Such an initiative would require central banks to be involved in financial intermediation and maturity transformation. This column explores the implications of such a venture by central banks using a classic banking model. With sufficient competition, a central bank digital currency can be beneficial and achieve the optimal allocation of funds. However, it also risks giving central banks excessive monopoly power, which could result in inferior outcomes.
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The Destructive Effects of the Coronavirus Relief Package – Thorsten Polleit
23 april
Governments and their central banks have put together mega–bailout packages. In the US, President Donald J. Trump has signed off on a $2 trillion “virus relief package” amounting to around 10 percent of the US gross domestic product. It is meant to provide massive financial support—in the form of loans, tax breaks, and direct payments—to large and small businesses as well as individuals whose revenue and income have been destroyed by the politically dictated “lockdown.”
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“It Wasn’t A Black Swan” – Nassim Taleb Blasts Bail-Outs As Misguided And “Morally Unacceptable” – Tyler Durden
24 april
Throughout his career, Nassim Taleb has always demonstrated an uncanny gift for good timing. The publication of his book “The Black Swan”, in 2007, immediately preceded the financial crisis – one of only a small handful of genuine “Black Swans” to emerge in recent decades – instantly launching him into the pantheon of pop-intellectual superstardom.
However, Taleb – who claims his “core identity” is that of an options trader – never seemed quite comfortable with this position. And he swiftly set about rocking the boat and embracing controversial ideas that were deemed “fringe” by some mainstream economists.
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Market Mayhem Meets Liquidity Mismatch: “At Least” 76 Mutual Funds in Europe Were “Gated” in March – Nick Corbishley
22 april
Due to “the interconnectedness of the financial system” fund gatings can trigger “contagion risk” with “the potential to become a systemic issue”: Fitch
The mass shuttering of open-end mutual funds, a problem that has dogged the UK’s fund industry for months, appears to have crossed over to multiple fund industries in mainland Europe. According to Fitch Ratings, “at least” 76 European mutual funds, with an estimated $35 billion of assets under management (AUM), suspended redemptions in March after investors scrambled for the exits. Almost £9 billion was pulled from UK-based funds alone, more than any other month on record.
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The COVID-19 Crisis Is Driving the EU to the Brink – Philipp Bagus
25 april
The eurozone is a gigantic machine of monetary redistribution. Several independent governments can finance their expenditures through deficits that are monetized directly or indirectly by one printing press. More specifically, the European Central Bank (ECB) may buy eurozone government bonds directly from market participants or accept them as collateral in its lending operations, effectively increasing the monetary base. Through this monetization, a government can externalize the costs of its deficit partially onto the citizens of other eurozone countries in the form of a lower purchasing power for the euro. The setup resembles a tragedy of the commons. The commonly owned resource is the purchasing power of the euro, which is exploited by several users. These users are the eurozone governments. They issue debts resulting in an increase in the money supply. By running comparatively higher deficits than their peers, eurozone governments can attempt to live at the expense of foreigners.
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Bank portfolio risk profiles vs the zero lower bound – Johannes Bubeck, Angela Maddaloni, José-Luis Peydró
23 april
The way that banks in the euro area react to negative central bank interest rates may be closely linked to their individual funding structure. This column suggests that they do not generally pass negative rates on to their depositors, and that they search for yield by investing in riskier securities. New evidence suggests that their investments are directed more towards securities issued by the private sector and securities denominated in dollars.
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Postmortem of the Infamous Day WTI Crude Oil Futures Went to Heck in a Straight Line – Wolf Richter
23 april
The US Energy Information Agency (EIA) dissects the historic event.
“It’s not often that we’re served up a WTF moment like this,” I wrote on April 20, when the May contract for crude-oil benchmark-grade West Texas Intermediate (WTI) plunged to minus -$37.63 in a straight line, thus violating the WOLF STREET beer-mug dictum that “Nothing Goes to Heck in a Straight Line.” It was the first time in history that a US crude oil futures contract plunged into the negative. The peculiar dynamics that came together and caused this are expected to continue and some of them are expected to get worse over the next month or two.
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***How Shutdowns Will Keep Killing the Economy, Even When They’re Over – Ryan McMaken
24 april
Imagine what it is like right now to plan for the future as a business owner. The owner doesn’t know if he or she will even be allowed to be open for business two weeks from now, or a month from now.
Indeed, politicians and their unelected (and unaccountable) health advisors keep insisting that they might elect to close down businesses or impose new restrictions on large portions of the economy at any time.
The uncertainly associated with all this is immense. Consider some examples: thanks to moratoria on evictions in many cities, renters who can’t pay rent — thanks in part to government-forced lockdowns — can stay in their rental units indefinitely. Landlords have no idea when they will next be able to actually collect revenues again from paying customers. Meanwhile, “elective” healthcare services like eye care and dental care have been deemed “unessential” by bureaucrats and governors in many states. These offices will be closed and collecting little-to-no revenue. Restaurants, of course, aren’t permitted to do business beyond take-out service in places with lockdowns. (Although these restaurants still have to pay rent for their dining rooms.)
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***What’s Collapsing Can’t Be Saved: Our Fraudulent Economy – Charles Hugh Smith
22 april
Pulling the sleeve down to hide the tracks doesn’t mean the addict is cured.
Just for a change of pace, can we be bluntly honest about the U.S. economy? It’s difficult to do because we’ve chosen to ignore all the realities, much like a family that hides all the addictions, drunkenness and lies in a dysfunctional household to maintain the outward illusion of a happy functioning family.
It’s extraordinarily costly to maintain such a demanding masquerade. The psychological toll is immense, and the financial ruin that’s always threatening to collapse the flimsy facade feeds the most destructive coping strategies.
Please don’t claim that Daddy and Mommy aren’t really addicts, addicted to lies, cheating and stealing to fund their corruption and maintain the absurdly threadbare happy-story mask of normalcy.
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Corporate board networks and firm value – Ester Faia, Maximilian Mayer, Vincenzo Pezone
26 april
Directors of corporations often sit on several boards at once. This column addresses asks whether this connectivity is beneficial for firm value (due to a wider network of knowledge sharing), or if it is simply crony-capitalism built on a deep exclusivity at the board level. Exploiting data from Italy, the authors suggest that network centrality may not always translate into a gain for consumers, and that policymakers must be cautious in accommodating the appropriate reactions for cases that may have different implications for consumer welfare.
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***Freedom in Prices Ends Shortages. Even with Toilet Paper – Dale Steinreich
25 april
In a column containing a rebuke of the Mises Institute, Medium Marker writer Will Oremus has come up with what he fervently believes is The Explanation for the empty shelves in big-box and grocery stores that once had toilet paper for sale. There is a lot at stake in this debate, for if Oremus and many others are correct and economists and basic economics cannot explain the simplest exchange phenomena such as surpluses and shortages, then economics sits on the same plane as astrology and is no longer a credible discipline, nevermind a social science.
In “What Everyone’s Getting Wrong About the Toilet Paper Shortage,” Oremus cites explanations such as “anticipatory anxiety,” “zero-risk bias,” and herd mentality. With respect to the Mises Institute, he takes particular aim at a March 17 post by Sandra Klein, “Anti-Gouging Laws Are the Reason There Is a Toilet Paper Shortage,” which he thinks is off the mark, at the very least. No details are provided as to why Klein is wrong, just a figurative contemptuous eye roll at what those wacky libertarians will come up with these days.
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Cash in the time of Corona – Andreas Joseph, Christiane Kneer, Neeltje van Horen, Jumana Saleheen
26 april
Many firms are facing an unprecedented turnover shock as the corona pandemic unfolds. According to this column, insights from the global financial crisis suggest that firms with high levels of cash going into a crisis are not only better placed to weather the downturn but can improve their competitive positions in the long run. During the financial crisis, cash-rich firms were able to continue to invest while industry rivals without cash had to divest. This led to a shift in competition dynamics, allowing cash-rich firms to outperform their rivals when the economy recovered.
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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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