Economische aanraders 26-12-2016
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 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.
New Census Data Shows Why the Job Market is Still “Terrible” (as Trump said), but the Numbers Get Hushed up – Wolf Richter
Hardly any improvement for individuals since the Great Recession.
When Donald Trump campaigned on how “terrible” the jobs situation was, while the Obama Administration touted the jobs growth since the employment bottom of the Great Recession in 2010, it sounded like they were talking about two entirely different economies at different ends of the world. But they weren’t. Statistically speaking, they were both right.
Since 2011, the US economy created 14.6 million “nonfarm payrolls” as defined by the Bureau of Labor Statistics – whether or not they’re low-wage or less than full-time jobs. But for individuals, this job market, statistically speaking, looks almost as tough as it was during the Great Recession.
***What Have the “Experts” Gotten Right? In the Real Economy, They’re 0 for 5 – Charles Hugh Smith
If the “experts” were assessed on results, they’d all be fired.
The mainstream media continually hypes the authority of “experts,” i.e. people with a stack of credentials from top institutions.
But does the mainstream media ever check on whether the “experts” got anything right? Let’s compare the “experts” (conventional PhD economists) diagnoses and fixes with the results of their policies.
Let’s stick to the big issues: inflation, productivity, near-zero interest rate policy (ZIRP), employment and “growth”. If you get these wrong, you get the entire economy wrong.
If you can’t get the big issues right, your “expertise” has failed: your “expertise” is not just worthless, it’s counter-productive, because if common-sense policies had been put in place instead of the “experts'” fixes, we’d have made progress rather than digging a deeper hole.
***The Fundamental Flaw in Muddied Brexit Thinking – Yves Smith
Yet another set of articles in today’s Financial Times confirms what we’ve observed about the UK’s stance towards Brexit from the outset: an astonishing capacity for denial. For Americans who’ve observed the Clinton bubble and the heroic post-election attempts to keep it pumped up, the Brits are managing to do them one better.
One of the sightings is on how foreign banks in the UK will make “transition arrangements” if there’s no clear post-Brexit deal likely to be in place by the presumed Brexit date of March 2019. As we noted last week, Japanese banking leaders had a tea and cookies chat with British regulators and told them they’d start moving operation out in six months if they didn’t get reassurances. That puts them behind pretty much all other foreign banks, who started getting licenses and looking into foreign office space locations pretty much as soon as they’d recovered from the immediate Brexit vote shock. Late last week, Lloyds of London was the first prominent City institution to set a schedule for relocating part of its operations to the Continent as a Brexit hedge.
***Ten Fundamental Laws of Economics – Antony P. Mueller
In the midst of so many economic fallacies being repeatedly seemingly without end, it may be helpful to return to some of the most basic laws of economics. Here are ten of them that bear repeating again and again.
Policy analysis in a post-truth world – Charles Manski
Exact predictions of policy outcomes and estimates of the state of the economy are routine; expressions of uncertainty are rare. This column argues that with the US approaching the beginning of an administration, the incredible certitude of past governmental policy analysis will soon seem a minor concern relative to what lies ahead. Whereas analysis with incredible certitude makes predictions and estimates that are possibly true, analysis in a post-truth world makes predictions and estimates that are clearly false.
France Comes up with a Real Jewel to Prop up its 4 TBTF Banks – Don Quijones
To cover a capital shortfall of €50 billion.
New language can often serve as a cryptic signpost to the future. This is particularly true in finance. Take the expression “Too Big to Fail.” Within months of the fall of Lehman Brothers, the expression was being used so widely that it ended up being abbreviated to the now instantly recognizable TBTF.
For the captains of the global financial industry in their plush seats on the Basel-based Financial Stability Board, a TBTF bank was too simple and vulgar an iteration, so they coined a new term with a little more gravitas: Global Systemically Important Bank (or G-SIB).
Now a new word is coming into common use: “bailinable” (bail-in-able).
How the interactions of monetary and regulatory policies may have been ahead of the anti-globalisation backlash – Kristin Forbes, Dennis Reinhardt, Tomasz Wieladek
Globalisation is in retreat, but while the slowdown in trade is widely recognised, what is more striking is the collapse of global trade flows. This column shows how banking deglobalisation is a substantial contributor to the slowdown in global trade. It finds that certain types of unconventional monetary policy, and their interactions with regulatory policy, can have important global spillovers. Policies designed to support domestic lending may have had the unintended consequence of amplifying the impact of microprudential capital requirements on external lending.
No hawks, no doves, only consensus: How central banks set interest rates – Richard Barwell
It is generally assumed that central bankers often argue over the appropriate conduct of monetary policy. Focusing on the Bank of England’s Monetary Policy Committee, this column argues that based on what policymakers vote for, there is no evidence that they disagree with one another in any meaningful sense. Either policymakers essentially agree all the time, or they do not vote their view.
Macroeconomics and consumption: Why central bank models failed and how to repair them – John Muellbauer
The failure of the New Keynesian dynamic stochastic general equilibrium models to capture interactions of finance and the real economy has been widely recognised since the Global Crisis. This column argues that the flaws in these models stem from unrealistic micro-foundations for household behaviour and from wrongly assuming that aggregate behaviour mimics a fully informed ‘representative agent’. Rather than ‘one-size-fits-all’ monetary and macroprudential policy, institutional differences between countries imply major differences for monetary policy transmission and policy.
Will A Stronger Dollar Cause a Trade War with Europe? – Brendan Brown
Markets have not been slow to see through the hollowness of the European Central Bank’s announced (on December 8) curtailment of the pace of money printing planned for April next year. The ECB plans to reduce its “stimulus” from 80 billion euros per month down to 60 billion euros per month. But, it plans to do this for nine months before any further review — rather than the usual 6-month fixed period until further review.
Sixty billion is a huge number and the persistence of the ECB in sticking to its radical policy suggests that Chief Draghi, and ultimately Chancellor Merkel, are deeply anxious about the dangers of financial crisis ahead which could rock the status quo in Europe. The potential triggers to crisis include first and foremost Italy — but also the looming elections in Holland, and most importantly France.
Why the Massive Expansion of “Money” Hasn’t Trickled Down to “The Rest of Us” – Charles Hugh Smith
If you create and distribute money only in the apex of the wealth/power pyramid, it can only benefit the few rather than the many.
There are numerous debates about money: what it is, how we measure it, and so on. In recognition of these debates, I’m referring to “money” in quotes to designate that I’m using the Federal Reserve’s measure of money stock (MZM).
Nowadays, “money” is often credit. We buy stuff not with currency/ cash, but with credit extended by lenders. The government pays for its programs with borrowed money as well, by selling sovereign bonds and spending the proceeds.
So to get a rough measure of the expansion of “money,” we look at money stock and total credit.
There’s a third measure: GDP, or gross domestic product. As money and credit expanded, did GDP go up, too? By how much?
GDP is also a flawed measure of value and activity, but once again we’ll use it as the conventional measure of economic “growth.”
Red Flag on Recession Crops up in NY Fed’s Coincident Economic Index – Wolf Richter
Last time the index declined was in November 2009.
“Our Indexes of Coincident Economic Indicators (CEI) for November show economic activity declining for the 3rd straight month in New York State, flattening out in New York City, and remaining essentially flat in New Jersey”: so the New York Fed.
The CEI for New York State fell at an annual rate of 1.9%, following a 1.1% decrease in October, and a 1.0% decrease in September. The index is still up 1.9% over the past 12 months, but is now below where it had been in June and is just above its level in May:
That’s why we’re paying attention to this. These indices, particularly for New York State and New York City, have an uncanny accuracy in moving with the national economy and turning south just before the business cycle for the nation turns south. And shortly after they turn south, a national recession begins.
Will Latin America Finally Embrace Markets? – José Niño
Much talk has been made lately about the Left’s recent defeats in countries throughout Latin America: Argentina, Brazil, and Venezuela most notably. These countries have been characterized by Leftist governments that had the luxury of exploiting commodity prices during the early-to-mid 2000s to finance their profligate social programs.
Various experts saw this new “pink tide” as a viable alternative to free-market models of economic organization. However, the game has completely changed as of late. These very governments now find themselves on the ropes not only because of low commodity prices, but also due to increasing degrees of corruption and economic malaise — largely the result of years of economic interventionism now taking its toll on these nations’ economic and institutional foundations.
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.