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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It Always Ends The Same Way: Crisis, Crash, Collapse – Charles Hugh Smith
23 Juni
Risk has not been extinguished, it is expanding geometrically beneath the false stability of a monstrously manipulated market.
One of the most under-appreciated investment insights is courtesy of Mike Tyson: “Everybody has a plan until they get punched in the mouth.” At this moment in history, the plan of most market participants is to place their full faith and trust in the status quo’s ability to keep asset prices lofting ever higher, essentially forever.
In other words, the vast majority of punters are convinced they will never suffer the indignity of getting punched in the mouth by a market crash. What makes this confidence so interesting is massively distorted markets always end the same way: crisis, crash and collapse.
The core dynamic here is distorted markets provide false feedback and misleading information which then lead to participants making catastrophically misguided decisions. Investment decisions made on poor information will also be poor, leading participants to end up poor, to their very great surprise.
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Sound Money versus Fiat Money: Effects on the Boom-Bust Cycle – Frank Shostak
23 juni
According to the Austrian business cycle theory (ABCT), the boom-bust cycle emerges in response to a deviation in the market interest rate from the natural interest rate, or the equilibrium interest rate. It is held that the major cause for this deviation is increases in the money supply. Based on this it would appear that on a gold standard without the central bank, an increase in the supply of gold will set in motion boom-bust cycle.
An increase in the supply of gold is likely to result in the lowering of market interest rates. This in turn is likely to cause the market interest rates to deviate from the equilibrium interest rate. Consequently, following the ABCT, an increase in the supply of gold is going to set in motion the boom-bust cycle.
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***No, Blackstone Didn’t “Buy 17,000 Houses” out from under Desperate Homebuyers. And BlackRock Didn’t “Buy a Whole Neighborhood.” But Built-to-Rent is a Huge Change – Wolf Richter
22 juni
Internet BS made from twisted headlines is fun to spread. But reality is a lot more interesting.
The social media and comment sections, including the illustrious WOLF STREET comments, are afire again with another headline, based on a headline in the Wall Street Journal that is being twisted, contorted, and spread by people who refused to even read the first paragraph. The meme is that PE firm Blackstone Group bought 17,000 houses for $6 billion, outbidding regular people, and thereby making it impossible for regular people to buy those houses amid a red-hot housing market.
Alas, what gorgeous ridiculous internet BS! Blackstone didn’t go around the US grabbing 17,000 houses, outbidding regular mom-and-pop buyers with its $6 billion war chest. On the contrary.
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Do You Hear The Bells Ringing? – MN Gordon
25 juni
There’s an old Wall Street adage, you’ve likely heard it, “No one rings a bell at the top (or bottom) of the market.”
The bell, of course, is the signal to sell at the market top. Here we pause to take exception with this adage.
As far as we can tell, bells do ring at market tops. Yet few hear them. Most people’s ears are plugged with the prospects of easy riches.
Bull markets often give way to manias…where an asset’s intrinsic value becomes less important than the hope that an overpriced asset can be later offloaded at a higher price to a greater fool. Certainly, irrational pricing based on greater fool dynamics is the sound of a ringing bell. Though this can go on for years.
The current ratio of total market capitalization to GDP (now over 200 percent) is most definitely the sound of a ringing bell. Another ringing bell is the $500 million batch in junk bonds recently sold by MicroStrategy for the sole purpose of buying bitcoin. These bitcoin junk bonds pay a generous 6.125 percent coupon rate.
How will MicroStrategy pay the coupon if bitcoin goes down? Will they sell more junk bonds? Will anyone buy them?
Do you hear any bells ringing?
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BofA Crashes The “Transitory” Party: Sees Up To 4 Years Of “Hyperinflation” – Tyler Durden
26 juni
At the start of May, when observing the avalanche of “higher inflation” mentions on Q1 earnings calls, which had quadrupled YoY; and jumped by a record 800% YoY…
… BofA chief equity strategist Savita Subramanian summarized the current state of affairs as follows: “On an absolute basis, [inflation] mentions skyrocketed to near record highs from 2011, pointing to at the very least, “transitory” hyper-inflation ahead.”
Needless to say, a “serious” bank warning of hyperinflation – transitory or otherwise – was enough to spark very serious concerns that the Fed was losing control of prices, a panic which only grew after Deutsche Bank joined the chorus, earlier this month when it warned that inflation was about to explode “Leaving Global Economies Sitting On A Time Bomb.”
Of course, BofA had left itself a loophole, the same loophole used so generous by the Fed as often as several times each day: after all the definition of transitory is fluid, and could be as short as just a few weeks, making the coming period of pain somewhat manageable.
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Interventionism Turns Crisis into Depression – Mark Thornton
26 juni
Austrian economists have a well-developed theory that explains the boom, bubble, bust, and recovery. A good introduction to the Austrian theory of the business cycle can be found in Larry Sechrest’s article “Explaining Malinvestment and Overinvestment.” Larry wrote the article to provide a pedagogical device for economics students, but academic economists will probably be able to understand it as well.
Here we examine the case of business cycles where instead of recovery, the economy enters a prolonged economic depression or recession. The types of intervention that cause business cycles are restricted to money and credit. The types of intervention that cause depressions can be of a monetary, fiscal, or regulatory nature. Even moral suasion can contribute to the making of a depression, as was the case with Herbert Hoover.
The most effective depression-producing program would include a variety of interventions. The only necessary requirement is that the interventions help to forestall the correction process and that the interventions collectively undermine the ability of the price system and the system of profit and loss to properly reallocate resources. Austrians find that the cycle is the result of monetary intervention and that depressions emerge as the result of subsequent interventions designed to forestall the corrective processes of the bust.
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The Fed Is Trapped Between A ‘Keep Inflating’ Rock & A ‘Collapsing Dollar Confidence’ Hard Place – Alasdair Macleod
25 juni
“The Fed finds itself between a rock and a hard place: either it keeps inflating or the whole confidence-based valuation of financial assets collapses. Either it raises interest rates or the dollar collapses.”
There has been occasional speculation about what happens to asset values in a hyperinflationary collapse. The basis of the question has recently become suddenly relevant, because consumption in America and Britain has been stimulated with unprecedented monetary inflation aimed at consumers, and been met with limited supply, leading to strongly rising prices across the board.
In short, unless urgent action is taken, a hyperinflationary outcome has become a possibility. The only alternative is to stop monetary inflation and thereby deliberately crash the global economy.
Along with other central banks, the Fed is trapped. We will assume that rather than face this reality, governments and central banks will continue with their money printing until both their fiat currencies and financial systems face collapse. All precedent points to this choice.
That being the case, an examination of how a collapse in the purchasing powers of fiat currencies is likely to affect asset and consumer prices is timely. This article draws on theories of money as well as empirical evidence in search of some answers. The answers will surprise and discomfort many of its readers.
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Biden’s Real Crime Against The Economy – James Rickards
25 juni
I try to keep politics out of my economic analyses, and my approach is non-partisan. But sometimes I can’t avoid it because political policies can have significant economic impacts. Today is one of those times.
One of Joe Biden’s first acts as President was to kill construction of the Keystone XL pipeline. This is a pipeline that would bring oil from the tar sands of Alberta, Canada to the Midwest United States. From there it would be moved through other pipelines or refined and distributed to gas stations and industrial users in America.
Biden’s decision was destructive for a long list of reasons.
The immediate impact was to kill about 10,000 high-paying union jobs with benefits in construction, transportation and expert services. The ripple effects were even greater. Once a pipe delivery operation is killed, the trucking company and pipe manufacturer lay off more personnel and those workers stop spending at local restaurants and so on.
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The geopolitical relevance of central bank digital currencies – Brunello Rosa, Alessandro Tentori
26 Juni
Digital currencies are becoming increasingly present on both research and policy agendas, including for central banks. This column explores the geopolitical role of central bank digital currencies, with a particular focus on China. It argues that such currencies could be useful as a means for central banks to record transactions in an increasingly cashless economy and could help improve central banks’ monetary transmission. Nonetheless, the risk of cyber-attacks should not be overlooked.
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Two UK Commercial Real Estate Funds Shut Permanently, Investors Trapped, as Sector-Wide Exodus Intensifies – Nick Corbishley
26 juni
The sector was already hit hard by Brexit, then by lockdowns, and now by working from home as companies plan to cut floor space.
Aegon Asset Management has closed its UK Property Income and Property Income feeder funds, after struggling to raise sufficient cash to meet redemption requests, it said on Wednesday. The Aegon Property Income fund had £380 million ($531 million) in assets under management and the feeder fund £150 million, according to Morningstar. The announcement follows a move last month by Aviva to wind up its property fund and two feeder funds due to the prevailing economic uncertainty and liquidity concerns.
Both the Aegon and Aviva funds were suspended in March 2020, alongside most other UK property mutual funds, due to the acute uncertainty over market valuations caused by the virus crisis as well as liquidity issues. Many of these funds are open-end, meaning they offer daily withdrawals to their (predominantly retail) investors, even though the funds’ core investment — offices, industrial property and retail parks — is extremely illiquid, often taking months to offload.
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Transitory Inflation or Stagflation? – Doug French
21 juni
Bloomberg uses the price of a certain bike, the Santa Cruz Hightower C R, to make the case that price inflation is upon us. This bike will set you back $4,749, a 10 percent leap from the first of the year. By the way, I have three bikes for sale on OfferUp, each priced at less than 10 percent of the fancy Hightower. No one even wants to negotiate. I’m not so sure there has been an outbreak in bike riding, despite Justin Blum’s assertion that “Americans went on a bike-buying binge at the start of the Covid-19 lockdown, to get exercise, avoid public transportation or entertain kids stuck at home.” Here in Las Vegas, currently 105 degrees as I write, I don’t see too many bikers.
Supply chain breaks and increased demand are not inflation. A more clear-eyed view is from Peter Boockver, who wisely looks at price inflation, first in services, and then in goods. In an interview with Real Vision’s Ed Harrison, Boockvar said, “When it comes to services, take out energy, so call it core services, over the last 20 years, it’s averaged an annual gain of 2.7%.”
He cites increases in rents, medical costs, insurance, and education as the culprits.
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Understanding global value chains by accounting for firm heterogeneity in US production within industries – James Fetzer, Tina Highfill, Kassu Hossiso, Tom F. Howells III, Erich H. Strassner, Jeffrey A. Young
23 Juni
Research has shown that multinational enterprises located in the US account for roughly 90% of US exports of goods and for over 90% of exports of selected services. While these estimates show that multinationals clearly dominate trading activity of gross exports, they overstate the role of multinationals in US exports since non-multinationals are an important part of the production supply chain and make significant contributions to the value embodied in these exports. This column uses experimental Trade in Value Added statistics estimated from extended supply-use tables for the US for 2005 and 2012 to show that both multinational and non-multinational firms contribute significant amounts of content embodied in US exports.
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America’s Social Order is Unraveling – Charles Hugh Smith
25 Juni
The unraveling of America’s social order is accelerating, and denial will not save us from the consequences of the plundering of the social contract.
What kind of nation boasts a record-high stock market and an unraveling social order? Answer: a failed nation, a nation that has substituted artifice for realism for far too long, a nation that now depends on illusory phantoms of capital, prosperity and democracy to prop up a crumbling facade of “wealth” that the populace now understands is largely in the hands of a few families and corporations, most of which pay little to support the citizenry they dominate politically and financially.
The social order sounds abstract, but it is all too real. The social order has two primary components: social cohesion, the glue of common purpose and shared sacrifice binding the social order, and the social contract, the implicit contract between the ruling elite, the state (government) and commoners (the middle class, the working poor and state dependents) that their labor, taxes and sacrifices will nourish a society with a level playing field, broad-based opportunity and security.
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***The Real Trickle-Down Effect: Making “Luxuries” Affordable to Regular People – Lipton Matthews
24 juni
Most readers are familiar with the notion of the “trickle-down effect.” This caricature is usually employed by left-leaning economists to denounce tax cuts for the entrepreneurial class. Writing for the Washington Post, Christopher Ingraham tells readers that slashing tax rates for the wealthy fails to stimulate employment, though rich people become more affluent. Unfortunately, free market economists often respond by demonstrating that there is a positive link between low tax rates and economic growth.
Although their efforts are commendable, such writers are employing the wrong strategy. Instead of showing that tax cuts benefit ordinary people, they should highlight the well-documented trickle-down effect of capitalism. In general, capitalism reveals a trickle-down effect by making luxury goods affordable to the masses. Through intense competition, capitalism drives down costs, thereby allowing ordinary people to access luxuries. For instance, in 2011, 35 percent of Americans owned a smartphone, and today the figure is 85 percent.
Furthermore, the allure of profit motivates entrepreneurs to cannibalize the market with their products, and when the aim is to gain wealth, the social class of consumers becomes irrelevant. Economist Tim Worstall describes Henry Ford as one such entrepreneur: “Henry Ford didn’t make the Model T because he thought rich people wanted a car in any colour they liked as long as it was black…. He was deliberately making cars cheaper in order to maximize his sales and profits…. Because gaining a few pence or pennies from hundreds of millions of people is a bigger pile of cash than catering to the few billionaires out there.”
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***Fishy business in an expert product review – Ben Vollaard, Jan van Ours
24 Juni
Many expert product reviews are non-blind and influenced by cosy relationships between reviewers and producers that consumers are not aware of. The downside of biased reviews is largely unknown because of a lack of data and small sample sizes. Based on unique data for a long-running expert product review in the food-service industry, this column finds that a conflict of interests for reviewers led to a sizeable bias in ratings. This casts doubt on the value of non-blind expert product reviews that are not bound by very strict rules.
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How Fiat Money Changes Culture – Stephan Livera
23 juni
Can the type of money used change the culture of a society? This might seem like an absurd proposition, but it is supported by the arguments of proponents of the Austrian school of economics.
First, let’s contextualize the importance of sound money as opposed to fiat money. Mises notes in The Theory of Money and Credit: “It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments.“
Fiat money has never arisen through purely voluntary market actions. It has always been coercively imposed via interventions such as legal tender laws, capital gains tax laws, central banking, laws permitting fractional reserve banking, government bailout guarantees, etc. This causes a degeneration in the quality of money used by society. But are there cultural consequences of this?
To see the cultural consequences, we must first understand the pivotal role money and prices play in coordinating production across society. Entrepreneurs must act under uncertainty to gather the required resources to offer their goods and services. And yet money, their unit of account, for measuring profit and loss, is being manipulated by the government. Money is created as new loans are issued by commercial and retail banks, and the first recipients of that money benefit at the expense of late recipients.
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The Breathtaking Collapse of Retail Rents in Manhattan, Year 7 – Wolf Richter
23 juni
Retailers willing to battle ecommerce will find “ample availability” – the shuttered stores dotting the sidewalks – and much lower but still very high rents.
The collapse of asking rents for vacant retail spaces lining the sidewalks along the 17 major shopping corridors in Manhattan has been spectacular. Since the beginning of the meltdown in 2015, the average asking rent in a number of these corridors has now plunged between 50% and 68%.
But there were a few exceptions. And in one corridor, retail rents soared 70% since 2015.
This is the first half of the seventh year of the meltdown. The whole brick-and-mortar retail model has come under question. Rents in Manhattan, even after the plunge, remain expensive, and retailers, already under attack from ecommerce, are having trouble surviving.
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Fears for the future: Saving dynamics after the Covid-19 outbreak – Valerio Ercolani, Elisa Guglielminetti, Concetta Rondinelli
26 Juni
The Covid-19 pandemic has seen a surge in household savings across the world. This column exploits information from the Bank of Italy’s Special Survey of Italian Households to break down recent saving patterns in Italy. It finds an increase in precautionary savings associated with factors such as higher job uncertainty and fears of a protracted pandemic. Additionally, it suggests that a lasting precautionary attitude could slow the decumulation of piled up savings, even as the pandemic slows down.
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Central Banks See No Way out of the Low Interest Rate Trap – Thomas MayerGunther Schnabl
21 juni
Since the 1980s, slower economic growth in the industrial countries has been accompanied by declining interest rates. They have even turned negative in more recent years. At the same time, investment, productivity, and real GDP growth all have slowed. Recession caused by lockdowns of the economy to fight the corona pandemic in 2020/21 has accelerated the demise of interest. Even as the world economy recovers, central bankers around the world have signaled that interest rates will be kept low for a long time to come. What is going on here? Various economists have provided different theoretical and empirical explanations for the global decline of interest rates.
The Keynesian perspective in the tradition of Alvin Hansen and Larry Summers has attributed secularly declining nominal and real interest rates—and thus declines of the “natural rate”—to a global savings glut driven by aging societies, a declining demand for fixed capital investment, and a declining marginal efficiency of fixed capital.1 From this perspective, monetary policy has simply adjusted to these changes and lowered nominal and real interest rates. The corona crisis has only reinforced what has been going on for a long time before. Owing to the lockdowns, household and company incomes fell off a cliff, so the neutral rate has dropped even more, probably deeply into negative territory.2 In sum, central banks simply take account of exogenous forces, such as secular stagnation and the corona crisis, by aligning policy and market interest rates with a natural rate of zero or less.
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Central Banks Did it, Won’t Admit it. Top OECD Housing Bubbles: #1 New Zealand, #2 Canada, #7 USA – Wolf Richter
24 juni
According to “Bubble Ranking” by Bloomberg Economics.
It is just so much fun to watch central banks denying that there are housing bubbles, and even if there were housing bubbles, denying that they could be seen, and even if they could be seen, denying that monetary policies are responsible for them, and even if monetary policies are responsible for them, denying that monetary policies could be used to deflate them or prevent them in the first place.
Central banks say this after spending years repressing short-term interest rates via their policy rates – often now into the negative – and repressing long-term interest rates via asset purchases, including housing bond purchases, such as MBS, and thereby driving down mortgage rates, which then trigger enormous price increases and soon housing bubbles.
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