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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If money could buy happiness: The determinants of utility of international currencies – Eiji Ogawa, Makoto Muto
26 juli
Given the US dollar’s historical prominence in international currency systems, it can be argued that a large part of its present-day importance is due to inertia. This column analyses the determinants of the utility of four international currencies, focusing on the liquidity premium. It shows that while inertia does have a strong effect on a currency’s utility, a liquidity shortage can also reduce the utility of an international currency.
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Central Banks are Making “Conservative Investments” Riskier. This Could Be Disastrous for Pensions – Daniel Lacalle
24 juli
There are many misconceptions about the collateral damages of financial repression. The first one is to believe that Central Banks monitor or react to financial risk accumulation. Policymakers tend to allow excessive risk-taking as a lesser evil side effect in their quest for inflation at any cost (read my paper). If asset valuations are somehow elevated, they expect a moderate correction to solve it. Another misconception is to believe that risks accumulated during periods of monetary expansion can be easily absorbed and mitigated with macroprudential measures and regulation (Steiner et al). The evidence also shows that risk happens fast and the impact across assets and the real economy far exceeds the maximum impact estimated by commercial, investment, and central banks. The failure of stress tests and the inability to see financial bubbles or predict a crisis are a testimony to the mistakes in consensus complacent views of risk.
One of the biggest problems right now is that the most conservative and prudent investments are increasingly adding extraordinary risks for lower yields.
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Who Holds the $3.2 Trillion in “Leveraged Loans” and CLOs? – Wolf Richter
22 juli
Murk everywhere. There isn’t even an agreement what “leveraged loans” are. No, banks are not off the hook. They hold 57% of these instruments, the Bank of England found.
Leveraged loans are risky. They’ve been issued by junk-rated overleveraged companies that are often owned by private equity firms. These loans are often packaged into highly rated Collateralized Loan Obligations (CLOs). The Fed, the Bank of England, and other central banks are fretting about them publicly in their Financial Stability Reports. Leveraged loans are traded in slices like securities, but they’re loans, and not securities, and so securities regulators don’t regulate them, and no one regulates them. No one knows into whose balance sheets they can blow holes. And there is not even any agreement what exactly leveraged loans are.
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***Every era’s monetary and financial institutions are unimaginable until they’re real – John H. Cochrane
24 juli
Every era’s monetary and financial institutions are unimaginable until they’re real, writes Tyler Cowen in an excellent Bloomberg.com essay on the anniversary of Bretton Woods. (MR link)
Our ancestors’ experience with paper money leading quickly to massive inflation would leave them agape at our completely unbacked fiat money and floating exchange rates which has led only to mild inflation.
…fast forward [from the gold standard] to the current day. Currencies are fiat, the ties to gold are gone, and most exchange rates for the major currencies are freely floating, with periodic central bank intervention to manipulate exchange rates. For all the criticism it receives, this arrangement has also proved to be a viable global monetary order, and it has been accompanied by an excellent overall record for global growth.
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The Fed’s Dangerous Game: A Fourth Round of Stimulus in a Single Growth Cycle – Brendan Brown
26 juli
The longer the signals in capital markets go haywire under the influence of “monetary stimulus,” the bigger is the cumulative economic cost. That is one big reason why this fourth Fed stimulus — in the present already-longest (but lowest-growth) of super-long business cycles — is so dangerous.
True, there is nothing new about the Fed imparting stimulus well into a business cycle expansion with the intention of combating a threat of recession. Think of 1927, 1962, 1967, 1985, 1988, 1995, and 1998.
This time, though, we’ve seen it four times (2010/11, 2012/13, 2016/17, 2019) in a single cycle. That is a record. Normally, a jump in recorded goods and services inflation, or concerns about rampant speculation, have trumped the inclination to stimulate after one — or at most two — episodes of stimulus.
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Productivity and competitiveness in the euro area: A view from France – Agnès Bénassy-Quéré, Olivier Blanchard, Laurence Boone, Gilbert Cette, Chiara Criscuolo, Anne Epaulard, Sébastien Jean, Margaret Kyle, Philippe Martin, Xavier Ragot, Alexandra Roulet, David Thesmar
24 juli
In September 2016, the European Council invited all euro area members to set up a National Productivity Board to focus on productivity and competitiveness. This column summarises the main findings of the first report of the Conseil National de Productivité, which analyses the causes of the French productivity slowdown that are common to other OECD countries and those that are specific to France. It also proposes a definition of competitiveness that should be useful for euro area macroeconomic policy debates and explains why current account imbalances in the euro area are both a sign of deficient adjustment mechanisms and a cause of concern.
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A Shocker In Today’s GDP Revision: No Profit Gains In The Past 5 Years – Joseph Carson
26 juli
The happy prophecy of endless growth in the economy generating a continuous flow of strong corporate earnings just ran into trouble—the “truth” on profits. According to GDP data released today Q2 corporate earning posted their largest annual decline in several years, and the revised data shows that there has been no growth in operating profits for the past 5 years.
Q2 Real GDP bettered analyst’s expectations growing 2.1% annualized, driven by strong gains in consumer and government spending. Yet, the gain in GDP did not flow to the bottom line for companies.
According to the preliminary Q2 GDP results, implied operating profits for the period totaled $1,900 billion, down 5% from Q1, which would represent the third consecutive quarterly decline, and off over 7% from the year ago levels, one the largest declines recorded in several years.
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World Trade in Face of Tariffmageddon, Trade Wars & Manufacturing Slowdown – Wolf Richter
25 juli
Consumers and companies keep plugging, the world has not come to an end.
World trade volume – imports and exports of merchandise across the globe – increased 0.3% in May from April, after falling 0.6% in the prior month, according to the Merchandise World Trade Monitor, released today by CPB Netherlands Bureau for Economic Policy Analysis. On a year-over-year basis, the index fell 0.4%. And it is down 2.1% from the peak in October 2018. This isn’t exactly stellar, compared to 2017 and 2018, when the world trade index increased between 2% and 6% year-over-year.
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***Once “Prosperity” Falters, the Legitimacy of the Status Quo Evaporates – Charles Hugh Smith
26 juli
All we’re doing is waiting for the fake “prosperity” to crumble, and the resulting loss of credibility and legitimacy will follow like night follows day.
The citizenry of corrupt regimes ruled by self-serving elites tolerate this oppressive misrule for one reason and only one reason: increasing prosperity, which we can define as continual improvement in material well-being and financial security.
The legitimacy of every corrupt regime ruled by self-serving elites hangs on this single thread: once prosperity fades, the legitimacy of the regime evaporates, as the citizenry have no reason to tolerate their rapacious, predatory overlords.
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***The declining labour share of income: Accounting for the main factors from a meso perspective – Jan Mischke, Hans‐Helmut Kotz, Jacques Bughin
26 juli
Since the 1980s, labour compensation relative to aggregate output has been on an inexorable downward trend across major developed economies. This column deploys a simple accounting technology to tease out the driving factors behind this, focusing on the US. The findings highlight the key role of under-appreciated factors, including supercycles and boom-bust effects and rising depreciation. The analysis suggests that while the effect of some factors may dampen or reverse, others will likely continue at an uncertain pace.
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Are Expectations the Driving Force Behind Business Cycles? – Frank Shostak
22 juli
According to Ludwig von Mises’s Austrian Business Cycle Theory (ABCT), the artificial lowering of interest rates by the central bank leads to a misallocation of resources due to the fact that businesses undertake various capital projects that prior to the lowering of interest rates weren’t considered viable. This misallocation of resources is commonly described as an economic boom.
Once the central bank reverses its stance, this sets in motion an economic bust. It follows then that the artificial lowering of interest rates sets a trap for businessmen by luring them into unsustainable business activities that are revealed as such once the central bank tightens its interest rate stance.
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***Unpacking e-commerce: The rise of new business models – Molly Lesher, Jan Tscheke
25 juli
E-commerce facilitates trade across borders, increases convenience for consumers, and enables firms to reach new markets. This column identifies a range of digital technologies and the new business models they enable that are driving dynamism in e-commerce markets. Despite this dynamism, however, important gaps remain with regard to e-commerce participation among firms and different groups of individuals. Targeted polices are needed to provide the regulatory flexibility for new business models to thrive and to ensure that e-commerce becomes more inclusive.
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Is Digital Bling Propping up China’s Stock Market? – Adam Williams
21 juli
Tencent is one of the top ten companies by stock market valuation worldwide, at around $441 billion. Its finances are a complex web, and its products are the backbone of urban Chinese digital life. It does this by leveraging its mobile gaming revenue into an IT behemoth of infrastructure and tech. Tencent dominates the Chinese gaming market with NetEase a distant 2nd (market cap of $31 billion), with a few other majors, and countless startups picking up the crumbs.
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Acknowledging and pricing macroeconomic uncertainties – Lars Peter Hansen, Thomas Sargent
22 juli
False pretences of knowledge about complicated economic situations have become all too common in public policy debates. This column argues that policymakers should take into account what they don’t know in their decision making. It describes a tractable approach for acknowledging, characterising, and responding to different forms of uncertainty, by using theories and statistical methods available at any particular moment.
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Soaring Debt Vs. Shrinking Populations Of Young To Repay Or Service That Debt – Chris Hamilton
26 juli
For nearly a half century wealthy nations young populations have been declining versus rising young among poor nations…offset by secularly declining interest rates and the addition of over $240 trillion in global debt to maintain unnaturally high rates of economic growth. The consumer nations population of relatively wealthy young has been declining for nearly 4 and a half decades, falling over 100 million or 12% during that span. The population of relatively poorer nations young has increased by nearly 190% or increased by 570 million. On average, each wealthier nations young person represents $26.5k in per capita consumption versus each poor nations young represents $1.5k in per capita consumption. Said otherwise, it takes 15 more poor nations inhabitants to replace the loss of every one wealthier nations inhabitant to simply maintain flat consumption, thus the impetus for interest rate cuts and massive increases in debt among the wealthy. Obviously, consumption hasn’t been flat but has grown tremendously, primarily thanks to interest rate cuts, cheap debt, and only in a very small part from growth in consumption among the poorer nations population gains.
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***The Companies with the Most Debt in America – Wolf Richter
26 juli
The concentration of corporate debt: The top 46.
The US Justice Department today approved the merger of T-Mobile, the third largest wireless carrier and Sprint Corp., the fourth largest wireless carrier. For the merger to go forward, they will have to sell Sprint’s prepaid brands to Dish. As for the rest, whatever this does to competition and rates for wireless services, one thing is for sure: It creates another US debt monster.
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Mapped: The Countries With the Highest Housing Bubble Risks – Steve Desjardins
19 juli
With a decade-long bull market and an ultra low interest rate environment globally, it’s not surprising to see capital flock to housing assets.
For many investors, real estate is considered as good of a place as any to park money – but what happens when things get a little too frothy, and the fundamentals begin to slip away?
In recent years, experts have been closely watching several indicators that point to rising bubble risks in some housing markets. Further, they are also warning that countries like Canada and New Zealand may be overdue for a correction in housing prices.
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***Value of data: There’s no such thing as a free lunch in the digital economy – Wendy C.Y. Li, Makoto Nirei, Kazufumi Yamana
23 juli
Online platforms that provide services at zero monetary cost benefit greatly from the data these transactions generate. This column proposes a new method to value these data, based on firm investments in organisational capital. The method also captures the social value of consumer data. Accurate estimates may guide investment and improve national accounts.
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