Economische aanraders 28-11-2021

Economische aanraders 0

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.

Central bank digital currency: Considerations, projects, outlook – Dirk Niepelt
24 november

Central bank digital currency has become a major preoccupation of central bankers. In a new CEPR eBook, academics and policymakers review what we know about the economic, legal, and political implications, discuss current projects, and look ahead. While consensus on the ‘right’ CBDC choices remains elusive, common perspectives emerge. First, money, banking and payments are ripe for upheaval, with or without CBDC. Second, the key risk of CBDC is unlikely to be bank disintermediation – privacy, politics, and information may be more critical. Third, the use case for CBDC must be clarified country by country, and may not exist. Fourth, parliaments and voters should have the final say.
Powell & Brainard Suddenly Make Inflation #1 Priority in their Thank-You Statements – Wolf Richter
22 november

Looks like the start of a U-Turn on inflation. 2-year and 10-year yields jump.
The White House announced today that President Biden, eager to get something through the Senate without a long bruising fight, will re-nominate Republican Jerome Powell for a second term as chair of the Federal Reserve’s Board of Governors and will elevate Democrat Lael Brainard to vice chair. Powell is opposed by some prominent Senate Democrats, but supported by many Republicans. And Brainard doesn’t seem to face opposition from Democrats. Both will likely win Senate confirmation.
As you would expect, both Powell and Brainard released thank-you statements about their nomination.
But as you would not expect, fighting inflation was suddenly the number one priority in both their statements – after they’d driven inflation to a three-decade high through record gigantic money printing and interest rate repression, and then had stubbornly brushed off this inflation as something that would quickly go away on its own.
Housing Hubris: Can Home Prices Spiral upward Forever? – Doug French
27 november

For the Wall Street sequel, the subtitle was Money Never Sleeps. But the Oliver Stone reprisal of Gordon Gecko was the stuff of 2010. In America, a decade plus ago, money slept. Now, it truly doesn’t, with cryptocurrency prices gyrating 24/7/365. This frantic activity has spread to other asset markets.
Once real estate was stable and slow moving. Buyers would walk through a home, and walk it again with someone they trusted, before making an offer. But, as Francesca Mari titles his lengthy New York Times Magazine article, “In Austin and cities round the country, the crazy real estate market has forced regular people to act like speculators.” He wonders, “Will home buying ever be ‘normal’ again?”
Mari’s piece chronicles the trials and tribulations of millennials (who are now the largest generation) simply trying to buy a home. In some cases, the offers are made long distance on the basis of images from their computer screens. Nationwide home prices have soared nearly 25 percent. But, where the jobs are, in medium-size metropolitan areas such as Boise, Phoenix, Austin, and Salt Lake City, prices have soared 46 percent, 36 percent, 35 percent, and 33 percent, respectively.
The global footprint of Chinese banks – Cathérine Casanova, Eugenio Cerutti, Swapan-Kumar Pradhan 24 november
The global footprint of Chinese banks is substantial and growing, including during the COVID-19 pandemic. While they are similar to other banks from emerging countries in terms of their ownership and asset structure, their global footprint often resembles that of banks from advanced countries. Geographical distance acts as a barrier for Chinese banks’ lending, comparable to that for US or European banks. Also like their US peers, the lending of Chinese banks strongly correlates with trade. Some differences are present, such as an atypical negative correlation between bank lending and portfolio investment.
The Euro’s Death Wish – Alasdair Macleod
28 november

Last week’s Goldmoney article explained the Fed’s increasing commitment to dollar hyperinflation. This week’s article examines the additional issues facing the euro and the Eurozone.
More nakedly than is evidenced by other major central banks, the ECB through its system of satellite national central banks is now almost solely committed to financing national government debts and smothering over the consequences. The result is a commercial banking system both highly leveraged and burdened with overvalued government debt secured only by an implied ECB guarantee.
The failings of this statist control system have been covered up by a pass-the-parcel any collateral goes €10 trillion plus repo market, which with the TARGET2 settlement system has concealed the progressive accumulation of private sector bad debts ever since the first Eurozone crisis hit Spain in 2012.
No, Inflation Is Not Good for You – William L. Anderson
22 november

With the recent rise in inflation—with subsequent increases in both consumer and producer price levels—one suspects that sooner or later people on the left either would downplay it or find a way to spin the bad news into something positive like an alchemist would want to spin straw into gold. Both accounts have arrived, thanks to the New York Times and the hard-left publication, The Intercept.
The various accounts in the Times hardly are surprising, given the link the paper has to the nation’s political, economic, and academic elites, and given that these are the people that have created the inflation problem in the first place. Not surprisingly, the NYT “experts” (because progressives believe that the “experts” always have the right answers) are playing down the latest spikes as temporary and related to current issues of supply and demand, not any unprecedented increases in the nation’s money supply.
What’s Behind the Pile-Up of New Houses for Sale, Highest since 2008, as Construction Costs Spike Most in 42 Years, Projects Stall – Wolf Richter
27 november

The supply chain mess bogs down home construction.
The inventory of new single-family houses that homebuilders put on the market for sale rose to 389,000 in October, the highest since September 2008, according to data from the Census Bureau:
These houses for sale are in all stages of construction. When you go to a new development, the homebuilder has already completed some houses, but others are under construction, and others haven’t been started yet. If you buy a home where construction hasn’t started yet, the homebuilder will offer the most choices in terms of the appearance and finishes of the house.
Sales of new houses at all stages of construction — not started, under construction, and completed — fell 23% from the pace at the same time last year, to a seasonally adjusted annual rate of 745,000 houses.
The impact of the US-China tariff war on China’s economy: New evidence from night-time lights – Davin Chor, Bingjing Li
25 november

Tariffs initiated by the Trump administration in 2018 raised duties on China’s exports to the US, sparking a ‘tariff war’. This column uses satellite readings of night-time luminosity to show that that locations within China that were more exposed to the US tariffs experienced a larger decrease in night light intensity, pointing to a contraction in local economic activity. By contrast, exposure to China’s retaliatory tariffs appeared to have no significant effect on grid-level night lights.
***We Don’t Talk About Collapse To Revel In It, We Talk About Collapse to Prevent It – Charles Hugh Smith
26 november

If one possible result of the current system is collapse, realizing the system itself must be changed isn’t doom-and-gloom, it’s problem-solving.
Those of us who discuss collapse are generally dismissed as doom-and-gloomers, the equivalent of people who watch dash-cam videos of vehicle crashes all day, reveling in disaster. Why would we spend so much effort discussing collapse if we didn’t long for it?
Those dismissing us all as doom-and-gloomers hoping for collapse have it backward: yes, some long for collapse as a real-life disaster movie, but those discussing collapse in systems terms are trying to avoid it, not revel in it.
If the system is vulnerable beneath a surface stability, then the only way to avoid negative consequences is to understand those vulnerabilities / fragilities and work out systemic changes that reduce those risks.
It’s not the analysis of vulnerabilities that causes collapse, it’s refusing to look at vulnerabilities because to do so is considered negative. Why not be optimistic and just go with the consensus that the status quo is impervious to serious disruption? Can-do optimism is all that’s needed to overcome any spot of bother.
Inflation Stretching Budgets Thin For Americans As They Rethink Holiday Buying – Tyler Durden
26 november

What looked like a win for workers earlier in the year, as wages increased, has turned out to be another blow after accounting for inflation. Real wages are negative on the year, and that is impacting how consumers spend this holiday season. \
Consumer confidence has been sliding as real wages are negative on the year as consumer prices in October spiked 6.2% YoY, far higher than the +5.9% YoY expected and accelerating from September’s 5.4% YoY; that was the highest print since 1990…
Inflation this holiday season will undoubtedly be a topic at the dinner table. Retailers are pushing costs onto consumers as they attempt to preserve margins. Soaring commodity costs (including decade high in food prices), snarled supply chains, higher transportation costs, labor shortages have allowed shallower discounts.
Buying attitudes for big purchases has utterly collapsed (due to price concerns)
The 2021 surge in inflation: A look at sticky prices – Javier G. Gómez-Pineda, Juan Manuel Julio, Julián Roa-Rozo
28 november

There is disagreement over whether the current inflation is here to stay. This column argues that sticky-price inflation, which focuses on components of the consumer price index with infrequent price changes, is particularly useful at the moment as it can help control for ongoing changes in the relative prices of goods and provides hints about future CPI inflation. In October 2021, monthly sticky-price inflation, partially corrected for base effects, was 5.3%. In turn, the CPI inflation forecast for October 2022 is 5.6% and highly uncertain.
Monetary Policy Is in Turmoil – Jörg Guido Hülsmann
26 november

Monetary policy is in turmoil. Ever since the financial crisis erupted eight years ago,* major central banks have fundamentally reformed the way they create and absorb money. Their activism has failed to extinguish the fires. There are already plans to equip monetary policy with new tools, such as the elimination of cash and “helicopter money” in order to face the challenges of the moment and the near future.
One thing seems to be clear: the monetary policy of tomorrow will still be very different from that of today. The monetary system and the economy of tomorrow will be profoundly different from those of today. Can we predict this future?
The future is the result of the previous choices. Where there are choices, the future is in principle uncertain. But this matter of fact needs to be put into perspective. Monetary history has been forged under the impact of certain forces that tirelessly push for an inflation of the money supply. These forces are at work today as at the dawn of time, and they will not disappear tomorrow. It is therefore interesting to identify them, to imagine their extension into the future and to assess them in the light of economic analysis.
***When Risk and Opportunity Become Personal – Chalres Hugh Smith
24 november

The opportunity to lower our exposure to risk is always present in some fashion, but embracing this opportunity becomes critical when precarity and change-points rise like restless seas.
The Chinese characters that comprise the equivalent of “crisis” are famously–and incorrectly– translated as “danger” and “opportunity.” This mis-translation has reached the peculiar prominence of being repeated often enough to be taken as accurate, but according to Wikipedia and other sources, the more accurate translation is “precarious” plus “change point.” (Chinese speakers may be able to shed even more light on the characters’ shades of meaning.)
The American attachment to “crisis” equaling “danger” and “opportunity” is easy to understand: the American “can do” culture is fond of optimistic calls to action (“when life hands you lemons, make lemonade,” etc.) and so crisis presenting opportunity fits this perfectly.
As for the danger: that’s the necessary impetus to grab the opportunity.
Lost in this cheerleading of great opportunities just waiting beneath an oil slick of danger is the possibility that the precariousness of imminent change offering sure-fire opportunities might be wishful thinking.
There is no guarantee that “crisis” is only 10% danger/precarity and 90% unalloyed opportunity; it might just as well be 90% precarity and 10% extremely risky opportunity where the odds of failure exceed those of success.
Bank leverage constraints and bond market illiquidity during the COVID-19 crisis – Johannes Breckenfelder, Victoria Ivashina
27 november

The onset of COVID-19 led to heightened uncertainty and a ‘dash-for-cash’, particularly in the mutual fund sector which faced fire sale pressure. Typically, banks trading securities absorb such pressure and support market liquidity, but regulation may limit their ability to do so. This column analyses the role of bank leverage constraints as an amplifier of bond market illiquidity. It concludes that leverage ratio regulation can have negative side effects by increasing bond market illiquidity in times of economic distress, suggesting that the optimal leverage ratio is procyclical.
OPEC Can’t Make High Oil Prices Go Away – Daniel Lacalle
20 november

High oil prices are a symptom of economic and monetary imbalances, not just a consequence of Organization of the Petroleum Exporting Countries (OPEC) decisions. Throughout history, we have seen how OPEC cuts have done little to elevate prices when diversification and technology added to rising efficiency.
Likewise, OPEC output increases do not necessarily mean lower prices, let alone reasonable ones. Increased OPEC output helps but does not solve price issues, even if they would probably like to.
The problem in the oil market has been created by years of massive capital misallocation and underinvestment in energy created by extremely loose monetary policies directed by governments that have penalized capital expenditure on fossil fuels for ideological reasons.
Misguided activism and political nudging in the middle of massive monetary injections have created massive bottlenecks and underinvestment that hinder both security of supply and a technically feasible competitive energy transition.
How climate change reallocates capital and labour within nations: New evidence from Brazil – Christoph Albert, Paula Bustos, Jacopo Ponticelli
26 november

There are still significant gaps in our understanding of how climate change affects economic outcomes. This column uses new data on extreme weather events in Brazil to study their impact on labour and capital reallocation across regions, sectors, and firms. Long periods of excess dryness lead to the reallocation of capital and labour away from affected regions. Excess dryness over the last two decades has also changed the structure of the economy – not only in directly affected areas, but also in regions that were integrated with them via labour and capital markets.
When Everything Is Artifice and PR, Collapse Beckons – Charles Hugh Smith
22 november

The notion that consequence can be as easily managed as PR is the ultimate artifice and the ultimate delusion.
The consequences of the drip-drip-drip of moral decay is difficult to discern in day-to-day life. It’s easy to dismiss the ubiquity of artifice, PR, spin, corruption, racketeering, fraud, collusion and narrative manipulation (a.k.a. propaganda) as nothing more than human nature, but this dismissal of moral decay is nothing more than rationalizing the rot to protect insiders from the sobering reality that the entire system is unraveling and heading for its final reckoning: collapse.
We’ve become so accustomed to the excesses of marketing that we’ve lost the ability to recognize the difference between “science” that’s been carefully designed to reach a pre-planned conclusion and science that accepts the outcome, even if it harms well-funded interests.
The vast expanses of ignorance greatly aid this artifice. Even though high school physics, chemistry and biology are sufficient to tease apart the vast majority of rigged experiments, trials and studies, few Americans have the interest or fortitude to read Phase III trial results, etc. critically, and so the corporate media can trumpet bogus results without fear of exposure: all the statistical tricks and gimmicks are passed off as “science” to the distracted and gullible.
How euro area consumers adjust their medium-term inflation expectations in turbulent times – Ewa Stanisławska, Maritta Paloviita
26 november

The responsiveness of longer-term inflation expectations to shorter-term economic developments plays an important role in inflation dynamics. Using the new ECB Consumer Expectations Survey conducted in the middle of the Covid-19 pandemic, this column explores how consumers adjust their medium-term inflation views in response to changes in short-term inflation expectations and inflation perceptions. Covid-19 contributed to an increase in consumer inflation expectations, but greater trust in the ECB is associated with more muted responsiveness of inflation expectations.

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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