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.

——————————————————————————————————
Where Prices Come From: Menger Explains – Antony P. Mueller
24 augustus
Prices Reflect Exchange Ratios
Prices, as Menger points out in his Grundsätze, emerge as an accidental phenomenon. They are not the essence of economic activity. Prices are fortuitous insofar as they are the unintended result of an economic exchange that has subjective evaluations as its basis. Prices do not determine the exchange, but rather the individual exchange valuations determine the limits within which a negotiated price in terms of exchange ratios will be agreed upon. It is not prices that move the economy, but the endeavor of people to satisfy their needs as fully as possible. Out of this motive, people exchange, and prices appear as an accompanying unintended side effect (p. 172).
Prices show up on the surface as the visible portion of economic activities. Because prices are a constant companion of economic life and are observable as seemingly objective phenomena, many economists have assumed that they are also the most important portion of the economy and therefore of economics. Prices appear in the form of numerical quantities and thus it is an understandable error to take prices as the fundamental aspect of the economy. This mistake led to the blunder of regarding the quantities of goods that appear in an exchange as equivalents (p. 173).
——————————————————————————————————
All Of A Sudden It’s Obvious To Everyone That The Fed Should Have Been Tapering A Long Time Ago – Tyler Durden
27 augustus
It appears the investment world is starting to wake up to a message that we have been screaming from rooftops for more than 10 years : the Fed has boxed itself into the largest asset bubble in history.
And there’s no obvious way out.
Since 2009 we have been raising critical questions about how long the Fed would be able to kick the can down the road with its monetary policy, but even we could have never predicted the size and scope that QE would eventually mutate into.
With our Central Bank just casually doubling its balance sheet (and nearly the money supply) in the course of under two years, all markets – housing, bonds, stocks, consumer pricing – have screamed to new highs with no signs of stopping.
As each day goes by, it’ll slowly become more apparent to the public, the investment world and yes, even the rocket surgeons at the Fed, that the notion of bringing the economy in for a “soft landing” from this bubble is going to be far more difficult than ever imagined (assuming the Fed actually ever pondered the situation, which it likely hasn’t). That is to say, it could even be downright impossible.
——————————————————————————————————
IMF loans and offshore financial flows – Shekhar Aiyar, Manasa Patnam
24 Augustus
Recent research suggests that World Bank aid disbursements are associated with outflows from recipient countries to offshore financial centres, indicating elite capture of aid. This column uses 25 years of data to examine whether the same is true for IMF lending. It finds no evidence that IMF loans are diverted to offshore bank accounts. This could be because IMF lending differs in structural respects – such as conditionality, concessionality, and continuity – from World Bank aid.
——————————————————————————————————
Macroeconomic Data Is a Tool for Government Intervention – Frank Shostak
24 augustus
It is common for commentators and economists to refer to something called the “economy,” which sometimes performs well and at other times poorly. The “economy” is presented as a living entity apart from individuals.
For example, various experts report that the “economy” grew by such and such percentage, or that the widening in the trade deficit threatens the “economy.” What do they mean by the term “economy”? Does such an entity actually exist?
Within this framework of thinking, the “economy” is assigned a paramount importance while individuals are barely mentioned.
The “economy” produces goods and services in this way of thinking. Once the output is produced by the “economy,” its distribution among individuals in the fairest way is required.
In reality, goods and services are not produced in totality and supervised by one supreme commander. Every individual is preoccupied with his own production of goods and services. Consequently, there is no such thing as the total national output.
——————————————————————————————————
“Rapidly Becoming Untenable” – Eurozone Finances Have Deteriorated – Alasdair Macleod
26 augustus
Despite negative interest rates and money printing by the European Central Bank, which conveniently allowed all Eurozone member governments to fund themselves, having gone nowhere Eurozone nominal GDP is even lower than it was before the Lehman crisis.
Then there is the question of bad debts, which have been mostly shovelled into the TARGET2 settlement system: otherwise, we would have seen some substantial bank failures by now.
The Eurozone’s largest banks are over-leveraged, and their share prices question their survival. Furthermore, these banks will have to contract their balance sheets to comply with the new Basel 4 regulations covering risk weighted assets, due to be introduced in January 2023.
And lastly, we should consider the political and economic consequences of a collapse of the Eurosystem. It is likely to be triggered by US dollar interest rates rising, causing a global bear market in financial assets. The financial position of highly indebted Eurozone members will become rapidly untenable and the very existence of the euro, the glue that holds it all together, will be threatened.
——————————————————————————————————
How to Identify a Bubble: Wall Street Says It’s Not a Bubble – Chalres Hugh Smith
25 Augustus
The post-bubble-crash phase is already being prepared: ‘no one could have seen this coming’–except anyone who paid attention to anything other than self-interested shills.
It’s really pretty simple to identify a speculative bubble of epic proportions in stocks: if Wall Street says it’s not a bubble, it’s a bubble. As I explained in The Smart Money Has Already Sold, from the long view the entire game of “investing” (wink-wink) boils down to one dynamic:
Wall Street and the Federal Reserve inflate an unprecedented debt-funded speculative bubble and then lure retail “investors” (i.e. gamblers) in with the promise that the enormous gains are just starting, there’s so much more easy money ahead, etc. Then Wall Street distributes (sells over time so as not to alert the complacent herd of retail punters) its shares of overpriced rubbish (“investments”, heh) to bagholders, and then to everyone’s surprise (or not), the market suddenly crashes as the unsustainable bubble pops.
Wall Street has long practice in how to reassure the herd: since insiders have juiced the market higher for years at every dip (with the Fed’s free trillions offering a helping hand), the bagholders have been well-trained to buy the dip even as the wheels come off the whole “this time it’s different” scam.
——————————————————————————————————
The Structural Changes Taking Place In The Economy Are “Very Dangerous” – Bruce Wilds
24 augustus
Markets Are Focused On The Fed And Tapering, Not Jobs.
Markets are not focused on jobs as much as it is about when tapering will begin. Some economists are going as far as calling the last “a remarkably strong jobs report.” I beg to differ. Let’s be clear, most of these are not new jobs but simply people returning to the slots made when Covid-19 disrupted the economy. A huge X factor here is of course how Covid-19 fear is handled going forward.
The fact is, Covid-19 is not going to disappear completely and we will have to deal with it one way or another. Yes, jobs are being restored and much of this is being pushed forward by some states no longer giving out the “bonus” unemployment benefits showered upon us by the Federal government. This has resulted in a drop in the number of workers claiming they are no longer unemployed. It has also dropped the unemployment rate.
——————————————————————————————————
Don’t Be Fooled by the Fed’s Taper Talk – Brendan Brown
23 augustus
Question: Suppose the Fed doubles the supply of ”high-powered money” (monetary base) from around 15 percent to 30 percent of US GDP over a period of less than two years, then announces that the pace of increase will slow to just above zero within the next year providing that the economy remains “on course”; does this amount to a serious attenuation of monetary inflation?
Answer: No.
The Fed’s prospective “taper,” now the endless subject of the twenty-four-hour financial TV news cycle, provides a case study for explaining this response.
The US central bank, on course to deliver this year a record amount of inflation tax revenue to the federal government, is now using all its instruments of propaganda to tell us about its looming “monetary normalization” program, otherwise described as “tapering.” An ostensible aim is to keep markets calm.
——————————————————————————————————
Inefficiency of carbon pricing with government-owned companies – Bruno Baranek, Federico Boffa, Jakub Kastl
23 Augustus
Carbon pricing is generally considered by economists as a superior alternative for emissions mitigation to command-and control regulation. This column uses data from the Italian electricity market to challenge this view in the context of the electricity sector, showing that carbon pricing schemes may not work efficiently when the major firms in the market are government controlled. As the vast majority of large electricity generators in the world are government-controlled and the electricity sector accounts for more than 40% of global carbon emissions from fuel combustion, the findings have important policy implications. Properly implemented command and control approaches might be more efficient, especially since reliable estimates of the production functions of electric generators are readily available.
——————————————————————————————————
The End of the Gold Standard. Fifty Years of Monetary Insanity – Daniel Lacalle
21 ugustus
This year marks the fiftieth anniversary since Nixon suspended the convertibility of the US dollar into gold. This began the era of a global fiat money, debt-fueled economy. Since then, crises are more frequent but also shorter and always “solved” by adding more debt and more money printing.
The suspension of the gold standard was a catalyst for massive global credit expansion and cemented the position of the US dollar as the world’s reserve currency, as it de facto substituted gold as the reserve for the main central banks.
Thus, since the breakdown of the gold standard, financial crises are more frequent but also shorter than before.
The level of global debt has skyrocketed to more than 350 percent of GDP, and what is mistakenly called “the financial economy,” which is actually the credit-based economy, has multiplied.
The gold standard supposed a limit to the monetary and fiscal voracity of governments, and suspending it unleashed an unprecedented push to increase indebtedness and the perverse incentive of the states to pass on the current imbalances to future generations.
By substituting gold for the US dollar as a global reserve, the United States has been able to borrow and increase its money supply massively without triggering hyperinflation, because it exports its monetary imbalances to the rest of the world. Other currencies follow the same monetary expansion without the global demand that the US dollar enjoys, so the rising imbalances always end up making those currencies weaker versus the greenback and the economies more dependent on the US dollar.
——————————————————————————————————
Korea & Iceland Kick off Rate-Hike Cycle in Developed Economies after Shock-and-Awe Rate Hikes in Russia, Brazil – Wolf Richter
26 augustus
Soaring home prices have become a thorny political issue for Korea’s government, facing a frustrated and angry middle class.
With its rate hike of 25 basis points today, to 0.75%, the Bank of Korea became the second central bank of a developed economy to hike its policy rate in this cycle. The first was Iceland, whose central bank hiked its policy rate on Wednesday by 25 basis points to 1.25%, after having already hiked it in May. These timid rate hikes follow the serial shock-and-awe rate hikes by the central banks in Russia and Brazil, among others, that started in the spring.
The statement and the comments by Bank of Korea governor Lee Ju-yeol had a hawkish bent, pointing at further rate hikes in the future, specifically to tamp down on financial imbalances, surging household debt, and soaring home prices.
The soaring home prices have become a thorny political issue for the government, facing a frustrated and angry middle class.
——————————————————————————————————
***Global weather disruptions, food commodity prices, and economic activity: A global warning for advanced countries – Jasmien De Winne, Gert Peersman
29 Augustus
The world is expected to see a significant rise in the frequency, duration, and intensity of extreme weather events. This column examines the macroeconomic effects of global food commodity price increases that are caused by global harvest and weather disruptions, and finds that the decline in economic activity is substantial and greater in advanced than in low-income countries. The findings suggest that the consequences of climate change for advanced countries may be greater than previously thought, and the strong rise in food prices since the outbreak of COVID-19 could seriously impede the recovery.
——————————————————————————————————
Fed Up with the Fed’s Abuse of Power – Charles Hugh Smith
25 augustus
One phrase describes the Fed’s pillaging of the nation to benefit the few at the expense of the many: abuse of power.
To confess that the fate of the entire global economy now rests on the mumblings of a fossilized Politburo fanatically devoted to making the rich richer is to 1) state the obvious and 2) admit the extreme fragility of the global financial system. That it has come to this– all global markets soar or collapse in unison based on the addled spew of the fossilized Politburo’s chairman–is overwhelming evidence that 1) the system is broken and 2) the fossilized Politburo has way too much power and 3) the fossilized Politburo is abusing its power by enriching the already-rich, decade after decade, to the detriment of the bottom 90% and systemic stability.
Let me translate the incoherent ramblings of Chairperson Powell: let them eat cake (or more precisely, let them eat brioche), for increasing wealth and income inequality has been the Fed’s prime directive since The Maestro Alan Greenspan began the Fed’s manipulation–oops, I mean management–of the stock, bond and risk markets in the early 1990s.
The fatal synergies unleashed by the Fed’s abuse of power were already apparent to Greenspan by December 5, 1995 when he issued his famous warning that equities were exhibiting “irrational exuberance.” The irrational exuberance of those early days of the Fed’s abuse of power–stripmining the middle class to boost the wealth of America’s top tier–now look positively quaint compared to today’s Fed-fueled speculative mania which has poisoned the entire society and hoisted the economy on a rickety ladder to the sky that will crush everything below when it finally snaps.
——————————————————————————————————
The long-run effects of R&D place-based policies: Evidence from Russian science cities – Helena Schweiger, Alexander Stepanov, Paolo Zacchia
26 Augustus
Localised innovation policies, such as local R&D clusters, are very popular, yet the evidence about their effectiveness is scarce in the short run, let alone the long run. This column fills the gap by studying the long-run effects of a historic localised place-based innovation policy in the form of Russian science cities. It finds that in present-day Russia, science cities remain more innovative and productive, host more highly skilled workers, and pay them higher salaries.
——————————————————————————————————
Holy Cow – Australian Beef Prices Hit Record High As Food Inflation Concerns Persist – Tyler Durden
28 augustus
After decades of low inflation and relatively cheap food prices, those days appear over as food inflation soars worldwide. The latest observation that food prices are out of control is in Australia.
Australian cattle futures are at record-highs as farm operators hold back livestock from slaughterhouses to rebuild herds after years of drought forced many cattle operators to cull herds. Supply disruptions have resulted in the benchmark Eastern Young Cattle Index soaring to A$10.082 ($7.26) a kilogram. From the 2020 low, prices have more than doubled in a year.
——————————————————————————————————
End of the Era of Voracious Corporate Appetite for Office Space – Wolf Richter
24 augustus
Formerly temporary, now persistent work-from-home turns into slow-motion nightmare for office landlords.
It has been nearly 18 months that many big-company offices became no-go places, and the temporary disruption that was supposed to last only a few months has been dragging on and on. The vaunted and repeatedly delayed “return to the office” – as flexible, partial, and “hybrid” as it was supposed to be – is being pushed out further into next year. February 2022 will close the second year of this shift to working from home.
Apple, which spent a massive fortune on its new campus in Cupertino and wants its people back in it badly, said that it would delay the return to the office until at least January 2022. Amazon, DoorDash, Lyft, Chevron, Wells Fargo, Facebook, and many others have delayed their return to the office until next year as well.
This is on top of the numerous companies that have moved to permanent work-from-home models.
——————————————————————————————————
Fed Policy Continues to Support Cyclical Stocks – Bryce Coward
27 augustus
Yesterday at the annual Jackson Hole Economic Symposium, Federal Reserve Chairman Jerome Powell reiterated that the Fed is in no hurry to either taper asset purchases immediately or aggressively. Additionally he made crystal clear that even when the Fed does eventually start tapering asset purchases (likely November or December), it should not be taken as signaling interest rate hikes will follow on some preset course. Indeed, Fed Chairman Powell continues to lean into the idea that inflation is will prove to be transitory and so there is no rush to tighten policy, especially with the employment part of the mandate still far from being achieved.
This strong dovish guidance flies in the face of what many investors have been expecting, which was for the Fed to commence asset tapering sooner rather than later and for rate hikes to potentially commence in 2022 rather than the middle of 2023 or later. The reiteration of the more dovish Fed stance opens the door inflation expectations to turn back up, since the Fed is not so eager to front run rises in inflation with more restrictive policy.
——————————————————————————————————
***Covid: How the West Embraced Central Planning and Abandoned Human Rights – Birsen Filip
27 augustus
In January 2020, Hubei and more than a dozen other provinces in mainland China implemented totalitarian lockdown measures, such as the closure of schools and workplaces, and strict restrictions on travel and mobility, including the suspension of all public transport, the cancellation of flights, blocking train and bus routes, and closing highway entrances. Efforts to bring the outbreaks under control in these provinces also included mask mandates and strict stay-at-home orders. By the end of February 2020, the pandemic was largely under control in most Chinese provinces, which led the government to start easing many of the oppressive lockdown measures the following month. The lockdown was officially lifted on April 8, 2020, seventy-six days after it was initially implemented.
——————————————————————————————————
Platform regulation: What policymakers can and cannot learn from utility industries – Tobias Kretschmer, Sven Werner
28 Augustus
Recent discussions on how to regulate dominant online platforms revolve around the suitability of applying existing regulatory frameworks. This column contrasts the economic and strategic features of platform business models to those of utility industries, which are often considered structurally similar. It argues that the design of effective regulation for dominant digital platforms should account for platforms’ nature as an ecosystem of independent actors and for their relatively shorter innovation cycles.
——————————————————————————————————
Flush with Free Money, Americans Spent Heroic Amounts, but Inflation Ate it Up – Wolf Richter
28 augustus
Pay More, Get Less. Spending on durable goods after inflation down 10% from historic spike. But services surged, pointing to next source of inflation.
The fly in the ointment of the most monstrously overstimulated economy ever is, it turns out, duh, inflation which is now eating into what Americans earn, and what they spend, though they’re making heroic efforts to spend.
Before inflation, personal income from all sources rose by 2.7% in July compared to a year ago, and by 1.1% for the month, to a seasonally adjusted annual rate of $17.8 trillion, according to the Bureau of Economic Analysis on Friday. This includes income from wages, stimulus payments, transfer payments (unemployment compensation, Social Security benefits, etc.), and income from other sources such as interest, dividends, and rental income.
——————————————————————————————————
Declining capital formation in Japan and the role of intangibles – Tsutomu Miyagawa, Takayuki Ishikawa
27 Augustus
The Japanese economy has seen a decline in the contribution of capital accumulation to economic growth since 2000. This column uses over 30 years of national productivity data to explore this trend. It finds that the fall in tangible capital accumulation has largely been offset by investment into intangible capital. However, the growth in tangible and intangible capital accumulation has been imbalanced, calling for support of both types of asset accumulation.
——————————————————————————————————
The Lasting Legacy of Carl Menger – Antony P. Mueller
26 augustus
Carl Menger (February 23, 1840–February 26, 1921) is the founder of the Austrian school of economics. He is generally recognized in economics for his contribution to the development of the concept of marginal utility and as a pioneer of the subjective value theory. For Austrian economics specifically, he laid the foundation with his insights on the use of knowledge and foresight, the importance of relative prices, the role of time, and the role of the spontaneous emergence of social institutions. Menger provides a consistent perspective of the economy and delivers a coherent exposition of the complexities of the interrelation among goods, value, exchange, and prices.
——————————————————————————————————
***Math education — or not – John H. Cochrane
25 augustus
Percy Deift, Svetlana Jitomirskaya, and Sergiu Klainerman have a well-informed essay at Quillette on the state of math education in the US and China. Italics are mine throughout. I did not copy over the links, but the article is full of documentation.
The most interesting part is the economics and politics of math education:
One obvious problem lies in the way teachers are trained. The vast majority of K-12 math teachers in the United States are graduates of programs that teach little in the way of substantive mathematics beyond so-called math methods courses (which focus on such topics as “understanding the complexities of diverse, multiple-ability classrooms”).
——————————————————————————————————
Beer: A Short and Bitter History of Regulation – Daniella Bassi
21 augustus
“Brewed according to the German Purity Law,” a Hobräu München hefeweizen bottle proudly declares. This brewery is not alone. Other German and even American brewers brag about how their beer adheres to the 1516 Bavarian Reinheitsgebot, which originally limited beer’s ingredients to water, barley, and hops.
The pride in this law is strange—in 2013 the German Brewers Association tried to get UNESCO to designate it an intangible cultural heritage and its five hundredth “anniversary”1 in 2016 was widely celebrated and written about. The law was very restrictive—so much so that exceptions had to be made so that some drinks, such as wheat beers, could continue to be produced. Today, of course, most beer is bittered with hops, and the plant is integral to beer’s identity in the United States and Europe, if not the world.
Few know that beer used to be flavored and preserved with a variety of different herbs (bog myrtle and wild rosemary especially), resins, fruit, and animal products. The additives varied widely across northwestern Europe, but the mixture of ingredients, whatever it may have contained, was called gruit. Gruited beer was called ale in England and ael in the Low Countries—Holland, Flanders, Brabant, and Liège—while hopped beer was called beer (bier), but today people broadly refer to unhopped beer as gruit.
——————————————————————————————————
Banks’ IT adoption and lending during the pandemic – Nicola Branzoli, Edoardo Rainone, Ilaria Supino
23 Augustus
The Covid-19 pandemic increased the pace of change in clients’ relationships with the banking sector, with mobility restrictions forcing banks to make better use of information technology to accommodate the increasing demand for digital financial services. This column analyses the role of IT adoption in bank lending since the outbreak of the pandemic. It finds that intermediaries with a higher degree of digital readiness provided more credit to non-financial corporations. It also shows that proximity to a physical bank branch increased the positive impact of IT on the amount of credit granted.
——————————————————————————————————

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.

Eerdere afleveringen van dit wekelijkse overzicht vindt u hier.Economische aanraders