Economische aanraders: 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.

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***The Two Charts That Dictate the Future of the Economy – Charles Hugh Smith
26 juli
If you study these charts closely, you can only conclude that the US economy is doomed to secular stagnation and never-ending recession.
The stock market, bond yields and statistical measures of the economy can be gamed, manipulated and massaged by authorities, but the real economy cannot. This is espcially true for the core drivers of the economy, real (adjusted for inflation) household income and real disposable household income, i.e. the real income remaining after debt service (interest and principal), rent, healthcare co-payments and insurance and other essential living expenses.
If you want to predict the future of the U.S. economy, look at real household income. If real income is stagnant or declining, households cannot afford to take on more debt or pay for additional consumption.
The Masters of the Economy have replaced the income lost to inflation and economic stagnation with debt for the past 17 years. They’ve managed to do so by lowering interest rates (and thus lowering interest payments), enabling households to borrow more (and thus buy more) with the same monthly debt payments.
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Our Obsession with Survey Data is Ruining Economics – Jonathan Newman
23 juli
In a recent Bloomberg article, Noah Smith celebrates the increasing trend of empirical work in economics over the years. Purely theoretical papers are on the decline as a share of all published work. More and more economists are utilizing data to estimate the magnitude of various effects or to estimate specific parameters in theoretical models.
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It’s Your Money But You Can’t Have It: EU Proposes Account Freezes to Halt Bank Runs – Mish Shedlock
28 juli
If there is a run on the bank, any bank in the EU, you better be among the first to get your money out.
Although it’s your money, the EU wants to Freeze Accounts to Prevent Runs at Failing Banks.
European Union states are considering measures which would allow them to temporarily stop people withdrawing money from their accounts to prevent bank runs, an EU document reviewed by Reuters revealed.
The move is aimed at helping rescue lenders that are deemed failing or likely to fail, but critics say it could hit confidence and might even hasten withdrawals at the first rumors of a bank being in trouble.
The proposal, which has been in the works since the beginning of this year, comes less than two months after a run on deposits at Banco Popular contributed to the collapse of the Spanish lender.
Giving supervisors the power to temporarily block bank accounts at ailing lenders is “a feasible option,” a paper prepared by the Estonian presidency of the EU said, acknowledging that member states were divided on the issue.
EU countries which already allow a moratorium on bank payouts in insolvency procedures at national level, like Germany, support the measure, officials said.
“The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge,” a person familiar with German government’s thinking said.
The Estonian proposal was discussed by EU envoys on July 13 but no decision was made, an EU official said. Discussions were due to continue in September. Approval of EU lawmakers would be required for any final decision.
Under the plan discussed by EU states, pay-outs could be suspended for five working days and the block could be extended to a maximum of 20 days in exceptional circumstances, the Estonian document said.
Spooking Customers
I side with Charlie Bannister of the Association for Financial Markets in Europe (AFME), who says “We strongly believe that this would incentivize depositors to run from a bank at an early stage.”
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Risk has been Abolished, According to Institutional Investors – Wolf Richter
26 juli
Why? Wall Street sells “more financial products and generates more profits when investors are bullish.”
“Covenant-lite” loans – risky instruments issued by junk-rated borrowers, with few protections for creditors – set an all-time record at the end of the second quarter.
They’re part of the risky universe of “leveraged loans,” and they’re secured by some collateral, but they don’t come with the protections and restrictive maintenance requirements in their covenants that traditional leveraged loans offer creditors.
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The Toxic Fruit of Financialization: Risk Is for Those at the Bottom – Chalres Hugh Smith
27 juli
One of the most pernicious consequences of financialization is the shifting of risk from the top of the wealth-power pyramid to the bottom: those who benefit the most from financialization’s leveraged, speculative credit bubbles protect themselves from losses while those at the bottom of the pyramid (the bottom 99.5%) face the full fury of financialization’s formidable risk.
Longtime correspondent Chad D. and I recently exchanged emails exploring how the higher debt loads and higher interest payments of financialization inhibits people at the bottom of the wealth-power pyramid (i.e. debt-serfs) from taking risks such as starting a small business.
But this is only one serving of financialization’s toxic banquet of risk-related consequences. Chad summarized how those at the apex of the wealth-power pyramid protect themselves from risk and losses.
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Trilemmas and Financial Instability – Joseph Joyce
26 juli
Whether or not the international monetary trilemma (the choice facing policymakers among monetary autonomy, capital mobility and a fixed exchange rate) allows policymakers the scope for policy autonomy has been the subject of a number of recent analyses (see here for a summary). Hélène Rey of the London Business School has claimed that the global financial cycle constrains the ability of policymakers to affect domestic conditions regardless of the exchange rate regime. Michael Klein of the Fletcher School at Tufts and Jay Shambaugh of George Washington University, on the other hand, have found that exchange rate flexibility does provide a degree of monetary autonomy. But is monetary policy sufficient to avoid financial instability if accompanied by unregulated capital flows ?
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Foreign Investment Is Not a Problem for the Domestic Economy – Mateusz Machaj
27 juli
In recent months, the political atmosphere in Poland has become more nationalist, which is reflected in a growing anti-foreign attitude toward capital flows. The general argument used relates to the apparently negative aspect of interest payments and dividends on invested capital being transferred to foreign owners. “What a waste,” the complaints go, “cannot we leave everything in the hands of domestic owners, so that money stays in the country to provide employment? How can we let such a drain of resources occur?”
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***Endogenous childlessness and stages of development – Thomas Baudin, David de la Croix, Paula E. Gobbi
25 juli
The fertility of women in developing countries is higher on average than in developed countries, yet many women in developing countries remain childless. This column argues that understanding the causes of why some women choose childlessness is important if we wish to predict the impact that development policies have on the demographic transition of poor countries.
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Stunning Lack of Market Decline Highlights Surreal New Normal – Benjamin A. Smith,
27 juli
To say the stock market is on a roll is an understatement. The Big Three indexes (S&P 500, Dow Jones Industrial Average, NASDAQ) are making fresh highs, mostly because of valuation expansion. That is what investors are focused on. But what about the lack of market decline? The dynamics behind this fact could speak louder than any stock rally could.
The Wall Street Journal is reporting that major indexes haven’t gone a calendar year without a five-percent-or-more pullback in 20 years. The last time this happened was following the “Brexit” referendum, which eked out a 5.2% peak-to-trough loss. While not quite a “calendar” year, it was over a year ago that this happened. In fact, the 267-day streak with a five-percent decline is the longest going back to 1996.
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The Fed Remains on Course – to Trouble – Thorsten Polleit
26 juli
The Federal Reserve (Fed) is widely expected to continue to tighten its monetary policy this year. According to a latest Reuters Poll, the Fed is likely to start shrinking its US$4 trillion balance sheet in September and, moreover, raise further its key interest rate, which is currently standing in a range of 1.0 to 1.25 percent, in the fourth quarter this year.
According to mainstream economic wisdom, the time has come for the US economy to return to a more normal level of interest rates. Industrial output is expanding at a decent clip, official unemployment has declined markedly, and prices in the stock and housing market show a sustained upward drift. Considering these circumstances, the US economy can now shoulder a tighter monetary policy, it is said.
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Excess saving and low interest rates: Assessing theory and evidence from the Global Crisis – Peter Bofinger, Mathias Ries
29 juli
There is a broad consensus that the global decline in real interest rates can be explained with a higher propensity to save, above all due to demographic reasons. This column argues that this view relies on a commodity theory of finance, which is inadequate for analysis of real world phenomena. In a monetary theory of finance, household saving does not release funds for investment, it simply redistributes existing funds. In addition, the column shows that at the global level, the gross household saving rate has declined since the 1980s, as well as net saving rates.
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P&G Slashed Digital Ad Spending. This is What Happened Next – Wolf Richter
28 juli
Procter & Gamble, one of the largest and most sophisticated advertisers in the world, reported on Thursday that sales were slightly down in the fourth quarter and for the fiscal year, despite consumer price inflation. It’s the epitome of corporate revenue stagnation: only price increases keep revenues from declining. An activist investor – formerly called “corporate raider” – is breathing down its neck. So cost cutting to raise profits is the trick.
When a corporate giant cuts costs, it cuts the revenues of other companies.
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***A Mixed Hero: A Libertarian Reassessment of Elon Musk – Konrad Graf
23 juli
Many libertarians seem to love to hate Elon Musk these days. His crime is to live off the public purse. His companies would be bankrupt without green subsidies and cheap government loans and contracts. He seeks out favorable terms from governments and angles to capture subsidies and cheap loans with no reservation and with vast success at doing so. This situation, along with certain financing practices and relationships among his companies, has led to it becoming fashionable to disdain Musk as a public figure and to characterize him with sweeping put-downs.
I have a more complex assessment of Musk as a figure. I enjoyed listening to his 2015 biography by Ashlee Vance. I tend to look for the positive things in people. One positive quality here is the ability to re-envision products from the ground up in a completely different way. The Tesla is not just the evolution of the car, but a completely new way to think about what a car is. A car is a thing with an engine and a drive train, right? True for a century, but not any more. Musk has done in the fields of cars and rockets, what Steve Jobs did for computers and phones, completely re-envisioned what they could be, how they could be built, and how they could be used.
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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.