Economische aanraders 30-10-2016
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.
***Why the Jobs Aren’t Coming Back – James Murray
The candidates in the current campaign – or any campaign – are all promising to “bring back good jobs” to “create good jobs.” When asked how they would do that, they are all a little light on details.
About a year ago, Joe Biden was in Michigan to celebrate the opening of a new manufacturing plant that made “small metal clamps” used in all kinds of industries to hold wiring, hoses. Etc. in place. The largest market is the auto industry but they are sold to hundreds of other manufacturers. Depending on size, shape, and material, these parts sell for a few pennies or less. You have to make a lot of these parts to have any substantial billing numbers.
This new plant is fully automated and runs 24/7/365 with just 14 people. Joe was quite happy saying “manufacturing is returning to America.”
The role of multinational firms in international business cycle co-movement – Javier Cravino, Andrei Levchenko
Multinational production has become one of the most important means by which firms serve foreign markets. This column examines the role of multinational firms in aggregate business cycle transmission. The results suggest that the combined impact of all foreign multinationals is small but significant, accounting for about 10% of the productivity shocks in a typical country and leading to a somewhat more synchronised international business cycle.
*** What’s Really Different this Time: Business Investment Drops to Lowest September since 2010 – Wolf Richter
What if it’s really different this time? What if eight years of radical monetary policies have altered the way things work to such an extent that the normal economic patterns no longer apply, that the economy has entered far into a new territory where ultra-cheap credit sloshes around, and where – instead of short, sharp recessions that clean out the cobwebs and help economic actors slough off excess debt at the expense of creditors – we get years of quagmire interrupted by mild declines and false-hope rises, even as the debt burden continues to grow and grow to suffocate all hopes at economic growth?
There have been plenty of symptoms of this. Here is one more: business investment – which plays an outsize role in economic growth. And it just booked its worst September since 2010.
Why the ECB is going to print, print, PRINT! – David Llewellyn-Smith
A key purpose behind the ECB’s alternative easing programs has been to materially improve credit provision and conditions in the Euro Area economy. Exhibiting a lagged relationship with the business cycle and further hampered by the health of European banks, success on this front has been slow and limited.
As referenced in their most recent policy statement, “loan dynamics followed the path of gradual recovery observed since the beginning of 2014”. However, that has only left annual growth in loans to non-financial corporates and households at 1.9%yr and 1.8%yr respectively at September 2016.
These are hardly strong outcomes and, of late, there has been a clear lack of momentum, meaning further material gains are unlikely for the forseeable future. Indeed, from the detail of the ECB’s own bank lending survey, there is evidence to suggest credit growth is set to slow.
Starting with non-financial corporates, the ECB survey reports that there is a clear downtrend in current credit demand, with the net per cent of respondents reporting increased demand for credit from firms having peaked in the first quarter of 2016 and consistently declined ever since.
Dollar and Yuan Cash In on the Global Money-Printing Trend – Alasdair McLeod
There is little doubt that the rapid expansion of both dollar-denominated debt and monetary quantities since the financial crisis will lead us into a currency crisis. We just don’t know when, and the dollar is not alone. All the major paper currencies have been massively inflated in recent years. With the dollar acting as the world’s reserve currency, where the dollar goes, so do all the other fiat monies.
Until that cataclysmic event, we watch currencies behave in increasingly unexpected, seemingly irrational ways. The fundamentals for Japan are not good, yet the yen remains the strongest currency of the big four. The eurozone risks a systemic collapse, overwhelmed by political and financial headwinds, yet the euro’s exchange rate has proved relatively impervious to this deep uncertainty. The British economy is strongest, yet sterling is the weakest of the four majors.
New eBook: What To Do With the UK? EU Perspectives on Brexit – Charles Wyplosz
With Britain’s exit from the EU edging ever closer, so too are the negotiations. So far the focus has been on the future position of the UK. Now the time comes for the remaining 27 member states to understand the implications for them, and to establish a strategy for the EU. This column introduces a new eBook aimed at contributing to the extraordinary challenges that lie ahead.
How the Ballooning “Pension Crisis” Will Impact the Economy – James Murray
In the very simplest terms, the Dallas Police & Fire Pension Fund is going broke, and the police who are counting on it for their retirement are beginning to panic. Police involved are retiring as early as possible and taking cash payouts because they fear that the fund will run dry and future checks may not be forthcoming. The whole thing is beginning to look like a run on a bank and it is just making matters worse.
It’s not that the DPFP is all that different from most of the public and private retirement funds; it’s just that what is happening has been noticed and made the headlines.
The danger of Germany’s current account surpluses: Results of the CFM and CEPR Survey – Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis
The October 2016 expert survey of the Centre for Macroeconomics (CFM) and CEPR invited views from a panel of macroeconomists based across Europe on Germany’s trade surplus, its impact on the Eurozone economy, and the appropriate response of German fiscal policy. More than two-thirds of the respondents agree with the proposition that German current account surpluses are a threat to the Eurozone economy. A slightly smaller majority believe that the German government ought to increase public investment in response to the surpluses.
Ideas make us rich – Allen Mendenhall
The following excerpt is adapted from Mendenhall’s review of Deirdre McCloskey’s book Bourgeois Equality; the original review, which appeared in the Quarterly Journal of Austrian Economics, is available here.
Writing with an air of confidence, McCloskey submits, contra Thomas Piketty, that ideas and ideology — not capital accumulation or material resources — have caused widespread economic development. Since 1800, worldwide material wealth has increased and proliferated; the quality of life in poor countries has risen — even if it remains unequal to that of more prosperous countries —and the typical human being now enjoys access to the food, goods, services, medicine, and healthcare that, in earlier centuries, were available to only a select few in the richest parts of the globe. The transition from poverty to wealth was occasioned by shifting rhetoric that reflected an emerging ethical consensus. The rhetorical-ethical change involved people’s “attitudes toward other humans” (p. xxiii), namely, the recognition of shared experience and “sympathy,” as Adam Smith stated in The Theory of Moral Sentiments. Attributing human progress to ideas enables McCloskey to advocate the norms and principles that facilitated economic growth and social improvement (e.g., class mobility and fluidity) while generating extensive prosperity. Thus, her project is at once scholarly and tendentious: a study of the conditions and principles that, in turn, she promotes.
Why unconventional monetary policy works in theory – Roger Farmer, Pawel Zabczyk
Ben Bernanke famously quipped that monetary policy works in practice, but not in theory. This column bridges the gap between practice and theory in assessing how central banks can influence both of them by intervening in asset markets. To the extent that asset market volatility is driven by shifts in beliefs, the central bank should aim to eliminate that volatility by engaging in countercyclical unconventional monetary policy, which would end up reducing the risk premium.
A Behavioral new-Keynesian Model – John H. Cochrane
Here are comments on Xavier Gabaix’ “A Behavioral new-Keynesian model.” Xavier presented at the October 21 NBER Economic Fluctuations and growth meeting, and I was the discussant. Slides here
Short summary: It’s a really important paper. I think it’s too important to be true.
Gabaix’ irrationality fixes the pathologies of the standard model by making a stable model unstable, and hence locally determinate. Gabaix’ irrationality parameter M in [0,1] can thus substitute for the usual Taylor principle that interest rates move more than one for one with inflation.
Gabaix imagines — after three papers worth of careful math — that people pay less attention to future income when deciding on consumption than they should. Making today’s consumption less sensitive to future income, means expectations of future income are larger for any amount of today’s consumption. Thus, it makes model dynamics unstable.
Economist Predicts Rising Obamacare Costs Will Lead To Riots – Tyler Durden
Now that it is widely accepted by everyone except the president in denial, that Obamacare is an epic debacle, one which boosts GDP because it is fundamentally a tax that counts toward healthcare expenditures yet takes away from other discretionary spending leading to a downtrend in overall US consumption, most also have an opinion on how it unwinds. However, few are as gloomy as economist Chris Butler of Butler, Lanz and Wagler, who discussed the rising cost of health insurance plans rising next year under the Affordable Care Act, and said he expects riots as the populace begins to expresses outrage upon learning many will be priced out of health care options.
Butler told Chris Stigall on Talk Radio 1210 WPHT to expect more public demonstrations of anger as prices move upward.
Herd Behavior: Why Lack Of Patience Could Spark Argentina’s Next Crisis – Bianca Fernet
It’s been almost one year since President Mauricio Macri shocked the world by winning Argentina’s presidential elections, and the country is in a state of flux — hovering in an uncertainty characterized by hope, anxiety, fear and just a few whiffs of the dreaded stench of failure.
Besides displaying a shocking lack of political PR and taking on a few petty wastes of time, this government is doing most things within its power correctly to right the course of a vessel that seemed destined to crash.
Despite these positive steps, one sinister question looms: Has the Macri government managed to avert the looming economic crisis entirely, or is it merely kicking the can down the road? It’s scary, but Argentina is in uncharted territory. Rather than boom, the economy is in a prolonged recession that could be heading for an all too familiar outcome — bust.
Exchange rate behaviour when interest rates are negative: The evidence – Allaudeen Hameed, Andrew Rose
Recently a number of both small and large economies have experienced negative nominal interest rates. This column uses exchange rate data from 2010 to 2016 to demonstrate that negative interest rates seem to have little effect on observable exchange rate behaviour in these economies. While the long-run consequences for the financial sector of negative interest rates are unknown, the short-run effects on exchange rates in the sample are negligible.
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.