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Economische aanraders 31-01-2021

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.

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The Monetary Approach to the Balance of Payments – Joseph T. Salerno
30 januari

Leland Yeager offers an illuminating discussion of a serious problem that has historically plagued monetary theory and continues to do so to this day: the failure to clearly distinguish between the individual and the overall viewpoints when analyzing monetary phenomena. I wish to emphasize particularly Yeager’s insight that the source of this problem lies in the failure of monetary theorists to heed “the sound precept of methodological individualism,” which dictates that bridges be constructed between the two viewpoints “by relating propositions about all economic phenomena, including the behavior of macroeconomic aggregates, to the perceptions and decisions of individuals.” In detailing and critically analyzing the errors engendered by this confusion of viewpoints in monetary theory, Yeager has taught an elementary, yet much needed, lesson in the principles of economic reasoning and the dire consequences of neglecting them. I daresay this lesson would have been wholly unnecessary had economists attended more closely to the earlier lessons taught by Ludwig von Mises, certainly the foremost exponent and practitioner of methodological individualism in twentieth-century monetary theory.
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The Stock Market, Fatally Wounded by the Truth, Will Stumble and Crash – Charles Hugh Smith
30 januari

It didn’t have to be this way, but this is the reality we must now face: truth is fatal to fraud, and our entire financial-political system is a fraud.
The stock market has just been punctured by the thin blades of truth. It is fatally wounded but nobody dares notice. The wounds are barely visible, but the internal damage is mortal. The stock market is already stumbling and will soon crash.
The banquet’s participants ignore the faltering market because the rules are we never reveal the truth, or acknowledge it, or discuss it, no matter how obvious, because truth is fatal to fraud. So the stock market’s vital signs are in freefall but the conversation remains upbeat and light: stimulus, rapid growth in the second half, etc., all the patter of a carefully constructed illusion that fraud is forever as long as the truth never comes out.
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Compared to Europe and China, America Is Still a Safe Bet – Daniel Lacalle
27 januari

Many financial experts have rushed to make what has been regarded as “Biden trade” calls based on the projections by the Associated Press, NBC News, and other news outlets of a Joe Biden presidency. The “Biden trade” is a synonym of a recommendation to invest in assets that may benefit from a Democratic presidency judging by the main policies announced throughout the campaign.
The first risk for investors is to make significant bets on radical changes of policy when the balance of power in the House and Senate may inhibit many of the headline-grabbing policy changes. We already have reports, for example, that show how the tax hikes may be halted due to a combination of a divided government and the negotiations of a new stimulus package.
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***How financial markets shape social values and political views – Yotam Margalit, Moses Shayo
31 januari

The impact of markets on participants’ values and political preferences has long been a contested issue. This column uses a large field experiment to evaluate the effects of engagement in financial markets. Participants from a national sample in England were randomly assigned substantial sums they could invest in stocks or non-financial assets over a six-week period. Results show that investment in stocks led to a more right-leaning outlook on society and economics, including issues like personal responsibility, merit, and the role of luck in economic success. It also increased support for market-friendly policies and less regulation.
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What to Expect from Bidenomics – Frank Shostak
27 januari

On Tuesday, January 19, 2021, the Treasury secretary designate Janet Yellen outlined before the Senate Finance Committee the likely course of President Joe Biden’s economic policies in the months ahead. Given the fragile state of the US economy as a result of covid-19, Yellen favors Biden’s $1.9 trillion spending plan to provide support to the economy. Yellen seems to be aware that some commentators might have misgivings about such a massive spending plan given the already large budget deficit and vast public debt: the twelve-month moving average of the budget deficit stood at $144 billion in December last year, while as a percentage of GDP the federal debt stood at 131 percent in September 2020 (versus 107 percent in September 2019).
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The effects of ‘global systemically important bank’ designation on corporate lending – Hans Degryse, Mike Mariathasan, Thi Hien Tang
29 januari

Frequent bailouts during the Global Crisis showed that governments cannot credibly commit not to support large financial institutions. This inability leads to moral hazard and motivated the Financial Stability Board’s framework for ‘global systemically important banks’. This column explores the net effects of this framework on the real economy, focusing on changes in corporate lending and the availability of credit as the basis to evaluate whether the framework is an effective way in which to reduce moral hazard and promote robust financial markets.
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The Dollar’s Reserve Currency Status Won’t Last Forever – Doug French
28 januari

The Federal Reserve and the confederation of central banks which follow Chair Powell and his lieutenants at the Eccles Building have flooded the world with fiat script which is only limited by Keynesians’ and modern monetary theorists’ imaginations. In this flurry of metaphorical printing, one country, Russia, has loaded its central bank balance sheet not with the speculation de jour, bitcoin, but instead with the barbaric relic gold.
Tellingly, Russia’s stockpiling began in 2016, and on the eve of the president’s departure from the White House, Vladimir Putin and Elvira Nabiullina, president of Russia’s central bank, had more gold than US dollars stockpiled.
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Understanding the Roots and Causes of Inflation – Ludwig von Mises
26 januari

[This is the fourth lecture from Mises’s Economic Policy: Thoughts for Today and Tomorrow.]
If the supply of caviar were as plentiful as the supply of potatoes, the price of caviar—that is, the exchange ratio between caviar and money or caviar and other commodities—would change considerably. In that case, one could obtain caviar at a much smaller sacrifice than is required today. Likewise, if the quantity of money is increased, the purchasing power of the monetary unit decreases, and the quantity of goods that can be obtained for one unit of this money decreases also.
When, in the sixteenth century, American resources of gold and silver were discovered and exploited, enormous quantities of the precious metals were transported to Europe. The result of this increase in the quantity of money was a general tendency toward an upward movement of prices in Europe. In the same way, today, when a government increases the quantity of paper money, the result is that the purchasing power of the monetary unit begins to drop, and so prices rise. This is called inflation.
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Americans Cut Back as Income from Wages & Salaries Hit Record as 10 Million People Still out of Work: Weirdest Economy Ever – Wolf Richter
29 januari

Meanwhile, away from the stock market mania…
Income from wages and salaries that consumers earned in December ticked up to a new record, as high earners and executives were making lots of money working from home though 10 million other people, mostly lower income, had lost their jobs; and income from unemployment insurance for those less lucky ones jumped. But spending on goods fell again as Americans cut back after the binge, and spending on services remained at dismal levels.
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Digital Currencies Are Changing the Money Landscape – Pascal Hügli
28 januari

Government-mandated money in the form of legal tender is a historical anomaly. For much of mankind’s history private monies and quasi monies competed alongside each other. Now, again, a new era of private money competition is resurging and reshaping our world.
Money, finance, and banking are currently experiencing the “Great Unbundling.” Value chains within finance are being broken up across the spectrum. Customers or users are no longer obtaining their money services as an all-in-one package from a single universal bank but increasingly follow a best-in-class approach in which the best offers from many different providers are chosen.
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The deposits channel of monetary policy: A critical review – Rafael Repullo
30 januari

A novel channel through which monetary policy affects bank lending has recently been proposed, motivated by the empirical finding that increases in the monetary policy rate lead to reductions in bank deposits at bank branches located in counties with stronger competition between banks. This column questions the proposed theoretical underpinnings of this ‘deposits channel’ and offers an alternative model which is able to fully rationalise the empirical findings.
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The ECB Is Playing a Dangerous Game with “Collective Action Clauses” on Bonds – Malachy McDermott
29 januari

There is a clause to European bond sales called a collective action clause. In fact, “all bonds issued by Eurozone member states with maturities exceeding one year, issued after January 1, 2013, have a mandatory collective action clause.” This clause is the first part in a dangerous game of perpetual growth with zero savings that European Central Bank (ECB) and the International Monetary Fund (IMF) are playing at the moment.
But firstly, what is a collective action clause (CAC)? To put it simply, it’s a mechanism whereby a bond’s value can be legally reduced by the issuer in times of hardship, originally very unpopular (in the ’80s and ’90s). Geoffrey Okamoto and others at the IMF and at central banks say that countries that were not allowed to do this to issued bonds experienced stagnation.
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Gold Price Framework Update: The New Cycle Accelerates – Goldmoney
28 januari

Gold prices rallied 25% in 2020 after having gained 19% the year before. We believe this marks still only the beginning of the current golds price cycle, as all main drivers for gold prices are strongly skewed to the upside.
In our gold price framework (Gold Price Framework Vol. 2 – The Energy Side of the Equation, May 28, 2018), we identified three main price drivers for gold prices over the long run:
Central bank policy (real-interest rate expectations and quantitative easing),
net central bank gold sales and
longer-dated energy prices.
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***The Coming Revolt of the Middle Class – Charles Hugh Smith
27 januari

That’s how Neofeudal systems collapse: the tax donkeys and debt-serfs finally rebel and start demanding the $50 trillion river of capital take a new course.
The Great American Middle Class has stood meekly by while the New Nobility stripmined $50 trillion from the middle and working classes. As this RAND report documents, $50 trillion has been siphoned from labor and the lower 90% of the workforce to the New Nobility and their technocrat lackeys who own the vast majority of the capital: Trends in Income From 1975 to 2018.
Why has the Great American Middle Class meekly accepted their new role as debt-serfs and powerless peasants in a Neofeudal Economy ruled by the New Nobility of Big Tech / monopolies / cartels / financiers? The basic answer is the New Nobility’s PR has been so persuasive and ubiquitous: soaring inequality and Neofeudalism has nothing to do with us, it’s just the natural result of technology and globalization–forces nobody can resist. Sorry about your debt-serfdom, but hey, your student loan payment is overdue, so it’s the rack for you.
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Biggest Office Glut since 2005 Hits Hong Kong Commercial Real Estate amid Worst Recession on Record – Nick Corbishley
28 januari

Several unique factors, topped off by the enduring trend to working from home and an exodus of companies.
Office demand in Hong Kong, one of the world’s most expensive property markets, remains “extremely weak,” says Cushman & Wakefield. More and more companies are allowing a larger percentage of their workforce to work from home on a long-term basis, reducing their office space needs. By the end of last year, overall net absorption — the sum of square feet that became physically occupied, minus the sum of square feet that became physically vacant — of Grade-A office space had slumped to -2.3 million square foot, the steepest annual drop on record.
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Moral hazard, the fear of the markets, and how central banks responded to Covid-19 – Mattia Bevilacqua, Lukas Brandl-Cheng, Jon Danielsson, Jean-Pierre Zigrand
28 januari

While the direct economic consequences of Covid-19 have been significant, the impact on the financial markets has been more nuanced. This column uses a unique data set on the financial markets’ fears and perceptions of long-run financial risk to identify how Covid-19, and particularly Fed policy responses to Covid-19, affected global market fears. While some Fed interventions had little or no impact on market fear, the most powerful were the US dollar swap lines, which strongly reduced the perceived likelihood of global market losses decades into the future. The results suggest that the Fed’s relative global role has been strengthened, possibly at the cost of increased moral hazard.
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***Lessons on Economic Freedom from Ancient Greece – Lipton Matthews
27 januari

Economic freedom isn’t a modern invention. Throughout history, we find time and time again that those areas with the most economic freedom were the most prosperous. Activists in favor of economic freedom often limit themselves, however, to only a few times and places, and most lean on modern studies showing the benefits of the marketplace. It is possible to take a broader view, however, and market defenders could strengthen their argument by revisiting the larger historical track record of economic freedom.
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2021 – A Disappointment Of Growth And Disinflation – Lance Roberts
29 januari

As we head into 2021, there is a large consensus that the massive monetary interventions in 2020 will lead to an explosion of economic growth, inflation, and higher interest rates. We suspect that the outcome of more debt-driven spending will lead to a disappointment in growth and disinflation instead.
Milton Friedman once said:
“Inflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output.”
There is little argument currently that the Federal Reserve is “printing money” without any reservation. The chart below is the “supply of money” as represented by M2.
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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.

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