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Keep Eye on Sovereign Debt for Next Minsky Moment

The recent turmoil in bonds offers a good example of what's to come as the global economy recovers and central bankers curb stimulus.

Alberto Gallo, Bloomberg 5 juli 2017

Den tyska hyperinflationen. "De eldade med pengar – sen kom Hitler." Fel, fel, fel.

Hyperinflationen under mellankrigsåren är en mardröm som ska prägla tyskarna länge. I detta trauma bottnar Bundesbanks inflationsskräck, Maastrichtavtalets stränga stabilitetskriterier och vad som ibland har upplevts som en hård och obarmhärtig attityd i eurokrisen.

Tomas Lundin, SvD 3 juli 2017

I oktober 1924 ersätts Rentenmark av Reichsmark. Denna stöds av de allierade som nu vill skapa ett skapa ett stabilt och ekonomiskt starkt Tyskland i stället för kaos. Men då är det redan för sent. Den 30 januari 1933 utses Adolf Hitler till rikskansler.

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Den uppmärksamme läsaren noterar hoppet på nio år från 1924 till 1933.

Vad hände då?

The Nazis only won 32 Reichstag seats in the election of May 1924, and just 12 in 1928. The Nazi party did not become a popular political force until long after the hyperinflation period ended. The Economist, November 15th 2013

It is sometimes said that German attitudes to the economy and the current crisis are instructed by experience of Weimar inflation Yet it wasn't hyperinflation that brought Hitler to power, but rather the depression of the early 1930s, which in Germany's case was greatly exaggerated by the pro-cyclical austerity the government of the time insisted on applying to the problem.
Jeremy Warner, February 17th, 2012

Det var inte inflationen som förde Hitler till makten, som Fokus och många andra tror, det var arbetslösheten
Bra Böckers Världshistoria, Band 13, sid 156-157 anför härom:

"Inrikespolitiskt lyckades man /i Tyskland/ stabilisera ekonomin genom att införa ett nytt penningsystem 1923-24. Inflationssedlarna växlades in till en kurs av en ny mark mot en biljon gamla. Inflationsprocessen hade verkat som en storstilad skuldsanering och därmed hade staten på nytt blivit solvent. 

- Slutet av tjugotalet präglades i Tyskland av ekonomisk framgång och med den följde också en viss politisk stabilisering... 1928 bildades en ny majoritetsregering med socialdemokraten Herman Müller som kansler och den konservative Gustav Stresemann som utrikesminister... I valet 1928 placerade sig /Hitlers parti/ NSDAP - Nationalsocialistiska Tyska Arbetareartiet / i raden av de många småpartierna och fick 2,6 procent av rösterna"


The second half of 2017 just got a lot more interesting for bond investors

For investors scrambling to keep pace with a hawkish shift in the world’s biggest central banks, the second half of 2017 just got a lot more interesting.

Bloomberg 29 June 2017

 Friday global sell off in the bond market spread to equities amid fears that the post-crisis era of easy money was coming to an end.

FT 30 June 2017


Ambrose BIS. The global economy is caught in a permanent trap of boom-bust financial cycles.

This deformed structure is becoming ever more corrosive and dangerous as debt ratios rise to vertiginous levels, BIS has warned.

Ambrose Evans-Pritchard, 25 June 2017


Greek economic tragedy, much of the European view continues to defy economic logic – and for a simple reason

European politicians worry about the domestic political consequences of granting Greece debt relief, especially ahead of Germany’s federal election in September.

Mohamed A. El-Erian, Project Syndicate 21 June 2017

Greece “extend and pretend” - The latest deal on debt won’t work, and everybody knows it.

This protracted game of “extend and pretend” serves nobody’s long-term interests:

not those of the Greek government, the International Monetary Fund or, most of all, the people of Greece.

The Editors, Bloomberg 21 June 2017


ECB rule book for giving emergency loans. Greek banks are still using 44 bn euro of ELA help.

ECB-sanctioned “emergency liquidity assistance” was a lifeline for a clutch of banks that were cut off from normal financing channels during the crisis.

FT 19 June 2017


“Minsky moment,” the point at which excess debt sparks a financial crisis.

The late Hyman Minsky said that such moments arise naturally when a long period of stability and complacency eventually leads to the buildup of excess debt and overleveraging. 

At some point the branch breaks, and gravity takes over. It can happen quickly, too.

Minsky came to mind because in the past week I saw yet more signs that financial markets are overvalued and investors excessively optimistic. Yet I still haven’t seen many references to Minsky. 

That’s a little surprising.

John Mauldin, 17 June 2017