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
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.
Under the compromise deal, the IMF is set to formally join the rescue programme, but delay providing any money to Athens until the eurozone provides more clarity on what debt relief it is prepared to offer. FT 15 June 2017
In 2010, when the Greek debt crisis started, Greece received €110bn in bailout money. And in 2012, the country received a second bailout of €130bn. In August 2015, the eurozone countries agreed to give Greece a third bailout, of up to €86bn The next tranche of that bailout, which Greece needs in order to honour repayments due in July, is being discussed at the eurozone finance ministers' meeting on Thursday. BBC 15 June 2017 Kommentar av Rolf Englund: Observera att man inte kan addera dessa summor, eftersom nästan hela de nya lånen används för att lösa in tidigare lån från EU och IMF. Ja, de första pengarna gick förstås till de tyska och franska banker som gärna lånat ut pengar till Grekland och nu hotades av konkurs. EU räddade inte Grekland. EU räddade bankerna. EU did not save Greece. EU saved the banks.
"Investors Should Be Petrified" Of The Coming Ice Age The big Ice Age call was that the tight positive correlation between equity yields and bond yields that market participants had enjoyed since 1982, driven by ever-lower inflation, would break down. zerohedge 7 June 2017
When politicians promise to make homes more affordable they are being utterly disingenuous because the requisite drop in house prices might lead to their being thrown out by the large pool of owners whose houses would be worth less. They prefer instead to bolster demand by offering financial support to first-time buyers via schemes such as the perverse Help to Buy initiative that until recently provided guarantees for mortgages that required only a 5 per cent deposit. John Plender, FT 14 May 2017
On the European mainland it has always been well understood that the whole purpose of European integration was political, and that economic integration was simply a means to a political end. Nigel Lawson, Telegraph 2 May 2016
For all the finance ministry’s ebullience over the MPS agreement, it will find it much harder to win approval from Brussels for a state bailout of Banca Popolare di Vicenza and Veneto Banca. FT 1 June 2017
Christine Lagarde said that eurozone creditors must provide considerably more detail on debt relief for Greece before the fund will take a decision to join the country’s bailout programme. “There cannot be a specific case for any particular country.” Read more here
Production is valued at the prices we pay for goods. Take beer.
Count the number of bottles sold, multiply by the price per bottle, and we have the value of beer produced, by the standard definition. That does not, however, indicate the value to consumers of all that beer.
To get value to consumers, we need an immeasurable concept called “consumer surplus.”
The steady expansion of central bank balance sheets via quantitative easing is still keeping the now-familiar show of equities at record levels and negligible risk premiums firmly on the road. FT 26 May 2017
Hushållens höga och stigande skuldsättning utgör ett allvarligt hot mot den finansiella och den makroekonomiska stabiliteten. Det finns även sårbarheter i det svenska banksystemet och dess motståndskraft behöver därför stärkas. Det gäller såväl bankernas förmåga att hantera likviditetsrisker som deras kapitalnivåer. Riksbanken Finansiell Stabilitet 24 maj 2017
De svenska storbankerna lånar in korta pengar och lånar ut långa – det klassiska receptet för allvarliga finanskriser.
Tidigare hanterades bolånen av särskilda bolåneinstitut. De gav ut bostadsobligationer med mycket långa löptider, som svarade mot låntagarnas amorteringstider.
However, accounting identities do not tell us the direction in which causality flows, and so all identity-based arguments must implicitly make assumptions about which of the variables drive the other. That is the nub of the claim Shultz and Feldstein make. They argue that if we cut the U.S. fiscal deficit, the U.S. trade deficit must automatically decline. Michael Pettis, The Carnegie Endowment for International Peace 22 May 2017
After more than eight hours of talks in Brussels, finance ministers from the single currency bloc and the International Monetary Fund (IMF) were unable to secure an agreement on the sort of debt relief measures the Athens government can expect when its current bailout program ends next year.
Greece could default on its debts in July if it can't repay some 7.3 billion euros
Since the start of 2017, MPS, the Italian government, the European Commission and the European Central Bank’s regulatory arm, the Single Supervisory Mechanism, have been locked in talks about the design of a rescue. FT 22 May 2017
As Queen ELIZABETH II famously once pointed out, most economists failed to predict the crisis of 2007-08. In a lecture to the American Economic Association in 2003, Robert Lucas argued that macroeconomics had succeeded in so far as the “central problem of depression prevention has been solved, for all practical purposes”. Yet within five years the world faced its worst crisis since the 1930s.
When the Queen asked asked an academic at the LSE why the economics profession had failed to predict the credit crunch, she raised a topic which continues to resonate. Although many answers have been given to Her Majesty’s question, I suspect that none of them has really settled the issue. Her question is disarmingly simple, but the answer is not. Gavyn Davies blog, February 10, 2011
Joseph Stiglitz, före detta chefekonom på Världsbanken och rådgivare till amerikanska regeringar, tvingas i sin nya bok Euro – hur en gemensam valuta hotar Europas framtid, konstatera att en fullständig ”brist på empati” präglar eurons politiska förespråkare. Per Wirtén drömmer om ett enat, federalt Europa, ett Europas förenta stater. Kärnan i den drömmen är just den euro som Stiglitz sågar med fotknölarna. Känslan är stark av att Wirtén inte greppat vidden och djupet av den katastrof som eurosystemet faktiskt ställt till med. Och hans lösning är att göra EU:s institutioner mäktigare.
Changing the exchange rate would not diminish the incentive for Germans to save. In the current European environment of near-zero interest rates, there’s little risk that additional public investment will crowd out private investment. Barry Eichengreen, Project Syndicate 14 May 2017
Across China, the virus that could spark the next pandemic is already circulating. It's a bird flu called H7N9.
What H7N9 can't do-yet-is spread easily from person to person, but experts know that could change.
The longer the virus spends in humans, the better the chance that it might mutate to become more contagious-and once that happens, it's only a matter of time before it hops a plane out of China and onto foreign soil, where it could spread through the air like wildfire.
– En fråga värd att diskutera är om det var rätt att hålla investeringar inom utgiftstaket eller om vissa skulle kunna lyftas ut.
– Man kunde ha lyft ut infrastruktur. Det skulle innebära svåra avgränsningar, men det är inte heller bra att underhållet av järnvägen blivit såpass eftersatt. - Vi förlorade idén om att påverka konjunkturutvecklingen med finanspolitiska medel. Under en lågkonjunktur ska man enligt normala spelregler öka offentliga utgifter. Assar Lindbeck, SvD 28 april 2017
Vi menade då /i Ekonomikommissionens rapport (SOU 1993:16)/, liksom nu, att de ekonomiska problemen inte endast, eller ens i första hand, härrör från ekonomisk-politiska missgrepp, som hade kunnat undvikas med skickligare politiker, experter och ämbetsmän.
Problemens rötter sitter i institutioner och regelsystem i den svenska varianten av representativ demokrati och parlamentarism.
Huvudpersonerna i kampanjen var Annika, handelsmedlem och ensamstående mamma, Anders, arbetslös byggnadsarbetare och Bibbi och Kenta, en lågavlönad barnfamilj. Kommentar av Rolf Englund: Kampanjens syfte från LOs sida synes ha varit att övertyga sina medlemmar, som hade fått lida av Göran Perssons åtstramningspolitik, om att deras lidande inte hade varit i onödan. Dessvärre var det nog ändå så att det var i onödan. Göran Perssons hade tydligen köpt den Bildt/Wibbleska problemformuleringen utan att inse att de dåliga offentliga finanserna berodde på krisen, och inte tvärtom. Det kanske kan förklaras av Göran Perssons traumatiska möte med "de flinande 25-åringarna" på Wall Street. Ur LOs verksamhetsberättelse för 1998, sid 76
“I am as orthodox neoclassical economist as they make them, not a fringe heterodox or something. I just do not like unreliable models that use some math like regression and miss a layer of stochasticity, and get wrong results, and I hate sloppy mechanistic reliance on bad statistical methods. I do not like models that fragilize. I do not like models that work on someone's computer but not in reality. This is standard economics.” Zerohedge 3 May 2017, Authored by Jeff Deist via The Mises Institute
He owes his voters an answer to the question of what he would do if, as is likely, Germany replies to his four proposals with: nein, nein, nein and nein. Wolfgang Münchau, FT 30 April 2017
Mr Macron is the opposite of a souverainiste: he wants a fiscal and political union for the eurozone because he recognises that the only nation state that benefits from the current political arrangements in Europe is Germany, not France. In that sense, he is the polar opposite of Marine Le Pen, leader of the rightwing National Front.
Mr Macron wants to make the eurozone work; Ms Le Pen wants to destroy it.
Wolfgang Münchau, FT 1 January 2017 Ms Merkel does not say “no” to eurozone bonds. She says: “Not without treaty change.” The German constitutional court in Karlsruhe would never allow Germany’s sovereign guarantee to be given to its eurozone partners without them submitting to effective and centrally budgeted discipline. Financial Times 31 May 2012
– För mig var det i september 1992. Allra värst var onsdagen och torsdagen den 23 och 24 september. Då var misstron mot Sverige total, vi hade länge syndat i så många avseenden.
I slutet av september hade den borgerliga regeringen och Socialdemokraterna just enats om ett första krispaket. Men bankernas finansieringskostnader skenade och boräntorna steg. På onsdagen hade all handel med svenska bostadsobligationer upphört.
Tidigare under krisen hade både Gotabanken och Nordbanken räddats med statligt stöd. Samtidigt hade en generell bankgaranti förberetts på Finansdepartementet.
Why would business leaders invest in an uncertain world, rather than paying dividends to demanding (but generally risk-averse) investors, or buying back some of their companies’ own shares (thereby improving the price/earnings ratio and, better yet, increasing their own remuneration)? Jim O'Neill, former chairman of Goldman Sachs Asset Management and former Commercial Secretary to the UK Treasury, Project Syndicate 26 April 2017
If you like the euro, why not just call for a global gold standard?
Argentina and Korea at least had the option of breaking their pegs to the dollar and printing money to support their banks. Similarly, countries bound by the gold standard always had the option of de-linking and re-pegging.
There is no comparably straightforward way to exit the strictures of the euro.
So, for those who believe the euro was a good idea at the time and remains a good idea for prospective members, why would you oppose restoring the classical gold standard? Why should the benefits of integration and price stability be limited to Europe?
A prolonged low-growth, low-interest rate environment can fundamentally change the nature of financial intermediation.
Combined with low credit demand, this would lower bank earnings, particularly for smaller, deposit-funded, and less diversified institutions, and presenting long-lasting challenges for life insurers and defined-benefit pension funds. Read more here About Banks at IntCom
In 2014, the California Legislature approved a package of groundwater-management laws -- long after most other Western states had done so -- that are now slowwwwwly beginning to take effect. Local groundwater-management agencies are being formed that will have to come up with plans to reach groundwater sustainability within 20 years. Bloomberg 18 April 2017 Groundwater at Google
Historical experience — not just Greece’s experience, but that of a typical advanced country — is inconsistent with the primary surplus paths that would make Greece’s current debt sustainable. New research from Jeromin Zettelmeyer, Eike Kreplin, and Ugo Panizza suggests Schaeuble is wrong: there is no reasonable likelihood that the Greek government can continue without significant further debt relief. Matthew C Klein, FT 13 april 2017
Talk from the Trump administration about restoring some kind of modern-day Glass-Steagall, a Depression-era law that prohibited banks from trading and investing at the same time as taking /insured/ deposits from consumers. FT 14 April 2017
We expect the dollar to rise by another 10pc to 15pc. Politicians from the G5 powers ultimately intervened to drive down the Reagan dollar at the Plaza Accord in 1985 That attempt to manipulate currencies in defiance of economic fundamentals led - by a complex chain of causality - to the Nikkei bubble in Japan, and to the 1987 stock market crash on Wall Street. Ambrose Evans-Pritchard, 11 April 2017
If something cannot go on forever, it will stop.” This is “Stein’s law”, after its inventor Herbert Stein, chairman of the Council of Economic Advisers under Richard Nixon. Rüdiger Dornbusch, a US-based German economist, added: “The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.” Martin Wolf, FT 11 april 2017
During this time trade imbalances were mostly determined by direct differences in the cost of traded goods, while capital flowed from one country to another mainly to balance trade flows. Today, however, conditions have changed dramatically. Capital flows dwarf trade flows, and investment decisions by fund managers determine their direction and size. Michael Pettis, Bloomberg 3 April 2017
A group of leading economists and thinkers for the Jacques Delors Institute warned in a seminal report last year that EMU states will have to accept a supra-national system with a pooling of debts - anathema to the creditor bloc of Germany, Finland, Holland and Austria.
“At some point in the future, Europe will be hit by a new economic crisis. We do not know whether this will be in six weeks, six months or six years. But in its current set-up the euro is unlikely to survive that coming crisis,” they said.
Orosspridarna? Sveriges Riksbank, Konjunkturinstitutet, Finansinspektionen, Boverket, Internationella Valutafonden, OECD, EU-kommissionen, European Systemic Risk Board, Moody’s, UBS, Nobelpristagare som Robert Shiller och Paul Krugman, svenska ekonomer som Lars Jonung med flera, förre finansministern Anders Borg, förre Riksbankschefen Lars Heikensten… hur mycket tid har ni? Gemensamt för ovanstående är att de på olika sätt har uttryckt oro för de svenska bostadspriserna, hushållens skuldsättning, de svenska bankerna och det otrevliga som allt detta riskerar att göra med svensk ekonomi.
Rather than rearranging the deck chairs on the Titanic, the EU needs to address why the ship is sinking. The choice will require EU leaders first to assess, with honesty and even bravery, where the EU is right now. They must be willing to call a spade a spade – or, in this case, to call the EU an intergovernmental organization in transnational clothing. Only after they recognize that this is a dysfunctional structure – because it allows both the EU institutions and member states to skirt responsibility by constantly pointing fingers at one another – can they pursue the needed rebalancing. Ana Palacio, a former Spanish foreign minister and former Senior Vice President of the World Bank, Project Syndicate 20 March 2017