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2021-10-27

Pledges of “net zero” thirty years from now are too easy. Wolf

 It is necessary to cut emissions by close to 40 per cent by 2030, instead. The curve of emissions must be bent downwards now. That is economically and technologically feasible, albeit hard. 

Ten years hence, it will be too late to avoid irreversible damage 

Martin Wolf FT 26 October 2021

https://www.ft.com/content/f859d515-f1d0-405f-9aee-c609951f4254


 So, what must be done? The Energy Transitions Commission’s Keeping 1.5°C Alive: Closing the Gap in the 2020s, published last month, addressed this question. It recommended a six-point plan that should provide the benchmark for discussions in Glasgow.



The idea of timing a bubble is seductive, but it’s close to impossible in practice

 Why people stay in bubbles. They think they are going to be the ones to get out at the right time.

Value managers who stuck to their guns in the late 1990s had often lost their jobs by the time the bubble burst. Even if you know you’re in a bubble, the conventional wisdom goes, it’s best to stay with the herd. 

John Authers Bloomberg 27 October 2021

https://www.bloomberg.com/opinion/articles/2021-10-27/stock-bubble-timing-entices-again-with-tesla-topping-1-trillion


Hushållens bostadslån uppgick i september till totalt 3 824 miljarder kronor

en ökning med 26 miljarder jämfört med månaden före och 

en ökning med 240 miljarder jämfört med motsvarande månad i fjol.

TT 27 oktober 2021


2021-10-26

Port System Collapse

 City  Prepping Youtube 25 October 2021

https://www.youtube.com/watch?v=QR3UFV_LhWI


 America’s woefully inefficient ports.

Ships idling off the coast, waiting to offload goods, have become an icon of paralysis.

Unions representing longshoremen have been remarkably effective in advancing their members’ interests — the average wage is $182,000 a year for dockworkers at West Coast ports

Bloomberg Editorial 26 October 2021

https://www.bloomberg.com/opinion/articles/2021-10-26/automated-ports-could-help-ease-supply-chain-woes


Why the S&P 500 could continue climbing into year's end, eclipsing its 21% rally so far in 2021

 S&P 500 SPX  has more than doubled since the worst of last year’s pandemic-induced meltdown, signifying a 104.1% gain from its bear-market low of 2,237.40 set on March 23, 2020.

MarketWatch 25 October 2021

https://www.marketwatch.com/story/why-the-s-p-500-could-continue-climbing-into-years-end-eclipsing-its-21-rally-so-far-in-2021-11635206174


Before the 1986 act, the S&Ls were the primary source of loan capital for local property owners...

 developers and builders. After 1986, 747 institutions with assets of more than $394 billion (about $1 trillion in today’s dollars) collapsed into the federal Resolution Trust Corp. 

When the S&Ls failed, community-based lending and much of the local home-building industry vanished. The fallout was ultimately felt up and down Main Street during the recession of 1990-91.

 Wall Street was the big winner, filling the void left by the S&Ls with commercial mortgage-backed securities, or CMBS. Today, most commercial and multifamily real-estate funding is done by CMBS loans. All major financial institutions—including banks, insurance companies and pension funds—participate heavily in CMBS markets. Consequently, we are all in this together. 

When the CMBS market collapsed in 2008, it plunged the global economy into the Great Recession. Taxpayers funded huge bailouts.

 Without tax incentives, real estate can’t compete with other investments for essential capital. Currently, real-estate professionals get depreciation deductions against taxable income, and long-term capital-gains rates when they sell. 

WSJ 25 October 2021

https://www.wsj.com/articles/democrats-tax-plan-would-sink-real-estate-rates-interest-savings-loans-11635180636


The Savings and Loans Bailout

https://englundmacro.blogspot.com/2021/04/financial-crises-get-triggered-about.html


Over the past 20 years major financial disruptions have taken place roughly every three years Financial crises differ in detail but, just as there are plot cycles common to literary tragedies, they follow a common arc.

Lawrence Summers, Financial Times August 27 2007

https://www.internetional.se/shares.htm#summersaug07



2021-10-25

No one is forecasting a U.S. recession — or was, until now. David “Danny” Blanchflower

 Plunging consumer confidence in the future. It’s called the six last recessions, the Dartmouth professor and former Bank of England policy maker warns in a new paper.

MarketWatch Oct. 23, 2021

https://www.marketwatch.com/story/the-u-s-may-be-falling-into-recession-heres-why-this-ex-central-banker-says-11634910899

in a new paper

https://cpb-us-e1.wpmucdn.com/sites.dartmouth.edu/dist/5/2216/files/2021/10/us-fear-oct-8-final-nber.pdf


Bondholders Risk $2.6 Trillion Hit on Even a Modest Yield Rise

It’s a result of investors’ exposure to duration, a key gauge of risk for bondholders that’s near record highs.

Even a half-percentage point jump in yields from here, to roughly the pre-pandemic average in 2019, would be enough to ravage funds of all stripes.

It’s a threat with implications across asset classes, from emerging markets to high-flying tech shares.

Bloomberg 23 October 2021

https://www.bloomberg.com/news/articles/2021-10-23/bondholders-risk-2-6-trillion-hit-on-even-a-modest-yield-rise


Hur skall detta sluta?

Det är väl skriande uppenbart. Det kommer att sluta illa den dag räntorna stiger.

Ju längre det dröjer, desto mer illa kommer det att sluta.

https://englundmacro.blogspot.com/2021/03/for-varje-dag-som-gar-med-nollranta.html



 

2021-10-24

Many assume increasing the throughput of the supply chain to meet overstimulated demand over the short term is doable

Last week I wrote about the growing Logistical Sandpiles problem. It shows no sign of improvement. That’s not good, but I think this situation is also a clue to our deeper problems. 

But if the problem is the supply chain is at capacity now, expanding will be hard/impossible over the next several months.

My friend Jim Bianco explained what is happening in a magnificent Twitter thread you should read. I’ll excerpt his key points and charts.

John Mauldin 22 October 2021



Shortages throughout the supply chains on which corporate America depends are translating into widespread inflationary pressure  

FT 23 October 2021


Poland must make a fundamental choice between being part of a state-in-the-making and secession

Ursula von der Leyen. “It is a direct challenge to the unity of the European legal order.”

In a sense, she is right. The primacy of EU law is what turns a club of nations into a superstate. Take it away, and the EU becomes just one more international association like Nato, ASEAN or the Council of Europe.

Why, you might ask, did the member countries agree to this surrender? The answer is that they didn’t – at least, not until very recently. The primacy of EU law is not to be found anywhere in the Treaty of Rome. 

It was invented, rather, by the European Court of Justice (ECJ) in a series of controversial rulings which even committed federalists now admit amounted to a power-grab. In particular, two landmark cases in the 1960s – Van Gend en Loos and Costa vs ENEL – established that EU rulings were directly binding upon individuals and businesses within the member states, knocking aside any national legal acts that might contradict them.

For a long time, this blatant judicial activism went unacknowledged in the treaties. It was only in 2009, in a declaration attached to the Lisbon Treaty, that the member governments retroactively acknowledged the supremacy of EU law “in accordance with well settled case law of the ECJ”.

Daniel Hannan Telegraph 23 October 2021

https://www.telegraph.co.uk/news/2021/10/23/poland-learning-britain-did-eu-will-never-let-members-sovereign/


"We must recover our legal sovereignty,” Michel Barnier told a rally last week.

 “We should no longer be subject to rulings by the European Court of Justice or the European Court of Human Rights!”

Daniel Hannan,  September 12th, 2021

https://englundmacro.blogspot.com/2021/09/we-must-recover-our-legal-sovereignty.html



 

Merkel warns of ‘spiral’ in Brussels’ conflict with Poland

 “You can’t resolve big political differences through court cases,” she said.

Merkel sought to deflect criticism from Poland, saying the rule of law conflict went to the heart of a much broader debate within Europe over “what should be in the EU’s competence and what in the competence of nation states”.

FT 22 October 2021

https://www.ft.com/content/7e7b155c-921d-4d09-a4c5-46293396d9ea


The EU has been warned not to delay the next phase of global banking rules,

as draft plans show that Brussels is suggesting giving European banks a two-year extension to an internationally agreed deadline.

Carolyn Rogers, secretary-general of the Basel Committee for Banking Supervision, said the new rules were “a really important final chapter” in the overhaul of capital regulations known as Basel III. 

They had to be implemented “consistently and as soon as possible”, she told the Financial Times.

A delay would be welcomed by banks in countries such as France

FT 24 October 2021

https://www.ft.com/content/eeff6501-ff37-4cc9-8a10-1fc9ddc1dbc4

2021-10-23

Václav Klaus Institute on Commissioner Leyen's attacks on Poland

 When democracy in Europe, or rather in the European Union, is under threat, it is necessary for European democrats to protest loudly. What is at stake today is not insignificant. 

In her speech in the European Parliament on October 19, Mrs Leyen declared that the recent ruling by the Polish Constitutional Court challenging the supremacy of EU laws “calls into question the foundations of the European Union”. 

According to Leyen, it is her “Commission's duty to protect the rights of EU citizens” and therefore “the Commission will act.” That is an unprecedented statement.

Poland did not break free from the Soviet rule to lose its sovereignty again, this time under seemingly democratic setting. The Polish Constitutional Court was aware of this, and that is what its ruling was about. It is the duty of us the Czechs, in our own interest, to support the Poles in this matter.

Shortly before Mrs Leyen’s outburst, Václav Klaus sent a letter to Jaroslaw Kaczyński in which he personally endorsed the Polish position.

Václav Klaus Institute, October 19th, 2021

https://www.klaus.cz/clanky/4812


De statliga garantierna för lånen till Saab personbilar kostade 2,2 miljarder

 (exklusive räntekostnader). 

Lotta Engzell-Larsson DI 23 oktober 2021

https://www.di.se/ledare/andersson-bor-vara-stolt-over-bankerna/


Det var pinsamt att höra Maud Olofsson berätta om vilka bra säkerheter som Spyker hade ställt gentemot staten. När det nya företaget går i konkurs kommer nog dessa säkerheter att visa sig värdelösa.

Englund blogg 2010-01-29

https://englundmacro.blogspot.com/2010/01/kan-en-valseger-vara-vard-fyra-saab.html


2021-10-22

Germany's Inflation Dilemma Is a Threat to Europe

As tighter fiscal policy that would be workable in Germany would be unfeasible in countries like Italy that have amassed much more debt, an unduly orthodox finance minister could reignite the euro zone’s sovereign debt crisis.

As Tooze says:  Europe’s recovery is still fragile. Europe’s debts are higher than before. The politics of eurozone governance is as unresolved as ever.

John Authers Bloomberg 22 oktober 2021

https://www.bloomberg.com/opinion/articles/2021-10-22/germay-s-inflation-dilemma-could-reignite-europe-s-debt-crisis


The future of Europe is at stake in the fight for Germany’s finance ministry

A fiscal conservative in the job and a new era of debt limitation could spell disaster for EU countries

In Merkel’s governments between 2009 and 2017, the post of finance minister was held by Wolfgang Schäuble. He became notorious as the pacemaker of the eurozone crisis. His constant demands for austerity put debtor countries under huge pressure. At the climax of the crisis, in 2015, he went so far as to suggest that Greece take a “time out” from euro membership. 

Schäuble is a conviction politician. For him the rule of law – including European treaties and fiscal rules – is the embodiment of Europe’s highest ideals, the greatest achievement of western civilisation.

Adam Tooze The Guardian 20 October 2021

https://www.theguardian.com/commentisfree/2021/oct/20/future-europe-germany-finance-ministry-debt-eu


Adam Tooze is the author of Shutdown: How Covid Shook the World’s Economy

https://englundmacro.blogspot.com/2021/09/how-covid-shook-worlds-economy-by-adam.html


2021-10-21

Euron kan inte kan införas utan en ny folkomröstning

Som vi alla vet, vill en stor del av den svenska politiska eliten byta den svenska kronan mot euron så snart som möjligt, medan bara omkring 20 procent av det svenska folket stöder tanken. 

Men Brexit och USA:s upptagenhet med Kinas växande makt kommer nu att föra upp eurofrågan på bordet i Sverige.

Den ekonomiska analysen när vi förhandlade om EU-medlemskap 1993–1994 var att kostnaden för att kalkylera, växla och ta växelkursrisker på grund av olika valutor var låg. 

Däremot var kostnaden hög för anpassning till ekonomiska kriser om man inte har en egen valuta och en självständig penningpolitik. Att behålla kronan sågs som en billig försäkring mot risken för stora kostnader i ekonomiska kriser.

Nejsidan vann en övertygande seger, 56 procent mot 42 för jasidan, trots jasidans överväldigande ekonomiska och politiska resurser. Valdeltagandet var mycket högt. Detta betyder att euron inte kan införas utan en ny folkomröstning. 

Nils Lundgren 21 oktober 2021

https://www.svd.se/behall-den-svenska-kronan

Kommentar RE:

Den svenska utrikespolitikens eviga fråga: Skall vi följa England eller skall vi följa Tyskland.

Så länge vi står utanför euron kan vi lämna EU om vi vill.

Om vi inför euron blir vi som Grekland. ECB kan då se till att pengarna i bankomaterna tar slut om vi inte lyder Bryssel.

 "ever closer union" - The United States of Europe

http://www.nejtillemu.com/englundcloser0506.htm 



Everything Is Awesome — Except in China

 Bitcoin is at another all-time high as it continues to head for the moon. The Dow Jones Industrial Average hit a record, while many more useful indexes of American stocks came close to peaks....  with the second-largest economy entering its worst slowdown in a generation.

John Authers Bloomberg 21 oktober 2021 

https://www.bloomberg.com/opinion/articles/2021-10-21/markets-haven-t-priced-in-risks-of-china-s-economic-slowdown


 Shares in China Evergrande fell sharply as the company’s stock resumed trading on Thursday after the Chinese real estate developer disclosed that a plan to sell its property services division had collapsed.

Evergrande’s Hong Kong-listed stock fell as much as 13.6 per cent after the end of the two-week suspension

FT 21 October 2021




The pain is spreading in the market for Chinese junk bonds

Real-estate developers dominate China’s international high-yield bond market, making up about 80% of its total $197 billion of debt outstanding, according to Goldman Sachs.

WSJ 21 October 2021