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2021-08-05

FT was among those calling for austerity in the aftermath of the financial crisis of 2008-2009

That austerity has contributed to the rise of right-wing populism in many European countries.

Khalaf: Yes, I think we went too far back then, that was a mistake. The editorial position of the FT was supportive of the austerity policies of the British government of David Cameron and George Osborne. 

Der Spiegel Interview with Financial Times Editor Roula Khalaf


https://www.spiegel.de/international/business/interview-with-financial-times-editor-roula-khalaf-a-1ab6d01e-9051-4b72-94ae-79c675e83d12

U.S. trade deficit jumps 6.7% to record high

 The trade gap widened to $75.7 billion

Imports rose 2.1% to $283.4 billion

Exports edged up 0.6% to $207.7 billion

MarketWatch 5 August 2021

https://www.marketwatch.com/story/u-s-trade-deficit-jumps-6-7-to-record-high-as-imports-surge-11628167978

https://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf

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We’d buy cheap goods made in other countries, and they’d buy our expensive services, and it would all balance out. That was the rationale. 

Few economic rationales have failed more spectacularly.

Wolf Richter 4 May 2021

https://englundmacro.blogspot.com/2021/05/services-trade-surplus-american-dream.html

Something in all this does not add up

The yield on ten-year Treasury bonds is 1.24%, well below the ten-year breakeven inflation rate of 2.4%.

At the same time, stock markets are flirting with all-time highs.

Something in all this does not add up

Inflation should remain around the Fed’s target. The breakeven inflation rate also seems to be pointing to this scenario.

But that doesn’t explain why the ten-year Treasury rate is so low, suggesting negative real rates over the next decade. In this scenario, however, it would be hard to justify the stock-market buoyancy 

Raghuram G. Rajan Project Syndicate 2 August 2021

https://www.project-syndicate.org/commentary/qe-bond-purchases-decrease-government-debt-maturity-by-raghuram-rajan-2021-08


Raghuram G. Rajan, former governor of the Reserve Bank of India, is Professor of Finance at the University of Chicago Booth School of Business and the author, most recently, of The Third Pillar: How Markets and the State Leave the Community Behind.


Rajan:The Third Pillar: How Markets and the State Leave the Community Behind

https://englundmacro.blogspot.com/2021/02/rajanthe-third-pillar-how-markets-and.html


Alla är nu börsexperter, särskilt i Sverige med femton positiva börsmånader av de sexton senaste

Vad kan gå fel liksom?

https://cornucopia.cornubot.se/2021/08/diskutera-spekulationsbubblan-i-sma.html


Warren Buffett once told me  

The macro future may not be knowable, but it certainly is important. 

https://www.ft.com/content/3e45991a-ce3a-4cda-b439-1c18f74ad0c5


- Economics may be dismal, but it is not a science, John Kay

Global stock of negative-yielding debt above $16tn

US Germany Japan

France’s debt trading at sub-zero yields up to maturities of 12 years

Negative yields mean investors are willing to pay for the opportunity to lend their funds. 

Those who hold this debt to maturity are guaranteed to make a loss.

FT 5 August 2021

https://www.ft.com/content/43280fe3-b6cd-44e1-bb75-25b0962b5ba1


Marknadsräntorna har fallit. 

Någon entydig förklaring har inte experterna




Jag skulle inte kalla det marknadsräntor. Centralbankerna, dagens Gosplan, stödköper och har därmed satt marknadens informationssignaler ur funktion.

Inte bra. Men att dom gör det beror inte på att de är idioter, vilket de inte är, utan på att de fruktar vad som skulle hända om de inte stödköpte. Det är det som är oroande.


Jag tycker det är skriande uppenbart att räntan världen över är för låg och att en större del av stimulanserna borde ske via finanspolitiken.
Detta kan inte vara klokt.
Rolf Englund blog 5 december 2009





2021-08-04

The truth is that we know very little about inflation, including its causes and cures.

For years, central bankers in the US, Europe and Japan have targeted a healthy 2 per cent rate of inflation, but none has been able to produce it.

This despite continuous economic growth, significant budget deficits, rapid expansion of the money supply through quantitative easing and low interest rates — all of which are supposed to be inflationary.

A memo I wrote in 2001: “You Can’t Predict. You Can Prepare.”

https://www.oaktreecapital.com/docs/default-source/memos/2001-11-20-you-cant-predict-you-can-prepare.pdf


Howard Marks FT 4 August 2021

https://www.ft.com/content/3e45991a-ce3a-4cda-b439-1c18f74ad0c5


The Law of Supply and Demand


https://www.internetional.se/supplyanddemand.htm



Nonsens.

If the economy takes off above Stall Speed the Philips Curve will be back.



https://englundmacro.blogspot.com/2017/08/discussions-around-death-of-phillips.html






Marknadsräntorna har fallit. Någon entydig förklaring har inte experterna

 – En tumregel brukar vara att realräntan normalt sett ska motsvara ungefär de reala tillväxtförväntningarna i ekonomin. Så vad nedgången i realräntan pekar på är att marknaden har en väldigt dyster bild av hur tillväxten kommer se ut under de kommande tio åren, säger Pär Magnusson.

– Det var många som låg i positioner för stigande räntor och så ligger man helt enkelt väldigt fel och måste stänga sina positioner, säger Robert Bergqvist.

– Räntenedgången är framförallt en effekt av att Federal Reserve fortsätter att köpa statsobligationer för massiva belopp, säger Claes Måhlén.

Pär Magnusson tror att det är i den amerikanska centralbankens intresse att försöka hålla räntorna låga länge.

Johan Carlström SvD 4 juli 2021

https://www.svd.se/mysteriet-pa-marknaden-darfor-faller-rantorna


Varför är tioårsräntan så låg?

Dynamiken är uppseendväckande men inte isolerad till USA. Den som vill låna ut pengar till Tyskland får nu räkna med negativ avkastning redan nominellt även för obligationer med lång löptid, exempelvis 30 år.

https://englundmacro.blogspot.com/2021/08/varfor-ar-tioarsrantan-sa-lag.html


Flying blind

Lorenzo Bini Smaghi, the former member of the ECB’s executive board: 

“We don’t fully understand what is happening in advanced economies.”











2021-08-03

Americans increased their mortgage borrowings...

adding fuel to a housing boom that has seen US prices surge at a record pace.

That helped to push mortgage balances to more than $10tn — meaning about 44 per cent of the outstanding mortgage balance was originated in the past year. 

FT 3 July 2021

https://www.ft.com/content/2d914791-b8c2-4083-913d-11764b9c5e18


‘It has never been like this’: US house price spiral worries policymakers

FT 4 August 2021

https://www.ft.com/content/36cdd5d2-18af-4745-88e8-b101fd4cab3f


 

Biden is continuing Trump’s break with the neoliberal, trickle-down economics of Clinton, Bush and Obama

 United States has moved into a de facto, if not de jure, state of permanent debt monetization—a policy that began under Trump and Fed Chair Jerome Powell.

If policies to reduce inequality lead to unsustainable increases in private and public debts, the stage could be set for the kind of stagflationary debt crisis I warned about earlier this summer.

Nouriel Roubini MarketWatch 3 August 2021 

https://www.marketwatch.com/story/why-bidens-economic-policies-are-more-like-trumps-than-obamas-11628003140


After ‘the Minsky Moment’ crashes overheated speculative markets, ‘the Volcker Moment’ will arrive to crash the debt-burdened global economy

Nouriel Roubini MarketWatch 30 June 2021 2021

https://www.marketwatch.com/story/the-looming-stagflationary-debt-crisis-will-deliver-a-one-two-punch-to-markets-and-economies-11625078897


At some point, this boom will culminate in a Minsky moment (a sudden loss of confidence), and tighter monetary policies will trigger a bust and crash.

Roubini: The Looming Stagflationary Debt Crisis

https://englundmacro.blogspot.com/2021/07/roubini-looming-stagflationary-debt.html



Let me explain now in more detail why we are now back to the risk of a total systemic financial meltdown

This is not just a US financial crisis; it is a global financial crisis hitting institutions in the US, UK, Eurozone and other advanced economies (Iceland, Australia, New Zealand, Canada etc.).

Nouriel Roubini Sep 29, 2008




Varför är tioårsräntan så låg?

Att låna ut pengar till världens mest respekterade nationalstater ser nu ut som en ovanligt dålig affär – frågan är bara varför? 

Så sent som i mars toppade den amerikanska tioåringen på 1,77 procent... den handlats ned till under 1,2 procent

Dynamiken är uppseendväckande men inte isolerad till USA. Den som vill låna ut pengar till Tyskland får nu räkna med negativ avkastning redan nominellt även för obligationer med lång löptid, exempelvis 30 år.

Centralbankernas köp av statspapper och tekniska faktorer.

Gabriel Mellqvist DI 3 augusti 2021

https://www.di.se/analys/marknadens-krissignaler-bor-tas-med-en-nypa-salt/


Interest rates haven’t been this low in 5,000 years

https://englundmacro.blogspot.com/2021/07/interest-rates-havent-been-this-low-in.html


I would like to go back to a time when we didn’t wake up in the morning wondering what the Federal Reserve would do. 

Its actions have distorted the economy, repressed savers, and made the wealth and income divide far greater than it should be.

John Mauldin 23 July 2021

https://englundmacro.blogspot.com/2021/07/it-is-my-opinion-john-mauldin-that-this.html


Artikelns fråga: Varför är mycket berättigad.

Och frågan kan förändras till Varför köper marknaden dessa papper?

Avkastningen är dålig och dessutom kommer obligationerna att sjunka när, inte om, räntorna vänder uppåt.

Varför köper de inte aktier i stället? Det har ju gått så bra. 

Eller varför inte sätter dom inte pengarna på banken, bankerna är ju säkra. Visserligen är räntan noll, men pengarna är inte låsta i tio år.

Something must be terribly wrong.








$3.2 billion. That's how much money investors pushed into Treasury Inflation-Protected Securities (TIPS) this past week

https://www.investopedia.com/terms/t/tips.asp

https://www.investopedia.com/


The Economist has noticed that the ravages of climate change are coming to this generation, not the next one

But the real story of this excellent and informative piece isn’t about the climate and what it will do to us. It’s about what the reaction to the climate will do to us.

August 3, 2021 by Yves Smith

https://www.nakedcapitalism.com/2021/08/the-economist-notices-the-climate.html


By Thomas Neuburger. Originally published at God’s Spies

https://neuburger.substack.com/p/the-economist-notices-the-climate


The Economist - What’s the worst that could happen

Three degrees of global warming is quite plausible and truly disastrous

Rapid emission cuts can reduce the risks but not eliminate them

https://www.economist.com/briefing/2021/07/24/three-degrees-of-global-warming-is-quite-plausible-and-truly-disastrous

2021-08-02

Virtual History: Alternatives And Counterfactuals

What if there had been no American War of Independence? What if Hitler had invaded Britain? What if Kennedy had lived? What if Russia had won the Cold War? 

Niall Ferguson, author of the highly acclaimed The Pity of War, leads the charge in this historically rigorous series of separate voyages into “imaginary time” and provides far-reaching answers to these intriguing questions.

Ferguson's brilliant 90-page introduction doubles as a manifesto on the methodology of counter-factual history. His equally masterful afterword traces the likely historical ripples that would have proceeded from the maintenance of Stuart rule in England. 

This breathtaking narrative gives us a convincing, detailed “alternative history” of the West—from the accession of “James III” in 1701, to a Nazi-occupied England, to a U.S. Prime Minister Kennedy who lives to complete his term.

 Virtual History: Alternatives And Counterfactuals by Niall Ferguson

https://englundmacro.blogspot.com/2020/09/virtual-history-alternatives-and.html

[Fed Chair Jerome] Powell is no idiot and he knows what a complete mess things are ...

so if I /reader “Sagelike”/ am Powell I'd have to ask myself how I need to play this? 

I wouldn't want to be the guy who presides over an economic implosion so I'd just keep the game going to avoid being tarred with that label for all time and, I'd retire in January with reputation more or less intact and leave the mess to someone else…

Debt monetization is the last and only option left on the table at this point. Interest rates can't go low enough to spur growth as they are near zero anyways nor can they rise high enough to rebalance the system without leading to debt default and depression. 

QE forever doesn't work so what's left?

John Mauldin 30 July 2021


https://www.mauldineconomics.com/frontlinethoughts/policy-errors-have-consequences 

House prices are booming in almost every major economy...

the broadest rally for more than two decades and reviving economists’ concerns over potential threats to financial stability.

Claudio Borio, head of the monetary and economic department at the Bank for International Settlements

Is it a bubble?

FT 1 August 2021

https://www.ft.com/content/491a245d-4af7-4cad-b860-6ba51b86b45f

 

2021-08-01

Vad skall in? Sol och vind?


Källa FT


 

We are approaching the 50th anniversary of the so-called Nixon Shock, one the most decisive ruptures in monetary history

On August 15, 1971, US President Richard Nixon announced in a televised address that he was “closing the gold window.”

 By ending the dollar’s convertibility into gold (at an official rate of $35 per ounce), Nixon severed the millennia-long link between money and precious metals.

To some optimists in Washington, DC, the persistence of America’s centrality to global economic governance may seem inevitable:  The US would still provide two goods that everyone needs: the English language as a common medium of expression, and the dollar as a common medium of exchange.

 Enormous advances in automatic translation in recent years mean that people around the world can now rely on artificial intelligence, rather than English.

As the digital revolution accelerates, the national era in money is drawing to a close.

Harold James Projet Syndicate 30 July 2021

https://www.project-syndicate.org/commentary/digital-money-alternatives-to-dollar-by-harold-james-2021-07


Harold James is Professor of History and International Affairs at Princeton University. A specialist on German economic history and on globalization, he is a co-author of The Euro and The Battle of Ideas, and the author of The Creation and Destruction of Value: The Globalization Cycle, Krupp: A History of the Legendary German Firm, Making the European Monetary Union, and the forthcoming The War of Words.

The Euro and the Battle of Ideas 

https://muse.jhu.edu/book/64555

Project MUSE for Individuals

https://about.muse.jhu.edu/individuals/


För 50 år sedan, 1971, avskaffade president Nixon dollarns knytning till guldet (at a rate of $35 an ounce)

https://englundmacro.blogspot.com/2021/07/for-50-ar-sedan-1971-avskaffade.html



 

After a 13-year bull market, the clock is ticking for U.S. stocks

 After hibernating for months, the stock-market bears came out of their caves on July 19. 

Before the bears could say, “I told you so,” the next day, July 20, the 700-plus point Dow selloff was erased by a 550-point Dow rally.

While the bulls scored another victory this time, one day the market won’t reverse direction and will begin a steep correction, or worse yet, a bear market. 

MarketWatch 31 July 2021

https://www.marketwatch.com/story/heres-your-to-do-list-before-the-stock-markets-next-dive-11627360870


”The world in a selfie” massturismens drivkrafter och verkningar.

Mark Twain grundade inte sin förmögenhet på Tom Sawyer, utan på att skriva resehandböcker.

Marco D’Eramos ”The world in a selfie” (Verso)

 

https://www.svd.se/unescos-lista-over-kulturarv-skadar-miljon

2021-07-31

Banca Monte dei Paschi di Siena, the world’s oldest bank, would see its capital wiped out...

in a severe economic downturn, according to European stress tests that also delivered relatively weak results for Deutsche Bank and Société Générale.

FT 30 July 2021

https://www.ft.com/content/c4207dc7-578f-428e-bb72-6aabbaf31f57


Mario Draghi Has to Explain One Last Thing. So what happened, exactly, at Monte Paschi?

https://englundmacro.blogspot.com/2019/07/mario-draghi-has-to-explain-one-last.html


 European Banking Authority

https://www.eba.europa.eu/eba-publishes-results-its-2021-eu-wide-stress-test


Twenty-three banks, including JPMorgan Chase and Goldman Sachs, underwent “stress tests” by the Fed that modelled the financial damage from a series of doomsday scenarios. 

These included a US stock market crash, a steep drop in economic output and substantial distress in commercial real estate.

The results, released on Thursday, pave the way for billions of dollars in stock buybacks and dividends, which bank investors have been eagerly anticipating.

FT 25 June 2021

https://www.ft.com/content/78f53986-fefa-4208-b4ea-674052a9ca3f


Why 2% in the First Place?

 The Fed has never justified 2%. It is a number dreamt up, without explanation but unfortunately now used world-wide.

2% inflation benefits banks, the wealthy, and those with first access to money.

https://mishtalk.com/economics/economic-nonsense-is-extremely-well-anchored-in-fantasyland-and-not-just-at-the-fed


Amid a wide range of options, inflation targeting remains the simplest and least bad


2021-07-30

Interest rates haven’t been this low in 5,000 years

That’s a finding in the latest Bank of America flow show report, which, in fairness, is a number that’s been trotted out before. It’s based on a 2005 book about the history of interest rates, but the chart is still incredible to examine.

The Bank of America report pointed out there was a record weekly inflow to Treasury inflation-protected securities of $3.2 billion.  

The 10-Year Treasury Inflation-Indexed security yielded a record low negative 1.15% on Thursday.

MarketWatch July 30, 2021

https://www.marketwatch.com/story/interest-rates-havent-been-this-low-in-5-000-years-11627644496


https://www.wiley.com/en-gb/A+History+of+Interest+Rates,+4th+Edition-p-9780471732839


Vi kan mycket väl bevittna världshistoriens största och kanske farligaste bubbla.

Räntorna är de lägsta på åtminstone 5 000 år.

Detta betyder att priset på obligationer är de högsta på 5 000 år.

Andreas Cervenka, SvD 27 januari 2016