Visar inlägg från oktober, 2017

Banks do not "lend out" deposits or reserves

Rather, they create both loan assets and matching deposit liabilities "from nothing" by means of double entry accounting entries.  Creating money with a stroke of the pen (or a few taps on a computer keyboard) is what banks do. Frances Coppola, 29 October 2017

Six Ways NIRP Is Economically Negative

John Mauldin

Central banking is hard. But the Federal Reserve Bank of San Francisco makes it look easy.

They have a game called “Chair the Fed” where you get to set the level of short-term interest rates once every three months. The European Central Bank has its own game  Matthew C Klein, FT Alphaville 30/10 2017

Kronan borde ha släppts fri redan 1985. Feldt, Palme och Lars Wohlin.

Den 21 november 1985 vid ett-tiden fick jag - som chef för Stadshypotek - meddelandet om att Riksbanken hade upphävt alla utlåningsrestriktioner. Jag tittade på mina medarbetare och undrade om man på Riksbanken verkligen förstod vad man gjorde. Lars Wohlin i Ekonomisk Debatt nr 1/1998 Misstaget var att inte låta kronan flyta redan 1985 Kjell-Olof Feldt, SvD 28 oktober 2017 – När vi devalverade 1982 lovade vi att aldrig mer devalvera. Men det var ett misstag att inte låta kronan flyta långt tidigare. Hade vi släppt kronan 1985 så hade mycket gått bättre. Det är jag övertygad om, sade Feldt. Full text Kjell-Olof Feldt: ALLA DESSA DAGAR... I regeringen 1982-1990: Jag var emellertid tvungen att försöka fånga hans /Palmes/ uppmärksamhet åtminstone en kort stund för ett viktigt meddelande. Riksbanken ville nämligen inom kort avlägsna de sista resterna av regleringarna på kreditmarknaden... Men den politiska innebörden var solklar: det betydde att socialdemokrati

The Euro is good for separatists like Catalonia

It has always been a big problem for a new state to get a currency that is widely accepted. Catalonia does not have that problem.  They just keep the euro.  They do not have a printing press of their own, but neither has Spain. Ironic, is it not, that the Euro, meant to unite Europe, now serves to disunite Spain.

We cannot tell people they must remain stuck in a deflationary economy because it is the only way to stop the financial system from exploding.

Martin Wolf, about IMF Global Financial Stability Report, FT 24 October 2017

Oscar Properties

Investeringen i Oscar Properties uppges ha beskrivits som ”säker” av banken. Den beskrivning vänder sig Claes Hemberg emot. Bland annat hjälpte Swedbank Oscar Properties att ta upp ett lån på sammanlagt nära en halv miljard genom en så kallad obligation. SvD Näringsliv 25 oktober 2017

My modest conribution to solving the conundrum of missing NAIRU inflation

We all know from our first economics textbooks that demand can leak, into savings or imports. We all know that more and more of things are imported from China. When demand in countries like Sweden increases a lot of it goes to buying flatscreens TVs. From Asia, The conslusion is therefore that the effect should be seen not only in CPI but also more and more in the current account. This of course is something that every Master of The Universe economist knows.  But why do the not write about it? Too simple and already in their models? The relationship between slack and inflation nonetheless appears to hold at global level. John Plender FT 3 October 2017 What is the “stall speed” of an economy? Unemployment tends to rise when GDP growth falls below about 2.5-3 per cent Gavyn Davies blog June 15, 2011 U.S. Trade and Current Account Deficit

China risks 'Minsky Moment' as debt reaches saturation

China’s lending boom since the downturn in early 2015 is comparable to the massive stimulus after the Lehman crisis.  Non-financial debt has galloped up to 300pc of GDP, uncharted territory for a big developing economy. Ambrose 19 October 2017

The (non) disappearing Phillips Curve: why it matters

The existence, and recent disappearance, of the Phillips Curve is the hottest topic among macro investors and policy makers at the moment. Gavyn Davies' blog, 22 October 2017

Zhou Xiaochuan, the long-serving and respected governor of the People's Bank of China, raised eyebrows last week

when he cautioned that the country could have a "Minsky Moment" if "we are too optimistic when things go smoothly." Mohamed A. El-Erian, Bloomberg 23 October 2017

Tett: I believe that low rates have distorted the financial system so deeply that they are now doing more harm than good, creating perverse effects;

FT colleagues such as Martin Wolf disagree and think rates should stay low.  Gillian Tett, FT Magazine 20 October 2017

Unconventional policies are turning out to be a classic game-theoretic bad equilibrium

Each central bank stands to gain by keeping interest rates low, but, collectively, their approach constitutes a trap. Kaushik Basu, Project Syndicate 18 October 2017

There is one economist whose name is on everyone's lips today. Hyman Minsky

The phrase was never used in the FT until early 2007. It has now appeared more than 80 times.  The reason for this is that the Lehman crisis provided us with a perfect, textbook example of a Minsky Moment. John Authers, FT 29 October 2017

China’s central bank governor used the Communist party congress to caution a possible “Minsky moment”.

China’s central bank governor has warned in unusually stark language of the risks from excessive debt and speculative investment,  as he used the Communist party congress to caution that the country’s fast-growing economy faced a possible “Minsky moment”. FT 19 October 2017

Central bankers have one job and they don’t know how to do it

Matthew C Klein, FT Alphaville 18 Octobr 2017

Basil Fawlty’s “Don’t mention the war!” has given way to something nasty:

non-German macroeconomists over the euro and global reflation — with epithets like “ordo-liberal” and worse flying around. Former IMF staffer Peter Doyle, FT Alphaville 17 October 2017

Black Monday, October 19 1987, the US stock market fell by more than 20 per cent.

October has always been the month of highest crash risk — in addition to 1987, try 1929, 1997 and 2008 The big question is: could it happen again?  John Authers, FT 17 October 2017

ECB bondbuying, handled largely by national central banks, which purchase their own governments’ bonds

The vast bond-buying operations nominally undertaken by the ECB in recent years  have been handled largely by national central banks, which purchase their own governments’ bonds. Daniel Gros, Procect Syndicate 11 October 2017

DN-ledare: Frågan har ju alltid varit när och inte om bostadskarusellen i storstäderna kommer att hejdas.

Den svenska hyresregleringen tenderar att låsa in folk där de bor.  De som inte har etablerat sig är utfrysta. Vår skeva skattestruktur gör det samtidigt billigt att låna och bo, men dyrt att flytta från en villa eller bostadsrätt. Flyttkedjorna blir kortare, trögare.  Det vore därför inte så konstigt om den nya byggboomen slutade i en paradox: fina lägenheter som gapar tomma, och fortsatt stor bostadsbrist. DN-ledare 14 oktober 2017 ‘The risks have definitely increased’ – Sweden’s housing boom wobbles

More likely are rising inflation, a sharp rise in interest rates, a higher dollar and a huge surge in the US current account deficit.

Martin Wolf, FT 13 October 2017

World’s top economists worry about tools to fight economic downturn

The question is whether there are enough weapons to fight the next crisis when it comes With interest rate cuts unlikely to be sufficiently effective in another downturn because they will not start high enough, Mr Blanchard and Lawrence Summers, the former treasury secretary, advocated much more effective and planned use of fiscal policy.  In a joint presentation, they called for governments to put in place plans for aggressive fiscal stimulus in the event of a downturn. FT 13 October 2017

The US economy looked eerily similar in late 1965

The edifice of hyper-valued assets across the world is built on one elemental premise: that US inflation is dead, and therefore that the US Federal Reserve will continue to bathe international finance with dollar liquidity.  We have been here before. The US economy looked eerily similar in late 1965. The jobless rate had fallen to 4.2pc - exactly where it is now - without a flicker of wage pressure. It was the calm before the storm. Powerful forces were building below the surface. The US was on the cusp of the Great Inflation. Wall Street equities lost almost 60pc of their value in real terms over the next decade.  Bondholders were slaughtered.  The collective market bet is that this time is different. Ambrose 12 October 2017 NAIRU

The pundits may finally be right about the dollar

Pundits have been saying last rites for the dollar’s global dominance since the 1960s – that is, for more than half a century now.  But the pundits may finally be right Barry Eichengreen, Project Syndiate 11 October 2017

Central bankers face a crisis of confidence as models fail

Inflation is not behaving in the way economic models predicted. “the link between measures of domestic slack and inflation has proved rather weak and elusive for at least a couple of decades” (The relationship between slack and inflation nonetheless appears to hold at global level. John Plender)  FT 11 October 2017

Fastighetsbolag med exponering mot bostadsrättsmarknaden. JM har backat 21 procent.

Besqab har tappat nästan 28 procent, SSM drygt 39 procent och  Oscar Properties Holding nära 37 procent.  Annika Winsth, chefsekonom på Nordea:   - I alla län i Sverige har vi haft det högsta byggandet på 25 år. SvD 11 oktober 2017 Huspriser i Sverige

Martin Wolf on Inflation and stagflation

All this would undermine elevated asset markets and might trigger worries over debt sustainability. In a still fragile world economy, the results might be ugly. One might even see a return to the stagflation of the 1970s, with far lower inflation, but also far higher indebtedness. The starting point is a puzzle: why is inflation so low when the rate of unemployment is already a little below the level the Fed (and most economists) consider to be “full employment” (the rate at which inflation should start to accelerate upwards). Martin Wolf FT 10 October 2017

Wallenstam omvandlar första etappen av ett bostadsrättsprojekt mellan Telefonplan och Älvsjö till hyresrätter.

Solberga ligger mellan Telefonplan och Älvsjö, där det de senaste åren byggts tusentals nya lägenheter, varav många bostadsrätter. Aftonbladet 9 oktober 2017 Det finns troligen ingen bostadsbubbla i Sverige, eftersom det är dyrare att bo i hyresrätt än i bostadsrätt. Det menar Finanspolitiska rådets ordförande Harry Flam. 21 september 2017

Wolfgang Schäuble warns of debt-driven global financial crisis

Central bank policies raise threat of bubbles, says outgoing German finance minister  His comments come a day after Christine Lagarde warned of “threats on the horizon” from “high levels of debt in many countries to rapid credit expansion in China, to excessive risk-taking in financial markets”. The BIS warned last month that the world had become so used to cheap credit that higher interest rates could derail the global economic recovery. FT 8 October 2017

Svegfors om Anders Ferm, Tomas Fischer, Rolf Englund och kronkursförsvaret

Tack för tipset AF. Anders Ferm Tomas Fischer Vi har en väldigt dålig ansvarskultur i svensk politik. Det mest flagranta exemplet är kronfallet i november 1992. Och så kallade man detta ett misslyckande och alla satt kvar. Det menar jag var ett stort moraliskt haveri Barbro Hedvall i Filosofiska Rummet, 29/10 2006

Fed has no reliable theory of inflation, says Former Fed governor Tarullo

John Plender: The relationship between slack and inflation nonetheless appears to hold at global level. FT 4 October 2017

Population growth in Africa

As for Africa, the UN’s  mid-point projection  puts the population aged 20-65 at 1.3 billion in 2050 and 2.5 billion by 2100, up from 540 million today. Sep 29, 2017   ADAIR TURNER The global population is growing steadily.  The UN’s medium-variant projection shows a rise to 9.7bn people in 2050 and 11.2bn by 2100.   Robin Harding, FT August 11, 2015 How the world's population has changed, The Economist

Mario Draghi: “Investment is doing very well because corporate profits are good, because interest rates are low.”

FT 4 October 2017

1917 skakades Sverige av hungerkravaller förorsakade av prisreglering på potatis, typ hyresreglering

Hyresregleringen finns fortfarande kvar, fast under annat namn. 1917 skakades Sverige av hungerkravaller.   Stapelfödan för personer med låg inkomst var potatis.  För att hålla nere priset på potatis, och hindra bönderna att tjäna pengar, införde regeringen prisreglering på potatis. Alltså blev det inte lönsamt för bönderna att odla potatis till försäljning.  Grisarnas vanliga föda var kålrötter. De var inte prisreglerade.  Så bönderna gav potatisen till grisarna och sålde kålrötterna till de hungriga stadsborna. Nils-Eric Sandberg, Byggindustrin 20 september 2017

Stockholm och andra svenska storstäder kan bli det Nya Norrland, fast i en ond spiral av utflyttning och bristande affärsunderlag.

När bostäderna stiger i värde konsumerar hushållen ungefär 25 procent av värdestegringen.  Den konsumtionen försvinner om bostadspriserna inte längre stiger. Mattias Svensson, Fastighetstidningen 3 oktober 2017 Det är en del, företrädesvis fastighetsmäklare och bankekonomer,  som försöker intala sig själva och oss andra att bostadspriserna kan plana ut. Men bostadsbubblor, liksom andra bubblor, har en mycket karaktäristisk form. Det brukar, alltid, se ut så här.

Double, Double Toil and Trouble