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2019-05-30

Debate on output gap will determine Italy’s scope for growth

The biggest bazooka of all in the monetary policy arsenal

Targeted long-term refinancing operation - TLTRO

Banks were able to borrow from the ECB at the deposit rate (minus 0.4 per cent) as long as they lent the money on to the real economy — an effective subsidy of banks.

FT 29 May 2019

2019-05-29

Spitzenkandidatsystemet innebär att man förvandlar rollen som EU-kommissionens ordförande, till en roll mycket nära en klassisk premiärministers

– en makthavare som är vald på politiska premisser i allmänna val och backas upp av en parlamentarisk majoritet. 

En inte helt oproblematisk omskrivning av EU-kommissionens arbetsuppdrag.

I EU:s senaste regelbok, Lissabonfördraget från 2009, står det att EU:s stats- och regeringschefer måste ta resultatet i valet till EU-parlamentet ”i beaktning” när de väljer ordförande till EU-kommissionen.

EU-parlamentet har inte heller ställt väljarna frågan om de vill att EU ska ha en politiskt vald premiärminister.


Teresa Küchler SvD 2019-05-28

Vad är det som har en flagga, en nationaldag, en nationalsång, en militärstyrka, ett parlament och en högsta domstol. En stat, naturligtvis. Vad är det mer en stat har? Jo, en valuta. Det är därför Europas ledande politiker har infört euron. 


Rolf Englund Internet 20/1 2003





To the extent modern monetary theory is true, it is unoriginal; to the extent it is original, it is false

Since the financial crisis, central bank balance sheets and bank reserves have grown hugely, but broader monetary aggregates have not. 

The explanation is that the dominant driver of the money supply is the (risk-adjusted) profitability of lending, which is high in booms and low in busts. 

The weakness of credit also explains why inflation has remained low.

Martin Wolf FT 28 maj 2019



Krisvarning: Bankerna kan förlora 771 miljarder

Vår sammantagna bedömning i Stabilitetsrapporten är att bankernas motståndskraft behöver öka, säger Olof Sandstedt, chef för avdelningen finansiell stabilitet på Riksbanken.

Riksbankens övning är att resultatet skiljer sig drastiskt från det resultat som Finansinspektionen och Europeiska bankmyndigheten, EBA, kablade ut i höstas 

Totalt över de tre åren i scenariot blir bankernas kreditförluster med Riksbankens metod 771 miljarder kronor – och med bankernas metoder i EBA:s stresstest 155 miljarder kronor.

Patricia Hedelius SvD 2019-05-28

https://www.riksbank.se/globalassets/media/rapporter/fsr/fordjupningar/svenska/2019/stresstester-av-bankers-kapital-fordjupning-i-finansiell-stabilitetsrapport-2019_1.pdf


https://www.riksbank.se/globalassets/media/rapporter/fsr/svenska/2019/190522/finansiell-stabilitetsrapport-2019_1.pdf


Svenska banker

2019-05-25

EU and the coming economic downturn

Unlike the crisis of ten years ago, the damage caused by the coming slowdown will not be concentrated in southern Europe; it will hurt the eurozone as a whole, including almighty Germany. ,

The European Union barely survived the first crisis. A recession that hits the EU core would amount to a serious, even existential, threat.

One would think that ten years were enough to take steps to prevent history from repeating itself. But initiatives like the creation of a banking union and the completion of the single market have not been realized, because Europe’s leaders have insisted on discussing issues at the margins, rather than implementing difficult reforms. 

It is as if they haven’t noticed the lowering clouds on the economic horizon.

Ana Palacio Project Syndicate 22 May 2019

2019-05-24

Economics is rightly in the midst of a re-think

It was obvious a lot had gone wrong at the time of the financial crisis; it was a professional embarrassment that the worst crash in three generations occurred not too long after economists took over in the cockpit.

And then just as significantly, a decade on from that crisis, we know that the orthodox economic model (the one that many people call "neoliberal") is leaving swathes of people in large parts of all western societies dissatisfied.
Obviously, politics and policy-makers are responding to the anger in the usual way - trying to fumble their way to something different. 
But there is something else going on as well: the whole academic discipline of economics is being re-considered: the theory as well as the policy advice.



Carl Bildt vill nog gärna bli EU High Representative for Foreign Affairs and Security Policy

Following the 2008 financial crash, the euro crisis, and recurrent migration imbroglios /an extremely confused, complicated, or embarrassing situation/  the EU has turned inward. 

At the same time, the EU’s immediate neighborhood has transformed from a circle of potential friends and partners into a ring of fire.

The choice, then, is clear. Europe’s strategic mission in the coming years must be to secure its position on the world stage, and all matters of policy and personnel should be settled in a way that advances that objective. 

Obviously, a strong European Council president, working closely with a strong high representative, will be essential.

Carl Bildt Project Syndicate 20 May 2019

2019-05-23

William White, the BIS’s former chief economist

“It ­reminds me of what happened in 2008 to 2009 when European banks were ­financing long-term assets in the US with short-term dollar debt. They had a huge liquidity problem. This time the trouble is in Asia, and I am afraid that Asian banks might have to sell a lot of assets in fire-sale conditions.”
The Fed saved the day in 2008 by ­extending emergency dollar liquidity to fellow central banks through swap lines. “It is not clear whether Trump and Congress would let the Fed do that again,” 

Mario Draghi may have saved the eurozone not once, but twice.

Mario Draghi’s 2012 commitment to do “whatever it takes” to preserve the single currency, is backed by a credible threat. But at a national level, no country in the eurozone is monetarily sovereign. 

Mr Draghi has created something novel — a “contingent safe asset” if you will. 

If you comply with the fiscal rules in the eurozone, you are eligible for bond-buying programmes carried out by the ECB, and are therefore as good as credit risk-free. 

The eurozone now has a mechanism to deal with fiscal freeriding and has clear conditions for the creation of safe assets. 





Danes and Swedes voted No to the euro, and the Irish voted No to the Nice Treaty.

The Laeken Summit that December took place behind a fortress of razor wire. In that moment of soul searching EU leaders briefly flirted with retreat.


A Convention modelled on Philadelphia in 1787, and partly composed of MPs from national parliaments, would draw up an EU constitution to restore “democratic legitimacy”.
I mention this forgotten episode because what then happened is such a lesson. Insiders hijacked the process. The dissident utterings of nation state champions were quashed in the working groups. 
Ambrose 22 May 2019

EUs grundlag - The Constitution



No European election ever deflects the EU deep state one inch from its rigid course

Manfred Weber leads the centre-Right (EEP) block and Udo Bullmann leads the Socialists. 

Klaus Welle runs the engine room as secretary-general of the parliament, while his countryman Martin Selmayr operates in tandem as head of the Commission apparatus. 

The nodal points are in capable German hands.

The game is symbolism. European elections are to promote the brand at home and gain fungible funding 

Ambrose 22 May 2019

2019-05-22

How inflation could return, catching the Fed off guard

While persistently subdued – and, on nearly $11 trillion of global bonds, negative – interest rates may be causing resource misallocations and undercutting long-term financial security for households, elevated asset prices have heightened the risk of future financial instability.

Also, investors have become highly (and happily) dependent on central banks, when they should be prudently more fearful of them.

Mohamed A. El-Erian MarketWatch  May 22, 2019 

- A decision to base policy on measures of money presupposes that we can locate money.

As far as we can tell Alan Greenspan was right only a single time after he took the helm of the Fed in August 1987. 

Said the Maestro:

- A decision to base policy on measures of money presupposes that we can locate money. And that has become an increasingly dubious proposition.

Note that these words were spoken on June 28, 2000 in the very inner sanctum of the Eccles Building. They were recorded word for word in the FOMC meeting transcript and released with a ten year lag 

Friedman had been a closet Keynesian all along, and had erroneously claimed that GDP growth and prosperity were a function of money supply growth, and that the change rate of the latter, in turn, could be managed to nearly the decimal point by the rate of growth in high-powered money ladled out by the Fed.

David Stockman May 21st, 2019

Monetarism

Alan Greenspan

2019-05-21

Fed chair tempers fears over corporate debt meltdown

Powell says he is confident financial system can withstand business sector losses

FT 21 May 2019

2019-05-18

Två visioner om Europa står mot varandra.

 Å ena sidan ett EU med alltmer överstatlighet, som präglas av legalism, där det alltid finns ett nytt fördrag eller ny konvention som medlemsstaterna har att underkasta sig. Ett Europas förenta stater.

Å andra sidan ett EU av relativt självständiga nationer, men där man samarbetar om det man inte kan lösa på egen hand. Där ingen yttre makt tvingar demokratiskt valda regeringar att genomföra politik deras folk avskyr. Ett europeiskt nationernas förbund.

Detta är vår tids stora politiska konflikt.

2019-05-15

The Hong Kong dollar has fallen to a 33-year low and is testing the limits of the enclave's currency board regime

The enormity of the pension funding gap

EU:s överstatliga lagstiftningsmakt måste förstås användas med måtta, sans och balans.

”Gårdagens suveräna stater kan inte längre lösa dagens problem”, skrev Jean Monnet, mannen som presenterade idén bakom kol- och stålunionen. 

Den beslutsmetod som Monnet föreslog innebar därför ett helt nytt sätt att klubba tvingande lagar som skulle gälla över nationsgränserna.

Det var en uppseendeväckande tanke, också på 1950-talet. Många av nationalstatens ivrigaste försvarare – från höger till vänster – avskydde Monnets metod, och så är det än i denna dag.

EU:s överstatliga lagstiftningsmakt måste förstås användas med måtta, sans och balans.

Monnet underskattade det demokratiska underskott som byggdes in i unionen och därför ska EU-makten inte lägga sig i allting. 






2019-05-09

Carl Bildt och Marcus Wallenberg ojar sig över den svaga svenska kronan

De är inte ensamma. Flera andra företrädare för bankerna gör sammaledes.

Det är inte konstigt med tanke på att bankerna under många har tjänat stora pengar på den enkla affärsidén att låna pengar i utlandet på typ 30 dagar för att sedan låna ut det på typ 30 år till bostadsköpare.

När kronan sjunker, eller om det är dollarn som stiger, så blir bankernas lån i utlandet dyrare att betala tillbaka.

Carl Bildt har ju också ett förflutet som försvarare av växelkursen. Det blev dyrt för många svenskar men bankerna fick tid på sig att lösa in så mycket av sina utlandslån att de inte gick i konkurs.

"Strax före klockan 14.00 växlades Luxonens jumbolån. Sedan stängde Riksbanken"
Tomas Fischer, Fokus, 5 september 2008


Det var också detta intervenerande, att man stödköpte kronor, som enligt Hans Tson Söderström och Nils Lundgren blev det kronförsvaret som kostade skattebetalarna mest, frånsett de svårberäknade följderna för hela samhällsekonomin.

I den läsvärda boken Ekonomisk Politik. En vänbok till Assar Lindbeck (SNS Förlag 1995) bidrar de båda ekonomerna med ett intressant kapitel kallat Kronförsvaret hösten 1992- var det värt sitt pris?

Om kostnaderna skriver de: 
Kostnaderna utgörs av valutaförluster och produktionsbortfall. Båda är svåra att kvantifiera av både begreppsmässiga och datamässiga skäl. Den svenska staten försämrade via riksbanken och riksgälden sin nettoställning i utländsk valuta med omkring 250 miljarder kronor under hösten 1992.

 I sin slutsats skriver de: 
Den absoluta lejonparten av de totala kostnaderna för Riksbanken åsamkades under den sista veckan före kronans fall, när Riksbanken frångick sin tidigare strategi att försvara kronan genom räntehöjningar för att i stället övergå till direkta interventioner på valutamarknaden.

Sedan kommer en anmärkningsvärd mening:

Detta strategibyte gav privata aktörer som litat på Riksbankens utfästelser om fast kronkurs möjlighet att gå ur sina valutalån, men öppnade samtidigt möjlighet för utländska och inhemska spekulanter att ta position mot kronan. 

En kanske önskvärd omfördelning av oundvikliga växelkursförluster inom Sverige kunde genomföras endast till priset av ytterligare förluster för Riksbanken vilka motsvarades av privata spekulationsvinster i Sverige och omvärlden.

Utdrag ur kapitlet:Hur mycket kostade kronförsvaret 1992? i Vad hände med Sveriges ekonomi? SOU 1999:150 av Torsten Sverenius sid 275 ff.


2019-05-07

Long-suffering market bears, like John Hussman

Hussman’s flagship $312-million Strategic Growth Fund  focuses on “the protection of capital during unfavorable market conditions,”

He says a 65% retreat would be a “run-of-the-mill” decline. 

He pointed to this chart of margin-adjusted price-to-earnings, which he says is one of the most reliable valuation measures he’s tested across historic market cycles:

https://www.marketwatch.com/story/ho-hum-a-65-market-plunge-would-be-run-of-the-mill-fund-manager-says-2019-05-07

More about Hussman

2019-05-03

Equity prices, bond prices and the breakdown of monetarism

Equity prices are driven by prospects for real economic activity and the expected corporate profits that will result from it. 

But bond prices are driven by the prospects for inflation and the expected interest rates that will result from it. 

In the pre-crisis world, strong economic growth almost invariably meant higher inflation and, therefore, higher interest rates. 

But during the past decade, the links between economic activity, inflation, and monetary policy that were taken for granted in the 1980s and 1990s have completely broken down. 

The pre-crisis dogma that inflation “is always and everywhere a monetary phenomenon” has turned out to be nonsense, at least for advanced economies, where central banks have printed money like wallpaper without any inflationary response.

Anatole Kaletsky Project Syndicate 23 April 2019


Kaletsky menar att det var Paul Volcker som ledde återgången till "demand management".


Monetarism

Secular Stagnation






After 40 years of market fundamentalism, America and like-minded European countries are failing the vast majority of their citizens.

At this point, only a new social contract – guaranteeing citizens health care, education, retirement security, affordable housing, and decent work for decent pay – can save capitalism and liberal democracy.

Joseph E. Stiglitz Project Syndicate 3 May 2019 

About Stiglitz at IntCom


Did inflation targeting fail? 
How can it have gone so wrong?

Martin Wolf, Financial Times, May 5 2009


The doctrine behind MMT was smart but not completely right

Well, it looks as if policy debates over the next couple of years will be at least somewhat affected by the doctrine of Modern Monetary Theory

The good news is that MMT seems to be pretty much the same thing as Abba Lerner’s “functional finance” doctrine from 1943.

His argument was that countries that (a) rely on fiat money they control and (b) don’t borrow in someone else’s currency don’t face any debt constraints, because they can always print money to service their debt. What they face, instead, is an inflation constraint.                                                                                                                                                
What about debt? A lot depends on whether the interest rate is higher or lower than the economy’s sustainable growth rate. 

Paul Krugman NYT Feb. 12, 2019


Head of world’s largest hedge fund says adoption of unorthodox monetary policy is ‘inevitable’

Ray Dalio, founder of Bridgewater Associates, says that unconventional monetary policies may be required as traditional policy stumbles.





Politikens stora frågor

Den svenska politikens stora frågor har varit 

1. Skall vi ha demokrati?
2. Skall vi införa socialism?
och nu
3. Skall Sverige bestå som självständig stat eller bli en delstat i Europeiska Unionen?

Moderaterna borde upphöra med att vara EU- och Euro-kramare och sätta ner foten som försvarare av rikets självständighet.


Den svenska utrikespolitikens eviga fråga. 

Skall vi följa Tyskland eller skall vi följa England.