Englund

The longstanding suspicion that Italy’s profligate borrowing could ultimately become the whole of Europe’s problem was the recurring nightmare of German finance officials throughout the 1990s. Italy’s finances now depend wholly on the European Central Bank keeping a lid on its borrowing costs. Meantime, the only realistic question for officials in Berlin is how to structure further aid, since the alternative may be a failed state at the heart of the currency union, fatally threatening the euro. Bloomberg 31 March 2020 Germany will only act to help others when it perceives an existential threat to the eurozone

Mona Sahlin självkritisk om SD: ”Det var fegt gjort” Publicerad 30 mars 2020 kl 20.00 Det gör att man osökt erinrar sig Tony Blairs medarbetare som 9/11 tyckte att det var en bra dag för att få ut dåliga nyheter. Miss Moore's memo, written at 2.55pm on September 11, when millions of people were transfixed by the terrible television images of the terrorist attack, said:  "It is now a very good day to get out anything we want to bury. Councillors expenses?" The announcement she referred to related to a minor U-turn on pension rights for councillors. Miss Moore, 38, apologised and Downing Street /Tony Blair/ said that this would be enough to allow her to keep her job. Artikeln hos Expressen där Mona uttalar sig 

Britain’s best known monetarist, Tim Congdon.: “Given that money and nominal GDP do track each other over time, it seemed plausible also to propose that inflation might reach 5pc at some point in the next two to three years. I now feel that I was being too conservative. The annual rate of money growth to spring 2021 might be between 10pc and 15pc, perhaps even heading towards 20pc. If so, the right sort of maximum inflation rate to expect in the next few years would be in the 5pc to 10pc band.” Jeremy Warner Telegraph 31 March 2020 Monetarism

Lenders on both sides of the Atlantic have upwards of 100 open credit lines to vehicles known as collateralised loan obligations,  which are among the biggest sources of funds for businesses that do not have top-quality credit ratings, FT 31 March 2020 2007 it was a real estate bubble in the US and Club Med. This time it’s a global corporate debt bubble Ambrose Evans-Pritchard Telegraph 1 January 2020

As the German constitutional court keeps reminding us in ruling after ruling, fiscal policy is a national prerogative.  If the nine countries want to go down the mutual path, they can. It is a risky choice, but not nearly as risky as sheltering under the rescue umbrella the eurozone set up after the last crisis. Wolfgang Münchau 29 March 2020 Macron warned that the political reaction after this crisis could kill the European project

When the banks were bailed out at a cost of hundreds of billions of dollars during the 2008 crisis, it was supposed to be a one-off intervention by governments and central banks, designed to save the financial system and prevent a collapse in the world economy. Barely a decade later and we have another “black swan”. Now, in addition, the global economic shutdown threatens WeWork’s fundamental business model — and in a way that has startling echoes of the failure of Lehman Brothers, Northern Rock and other high-profile casualties of the last financial crisis. The reason those institutions failed was because they had relied on high volumes of very short-term finance, when their own lending commitments were far longer-term. FT 30 March 2020 Northern Rock

EU project in ‘mortal danger’ if Italy and Spain are abandoned  Jacques Delors, former Commission chief and euro godfather, who stepped back into the fray this weekend, denouncing Europe's paralysed response to the greatest crisis since the Second World War as a “mortal danger” to the European project. Delors launched monetary union in the early 1990s on the implicit assumption that it would be the federalysing catalyst, leading – by means of crises – to full fiscal and political union.  Ambrose Evans-Pritchard, Telegraph  29 March 2020 Jacques Delors

The rating agency flagged bank risks in France, Italy, Spain, Belgium, the Netherlands and Denmark Ambrose Evans-Pritchard, Telegraph  25 March 2020 Macron warned that the political reaction after this crisis could kill the European project

Angela Merkel agreed with the bleak assessment of the situation, she resisted calls for mutualizing debt, warning against unrealistic expectations.  Merkel’s tone was more categorical than before After Bailing Out Euro Area, Lagarde Tackles Merkel on Debt Bloomberg 26 March 2020 Germany’s top court has already warned that eurobonds would require a change in the country’s Basic Law The most heavyweight endorsement of a move towards true fiscal union  The constellation — call them the “No Limits Nine” — have written to European Council president Charles Michel calling for the creation of a common debt instrument to fight the devastating impact the coronavirus crisis is threatening to wreak on Europe’s economy. Among the signatories are usual suspects such as France, Italy and Spain and relatively new adherents such as Ireland, Slovenia and Luxembourg.   The statement is perhaps the most heavyweight endorsement of a move towards true fiscal union in the history

CNBC 26 March 2020

Säga att nu är det fritt fram att åka pendeltåg och tunnelbana, gå på bio, äta på restaurang och göra båtfärder på kryssningsfartyg, hur många skulle göra det då? Det blir inte som vanligt förrän medborgarna känner att risken att bli smittad är låg. https://www.nytimes.com/interactive/2020/03/25/opinion/coronavirus-trump-reopen-america.html Allmänhetens hållning är fullt begriplig och i många fall även rimlig. Den grundar sig på uppfattningen att coronasmittan ännu inte är under kontroll. Därför går det inte att slå in på helt annan väg innan så länge som hotet hänger över oss: svenskarna har visat att vill vara försiktiga.  En tidsgräns av den typ som har föreslagits av Tredje AP-fondschefen Kerstin Hessius skulle inte fungera. https://johanschuck.se/coronasmittan-maste-hejdas-annars-blir-det-svart-att-radda-ekonomin/

Almost all constraints that applied to the ECB’s previous asset-purchase programmes have been removed or significantly loosened FT 26 March 2020

As always in EU politics, ideologues are pursuing their own Monnet agenda: exploiting Covid-19 to advance federalist integration by means of crisis without clear democratic consent.  “They are making the same serious category error as they did in the Greek crisis in 2010. They are treating an insolvency crisis as if it were a liquidity crisis,” said Yanis Varoufakis, the former Greek finance minister. Acting as a lender-of-last resort for the country - though vital - does not conjure away the deeper issue that Italy requires a huge devaluation and a debt restructuring to break out of the contractionary spiral and restore lost viability. “How much of Italy’s debt is the ECB going to keep buying. A quarter? Half? Three quarters? At some point the system cracks,”  Mody   said. Ambrose Evans-Pritchard, Telegraph  25 March 2020

Holders of the ETF have stampeded to the exits and, just as the ETF critics consistently predicted,  this liquidity mismatch has wreaked havoc with the market. IEAC’s market capitalisation has fallen from over €13bn to €10bn in about a month. FT 25 March 2020

Back when the world was awash with liquidity, lenders would offer low-cost revolving credit facilities — akin to a credit card — as a perk to win other business.  The banks believed that most would never be used in full; such was the stigma of large companies drawing them.  FT 25 March 2020 Consider OTC derivatives We're Looking at a System-Wide Margin Call

– Där händer väldigt mycket och det händer väldigt fort, och det kan bli problematiskt.  Redan nu ser man väldigt många dödsfall och fall inom intensivvården, vilket talar starkt för att man har en rätt omfattande spridning i landet redan, som man kanske är lite för sent ute för att ta hand om på många ställen, säger han. – Men vi får se, säger Tegnell. SvT 25 mars 2020

to combat a crisis that threatens modern life.  New borrowing of 156 billion euros ($169 billion), equivalent to half of the country’s normal annual spending, will be used to fund social benefits and direct aid to virus-hit companies. Bloomberg 25 March 2020

Undvik barnbarn, butiker och bussar, men gå gärna ut och träffa andra – på behörigt avstånd. Ta reda på vilken hjälp du kan få i vardagen. Använd ditt eget sunda förnuft. Det är några av statsepidemilog Anders Tegnells råd till dig som är äldre. https://www.expressen.se/nyheter/coronaviruset/anders-tegnells-fem-coronarad-jobbigt/

“We haven’t flattened the curve, and the curve is actually increasing,” Mr. Cuomo said.  NYT 24 March 2020 Mr Trump’s suggestion that the US might simply abandon efforts to stop the pandemic spreading -  in order to revive the US economy- would almost certainly be self-defeating.  California, New York, and Illinois, among others, are in lockdown and would ignore the White House.  The result would be a half-baked containment policy that leaks badly and achieves neither one objective or the other.   Ambrose Evans-Pritchard, Telegraph  24 March 2020

Europe needs unconstrained QE to save the euro. In May  a German court is due to rule on the constitutionality of QE.  Many expect the judges to vote that it’s unconstitutional.  European governments would then be faced with a possible choice of abandoning the euro or coming up with real reform that takes the monetary union a step further, say through the issuance of a Eurobond. Again, a crisis that threatens the euro’s very existence would lead to a reform that secures its future. Melvyn Krauss Bloomberg 24 mars 2020 German Constitutional Court

Long before government-imposed lockdowns, many people stopped travelling or going to restaurants, cinemas or shops.  Decisive action to suppress the virus and follow up with testing and tracking of new infections could well end the inevitable economic slump even sooner than otherwise. Martin Wolf 24 March 2020

If the Western democracies get a grip on Covid-19 with an immediate and total lockdown – which several are not yet doing – they can essentially overcome the pandemic within eight weeks. An economic sudden stop for two months does not fundamentally matter – any more than a national holiday fundamentally matters – provided that the state acts as a shock absorber and keeps the productive system whole, avoiding mass bankruptcies and hysteresis.  Ambrose Evans-Pritchard, Telegraph  24 March 2020

The dollar’s surge echoes a similar jump during the most acute stage of the financial crisis.  Firms around the world have dumped assets in a bid to raise cash.  Outside the U.S., firms are in desperate need of the currency to serve a rising tide of dollar loans just as dollar revenues dry up. MarketWatch 23 March 2020

The worst scramble for cash is happening in an opaque corner of the market that the Fed can’t control. Consider OTC derivatives, which are mostly betting slips on the future movements of interest rates and currencies. More than a decade ago, the scramble for cash wiped out as much as $36 trillion, or more than half of the market value of global equities.  So far, the coronavirus has cost global stocks about $26 trillion, or roughly 30% of their market value, from their late-February peak.  So you could argue there’s a long way to go. Bloomberg 24 March 2020

FT 23 March 2020 Carnegie Fonder in Sweden gated 12 funds on Friday, mostly in corporate bonds

Det är inte svårt att se 90-talskrisen framför sig.  Skillnaden nu är att lånen är oerhört mycket större och räntekänsligheten högre. Situationen är komplicerad eftersom hushållens bolån till stor del är finansierade genom bankernas säkerställda obligationer, ofta kallade bostadsobligationer. Riksbanken accepterar numera också att banker lämnar in inte bara andras, utan också sina egna, bostadsobligationer som pant hos centralbanken för att låna pengar. Louise Andrén Meiton SvD 23 mars 2020 Ingves upprepade sin varning om att utländska investerare kan tappa tålamodet med Sverige. Och betonade att 81 procent av utlåningen från de svenska affärsbankerna har fastigheter och bostäder som säkerhet. SvD 18 september 2019

in order to support the financial market.  The Fed said it would buy assets "in the amounts needed" to support smooth market functioning and effective transmission of monetary policy.  The Fed had previous set a $700 billion limit for asset purchases. MarkerWatch 23 March 2020

Returns on trades in which investors borrow in dollars to invest in developing-nation currencies have slumped 13% so far this year, the most since at least 1999 Bloomberg 23 March 2020 Carry Trade at IntCom

Det är två viktiga inslag i den advokatrapport som publiceras idag från Swedbank. Kritiken innebär att risken för ytterligare miljardböter ökar.  Swedbanks ordförande Göran Persson är besviken. SvD 23 mars 2020

as critics of Roosevelt never tire of pointing out.  Unemployment was still over 14 percent when World War II broke out. It was the war, and the astonishing mobilization for war, that finally cured the Great Depression.  Robert Kuttner NYT March 22, 2020 ”Det som satte stopp för trettiotalsdepressionen i USA var ett massivt underskottfinansierat program för offentliga arbeten som kallas andra världskriget”. Carl Johan Gardell, Understreckare SvD 13 augusti 2009

Philip Turner Project Syndicate 18 March 2020

In the previous crisis, Washington bailed out banks. Today, it’s about to bail out big business. The corporate sector looks a lot like the financial sector did pre-2008: debt-laden, with some sectors highly leveraged, and most of them reliant on financial engineering to create the illusion of growth and innovation. Rana Foroohar, Associate Editor at the Financial Times, 22 March 2020

Given the massive accumulation of debt in both developed and developing countries since the 2008 financial crisis, it has long been clear that even a minor event – some “known unknown” – could have far-reaching destabilizing effects.  Yet, until recently, rising asset prices – owing to a long period of extraordinarily loose monetary policies in advanced economies – disguised mounting debt levels.  As the recent scare in global equity markets indicates, asset bubbles cannot last forever.  By contrast, in the absence of active public pressure or state intervention to facilitate their resolution, debts do not deflate on their own. Javuati Goshi Ptoject Syndicate  16 March 2020  

Smittans förlopp har rekonstruerats noga av Italiens största morgontidning Corriere della Sera. I centrum står en 38-årig man som troligen är den första smittade.  Massimo Galli är infektionsläkare på sjukhuset Luigo Sacco i Milano. Han säger i en intervju i Corriere della Sera att epidemin startade utanför sjukhuset, men att den växte och fick fart inne på sjukhuset. – Det är synd att vi inte förstod vilken sjukdom den förste patienten hade. DN 25 februari 2020

Danske Invest, the asset management arm of Denmark’s biggest lender, had 15 Danish funds suspended on Friday, most of them in high-yield bonds.  Carnegie Fonder in Sweden gated 12 funds on Friday, mostly in corporate bonds, while Forte Kreditt, a Norwegian high-yield fund, was suspended all of last week. Other fund managers such as Spiltan, Cicero and Danske in Sweden and Jyske in Denmark all suspended funds last week. FT 22 March 2020 BNY Mellon stepped in to support one of its money market funds SEB var en av flera fondförvaltare som i slutet av förra veckan valde att stänga för handel i vissa räntefonder, vid sidan av bland annat Carnegie och Spiltan. Den smått unika åtgärden innebar att fondsparare som ville plocka ut sina fondandelar eller byta fondinnehav plötsligt inte kunde det. https://www.svd.se/coronastopp-pa-fondmarknaden-borjar-slappa

På min dagliga vandring genom skogen längs Lidingös södra strand passerar jag en gångtunnel. Den har inte varit så rolig. Gångtunnlar brukar inte vara det. Men nu är den utsmyckad. https://www.lidingo.se/toppmeny/kulturfritid/kulturochmotesplatser/kulturarv/omradecsydvastralidingo/14forstalidingobronochlarsbergsbrostuga.4.2e2f4c114d5435c2fd8079.html Här kan man läsa vad den den föreställer. Här flera bilder. Om Lars Fresk på Wikipedia Under andra världskriget spelade Elfvik Gård en särskild roll. Här knäckte matematikprofessorn Arne Beurling den tyska chifferkoden, vilket gav den svenska försvarsstaben möjlighet att läsa ca 300 000 tyska meddelanden, ovärderligt i Sveriges roll för att hålla sig neutrala. Läs mer här

Sanna Rayman Expressen 21 mars 2020

as rating agencies warn that the economic impact of the coronavirus will lead to a surge of corporate downgrades and defaults. The average yield for investment-grade corporate debt has risen from 2.26 per cent two weeks ago to almost 4.5 per cent FT 21 March 2020 Hidden within the $16 trillion corporate debt market are many potential troublemakers, including the zombies.  NYT 16 March 2020

amid sharp outflows from parts of the sector this week, buying $1.2bn of the fund’s assets so it had cash to help cover redemptions. The US bank made the liquidity injection as investors withdrew $6bn from the Dreyfus Cash Management fund in the week ending Thursday, around half of its assets, FT 20 March 2020 Dreyfus Corporation Varför min sida om Finanskrisen heter hedgefunds.htm Finanskrisen och därmed eurokrisen tog sin början i Frankrike, när tre hedgefonder tillhöriga Frankrikes största bank, BNP Paribas, inställde betalningarna i augusti 2007. Den dåvarande chefen för ECB, Jean-Paul Trichet,  pumpade raskt in 200 miljarder euro för att rädda bankerna.

A series of policy ideas which were once the province of a small number of mavericks and limited to purely theoretical discussions are taking centre stage. The most important of those unorthodox approaches is the “helicopter drop”  “We have to be willing to accept fiscal deficits on the scale of 2009,” says Adair Turner, the former head of the UK’s Financial Services Authority. Martin Sandbu 20 March 2020 New World Order Is Coming, Maybe in Helicopters John Authers Bloomberg 9 mars 2020 Helicopter Money -- The Fed's Final Tool The Atlantis Report 19 November 2019 What to do if stagnation threatens when interest rates are already close to zero? Adair Turner Project Syndicate 29 March 2019

CNBC 19 March 2020

The European banking index is down by more than 70% since 2008. CNBC 20 March 2020

https://www.cnbc.com/2020/03/19/apple-macbook-air-review-2020-the-keyboard-is-fixed.html

This time it is tearing up the rule book entirely, announcing that it will not be bound by “self-imposed limits”. It will intervene in the sovereign debt markets wherever needed most – meaning that it can deploy its vast arsenal to defend Italy or Portugal – without strict conditions or ifs and buts.  It has vastly expanded the range of assets on the menu. It will do “as much as necessary and for as long as needed”. While Frankfurt needs the fig-leaf of stating that the €750bn blitz is to ensure “the  smooth transmission of its monetary policy in all jurisdictions of the euro area”, it is clear that the ECB is in reality acting to prevent the collapse of Italy's sovereign debt, which in turn would set off a Club Med chain-reaction within hours and blow up monetary union.  It took 20 years but the eurozone finally has its own version of the US Federal Reserve. Or as founding father Jean Monnet famously put it, “Europe is forged in crises”. Ambrose Evans-Pritchard, Telegraph

While wealthy Romans fled to their villas, Aurelius stayed in the capital and led by example. Aurelius took advice and empowered qualified people to lead. The Roman emperor spread the burden of fighting the pestilence among classes. He raised taxes on Rome’s aristocracy, sold his own imperial luxuries and paid for the funerals of ordinary people.  “Never will so many ask so much of so few,” Mr Varadkar said. Hospital staff battling an invisible enemy are the equivalent of the second world war pilots fighting the Luftwaffe.  Which role will Mr Trump play? At the moment he is hovering between Marshal Philippe Pétain and General Charles de Gaulle. Let us hope he knows enough history to choose. Edward Luce FT 19 March 2020 The Fate of Rome is the first book to examine the catastrophic role that climate change and infectious diseases played in the collapse of Rome's power--a story of nature's triumph over human ambition. https://englundmacro.blogspot.com/2019/12/d

Why the virus-driven rush out of haven assets is a worrying sign for the system FT 19 March 2020

Now, large U.S. airlines and Boeing have requested massive aid from the federal government. MarketWatch 18 March 2020

Traders and economists said the dollar surge reflects global demand for dollars among investors around the world as they exit down leveraged positions across financial markets. MarketWatch 18 March 2020

The decision in an unscheduled meeting on Wednesday night ECB President Christine Lagarde reinforced the message that policy makers will do all they can, saying there are “no limits to our commitment to the euro.” Program will cover all assets eligible under current quantitative-easing program, and will be extended to commercial papers of sufficient credit quality Greek government debt will be included Collateral standards will be eased Bloomberg 19 March 2020 The eurozone’s “whatever it takes” moment has arrived https://www.ft.com/content/be7e37b0-697b-11ea-a3c9-1fe6fedcca75 Eurozone stability is under threat again

About $300bn of bonds rated triple B trade with junk-like yields above 6 per cent FT 16 March 2020

The Money GPS Youtube  18 March 2020

The coronavirus saga is starting to follow the outlines of the 2008 credit crisis.  Let’s start with the day’s most remarkable market event, which was a rise of 34 basis points in the 10-year Treasury yield, probably the world’s most important financial benchmark.  That was its biggest daily move since the summer of 1987 (when the yield started as high as 8%). This was a historic move out of bonds. On Tuesday, the Federal Reserve said it was reactivating a 2008-era program to support commercial paper issued by companies — essentially to ensure that scarcity of short-term funding doesn’t force some large company to fail to meet its payroll, and take the crisis to another level.  John Authers Bloomberg 18 mars 2020  Lehman Brothers

When it comes to bonds, deflationary economic trends are misleading. The Fed and other major central banks are already pumping large but with diminishing or perhaps eventually even counterproductive results. Seeking Alpha 16 March 2020 European government obligations including bunds tumbled at the same time as stocks in the region.  Treasuries fluctuated, threatening to extend their decline a day after the biggest yield jump for 10-year U.S. bonds since 1982. Bloomberg 18 March 2020 Next Bubble U.S. Government Bonds

At a possible mortality rate of 1 per cent, that could mean 60m additional deaths, equivalent to the second world war. Doubt about the health of the financial system will re-emerge. There is a risk of a collapse in demand and economic activity that goes far beyond the direct impact of the health emergency. No event better demonstrates why a quality administrative state, led by people able to differentiate experts from charlatans, is so vital to the public. Martin Wolf FT 17 March 2020

is that it is technically correct, but can’t be sold politically, because it violates the ancient constitutional principle that the state should spend money only with taxpayer consent. A second misconception – which New Keynesian economists have perpetuated – is that the only obstacle to continuous full employment is “sticky” prices and wages.  Those who believe this have bought into the neo-classical view that economic agents always have rational expectations (based on complete information) about future prices and events. Robert Skidelsky Project Syndicate 17 March 2020

yet still failed to calm markets or to unfreeze critical parts of the global financial system.  Either the rules are changed fast or we risk uncontrolled global liquidation.  The US Federal Reserve must be unshackled to act as a buyer-of-last-resort for the corporate debt markets, for great swaths of the credit system, and for Wall Street equity indexes. The European Central Bank must acquire powers to act as a genuine lender-of-last resort for eurozone sovereign states. It must do exactly what Christine Lagarde refused to do when she blurted out last week that “the ECB is not here to close bond spreads” Ambrose Evans-Pritchard, Telegraph 17 March 2020

One of the sharpest fallers was Deutsche Bank, whose $1.25bn AT1 bond dropped more than 10 cents to 61 cents on the dollar.  It had been sold to investors at face value a little over a month ago. FT 17 March 2020 Tier 1 Capital Banks

IFRS 9 requires banks to take earlier provisions for loans going bad, especially when they cross key thresholds such as a “material change in circumstances”. Meanwhile, US banks have been operating under a new standard, dubbed ‘current expected credit losses’, since the start of the year. This requires them to book lifetime loan losses as soon as there is reason to believe a loan will not be repaid in full. FT 17 March 2020

The level of debt in America’s corporate sector amounts to 75 percent of the country’s gross domestic product, breaking the previous record set in 2008.  Among large American companies, debt burdens are precariously high in the auto, hospitality and transportation sectors — industries taking a direct hit from the coronavirus. Hidden within the $16 trillion corporate debt market are many potential troublemakers, including the zombies.  T hey are the natural spawn of a long period of record low interest rates, which has sent investors on a restless hunt for debt products that offer higher reward, with higher risk.  NYT 16 March 2020

BlackRock, Vanguard and State Street Global Advisors have all seen their assets under management fall sharply FT 15 March 2020

https://www.dn.se/kultur-noje/stefan-jonsson-bilden-fran-vita-huset-uttrycker-en-hel-varldsordning/

which makes up three quarters of its economy and whose resilience was crucial to offset a manufacturing slump last year.  With the outbreak forcing airlines to cancel flights, governments to suspend schools and impose nationwide lockdowns, the first recession since 2013 appears all but inevitable. EU finance ministers meet in Brussels on Monday “We want to ensure that we are able to preserve our companies, able to preserve jobs as much as possible so we avoid more lasting damage to the economy,” Commission Vice President Valdis Dombrovskis told  Bloomberg  Friday. Bloomberg 16 March 2020 Valdis Dombrovskis var tidigare finansminister i Lettland. Lettland

“All of us have just witnessed a central bank expend all of its conventional and unconventional tools to support an equity market that is less than a month from all time highs.” — Mike O’Rourke, chief market strategist at JonesTrading. MarketWatch 15 March 2020