A gulf is growing between the amount of US government debt to be issued by the Treasury department this year and what the Federal Reserve is planning to buy. Inflation expectations have fallen dramatically in the months that followed, with one market measure derived from inflation-protected US government securities — the 10-year break-even rate — remaining at just over 1 per cent. FT 29 June 2020
One innocent explanation for the extraordinary bounce back in global equity markets in the second quarter is that investors have concluded that the worst of the pandemic is over and that recovery is within reach. A less innocent — but all too plausible — alternative reading is that investors now believe central banks will exercise complete control over asset prices for the foreseeable future. could ensure a lasting decoupling of equity prices from ailing economies. In a recent paper for the Brookings Institution, Sage Belz and David Wessel
A pick-up in inflation is a far more probable outcome than markets currently allow.
It is, moreover, part of the solution to countries’ excessive debt burdens.
The EU’s biggest member is in charge, whether Germans like it or not. The EU is supposed to be a convergence machine, spreading prosperity rather than embedding differences between rich and poor countries. It has not worked that way. When the euro was introduced at the start of the millennium, Italian GDP per capita was 20% below Germany’s. Now the gap is nearly 40%—a figure that will only widen during the crisis. The Economist 27 June 2020
Preparedness is one of things that governments are for If a coronal mass ejection (cme) were to hit, all sorts of satellite systems needed for navigation, communications and warnings of missile attacks would be at risk. Large parts of the planet could face months or even years without reliable grid electricity The Economist 25 June 2020
A vast underclass of increasingly indebted, socially immobile Americans – African-Americans, Latinos, and, increasingly, whites – is revolting against a system that has failed it. The precariat is the contemporary version of Karl Marx’s proletariat: a new class of alienated, insecure workers who are ripe for radicalization and mobilization against the plutocracy (or what Marx called the bourgeoisie). This class is growing once again, now that highly leveraged corporations are responding to the COVID-19 crisis as they did after 2008: taking bailouts and hitting their earnings targets by slashing labor costs. Nouriel Roubini ProjectSyndicate 24 June 2020 Nouriel Roubini, Professor of Economics at New York University's Stern School of Business and Chairman of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is NourielRoubini.com.https://nourielroubini.com/
Martin Wolf 2008: One might not expect much from economists, but one would surely expect them to warn us of a crisis on this scale. I am not seeking to deny that a few people saw important pieces of the emerging puzzle and some saw more than a few pieces. In my gallery of heroes are Avinash Persaud, who told us early and often that the risk-management models on which regulators foolishly relied were absurd individually and lethal collectively (Long list of names.....and Nouriel Roubini, of course, who was Dr Doom before almost anybody else.)
The list is not exhaustive and I apologise to all those offended by my omissions.Alternatively, we could have spent more time studying the work of Hyman Minsky. Speech given by Martin Wolf, chief economics commentator, at the FT’s annual economists’ drinks party in London
The domino theory — the idea that setbacks can accumulate quickly and catastrophically — is one of the most controversial ideas in U.S. foreign policy. It guided a half-century of statecraft during the Cold War, only to be rejected by many historians of that conflict The domino theory became infamous thanks to the Vietnam War, which the U.S. fought in part to prevent the rest of Southeast Asia from falling. President Dwight D. Eisenhower coined the phrase in 1954, in explaining why losing Indochina would be so disastrous A principal reason President Harry Truman provided aid to Greece and Turkey in 1947 was fear that other parts of the Middle East and Europe would find it impossible to resist if these countries succumbed to Soviet pressure or communist subversion. The U.S. war in Vietnam may have bought time for other parts of Southeast Asia, but the price, in human and strategic damage, was astronomical for America itself. Hal Brands is a Bloomberg Opinion columnist, the Henry Kissinger Distinguished Professor at Johns Hopkins University’s School of Advanced International Studies, and a scholar at the American Enterprise Institute. Most recently, he is the co-author of "The Lessons of Tragedy: Statecraft and World Order." https://www.bloomberg.com/opinion/articles/2020-06-27/korean-war-anniversary-china-and-return-of-the-domino-theory
2016, King published The End of Alchemy – a searing critique of the global banking system – which argued that “another economic and financial crisis would be devastating to the legitimacy of a democratic market system”. “I think it is a terrible mistake the economics profession has engendered, to believe it doesn’t really matter why the economy is growing slowly; you just need to … lower rates and print more money.” “That will lead us back to the world from which we had happily escaped in the early 1990s, after two decades of high and volatile inflation, and a very painful recession … that bad old world of high inflation.” Having consistently warned of the “technical incoherence of monetary union”, King now sees the eurozone as “the single biggest problem we face in rebalancing the world economy”. He says that “the fundamental mistake … was to pretend monetary union … would ensure each country was responsible for its own debts – something they’ve found it impossible to stick with”. As a result, eurozone governments have now “entered into a gradual and slow move towards fiscal union, for which there is absolutely no legitimate democratic support across Europe”. Mervyn King Telegraph 25 June 2020 Lord Mervyn King, former governor of the Bank of England The End of Alchemy.
The End of Alchemy
Money, Banking, and the Future of the Global Economy by Mervyn King
FT 23 June 2020 The Deficit Myth: Modern Monetary Theory and How to Build a Better Economy by Stephanie Kelton The government, proponents argue, can print as much money as it wants to fund whatever it wishes. The only constraint is excess demand and so inflation. It is right, because there is no simple budget constraint. It is wrong, because it will prove impossible to manage an economy sensibly once politicians believe there is no budget constraint.
“Speculation is rampant and being championed by a bold new breed of millennial day traders,” he said. “The mania is based on a widespread hope in Fed money printing. The catalysts for reckoning are numerous as a major cyclical economic downturn has only just begun.” MarketWatch 20 June 2020
The function of the suit and tie in 2020 is almost purely as a professional uniform: the domain of politicians, lawyers and middle management (upper management are required to drop the tie, to communicate their openness and sincerity). FT 18 June 2020
Those who have seen more than one cycle know many of them will not survive. Then they will have to face the problem that while the AAA holders might have survived, the more speculative tranche holders will be wiped out. FT 19 June 2020
The retreat from globalisation and a switch from just-in-time supply chain management to just-in-case inventories will not be good for corporate profits. The current debt overhang will never be repaid in full. With central banks directly monetising government deficits, much of the debt will ultimately be inflated away — which is something that fixed-income markets resolutely refuse to believe. John Plender FT MAY 8 2020
Intervju: Är du säker på att inte Engström hade alibi, Krister Petersson? Vi vet ganska precis var och när mordet ägde rum: i Dekorimahörnan klockan 23:21:30 fredagen den 28 februari 1986. Och frågan som måste ställas lyder så här: är det sannolikt att Stig Engström över huvud taget kunde befinna sig där vid just den tidpunkten? Nej, men han stämplade ju ut innan han passerade receptionen. Och både han och väktaren i receptionen sa att de hade ett samtal. Då ska han alltså hinna med att stämpla ut, han ska gå till receptionen, han ska gå ut och sedan ska han hinna utföra mordet. Om han stämplade ut mellan 23.20.00 och 23.20.59 kan jag inte se att han hade någon tid att utföra mordet. https://gunnarwall.wordpress.com/2020/06/12/ar-du-saker-pa-att-inte-engstrom-hade-alibi-krister-petersson/ Det märkliga är att Lisbeth – enligt vad som är officiellt känt – inte förhördes igen förrän den 25 mars då Hans Holmér hade ett samtal med henne hemma hos Ebbe Carlsson på Söder. Jag har i mitt skrivande gjort klart att jag menar att just Holmér, Ebbe och Lidbom var centrala figurer i ett sådant mörkläggningsarbete Lars Borgnäs bok inleds med ett förord av författaren Lena Andersson som förklarar att hon ansluter sig till Borgnäs uppfattningar. https://gunnarwall.wordpress.com/2020/04/06/har-lars-borgnas-ratt-nar-han-omtolkar-forloppet-pa-sveavagen/
Anders Isaksson har skrivit standardverket om folkhemmet och Per Albin Hansson i fyra delar och kartlagt samtidens elit i "Den politiska adeln". Nu kommer hans nya bok: "Ebbe - Mannen som blev en affär" (Bonnier fakta).
is built on the premise that the lockdown is one-and-done, and that a V-shaped recovery in GDP is more or less assured. US Treasury will be issuing $100bn of monthly debt over and above Fed purchases from now on, and appetite for this flood of bonds from banks, pension funds, and foreign investors is “lukewarm” . The Fed and the ECB will not dare until they have crystal clear justification. It will take a very painful sell-off before we reach that threshold. As we now know from an astonishing speech this week by the Bank of England’s Sir Jon Cunliffe, is that the market ructions in late March came close to bringing down the global financial system (yet again). Ambrose Evans-Pritchard Telegraph 12 June 2020
All along, there has been a dichotomy between those who saw the EU as being on a journey towards a United States of Europe and those who saw it as destined to remain a federation of sovereign states. It was always envisaged by its proponents that monetary union would be a key step along the road to full union, including the pooling of past debts, the common issue of new debt, a shared tax base and, eventually, political union. Indeed, this was also recognised by its opponents, including in this country, which is precisely why there was so much hostility here towards joining the euro. Mind you, after Julius Caesar crossed the Rubicon in 49BC, things didn’t exactly turn out too well. Rogerl Bootle Telegraph 14 June 2020 Crossing the Rubicon Wikipedia
Maos fjärde fru Jiang Qing, ledare för De Fyras Gäng
När dagens ikonoklaster besöker det förflutna gör de det med revolutionärens blick: allt som inte passar in i den framtid som ska byggas måste rensas ut. Maoisterna tänkte likadant under den kinesiska kulturrevolutionen Ivar Arpi SvD 14 juni 2020 Ikonoklasm Under 1500-talets reformation ägde en liknande bildstrid rum, då reformerta bildstormare förstörde konstverk i bland annat tyska, nederländska och engelska kyrkor. Lutherdomen var mer tolerant, varför bilderna behölls i kyrkorna i de nordiska länderna. Talibanstyret i Afghanistan införde ett totalförbud mot avbildning av människor, något som i mars 2001 resulterade i förstörelsen av de två gigantiska, antika buddhastatyerna i Bamiyan. Wikipedia Kulturrevolutionen Kampanjen inleddes 1966 och hade sin mest intensiva fas till år 1969, men upphörde slutgiltigt först med Maos död år 1976. Det officiella syftet var att förnya och sprida revolutionen till alla delar av det kinesiska samhället. Kampanjen genomdrevs med stöd av de unga idealistiska rödgardisterna och en grupp trogna i partiledningen. Enligt den idag både i och utanför Kina vanliga historieskrivningen avslutades kulturrevolutionen definitivt först med Maos död och gripandet av de fyras gäng år 1976. https://sv.wikipedia.org/wiki/Kulturrevolutionen Maos svaga hälsa och tilltagande senilitet ledde dock till ett maktvakuum, vilket fylldes av Maos fjärde fru Jiang Qing samt en mycket radikal politisk gruppering runt henne. De fattade radikala beslut, vilket bland annat innebar förstörandet av flertusenåriga kulturskatter, historiska monument, brännande av stora mängder litterära verk, fördömande, förföljelse, fängslande och avrättande av författare, konstnärer, akademiker och intellektuella. Skolor, universitet och sjukhus stängdes för att rensa ut "gammalt tänkande" Wikipedia
The resilience of stock markets in the face of economic catastrophe actually makes some sense. Who is to say that the collective judgment of millions of investors is wrong? Jeremy Warner 6 June 2020 https://www.telegraph.co.uk/business/2020/06/05/nothing-irrational-buoyant-stock-prices/ Markets are celebrating $9 trillion of stimulus across the world, but they have either forgotten why authorities are having to take wartime counter measures, or they are ignoring that a V-shaped economic recovery is not in fact happening anywhere
The era of the U.S. dollar’s “exorbitant privilege” as the world’s primary reserve currency is coming to an end. Then French Finance Minister Valery Giscard d’Estaing coined that phrase in the 1960s largely out of frustration, bemoaning a U.S. that drew freely on the rest of the world to support its over-extended standard of living. For almost 60 years, the world complained but did nothing about it. Those days are over. Already stressed by the impact of the Covid-19 pandemic, U.S. living standards are about to be squeezed as never before. Stephen Roach Bloomberg June 8, 2020
The Institute of International Monetary Research says “broad” M3 money has been growing at a 19pc rate over the last three months (annualised) and will rise further Prof Mayer is author of Europe’s Unfinished Currency and a fellow at the Centre for Financial Studies in Frankfurt. While Weimar inflation stemmed from the upheavals of the First World War, Germany did succeed in stabilising the mark and controlling prices for a while. The rot set in when the Reichsbank stepped up money creation to cover falling tax revenues. Inflation spiralled higher in early 1923 after French troops occupied the Ruhr to extract war reparations. Germans stayed at home under a policy of passive resistance, a form of lockdown. Printed money covered the shortfall. Oxford professor Richard Werner said the euro has become a doomsday machine. “In the end it destabilises every country in one way or another. It will be Germany’s turn next,” he said. Ambrose Evans-Pritchard Telegraph 7 June 2020
The difference in yields between 5-year and 30-year Treasuries rose to 122 basis points, the most since December 2016. FT 4 June 2020 US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941. Niall Ferguson, FT February 10 2010
Hans senaste opus handlar om så skilda ting som Lenin, Alexander Kerensky, Viktor Orban, Modern Monetary Theory och Joe Biden. - In March 1917, Vladimir Lenin was living in Zurich, in smelly rooms rented from a shoemaker, spending his days in the library. When a neighbour told him there had been a revolution in Russia, he could hardly believe it. - In October the Bolsheviks seized the Winter Palace. Nothing about their triumph was historically inevitable. Alexander Kerensky, head of the provisional liberal government, who would die almost forgotten in New York in 1970, might have prevailed. - Hungary’s Viktor Orban is currently ruling by decree, though the government now says those powers will lapse on June 20. - Most governments still deny that they can print money with impunity, as advocated by modern monetary theory, but what matters is that they are doing it. - Nobody would call Biden an ideas person steeped in libraries, but his campaign is listening to people who are Simon Kuper FT 4 June 2020
The bull market in stocks that galloped on for a decade after 2009 was widely described as the most hated rally in history. It took many by surprise (myself included), and came even as money flowed into bonds. So it is a sign of clear positivity (or negativity for those of us who hate the rally) that Bloomberg’s dollar index, which compares the dollar to both developed and emerging currencies, has reached its 200-day moving average. Survival Tip: Consider moving to Vancouver. John Authers Bloomberg 3 June 2020
when Muammer Gaddafi, the dictator since 1969, was overthrown in a popular uprising to which Nato, with Britain and France leading the way, lent air support. The EU operation may end up helping the general, who is backed by Russia, Egypt and the United Arab Emirates, not the UN-backed government that the EU officially supports. FT Editorial 1 June 2020
The United States and Britain have warmly welcomed Libya's decision to abandon its programmes for developing weapons of mass destruction. British Prime Minister Tony Blair put his personal seal of approval on Libya's return to international respectability by shaking hands Thursday with Libyan leader Moammar Gaddafi in a ceremonial Bedouin tent near Tripoli. https://englundmacro.blogspot.com/2019/04/battle-for-tripoli-escalates-as.html
Nuclear energy is hugely polarizing, geopolitically sensitive and not without risk. It’s also a reliable source of clean power that can displace fossil fuels and effectively work in tandem with renewable energy. Bloomberg 1 June 2020
Ireland fought hard to control its towering debt load after the financial crisis. But now coronavirus has plunged its finances back into deficit and pushed swaths of people out of work, sparking fierce political debate about what spending to cut and how large any reductions should be. FT 1 June 2020
When former US Treasury secretary Lawrence Summers delivered his famous address on the return of secular stagnation at the IMF in 2013, he revived interest in a Keynesian construct that had fallen into disuse since the 1940s. As he puts it, “just in case will replace just in time”, with the private sector wanting to hold greater financial reserves in case of further shocks to globalised markets. Monetary policy as we know it has become redundant. Central banks’ golden era is probably over. Gavyn Davies FT 31 May 2020
The financial crisis of 2008-10 illustrated the immense dangers of a mismanaged housing market. The ensuing wave of defaults led to a global recession and nearly brought down the financial system. The Economist 16 January 2020