https://www.youtube.com/watch?v=ztoGCErCSqU
How The Euro Dies by Nickolai Hubble
Over the 12 chapters he presents two main arguments-- 1) the euro was doomed to die and 2) it will be caused by Italy.
He supports these arguments with 4 reasons ( the four horsemen) which are the Unholy Trinity, Target2, Democracy and No bailout.
https://www.goodreads.com/book/show/48664775-how-the-euro-dies
“I just want to ensure that the way it’s financed is legal and doesn’t violate the EU treaties.”
FT 31 March 2021
https://www.ft.com/content/950c218d-749c-4d2e-9079-e91bfbab0401
Germany's top court suspends ratification of EU recovery fund
https://englundmacro.blogspot.com/2021/03/germanys-top-court-suspends.html
Di Digital har tidigare skrivit om Lidingöbaserade Candela, som startades 2014 av Gustav Hasselskog.
2018 startade serietillverkningen av fritidsbåten Seven, och nu inleds ett innovationsprojekt tillsammans med Region Stockholm för den 12 meter långa pendelbåten Candela P-30.
Värtahamnen och Södra Värtan ska bli Stockholms nya entré från sjösidan. Här kommer 5 000 personer att bo och dubbelt så många att arbeta när området är färdigställt.
Södra Värtan är en del av det hållbarhetsprofilerade stadsutvecklingsområdet Norra Djurgårdsstaden
https://vaxer.stockholm/projekt/sodra-vartan/
and anywhere from three to 10 times that amount in market exposure.
That’s risky.
March 30, 2021 By Barron's
https://www.marketwatch.com/articles/investing-lessons-from-the-archegos-saga-51617106276
Singapore did not inspire him because of its level of development. If that were his priority, many cities in Japan or the West would have impressed him more.
Singapore was special because it represented the achievement of an estranged relative. Nowhere else outside China was there a country with ethnic Chinese in its majority.
Lee Kuan Yew told him that if Singapore Chinese who were the descendants of poorly-educated coolies could make good, how much better mainland China could be if the right policies were adopted.
https://mothership.sg/2018/11/deng-xiaoping-singapore-china-george-yeo/
Archegos used equity swaps or CFDs, people familiar have said
Instruments are popular with hedge funds, allow non-disclosure
Bloomberg 29 mars 2021
The banks had each allowed Archegos to take on billions of dollars of exposure to volatile equities through swaps contracts
https://www.ft.com/content/db4508ed-ccb4-48f6-8dd6-dd7d38e3cfa4
Powell is betting that economic growth will come roaring back later this year as the economy reopens, but that inflation, after a brief overshoot of target, will fall obediently back to about 2 per cent and stay there.
Thus, there is no need to lift rates this year, or next, or the year after.
FT 29 March 2021
https://www.ft.com/content/835efc35-3688-4795-ada1-ecb566a3aa9d
Vi kan uppfattas som idioter - fools, men vi skall sälja till One More Fool.
Sedan skall vi köpa Buy the Dip och bli ändå rikare.
Frågan bli I slutändan denna: Where is the one more fool when we really need him (or her)?
https://englundmacro.blogspot.com/2021/03/for-varje-dag-som-gar-med-nollranta.html
Margin Call at Archegos Capital
https://englundmacro.blogspot.com/2021/03/margin-call-at-archegos-capital.html
A catalogue of errors in its handling of the Northern Rock crisis, which saw the first run on a British bank in more than a century. Daily Telegraph 26/03/2008
Archegos Capital, a private investment firm, which had large exposures to ViacomCBS and was hit hard after shares of the US media group began to tumble on Tuesday and Wednesday.
The declines prompted a margin call from one of Archegos’ prime brokers, triggering similar demands for cash from other banks
“forced deleveraging”
https://www.ft.com/content/2542af81-9e93-4d05-a0b9-26c0f6aab6f3
What ‘unprecedented’ Discovery, ViacomCBS selloff means for Wall Street
MarketWatch March 28, 2021
Bubblor planar inte ut
Bostadsbubblor, liksom andra bubblor, har en mycket karaktäristisk form.
Det brukar, alltid, se ut så här.
https://englundmacro.blogspot.com/2014/01/bubblor-planar-inte-ut.html
Anders Borg och Irving Fisher om att priserna har planat ut och nått en platå.
https://englundmacro.blogspot.com/2014/01/anders-borg-och-irving-fisher-om-att.html
Irving Fisher
https://www.internetional.se/irvingfischer.htm
Margin Call is a 2011 American financial thriller film. The principal story takes place over a 24-hour period at a large Wall Street investment bank during the initial stages of the financial crisis of 2007–2008.
https://en.wikipedia.org/wiki/Margin_Call
Because policy rates cannot be raised to address any looming inflationary threat without inflicting serious financial instability along with economic recession, or worse.
John Plender FT 28 March 2021
https://www.ft.com/content/1fdf201b-ed47-4e1a-b5ff-098310db8bc2
Judges at the constitutional court say the legislation can only be approved once they have heard all the legal challenges against the debt-pooling €750 billion rescue fund, part of a wider EU package agreed last year.
Deutsche Welle 26 mars 2021
https://www.dw.com/en/germanys-top-court-suspends-ratification-of-eu-recovery-fund/a-57018350
https://englundmacro.blogspot.com/2021/03/they-accuse-european-central-bank-of.html
http://www.nejtillemu.com/vonstauffenberg.htm
Starting in the mid-1960s, various European countries began demanding payment for their dollars in gold. They wanted the US to balance its budget, which had gone wildly into deficit because of the Vietnam War.
The US was literally using Air Force planes to ship gold from Fort Knox to New York and outbound. You can read many interesting stories like this one. We tend to think of crises as happening over very short periods. This one was building for years.
August 15, 1971, President Nixon ended the Bretton Woods system
The dollar crashed even more and we had to invent the word “stagflation” to define the widespread misery.
A host of writers and websites have chronicled the seemingly sudden changes. For instance, try WTF Happened in 1971?
Hourly compensation grew roughly in line with productivity from 1948 until the early 1970s. From there, productivity rose far faster than income.
College degrees have become a proxy for the IQ tests that were made illegal 50 years ago. They aren’t a particularly good proxy, but large employers lack better options.
John Mauldin 26 March 2021
https://www.mauldineconomics.com/frontlinethoughts/the-1970s-never-ended
WTF Happened in 1971?
Insikten om ägandets avgörande roll för innovationer och välstånd är central. Samtidigt är Svenskt Näringsliv – till skillnad från hur organisationen ibland beskrivs av vänsterdebattörer – en utpräglat pragmatisk röst i samhällsdebatten. Man tar inte ställning för eller mot något parti, utan pratar med alla. Inte minst med Socialdemokraterna.
Den moderna företagarrörelsen växte fram ur 70- och 80-talets kris och ideologiska strider. Vad de flesta förmodligen inte inser är att en del företagsledare då ryckte på axlarna åt socialiseringspolitiken. De var anställda tjänstemän. Vad brydde de sig om ägarfrågor? Inte deras kulle att dö på. Många såg nog rent av fram emot livet under fondsocialismen. I en värld utan kapitalister är verkställande direktören kung.
Janerik Larsson DI 27 mars 2021
Tidigare informationschef på SAF och vice VD på Svenskt Näringsliv. Aktuell med boken ”Det långa loppet – om näringslivets opinionsbildning” (Ekerlids Förlag).
https://www.di.se/debatt/den-storsta-utmaningen-pa-decennier-for-det-fria-naringslivet/
---------
Englund: Enligt min mening lade dom, vilka de nu var, ner SAF, sålde huset till Wallenberg och bytte ut skylten på Industriförbundet.
Socialists at the Gate /Timbro och dess föregångare/
Swedish Business and the Defense of Free Enterprise, 1940–1985
https://englundmacro.blogspot.com/2020/11/socialists-at-gate-timbro-och-dess.html
Unexpectedly high inflation would raise interest rates, destabilise exchange rates, ignite unrest in labour markets, push the highly indebted towards default and destabilise asset markets.
The 1970s were an era of stagflation — high inflation and low growth. They were also, as a result, an era of terrible performance for asset prices.
Stocks did terribly, too. The cyclically-adjusted price/earnings ratio (CAPE), developed by Nobel laureate Robert Shiller, collapsed from 24 in 1966, to 8 in 1974 and 7 in 1982.
Another salient characteristic of the past four decades has been expanding debt
In 2005, former Federal Reserve chair, Ben Bernanke, called this phenomenon “the savings glut”. More recently, former US treasury secretary, Lawrence Summers has termed it “secular stagnation”.
The ideas of “Modern Monetary Theory” has won much intellectual favour on the left.
... waves of default far more pervasive than in the early 1980s, when the big story was the debt crisis in developing countries. This time, the debt crises could be almost everywhere, because there is so much more debt.
Inflation has not come back. It may never do so.
Martin Wolf 26 March 2021
https://www.ft.com/content/6cfb36ca-d3ce-4dd3-b70d-eecc332ba1df
The Communist Manifesto: "A spectre is haunting Europe—the spectre of communism.
https://en.wikipedia.org/wiki/The_Communist_Manifesto
This administration wants to avoid the mistakes of the Obama era. But it could make opposite ones.
Martin Wolf 23 March 2021
https://englundmacro.blogspot.com/2021/03/lawrence-summer-these-are-least.html
Fundraising exceeds record at height of Covid crisis, when groups sprinted to fortify their finances
The three biggest issuance quarters on record have all fallen in the past 12 months, helping to propel the size of the US high yield market towards a record $1.5tn
FT 25 March 2021
https://www.ft.com/content/87e1ddd6-c613-4e51-bb7a-8db6d5fffe03
Manoj Pradhan, formerly a Morgan Stanley managing director in charge of global economics and the founder of Talking Heads Macroeconomics, said at a presentation held by fund manager Tabula Investment Management that inflation is going to heat up just when the Federal Reserve expects it to cool down, next year.
Pradhan argued that the breakdown of the Phillips curve — the traditional relationship that shows inflation rising as unemployment falls — occurred because of China’s entrance into the global labor force. But he said demography and the COVID-19 pandemic will fix it.
MarketWatch 26 March 2021
Talking Heads Macroeconomics
https://talkingheadsmacro.com/thm/
Har hajpats på de amerikanska börserna det senaste året. Nu kommer den första svenska varianten.
Olyckskorpar varnar för en ny finansiell mani.
Det var sent 1600-tal. Redan då fanns begreppet bubbla.
De riktiga bolagen hette saker som Company for Making Hollow Sword Blades in the North of England. Trots namnet var bolaget under långa perioder ett finansiellt skal, utan riktig verksamhet.
Genombrottet kom när det ömsade skinn till Söderhavskompaniet. Och i den inkarnationen stod företaget i centrum för den stora Söderhavsbubblan som sprack 1720.
I praktiken har folk betalat 150 kronor för att få ha 100 kronor på ett sparkonto, i förhoppning om att pengarna ska placeras på ett genialt sätt. En renare form av spekulation får man leta efter.
Det är investeringsbolaget Bure som ska sätta ihop det första upplägget. 3,5 miljarder kronor skrapas ihop och sätts på börsen under namnet ACQ. Som ett tomt påskägg.
Carl Johan von Seth DN 10 nars 2021
Another infamous example was the South Sea Bubble in 1720. The London-based South Sea Company came up with an ingenious plan to take over Britain’s national debt in return for interest and sole trading rights to the South Seas (South America) and hence, in theory, access to the treasures of the gold and silver mines in Peru and Mexico.
Even Sir Isaac Newton averted his gaze from the stars for long enough to buy some shares and make a profit, then buy some more and lose a packet. His comment? “I can calculate the motion of heavenly bodies, but not the madness of people.”
https://www.internetional.se/econspectulip9909.htm
Acting perhaps with the wisdom of his years, a 67-year-old Newton in the spring of 1720 sold his South Sea stock for a tidy profit of £20,000.
But then the madness gripped him. As South Sea shares just kept on rising, Newton reversed course and ploughed his proceeds back in. He doubled down, converting his government bonds into even more South Sea Company stock.
Unfortunately, the bubble burst in the autumn of 1720, wiping out the ageing Newton’s savings.
https://www.ft.com/content/b37485c4-a82e-4f99-abbe-0af6a0214f5e
Bure bildades 1992 ur de avvecklade löntagarfonderna och noterades på Nasdaq Stockholm 1993.
Almost simultaneously publish books arguing that there is something profoundly awry with the economy as it is now
Some sections of each book read as though written by those more likely to have been marching on the streets during the Occupy movement
In What We Owe Each Other, Minouche Shafik begins by defining what she means by the social contract
Mark Carney’s Value(s)
Carney aligns himself with some authors admired by the heterodox economics community, such as Branko Milanovic, a scholar of inequality influenced by Marxism, and Hyman Minsky, the late US economist known for his theory of cyclical financial instability in capitalism.
Diane Coyle FT 25 March 2021
Diane Coyle is Bennett Professor of Public Policy at the University of Cambridge and author of ‘Markets, State and People: Economics for Public Policy’
https://www.ft.com/content/d54b4839-b66c-4237-8d1e-f1e7eb6035ab
This is not just a question for the UK: the same can be asked of the world economy as a whole.
Paul Krugman has been unrelenting in his derision. The lesson of the 2010/11 crisis, he notes, is “don’t panic”; there will be no return to 1970s style stagflation.
Well, maybe, but as Andy Haldane, chief economist at the Bank of England, observed in a recent speech, the chances of it are a good deal higher this time around than last.
Starved for more than a year of the ability to spend, consumers won’t much care what it costs. They’ll pay almost anything for a pint in the pub.
Jeremy Warner Telegraph 24 March 2021
https://www.telegraph.co.uk/business/2021/03/24/britain-has-much-debt-handle-higher-interest-rates/
They are, at least, the most daring.
This administration wants to avoid the mistakes of the Obama era.
But it could make opposite ones.
Martin Wolf 23 March 2021
https://www.ft.com/content/cf2d5ad5-2b60-4398-a6d3-cbec8716d9ec
Biden administration looks set to continue enjoying the dollar’s exorbitant privilege.
FT 24 March 2021
https://www.ft.com/content/590c6ed8-5fb7-4d34-ad93-da9e66649984
och i nyproduktionen är varje kvadratmeter belånad med 13.700 kronor.
Det senare innebär en extra ryggsäck på 1,4 Mkr för köpare av en ny bostadsrätt på 100 kvadratmeter.
https://www.di.se/nyheter/da-blir-bolanet-50-procent-dyrare/
Households saved a good deal of their stimulus checks. Healthy corporations cut back investment and bulked up cash hoards, and weaker companies borrowed heavily to stay afloat.
Investors hungry for yield jumped into junk bonds, and that leaves many firms—otherwise expected to travel through bankruptcy—heavily in debt but still functioning.
Mortgages became available at rock-bottom rates. Many who could work from home sought expanded living spaces, farther from commercial centers, and housing prices jumped 13% in 2020.
MarketWatch 24 March 2021
För att underlätta i coronakrisen har bankerna kunnat låta kunder slippa att amortera. Men trots osäkerheter rusar nu priserna på delar av bostadsmarknaden och skuldsättningen ökar.
Det är dags att dra åt bromsen.
DN 24 mars 2021
https://www.dn.se/debatt/dags-att-bromsa-bolanen-amorteringskrav-aterinfors/
Birgitta Swedenborg m fl SvD 23 mars 2021
https://www.svd.se/ska-vi-bara-fortsatta-att-overlata-makt-till-eu
PODD | 23 mars. Skuldsättning av framtida generationer för att rädda coronakrisande EU-ekonomier. Borde Sverige säga nej?
https://www.svd.se/eus-aterhamtningspaket
When the failures of the current approach become clear, Turkey will have few options to avoid a “hard landing”
FT Editorial 23 March 2021
https://www.ft.com/content/a3a2542f-0feb-4596-8357-30ab965697d6
The Norwegian army in Sweden during World War II - documentary
https://www.youtube.com/watch?v=jyY3dBJ_oI8
Värmland
DN publicerade på måndagen en unik kartläggning om vilka det är som hittills har dött i covid-19 i Sverige. Låginkomsttagare, lågutbildade och utrikesfödda från vissa länder är starkt överrepresenterade bland de avlidna.
https://www.dn.se/sverige/unik-kartlaggning-har-ar-de-som-dott-i-covid-i-sverige/
Vi fick tidigt dessa signaler, till exempel att det var en stor dominans av utrikesfödda på Iva (intensivvården, reds anm). Det gällde framför allt personer födda i Mellanöstern och Afrikas horn.
Den enskilt viktigaste riskfaktorn för dödlighet i covid-19 är dock ålder. Skillnaderna i risk är påtagliga. Bara en promille av de döda, 16 personer, var under 30 år. De allra flesta döda, 72 procent, finns i åldersgruppen 80 år och äldre.
– Ingen som jag har pratat med kan komma på någon sjukdom som är så extremt åldersberoende.
DN 23 mars 2031
https://www.dn.se/sverige/tegnell-tydligt-att-socioekonomi-spelar-stor-roll/
The advisers in FDR’s “brain trust” were reformers, not Keynesians, and had a different view.
Attributing the Great Depression to excessive corporate power, they thought that the route to recovery lay in institutional change. As a result, so-called Keynesian stimulus was a minor component of the New Deal – emergency treatment pending longer-run cures.
Robert Skidelsky March 16, 2021 Project Syndicate
The lessons of 1937
https://www.internetional.se/1937.htm
Most of Italy is in lockdown again. France has imposed a disguised lockdown for another month in greater Paris, where critical care beds are saturated and the South African variant is nearing a tenth of cases. The variant is above 30pc in hotspots in western France.
AMBROSE EVANS-PRITCHARD Telegraph 19 March 2021
https://www.youtube.com/watch?v=RYfmRTyl56w
Fed's Efforts to Hold Down Rates Raises Inflationary Pressures: Dalio
Stagflation
Bloomberg 20 mars 2021
https://www.youtube.com/watch?v=-wPKUoLjKLo
Ray Dalio, founder of Bridgewater Associates, and MMT
https://englundmacro.blogspot.com/2019/06/ray-dalio-founder-of-bridgewater.html
WAITING FOR THE LAST DANCE
The Hazards of Asset Allocation in a Late-stage Major Bubble
Jeremy Grantham 5 January 2021
https://www.gmo.com/europe/research-library/waiting-for-the-last-dance/
Citigroup chairman Chuck Prince and ABBA: Dance While The Music Still Goes On
“So long as the music is playing, you’ve got to keep dancing. We’re still dancing.”
Chuck Prince, former chairman and chief executive of Citigroup, interviewed only a month before the music stopped 2007.
https://englundmacro.blogspot.com/2015/01/citigroup-chairman-chuck-prince-and.html
Elvis Presley Save the last dance for me
Investors are betting that loose monetary policy cannot last
At some point, the Fed may have to adjust policy to discourage market movements it does not like
FT 19 March 2021
https://www.ft.com/content/a9041dd8-9e5e-40e7-9949-0376877c15a1
The Fed has lost control of bond markets - and Europe is the victim
Ambrose Evans-Pritchard Telegraph 26 February 2021
https://englundmacro.blogspot.com/2021/02/the-fed-has-lost-control-of-bond.html
Det är bra med samarbete, men det får ju finnas gränser.
I år är det exakt 50 år sedan jag skrev boken Vår framtid Europa, typ Ja till EEC.
Det finns ingen anledning att ändra sig.
Rolf Englund 18 mars 2021
https://www.internetional.se/siven.html
Yves here. This article by William White, famed for his days at the Bank of International Settlements, when along with Claudio Borio, he warned of housing bubbles forming in many economies in the early 2000s, is consistent with arguments we’ve been making against negative interest rates for many years
(see our most recent example, Negative Interest Rates Are Coming, but There Is No Chance That They Will Work).
March 18, 2021 by Yves Smith
Why have markets reached their exposed position? The answer is that success breeds excess.
This is the argument of a fascinating new paper from William White, economic adviser to the Bank for International Settlements.
Martin Wolf, Financial Times 24/5 2006
https://www.internetional.se/stabiliseringspolitik.htm#whiteplanb
We can indeed, as Grantham told the FT, observe classic symptoms of mania: the rise of amateur traders, frenzied interest in once obscure companies, soaring prices of speculative assets such as bitcoin and hot businesses like Tesla, and the emergence of special purpose acquisition companies, or Spacs.
These are vehicles for the acquisition of unlisted companies and so a way around initial public offering rules. They are modern versions on a vastly bigger scale of the company allegedly created during the early 18th century’s South Sea bubble, “for carrying on an undertaking of great advantage, but nobody to know what it is”.
That bubble ended badly. Will this time be different?
Martin Wolf 16 March 2021
Highly recommended
https://www.ft.com/content/a8e8475a-c808-4552-96fb-7ce5551e338e
WAITING FOR THE LAST DANCE
The Hazards of Asset Allocation in a Late-stage Major Bubble
Jeremy Grantham 5 January 2021
https://www.gmo.com/europe/research-library/waiting-for-the-last-dance/
För varje dag som går med nollränta växer problemen
https://englundmacro.blogspot.com/2021/03/for-varje-dag-som-gar-med-nollranta.html
Yet, while not impossible, top Fed officials are yet to show any inclination to contemplate this, let alone embark on it.
This is not because they are blind to the improving economy and massive fiscal stimulus.
It is because they are worried that a tightening of financial conditions would destabilise markets and undermine the recovery.
Mohamed El-Erian FT 16 March 2021
https://www.ft.com/content/5e31952b-2b51-4125-a182-477b445602e5
För varje dag som går med nollränta växer problemen
https://englundmacro.blogspot.com/2021/03/for-varje-dag-som-gar-med-nollranta.html
“At this stage, it is likely national regulators are acting conservatively and out of an abundance of caution, in the belief a risk-averse approach will help reassure the public and limit the impact on uptake going forward. But the prospect of a longer review or an outright ban cannot be ruled out,” Federico Santi, senior Europe analyst at Eurasia Group, said in a note Monday.
“Either way, the damage is done. Willingness to take the AstraZeneca vaccine had already been lower than the mRNA vaccines available in the EU due to lower headline efficacy numbers and the initial confusion over its suitability for over 65s,” he said.
Some wonder whether there is a political element behind the decision to pause the vaccine, given earlier disputes over the vaccine.
https://www.cnbc.com/2021/03/16/europes-suspension-of-astrazenecas-covid-vaccine-is-damaging.html
The ECB and other authorities have given banks unprecedented regulatory relief to ensure they can keep lending to companies hurt by lockdowns and other fallout from the health crisis.
In a trade-off, the ECB froze dividend payments last year and capped them for much of 2021.
Bloomberg 16 March 2021
Hushåll, företag och stater ökar sin skuldsättning.
Allt fler köper bostäder och aktier till stigande kurser.
Allt sämre företag kan sälja sina skräpobligationer, junk bonds.
Alla är glada.
Happy days are here again!
https://www.youtube.com/watch?v=6h_GChgSv_A
Utom riksbankscheferna som vet att de inte har någon plan för återgång till något slags normalitet.
Hur skall detta sluta?
Det är väl skriande uppenbart.
Det kommer att sluta illa den dag räntorna stiger.
Ju längre det dröjer, desto mer illa kommer det att sluta.
Jag hör redan hånropen skalla.
- Så har Du sagt länge, Rolf, men Du har haft fel. Vi som vet bättre har för länge sedan förstått att det är så, men vi skall hoppa av i tid. Vi kan uppfattas som idioter - fools, men vi skall sälja till One More Fool. Sedan skall vi köpa Buy the Dip och bli ändå rikare.
Frågan bli I slutändan denna: Where is the one more fool when we really need him (or her)?
https://www.investopedia.com/terms/g/greaterfooltheory.asp
Martin Wolf 16 March 2021
Highly recommended
https://englundmacro.blogspot.com/2021/03/if-correction-is-due-to-higher-rates.html
Hundreds of people have joined a vigil in London for Sarah Everard, despite Home Secretary Priti Patel urging against gatherings.
Earlier, the home secretary said she understood public anger over her death, but warned against protests while Covid restrictions were in place.
BBC 16 March 2021
https://www.bbc.com/news/uk-56406965
Priti Sushil Patel serving as Home Secretary since 2019 was born in London to an Ugandan-Indian family.
The downside of TIPS is that their prices are already at record highs and their real, inflation-adjusted yields at record lows.
Those who bought into TIPS bonds during their last boom, in 2011-12, quickly saw their price collapse by about 10%, on average, when inflation worries faded.
TIPS offered a pretty good deal when their real, inflation-adjusted yield was about 2%. But today it’s either zero or negative. At this point it’s expensive insurance. The lowest price risk comes from shorter-term bonds (as usual).
But someone buying five-year TIPS bonds is actually locking in a loss of purchasing power of about 1.7% a year between now and 2026.
That sounds to me like a pretty lousy deal, at least unless I really am convinced inflation is about to hit.
MarketWatch 15 March 2021
While consumer prices have been held in check by globalisation and automation, easy money pouring out of central banks has been driving up the price of assets from stocks to bonds and housing. As homes are generally not counted as consumer goods, even sharp price spikes carry relatively little weight in central bank deliberations.
Of 502 international cities tracked by Numbeo, a research firm, prices are “unaffordable” (more than three times median family income) in more than 90 per cent.
Housing bubbles are the worst. The $220tn global housing market is more than twice the size of the global stock market and complicated by debt.
Ruchir Sharma FT 14 March 2021
The writer, Morgan Stanley Investment Management’s chief global strategist, is author of ‘The Ten Rules of Successful Nations’
https://www.ft.com/content/c8959502-7dae-43b1-b993-3bf85fb4325a
If Greenspan had raised rates because of rising inflation starting about 2003–4, there would have been no housing bubble, no subprime crisis, no overheated stock market, and no stock market crash.
We would not have had the worst unemployment numbers since the Great Depression.
Retirees and everyone else would have been able to earn reasonable yields on fixed income instruments.
John Mauldin 12 March 2021
https://englundmacro.blogspot.com/2021/03/for-most-people-housing-is-major.html
For most people, housing is a major expense, and often the single largest one. Hence it is rightly a big part of the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE).
The Federal Reserve favors the PCE measure, while for whatever reason, the business media seems to focus on CPI. Typically, the core CPI and PCE move more or less in tandem. But notice that both measures use housing as their biggest component.
Notice that owner’s equivalent rent (OER) in the CPI is 23.4%, but total housing costs are weighted at 42.4%.
Housing prices have no direct influence on our inflation measures. They do have indirect influence via the imputed, subjective “owner’s equivalent rent” methodology. Its accuracy is questionable at best.
What’s not questionable, though, is that home prices have a direct impact on the homeowner’s spending power.
If Greenspan had raised rates because of rising inflation starting about 2003–4, there would have been no housing bubble, no subprime crisis, no overheated stock market, and no stock market crash.
We would not have had the worst unemployment numbers since the Great Depression.
Retirees and everyone else would have been able to earn reasonable yields on fixed income instruments.
John Mauldin 12 March 2021
https://www.mauldineconomics.com/frontlinethoughts/inflation-is-broken
Consumer Price Index (CPI)
A group of 16 economists and businessmen have finally pulled the trigger. They accuse the European Central Bank of “blatant monetary financing of states” in breach of Article 123 of the Lisbon Treaty and straying ever further into fiscal rescue missions, undermining the sacred contract agreed by the German nation when it gave up the Deutsche Mark.
“The ECB does not have a mandate to hold the eurozone together,” said the 140-page legal filing reported by Die Welt. It has a primary legal mandate to maintain price stability.
If Germany is to take part in an EU fiscal union of shared debts this constitutional change must be validated by treaty changes.
Ambrose Evans-Pritchard Telegraph 12 March 2021
If Germany were suddenly to say “nein” to PSPP one or more eurozone countries could be forced to crash out of the monetary union.
https://englundmacro.blogspot.com/2020/05/if-germany-were-suddenly-to-say-nein-to.html
That is remarkable. And it underscores a second lesson from this week’s market swings — the need for investors to reread the 2011 book Thinking, Fast and Slow by the psychologist Daniel Kahneman
Gillian Tett FT 11 March 2021
https://www.ft.com/content/89c95e78-ec7f-4d06-9ea8-a9b19a5ed6da
The US break-even curve, which tracks investors’ forecasts for inflation, has flipped upside down, with short-term rates eclipsing their long-term counterparts.
This previously happened on a sustained basis in 2008, during the global financial crisis.
Powell recently argued that any jump in inflation would be “neither large nor sustained” and underscored that the economy is still a long way off from the US central bank’s goal of average 2 per cent inflation.
FT 12 March 2021
https://www.ft.com/content/4b39a372-1924-4839-b931-c6773b251968
Avstampen för en framtidskonferens sker på Europadagen den 9 maj i Strasbourg.
För att ändra i fördragen ställs krav på enhällighet, det vill säga varje medlemsland har vetorätt. Därtill kommer att förändringar måste godkännas i vart och ett av de 27 medlemsländerna, vilket öppnar för opposition i nationella parlament och kanske krav på folkomröstningar.
Framtidsdiskussionen har historiskt sina rötter redan i förhandlingen i Maastricht (1991) då en del överblivna institutionella knäckfrågor lämnades till senare förhandlingar. Den processen kulminerade vid det katastrofala toppmötet i Nice (2000) som president Chirac ledde. Det avslutades i en motsägelsefull, oklar kompromiss som behövde rekonstrueras av experterna.
För att räta ut frågetecknen och för att förbereda EU för en stor utvidgning av medlemskretsen inkallades ett konvent som utarbetade ett förslag till ”konstitutionellt fördrag” under ledning av Valéry Giscard d’Estaing. Det förkastades i folkomröstningarna i Frankrike och Nederländerna (2005).
Tankepaus proklamerades och två år senare började en omredigering som 2009 kom att kallas Lissabonfördraget. Det antogs slutgiltigt under Fredrik Reinfeldts ordförandeskap i EU.
Rolf Gustavsson SvD 10 mars 2021
https://www.svd.se/manga-fragetecken-kring-unionens-framtid
EUs grundlag - The Constitution
http://www.nejtillemu.com/konvent2007.htm
In 1992, the Danes voted against Maastricht; their government secured opt-outs and, in 1993, the public backed the Treaty on a second referendum.
In 2001, the Irish rejected the Nice Treaty; a year later, after caveats, they gave it the nod.
In 2005, France and the Netherlands voted down the EU constitution; the EU repackaged the constitution as the Lisbon Treaty and carried on merrily.
The Irish said no to Lisbon in 2008 but affirmed it after a rethink in 2009.
https://englundmacro.blogspot.com/2019/04/the-night-of-referendum-as-results-came.html
Flaggan och hymnen är faktiskt inte officiella EU-symboler
När fransmän och holländare hade röstat nej till det som skulle bli en Konstitution enligt amerikansk förebild slopades flaggan och hymnen i det som i panik gjordes om till ett fördrag i Nice.
https://englundmacro.blogspot.com/2020/05/flaggan-och-hymnen-ar-faktiskt-inte.html
Robert Schuman och EU:s symboler
Är slutet nära för den litteratur vi alla har vuxit upp med – en värld med förlag, recensioner, krav på originalitet och konstnärlig frihet och oberoende?
Måns Wadensjö SvD 10 mars 2021
Detta är en understreckare
https://www.svd.se/litteraturens-slut-kan-oppna-for-nya-former
Hans tidigare artikel
https://www.svd.se/inte-ens-jag-sjalv-vill-lasa-bocker-som-mina
Happy Jankells debutroman ”Livlina” är en nästan fyrahundra sidor lång skildring av Livs problem med hälsoångest
Liv bor i Stockholms innerstad men deltar knappt i livet omkring eftersom hon oroar sig så starkt för sin hälsa. Utöver jobbet på fiket är hon mest hemma med ångesten, redo att åka till akuten. Hon kontrollerar sin fysik, hetsäter och skär sig.
SvD 10 mars 2021
https://www.svd.se/potentialen-slarvas-bort-i-jankells-debut
Save money, park it in interest-bearing instruments, and live off the income, with Social Security and maybe a job pension to help. Not complicated and it worked well for decades.
This chart shows the spread between 10-year Treasury yields and 30-year mortgage rates.
I noted last week that the long-lost “bond vigilantes” are trying to rise from the dead.
I firmly believe that at some point the Federal Reserve will begin to buy large quantities of longer-dated securities, taking interest rates down and driving a stake into the heart of those who want higher returns for the risks they are taking.
That point is likely when the market drops (say) 20%. Until then they just let things rock along. The Federal Reserve is going to give us return-free risk.
I reviewed stock valuations in more detail a few weeks ago (see here) and everything I said then still applies. Anyone who owns passive index funds will endure a major drawdown at some point.
I can’t say exactly when but it’s going to hurt.
John Mauldin 5 March 2021
Nice, sort of, pic of Fed Chair Jerome Powell
https://www.mauldineconomics.com/frontlinethoughts/everything-is-broken
The idea is that if you “push down on the economic accelerator” you discover hidden slack. Added demand creates its own added supply.
Even Olivier Blanchard, the high priest of stimulus, is choking on the numbers. He warns of a ‘nonlinear’ effect where inflation suddenly breaks out, akin to the late 1960s.
Roosevelt’s military-industrial expansion tightened the labour market and lifted wages, leading to the most dramatic fall in income inequality in US history. It ushered in the ‘social democrat’ era of the American Dream. It is this that Mr Biden aims to replicate.
The twin effect of a rising dollar and rising US rates is to drain global dollar liquidity. This has systemic consequences in a world where offshore dollar debt has reached $12 trillion and trade invoicing is still done mostly in US currency. The IFF warns of another ‘taper tantrum’ akin to the global sell-off in 2013 unless bond yields stabilise soon.
Their research provided the main intellectual underpinnings of the austerity policies that followed and are now widely thought to have done more harm than good.
Following the coronavirus pandemic, policy makers are leaning hard on the work of Olivier Blanchard and Lawrence Summers, who have argued that low interest rates increase the scope for fiscal policy and larger deficits can actually help solve our economic woes. Their theory helped inspire Joe Biden’s $1.9 trillion stimulus package for the US economy.
This week Blanchard tweeted that Biden’s plan reminded him of the snake that swallowed an elephant in Le Petit Prince by /French aristocrat, writer, and aviator/ de Saint-Exupéry. “The snake was too ambitious,” wrote the former chief economist of the IMF. “The elephant will pass, but maybe with some damage.”
Ben Wright Telegraph 10 March 2021
https://www.telegraph.co.uk/business/2021/03/10/crack-dam-holding-back-next-economic-crisis/
Fed has signalled it will tolerate an overshoot of the target for a period of time to compensate for persistently low inflation.
The risk, as I see it, is that inflation could overshoot the overshoot levels the Fed is comfortable with.
To date, US households have lost $490bn in income but have received $1.3tn in transfers. The total amount of transfers will undoubtedly rise with the passage of the next fiscal stimulus package.
Chetan Ahya FT 10 March 2021
The writer is chief economist at Morgan Stanley
https://www.ft.com/content/e8d6b6e6-1f19-473e-a1c5-fbe077615e0f
In a fascinating recent lecture on “Techno-optimism, behaviour change and planetary boundaries”, the British economist Lord Adair Turner tackles head on the question of how best to manage the challenges.
In brief, the physics of the energy transition is simple. The difficulty is shortage of time.
We need to make large progress towards lower emissions over the next decade.
Martin Wolf FT 9 March 2021
https://www.ft.com/content/a3285adf-6c5f-4ce4-b055-e85f39ff2988
Det händer dagen efter midsommar när allt är toppen, men inte riktig lika ljust som dagen innan.
Henrik Mitelman DI 8 mars 2021
https://www.di.se/analys/se-upp-for-rodljuset-som-hotar-borsfesten/
Government debt simply cannot provide the kind of safe harbour it once did
In short, stronger economic growth sparked by unprecedented stimulus or the return of inflation, will eventually lead to a pullback in liquidity support from central banks.
Thushka Maharaj FT 9 March 2021
The writer is global multi-asset strategist at JPMorgan Asset Management
https://www.ft.com/content/c1e55398-2cbc-4172-86e3-bc53047f192d
US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.
For a long time, the joke did not appear to be ageing well. Bond markets were not intimidating anybody as central banks mopped up huge amounts of debt and investors fell over themselves to lend to governments – sometimes even at negative rates.
But all this has now changed.
In many ways, the puzzle is not that bond yields should recently have risen but rather that they should have stayed so low for so long. In the whole history of bond markets over hundreds of years, there has been no precedent for yields being this low.
Median maturity of all government debt is set to be less than one year by March 2022.
Roger Bootle Telegraph 7 March 2021
– Misstaget var löftet att aldrig mer devalvera.
Hade vi låtit kronan flyta redan 1985 hade allt gått mycket bättre. Det är jag övertygad om.
Kjell-Olof Feldt, SvD 28 oktober 2017
Hos IntCom
https://www.internetional.se/98fltala.htm
– Misstaget var löftet att aldrig mer devalvera. Hade vi låtit kronan flyta redan 1985 hade allt gått mycket bättre. Det är jag övertygad om.
Det glada 80-talet slutade i ett klart dystrare 90-tal. Kraschen blev brutal.
SvD 28 oktober 2017
https://www.svd.se/s-legendaren-borgerlig-majoritet-efter-valet
Since I was running the Financial Times markets team, I spent two days frantically trying to identify the reason for the panic. Nobody knew. But that weekend I suddenly woke in the middle of the night with an image of a Spanish bin in my head.
A month earlier I had attended a credit conference in Barcelona, where I read brochures about a little-known, and supposedly safe, entity known as a “structured investment vehicle”.
The material had seemed achingly dull. So on the way home I tossed the papers into an airport bin — and forgot it.
But, somehow, my subconscious knew that had been a mistake. So I awoke and went online to uncover what I had left in that bin.
Gillian Tett FT 10 August 2017
https://www.ft.com/content/a859449e-7daf-11e7-ab01-a13271d1ee9c
Gillian Tett: Have we learnt the lessons of the financial crisis?
FT 2018-09-01
https://englundmacro.blogspot.com/2018/09/gillian-tett-have-we-learnt-lessons-of.html
The former leader of the UK Independence Party and the Brexit Party, credited even by his sharpest critics as the most influential politician of the past two decades, has finally quit politics.
Telegraph 6 March 2021
https://www.telegraph.co.uk/politics/2021/03/06/exclusive-nigel-farage-quits-politics-time-means/
Inflation in most rich countries has been low since the 1990s, not least because of central banks’ success in lowering long-term inflation expectations. But
https://www.project-syndicate.org/bigpicture/is-inflation-alive
Wolf: Amid a wide range of options, inflation targeting remains the simplest and least bad
https://englundmacro.blogspot.com/2021/03/amid-wide-range-of-options-inflation.html
Allowing the bond market to take some air out of ebullient valuations in equities and housing through higher 10-year rates is an appropriate policy approach given how far asset prices have risen and when economic growth is picking up.
The US 10-year currently remains below the 1.80 per cent level seen before the arrival of the pandemic. Arguably, that looks low because the current macro outlook is the reverse of the slowdown that was evident in early 2020.
Michael Mackenzie FT 5 March 2021
https://www.ft.com/content/893d652f-36cb-4993-bfea-0ab936bed7df
As anyone with a working memory of last March’s pandemic-inspired selloff, much less the global financial crisis of 2008, the dot-com bubble burst in 2000 or October 1987 would recall.
Last year as it became apparent the COVID-19 pandemic would bring the U.S. and global economy to a near halt. The S&P 500 plunged from a record close on Feb. 19, dropping around 34% before bottoming on March 23.
Since those March lows, the S&P 500 remains up nearly 72%, while the Dow has rallied nearly 70%. And even with its recent pullback, the Nasdaq remains up more than 90% over that stretch.
MarketWatch 4 March 2021
In March 2020, as Covid-19 hit the west, Treasury prices went haywire as market liquidity collapsed.
That was shocking in a sector that is normally “the largest and most liquid government securities market in the world”, according to the Federal Reserve.
Fed officials eventually unblocked the market with unprecedented interventions
Last week, the markets started to gyrate alarmingly again amid inflation concerns
Gillian Tett FT 4 March 2021
https://www.ft.com/content/375e447e-4d69-4817-b00c-a472b06ec3f3
Liquidity is in the world’s biggest bond market, except when you really need it
https://englundmacro.blogspot.com/2021/03/iquidity-is-in-worlds-biggest-bond.html
Bond traders have been saying for years that liquidity is there in the world’s biggest bond market, except when you really need it.
Last week’s startling gyrations in U.S. Treasury yields may offer fresh backing for that mantra, and prompt another bout of soul-searching in a $21 trillion market that forms the bedrock of global finance.
Bloomberg 2 March 2021
Låga räntor och stor efterfrågan har istället lett till nya rekordnivåer. Vad får det för konsekvenser och hur länge kan det fortsätta så här?
I studion riksbankschefen Stefan Ingves, Cecilia Hermansson, forskare i finansiell ekonomi vid KTH och Shoka Årman, privatekonom på SPP.
SvT 1 mars 2021
https://www.svtplay.se/video/30288014/ekonomibyran/ekonomibyran-sasong-3-avsnitt-7?start=auto
The rationale for inflation targeting has three components.
The first is that one instrument — in this case, monetary policy — can only be aimed at one goal.
The second is that a central bank can only target a nominal goal of some kind.
The third is that inflation is a comprehensible and politically acceptable aim.
There are at least four strong objections to targeting asset prices.
It is possible that an exceptional crisis, such as the pandemic, will generate policy mistakes, including unexpectedly high inflation. Andy Haldane, the Bank of England’s chief economist, has stressed just this risk in a thought-provoking recent speech.
Martin Wolf FT 1 March 2021
https://www.ft.com/content/160db526-5e8d-4152-b711-21501a7fbd01
Andy Haldane recent speech.
Inflation targeting has been successful because it managed to anchor expectations — until it did not.
https://englundmacro.blogspot.com/2020/07/the-troubling-bit-is-that-these.html
Did inflation targeting fail?
Martin Wolf, Financial Times, May 5 2009
https://www.internetional.se/taylor.html#wolfomtaylormaj09
The Accord itself — admirably short — was published for the morning papers on Sunday, March 4, 1951:
The Treasury and the Federal Reserve System have reached full accord with respect to debt management and monetary policies to be pursued in furthering their common purpose to assure the successful financing of the Government's requirements and, at the same time, to minimize monetization of the public debt.
The striking difference between then and now is that the pressure to keep rates low is coming from central banks themselves. Guided by the belief that any bad news requires a monetary response, central banks today are assuring financial markets that rates will be low for a long time, with some engaging in “yield curve control” to explicitly cap rates farther along the yield curve. They’re expanding the money supply rapidly at the same time as governments are running large budget deficits.
It’s surprising that officials do not see inflation even as a risk.
Mervyn King Bloomberg 1 March 2021
Mervyn King's analysis of the “Great Stagnation”
https://englundmacro.blogspot.com/2019/10/mervyn-kings-analysis-of-great.html
