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Where to hide if the world goes into recession

Covid monetary and fiscal stimulus is being withdrawn just as the global economy slows.  

Nomura calls it China’s “Volcker Moment”, a deliberate purging of rampant excesses that can no longer be delayed.

... the greater danger ahead is “Japanification” and a relapse into secular stagnation may win the next round. 

We know in hindsight that the US economy went into recession in November 2007 almost a year before the collapse of Lehman Brothers, but the Federal Reserve had no idea at the time.

Shiller price/earnings ratio on Wall Street currently at a record 38 times. The pre-Lehman peak in late 2007 was 27. 

... stick to the classic: three-month US Treasuries. This is where Warren Buffett has parked $113bn, waiting to pounce after an equity correction. The dollar always spikes in a big global sell-off. 

Ambrose Evans-Pritchard Telegraph 19 October 2021


TINA appears to have morphed into TINA RIF (There Is No Alternative — Resistance Is Futile)

 Fund managers’ equity allocations are higher than they were during the dot-com boom, even as economic growth fades.

TINA (There Is No Alternative — to stocks), appears to have morphed into her fearsome sister TINA RIF (There Is No Alternative — Resistance Is Futile). 

With yields low and inflation on the horizon, bonds are regarded as unbuyable.

John Authers Bloomberg 20 oktober 2021


SEB kommer även att köpa tillbaka egna aktier för 2,5 miljarder kronor


SEB kommer även att köpa tillbaka egna aktier för 2,5 miljarder kronor. 

DI 20 oktober 2021



EU is withholding 36 billion euros of Polish stimulus funds

Morawiecki defended the ruling saying that Poland is ready for a dialog on the rule of law. But he warned that the country wants its sovereignty respected and financial coercion would backfire and undermine the entire EU. 

“I won’t agree to politicians trying to blackmail and threaten Poland so that the blackmail becomes the way of conducting politics against any member states.”

Bloomberg 19 October 2021


Poland Just Raised a Question the European Union Must Answer


The European Commission has produced a clip for the 20th anniversary of the fall of communism, but it forgot to mention that it all started in Poland. “Solidarity”, Lech Walesa and the events of 1989 are completely absent.

The rare shots from Poland show general Jaruzelski, who introduced martial law in 1981.



California Has Driest Year Since 1924

 Gov. Gavin Newsom has asked Californians to cut their water use by 15% in light of the conditions. 

The state is home to about 70,000 farms and ranches, with a combined output of about $50 billion a year. 


40 Million People Rely on the Colorado River. It’s Drying Up Fast


Greta Thunberg singing, dancing and Rickrolling the climate

BBC 16 October 2021


We know which side will win in the end, because vested interest is slowly shifting towards the ever-larger renewable sector, and because inertia over time loses ground to the movements that keep growing. 

But we don’t know if that win will come in time to matter. 


The Dawn of Everything: A New History of Humanity by David Graeber and David Wengrow

 Still, the question the authors repeatedly ask, but never quite get round to answering is, how then did we become “stuck” in a system of hierarchies and conspicuous inequalities of power and consumption? 


Flaskhalsarna hamnarna. Miljölagar gjorde det olagligt för ca 50% av de tillgängliga lastbilarna att transportera gods genom Kalifornien


Supply chain chaos is already hitting global growth. And it’s about to get worse

CNBC OCT 18 2021


Ratings agencies issued a fresh round of downgrades on Chinese property firms

Sinic Holdings warned last week it’s not likely to repay offshore bonds worth $250 million.

China Properties Group, said it had defaulted on $226 million worth of notes.

CNBC 18 October 2021


China risks making ‘big mistakes’ with widespread crackdown, says Raghuram Rajan,  ex-IMF chief economist

CNBC 15 October 2021


The marvelously complex division of labor among millions of people around the world

 The ongoing, intensifying supply chain... The problem is complex systems are inherently fragile. 

The optimization that makes them cost-effective also removes the redundancies that make them resilient.

Things can fall apart quickly when some unforeseen event occurs. Or an unforeseen sequence of events, which is what’s happened.

Everything works until suddenly it doesn’t

John Maulding 15 October 2021


Bank of America debt security now stands at nearly $970bn

 The biggest US banks highlighting the debate on Wall Street over the direction of interest rates.

 JPMorgan Chase is more inclined to park deposits at the Federal Reserve than buy potentially overpriced Treasuries    

 Lending out the money would be their preferred option. But loan growth has been sluggish as companies have found ample liquidity in the bond markets and consumers have paid down debts on credit cards.

 If rates move higher, Treasuries could fall out of favour with the banks, creating a negative feedback loop in the markets.

FT 16 October 2021



Lagos is poised to become the world’s biggest city

 A Week in the World’s Most Chaotic City

Unending traffic jams, incessant noise and a population of over 20 million people: Lagos is a city on the brink of insanity. 

Der Spiegel 30 September 2021



One of the greatest mysteries confronting the markets is the obdurate persistence of low real bond yields Authers Plender

 (obdurate: stubbornly persistent in wrongdoing)

In the case of 10-year TIPS yields for the U.S., they have managed to fall once again below the once-inconceivable minus-1% level. Yields like that are not supposed to happen, and certainly not when the economy is growing and people are worried about inflation. 

Biden’s political difficulties have multiplied with startling speed. 

That leads to the risk that it waits too long to raise rates, allows inflation to take hold, and has to raise rates more in consequence. That is the kind of miserable prospect that might make it sensible to accept a negative real yield. 

Can I summarize all of this neatly? No, not really. A few decades from now, it will be obvious what was going on as the world tried to emerge from the pandemic. At present, all that is clear is that things are changing profoundly.

Q: What’s the difference between a Bond and a bond trader?

A: A Bond matures.

James Bond has a license to kill, so does the long bond

John Authers Bloomberg 15 October 2021

IMF says that there is significant uncertainty about the effect of normalisation on asset prices

In its latest Global Financial Stability Report.

The central bankers know this ... there could be a behavioural bias towards caution and delay in tightening. 

Yet investors’ deep seated conviction that monetary authorities will always come to the rescue if markets tank suggests that weakness in bond and equity prices will not turn into a rout just yet. 

John Plender 15 October 2021



The search for a congruent euro area policy mix


Marco Buti, Marcello Messori 13 October 2021


Stupiditetspaktens död

Viktor Munkhammar DI 6 maj 2021


Gravitas Plus: The Supply chain crisis

 Gravitas Plus: The Supply chain crisis

10 okt. 2021


From Shenzhen to Los Angeles, storms, Covid and labour shortages are causing disruption


The Washington Consensus is on its way out

Having narrowly avoided a global economic collapse twice – first in 2008 and then in 2020, when the coronavirus crisis nearly brought down the financial system – the world now confronts a future of unprecedented risk, uncertainty, turmoil, and climate breakdown. 

The alternative is the recently proposed “Cornwall Consensus.”

Mariana Mazzucato Project Syndicate 13 October 2021


What is the “Washington Consensus? Did it fail?


Samuelson and Friedman — two giants of postwar economics

Nicholas Wapshott’s book, Samuelson Friedman: The Battle Over the Free Market.

Friedman’s victory was ambiguous. Though Paul Volcker’s interest rate hike in 1979 put a stop to inflation in the US, Friedman disowned the experiment. The shock therapy that Volcker administered was not monetarism as Friedman envisioned it. 

To mark Friedman’s 90th birthday in 2002, Ben Bernanke paid tribute to him and Schwartz. Referring to the Fed’s baneful role in the Great Depression, he remarked: “You’re right. We did it. We’re very sorry. But thanks to you, we won’t do it again.”

In 2008 Bernanke and his colleagues let Lehman Brothers fail. The result was to drive the world to the brink of the greatest financial crisis since the 1930s.

Adam Tooze FT 14 October 2021


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


Lehman Brothers at IntCom


Martin Wolf: John Maynard Keynes and Milton Friedman, today’s policy orthodoxies are a synthesis of their two approaches.


Milton Friedman's Cherished Theory - The permanent income hypothesis - Is Laid to Rest Noah Smith



Today’s central bankers are flying blind in one important respect:

they have forsaken the tools of interest-rate targeting for a balance-sheet approach to monetary policy supported by a breathtaking quantitative easing. 

Therein lies a serious risk that was not present in the 1970s. Central bankers haven’t a clue about the links between their asset holdings and the forces of supply and demand that are currently wreaking havoc on inflation.

 I was part of the staff involved in that regrettable exercise to create the first measure of core inflation, on the team that developed new metrics and wrote brilliant reports that no one ever read.

Aaggregate demand is likely to be far less sensitive to central bank balance sheet adjustments than to the real cost of money, and monetary policy actions have a long lag time.

Inflation is unlikely to peak soon.  And it will take far more monetary tightening than financial markets are expecting to avoid stagflation 2.0.

Stephen Roach  FT 13 October 2021

A return to 1970s stagflation is only a broken supply chain away

Stephen Roach FT 6 May 2020

Fed Is Behind the Curve on Countering Runaway Inflation Risks, Summers Says

MarketWatch Oct. 12, 2021 


Slammed by losses tied to bad mortgages and other distressed holdings in 2008, it required more U.S. taxpayer support than any other bank in the financial crisis. 

In 2009 its stock price dipped below $1. 

Even now, the shares trade 86% lower than 15 years ago.


Citigroup, the nation's third-largest bank by assets, was on the verge of being closed by regulators the week of Nov. 24, 2008


Chuck Prince, a former head of Citigroup, who was asked why the bank was still lending in mid-2007, just before the financial crisis.

“As long as the music is playing, you’ve got to get up and dance,” he said.


The crypto-currency market is double the size of the sub-prime debt in the U.S. on the eve of the financial crisis...

and poses a threat unless urgently regulated, the Bank of England said.

Crypto assets are now worth $2.3 trillion, about 200% more than at the start of the year. While that’s still a small part of the $250 trillion global financial system, it’s about twice the size of the $1.2 trillion sub-prime real estate debt market in 2008.


Jemima Kelly, Cryptocurrencies and all that (Bitcoins, Tulips, South Sea Company)


The Biden administration lacks a coherent China policy

Peter Morici MarketWatch Oct. 13, 2021 


Deadly poker game over Taiwan


When it comes to the big turning points, the IMF almost invariably fails to see them and therefore gets it disastrously wrong.

 This is what the WEO says about the outlook for inflation: “We project, amid high uncertainty, that headline inflation will likely return to pre-pandemic levels by mid-2022 for the group of advanced economies and emerging and developing economies.” 

That’s certainly what policymakers are hoping for. But for many countries, including our own, it’s looking increasingly at odds with the evidence.

Jeremy Warner Telegraph 13 October 2021


“the end to 60/40”

 Bank of America Corp. called it “the end to 60/40” while Goldman Sachs Group Inc. said losses from such portfolios could swell to 10%. 

Similar alarms also rang at Deutsche Bank AG, where strategists including Jim Reid said a shift in the stock-bond relationship may force money managers to adjust their thinking.

...  if so a lot of the relationships that have prevailed in the average person’s investment career could change.” 

IEA Warns World Isn’t Investing Enough

 investment in green energy like solar and wind is falling short of what’s needed to keep the planet from warming up significantly.

At the same time, spending on fossil fuels is lower than needed if current demand growth for oil, natural gas and coal continues. 

global emissions are on track to post their second-largest annual increase in 2021, nearing an all-time high.


IEA warns clean-energy spending must triple to curb climate change

 even if all governments’ current net zero pledges were implemented in full and on time, the world would only achieve 20 per cent of the emissions cuts by 2030 needed to keep the goal of net zero emissions by 2050 a possibility.


Three weeks after Evergrande Group began failing to make scheduled payments on its debt...

 prompting a one-off shock to U.S. equity prices, there is no obvious reason to feel any more relaxed about the situation. 

The Chinese real estate sector itself is selling off ever more aggressively, and its descent has only accelerated this month. 

Survey shows the proportion of small businesses preparing to raise prices in the next three months at its highest in more than four decades. It has only once been higher, amid the oil crisis of 1979

John Authers Bloomberg 13 oktober 2021 



Fed Won’t Rush to Stock Market’s Rescue This Time

 After six consecutive quarters of gains that has been driven by generous monetary and fiscal support, momentum has been fading for U.S. and European equities in recent weeks. 

The S&P 500 Index is down almost 4% from its record high reached last month, as surging inflation, tapering fears, an energy crisis and slowdown concerns have weighed on the sentiment. 

Bloomberg 12 October 2021


Asset valuations are elevated, Bank of England says P/E


Poland Just Raised a Question the European Union Must Answer

Forces the bloc to decide whether it wants to be a federation or just a club.

Brussels, obviously, cannot let this stand. That situation would overturn the EU’s presumed vertical hierarchy, in which the European Court, based in Luxembourg, sits atop the 27-member nations’ high courts the same way the U.S. Supreme Court has primacy over state courts. 

The EU tried to adopt a constitution once, but in 2005 French and Dutch voters rejected it in referendums. In its absence, the bloc continues to rely on treaties among the member states.

But those are clearer on the European Court’s horizontal supremacy — its power to review the law coming out of other pan-European institutions — and rather vague on its vertical authority vis-a-vis national courts. 

Another constitutional convention would revive the idea of “ever closer union,” which implies a sovereign European state as the ultimate destination. 

Europe’s leaders and citizens may regard that as unrealistic or even undesirable. It could, in time, lead other nations to follow the British example and exit. If so, the EU should at least admit that a federation is no longer the goal.

Andreas Kluth Bloomberg 12 oktober 2021


EU’s draft constitution, produced by a convention that he chaired, was voted down by his fellow French citizens and by the Dutch before its reforms finally found a home in the Lisbon treaty of 2009. 

The referendum defeats in 2005 shook the entire Union and exposed the gap between the people and the Brussels elite.

FT 3 December 2020



Deadly poker game over Taiwan

 Would the US go to war to prevent that happening? The short answer is that no one really knows. 

Not the military planners in Washington and Beijing, whose job it is to draw up elaborate plans for conflict over Taiwan. Nor, possibly, even America’s commander-in-chief, Joe Biden. 

So much would depend on the nature of the attack — and the domestic and international political situation at the time.

As the Cuba missile crisis of 1962 and the 1914 July crisis in Europe both demonstrated, world-shaking decisions about war and peace, are often made in a surprisingly haphazard fashion under the pressure of fast-changing events.

Gideon Rachman FT October 2021


 One-China policy


Biden must therefore make it crystal clear to Xi that the US would mobilize its own military resources to defend Taiwan. But will he? 


Britain is instrumental in the worldwide concealment of cash and assets

And some tax havens are closer to home than many would imagine.

Nicholas Shaxson the author of “Treasure Islands,” a book about tax havens, and “The Finance Curse,” about oversize global finance.

NYT 11 October 2021


What the heck is happening in the Cayman Islands?

Almost 20 per cent of banks’ cross-border dollar funding is now supplied by entities based in the Cayman Islands

Gillian Tett 10 October 2019


China - The final stage of one of the largest real-estate booms in history

More than $5 trillion in debt

WSJ 10 October 2021




Evergrande is the first domino of something worse

Domino 2: Companies Similar to Evergrande. 

A significant number of companies are borrowing above 20% rates and can no longer fund from the dollar funding market. 

These companies can either default, they can try to sell assets, they can go to government banks to borrow money (but this route is currently closed until January) or they can go to the government. Today there are 35 “significant” companies, as per the strategist’s definition, and 13 are saying in the dollar funding market that they should not be refinanced. 

This is like the sub-prime equivalent; one has gone down, and the others are feeling the knock-on effect. These companies are 12.5% of the current market cap of the property sector. The amount of market cap that has been lost is $250 billion and including Evergrande is $500 billion to give some scale of numbers.  

Domino 3: Minsheng Bank. 

In 2008, Bear Stearns imploded due to subprime debt. 

Citigroup is watching Minsheng Bank, which has lost over half of its market cap over the last few months. It is currently modelling a 20% probability of default. It could create contagion effects within the banking system.  

Domino 4: Small Banks. There are numerous banks in China that are very similar to Northern Rock.

Domino 5: Ping An. This is a private insurer with a lot of problems. 

Domino 6: The Equity Market. There are $300 billion worth of margin loans. 

Domino 7: Big Banks


Domino 10: The Crisis Goes Global.

This is an extreme scenario which the authors don’t believe will happen. It would not be in Beijing’s interest to let events progress that far. But it’s also unclear at what point the Chinese government would intervene.

John Mauldin 8 October 2021



Fredrik Johansson: Euron – för Sveriges skull

Eurofrågan har ansetts politiskt död i Sverige sedan finans- och eurokrisen. Det borde den inte vara. Tvärtom har argumenten för att ansluta Sverige till euron aldrig varit starkare. Det gäller ekonomiskt, men framför allt politiskt.

När Lars Calmfors 25 år senare går igenom utredningens överväganden konstaterar han att man rejält underskattade eurons effekter för handeln.

 1990-talets statsfinansiella problem är avlägsna och institutionella förändringar som en oberoende riksbank och stramare budgetregler är på plats.

Calmfors är en bra illustration: ”Min inställning är fortfarande densamma som inför folkomröstningen 2003, nämligen att Sverige bör gå med för att bidra till en starkare politisk integration i Europa.”

Men vi behöver också ett fungerande samarbete för att lösa i princip varje stor fråga: från klimatet och migrationen till vår säkerhet och våra möjligheter att stå upp mot Kina och Ryssland.

Fredrik Johansson SvD 9 oktober 2021


- Vi är väldigt glada över att Fredrik har valt att ansluta till Hallvarsson & Halvarsson säger Anna Grönlund Krantz, vd. I det svårtolkade politiska landskap som våra kunder verkar i behövs kombinationen av vassa analyser och förmågan att kunna navigera rätt och där blir Fredrik ett värdefullt tillskott för våra kunder.


If you want to save the euro permanently, the judges are saying, write new rules into the European treaties and explain them to your voters.


Dags för en förnyad debatt om ett svenskt deltagande i euro­samarbetet

 Det är hög tid att bestämma sig för vilken roll Sverige ska ha i Europa.

Sven Hegelund, tidigare stats­sekreterare i finans­departementet (1999–2002, under regeringen Persson), författare till den nyutkomna boken ”Intressanta tider. Ekonomi och geopolitik i det 21:a århundradet”

SvD 15 september 2021


Göran Persson som idag är konsult på kommunikationsbolaget JKL, var för ett svenskt inträde i eurosamarbetet vid folkomröstningen 2003, och han tror fortfarande att det är dithän vi är på väg.



And then there is the renewed threat of stagflation

The threat of global contagion from the troubled Chinese property developer Evergrande is far from negligible. For good measure the ebb and flow of news on the pandemic continues to be alarmingly unpredictable. And then there is the renewed threat of stagflation.

Power outages, supply chain disruption, shortages in the shops, soaring energy prices, labour shortages, accumulating debt — the bad news piles up.

The difficulty amid all these uncertainties is to understand precisely where we are in a cycle that has been hijacked by Covid-19... What is confusing now is that inflationary pressure is arising much earlier than usual in an upturn.

John Plender FT 7 October 2021

1997 Clinton-Jiang Summit and U.S.-China Joint Statement

 October 29, 1997

China stresses that the Taiwan question is the most important and sensitive central question in China-U.S. relations, and that the proper handling of this question in strict compliance with the principles set forth in the three China-U.S. joint communiques holds the key to sound and stable growth of China-U.S. relations. The United States reiterates that it adheres to its "one China" policy and the principles set forth in the three U.S.-China joint communiques.

1997 Summit and the State Department on the "Three Noes"148

October 31, 1997

We certainly made clear that we have a one-China policy; that we don't support a one-China, one-Taiwan policy. We don't support a two-China policy. We don't support Taiwan independence, and we don't support Taiwanese membership in organizations that require you to be a member state. We certainly made that very clear to the Chinese.



The ‘Orient Express’ is a real train

 $2,300 for a one-night trip. That’s the starting rate to go from Florence to Paris aboard the Venice Simplon-Orient-Express, a historic luxury train operated by the LVMH-owned Belmond travel brand. 

Other routes cost more — much more.

In the 1970s, American James Sherwood, Belmond’s founder, bought several dilapidated carriages at an auction. By 1982, he had located — and restored to their former grandeur — enough original carriages to form the Venice Simplon-Orient Express that still operates today.

CNBC 7 October 2021


Global supply-chain bottlenecks are feeding on one another...

 with shortages of components and surging prices of critical raw materials squeezing manufacturers around the world.

The supply shocks are already showing signs of choking off the recovery in some regions.

Meanwhile, global labor shortages, often the result of people leaving the workforce during the pandemic, are throwing further obstacles in the way of producers.

WSJ 8 October 2021


“Hiking  will reduce demand a little bit and strengthen the currency. But it will have no impact on supply chain issues [ . . .] it won’t bring back lorry drivers.”

FT 30 September 2021


Nice pic of shipping containers and container ships are seen at the ports of Long Beach and Los Angeles last week.

MarketWatch 29 September 2021

Nearly 80,000 shipping containers are stacked in various configurations at the Port of Savannah — 50 percent more than usual.

NYT 10 October 2021

Asset valuations are elevated, Bank of England says P/E

As of the end of September, U.S. companies are trading on a price-to-earnings ratio for next year of 20.6, compared to just 11.8 for the U.K., according to Citi. Globally, developed markets are trading at 18.3 times next year’s earnings, according to Citi.

The Bank of England said asset valuations could correct sharply if market participants re-evlauate the prospect for growth, inflation of interest rates. The Bank of England added that risks in leveraged loan markets are continuing to build globally.

MarketWatch Oct. 8, 2021 


Financial Policy Summary and Record - October 2021

Bank of England 8 October 2021


Laurent Binet’s counter-history “Civilizations”

The half-sister of Leif Erikson leaves Greenland for the North American shores known as Vinland. 

Quickly befriending and mixing with the coastal indigenous tribes Freydis Eriksdottir and her entourage pass on to the native peoples an invaluable source of knowledge: the method of extracting iron from peat.

Christopher Columbus upon landing is met by an organized Taíno military armed with axes and iron-tipped spears. Naked, ailing and housed in the Cuban royal court as a kind of jester Columbus perishes.

Arriving in a wondrous city called Lisbon, the Incas find the population shell-shocked by an earthquake, and, more generally, demoralized by the effects of never-ending warfare against Muslims, Jews, the French and the continent’s many factions of Protestants—all of whom prove to be biddable allies against a common oppressor, the Holy Roman Emperor Charles V....

WSJ  Sept. 17, 2021 


Virtual History: Alternatives And Counterfactuals

by Niall Ferguson


List of alternate history fiction


The books discussed here each use history to examine the conundrum of debt as both a necessity and a potential problem

In 1931: Debt, Crisis, and the Rise of Hitler, economic historian Tobias Straumann of the University of Zurich offers an impressive, fast-paced narrative account of the crucial phase in Germany’s Great Depression, underscoring the point about consensus and the politics of debt

Breaking with what has become conventional wisdom, Straumann does not see the politicians of the Depression era – particularly Heinrich Brüning, known as the “Hunger Chancellor” – as having made bad choices in pushing austerity when they did. 

The burden of external debt (in the form of war reparations) played a critical role in creating these political conditions. As Straumann shows, it was Adolf Hitler’s campaign against a new reparations program (the 1929 Young Plan) that brought the National Socialists back from the political wilderness. 

 Adam Tooze, who has also written extensively on Germany and the interwar failures, has produced a genuinely global narrative chronicle of the explosion of central bank-financed debt in response to the COVID-19 pandemic.

His approach in Shutdown reprises that of Crashed, his 2018 account of the 2008 financial crisis; but, for obvious reasons, the new book lands in the middle of the events it examines, like a history of WWI written in 1915.

Tooze’s basic framework is borrowed from a schema outlined by Chen Yixin, the secretary-general of the Communist Party of China’s Central Political and Legal Affairs Commission. 

MMT is applicable only in countries that have full monetary sovereignty

Markus Brunnermeier’s The Resilient Society explicitly asks how long the apparent free lunch of low-to-zero-cost debt can continue. 

As OECD Chief Economist Laurence Boone warns, “it’s not free money forever.” In a striking passage, Brunnermeier suggests that government debt is not just financial rocket fuel, as Tooze has it, but also “essentially a bubble,” a Ponzi scheme.

Ludger Schuknecht’s Public Spending and the Role of the State offers valuable historical lessons   He argues that a low-interest-rate environment may obscure the necessity of choosing how and how much to invest in the future. 

In the moral view, public debt is bad, as it represents a burden that current generations pass on to the unborn. In the high-minded political view, debt in democracies is good, because it creates solidarity. And in the low-minded political view, it is good because it wins elections and brings other rewards.

Harold James Project Syndicate 8 October 2021


Tooze’s implication is clear: The West has no systematic ability to prevent or effectively fight large-scale crises. Our political systems are broken by cultural division and, in Tooze’s view, hamstrung by outmoded economic principles.


Between 1930 and 1932, in the middle of the Great Depression, Brüning cut spending, increased taxes and rolled back the social safety net.


The Young Plan


What We Owe Each Other


Twentysomethings With Fat Checkbooks Join the SPAC Rush

Growing numbers of young people are raising funds for SPAC deals in a challenge to financial vets. The trajectory of blank-check companies is shaping up to be a classic feeding frenzy—they've morphed in just a couple of years from a niche product aimed at pros into a mass-market phenomenon.

SPACs raise funds from investors to make an unspecified acquisition, though they’ll sometimes declare a theme such as health care, technology, or Asia. After a SPAC begins trading, its promoters scour the globe for a good company to buy. The two sides negotiate a deal and merge, effectively offering the target a shortcut to going public—and a rich reward for the SPAC’s founders. 



The warning signs are already apparent in today’s high price-to-earnings ratios, low equity risk premia, inflated housing and tech assets, and the irrational exuberance surrounding special purpose acquisition companies (SPACs)

Nouriel Roubini Project Syndicate 30 June 2021


US Trade dream


Back when offshoring production by Corporate America to cheap countries was hailed as good for the overall economy, rather than just good for Corporate America, any fears about potentially exploding trade deficits were papered over with visions of the new American Dream: 

America was great at producing and selling high-value services – the financialization of everything, movies, software, business services, IT services, etc. Exports of these high-value services would make up for the imports of cheap goods. 

And trade would balance out.


By Wolf Richter. Originally published at Wolf Street


RE: It is disturbing that the only time US had a near zero deficit was in 1992 and the dollar was low against the swedish krona.


Nu står kronan i 8.78. Det var när dollarn sjunkit från 9:40 till 5:30 som Carl Bildt m fl till varje pris ville försvara kronkursen

Dollarn skulle inte kosta mer än 5:30, tyckte Bildt, med flera.



Efter den 110-procentiga börsuppgången på exakt 500 kalenderdagar är det inte märkligt

Bara fem gånger tidigare har Stockholmsbörsen dubblerats utan en enda liten korrektion. 

Så här har det gått efter de superuppgångarna:

1989, 1994, 1997, 2000  och 2006

Mikael Vilenius DI 6 oktober 2021


Tehran uses off-the-shelf components to build armed drones used in attacks that challenge the U.S. and its allies in the Middle East

Iran’s drone program can be traced to Iran Aircraft Manufacturing Industries... originally set up in the 1970s by American defense contractor Textron to make military helicopters at a time when Iran’s ruling monarch, Shah Mohammad Reza Pahlavi, was a key ally of Washington in the region.

WSJ 6 October 2021


Experten: Paniksälj inte när börsen faller

”Vi har väntat på att en rekyl ska komma. Nu är den här”, säger Robert Oldstrand, aktiestrateg på Swedbank.

...  Oldstrand, som inte tycker att man bör dra alltför stora växlar på börsfallet under onsdagen. Han tillägger att aktier fortfarande är ett attraktivt tillgångsslag i nuvarande lågräntemiljö.

SvD/TT 6 oktober 2021


Generellt tycker jag att börsuppgången är väldigt välgrundad, säger Molly Guggenheimer, aktiestrateg på Danske Bank


Molly Guggenheimer, Frida Bratt, Henrik Mitelman, Carolina Neurath 

Ekonomibyrån SvD 27 september 2021


Experten: Paniksälj inte när börsen faller varnar Maria Landeborn på Danske Bank.

”På lång sikt har det alltid lönat sig att våga investera i aktier trots kriser och börsras längs vägen. Avbryt inte ett månadssparande för att börsen går ned, och sälj inte ett långsiktigt sparande på grund av kortsiktig börsoro.”

DI 6 oktober 2021


Half of China’s high-yield property bonds now trading at yields of above 20%

— implying a high default risk for those companies and making it hard for them to refinance coming debts.

She - Jenny Zeng, co-head of Asia Pacific fixed income and a portfolio manager at AllianceBernstein in Hong Kong.

WSJ 6 October 2021

Asia’s junk-bond market suffered through another wave of selling Thursday, pushing prices of many Chinese developers’ bonds further into distressed territory.

WSJ 2021-10-07

Forty years ago start of a bull market in bonds. No one saw it coming.

Have I got a deal for you. You can buy mortgage bonds priced to yield 17.85% over the next 10 years or 18.75% over the next 20 years. They’re investment grade, not junk bonds.

The only catch? You have to buy them on Sept. 30, 1981.

Even today, nobody has a clear explanation of why bonds suddenly seemed more attractive on Oct. 1, 1981, than they had the day before.

Because we can see the past as clear as day, it’s all too easy to forget that the future is always enshrouded in fog.

“Things can’t go on forever at these rates,” says Mr. Gross. “Interest rates can’t stay this low [net of inflation] because savers, whether it’s Mom and Pop in Des Moines or big pension funds, can’t earn anything on their investment.”

 He adds, “For the economy to survive, at some point interest rates have to regain some semblance of an attraction to savers. Otherwise the savings function will be destroyed.”

No one knows when that time will come—but come it will.

Jason Zweig WSJ Oct. 1, 2021 


Bill Gross Bonds are trash

Bloomberg 2 september 2021


Central Banks and the Looming Financial Reckoning

In the years between the start of the Great Moderation in the mid-1980s and the 2007-08 financial crisis, advanced-economy central banks failed to give sufficient weight to financial stability.

The economic and social cost of a financial crisis, especially with private and public leverage as high as it is today, would dwarf the cost of persistently overshooting the inflation target. 

If preventing a financial calamity requires a few years of high single-digit inflation, the price is well worth it.

China’s real-estate bubble—and the household debt secured against it—is likely to implode sooner or later. 

Across the advanced economies risk assets, notably equity and real estate, appear to be materially overvalued. The only way to avoid this conclusion is to believe that long-run real interest rates today (which are negative in many cases) are at or close to their fundamental values.

I suspect that both the long-run real safe interest rate and assorted risk premiums are being artificially depressed by distorted beliefs and enduring bubbles, respectively. If so, today’s risk-asset valuations are utterly detached from reality.

Whenever the inevitable price corrections materialize, central banks, supervisors, and regulators will need to work closely with finance ministries to limit the damage to the real economy. Significant deleveraging by all four sectors will be necessary

Willem H. Buiter MarketWatch 5 October 2021


Central Banks and the Looming Financial Reckoning

WILLEM H. BUITER Project Syndicate Oct 4, 2021


Excellent about Bitcoins. Tulips, England’s South Sea Company and France’s Mississippi Company

 “Leverage is the killer,” Willem Buiter said.



Fantasia Fails to Repay $206 Million U.S. Dollar Bond

 Notice of the missed payment took some market participants by surprise

WSJ 5 October 2021


Nice chart


August exports were $213.7 billion, $1.0 billion more than July exports. 

August imports were $287.0 billion, $4.0 billion more than July imports.

Year-to-date, the goods and services deficit increased $140.8 billion, 

or 33.7 percent, from the same period in 2020. 

Exports increased $244.3 billion or 17.5 percent. 

Imports increased $385.1 billion or 21.2 percent.

US Trade deficit July 2019 - 2021

The U.S. trade deficit widened to a record in August

“With most other economies still behind the U.S. in their recovery from the pandemic, and domestic consumption growth slowing, we still think goods exports will start to catch up with imports soon,” Andrew Hunter, senior U.S. economist for Capital Economics, a research firm, wrote in a note.

WSJ 5 October 2021

US Trade deficit July 2019 - 2021

Central banks must be alert to stagflation

Global economy is still growing but supply chain disruption is a cause for concern



Global supply chain disruption

BBC  Video 2 October 2021


October 5 - Global Energy Crisis Is the First of Many in the Clean-Power Era

The next several decades could see more periods of energy-driven inflation, fuel shortages and lost economic growth as electricity supplies are left vulnerable to shocks.

What’s different now is that the richest economies are also undergoing one of the most ambitious overhauls of their power systems since the dawn of the electric age -- with no easy way to store the energy generated from renewable sources.


October 4 - A bad day on Wall Street

It was an ugly day for U.S. markets. Fears over inflation, the global energy crisis and Fed tapering spooked investors again and a selloff in big tech stocks resumed. Apple cratered, sending its shares into correction territory. Amazon turned negative on 2021. The Nasdaq had its worst day since June and the S&P 500 slid more than 1%. In other words, October’s reputation for volatility remains intact. 

Bloomberg Evening Briefing 



Global supply chain disruption

BBC  Video 2 October 2021


“Hiking  will reduce demand a little bit and strengthen the currency. But it will have no impact on supply chain issues [ . . .] it won’t bring back lorry drivers.”


Empty Buildings in China’s Provincial Cities

Real estate became some cities’ biggest economic driver and the most important source of revenues. 

WSJ 4 October 2021



Lead Us Not Into Stagflation

What are we afraid of? There is reason to worry about both stagnation and inflation — the dreaded “stagflation.” 

The best arguments against stagflation comes from looking at the cash currently held by companies and by households. They suggest that if there is a danger ahead, it is of economic overheating. 

That might well bring stock market disappointment with it, and could be very dangerous. It’s not stagflation.

And for the time being, families aren’t experiencing any particular difficulty paying their debts (in aggregate — there are many tragic exceptions), because of interest rates that remain historically low. This is nothing like 2008.

All of this suggests that the “stag” part of stagflation is unlikely.

John Authers Bloomberg 4 October 2021

The median American household would need 32.1% of its income to cover mortgage payments on a median-priced home, according to the Federal Reserve Bank of Atlanta. 
That is the most since November 2008

WSJ 3 October 2021

Conspicuous consumption can no longer be our economic engine

FT 14 July 2021



As in all affluent societies, the greater part of this spending no longer serves to procure the basics of life, such as food and shelter and physical comfort. Instead, it is directed at a range of social functions, from gaining the esteem and consideration of others to expressing one’s own identity. 


US House prices are rising at a record pace

but incomes aren’t keeping up, which is making home ownership less and less affordable.

The median American household would need 32.1% of its income to cover mortgage payments on a median-priced home, according to the Federal Reserve Bank of Atlanta. 

That is the most since November 2008, when the same outlays would eat up 34.2% of income.

WSJ 3 October 2021



The real problem is that we have left it too late to normalise monetary policy and ...

create a more balanced economy that isn’t just about riding asset bubbles.

We should taper faster, and move forward slowly but surely with normalising monetary policy.

Wall Street isn’t Main Street.

Rana Foroohar Associate Editor at the Financial Times 3 October 2021


The longer central bank ‘tapering’ is delayed, the more the risk of a disruptive markets move

Mohamed A. El-Erian FT 29 September 2021


Jag tycker det är skriande uppenbart att räntan världen över är för låg och att en större del av stimulanserna borde ske via finanspolitiken.

Rolf Englund blog 5 december 2009

År det så hemskt att vi faktiskt inte vet hur vi skall undvika att den nuvarande ekonomin byggd på en allt högre belåning av stigande huspriser skall kunna brytas och ersättas med något annat, vad det nu kan vara?

The Federal Reserve is doing its best to avoid the taper tantrum of 2013

Treasuries investors, 2021 could turn out to be even worse than eight years ago.

The latest bond selloff -- triggered by a hawkish shift in the Fed’s signal on its policy path -- has left the Bloomberg U.S. Treasury Index down 2.2% this year, on track for the first annual loss since 2013, when it declined 2.8%. 

The market is hardly anticipating a repeat of the rout eight years ago, when then-Fed Chairman Ben Bernanke triggered a surge in yields after he suggested the central bank could begin to reduce asset purchases. In that episode, 10-year yields jumped more than 100 basis points in four months.

Ye Xie Bloomberg 2 oktober 2021


I do not think Evergrande Group is the problem, or even the catalytic tipping point

Evergrande is not a classic “black swan” crisis, but rather a conscious and deliberate consequence of Chinese policy aimed at deleveraging, de-risking, and preserving financial stability. 

Chinese government has doubled down, with President Xi Jinping throwing the full force of his power into a “common prosperity” campaign aimed at addressing inequalities of income and wealth. 

strikes at the heart of the market-based “reform and opening up” that have underpinned China’s growth miracle since the days of Deng Xiaoping in the 1980s. 

Vice Premier Liu He, China’s leading architect of economic strategy and a truly outstanding macro thinker

Stephen S. Roach Project Syndicate 27 September 2021



Wall Street Q 3

WSJ 1 October 2021

Oron lättar inför helgen: Kraftfull återhämtning på Stockholmsbörsen

DI 1 oktober 2021 kl 14:19



That problem, as Eeckhout puts it, is “wage stagnation and extreme wage inequality.”

Over the past half-century, the situation for workers in most rich countries has deteriorated on average, setting this era apart from the 30 glorious years (les trente glorieuses) after World War II, when West Europeans, Canadians, and Americans enjoyed a near-miraculous period of sustained growth, including broad-based growth in real wages and higher living standards.

The global scale allows superstar firms to compete for entire markets, rather than competing within markets. 

Once one or two behemoths have achieved dominance in a given sector, they can maintain their market power by constructing bulwarks against competition from new entrants.

In an admirable effort to step out of the ivory tower, the Tirole-Blanchard report seeks to equip political leaders for the task of public persuasion.

Project Syndicate 1 October 2021


Greenflation? What is inflation anyway?

The average global carbon price today “is around three dollars a tonne”. 

However, the Network for Greening the Financial System, a group of central banks, recently suggested that “a carbon price of around $160/tonne would be needed by the end of the decade to incentivise a transition towards net zero by 2050”, 

while the IMF suggests it should be $75 a tonne. 

“We don’t have models which understand [the implications] of this 

Gillian Tett FT 30 October 2021

Inflation concerns intensify as cost of energy soars
Rising natural gas prices have helped push eurozone inflation to 13-year high

FT 1 Octoner 2021

Comment by Englund:

We get inflation when the economy is overheating (like the world, ha ha ha) and the central banks should therefore put interests up to cool it down.

But is it really inflation when e.g. energy prices is going up? The effect is that the consumer have less money to spend on other things which is deflationary. 

If the central banks hike interest rates in this case things would be worse.

Am I brilliant, re-inventing the wheel or ignorant?


I am re-inventing the wheel.

The orthodox economic view is that central banks should do nothing to offset inflation caused directly by a supply shock, such as this week’s rise in oil prices to a seven-year high. 

The central problem is that monetary policy typically works by raising or lowering economic demand. If spending is growing too fast and generating inflation, higher interest rates dampen the willingness of companies and households to consume or invest by increasing the cost of borrowing.

The same is not true when prices are rising because supply chains have broken, energy prices are increasing or there are labour shortages. In such cases, monetary policy is ill-suited to dealing with the shock.

Efter dystra september – nu kommer börsljuset

 – Börsen brukar helt enkelt gå starkt inför årsskiftet och jag tror att vi även i år kan få en ganska bra avslutning på börsåret, även om värderingen är ansträngd.

Johan Larsson, chefsstrateg  Nordea SvD 1 oktober 2021


Stagflation fears intensify - it won’t bring back lorry drivers

Supply chain disruptions sweeping major economies have reawakened an old nemesis for investors: stagflation.

... with oil topping $80 a barrel, global food prices a third more expensive than they were a year ago and other commodities at decade highs...

“Hiking  will reduce demand a little bit and strengthen the currency. But it will have no impact on supply chain issues [ . . .] it won’t bring back lorry drivers.”

FT 30 September 2021


Nice chart