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2022-11-29

U.S. Government to Back Mortgages Above $1 Million Mark for First Time

 The maximum size of home-mortgage loans eligible for backing by Fannie Mae and Freddie Mac will rise to $1,089,300 next year 

The higher limits are likely to renew a debate about how big of a mortgage is too big to be. Critics of Fannie and Freddie’s large role say borrowers who can afford million-dollar mortgages should be able to finance a home without government-backed financing.

Mortgage-interest rates have risen rapidly this year, cracking 7% for the first time in two decades.  

The median sales price of an existing single-family home was up 8.6% in the third quarter from a year earlier.

WSJ 29 November 2022

https://www.wsj.com/articles/u-s-government-to-backstop-mortgages-above-1-million-mark-for-first-time-11669740331


Högbelånade villaägare riskerar kostnadsökningar på uppemot 15 000 kronor per månad

Det framgår av Finansinspektionens nya högräntescenario där även dyrare el och ökade levnadskostnader räknas in.

Ser man till gruppen som köpte till lägre priser, och därmed är lägre belånade, under 2018 är det bara ett fåtal som riskerar underskott enligt FI.

Kostnadssmällarna för bostadsrättsägare blir enligt FI inte lika höga, framför allt på grund av att energikostnaderna inte är lika höga per bostad. I Stockholm stiger kostnaderna för en genomsnittlig bostadsrättsfamilj med drygt 6 000 kronor per månad.

Hans Bolander DI 29 november 2022

https://www.di.se/nyheter/varningen-kostnaden-for-boende-kan-explodera/


Så sent som den 2 maj låg Riksbankens styrränta på 0 procent


https://englundmacro.blogspot.com/2022/11/sa-sent-som-den-2-maj-lag-riksbankens.html


 

If central banks increase interest rates enough to bring inflation down to 2%, they will cause a severe economic hard landing

 And if they don’t – attempting instead to protect growth and jobs – they will be left increasingly far behind the curve, leading to a de-anchoring of inflation expectations and a wage-price spiral.

Project Syndicate: In your latest PS commentary, you reaffirmed your expectation that monetary authorities’ efforts to rein in inflation will “cause both an economic and a financial crash,” and that “regardless of their tough talk,” central banks “will feel immense pressure to reverse their tightening” once that crash materializes. 

What would the impact of such a reversal be? Do monetary policymakers in the United States and Europe have any good – or less bad – options?

Nouriel Roubini: Central banks are in both a stagflation trap and a debt trap. 

Raising interest rates enough to crush inflation causes not only an economic crash, but also a financial crash, with highly leveraged private and public debtors facing severe distress. 

In these circumstances, central banks will blink.

Nouriel Roubini Project Syndicate 15 November 2022

https://www.project-syndicate.org/onpoint/interview-nouriel-roubini-stagflation-debt-crisis-crypto-china-2022-11


Megathreats

The Ten Trends that Imperil Our Future, and How to Survive Them

Nouriel Roubini 2022-10-20

https://englundmacro.blogspot.com/2022/10/roubini-megathreats.html


2022-11-28

The decade-long housing boom in the US is over, and the market has gone eerily quiet

 With a typical home now only affordable to someone earning more than $100,000, brokers are struggling to find buyers. And try convincing a homeowner to sell, especially if it means trading in a 3% mortgage for a much more expensive one.  

For the logjam to break, affordability has to improve, and that means a significant drop in either prices or rates. Borrowing costs have come down some after crossing 7% a few weeks ago, but they’re unlikely to fall much more in the near future, according to Mark Zandi, chief economist for Moody’s Analytics. 

He expects prices to slip almost 10% from their June peak over the next two years — if the country avoids a full-blown recession. 

Even a moderate one, however, could push prices down twice as much, he said.

Bloomberg 28 November 2022 

https://www.bloomberg.com/news/articles/2022-11-28/us-housing-enters-deep-freeze-with-sellers-and-buyers-sidelined


Crypto Speculation Is All But Over

Cryptocurrency owners should be asking themselves whether their bitcoin, dogecoin and other tokens are safe. Hold them with the wrong broker or custodian, and they might vanish into an interminable bankruptcy proceeding, perhaps never to emerge.

The second question is closely linked: Have prices fallen enough to justify buying back in? There is no definitive answer, of course, since these are speculative assets with no basis for valuation. 

But for both the remaining speculators and the true believers who think eventually we will all use a crypto financial system, it is worth thinking about how much investors are prepared for a systemic crisis. 

For the rest of us, it’s amusing to watch from the sidelines.

James Mackintosh WSJ 22 November 2022 

https://www.wsj.com/articles/crypto-speculation-is-all-but-over-its-systemic-troubles-arent-11669136978


New York Fed president Williams sees inflation remaining above 3% in a year

 Inflation using the Fed’s preferred gauge, the personal-consumption-expenditures price index, rose 6.2% in the 12-months ended September. 

Mr. Williams said he expects the inflation rate to slow to between 5% and 5.5% by the end of this year, and to between 3% and 3.5% next year.

WSJ 28 November 2022 

https://www.wsj.com/articles/fed-officials-discuss-outlook-for-inflation-interest-rates-11669654763


Regeringen vill säga ja till Ukrainastöd på runt 200 miljarder kronor

Regeringen tycker att Sverige ska säga ja till det nya EU-stöd på runt 200 miljarder kronor under 2023 som nyligen föreslogs i Bryssel.

Riksdagens EU-nämnd ska diskutera den svenska linjen vid sitt möte på fredag.

https://www.di.se/nyheter/regeringen-vill-saga-ja-till-ukrainastod/


Att ett antal regeringschefer /eller finansministrar/ kommer överens om något gör det inte till ett EU-beslut även om det har fattats i en lokal smyckad med EU-flaggor.

Av den anledningen var det nödvändigt med ett enhälligt beslut.

https://englundmacro.blogspot.com/2016/03/migrantoverenskommelsen-var-inget-eu.html


 Jag hade tydligen fel. När man vänder på stenarna hittar man otrevliga saker. Ytterligare steg som ökar EUs makt. Frågan om gemensam upplåning i EUs namn är en gammal och viktig stridsfråga. Bör således behandlas av EU-nämnden.

The package proposed on Wednesday includes three legislative texts, two of them requiring a qualified majority in the Council, representing member states, while the third, a regulation, requires unanimity among EU states. The EU commission wants to borrow on capital markets using the diversified funding strategy to raise the €18bn.

Se även 

https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_1702



QMV Qualified Majority Voting

https://englundmacro.blogspot.com/2022/09/the-notorious-luxembourg-compromise.html


Inlåsningen av K-Fastigheters huvudägares aktieinnehav ut på tisdagen

Största ägare i bolaget är vd Jacob Karlsson och styrelseordföranden Erik Selin

K-Fastigheter hade efter noteringen den 29 november 2019 en succéartad kursresa på börsen. Från introduktionskursen på 105 kronor steg aktien till som mest 420 kronor i juni 2021

Sedan årsskiftet är K-Fastigheters aktie ner med 76 procent och handlas på fredagen för 20,80 kronor. 

Det kan jämföras med den för spliten justerade introduktionskursen på 17,50 kronor, och att de första avsluten någonsin i aktien gjorde på nivån (justerat) 22,67 kronor.

Robert Triches DI 28 november 2022 

https://www.di.se/live/inlasning-i-k-fastigheter-gar-ut-miljontals-aktier-satts-i-spel/


Italy Has a $127 Billion Debt Problem It Can’t Easily Resolve

Italian companies had a record $127 billion of Covid-era state-backed credit lines outstanding as of June 30

The government is implementing an aid package allowing companies to spread out their energy bills over as many as two years, and providing gas and electricity suppliers a 90% state-backed guarantee on their exposure to the rescheduled bills. 

Any additional support for companies in the form of debt just postpones the pain, leaving them with heavily indebted corporate structures that could become unsustainable if revenue and profits are hit in a recessionary environment, warns Stefano Caselli, the dean of SDA Bocconi School of Management in Milan.

Guarantees were offered to companies across the credit spectrum, even junk-rated ones. Banks were willing to supply credit lines knowing they’d be covered for a great majority by the state. 

So the key question now is when and how will all this debt be repaid. 

Bloomberg 28 November 2022 

https://www.bloomberg.com/news/articles/2022-11-28/italian-companies-have-a-127-billion-debt-problem-they-can-t-easily-resolve


If Italy Slides Toward Default

Italy’s debt has long been the Achilles’ heel of the euro area. 

Bloomberg 16 November 2022

https://englundmacro.blogspot.com/2022/11/if-italy-slides-toward-default.html


Fed Shouldn’t Raise Its Inflation Target

 Some people are suggesting that the Federal Reserve consider a compromise in its battle with rising prices: Instead of imposing the full monetary tightening required to get inflation back down to its 2% target, why not increase the target a bit?

The central bank last changed its inflation objective quite recently, in August 2020. 

Previously, the Fed had tried to hit the 2% target at all times, regardless of past performance. 

Under its revised monetary policy framework, it would seek to achieve an average of 2%. 

Past misses would no longer be treated as “bygones,” but instead offset by misses on the other side, to keep inflation expectations well anchored at 2%. 

Inflation is too high. This has caused some prominent economists, including Olivier Blanchard and Jason Furman, to ask: What’s so special about a 2% inflation target in the first place? Why not 3%, or even higher?

A higher target would result in a higher peak in nominal interest rates during economic expansions.  This would create more room to cut rates during downturns, reducing the risk of getting pinned at the zero lower bound and lessening the need to use other monetary policy tools such as quantitative easing and forward guidance.

 I believe the Fed has already subtly raised its inflation objective. When Chair Jerome Powell talks about getting inflation back to 2%, there’s no mention of going below 2% to offset recent persistent overshoots. 

Bill Dudley Bloomberg 28 november 2022 

https://www.bloomberg.com/opinion/articles/2022-11-28/the-fed-shouldn-t-raise-its-inflation-target 


Rolf Englund: 

Om centralbankerna inte kunde få upp inflationen från noll till två, hur kan då någon tro att de inom rimlig tid skall få ner den från 8-10 procent till två?



Strategen: Det finns inget ljus i tunneln

 Det markanta humörlyftet på börsen sedan i mitten av oktober väcker hopp om att börsbotten är passerad. 

Årets ras för världsindex MSCI World har mildrats till minus 15 procent, från som värst minus 23 procent den 12 oktober. 

Stockholmsbörsens nedgång i år har under samma period minskat från minus 33 till minus 23 procent.

Nils Åkesson DI 28 november 2022

https://www.di.se/analys/strategen-det-finns-inget-ljus-i-tunneln/








2022-11-27

The Last of Lehman Brothers

 The bank whose collapse marked the beginning of the 2008 financial crisis is only mostly dead. 

These are the people attending to its last remains ahead of its final court cases.

Lucca De Paoli and Jeremy Hill Business Week 18 maj 2022

https://www.bloomberg.com/features/2022-lehman-brothers-collapse-plan-repay-after-bankruptcy/


Lehman infamously was allowed to fail — in part at least as retribution for past perceived misdeeds.

To be clear, Lehman’s collapse did not cause the financial crisis, but ... Hank Paulson to push the group into bankruptcy rather than find a rescue solution, was significant — world-changing even.

Patrick Jenkins, Deputy Editor Financial Times, 14 March 2022

https://englundmacro.blogspot.com/2022/03/russian-sanctions-world-should-remember.html



Kan Henrik Jönsson ha tänkt fel om Riksbanken och staten?

Han skriver att det skenande ränteläget pressar nu riksbanken hårt, eftersom dess enorma obligationsportfölj även innebär skenande ränteskulder. 

Konsekvenserna av detta är utomordentligt allvarliga, och i oktober varnade flera bedömare för att riksbanken med stor sannolikhet kommer att behöva ett statligt kapitaltillskott på bortemot 70 miljarder kronor – en nota som ytterst kommer att landa i skattebetalarnas knä. 

Föreställningen att stat och riksbank har obegränsad kapacitet att kreditdopa den svenska samhällsekonomin utan konsekvenser har sina rötter i finanskrisen 2008

i Sverige införde riksbankens chef Stefan Ingves 2015 för första gången i rikets historia en negativ reporänta.

Trots att Sverige är ett av världens rikaste länder är befolkningen inte särskilt förmögen. En majoritet av befolkningen äger sin bostad men saknar eget kapital (kurs här)  - och har nu Europas näst högsta skuldsättningsgrad.  

Entreprenören och debattören Henrik Jönsson DI 25 november 2022

https://www.di.se/debatt/debatt-hur-ska-regeringen-radda-det-sjunkande-skeppet/


Men, undrar jag, Riksbanken är väl en del av staten. Och det gäller att skilja på realt och finansiellt. Behöver skattebetalarna betala 70 miljarder därför att staten överför detta belopp till Riksbanken? Penningmängden påverkas väl inte om Riksbanken skriver ner värdet på sina obligationer, de flesta köpta av svenska staten?

Däremot skulle penningmängden minska om skattebetalarna överförde 70 miljarder från sina bankkonton till staten.

Det är inte helt lätt detta. Kanske inte ens för mig och Henrik Jönsson.


Hur blev det så att I Sverige är hård budgetdisciplin, ända sedan 1990-talskrisen, närmast en statsreligion?

https://englundmacro.blogspot.com/2021/09/hur-blev-det-sa-att-i-sverige-ar-hard.html


Så sent som den 2 maj låg Riksbankens styrränta på 0 procent

 Nu höjs den till 2,50 och bolåneräntorna på väg mot 4. På mindre än sju månader.

– Efter åtta år med nollränta är det många lån som ska förhandlas om


Ida Westerlund berättar att marknaden var bra under hela våren, ända fram till att Riksbanken höjde styrräntan från noll till 0,25 procent i maj i år.

– Då tvärdog det. Vi kände av det direkt. Det gick knappt att sälja under juni.


Ida Westerlund är optimistisk... Hon tror att nästa räntehöjning blir den sista justeringen uppåt.

Sara L Bränström SvD  27 november 2022

https://www.svd.se/a/Ll356q/maklare-om-rantehojningen-det-tvardog


The extraordinary thing about rates is not how high they are but how low

https://englundmacro.blogspot.com/2022/10/the-extraordinary-thing-about-rates-is.html


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 blogg 5 december 2009

https://englundmacro.blogspot.com/2014/08/skriande-uppenbart.html


2022-11-25

Climate Progress Is Happening, Just Not Fast Enough COP27

 It would’ve been better to do more, of course, since the world is still on course for devastating levels of warming.

The ethics of the “loss and damage” question were never in dispute. Rich countries have already emitted almost all the carbon the atmosphere can stand if climate change is to be arrested. 

A group of countries led by the US and Japan announced a $20 billion financing package to support Indonesia’s plan to shift from coal to renewables.

The agreement would not have happened without the leadership of Indonesia and the G-7 nations, along with Mark Carney and Mary Schapiro of the Glasgow Financial Alliance for Net Zero, a group Carney and I co-chair that includes many of the world’s largest financial firms and asset managers. 

Michael R. Bloomberg Bloomberg 25 november 2022

Michael R. Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News

https://www.bloomberg.com/opinion/articles/2022-11-25/michael-bloomberg-on-cop27-climate-progress-is-happening-just-not-fast-enough


The COP climate process has been a miraculous success, thanks to technology and capitalism

Ambrose Evans-Pritchard Telegraph 22 November 2022 

https://englundmacro.blogspot.com/2022/11/the-cop-climate-process-has-been.html


 


Pressure on the Hong Kong Dollar Peg Keeps Building

 The social and economic costs of maintaining the currency’s link to the greenback may be getting too great to continue bearing.  

Richard Cookson Bloomberg 23 november 2022

https://www.bloomberg.com/opinion/articles/2022-11-23/pressure-on-the-hong-kong-dollar-peg-is-building


2022-11-24

Den 1 januari 2006 tillträder Stefan Ingves som riksbankschef.

 Han kommer från ett toppjobb vid Internationella valutafonden IMF. Innan dess har han bland annat hunnit med att vara vice riksbankschef och generaldirektör för bankstödsnämnden.

Efter finanskrisen uppstår en konflikt i Riksbankens direktion om hur snabbt räntan ska sänkas för att stimulera ekonomin. Ingves är på sidan som vill skynda långsamt. 

Konflikten blir offentlig sommaren 2012 när vice riksbankschef Lars EO Svensson går ut och anklagar sina kolleger för att föra en politik som i onödan driver upp arbetslösheten.

Även om Lars EO Svensson har lämnat får han till slut gehör för sin linje om sänkt ränta. I juli 2014 sänker Riksbanken räntan med 50 punkter från 0,75 procent till 0,25 – mot chefens vilja. Enligt protokollet har Ingves förordat en mindre sänkning, på 25 punkter, men blivit nedröstad.

Det är första gången i Riksbankens historia som den övriga i direktionen kör över sin chef. Ingves gör sitt bästa för att tona ner oenigheten. Att det blev 50 och inte 25 punkter var enligt honom en fråga om ”nyansskillnader”.

Samtidigt innebär det penningpolitiska mötet den 2 juli i princip slutet för den period då Riksbanken hållit räntan högre för att dämpa hushållens skulder och bostadspriser. Från och med nu är det inflationen och inget annat som gäller.

Direktionen lyfter vid mötet över ansvaret för hushållens skulder på politikerna, med formuleringen ”att det nu är ännu mer angeläget att andra politikområden vidtar åtgärder för att hantera riskerna...”.

Birgitta Forsberg, Mikael Törnwall, Anders Billing SvD 23 november 2022

https://www.svd.se/a/onEjXj/ingves-slutar-pa-riksbanken-efter-17-ar


Riksbanken har sänkt räntan till noll.

Det skall väl få tyst på en del av den enfaldiga kritiken ledd av Lars E.O. Svensson, som, även om det är väl dolt på sidan om honom hos Wikipedia, var vetenskaplig rådgivare åt riksbanken när Bengt Dennis och Carl Bildt misslyckades med kronkursförsvaret, trots en ränta på 500 procent.

Så skilda personligheter som Bertil Ohlin, John Maynard Keynes, Adolf Hitler och Ernst Wigforss insåg att när räntan hade sänkts och det ändå inte blev fart på ekonomin skulle man använda använda andra metoder.

Till och med Hitler förstod att det var bättre att folk byggde motorvägar och Volkswagen-bilar än att de skulle gå arbetslösa och inte göra något.

På senare år har emellertid Tea Party-typer lyckats utnyttja vanligt folks oförmåga att skilja på statens budget och sin egen och skrämt dem med att staten i dåliga tider måste spara, det måste vi ju alla göra...

Ingen i TV-soffan har haft modet att stå emot detta budskap. 

Englund blogg 28 oktober 2014

https://englundmacro.blogspot.com/2014/10/jag-tycker-det-ar-skriande-uppenbart.html



Riksbanken kommer att anpassa penningpolitiken på det sätt som behövs för att säkerställa att inflationen återförs till målet inom rimlig tid

 För att få ner inflationen och värna inflationsmålet har direktionen beslutat att höja styrräntan med 0,75 procentenheter till 2,5 procent. 

Prognosen visar att styrräntan sannolikt kommer att höjas ytterligare i början av nästa år för att då vara strax under 3 procent. 

https://www.riksbank.se/sv/penningpolitik/penningpolitisk-rapport/2022/penningpolitisk-rapport-november-2022/

https://www.riksbank.se/globalassets/media/rapporter/ppr/svenska/2022/221124/bilder-fran-presstraffen-den-24-november-2022.pdf

https://www.di.se/live/riksbanken-hojer-rantan-med-75-punkter-spar-ingen-sankning-innan-2025/

https://www.di.se/nyheter/riksbankens-inflationsskrack-rantan-kan-hojas-till-4-5-procent/

https://www.di.se/nyheter/varningen-nya-rantebanan-knacker-bomarknaden-ar-redan-jattepaverkad/

https://www.svd.se/a/jlv07w/nordea-spar-rorliga-borantor-pa-over-5-procent


The extraordinary thing about rates is not how high they are but how low

https://englundmacro.blogspot.com/2022/10/the-extraordinary-thing-about-rates-is.html



2022-11-22

Cryptotalk at Thanksgiving

 Holiday gatherings are going to be awkward for people who told their relatives to buy cryptocurrencies last year.

When his family discusses crypto at Thanksgiving this year, Tyler Lucky says his parents will “slap me upside the head and say I’m dumb.”

The 28-year-old tech consultant in Virginia told his relatives all about digital currencies and non-fungible tokens at the family gathering in 2021. Now, he’s preparing himself for them to say: “I told you so.” 

“They’ll say, ‘Why didn’t you go into something safer?’” Lucky said, adding he expects them to ask why he didn’t invest in companies like Apple Inc. or Microsoft Corp. 

For that, he has a ready reply: “They haven’t done so well either.”

Claire Ballentine Bloomberg 22 November 2022

https://www.bloomberg.com/news/articles/2022-11-22/bitcoin-btc-and-ftx-crypto-investors-face-awkward-questions-at-thanksgiving


Crypto’s Final Price Could Be Zero

No sane lender would extend credit against assets lacking any underlying collateral.

Sam Bankman-Fried, with his imploded FTX and Alameda empires. Sure, these companies misappropriated, to put it nicely, customers’ assets. 

And yes, withdrawals that acted like a bank run drove the company into Chapter 11. But the company’s original sin was to borrow against its own FTT token, which was held up by nothing but air.

You can’t manipulate something forever. Reality eventually replaces delusion. 

Andy Kessler WSJ 27 November 2022

https://www.wsj.com/articles/cryptos-final-price-could-be-zero-technology-debt-lbo-twitter-musk-bankman-fried-ftx-market-cap-coin-11669567022


When I was an investment banker,

 one thing that I did was pitch convertible bond offerings to companies. A coverage banker — an investment banker whose job was to know companies and advise them on financial topics — would bring me to a meeting with the chief financial officer of one of her companies to talk about convertible bonds. 

And I would come in and say “the convertible bond market is hot, you should do one, we think you could raise $200 million of 5-year convertibles and pay 2% interest with a 30% conversion premium.” 

Matt Levine Bloomberg 22 november 2022

https://www.bloomberg.com/opinion/articles/2022-11-22/s-p-overpromised-and-overdelivered


The rental surge of 2021-22 was quite spectacular,

 with rents rising at double-digit rates for about a year and a half. But it has leveled off recently. 

In fact, Zillow’s index have been signaling rent declines for two or three months. This is good news for renters. It’s also, potentially, good news for the fight against inflation.

Actual rents plus these “imputed” rents account for more than 30 percent of the Consumer Price Index, and almost 40 percent of the so-called core index, which excludes food and energy.

So rising rents have been a major factor in stubbornly high inflation, which led many economists (again, myself included) to retreat from the view that inflation was transitory.

I don’t want to overstate the bottleneck story. We probably do, in fact, have an overheated economy, which would have inflation problems even in the absence of bottlenecks in specific areas. But a larger amount of recent inflation now looks more transitory than many economists were arguing even a few months ago.

But here’s the thing: Easing rent inflation hasn’t yet begun to show up in official price statistic

Paul Krugman NYT 22 Novenber 2022


The COP climate process has been a miraculous success, thanks to technology and capitalism

 The star of Glasgow was South Africa. The country agreed to shut most of its 15 coal plants by 2030, even though coal provides 85pc of its power and employs 80,000 people. 

That deal was made possible by an $8.5bn pilot project of cheap loans from the US, UK, and the EU known as the Just Energy Transition Partnership (JETP). It has had teething problems but remains the global template. 

In Sharm El-Sheikh the star was Indonesia, the second of the JETP series, this time drawing the biggest financial climate package ever put together. The country agreed to halt 13 gigawatts of planned coal plants, phase out unabated coal plants, and start reducing power emissions by 2030, seven years early and at a much lower level than expected. 

In recompense, the US and Japan will lead the West in coming up with $20bn of funding, half from state agencies, which in turn unlocks the other half from HSBC, Bank of America, et al, under the Glasgow Financial Alliance for Net Zero.

Ambrose Evans-Pritchard Telegraph 22 November 2022 

https://www.telegraph.co.uk/business/2022/11/22/cop-climate-process-has-miraculous-success-thanks-technology/


Glasgow Financial Alliance for Net Zero

GFANZ was launched in April 2021 by UN Special Envoy on Climate Action and Finance Mark Carney and the COP26 presidency, in partnership with the UNFCCC Race to Zero campaign, to coordinate efforts across all sectors of the financial system to accelerate the transition to a net-zero global economy. 

https://www.gfanzero.com/


Svensk ekonomi har fyra varningslampor som blinkar i EU-kommissionens årliga kontroll

Huspriserna i Sverige beräknades vara övervärderade med 35 procent 2021, en av de högsta nivåerna i EU, skrev kommissionen i rapporten. 

Kommissionen varnar för risker med övervärderade huspriser, hög privat skuldsättning, snabb ökning av skuldsättningen och hög ungdomsarbetslöshet. DI 22 november 2022

https://www.di.se/live/eu-kommissionen-ser-flera-varningslampor-i-svensk-ekonomi/


Mortgage Market Upheaval - $17 Billion in Paper Losses for Banks

While rising rates buoy revenue for the country’s largest banks, in the short term they also force them to write down the value of assets they hold on their balance sheet

Bloomberg 17 November 2022

https://www.bloomberg.com/news/articles/2022-11-17/mortgage-market-upheaval-sparks-17-billion-in-paper-losses-for-us-banks


Credit Suisse How a bastion of Swiss banking lost its way

For more than 160 years, Credit Suisse Group AG’s stone-clad headquarters on Zurich’s moneyed Paradeplatz has exuded power, stability and quiet wealth. 

Those days are over.

It’s one of the few banks that’s in a weaker position today than when it emerged from the 2008 global financial crisis—notably without a state bailout.

Bloomberg 22 november 2022

https://www.bloomberg.com/news/features/2022-11-22/credit-suisse-s-future-hinges-on-overcoming-a-fraught-past


Den svenska styrräntan sjönk under nollstrecket 2015,

så förblev det fram till ingången av 2020. 

Ända fram till maj i år var styrräntan noll. 

Riksbankschefen hävdade i februari 2022 att styrräntan skulle vara noll fram till 2024

DI 22 november 2022

https://www.di.se/debatt/debatt-ingves-bedrovliga-tajming-har-forsvagat-ekonomin/


 

Sweden Is Rethinking What Makes It Great


Sweden was never able to match its generous policy toward migrants with its ability to absorb them into society.

Successive waves of refugees, hailing from Bosnia, the Middle East and Somalia, have been trapped in housing developments on the peripheries of big cities such as Stockholm, Gothenburg, Upsala and Malmo. 

The combination of geographical isolation with low skills in a high-wage economy (with minimum wages negotiated at two-thirds of the median wage) proved toxic. Parallel societies based on clan and religious ties developed. Young people were recruited by criminal gangs. Drug-related crime and violence exploded.

The final straw came in 2016 when Sweden granted 156,031 residence permits to refugees

Bloomberg 22 November 2022



OECD inflation


 

Vi har inte ens sett början av de stora obligationsförfallen i fastighetsbolagen

Hans Bolander DI 22 November 2022

https://www.di.se/nyheter/fastighetsforvaltaren-vi-ar-mitt-i-stormens-oga/


Fed this year has been raising rates at the fastest pace in four decades

 

https://www.wsj.com/articles/feds-aggressive-rate-hikes-are-a-game-changer-11669006579


WSJ 21 November 2022

Under 200 år har vi skapat dagens samhälle

 Nu måste vi göra om samhället i grunden på 20-30 år.

 Sett på nätet, förmodligen Bloomberg.


2022-11-21

Sweden’s home-price decline accelerated in October,

 as the Nordic country gripped by the most severe housing slump in three decades shows what may lie ahead for many other developed economies. 


 Home prices in Canada are now down 10% from the peak. In addition to Sweden, peak-to-trough declines of as much as 20% are forecast for countries including the US, the UK and New Zealand.

Bloomberg 21 November 2022

https://www.bloomberg.com/news/articles/2022-11-21/sweden-s-housing-market-rout-deepens-in-showcase-for-world


Remember 2008

Although the repercussions of the carnage in crypto markets won’t be as broad or dire as those of the 2008 financial crisis, the parallels between the two episodes offer insights into what went wrong, and what’s likely to come.

All financial manias have some features in common. Strong beliefs feed into self-reinforcing feedback loops. On the way up, positive performance and speculation compound one another, fueled by borrowed money. 

On the way down, everything runs in reverse. Failures erode trust and participants flee until the whole system breaks down.

In the 2000s, the central belief was that home prices couldn’t decline on a national basis. 

In crypto, the belief was that this new market would keep growing until it displaced traditional finance.

Bill Dudley Bloomberg 21 november 2022

https://www.bloomberg.com/opinion/articles/2022-11-21/want-to-know-where-crypto-is-headed-remember-2008


This crypto pioneer wants tough U.S. laws to prevent another FTX and stabilize digital markets. 


A small but vocal group of critics is, paradoxically, urging a “head in the sand” approach to these market events — both of which were caused by irresponsible risk-taking and fraud rather than the failure of the underlying blockchain technology. 

These critics contend that legislation will legitimize an irredeemable industry. 


2022-11-20

Denmark’s central bank has no inflation mandate, instead focusing on keeping its currency tied to the euro

That’s worked well when prices hardly moved. 

Denmark’s inflation rate is now at 10.1%, the highest since around the time the peg was introduced four decades ago. In recent months, some Danish economists, think tanks and a former government minister have argued that there should be a discussion about whether the fixed-exchange-rate policy is still the right choice.

Olsen at Danske Bank says he thinks Denmark will opt to keep its peg, given the current monetary policy is backed by a majority of academics, government officials, politicians as well as the central bank itself.

Bloomberg 18 November 2022

https://www.bloomberg.com/news/articles/2022-11-18/danish-inflation-frustration-boils-over-to-spark-euro-peg-debate


Allan Larsson: Jag var mitt i smeten, i Riksbanksfullmäktige

Den morgonen 1992 /som kronan flöt/ hade finansminister Wibble begärt vårt stöd för att knyta kronan till Dmarken! Kronan skulle bli hårdvaluta! 

- Riksbanksledningen hade förstått att klockan var slagen och styrelsen godkände ett förslag till en process som innebar att marknaden skötte omläggningen av valutaregimen! 

Kronan fick ingen ny fast kurs, den fick flyta - det var början på en ny tid!

Allan Larsson på Facebook 20 november 2022


En felaktig analys låg i botten på den första uppgörelsen mellan oss och regeringen", menade Allan Larsson [i Visby på söndagen]. 

Man trodde att det var de dåliga statsfinanserna som rubbat tilltron och orsakat valutaspekulationen. I verkligheten var det finanskrisen, anser Allan Larsson i dag.

DN-ledare 1993-07-19

Han var 1990–1991 Sveriges finansminister, satt i styrelsen för Sveriges riksbank 1991–1994. 

Åren 1967–1969 arbetade han i Statsrådsberedningen och ingick i Tage Erlanders stab av politiska medarbetare. 1971 återgick han till Svenska metallindustriarbetareförbundet som utredningschef. Han författade där en av de motioner till LO-kongressen år 1971 som ledde fram till förslaget om löntagarfonder år 1974.

RE: De flinande finansvalparna i New York brydde sig inte om hur många karensdagar vi hade i sjukförsäkringen.





Central banks and inflation - eroded their credibility in the eyes of investors and society at large

Central banks’ independence is harder to justify after such a failure of “analysis, forecasts, action and communication,” Allianz SE’s chief economic adviser, Mohamed El-Erian, tweeted in October. 

The tragic result, he says, is “the most front-loaded interest­-rate cycle that we have seen in a very long time

When reckless lending eventually blew up the housing and credit markets in 2008, then-chair Ben Bernanke deployed the Fed’s balance sheet in ways that hadn’t been seen since the Great Depression.

Their coordinated response in March 2020 put a floor under asset prices and kept bond yields low, helping governments fund the massive spending needed to support millions of ­unemployed people.

While central banks in most modern economies enjoy day-to-day independence, their mandates are set by democratically elected governments. 

Bloomberg 20 November 2022

https://www.bloomberg.com/news/features/2022-11-20/inflation-has-humbled-central-bankers-here-s-how-they-can-regain-trust


Rolf Englund: 

Om centralbankerna inte kunde få upp inflationen från noll till två, hur kan då någon tro att de inom rimlig tid skall få ner den från 8-10 procent till två?



2022-11-18

Börsen 17 november 2022

 






One chart is all it took to move financial markets

That chart was presented by St. Louis Fed President James Bullard and it shows where he sees “the sufficiently restrictive zone” for the central bank’s main policy rate target.

Bullard put the zone somewhere between 5% to 7%

Bullard’s zone was based on estimated policy levels recommended by Taylor-type rules

https://www.marketwatch.com/story/this-is-the-chart-that-is-rattling-u-s-financial-markets-thursday-11668701498


Inflation may improve at times. The point is we aren’t going back to the halcyon days of 1% and 2% inflation for years 

John Mauldin 23 September 2022

https://englundmacro.blogspot.com/2022/09/the-federal-open-market-committees-fomc.html


2022-11-17

US recession is highly likely in the next 12 to 18 months

 The projections by the Fed governors will always paint a rosy picture. They’re instructed to condition their view on an optimal monetary policy, which obviously makes better outcomes achievable. 

In the real world, as has been demonstrated over the past year, policy is often far from that ideal, so actual results will usually be worse than implied by the projections.

Admitting that a recession would be required to get inflation in check might undercut public support for a tighter monetary policy. It also could subject the Fed to criticism that might ultimately undermine its independence or cause Congress to limit its authority in the future.

Fed is committed to bringing inflation down to its 2% annual rate target. 

Powell made it clear in his remarks at the Jackson Hole conference in August that this goal was “unconditional” and reiterated his commitment at his September news conference.

Failure is an unattractive option because inflation expectations would rise, necessitating a harsher monetary policy and worse outcomes later.

To bring inflation to 2%, the Federal Open Market Committee will have to push up the unemployment rate substantially. The labor market is much too tight to be consistent with a stable or declining underlying inflation rate.

Bill Dudley Bloomberg 16 november 2022

https://www.bloomberg.com/news/articles/2022-11-15/what-if-the-fed-s-own-forecasts-are-wrong




If Italy Slides Toward Default

 Italy’s debt has long been the Achilles’ heel of the euro area. 

Extensive asset purchases by the European Central Bank helped keep borrowing costs down for the government in Rome. Now the monetary authority’s fight against inflation has put the nation’s debt onto an unsustainable trajectory. 

Stabilizing the debt-to-GDP ratio would require swinging the primary balance to a surplus of 3% of GDP from a deficit of 1.8% in 2022. 

That would require some harsh austerity measures, and voters are unlikely to back that.

For the Governing Council, that will make it hard to agree that Italy’s debt is sustainable—a prerequisite to activate its new crisis-fighting tool, called the Transmission Protection Instrument. 

It will probably be deployed eventually, but only once Italy has negotiated with European partners. Expect drama.

If a crisis erupts, a solution could involve some form of fiscal consolidation, debt mutualization, or a writedown—and perhaps even a mix of the three.

The cost of servicing Italy’s debts will climb sharply as old bonds mature and new ones are issued. 

Bloomberg 16 November 2022

https://www.bloomberg.com/news/articles/2022-11-16/what-happens-if-italy-slides-toward-default




Banks Need to Worry About Shadow Banks

 The boom in market-based finance has taken risks away from regulated lenders, but recent crises show they’re still exposed.

Banks are far stronger and more stable than before the 2008 crisis, as I’ve written before. But they remain directly exposed to the market-based version of finance that has ballooned in the past decade. 

And that exposure can be far more dangerous than expected when a very large fund or group of funds hits big problems

Let’s first take a step back. Market-based finance – often called shadow banking – covers all the ways in which companies or households get funding from investors in capital markets. Those investors include insurers, pension funds, hedge funds and myriad vehicles known by obscure acronyms. 

Shadow banks controlled $225 trillion at the end of 2020, or nearly half of all global financial assets

Hidden leverage is hard to quantify, obviously, but it has certainly grown among shadow banks during the long years of ultra-low yields. 

Global supervisors at the Financial Stability Board call these non-bank financial intermediaries.

Paul J. Davies Bloomberg 17 november 2022

https://www.bloomberg.com/opinion/articles/2022-11-17/why-banks-need-to-worry-about-shadow-banks


Financial Stability Board 

https://www.fsb.org/


The core, and still unanswered, questions of the great financial crisis — why are banks so special? Yes, the major US banks are far safer and better capitalised than they were before 2008. But why do they chafe at single-digit capital requirements when businesses in any other industry hold multiples of that?

Everything from an increasingly volatile T-bill market to a home lending market now dominated by shadow banks

Rana Foroohar FT 25 September 2022

https://englundmacro.blogspot.com/2022/09/15-years-on-from-great-financial-crisis.html




Maybe inflation has peaked and will start heading back down. Are happy days here again?

The likelier scenario is that even if it starts to come back down, inflation may persist higher for longer than the markets, money managers, or the Federal Reserve thinks.

That’s because, in effect, inflation has reached the kind of critical mass or momentum this year that makes it much harder to control.

“An inflation jump to 4% is often temporary, but when inflation crosses 8%, it proceeds to higher levels over 70% of the time,” write Arnott and his co-author, analyst Omid Shakernia.

“Reverting to 3% inflation, which we view as the upper bound for benign sustained inflation, is easy from 4%, hard from 6%, and very hard from 8% or more,”

There are a couple of important caveats. The first is that the past is no guarantee of the future. Just because these things happened in previous instances of 8% inflation over the past 50 years doesn’t mean they will happen this way this time. 

(If “this time is different” are the four most dangerous words in finance, as Sir John Templeton once said, “this time is the same” are among the most dangerous five.)

MarketWatch 17 November 2022

https://www.marketwatch.com/story/history-says-inflation-could-persist-for-a-decade-11668642697


History Lessons: How “Transitory” Is Inflation?

By Rob Arnott Omid Shakernia November 2022

https://www.researchaffiliates.com/publications/articles/965-history-lessons




På lördag är det exakt 30 år sedan riksbankschefen Bengt Dennis och Carl Bildt-regeringen slängde in handduken för den fasta växelkursen och lät kronan flyta

Under pressen från 160 miljarder kronor i valutautflöden på fem dagar och stor dramatik gavs den fasta växelkursen upp och kronan tilläts flyta fritt den 19 november 1992. 

Folkomröstningen 2003 om att bli utbytt mot euron, vanns med 56 procent av rösterna för kronan mot 42 procent för euron. 

Allra mest briljerade den som säker hamn under euroskuldkrisen. De två dagarna den 8 och den 13 mars 2013 var kronan enligt KIX-indexet till och med starkare än innan den läts flyta. 

De som argumenterat för att EU:s länder var för olika, reagerade för olika på chocker och därför behövde olika penningpolitiska doser fick nu svart på vitt att de tänkt rätt, medan de som förespråkat euron och möjligheterna att påverka EU:s räntepolitik och delta i den föreslagna bankunionen vägde lätt i debatten. 

Kronan var populärare än någonsin. I SCB:s majenkät 2013 svarade över 80 procent att de ville ha kronan och under tio procent euron. 

Riksbanken bestyckad med räntevapnet, möjligheter att intervenera och statistik borde vara bäst skickad att göra valutaprognoser. Varje år sedan 2009 har de räknat med en starkare krona på två års sikt. Hittills har det varit fel alla gånger. 

Nu tror de också att kronan ska stärkas. De inte ensamma. Alla analytiker i nyhetsbyrån Bloombergs enkät räknar med att kronan 2024 kommer att stå stakare mot dollarn och euron än den gör nu. 

Linda Fries-Åman Grafik

Anna Byström  Grafik

Mikael Vilenius DI torsdagen den 17 november 2022

https://www.di.se/analys/30-arskris-for-flytande-kronan-en-av-varldens-samsta-valutor/


Det kommer inte att vara möjligt att länge till bibehålla den rekordhöga svenska realräntan. Om regeringen inte låter kronan flyta är risken alltmer överhängande för att marknaden kommer att se till den saken. Det blir genant för de ansvariga i nuvarande och tidigare regeringar men är ingen nationell katastrof.

Rolf Englund på DN Debatt 26 augusti 1992

https://www.internetional.se/dn92.html


2022-11-16

“There doesn’t seem to be anything useful or beneficial that hundreds of speculative cryptocurrencies can be used for”

 “Private cryptocurrencies are not backed or protected by the government, and they shouldn’t be.”

Ohio Sen. Sherrod Brown, the Democratic chairman of the Senate Banking Committee, said it was appropriate for regulators to treat crypto skeptically because such currencies have been used for speculation, fraud, sanctions evasion and theft.

WSJ 15 November 2022

https://www.wsj.com/articles/feds-michael-barr-says-crypto-turmoil-highlights-potential-risks-to-financial-system-11668516393


Pyramidspelet Bitcoin faller vidare och ligger nu på sin lägsta nivå sedan 2020. 

Fortsatt ointressant, men det kan ju vara kul att titta på utvecklingen ibland, om inte annat för att se hur bitcoiners reagerar när man skriver detta.

Lars Wilderäng Cornucopia 14 november 2022

https://cornucopia.se/2022/11/blandade-borser-i-asien-pa-mandagsmorgonen-bitcoin-rasar-vidare-slut-pa-billig-el-igen/


A year ago, cryptocurrencies were roaring and Coinbase Global Inc., considered the Charles Schwab of crypto exchanges,

was fresh off an IPO that valued the firm at $85 billion. 

Today, one market-based measure suggests that investors have doubts about whether the company can survive.

Sam Goldfarb WSJ 17 november 2022

https://www.wsj.com/articles/wall-street-sours-on-coinbase-signaling-broad-crypto-doubts-11668652436


Börsen 16 november 2022

 









Fed needs to push back to prevent the markets prematurely easing on its behalf

Two-year Treasury yields fell the most since Lehman Brothers failed in 2008, and before that since the Sept. 11, 2001, attacks. 

The ICE U.S. dollar index plunged 3.85% in two days, only slightly less than the 4.08% in the two days after the international Plaza Accord designed to weaken the greenback was made public in 1985.

Stocks naturally soared, with the S&P 500 up 5.5% and the ARK Innovation ETF, which holds lots of lossmaking do-or-die growth stocks, having by far its best day ever with a 14.5% gain.

Goldman Sachs’s overall measure of financial conditions combining stocks, interest rates, corporate bond spreads and the dollar loosened at a rate only previously seen in March 2020 and during the Fed’s emergency response to the 2008-9 financial crisis. 

James Mackintosh WSJ 16 November 2022

https://www.wsj.com/articles/markets-zoom-toward-collision-course-with-the-fed-11668602996



Even a global recession may not crush inflation

The lags between tighter monetary policy and lower inflation are not well understood. Central banks may have to cause more pain than they currently anticipate.






Everyone can agree on one thing about the past year. It has revealed quite how little economists understand inflation, including both what causes it and what causes it to persist.

It is likely, therefore, that economists will also struggle to predict when inflation will cool. Optimists hope that prices will once again take people by surprise, with their rise slowing sooner than expected. 

But it seems more likely that inflation will prove stubborn even as the economy slows. That will leave policymakers with a grim choice: to squeeze the economy tighter and tighter, or to let prices spiral.

The Economist 15 November 2022

https://www.economist.com/finance-and-economics/2022/11/15/even-a-global-recession-may-not-crush-inflation


What If the Fed Has to Take Rates Up to 6%?

When the Fed began raising rates in March, markets were pricing in a terminal rate of just 2.8%.  As of mid-November, that expectation has risen to 5%

Could they be forced to do even more? Absolutely.

At its September meeting, the Federal Open Market Committee’s dot plot showed a higher trajectory of rate hikes, despite a deterioration in the growth outlook.

A simple explanation for this anomaly is that the committee’s estimate of u* — alternatively called NAIRU, or the unemployment rate associated with price stability — has risen from the traditional 4%.

What if u* is even higher? A recent estimate by Fed staff put it in the 5%-to-6% range. 

Fed Chair Jerome Powell himself has said the natural rate of unemployment has “moved up materially.”

Anna Wong Bloomberg 16 November 2022 

https://www.bloomberg.com/news/articles/2022-11-15/what-if-the-fed-has-to-take-rates-up-to-6


What If Everything Goes Wrong At the Same Time?

Could 2023 be worse? Absolutely.

It is, of course, not a surprise that an exercise aimed at estimating a global downside scenario should arrive at a big negative number. 

Still, our analysis flags how easily the outcome for the year ahead could slip below already-lackluster expectations, as well as the extremity of the impact if negative shocks collide and compound.

https://www.bloomberg.com/news/articles/2022-11-14/what-if-everything-goes-wrong-at-the-same-time


“those who cannot remember the past are condemned to repeat it.” 

But sometimes even those who can recall the past have a selective memory and draw the wrong conclusions.  

The Volcker shock of 1979, when the US Federal Reserve, under then-chair Paul Volcker, sharply increased interest rates in response to runaway inflation, set the template for today’s monetary tightening.

Wage increases are not the main driver of inflationary pressures. In fact, even in the US, real wages have been falling over the past year. Yet that has not stopped some economists from arguing that higher unemployment and consequent larger declines in real wages are necessary to control inflation.

One would expect the supposed “adults in the room” of global macroeconomic policy to recognize the problem and seek to craft more appropriate responses. But...

Jayati Ghosh, Professor of Economics at the University of Massachusetts Amherst, is a member of the UN Secretary-General’s High-Level Advisory Board on Effective Multilateralism.

Project Syndicate 15 November 2022

https://www.project-syndicate.org/commentary/monetary-tightening-wrong-solution-for-current-inflation-by-jayati-ghosh-2022-11



2022-11-15

Börsen 15 november 2022

 






Not Even Keynes Can Help Us Now Vs The fatal error of austerity

The famous economist’s guidance about how and when governments should spend money doesn’t seem to apply to the current moment.

High rates of inflation around the world have pretty much ended the popularity of MMT, or Modern Monetary Theory, and its proposition that sovereign governments can spend as much as they want. 

But current economic conditions also call into question the usefulness of a much more established and accepted theory: Keynesian economics.

The recent history of the UK government is a paradigmatic example. Under Prime Minister Liz Truss, the plan was to boost spending on energy subsidies and cut some taxes. Whatever else you might say about the details of those policies, they did fit the Keynesian recipe for fiscal expansion in tough times (though it is noteworthy that many leading Keynesian economists strongly opposed them).

The problem is that markets didn’t like the policies, and the British pound fell and borrowing rates on government bonds rose. Financial markets were roiled, and now the Truss days are over.

A final problem is that rates of inflation are likely to stay relatively high for some while to come. I am relatively optimistic about the ability of many Western economies to get inflation down to the range of 3% or 4% within a few years. 

Tyler Cowen Bloomberg 14 november 2022

https://www.bloomberg.com/opinion/articles/2022-11-14/as-recession-looms-keynes-s-theories-offer-little-guidance


The fatal error of austerity

Here we go again. The Office for Budget Responsibility (OBR) has discerned an enormous deterioration in public finances

Upon this macroeconomic conjecture, it is bouncing the British Government into pro-cyclical fiscal tightening just as the country enters what is forecast to be the most protracted slump since the Great Depression

They deserve our national gratitude for eliminating the sovereign risk premium on the Truss mini-Budget but they now risk committing the greater and longer lasting error of Austerity 2.0. 

Let us clear up one misunderstanding before it becomes lodged in the public discourse: the UK does not face a sovereign debt crisis, any more than it faced the “Greek” fate alleged by Mr Osborne in 2010.

It is beyond depressing that the dismal Treasury View is once again in the ascendant, and worse yet George Osborne’s austerity overkill is being dusted off as a successful template. 

Is there no recognition in Treasury circles that this episode is viewed by the global economic fraternity as an awful misadventure, a policy error on a par with the self-defeating fiscal retrenchment of the 1920s, but without the excuse of pre-Keynesian ignorance or the Gold Standard.

Dario Perkins, a former Treasury official now at TS Lombard. “It is all absolute nonsense. We have tried a decade of austerity and if they seriously do it again, they will be unelectable for a generation,” he said.

Chancellor Jeremy Hunt has even gone so far as to recruit the architect of that fiscal squeeze, Rupert Harrison, to help formulate Austerity 2.0.

There is a revealing conversation with Mr Harrison in Aeron Davis’s new book on the Treasury – Bankruptcy, Bubbles, and Bailouts – that captures what happened. 

Indeed, the fiscal squeeze from 2010 to 2015 never had anything to do with economic science. It was an ideological use of the global financial crisis to shrink the state, creating the OBR along the way as a screen of policy legitimacy, and all dressed up with the discredited theory of “expansionary fiscal contractions”.

Ambrose Evans-Pritchard Telegraph 15 November 2022