Englund

 Overhauling the Rhine’s fleet of 8,900 ships for shallow water could total around €90 billion ($99 billion). And that’s just part of the costs to keep commerce flowing.  There’s extra inventories and the space to store them, as well as government plans to reengineer the river, which are slow in coming.  Bloomberg 31 July 2023 https://www.bloomberg.com/news/features/2023-07-31/low-rhine-river-levels-puts-europe-s-most-important-trade-route-at-risk Rhine River to Drop Further Bloomberg 12 August 2022 https://englundmacro.blogspot.com/2022/08/rhine-river-to-drop-further.html

 Both the US Federal Reserve and the European Central Bank appear to be dead set on getting inflation back to their 2% target.  But while 2% is viewed as a kind of “sweet spot” for inflation – neither so high that consumers struggle to cope, nor so low that it stifles economic dynamism – it is ultimately arbitrary, and its primacy in monetary policymaking is a relatively recent phenomenon. In this Big Question, we ask Michael J. Boskin, John Cochrane, Brigitte Granville, and Kenneth Rogoff whether it is time to rethink the 2% target. Project Syndicate 27 July 2023 https://www.project-syndicate.org/onpoint/is-2-really-the-right-inflation-target-for-central-banks

“We don’t know what the next shoe to drop is,” said Subadra Rajappa, head of U.S. rates strategy at the French bank Société Générale, The term “soft landing” first made its way into the economic lexicon in the early 1970s, when America was fresh from a successful moon landing in 1969. Setting a spaceship gently on the lunar surface had been difficult, and yet it had touched down. “The prevailing consensus right before things went downhill in 2007, 2000 and 1990 was for a soft landing,” said Gennadiy Goldberg, a rates strategist at TD Securities. “Markets have trouble seeing exactly where the cracks are.” “It looks like we’re headed toward a soft landing, but we don’t know the unknowns,” Ms. Rajappa said. New York Times 29 July 2023 https://www.nytimes.com/2023/07/27/business/economy/fed-economy-soft-landing.html

    It is where the wheel was invented, irrigation flourished and the earliest known system of writing emerged. The rivers here, some scholars say, fed the fabled Hanging Gardens of Babylon and converged at the place described in the Bible as the Garden of Eden. “You would not believe it if I say it now, but this was a watery place,” said Sheikh Adnan al Sahlani, a science teacher here in southern Iraq near Naseriyah, a few miles from the Old Testament city of Ur, which the Bible describes as the hometown of the Prophet Abraham. These days, “nowhere has water,” he said.  Indeed, for much of its history, the Fertile Crescent — often defined as including swaths of modern-day Iraq, Israel, Lebanon, Syria, Turkey, Iran, the West Bank and Gaza — did not lack for water, inspiring centuries of artists and writers who depicted the region as a lush ancient land. Spring floods were common, and rice, one of the most water-intensive crops in the world, was grown for more than 2,000 years. New York

Fukuyama, a young political scientist fresh out of the RAND Corporation, published an essay in the National Interest that, as the New Yorker put it, “turned the foreign-policy world on its ear.” It was entitled “The End of History?” — and over the last three decades, many people seem to have forgotten that question mark. Francis Fukuyama: In the US and in Europe, where you’ve got these right-wing nationalists rising, it’s often been attributed to growing economic inequality created by globalization. There’s this idea that a lot of working-class people have been left behind, as a result of outsourcing and that sort of thing.   FF: If it were just economic, you should be getting big left-wing populism arising everywhere, where people want more welfare benefits and more unemployment compensation, all this sort of thing.  But the biggest new voices are all on the right. And they’re nationalists. They’re anti-immigrant. And the complaint isn’t even so much that we’re losing our jobs, but th

 Rsing global temperatures would appear to be killing this version of summer.  None of what I have just described is enjoyable if the mercury is above 30 degrees C. Indeed, sunbathing becomes life-threatening. And who wants a week on Corfu if a large tract of the island is ablaze?  Those who own the capital stock — the hotels, the houses, the boats — naturally cling to the hope that this summer is an aberration and next year will return to normal. But they have been clinging to that hope for quite a few years now. The horrible question keeps suggesting itself: What if this is the new normal? Niall Ferguson Bloomberg 30 July 2023 https://www.bloomberg.com/opinion/articles/2023-07-30/record-heat-is-killing-summer-vacation-for-hotels-airlines-beaches

  Anthropogenic climate change interacting with these other stressors could thus cause a global catastrophe, in a worldwide societal collapse. Kemp  et al.  [ 1 ] have reminded us that although we have reasons to suspect it, such potential collapsing futures are rarely studied and poorly understood.  The closest research is the search for evidence of tipping dynamics and estimating thresholds, timescales and impacts of potential tipping points [ 4 ]. We advocate for considering them while using the available knowledge acquired from historical and prehistorical examples of local and regional collapses, transformations and resilience of human societies also driven by climate and unsustainable use of resources Climate change together with turbulent political rivalries and resource mismanagement that have hindered solving underlying problems have played key roles in the collapse or transformation of numerous previous human societies. This needed research must also consider the differences

In this age of climate crisis, the world is consuming more crude than ever. Peak oil demand? Not yet. Maybe one day, perhaps even soon, around 2030. It was just a question of timing, since oil demand surges during the northern hemisphere summer, when millions of European and American families guzzle gasoline and jet fuel during their holidays. The wholesale cost of refined products, such as gasoline, is  surging  too. Bloomberg 28 July 2023 The Harsh Truth Is We’ve Never Consumed This Much Oil - Bloomberg

Could a Recession Still Be Years Away?  Steady Growth, Moderating Inflation Improve Odds of Extended Expansion   forecasters have predicted   a recession was imminent.  But they have postponed the recession’s start date as growth remains steady. If Fed achieves a soft landing, history suggests economy could keep growing four or five more years   Powell  disclosed that the Fed staff, which earlier this year projected a recession, no longer does. The staff forecast doesn’t necessarily reflect policy makers’ own views.  The record, near-11 year expansion that ended in February 2020 was unique, killed off not by inflation or a financial crisis, but by a pandemic and lockdowns. Without that, it might still be going on.   The Fed has never pulled off a soft landing when inflation was so far above its goal and the labor market this overheated.  Still, there is a plausible case this time is different. In the past, inflation was usually caused by excess demand. This time, a bigger culprit is di

 It has taken two generations for most countries that were occupied by Nazi Germany to admit that it was the resisters, not the collaborators, who were the minority.  But now we risk swinging too far the other way: normalizing collaboration and making resistance such an exceptional choice that only saints would choose it.  Collaborators, argues Ian Buruma in his gripping study of three such figures, are a compelling subject because they have succumbed to a temptation that would confront us all if placed in the same situation. This is not how collaboration used to be understood.  The trials of Vichy officials who had been complicit in the murder of Jews continued into the 1990s. But not until Jacques Chirac’s presidency (1995-2007) did France publicly acknowledge that the deportation of French Jews to the Nazi death camps had been the work of a French government, French police, and French collaborators. https://www.project-syndicate.org/onpoint/wartime-collaboration-remains-a-complex-qu

Asset prices are supposed to reflect risk, but the coastal real estate market has been challenging that notion for years. Not only is the threat of rising seas not “ priced in ,” but many of the most vulnerable markets in the country — think Florida — are also among the  frothiest , with Miami area home prices up around 64% since 2019.  Logically, buyers must either lack information about the climate threat or they’re intentionally choosing to disregard it, perhaps under the influence of climate-skeptical politicians. Jonathan Levin Bloomberg  28  July 2023 Coastal Real Estate in Places Like Florida Can’t Seem to Price Climate Risk - Bloomberg

Many readers will be familiar with Finland’s heroic resistance to Soviet aggression in the Winter War of 1939-1940, a conflict in which Mannerheim again rose to the fore.  Far more sensitive is Finland’s 1941-1944 military alliance with Nazi Germany against the Soviet Union.   For decades, the official story in Finland was that Hitler forced the country into this alliance, and that the so-called Continuation War was in any case a “separate war” between Finland and the USSR.  Meinander carefully demonstrates that this comforting version of history is largely untrue. He calls Mannerheim one of the chief architects of the “brotherhood-in-arms with Germany”. Tony Barber FT 25 July 2023 Mannerheim, Marshal of Finland — nation-builder and Nazi partner | Financial Times (ft.com)

Stocks have surged this year without really anything going right, besides the rolling out of error-prone artificial intellligence chatbots. Interest rates have surged to a 22-year high, earnings are down from last year, and pandemic-era savings are being drawn down if not entirely exhausted. Hartnett and team noted that real retail sales — that is, adjusted for inflation — fell at a 1.6% year-over-year clip, which has coincided with recessions since 1967. Real retail sales falls in excess of 3% are associated with hard recessions. Steve Goldstein MarketWatch 28 July 2023  Puzzled by the stock-market surge? Overshoots are the new normal, Bank of America strategist says - MarketWatch

  The “ultimate fear” is that Japanese investors, who have vast holdings of U.S. fixed income, including Treasury notes and other securities, “begin to see a higher level of yields in their own backyard,” Torsten Slok, chief economist at Apollo Global Management, told MarketWatch in a phone interview.  That could prompt heavy liquidation of those U.S. positions as investors repatriate holdings to reinvest the proceeds at home. MarketWatch 28 uly 2023  Why U.S. stocks and bonds stumbled on talk of a Bank of Japan policy tweak - MarketWatch Land of the Rising Yields Gives Markets a Shock Yield Curve Control (YCC), or intervening to keep 10-year yields down, has been in force for seven years, and the current target of 0.5% had been in place for seven months. The BOJ has now decided to control yields “more flexibly,” which means in practice that it will now tolerate yields as high as 1%, double the previous limit.   By buying every 10-year bond in sight, the BOJ has been injecting cash int

  Existing weather is visibly outrunning our combined efforts to stem global warming.  “Shocking but not really surprising,” is how Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies, describes the experience of  observing Phoenix pass 110F (43C)  for at least 27 days straight this month. Going even faster means that renewable energy deployed globally needs to  triple by the end of the decade  while energy efficiency doubles and the oil-and-gas sector cuts methane emissions by 75%, according to the IEA’s models.  Until the last few years, clean-energy alternatives were too expensive to compete with fossil fuels. Today solar power costs just 11% of what it did in 2009. Offshore wind and battery prices fell 74% and 84%, respectively, from 2012 to 2022, BloombergNEF data shows. Plummeting battery costs have also helped put 27 million electric cars on the road at the start of the year — and the most recent forecast from BloombergNEF sees the global EV fleet reaching 100

For all its benefits, the common currency has a critical weakness: If a member state borrows beyond its means, it can disrupt other members’ economies and even undermine the entire union. To prevent this, the EU adopted fiscal rules known as the Stability and Growth Pact It didn’t work. In 2003, Germany and France, Europe’s two largest economies, were among the first to violate the deficit limits.  I n the early 2010s, extreme debts in some member states — most notably Greece, where government obligations reached more than 180% of GDP — triggered a crisis that nearly broke up the euro area. As of the end of 2022, Italy’s obligations stood at about 145% of GDP, with no plausible prospect of getting back down to 60% at any point in the next couple decades. What went wrong? In simple terms, the system was too rigid to be enforced. All too often, it demanded precisely the wrong actions — for example, dictating austerity during recessions. In such cases, fines would only make things worse. 

Trots att inflationen sjunker befaras den vara för hög under för lång tid. SvD/TT 27 Juli 2023 https://www.svd.se/a/VP2E3l/ecb-hojer-styrrantorna-med-25-punkter FT: ECB raises interest rates back to highest-ever level ECB said it would ensure interest rates “will be set at sufficiently restrictive levels for as long as necessary” to bring inflation down to rate-setters’ 2 per cent target.  At present, price pressures are almost three times above that level, at 5.5 per cent. We also decided to set the remuneration of minimum reserves at zero per cent.   It will improve the efficiency of monetary policy by reducing the overall amount of interest that needs to be paid on reserves in order to implement the appropriate stance. We are determined to ensure that inflation returns to our two per cent medium-term target in a timely manner.  We stand ready to adjust all of our instruments within our mandate to ensure that inflation returns to our medium-term target and to preserve the smooth func

From London’s Canary Wharf to Paris’s La Defense, high-rise financial districts have been hit hard and it’s about to get worse Banks and other prime tenants are looking to make going to the office more desirable as part of a post-pandemic reset, and instead of giant glass and steel towers styled after Wall Street, they’re opting for smaller sites in locations closer to shops and restaurants. All new major developments in Europe follow some aspect of the trend — from Barkarkby outside Stockholm and Ellinikon near Athens to the redevelopment of Tegel airport in Berlin and Milan’s former Expo center. https://barkarby.se/ Bloomberg 27 July 2023 https://www.bloomberg.com/news/features/2023-07-27/financial-districts-from-paris-to-london-keep-losing-tenants-as-banks-move-out

 ”Vi kan absolut ha fastighetsföretag som får problem, som går i konkurs. Men för att det ska ge problem i den finansiella sektorn ska det till problem i en skala vi inte har sett hittills”, säger hon.  Linda Öhrn DI 27 juli 2023 https://www.di.se/nyheter/harda-orden-lat-krisande-fastighetsbolag-ga-i-konkurs/ Hon har meriterat sig genom att skriva under en artikel på Brännpunkt inför folkomröstningen om EMU under rubriken "Euron lyfter Sverige"    I ingressen skrev SvD:  Vår slutsats blir att euron är bra för både näringsliv och konsumenter i Sverige, skriver Klas Eklund, Carl Johan Åberg och åtta andra nationalekonomer /däribland  således Karolina Ekholm/.  https://englundmacro.blogspot.com/2009/02/riksbankens-nya-stjarna-karolina-ekholm.html

It is becoming impossible to buy without the help of parents to provide a hefty deposit or a free place to live while savings are scraped together.  Those who cannot benefit from family money are stuck renting for longer, and possibly forever. Alexa Phillips Telegraph 24 July 2023 https://www.telegraph.co.uk/property/uk/britain-property-market-house-prices-parents-help/ Home ownership huge gaps between those with and without family wealth.   John Burn-Murdoch FT 14 July 2023 https://englundmacro.blogspot.com/2023/07/home-ownership-hereditary-privilege.html

 —will in fact take on an increasingly hawkish hue if inflation does continue to recede.  Unchanged nominal rates would be ever more restrictive in real terms  https://www.economist.com/finance-and-economics/2023/07/26/americas-battle-with-inflation-is-about-to-get-trickier

Fed is now closer to a level of borrowing costs it deems “sufficiently restrictive” to bring inflation down to its longstanding 2 per cent target in a timely manner. FT 26 July 2023 https://www.ft.com/content/110bd237-cbf2-463d-b1b5-edcb98245851 For over 20 years, Williams and company have been estimating the long-run neutral (or natural) rate — known to economists as r-star.  This is the interest rate at which the economy is humming along at its potential, with full employment and inflation at 2 per cent. R-star is a guiding light for central banks.  Englund: R-star and predictions that inflation and rates will fall to pre-pandemic levels (englundmacro.blogspot.com) Fed Chair Powell: Fed staff are no longer forecasting recession Fed Chair Powell: A return to 2% inflation could come by 2025 (cnbc.com) Fed Chair Powell: A return to 2% inflation could come by 2025 CNBC 26 July 2023 Fed Chair Powell: A return to 2% inflation could come by 2025 (cnbc.com)

In the latter half of his life, he single-mindedly devoted himself to a desperate attempt to rescue secular morality—morality without God—by arguing that it has an objective, rational basis.   Parfit | Princeton University Press

The system of ocean currents that regulates the climate for a swath of the planet could collapse sooner than expected, a new analysis found. NYT 25 July 2023 Ocean Currents in the Atlantic Could Slow by Century’s End, Research Shows - The New York Times (nytimes.com) A better known section of this circulation is the Gulf Stream, Climate study: A vital system of ocean currents could soon collapse (cnbc.com)

 Johan Hellekant SvD 26 juli 2023 Booli: Marknaden i obalans – ”Snart till salu” ökar | SvD  

Bloomberg 26 July 2023  

Bull markets, according to John Templeton, “are born on pessimism, grow on scepticism, mature on optimism and die of euphoria”.  in the 21st century, Templeton’s favoured moments of “maximum pessimism” present the very best buying opportunities. In March 2009 investors despaired over the future of capitalism; in March 2020, over a pandemic   It now looks like October 2022 should be added to the list. What started as a narrowly led climb has broadened into a full-blown bull market. The market, in other words, appears on the verge of euphoria. What would Templeton think of that? The Economist 25 July 2023 https://www.economist.com/finance-and-economics/2023/07/25/investors-are-seized-by-optimism-can-the-bull-market-las

,,, in which debtors borrowed vast amounts at very low, and sometimes negative, interest rates. Investors are on alert for financial vulnerabilities after a   crisis in U.S. regional banks   this year, and with   strains emerging   in commercial property.  Borrowing costs of all sorts have risen sharply for governments, businesses and consumers, as central banks have raised key interest rates to combat price pressures. Rates have surged on inflation-linked borrowings, but these aren’t the only source of pain. As standard bonds with fixed rates mature, they need to be replaced with more expensive new debt. Meanwhile, interest rates on loans are often floating, meaning they quickly reflect changes in policy rates.  WSJ 25 July 2023 The World Tied $3.5 Trillion-Plus of Debt to Inflation. The Costs Are Now Adding Up. - WSJ

Via Heimstaden AB har den norske äventyraren Ivar Tollefsen makten över Heimstaden Bostad, som riskerar mångmiljardnedskrivningar på sitt bestånd. Men kapitalet i Heimstaden Bostad kommer framför allt från en rad olika pensionsförvaltare, med Alecta i spetsen.  Från början var det dock ett litet bolag med ett bestånd värderat till 2,9 miljarder kronor, tio år senare har värdena ökat till 345 miljarder. I september 2021 skedde det ödesdigra 93-miljardersköpet från Akelius. Genom åren har framför allt Alecta fortsatt att stoppa in pengar i Heimstaden Bostad i nyemissioner, och innehavet är nu uppe i 50 miljarder kronor. Torbjörn Isacson DI  25 juli 2023 https://www.di.se/analys/pensionsmiljarder-i-skakigt-bygge/ Räknar vi bort passiva indexförvaltare är Alecta största ägare i världens just nu mest omtalade krisbank   Alecta arbetar på uppdrag av Svenskt Näringsliv och PTK  https://englundmacro.blogspot.com/2023/03/alectas-ordforande-ingrid-bonde.html Ivar Tollefsen Heimstaden https://eng

  Nu går driftkostnaderna upp medan hyresintäkterna är reglerade – och även om vi hade haft fri hyressättning har hushållen fortfarande en ansträngd ekonomi. Byggherrens marginaler krymper medan räntorna på bygglån tickar uppåt. Att bygga bostadsrätter är på pappret mindre riskabelt. Byggbolaget tar fram ett projekt, startar en bostadsrättsförening och börjar sälja lägenheter ”på ritning”. Först när en viss andel av lägenheterna blivit sålda inleds själva bygget. Lånet tas av bostadsrättsföreningen med byggbolaget som borgensman. – De enda projekten som startar nu är sådana som ligger i sådant premiumläge att priskänsligheten är extremt låg, eller där värdet på marken är väldigt lågt. Eller så har man kommit så långt i planeringen att det blir ännu dyrare att stoppa bygget, säger Lennart Weiss. Fokus 23 July 2023 Så gick byggbranschen rakt in i väggen - Fokus

Landlords have begun surrendering office buildings to lenders Many consider it the start of a reckoning for the estimated $20.7 trillion commercial real-estate market, likely its biggest test of confidence since the 2007-2008 global financial crisis. Brian Lane, the Well Fargo Investment Institute’s lead analyst for private credit, pointed to a $1 trillion “wall of worry” as a wave of commercial real-estate loans come due through the end of 2024 (see chart), in a Monday client note. The balance balloons to about $2.5 trillion through the end of 2027. Saira Malik, Nuveen’s chief investment officer, said that “nonoffice” commercial mortgage-backed securities that currently offer 10.6% yields look attractive MarketWatch 24 July 2023  https://www.marketwatch.com/story/the-1-trillion-wall-of-worry-for-commercial-real-estate-that-spirals-through-2027-81659671 Bank Regulators Urge Flexibility in Commercial Real-Estate Loan WSJ 24 July 2023 https://englundmacro.blogspot.com/2023/07/bank-regula