Englund

  Men 2022 tog experimentet med de historiskt låga räntorna plötsligt slut. För miljontals svenskar blev det en påminnelse om Riksbankens makt över vår ekonomi. Vilken roll spelar egentligen Riksbanken i samhällsutvecklingen, och vilka konsekvenser har de låga räntorna fått? Stefan Ingves var Riksbankens chef i många år. Ett filmteam följde honom under hans sista, dramatiska tjänsteår. https://www.svtplay.se/video/KZm2m6v/skuldfeber Stefan Ingves; världen ändrar sig hela tiden och då får man försöka förstå världen så gott det går; The Great Moderation DI 4 maj 2021 https://englundmacro.blogspot.com/2021/05/stefan-ingves-varlden-andrar-sig-hela.html Stefan Ingves: "Enligt vår uppfattning stod det finansiella systemet i Sverige inför en kollaps den 24 september 1992." https://www.internetional.se/9803ingv.htm - Den stora risken var att Grekland skulle utlösa en kris i italienska, franska och tyska banker. Nu finns i praktiken en EU-garanti för de utestående grekiska statsobliga...

Sheila Bair (Chair) Joyce Chang, Charles Goodhart, Lawrence Goodman, Barbara G. Novick, and Richard L. Sandor October 16, 2023 https://www.centerforfinancialstability.org/research/CFSMonPaper101623.pdf

  When departing from the Fed, it was hawkish, as witnessed in the disastrous decisions to hike rates shortly before the collapse of Lehman Brothers in the summer of 2008 John Authers Bloomberg 7 June 2024 https://www.bloomberg.com/opinion/articles/2024-06-07/lagarde-makes-history-eu-voters-might-swing-hard-right-to-make-more

  The spread between Italy’s bonds and German equivalents, a key measure of risk, narrowed earlier in 2024 to a two-year low Despite the calm on the surface, the economy is starting to see the consequences of problems that have been decades in the making. Increasingly eclipsed by the dynamism of the US and the rise of China, the euro zone is languishing with anemic growth, weak productivity, poor demographics, and bloated public finances in key countries. Bloomberg 3 June 2024 https://www.bloomberg.com/news/articles/2024-06-03/ecb-s-interest-rate-cuts-give-cheer-but-europe-s-economy-facing-many-problems Sänkningscykeln 2008-2009 drevs av finanskrisen  och den cykel som inleddes efter att eurokrisen förvärrats 2011  h ann ECB aldrig ur innan pandemin slog till.   Felicia Åkerman: ECB:s väg efter junisänkningen är oklar (di.se)

  Higher-for-Longer and That’s OK - Good News is Good News and Bad News is Good News (englundmacro.blogspot.com)

Inflation has come in slightly higher than expected for a second straight month.  Markets took Tuesday’s CPI data in stride. Investors are getting used to the idea that interest rates in the U.S. could stay high for longer than they had hoped.  Of course what will ultimately have the bigger impact on markets and the economy isn’t when the Fed starts but where it ends up.  Longer term, the debate hinges on where the so-called neutral rate falls in the current, postpandemic economy. In this light, Tuesday’s market action, with stocks rising even as rate expectations moved slightly higher, could be a sign that Wall Street is weaning itself off an addiction to low rates.  That certainly would be encouraging. Wall Street Journal 13 March 2024 https://www.wsj.com/economy/central-banking/its-a-higher-for-longer-world-for-rates-and-thats-ok-e8e8459a Producentpriserna i USA steg mer än väntat i februari.   Ökningen var 0,6 procent jämfört med januari. Ekonomkåren hade rä...

Fedchefen Alan Greenspan stod i början av 2000-talet på toppen av sin glans. Den legendariske journalisten Bob Woodward  - han som tillsammans med Carl Bernstein avslöjade Watergate och tvingade Nixon att avgå - gav ut boken Maestro: Greenspan's Fed And The American Boom. År 2002 fick han av Queen Elizabeth II of the United Kingdom titeln honorary Knight of the British Empire för hans "contribution to global economic stability". Sedan kom finanskrisen och Lehman Brothers gick i konkurs 2008. Katastrofen var nära och det råder nu så mycket konsensus som det kan bland ekonomer om att Greenspan var en av de skyldiga, genom att han hållit för låg ränta för länge. Sedan kom eurokrisen. Grekland låg sämst till, men det löstes akut genom att EU lånade ut pengar till Grekland så att Grekland kunde betala sin lån till bankerna. - Den stora risken var att Grekland skulle utlösa en kris i italienska, franska och tyska banker. Nu finns i praktiken en EU-garanti för de utestående grek...

 

A Slow-Motion Property Crash in Germany Is a Bigger Threat to Banks Than US CRE A long-term view of property values has shielded banks so far  “Also, it’s not like they’re holding worthless paper like back in 2008, there are buildings behind these loans.” The value of those properties, however, remains the subject of much debate as the gap widens between the prices buyers are willing to pay and those sellers need so they can repay their loans. German property values are particularly vulnerable to higher borrowing costs because capitalization rates — or the potential return on a real estate investment — were pushed lower there than in other markets during the cheap money era.  That reflected in part the fact that yields on German government bonds, a benchmark for investors, were negative at the time. Bloomberg 27 februari 2024  https://www.bloomberg.com/news/articles/2024-02-27/german-commercial-real-estate-crash-is-looming-threat-for-banks Deutsche Pfandbriefbank Too Smal...

Wall Street (i.e., bankers, money managers, large investors, etc.) makes its preferences known mainly through market price action. This group almost always wants lower interest rates and more liquidity.  Something called the “neutral” or “natural” rate of interest is a theoretical concept, meaning the interest rate at which an economy is at maximum output with stable inflation. Economists call it “r*” or r-star.  No one knows what this rate really is.  Monetary policy thus boils down to how far the policymakers think they must deviate from r-star in order to restore their beloved equilibrium without causing even more mayhem. Restrictive policy (higher rates) can help reduce demand by making loans more expensive. If you can’t afford the payments, you are less likely to buy that house, car, etc. Businesses are less likely to expand. In time, this brings inflation back down. The FOMC tries to calibrate policy to the r-star “natural rate” which, while it certainly exists, is ...

he SocGen strategist’s doomster scribblings are a must-read for fund managers — even if he’s often wrong. Edwards, 62, started in the City of London 40 years ago as a Bank of England economist after completing a masters degree in economics at Birkbeck, University of London.  But he cites his three-year stint as an asset manager at Bank of America Corp., coinciding with the 1987 Wall Street crash, as fundamental to how he thinks — and writes — about the world. I, for one, look forward to his doomster scribblings, although I reckon his pessimism is currently a bit overdone. However, his dismay about the likely repercussions of central bank interference in setting the price of money in recent years is spot on. Large firms with ready access to debt capital markets are benefiting from having raised debt at super-low interest rates during the pandemic. They’re now parking cash that earns more in interest than the coupons they pay bondholders — providing a windfall, but one that will prov...

A Lot. This columnist’s book selections highlight the wreckage of ultra-loose monetary policy. First up, someone must have a copy of You Always Hurt the One You Love: Central Bankers and the Murder of Capitalism by Bernard Connolly.  You might not need much more than the title to get your row going. But it’s worth reading on to nail down exactly why central bankers are almost entirely responsible for asset bubbles “unsupported by realistic expectations of future productivity,” along with recent financial crises and disruptive wealth inequality.  For more on how it’s all central bankers’ fault, follow Connolly with Edward Chancellor’s excellent The Price of Time, a history of interest rates.  Distort the price of money, says Chancellor, and you distort the price of time, the present and the future move “out of whack.” Overly low rates are in effect a type of “loan forbearance” that encourages investment and then traps capital in low- (or no-) return areas, something that h...

 That doesn’t mean it won’t. Financial strength has been declining for a while, a trend that was only briefly interrupted by the attempted cleanup in the wake of the Global Financial Crisis in 2008. The “post-Volcker” era of low interest rates has seen companies grow more and more accustomed to taking risks with their financial health, and getting away with it Andronoudis stresses that the Altman system may be outdated by now, as intangible assets make up a far greater share of balance sheets and generally do have value. But the idea that credit quality is degrading still stands. “zombies” — companies that are no longer able to grow or even produce enough profits to cover interest expenses, but can survive because their interest costs are so low. The effect of higher yields (and therefore lower bond prices) on banks’ investments. As Societe Generale SA demonstrates here, banks’ unrealized losses remain alarmingly high, while charge-offs on commercial real estate loans, which have g...

Just 1.13 million homes on the market last month,  the fewest for a September on record. Wall Street Journal 21 October 2023 https://www.wsj.com/economy/housing/housings-other-threat-to-the-economy-3d2ce022 USA-hus  Back  -  Next  -  Book Home  -  Climate Change Ursula von der Leyen expressed solidarity with the victims of the Hamas attacks This elicited a public rebuke from Josep Borrell, who has the grand title of High Representative for Foreign Affairs and Security Policy.  Borrell told journalists tetchily in Beijing. EU foreign policy was decided by the leaders of the 27 member states and by their foreign ministers in meetings “chaired by me.” Englund: Ursula von der Leyen expressed solidarity with the victims of the Hamas attacks, but ... (englundmacro.blogspot.com)   “Member Sta tes shall regard their economic policies as a matter of common concern.”  From this obligation, which EU countries are treaty-bound to honour, flows ...

  Back  - Next -  Book Home  -  Climate Change John Authers Bloomberg 16 oktober 2023 China Nice While It Lasted Consensus Builds That the Low-Rate Era Is Dead Bloomberg 16 oktober 2023  https://www.bloomberg.com/news/newsletters/2023-10-16/global-economy-latest-the-end-of-low-interest-rates Zirp https://www.marketwatch.com/story/why-bond-market-investors-are-not-panicking-about-the-worst-treasury-bear-market-in-history-7bcba5bc Ledare: Flera goda skäl för Riksbanken att sluta höja räntan - DN.se Banks Have a Big Commercial Real Estate Problem Fed has a liquidity program (BTFP explained below) to help banks paper over losses. Small regional banks overleveraged in long term treasuries and were clobbered by paper losses and then bank runs. In response, the Fed agreed to shield the banks from losses by offering swaps at par value, ignoring the losses. Mish 15 October 2023 https://mishtalk.com/economics/banks-have-a-big-real-estate-problem-but-its-com...

  - Law of Unintended Consequences Caused the Great Bond Rout Nobody could have predicted the Treasury market’s collapse of the last two years — apart from every critic of artificially low interest rates since John Locke. Niall Ferguson Bloomberg 9 oktober 2023  Worst Bond Collapse in 150 Years Caused by Unintended Consequences - Bloomberg John Locke https://www.econlib.org/library/Enc/bios/Locke.html Problemet är att utbudet av obligationer är gigantiskt.  Min gissning är att obligationsköparna snart återvänder.  Henrik Mitelman DI 10 oktober 2023 https://www.di.se/analys/nya-hotet-mot-borsen/   Treasury-market selloff has become the worst bond bear market of all time, according to BofA MarketWatch 9 October 2023 https://www.marketwatch.com/story/treasury-market-selloff-has-become-the-worst-bond-bear-market-of-all-time-according-to-bofa-9bed8832 Back  -  Next  -  Book Home  -  Climate Change

  WSJ 25/9 2023 https://www.wsj.com/finance/investing/why-are-tech-stocks-down-bond-yields-are-up-6c5d65a2 SE Räntan på den amerikanska tioåriga statsobligationen spränger igenom ännu en vall. DI förklarar varför detta är dåliga nyheter för börsen. Det är upp till bevis för aktier som tillgångsslag. Johan Wendel DI 25 september 2023 https://www.di.se/analys/skracksignalen-tjuter-starkare-och-pressar-borsen/ Röd Öppning - Boken https://englundmacro.blogspot.com/2023/09/rod-oppning-boken.html Home  https://englundmacro.blogspot.com/

 – Ta exemplet med en 27-åring som köpte sin första lägenhet för två år sedan utifrån de förutsättningar som gällde då, kontra 27-åringen som köpte sin första lägenhet för tio år sedan och som sedan hade åtta år av stigande marknad och så kallad bostadskarriär framför sig, säger Johanna Kull. Självklart är man ansvarig för sina egna lån, men i stället för att peka finger åt enskilda hushåll bör vi fokusera på den större bilden. Hur hamnade vi överhuvudtaget i den här situationen, resonerar Johanna Kull, sparekonom på Avanza Bank.  – Där menar jag att den expansiva penningpolitiken mitt i en högkonjunktur, tillsammans med en dålig och i många fall icke fungerande hyresmarknad spelar en avgörande roll. SvD 25 september 2023 https://www.svd.se/a/76AaLv/rantehojningarna-slar-mot-ensamstaende-foraldrar Home https://englundmacro.blogspot.com/  

  Riksbankens besked att höja styrräntan från 3,75 till 4 procent var väntat. Ungefär här är lagom, om inget drastiskt händer. Men drastiska händer ju ibland. Den stora frågan som svävar inte bara över Riksbanken utan alla centralbanker just nu är egentligen om vi har nått en räntetopp eller en platå. Den senaste tiden har förväntningarna skiftat mot mer varaktigt höga räntor. Carl Johan von Seth DN 21 september 2023 https://www.dn.se/ekonomi/carl-johan-von-seth-darfor-hojer-riksbanken-rantan-kanske-en-sista-gang/

On the eve of recessions in 1990, 2001 and 2007, many Wall Street economists  economists proclaimed the U.S. was on the cusp of achieving a soft landing, in which interest-rate increases corralled inflation without causing a recession.  Since World War II, economists say, the U.S. has achieved only one durable soft landing, in 1995. “We steered the economy very expertly, but in addition, we were lucky. Nothing bad happened,” said Alan Blinder, an economist who was Fed vice chair from 1994-96. Here is what could go wrong this time. First, if the Fed holds rates too high for too long, it would risk an unnecessarily severe downturn.  The economy stays too hot Energy prices take off A financial-market mishap. The Fed held interest rates near zero for seven years after the 2008-09 financial crisis and lifted them to still-historically-low levels in the years before the pandemic brought rates back to zero. As a result, some financial firms and businesses might have made investm...