Scandinavian Currencies: New Safe Havens?

• RGE Analysis by Mary Stokes and Mikko Forss: The Swedish krona (SEK) and the Norwegian krone (NOK) have staged a dramatic comeback, gaining 11% and 18%, respectively, against the euro for the year to March 1. Both are top performers relative to most other advanced economies’ currencies, and RGE sees further strengthening ahead in 2010 given Norway and Sweden’s solid macroeconomic fundamentals. But are these currencies evolving into safe havens? The short answer is no. A strengthening trend does not make a currency a safe haven. In the short-term, market participants may see these Scandie currencies as temporary shelters amid the current eurozone turmoil. However, these currencies are unlikely to develop into safe havens in the medium- or long-run given their positive correlation with risk appetite, their relative lack of liquidity and the fact that these economies are highly export-oriented, which makes a strong currency less welcome.

The Implications of Velocity

13. März 2010, 15:00:00 | John Mauldin

This week we do some review on a very important topic, the velocity of money. If we don’t understand the basics, it is hard to make sense of the hash that our world economy is in, much less understand where we are headed.

The Velocity of Money

The Federal Reserve and central banks in general are running a grand experiment on the economic body, without the benefit of anesthesia. They are testing the theories of Irving Fisher (representing the classical economists), John Keynes (the Keynesian school) Ludwig von Mises (the Austrian school), and Milton Friedman (the monetarist school). For the most part, the central banks are Keynesian, with a dollop of monetarist thrown in here and there.

Over the next few years, we will get to see who is right about debt and stimulus, the velocity of money, and other arcane topics, as we come to the End Game of the Debt Super Cycle, the decades-long cycle during which debt has grown. I have very smart friends who argue that the cycle is nowhere near an end, as governments are clearly increasing debt. My rejoinder is that it is nearing an end, and we need to think hard about what that end will look like. It will not be pretty for a period of time. The chart below shows the growth in debt, both public and private.

Deutsche Banken wollen ihre Ex-Manager verklagen

Aus pressetext.de: Spät, aber velleicht doch, könnte man sagen!

Fehlspekulationen könnten gerichtliches Nachspiel haben

 

Ex-Bankern und Managern drohen Klagen (Foto: aboutpixel.de, Burkhard Trautsch)

Frankfurt (pte/12.03.2010/11:33) -

Der folgenschwere Fauxpas deutscher Banken in der Finanzkrise könnte ein gerichtliches Nachspiel für ihre ehemaligen Manager haben. Mehrere Landesbanken hatten wegen Fehlspekulationen mit toxischen Hypothekenpapieren Milliarden verloren und mussten von den Ländern teilweise vor der Pleite gerettet werden. Sie erwägen nun Klagen und Schadenersatzforderungen gegen ihre vormaligen Vorstände und Verwaltungsräte, berichtet das Handelsblatt unter Berufung auf Finanzkreise. Die Ex-Chefs hätten über ihre Verhältnisse gewirtschaftet und fahrlässig bzw. pflichtwidrig gehandelt.

Sovereign Debt and Derivatives: Is a Ban on Naked CDS Justified?

European leaders are calling for an urgent ban on sovereign bond speculation, with some pushing for a ban on naked CDS trading (i.e., buying insurance without owning the underlying bond) and others in favor of suspending short sales. However, there is no international consensus on such a measure, which stands to water down its effect. Since it emerged that investment banks, in particular Goldman Sachs, had structured derivatives deals to temporarily disguise the true level of incurred liabilities, a backlash is underway against opaque financial instruments that contributed to spreading the crisis and forced governments to ultimately backstop their financial systems. Investors themselves are reportedly holding back due to fears of a political backlash that could ultimately lead to much stricter rules.

German Exports Decline 6.3% m/m in January: Blip or Trend?

German exports registered a strong contraction in January 2010 following four months of gains, the German Federal Statistical Office, Destatis, announced on March 9. The data release raises concerns regarding the strength and sustainability of the German recovery. Due to Germany’s excessive reliance on exports, an improvement in global—and especially European—demand for German exports is a crucial ingredient for a swift and robust recovery.

2010: BRICs, PIIGS and the G-5 Countries

Antonio Carlos Lemgruber

Mar 7, 2010 11:24PM

After the financial and banking crisis of 2007/2008, the year of 2010 will certainly be dominated by the following global macroeconomic themes:

a) the growing importance in the world economy of Brazil, Russia, India and China – the so-called BRIC countries – with excellent perspectives, as far as their impact on world economic growth is concerned;

b) the dangerous fiscal and/or balance-of-payments situation of Portugal, Ireland, Italy, Greece and Spain – the so-called PIIGS countries – bringing serious risks for the world economy, including a renewed credit crunch;

c) the contradictory economic policies of the G-5 “big” economies ( US, UK, Germany, Japan and France).

 

Bloomberg Reports Roubini Says Cautious China to Limit Yuan Gain to 4%

Nouriel Roubini

Mar 8, 2010 8:34PM

From Bloomberg

By Ye Xie

 

March 8 — China will limit the yuan’s appreciation to 4 percent over the next 12 months because of a “super cautious” outlook on the global economy, said New York University Professor Nouriel Roubini.

The central bank may end a 20-month peg to the dollar as soon as the second quarter, allowing a 2 percent one-step gain, and then let the currency strengthen another 1 percent to 2 percent in 12 months, Roubini said in an interview in New York. The yuan rose 21 percent between July 2005 and July 2008, when the government halted its advance to protect exports.

Es wird zwei Jahrzehnte dauern, bis die auf Euroraumebene verzeichnete Schuldenquote wieder auf ihren Stand vor der Finanzkrise zurückkehrt

Aus dem aktuellen Monatsbericht der EZB: 

Was die Finanzpolitik anbelangt, so stellen hohe staatliche Defizite und Schuldenstände eine zusätzliche Belastung für die Geldpolitik dar und schwächen den Stabilitäts- und Wachstumspakt als Grundpfeiler der Wirtschafts- und Währungsunion. Es ist von höchster Bedeutung, dass die Stabilitätsprogramme der einzelnen Euro-Länder die fi nanzpolitischen Ausstiegs- und Konsolidierungsstrategien für die kommende Zeit klar festlegen.  

Dies erfordert entschlossene Anstrengungen, insbesondere in Ländern mit hohen Defi zit- und Schuldenquoten. Von allen Staaten wird erwartet, dass sie ihren Verpfl ichtungen im Rahmen des Verfahrens bei einem übermäßigen Defi zit nachkommen. Die Konsolidierung der öffentlichen Finanzen sollte spätestens 2011 beginnen und wird deutlich über die jährliche Anpassung von 0,5 % des BIP hinausgehen müssen, die im Stabilitäts- und Wachstumspakt als Mindestanforderung festgelegt ist. Dabei sollten vor allem Ausgabenreformen im Vordergrund stehen.

Does Europe Need an EMF?

Interessanter Video von Financial Times.com.

How Larry Kotlikoff Would Fix the Financial System

The Boston University economist wants to take all the risk out of banking, hedge funds, and insurance companies. Some people are listening

Ein unkonventioneller, aussergewöhnlich interessanter, alternativer Ansatz.

Aus der Business Week vom 4. Februar:

Kotlikoff’s forthcoming book, Jimmy Stewart is Dead, calls for a radical—and swift—reorganization of the financial system. So rather than wait for the book’s Feb. 22 publication date, Kotlikoff is e-mailing PDF versions to dozens of economists, journalists, and policymakers. „We have miscreants running the financial system left, right, and center,“ says Kotlikoff. „Nobody is calling the [Obama] Administration to task and saying, ‘You guys are putting a Band-Aid on cancer.’“

Kotlikoff would drain the risk-taking out of commercial and investment banks, hedge funds, and insurance companies—turning them into boring, narrow intermediaries akin to mutual-fund firms. Instead of taking deposits and making loans, banks would connect borrowers and depositors with ultrasafe mutual funds created for those purposes. That would solve the problem of banks not keeping enough money in their vaults to pay depositors if they all wanted their money at once, a flaw vividly demonstrated to George Bailey, the character played by Jimmy Stewart in It’s a Wonderful Life (hence the title of Kotlikoff’s book).