Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Debt’

No-deal Brexit would ‚push national debt to levels last seen in 60s‘

Posted by hkarner - 9. Oktober 2019

Date: 08-10-2019
Source: The Guardian

IFS says public borrowing will more than double next year whatever the Brexit result

Richard Partington Economics correspondent

Emergency tax cuts and higher public spending to offset the impact of a no-deal Brexit would send government debt to its highest level in more than half a century, according to Britain’s leading experts on the public finances.

The Institute for Fiscal Studies (IFS) said the scale of the government response required to firefight a flatlining economy in the event of a disorderly departure from the EU would come with a hefty price tag for the public purse.

In a warning to Boris Johnson as his Brexit plan risked unravelling in the face of stiff opposition at home and abroad, the thinktank said government borrowing was already set to more than double next year regardless of the outcome of negotiations with Brussels.

It also said the national debt – the sum total of all borrowing accumulated by the British state – would hit almost 90% of GDP if Britain crashed out of the EU without a deal, its highest level since the mid-1960s. Den Rest des Beitrags lesen »

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The Self-Inflicted Recession

Posted by hkarner - 12. September 2019

Date: 11-09-2019
Source: Foreign Affairs By Jared Bernstein

The Next Downturn Will Be Political—and Tough to Escape

The United States is in its 11th year of uninterrupted economic expansion, unemployment has hit a historic low, and growth, while decelerating, still hums along. Yet anxiety about the next recession seems to mount with each new tariff or tweet that President Donald Trump lobs at China as part of his trade war—and for good reason. The president’s policies are clearly hurting tradeable sectors of the U.S. economy, especially manufacturing, which must contend with the double whammy of U.S. tariffs on imported inputs and Chinese tariffs on exports of finished goods. U.S. producers of vehicles, electronics, and agricultural goods, among other things, are all scrambling to disentangle their supply chains from China. But doing so is costly and complicated, and many of them are suffering as a result.

The trade war may not be enough to tip an otherwise healthy U.S. economy into recession. But if it does, the United States will be in a uniquely bad position to fight its way out again. The country is almost certain to enter the next downturn with historically high levels of public debt. That is worrying because governments in this position have historically failed to apply enough fiscal stimulus—that is, boost the economy through increased government spending as well as indirect measures like tax cuts—to counteract recessions. At the same time, short-term U.S. interest rates are already relatively low, meaning there will be limited room to cut them—the other main tool that governments have to battle downturns. Den Rest des Beitrags lesen »

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Vertrauen in den Finanz-Sektor sinkt

Posted by hkarner - 12. September 2019

Hohe Schulden der Unternehmen sind Risiko für die Finanzstabilität. Menschen vertrauen der Technologie-Branche mehr als den Finanzdienstleistern.

Wien. Die Finanzkrise 2008 hat das Vertrauen in die Finanzmärkte bis aufs Mark erschüttert. In den folgenden Jahren wurde wieder Mut gefasst. Seit 2012 ist das Vertrauen in das Finanzsystem stetig gestiegen, geht aus dem Unternehmens- und Finanzausblick 2019 der Industrieländerorganisation OECD hervor. Dafür verantwortlich seien die umfassenden Regulierungen, die nach der Krise implementiert wurden. Doch seit 2018 schlägt das Pendel wieder in die andere Richtung. Laut dem Vertrauensbarometer einer von der OECD in Auftrag gegeben Studie fiel das Vertrauen der informierten Bevölkerung von 62 auf 61 Punkten. Damit sind jene gemeint, die sich mit Finanzthemen auskennen. 2012 stand es noch bei 48 Punkten. Die allgemeine Bevölkerung steht der Finanzbranche noch viel skeptischer gegenüber. 2017 wie 2018 lag der Index bei 54 Punkten.

„Sollte das Vertrauen weiter sinken, müssen wir die Maßnahmen der Politik zur Stabilisierung des Finanzsystems in den vergangenen Jahren hinterfragen“, sagt der OECD-Experte Robert Patalano. „Geht Vertrauen verloren, wird jeder nervös und vorsichtig.“ Das sei kein gutes Umfeld für Wirtschaftswachstum. Vertrauen in andere Menschen und Institutionen sei essenziell für sozialen und wirtschaftlichen Fortschritt, heißt es in der OECD-Studie. Stabile Märkte agieren vorhersehbar. Zudem verlassen sich Marktteilnehmer darauf, dass sich alle an die Gesetze halten oder diese zumindest überwacht werden.

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High Debt Levels Are Weighing on Economies

Posted by hkarner - 11. September 2019

Date: 09-09-2019
Source: The Wall Street Journal
Borrowing helped pull countries out of recession but made it harder for policy makers to raise rates

’The world is in a delicate equilibrium,’ Mark Carney, governor of the Bank of England, said earlier this year.

Global interest rates are low and may head lower, driven by slowing economies and the U.S.-China trade war. A less appreciated reason for lower rates is a mountain of debt built up during the past decade.

Debt owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis to $246.6 trillion at the beginning of March, according to the Institute of International Finance, an association of global financial firms.

The borrowing helped pull economies out of the nasty recession, but left them with high debt burdens that make it harder for policy makers to raise rates. It also makes consumers and businesses more likely to pull back from spending money on new goods if economic conditions weaken.

“Globally, you are at worryingly high levels,” said Sonja Gibbs, managing director for global policy initiatives at the IIF. She said policy makers need to consider debt levels as they adjust interest rates. “There’s going to be an impact on the broader economy.”

In the U.K., Canada and Australia, central bankers have backtracked from rate increases in the past two years after consumers got bruised more than expected. U.S. consumers, who have borrowed to pay for college, cars and everyday spending, have been less affected because their debt burdens are much lower relative to their incomes.

“The world is in a delicate equilibrium,” said Mark Carney, governor of the Bank of England, in a February speech. “The sustainability of debt burdens depends on interest rates remaining low and global trade remaining open.”

Mr. Carney and other central bankers would have liked to raise rates further during the good years to give themselves room to cut when economies slowed. But the higher rates hit their economies harder than many expected.

“Tightening may have had more of a restraining effect than anticipated,” said Nathan Sheets, chief economist at PGIM Fixed Income and a former senior economist at the Federal Reserve. “It acts as a very powerful drag on spending.”

There is a direct connection between debt, interest rates and growth. Rising rates force consumers and businesses who take on adjustable-rate loans such as credit-card debt to pay more each month and reduce other spending. Even with fixed-rate loans, borrowers know they will have to pay higher rates to roll over the loans, so they start putting aside money that they would have otherwise spent.

It doesn’t take much for countries loaded down with debt to feel the strain. When the Bank of Canada raised interest rates in July 2017, the first increase in seven years, officials said higher rates signaled the economy was strong.

But the country’s households had been borrowing heavily, pushing their ratio of debt to after-tax pay to the highest level among the world’s most-advanced economies. After five increases drove the interest rate up to 1.75%, the resulting slowdown in growth was “sharper and more broad-based than we expected,” said former Bank of Canada deputy governor Lynn Patterson during a March speech. The bank stopped raising rates far short of the 4.25% level in place before the financial crisis.

U.S. consumers are better off because so much mortgage debt was wiped out in the financial crisis. The impact of higher rates was tempered by the popularity of fixed-rate mortgages.

But higher rates squeezed U.S. consumers with lots of credit-card debt and big auto loans, said Torsten Slok, chief economist at Deutsche Bank Securities. Average auto-loan interest rates jumped by almost 2 percentage points in 2018 to roughly 5% for 60-month loans, while delinquency rates jumped from roughly 4% to more than 4.5%.

When Bank of Canada began raising interest rates in 2017, the country’s households had been borrowing heavily. A for-sale sign at a Toronto house.

Higher rates slowed home and auto sales. Companies such as toolmaker Stanley Black & Decker Inc. blamed weaker sales on higher rates. Others, including Coca-Cola Co. , complained about the impact of higher interest costs on their expenses.

In January, the Fed signaled it was pausing its rate increases after worries grew about the economy, including the housing market, global growth and the impact of the trade war. “The fundamentals for consumers are more worrying than we think,” Mr. Slok said.

The Bank of England, facing the risks of Brexit on top of growth and trade worries, last raised interest rates more than a year ago. One reason is that households and businesses are struggling with debt. Through the first three months of this year, households spent more money than they made, marking an unprecedented run of 10 quarters of net borrowing, according to the country’s Office for National Statistics.

Business defaults, meanwhile, rose in England and Wales during the second quarter of this year to the highest level since the first quarter of 2014, according to the government’s Insolvency Service. Short-term rates in the U.K. are at 0.75%, down from 5.75% in July 2007.

In Australia, where consumers owe $2 for every dollar they earn, economists at the country’s central bank found that every 10% increase in debt shaves household expenditures by 0.3%.

Philip Lowe, Reserve Bank of Australia’s governor, acknowledged that the borrowing is leading to softer consumption when he announced in July that the bank would lower its benchmark rate to an all-time low of 1%.

It appears poised to fall again. The board kept rates unchanged on Tuesday but in its September statement said it “will ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time.”

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It’s Time to Start Worrying About the National Debt

Posted by hkarner - 25. August 2019

Date: 24-08-2019
Source: The Wall Street Journal By Valerie Ramey

Expecting economic growth to rescue the U.S. from unprecedented federal deficits is a dangerous gamble, as history shows.

For much of the 20th century, the U.S. government operated under the principle that it should finance its spending mostly by collecting taxes rather than by borrowing. While conventional wisdom favored running temporary deficits during emergencies, such as wars or recessions, no one argued that a fiscally responsible government should commit itself to running budget deficits so large and sustained that government debt would grow faster than the size of the economy.

Yet today the federal government is on such a path. The usual voices urging fiscal restraint have been drowned out by some policy makers and academic economists who, as aptly noted by the investor Ben Hunt, are urging us in the fashion of Dr. Strangelove to “learn to stop worrying and love the national debt.” But history has repeatedly taught us that a country with an outsize national debt often finds itself facing terrible economic trade-offs that cause misery for its citizens. Den Rest des Beitrags lesen »

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The Growing Risk of a 2020 Recession and Crisis

Posted by hkarner - 17. Juni 2019

Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank.

Across the advanced economies, monetary and fiscal policymakers lack the tools needed to respond to another major downturn and financial crisis. Worse, while the world no longer needs to worry about a hawkish US Federal Reserve strangling growth, it now has an even bigger problem on its hands.

NEW YORK – Last summer, my colleague Brunello Rosa and I identified ten potential downside risks that could trigger a US and global recession in 2020. Nine of them are still in play today.

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How to stop governments borrowing behind their people’s backs

Posted by hkarner - 15. Juni 2019

Date: 13-06-2019
Source: The Economist

Principles on debt transparency endorsed at a G20 summit may help

In 2016 the government of Mozambique confessed to secret debts of $1.4bn, or 11% of gdp, mostly as loan guarantees for state-backed companies. Growth faltered, the currency slumped and foreign donors pulled back. The results have been “devastating”, says Denise Namburete, a civil-society activist, describing health centres that have gone two years without medicines. American prosecutors are pursuing eight people involved in the scandal, including three foreign bankers and a former finance minister, on charges of money-laundering and fraud.

The Mozambique case may be unusual—or not. Even the imf is scratching its head about how much governments truly owe. In some places the mystery is loans from China and other emerging lenders. In others it is advance payments from oil traders, liabilities from public-private partnerships or hidden loans from commercial banks. The Institute of International Finance (iif), a group of banks and financial institutions, has responded to mounting concern by drafting principles on debt transparency. Finance ministers of g20 countries endorsed them at a summit in Fukuoka, in Japan, on June 8th-9th. Den Rest des Beitrags lesen »

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Warnung vor gefährlichen Schuldenexperimenten

Posted by hkarner - 14. Juni 2019

Günther Strobl, 12. Juni 2019, 06:00 derstandard.at

Eine Wirtschaftstheorie besagt, dass Schulden in eigener Währung kein Problem sind. Italien will den Beweis antreten. Ökonom Lars Feld warnt

Mit Schulden macht man keine Experimente, das sei brandgefährlich. Schulden seien in wirtschaftlich schlechten Zeiten mitunter nicht zu vermeiden, sollten aber in Zeiten wirtschaftlicher Prosperität, wenn auch die Steuereinnahmen sprudeln, umso energischer abgebaut werden. Auf dass Platz für geld- und fiskalpolitische Maßnahmen geschaffen wird, wenn die nächste Krise kommt. Das ist, verkürzt gesagt, das Credo von Lars Feld. Und es ist das Mantra der Mainstream-Ökonomie, auch wenn sich die vorgeschlagenen Rezepte für Krisenländer in der Vergangenheit oft als wenig tauglich herausgestellt haben. Der 53-Jährige, der Professor für Wirtschaftspolitik an der Universität Freiburg und einer von fünf Wirtschaftsweisen in Deutschland ist, sieht sich neuerdings mit einer Strömung in den Wirtschaftswissenschaften konfrontiert, die eine glatte Antithese zu allen bisher verkündeten „Wahrheiten“ darstellt. Modern Monetary Theory (MMT) heißt die Richtung. Ihre Kernidee: Defizite sind nicht zwingend schlecht.  Regierungen sollten die Vollbeschäftigung im Auge behalten, die Wirtschaft durch mehr Staatsausgaben und Steuern lenken und auf diese Weise die Notenbanken entlasten. Verschuldung löse, sofern sie in eigener Währung erfolge, auch keine Inflation aus, wie dies am Beispiel der bereits lange Zeit hochverschuldeten Industrienation Japan gezeigt werden könne.

Schulden als Heilsbringer

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Should Germany borrow to invest?

Posted by hkarner - 25. Mai 2019

Date: 23-05-2019
Source: The Economist

Politicians and academics clash over the debt brake

Outside the headquarters of the German Taxpayers’ Federation in Berlin, a display tracks the public debt in real time. Now displaying a total of just under €2trn ($2.2trn), it has been ticking down since early 2018. Germany’s public-debt ratio, expected to be 58% of gdp in 2019, is as much the envy of other rich countries as its engineering prowess. Thanks to rising labour-market participation, says Michael Hüther of the German Economic Institute, a think-tank, tax revenues per head reached their highest level ever, in real terms, in 2018.

Even so, Germany’s fiscal policy is becoming a subject of debate. Olaf Scholz, the finance minister, has warned that the “fat years” are over. Economic growth is projected to slow this year, reducing the tax take. If he is to meet Germany’s stringent fiscal rule, he must rein in public spending.

The Schuldenbremse (debt brake) was enshrined in the constitution in 2009, when the financial crisis was expected to swell public debt beyond 80% of gdp. It restricts the federal-government deficit to no more than 0.35% of gdp a year unless a downturn hits; any overshoot beyond that must be made up in better times. (The debt brake also affects states’ finances: from 2020, they will be forbidden to run structural deficits.) Some economists, though, are asking whether the rule is a good one. Pointing to Germany’s rock-bottom interest rates and crumbling infrastructure, they argue that the country needs more debt-financed investment. Den Rest des Beitrags lesen »

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OECD warnt: Schulden doppelt so hoch wie vor der Krise

Posted by hkarner - 22. Mai 2019

21.05.2019, kurier.at

Viele Risiken: Firmen haben hohe Kredite angehäuft, Handelsstreit bremst, Digitalisierung hilft bisher nur „Superstarfirmen“.

Die vielen Handelskonflikte hinterlassen Spuren. Die Industrieorganisation OECD hat am Dienstag ihre Prognose für das Wachstum der Weltwirtschaft 2019 auf 3,2 Prozent gesenkt. Das liegt unter dem Durchschnitt der vergangenen dreißig Jahre.

„Die Aussichten sind weiterhin trübe“, warnte OECD-Chefökonomin Laurence Boone. Sollten die Spannungen zwischen USA und China sich verstärken, würde das globale Wachstum über zwei bis drei Jahre um 0,6 Prozentpunkte geringer ausfallen.

Die OECD warnt überdies vor stark gestiegener Verschuldung im Privatsektor. Weil die Zinsen schon lange tief sind und weniger auf Risiken geachtet wurde, hätten Unternehmen jetzt doppelt so viele Kredite offen wie im Finanzkrisenjahr 2008. So seien Anleihen von fast 13.000 Milliarden Dollar (11.700 Milliarden Euro) ausständig. „Es könnte also zu erneuten Schwierigkeiten an den Finanzmärkten kommen“, so Boone.

Sie bilanziert zudem bisherige Effekte aus der Digitalisierung als „enttäuschend“. Die Technologie besitze zwar enormes Potenzial, damit Unternehmen effizienter arbeiten und die Lebensstandards steigen. Bisher profitiere von den höheren Gewinnen aber „nur eine kleine Gruppe von Superstarfirmen“ , analysiert Boone. Das Lohnwachstum sei schleppend, viele Jobs gerieten unter Druck.

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