Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Growth’

Where Will We Get the Cash?

Posted by hkarner - 12. Februar 2018

We already knew interest rates were rising. Recent data suggests they could rise significantly more than many expected just a few weeks ago. If so, that will be a big problem for bonds, stocks, and many other assets – not to mention taxpayers who will bear the cost of swelling government debt, consumers who may face inflation, and everybody who will be hurt by a recession.

The combination of a falling stock market and rising interest rates is historically and statistically rare. Normally, when the stock market goes through a correction, interest rates fall. Looking back through history, we see that 1987 and 1994, two years I have been writing about in connection with 2018, were the other unusual years.

I’ve been relatively optimistic on the economy this year, and I still think the year can end well. But given recent events, the path is more challenging now – and the odds of a rough 2019 are growing.

Burn Rate Den Rest des Beitrags lesen »

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Eurozone Set to Extend Post-Crisis Growth Spurt

Posted by hkarner - 8. Februar 2018

Date: 07-02-2018
Source: The Wall Street Journal

EU warns of risks including high asset prices in wake of stock rout

BRUSSELS—The European Union raised its forecasts for eurozone growth Wednesday, saying the monetary bloc would build on its fastest expansion since the global economic crisis while warning of risks including high asset prices as steep declines rock world markets.

Gross domestic product in the 19-member eurozone will grow 2.3% in 2018, the EU said, raising its forecast from 2.1% in November. The economy is expected to expand 2% next year, up from 1.9% previously.

The continued expansion marks a return to solid growth, EU officials said, despite a marginal slowdown in the eurozone growth from 2.5% in 2017, which marked the fastest pace in a decade. A global economic acceleration and boost in trade is bolstering activity in Europe, where subdued inflation and the European Central Bank’s monetary policies are poised to stoke the expansion through strong demand and investments.

“Europe’s economy has entered 2018 in robust health,” said Pierre Moscovici, the European commissioner for economic and financial affairs, taxation and customs. “Unemployment and deficits continue to fall and investment is at last rising in a meaningful way. Economic growth is also more balanced than it was a decade ago.” Den Rest des Beitrags lesen »

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Inclusive Growth or Else

Posted by hkarner - 6. Februar 2018

Sergei Guriev

Sergei Guriev is Chief Economist at the European Bank for Reconstruction and Development.

Danny Leipziger, Professor of International Business at George Washington University and Managing Director of the Growth Dialogue, was a vice president of the World Bank and served as Vice Chair of the Spence Commission on Growth and Development.

Jonathan Ostry is Deputy Director of the IMF’s Research Department.

The decision to place inequality at the center of the discussion at Davos this year was a promising development. But actual solutions remain undeveloped, and concern about widening economic disparities within many countries remains inadequate, which must change if the current global economic recovery is to continue.

LONDON/WASHINGTON, DC – At this year’s World Economic Forum meeting in Davos, Switzerland, participants did not question the basic building blocks of growth in today’s global economy: free markets, good governance, and investment in human capital and infrastructure. But they did criticize how unfairly the benefits of growth are being distributed. Rightly so: without a strong policy response aimed at building a more inclusive growth model, rising populism and economic nationalism will impair the functioning of markets and overall macroeconomic stability – potentially cutting short the current global recovery. Den Rest des Beitrags lesen »

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Breaking the euro area’s doom loop

Posted by hkarner - 3. Februar 2018

Date: 01-02-2018
Source: The Economist

A safe asset is devised for the euro zone

An ingenious proposal to end banks’ dangerous reliance on domestic sovereign bonds

THESE are bright days in the euro area. Preliminary figures say that the currency zone’s GDP grew by 2.5% last year, the fastest since 2007. But many of the faultlines in the zone’s financial system, as revealed by the financial crisis, remain. A proposal published on January 29th by a group reporting to the European Systemic Risk Board, a prudential supervisor, may mend one of the more troubling flaws.

Euro-area banks favour their home countries’ debt. A sample of 76 lenders examined by supervisors last year had exposures of €1.7trn ($1.9trn) to euro-area governments, of which €1.1trn was lent to their home states. That exceeded the banks’ common equity tier-1 capital, their cushion against losses, of €1trn. The fortunes of states and banks are thus bound in a “doom loop”. Suppose an economic shock raises the risk of a sovereign default. Banks’ balance-sheets start to crumble. They need propping up by the already wobbly state. And as they cut lending, the real economy weakens, worsening the fiscal woe. That, more or less, is what happened in the zone’s sovereign-debt crisis. Den Rest des Beitrags lesen »

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Russia’s Economic Stagnation Is Here to Stay

Posted by hkarner - 2. Februar 2018

Konstantin Sonin

Konstantin Sonin is a professor at the University of Chicago Harris School of Public Policy, a visiting professor at the Higher School of Economics in Moscow, and an associate research fellow at the Stockholm Institute of Transition Economics.

The Russian economy is stagnating across almost all sectors, meaning that boosting growth will be impossible without deep structural reforms. But with President Vladimir Putin approaching a fourth term after having shown little appetite for such reform, there is no reason to expect much to change in the foreseeable future.

CHICAGO – In the early days of 2018, the Russian economy is stagnating. This is no statistical blip: the average annual growth rate in 2008-2017 for Russia was just 1.2%. Last year, Russia’s GDP-growth rate was 1.5%, compared to 2.5% in the eurozone and 2.3% in the United States – both developed economies that should be growing 2-3 percentage points slower than a developing economy like Russia. And, as the Russian economic ministry, the World Bank, and the International Monetary Fund all recognize, this poor performance seems likely to continue.

Boosting Russia’s growth will be possible only with deep structural reforms, because the economy is stagnating at full capacity. With unemployment at around 5.5% for the fifth consecutive year – a rate that almost any developed country would envy – there are few unemployed to be put to work. Likewise, capacity utilization in manufacturing is roughly at the same level as in the previous two peaks (2007-2008 and 2013), meaning that there is almost no spare capacity to be put to use. Den Rest des Beitrags lesen »

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Trumponomics Is Failing on Growth

Posted by hkarner - 1. Februar 2018

Simon Johnson, a former chief economist of the IMF, is a professor at MIT Sloan, a senior fellow at the Peterson Institute for International Economics, and co-founder of a leading economics blog, The Baseline Scenario. He is the co-author, with James Kwak, of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.

After campaigning as a businessman who would usher in a new golden age of growth in America, US President Donald Trump’s economic track record in 2017 proved disappointing. Despite large tax cuts and little standing in the way of Trump’s deregulatory agenda, the US economy has performed no better under his administration than under the last.

WASHINGTON, DC – US President Donald Trump and his Secretary of the Treasury, Steven Mnuchin, have promised an economic miracle. They argue that when the United States adopts their policies, it will consistently achieve annual economic growth above 3%, or even above 4%. After a year of being in charge, pushing hard on deregulation, and getting what it wanted in terms of tax cuts, how is the Trump team doing?

We are still in the early days, but the results so far have been disappointing. And the US’s medium-term prospects for sustained growth could be endangered if Trump pursues the policies he claims to want.

Trump has repeatedly argued that America’s overall economic performance in 2017 should be seen as the direct result of his policies, and he has made a big deal out of the third-quarter growth rate, which was initially reported as 3.3%, then revised down to 3.2%. Yet, in the fourth quarter, growth was down to 2.6%, and initial estimates suggest that overall growth for the year will not surpass 2.3%. That is lower than what was achieved under former President Barack Obama in 2014 (2.6%) and 2015 (2.9%). Den Rest des Beitrags lesen »

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China’s Search for Quality Growth

Posted by hkarner - 31. Januar 2018

Andrew Sheng, Distinguished Fellow of the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance, is a former chairman of the Hong Kong Securities and Futures Commission, and is currently an adjunct professor at Tsinghua University in Beijing. His latest book is From Asian to Global Financial Crisis.

Xiao Geng, President of the Hong Kong Institution for International Finance, is a professor at the University of Hong Kong.

China’s leaders have demonstrated a willingness to accept lower rates of GDP growth as they shift toward a more balanced growth model that emphasizes human wellbeing. It will not be easy to realize the vision of „people-centered“ development that President Xi Jinping announced in October 2017, but the country is on the right track.

HONG KONG – As Chinese President Xi Jinping begins his second five-year term, shifting toward “quality growth” is at the top of the country’s policy agenda. Across China’s government, a quiet but resolute commitment to fostering a new growth model that corrects the distortions created by decades of double-digit growth – including corruption, pollution, rising inequality, and other structural imbalances – is taking root.

Over most of the last 40 years, China focused on rapid land-based development, driven by local initiatives aimed at attracting infrastructure investment, human resources, and tax revenues. The creation of special economic zones, industrial parks, and free-trade zones facilitated such development, as they benefited from a large pool of cheap labor migrating from rural areas.

Throughout this process, China used GDP growth as its main measure of success. This enabled the establishment of well-defined goals and incentives for local officials as they competed with one another. But it also caused serious problems – such as environmental damage, inequality, excessive debts, overcapacity, and corruption – to flourish. Den Rest des Beitrags lesen »

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Eurozone Economy Records Strongest Growth in a Decade

Posted by hkarner - 31. Januar 2018

Date: 30-01-2018
Source: The Wall Street Journal

Future growth prospects may rest on France and Italy, two large economies that have lagged behind since the start of the recovery

The eurozone economy outpaced its U.S. counterpart for the second straight year in 2017 as it recorded its strongest growth in a decade, aided by a revival in investment spending by French businesses.

The European Union’s statistics agency Tuesday said gross domestic product—the broadest measure of the goods and services produced by the eurozone’s 19 member countries—was 2.5% higher in 2017 than in 2016, the fastest growth rate since 2007.

That was further evidence of a synchronized pickup around the world, with the U.S. and China having already reported accelerations in 2017, to 2.3% and 6.9% respectively. Den Rest des Beitrags lesen »

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Gross Domestic Problems

Posted by hkarner - 30. Januar 2018

Fictitious Wall Street villain Gordon Gekko famously declared, “Greed is good.” I think actual Wall Street titans would mostly disagree. They would change one word. Instead of “greed,” they would say, “Growth is good.” That is Wall Street’s real mantra. Growth is the magic elixir we all need.

The question, if we define growth as good, is how do we measure it? Presently we use gross domestic product, or GDP. But GDP is showing its age in the 21st century. The measure was actually invented in the late 1930s when President Roosevelt needed some way to prove that his policies were working. And at 85 years old, the old formula may be nearing time for retirement.

The only way for Roosevelt to show that his policies were working was to put government spending inside the GDP number. There was vicious fighting among economists over whether he should be allowed to do so. Many economists even argued that military spending should not be included in GDP because it didn’t produce anything. And it’s true that overreliance on GDP has often sent policymakers and business owners in wrong directions. We need a better yardstick.

First, we must next decide what, specifically, a newly formulated GDP should measure and how – and that’s a thornier question than you might think. Today we’ll wrestle with that question and with some of the implications of changing how we measure growth. Den Rest des Beitrags lesen »

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The World’s Economies Are Growing in Rare Harmony

Posted by hkarner - 24. Januar 2018

Date: 23-01-2018
Source: The Wall Street Journal

Synchronized expansions tend to be self-reinforcing—and they can have staying power

More than 85% of the world’s nations increased their exports last year, the highest share of nations to do so on record, according to the IMF.

The International Monetary Fund estimates that the world’s seven biggest economies—the U.S., China, Germany, Japan, France, the U.K. and India—each grew more than 1.5% in 2017. That kind of synchronicity is uncommon, and it might set the world economy up for more solid growth in 2018.

Expanding in Sync
All major economies growing at once has only occurred a few times since 1980—in the late 1980s, the mid-2000s, and now. Den Rest des Beitrags lesen »

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