Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Inflation’

Monetary Fallacy? Deep Divisions Emerge over ECB Quantitative Easing Plans

Posted by hkarner - 5. November 2014

Date: 03-11-2014
Source: SPIEGEL

EZB Neubau ccTo prevent dangerous deflation, the ECB is discussing a massive program to purchase government bonds. Monetary watchdogs are divided over the measure, with some alleging that central bankers are being held hostage by politicians.

At first glance, there’s little evidence of the sensitive deals being hammered out in the Market Operations department of Germany’s central bank, the Bundesbank. The open-plan office on the fifth floor of its headquarters building, where about a dozen employees are staring at their computer screens, is reminiscent of the simple set for the TV series “The Office”. There are white file cabinets and desks with wooden edges, there is a poster on the wall of football team Bayern Munich, and some prankster has attached a pink rubber pig to the ceiling by its feet.

The only hint that these employees are sometimes moving billions of euros with the click of a mouse is the security door that restricts access to the room. They trade in foreign currencies and bonds, an activity they used to perform primarily for the German government or public pension funds. Now they also often do it for the European Central Bank (ECB) and its so-called “unconventional measures.”
Those measures seem to be coming on an almost monthly basis these days. First, there were the ultra low-interest rates, followed by new four-year loans for banks and the ECB’s buying program for bonds and asset backed securities — measures that are intended to make it easier for banks to lend money. As one Bundesbank trader puts it, they now have “a lot more to do.”

A Heated Dispute Den Rest des Beitrags lesen »

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Das Rubelproblem

Posted by hkarner - 4. November 2014

Date: 03-11-2014
Source: Die Zeit

Putin carDer russischen Wirtschaft geht es zunehmend schlechter. Doch Wladimir Putin hat jeden Reformwillen verloren. Die Folge: Der Kampf unter den Eliten wird härter.

” Wie schwierig die ökonomische Situation Russlands ist, lässt sich an einer Zahl ablesen: dem Wechselkurs des Rubels zum US-Dollar. Zwischenzeitlich kostete ein Dollar mehr als 43 Rubel – anderthalb Jahre zuvor waren es noch 30. Seit Anfang des Jahres verlor die russische Währung mehr als ein Fünftel ihres Wertes. Der Verfall spiegelt die tiefgreifende Krise der russischen Wirtschaft, aber auch die Folgen der Sanktionen wider.

“Bislang wurde die Abwertung vom Kreml toleriert, weil sie für die Regierung einen entscheidenden Vorteil hatte: Sie sorgte für zusätzliche Einnahmen, denn viele russische Zölle werden auf Dollarbasis berechnet. Nach Einschätzung des Finanzministeriums in Moskau bringt jeder Rubel, um den der Wechselkurs zum Dollar fällt, etwa 3,7 Milliarden Euro zusätzlich in die Staatskasse. Diesem Geldstrom hat es Russlands Finanzminister zu verdanken, dass der Haushalt bislang ausgeglichen blieb.

“Außerdem hat Russlands Präsident Wladimir Putin viele neue Schulden den Regionen aufgebürdet. Die meisten der Geldgeschenke wie Lohnerhöhungen für Staatsangestellte, die Putin nach seiner Amtsübernahme anordnete, müssen die regionalen Haushalte tragen. Viele haben sich dafür stark verschuldet.

“Auch im kommenden Jahr könnte Russlands Haushalt noch ohne Ausgabenkürzungen auskommen – zumal knapp zehn Milliarden Euro aus einem Reservefonds zum Stopfen möglicher Löcher bereitstehen. Aber dann wird es düster: Der föderale Dreijahreshaushalt, den das Parlament vor gut einer Woche verabschiedete, ist schon überholt. Er geht noch von einem Ölpreis von 100 Dollar pro Fass, von einer Rücknahme der Sanktionen Anfang 2015 und von einem anspringenden Wirtschaftswachstum aus. Nichts davon erscheint im Moment realistisch. Der Ölpreis liegt knapp über 80 Dollar. Spätestens 2016 müssen die Ausgaben gekürzt werden – nach heutiger Schätzung um zehn Prozent.

“Die Nachteile werden sichtbarer Den Rest des Beitrags lesen »

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EU Cuts Eurozone Growth Forecast

Posted by hkarner - 4. November 2014

Date: 04-11-2014

Source: The Wall Street Journal

Commission Cites Tensions in Ukraine, Middle East

The European Commission on Tuesday cut its growth forecasts for the eurozone and the European Union, citing the tensions in Ukraine and the Middle East along with a lack of investment.

The EU’s executive arm now also expects inflation in the eurozone to remain below the close-to 2% targeted by the European Central Bank until at least 2016. That is likely to boost expectations of stronger measures by the ECB such as large-scale purchases of government bonds and other assets. 

The commission said it now expects gross domestic product in the 18-country eurozone to grow 0.8% this year, down from 1.2% growth it forecast this spring. In 2015, the eurozone economy will likely grow 1.1%, also less than the 1.7% growth seen in the spring. In 2016, growth in the currency union will rise to 1.7%, the commission said.

The forecasts for the eurozone were dragged down by lower than-expected growth in big countries, including Germany, France and Italy, the latter of which expected to fall back into recession this year. Den Rest des Beitrags lesen »

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The dangers of deflation: The pendulum swings to the pit

Posted by hkarner - 25. Oktober 2014

Date: 23-10-2014
Source: The Economist

Politicians and central bankers are not providing the world with the inflation it needs; some economies face damaging deflation instead

IT IS a pernicious threat, all the more so because, at its onset, it seems almost benign. After two generations of fighting against inflation, why be worried if the victory looks just a bit too complete, if the ancient enemy is so cowed as to no longer strain against the chains in which it is bound? But the stable low inflation fought for in the 1980s and 1990s and inflation hazardously close to zero are not so far apart. And as inflation drops, slipping into deflation becomes ever easier. It is in that dangerous position that the world now stands.

In America, Britain and the euro zone central banks have a 2% target for inflation. In all three, it is below that target. In Italy, Spain and Greece, which have experienced wrenching crises and recessions, it is below zero (as it also is in Sweden and Israel). Japan, which finally escaped from deflation in 2013 after more than a decade of struggle, is battling not to return. Leave out the effects of a consumption-tax increase and inflation there is barely half way to its 2% target. Even in China inflation is below 2%, compared with a 4% central government target (see chart 1).

The lowflation of being consistently below an already low target is bad in itself; the deflation it could easy lead to is even worse. There are several reasons. The belief that money made tomorrow will be worth less than money today stymies investment; the belief that goods bought tomorrow will be cheaper than goods bought today chokes consumption. Central bankers can no longer set real (that is, inflation-adjusted) interest rates low enough to restore demand. Den Rest des Beitrags lesen »

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The Inflation Imputation

Posted by hkarner - 16. Oktober 2014

John Mauldin’s Outside the Box, 15/10

By Cliff Asness, AQR Capital Management LLC

In 2010, I co-signed an open letter warning that the Fed’s experiment with an unprecedented level of loose monetary policy – in amount, and in unorthodox method – created a risk of serious inflation. Sporadically journalists and others have noted that this risk has not come to pass, particularly in consumer prices. Recently there has been an article surveying each of us as to why; seeming to relish in, when provided, our various rationales, presumably as they sounded like excuses. It seems none of the responses provided what the authors clearly wanted, a blanket admission of error. I did not comment for that article, continuing my life long attempt not to help reporters who’ve already made up their mind to make fun of me – I help them enough through my everyday actions, they don’t need more!

More articles of similar bent keep showing up. The authors seem to find it amusing that four years of CPI data wouldn’t get people to change their economic views, while ignoring that 80 years of overwhelming evidence has not dissuaded Keynesians from the belief that this time, if they could only run everything, not just most things, they’d really get it right.

Focusing my attention, as was predestined, Paul Krugman lived up to his lifelong motto of “stay classy” with a piece on the subject entitled Knaves, Fools, and Quantitative Easing. Some lesser lights of the Keynesian firmament have also jumped in (collectivists, of course, excel at sharing a meme). Responding to Krugman is as productive as smacking a skunk with a tennis racket. But, sometimes, like many unpleasant tasks, it’s necessary. I will, at least partially, make that error here, while mostly trying to deal with the original issue separate from Paul’s screeds (though one wonders if CPI inflation had risen in the last four years if Paul would be admitting his entire economic framework was wrong – ok, one doesn’t really wonder – and those things never happen to Paul anyway, just ask him). Den Rest des Beitrags lesen »

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Gloom Gathers Over Eurozone Outlook

Posted by hkarner - 29. September 2014

Date: 29-09-2014
Source: The Wall Street Journal

Weak Confidence Data Suggest ECB Measures Have So Far Failed to Convince That Economic Outlook Will Improve

storm clouds ccStorm clouds . A decline in eurozone confidence suggests households and businesses are unlikely to raise their spending in the coming months.

Businesses and consumers across the 18 countries that share the euro were more downbeat about their prospects in September than at any time since the end of 2013, likely reflecting disappointment with the pace of the eurozone’s economic recovery and the conflict in Ukraine.

The decline in confidence also indicates that new stimulus measures announced by the European Central Bank in early September have so far failed to convince households and business leaders that the economic outlook will improve.

Indeed, businesses reported they expect their selling prices to be weaker than they did before the measures were announced, while consumers also lowered their expectations for inflation. The ECB’s measures are intended to end a period of very low inflation.

The European Commission Monday said its Economic Sentiment Indicator—a measure of consumer and business confidence—fell to 99.9 in September from 100.6 in August. Economists had expected a decline to 100.0.

That brought the ESI below its long-term average, going back to 1990, for the first time since November 2013. Den Rest des Beitrags lesen »

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The End of Monetary Policy

Posted by hkarner - 29. September 2014

By John Mauldin September 28, 2014Mauldin Video

We are the stuffed men
Leaning together
Headpiece filled with straw. Alas!
Our dried voices, when
We whisper together
Are quiet and meaningless
As wind in dry grass
Or rats’ feet over broken glass
In our dry cellar…

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.

–  T. S. Eliot, “The Hollow Men

What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of postwar history, but the end of history as such: that is, the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government. This is not to say that there will no longer be events to fill the pages of Foreign Affair’s yearly summaries of international relations, for the victory of liberalism has occurred primarily in the realm of ideas or consciousness and is as yet incomplete in the real or material world. But there are powerful reasons for believing that it is the ideal that will govern the material world in the long run.

– Francis Fukuyama, The End of History and the Last Man Den Rest des Beitrags lesen »

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German Central Bank Head Weidmann: ‘The Euro Crisis Is Not Yet Behind Us’

Posted by hkarner - 26. September 2014

Date: 24-09-2014
Source: SPIEGEL

Head of Germany’s central bank Jens Weidmann in his office: “I don’t think much of speculating.”Linke fordert Aufpasser fuer Bundesbankpraesident Weidmann

An extended period of calm on the bond markets has led many to conclude the euro crisis is over. But German central bank head Jens Weidmann says in an interview that the coast still isn’t clear and that there is still great need for reforms.

SPIEGEL: Mr. Weidmann, you are notorious for being a tough critic of European Central Bank President Mario Draghi. But the euro crisis seems to be over, largely thanks to ECB intervention. Has he not been proven right?

Weidmann: It’s not about being right or a personal confrontation. When it comes to extremely important monetary policy decisions, the ECB Governing Council does its utmost to find the correct path. And the decisions are so difficult because the crisis is not yet behind us, even if the current calm on the financial markets might suggest as much.

SPIEGEL: Yet Spain, once wracked by the euro-zone crisis, can today borrow money more cheaply than ever before in the history of the monetary union. Do you not think that is a consequence of Mario Draghi’s 2012 pledge to save the euro “whatever it takes”? Den Rest des Beitrags lesen »

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ECB First Four-Year Loan Uptake Disappoints

Posted by hkarner - 21. September 2014

Date: 19-09-2014
Source: The Wall Street Journal

Amount Borrowed Was Less Than Expected, Raising Doubts About the Program’s Impact on Economy

FRANKFURT—The European Central Bank’s first offering of cheap, four-year loans to eurozone banks failed to generate as much interest as expected, raising pressure on the ECB to find other ways of stimulating the region’s weak economy and boosting inflation from its worrisomely low levels.

The eurozone’s central bank announced the loan program—otherwise known as targeted longer-term refinancing operations—in June as part of a package of stimulus measures, which also included interest-rate cuts.

“The takeup in the first [loan offering] is disappointing and will raise further doubts about the feasibility of the ECB’s intention to increase its balance sheet by around €1 trillion,” said ING analyst Martin van Vliet.

The ECB said Thursday that 255 eurozone banks borrowed €82.6 billion ($106.9 billion) in four-year loans from a new program aimed at lowering the cost of borrowing and therefore spurring lending to businesses. The hope is that this would stimulate demand for goods and services and, in turn, raise annual inflation. Den Rest des Beitrags lesen »

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Draghi’s Covert Currency War

Posted by hkarner - 7. September 2014

Date: 06-09-2014
Source: The Wall Street Journal: SIMON NIXON

Draghi“We think we should state things as they are,” Mario Draghi said Thursday in response to a question about whether central bankers should sometimes avoid telling the truth in case they make things worse.  But was the European Central Bank chief really being as straight as he claimed?

Mr. Draghi was trying to explain why the ECB had just felt it necessary to spring on the market a surprise rate cut and announce a major asset purchase program when its own staff forecasts showed no change in the ECB’s 2015 and 2016 inflation forecasts. The reason, he said, was that there were signs inflation expectations had weakened over the summer, raising the risk that the euro zone could slip into outright deflation. The new package of measures, he insisted, would boost the supply of credit, helping the economy to grow and re-establishing confidence in the ECB’s ability to hit its inflation target.

But this explanation didn’t give the complete picture. Policymakers and analysts are rightly skeptical that the new measures will have a significant impact on credit creation, which is being held back as much by lack of demand and structural factors in some economies as lack of supply. The real objective of the latest ECB action – and pervious measures announced in July – is to weaken the euro. The ECB has been under intense pressure – notably from France and Italy – to drive down the euro to ease the pressure on European manufacturers. Den Rest des Beitrags lesen »

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