Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Risk’

An obsession with stable growth leads to vulnerabilities in China

Posted by hkarner - 22. Dezember 2016

Date: 20-12-2016
Source: The Economist
Subject: Smooth sailing, until it’s not

Risks lurk outside China’s borders and within it

china-gdp-increaseWHEN 2016 dawned the economy that investors fretted about most was China’s. Memories of a huge stockmarket crash were still fresh. Capital was pouring out of the country as savers anticipated a devaluation of the yuan. In the event, other countries provided the year’s big upsets. And in some respects, the Chinese economy is stronger today than it has been for a couple of years. Producer prices, mired in deflation for 54 straight months, are rising at last. Corporate profits are turning up. Promises to cut overcapacity in coal and steel, and to reduce the overhang of unsold housing, have borne fruit. After three straight quarters of 6.7% annual growth, economists are converging around—you guessed it—6.7% in their forecasts for the final quarter of 2016.

However, this outward stability is misleading. Risks lurk both outside China’s borders and within them. If it does not change its attitude to reform, the Middle Kingdom could soon be atop investors’ minds once again.

One obvious source of anxiety is the potential for a trade war. Much depends on what Donald Trump does when he takes office in January. But tensions are already rising. China had expected to win the status of a market economy in December, 15 years after its accession to the World Trade Organisation, but the West refused. Because China sees this as a broken promise, a game of tit-for-tat protectionism may well ensue. Den Rest des Beitrags lesen »

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Sind die Regeln für Banken zu locker?

Posted by hkarner - 21. Dezember 2016

21.12.2016 | 18:19 | Von Christian Höller (Die Presse)

Der Wirtschaftsbeirat der deutschen Regierung, dem 40 Topökonomen angehören, warnt vor großen Risken im Finanzsystem. Gefordert werden strengere Regeln für Banken.

Wien/Frankfurt. Fast täglich gibt es Meldungen über Probleme bei Großbanken. Am gestrigen Mittwoch teilte die italienische Krisenbank Monte dei Paschi mit, dass ihr in vier Monaten das Geld ausgehen werde. Daher soll der italienische Staat einspringen. Experten fragen sich, warum es Europa acht Jahre nach Beginn der Finanzkrise noch immer nicht schafft, die Lage bei den Banken in den Griff zu bekommen. Nun schlägt der Wirtschaftsbeirat der deutschen Regierung Alarm, dem 40 Topökonomen angehören. Die Experten fordern in einer jetzt vorgelegten Analyse unter anderem strengere Eigenkapitalvorschriften für die Banken. Im Beirat sitzen Martin Hellwig vom Max-Planck-Institut in Bonn sowie Hans Gersbach, Inhaber des Lehrstuhls für Makroökonomie an der ETH Zürich.

Nach Ansicht der Ökonomen habe es Europa verabsäumt, die Überkapazitäten im Finanzsektor abzubauen. So sei es in Europa nicht gelungen, marode Banken ausreichend zu sanieren oder abzuwickeln. Die USA hätten hingegen deutlich mehr für die Sanierung ihres Finanzsystems getan, heißt es. Tatsächlich wurden in den USA seit Ausbruch der Krise Hunderte Banken geschlossen.

Die Wissenschaftler kritisieren weiters die derzeitige Regelung, wonach Banken Immobilienkredite pauschal als sicherer als Unternehmenskredite behandeln dürfen. Denn Immobilienkredite stünden regelmäßig im Zentrum von Finanzkrisen. Den Rest des Beitrags lesen »

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The Economy’s Hidden Problem: We’re Out of Big Ideas

Posted by hkarner - 9. Dezember 2016

Date: 08-12-2016
Source: The Wall Street Journal

Dwindling gains in science, medicine and technology hold back growth; is America too risk-averse?

By all appearances, we’re in a golden age of innovation. Every month sees new advances in artificial intelligence, gene therapy, robotics and software apps. Research and development as a share of gross domestic product is near an all-time high. There are more scientists and engineers in the U.S. than ever before.

None of this has translated into meaningful advances in Americans’ standard of living.

Economies grow by equipping an expanding workforce with more capital such as equipment, software and buildings, then combining capital and labor more creatively. This last element, called “total factor productivity,” captures the contribution of innovation. Its growth peaked in the 1950s at 3.4% a year as prior breakthroughs such as electricity, aviation and antibiotics reached their maximum impact. It has steadily slowed since and averaged a pathetic 0.5% for the current decade.

Outside of personal technology, improvements in everyday life have been incremental, not revolutionary. Houses, appliances and cars look much like they did a generation ago. Airplanes fly no faster than in the 1960s. None of the 20 most-prescribed drugs in the U.S. came to market in the past decade. Den Rest des Beitrags lesen »

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Three Risks to the Global Financial System as Debt Hits Record Levels

Posted by hkarner - 7. Oktober 2016

Date: 06-10-2016
Source: The Wall Street Journal

IMF urges major restructuring of the European banking system and sees emerging-market corporate defaults on the rise

Deutsche Bank CC1Deutsche Bank headquarters in Frankfurt. Like other European banks, the German financial giant has come under pressure from investors wary of the company’s ability to turn a profit.

In recent years, the global financial system has weathered Brexit, China’s deceleration and emerging market mayhem.

But there’s no reason to be complacent, the International Monetary Fund warns in its latest reports on global financial stability and the fiscal health of economies around the world.

“The passing of these near-term risks has seen volatility fall and equity prices in advanced economies rise,” says Peter Dattels, deputy director of the fund’s monetary and capital markets department. “But medium-term risks are building because we are entering a new era of challenges.”

An unprecedented era of ultralow interest rates and feeble growth has led to a record buildup in global debt levels. Den Rest des Beitrags lesen »

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The insurance sector and systemic risk

Posted by hkarner - 27. Juli 2016

Gaston Gelos, Nico Valckx

Division Chief of the Global Financial Stability Analysis Division, IMF

Senior Economist, Global Financial Stability Analysis Division, IMF

27 July 2016, voxeu

Insurance companies – life insurers, as well as providers of property, casualty, health, and financial coverage – perform important economic functions and are big players in financial markets. Traditionally, however, they were not considered to pose systemic risks. Insurers have longer-term liabilities than banks, a greater diversification of assets, and less extensive interconnections with the rest of the financial system. However, the near-collapse of AIG during the Global Crisis prompted a rethinking of the sector’s systemic riskiness. A number of insurance firms were subsequently among the financial institutions designated as globally systemically important. Den Rest des Beitrags lesen »

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Nature’s Answer to Climate Risk

Posted by hkarner - 27. Mai 2016

Photo of Maria Damanaki

Maria Damanaki

Maria Damanaki, former EU Commissioner for Maritime Affairs and Fisheries, is Global Managing Director for Oceans at The Nature Conservancy.

MAY 26, 2016, Project Syndicate

LONDON – Nearly half the world’s population – some 3.5 billion people – lives near coasts. As climate change exacerbates the effects of storms, flooding, and erosion, the lives and livelihoods of hundreds of millions of those people will be at risk. In fact, the latest edition of the World Economic Forum’s World Risk Assessment Report names failure to adapt to the effects of climate change as the single greatest risk, in terms of impact, to societies and economies around the world.

Beyond endangering lives, more frequent and stronger storms could cost many billions of dollars, owing to infrastructure damage and lost revenues from farming, fisheries, and tourism. And, as the Harvard Business Review recently noted, the projected cost rises with each new study. Yet the international community currently spends on risk mitigation less than one-fifth of what it spends on natural-disaster response. Den Rest des Beitrags lesen »

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The Global Economy Confronts Four Geopolitical Risks

Posted by hkarner - 29. Dezember 2015

Photo of Martin Feldstein

Martin Feldstein

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush’s Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama’s Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

DEC 28, 2015, Project Syndicate

CAMBRIDGE – The end of the year is a good time to consider the risks that lie ahead of us. There are of course important economic risks, including the mispricing of assets caused by a decade of ultra-low interest rates, the shifts in demand caused by the Chinese economy’s changing structure, and European economies’ persistent weakness. But the main longer-term risks are geopolitical, stemming from four sources: Russia, China, the Middle East, and cyberspace. Den Rest des Beitrags lesen »

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The Middle East Meltdown and Global Risk

Posted by hkarner - 1. Oktober 2015

Photo of Nouriel Roubini

Nouriel Roubini

Nouriel Roubini, a professor at NYU’s Stern School of Business and Chairman of Roubini Global Economics, 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.

OCT 1, 2015, Project Syndicate

NEW YORK – Among today’s geopolitical risks, none is greater than the long arc of instability stretching from the Maghreb to the Afghanistan-Pakistan border. With the Arab Spring an increasingly distant memory, the instability along this arc is deepening. Indeed, of the three initial Arab Spring countries, Libya has become a failed state, Egypt has returned to authoritarian rule, and Tunisia is being economically and politically destabilized by terrorist attacks.

The violence and instability of North Africa is now spreading into Sub-Saharan Africa, with the Sahel – one of the world’s poorest and most environmentally damaged regions – now gripped by jihadism, which is also seeping into the Horn of Africa to its east. And, as in Libya, civil wars are raging in Iraq, Syria, Yemen, and Somalia, all of which increasingly look like failed states. Den Rest des Beitrags lesen »

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Risk tolerance of men and women

Posted by hkarner - 21. September 2015

Francesco D’Acunto 20 September 2015, voxeu

Assistant Professor of Finance at the R.H.Smith School of Business, University of Maryland

Den Rest des Beitrags lesen »

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Shock-Resistant Eurozone Appears Far Off

Posted by hkarner - 20. September 2015

Date: 19-09-2015
Source: The Wall Street Journal

With disparate proposals to cut risk in the currency union, Europe’s finance chiefs have raised a high bar to progress

After ignoring the question of how to make the eurozone more shock-resistant for the better part of a year, the currency union’s finance chiefs seem to have found a new way of avoiding progress: pushing so many different ideas at once that gridlock is unavoidable.

First out the gate was French Economy Minister Emmanuel Macron, who wants the eurozone to set up an economic government, with its own budget and parliament, as well as a finance minister to distribute investments and steer labor-market policies. “The status quo will lead to self-destruction,” Mr. Macron warned in a recent interview with German daily Süddeutsche Zeitung.

A few days later, Jeroen Dijsselbloem, the Dutch finance minister who also presides over the meetings of his eurozone colleagues, suggested that what the currency union needs is more “convergence,” or streamlining, of national economic policies—but no new institutions to enforce, incentivize or legitimize them. If governments want their citizens’ support for the euro, they have to ensure it leads to prosperity and prevent one country’s bad tax rules from creating problems for its neighbors, said Mr. Dijsselbloem.

Next up was Jean-Claude Juncker, the president of the European Commission, who in his “State of the European Union” speech promised to present proposals for a European deposit-guarantee system in the coming year and, further down the line, a European treasury.

Many economists see a common system for insuring deposits as a logical—and necessary—part of the eurozone’s “banking union,” complementing the centralized supervisor and the resolution authority that were created to prevent failing banks from bankrupting their governments. In other words, once a broken lender has been identified and the cost of resolving it has been shared among its shareholders and creditors, what is needed is a big pot of money to compensate savers with less than EUR100,000 in their accounts.

The commission proposal is likely to be less ambitious. Instead of having one fund for all 19 euro countries, the proposed system is expected to supplement national funds running low on their own resources with credit lines from their eurozone counterparts.

Even this scaled-down reinsurance system is too much for Germany, the leading opponent of mutualizing risks in the currency union. Yet, rather than ruling it out from the get-go, Finance Minister Wolfgang Schäuble is pursuing a new strategy.

“One has to be careful not to put the cart before the horse,” he told reporters after discussing the issue with his eurozone colleagues on Saturday.

Before teaming up to protect savers, Mr. Schäuble argued, the bloc has to take a host of other steps. Among them are obvious ones—such as requiring all countries to actually implement the agreed rules on imposing losses on bank investors—but also some that are clearly designed to delay progress. These include requirements for banks to build up capital buffers for government bonds and a system to restructure excessive government debts. (Finland, a traditional ally of Germany, has already convened its own expert group to look at how best to restructure sovereign bonds).

Even a eurozone finance minister isn’t unthinkable, Mr. Schäuble said, but before going there, the decision on whether national budgets are in line with EU rules should be taken out of the hands of the European Commission. Instead of the EU executive, which he said is less strict with large countries such as Germany or France, an independent “fiscal board” should be given the power to strike down national spending plans.

With this wish list Mr. Schäuble pulled a classic divide-and-rule move. Obvious supporters for a common deposit-insurance system and a centralized budget such as Italy or Portugal are bound to block any initiatives that would make their own large debts seem less safe. The European Central Bank, which favors a strong banking union, meanwhile, doesn’t want to get rid of the zero-risk labeling for government bonds in the eurozone unless others around the globe do the same for their own debts.

There are some ways to unblock the logjam. Rather than immediately force banks to hold significant capital on their holdings of government bonds, European regulators could set limits for how many bonds from one country a bank can hold, suggests Christian Odendahl, chief economist at the London-based Centre for European reform. That, he says, could help overcome German resistance to a limited deposit reinsurance system.

But officials involved in the discussions among ministers aren’t overly optimistic. “There’s no pressure,” says one of them. With policy makers’ attention focused on dealing with the refugee crisis and no imminent threat to the eurozone, progress on reinforcing Europe’s monetary union is bound to be slow.

“Improving EMU can only happen if we move in parallel on all fronts,” Benoît Cœuré, the French member of the ECB’s executive board, said after ministers’ deliberations last week.

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