Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Stimulus’

Eurozone Economic Sentiment Hits 10-Year High

Posted by hkarner - 1. September 2017

Date: 31-08-2017

Source: The Wall Street Journal

Improvement is led by rising confidence among industrial companies and the services sector

FRANKFURT—Economic sentiment in the eurozone reached its “highest level in more than 10 years”

in August, led by rising confidence among industrial companies and in the services sector, the European Commission said Wednesday.

Its Economic Sentiment Indicator, which aggregates business and consumer confidence, jumped to 111.9 from 111.3 in July. This marks the highest level since July 2007. Economists surveyed by The Wall Street Journal had expected a stable outcome.

Italy recorded the sharpest rise in economic sentiment among the region’s largest economies, followed by France and Spain—a sign the recovery is spreading. The mood, however, eased slightly in Germany and the Netherlands, the region’s traditional powerhouses. Den Rest des Beitrags lesen »

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Central Bankers Can’t Savor Their Stimulus Success

Posted by hkarner - 29. August 2017

Date: 28-08-2017
Source: The Wall Street Journal

Worry over issues in Washington draws focus from timing to withdraw measures put in place years ago

JACKSON HOLE, Wyo.—Central bankers have been looking forward for years to a moment when the world economy is growing steadily again, allowing them to unwind extraordinary monetary stimulus from global markets.

They are now in such a moment, but at the Federal Reserve’s annual retreat here over the weekend they found their attention turned to other challenges, including a possible leadership transition at the Fed next year and the risk of a government shutdown or debt-ceiling crisis in Washington next month. Den Rest des Beitrags lesen »

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Draghi Says ECB Policy Has Helped Reduce Inequality

Posted by hkarner - 28. Juni 2017

Date: 27-06-2017
Source: The Wall Street Journal

ECB chief indicates it would be counterproductive to withdraw stimulus too soon
Mario Draghi speaks to university students in Lisbon on Monday.

Mario Draghi speaks to university students in Lisbon on Monday.

LISBON—European Central Bank President Mario Draghi defended the impact
of the bank’s stimulus policies on Europe’s youth Monday, arguing that keeping interest rates low had helped create jobs and reduce inequality.

The rare question-and-answer session with Mr. Draghi, at a university in Lisbon, comes at a sensitive time for the ECB, which is preparing to discuss how to start withdrawing policies such as negative interest rates and a €2.3 trillion ($2.6 trillion) bond-buying program.

Pressure is mounting in Northern Europe for a policy change from Frankfurt, but Southern European countries face a different economic reality, with youth unemployment rates reaching up to 45%. Den Rest des Beitrags lesen »

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Bundesbank Head Says ECB Needs to Be Ready to Rein In Stimulus

Posted by hkarner - 24. Mai 2017

Date: 23-05-2017
Source: The Wall Street Journal

But Jens Weidmann says easy-money policies are currently appropriate

President of the German Bundesbank, Jens Weidmann

The European Central Bank shouldn’t wait too long before withdrawing its large
monetary stimulus, German central-bank president Jens Weidmann warned on Monday, wading into a debate over how quickly the ECB should signal a policy shift.

Pressure has been building in Northern Europe for a policy change from Frankfurt as the region’s economy picks up. Eurozone inflation recently jumped to 1.9%, within the ECB’s target range, after languishing close to zero for years.

But top ECB officials have yet to signal they are ready to change course and start winding down their €60 billion-a-month bond-purchase program, known as quantitative easing or QE. ECB President Mario Draghi says the topic hasn’t even been discussed by the bank’s 25-member governing council. Den Rest des Beitrags lesen »

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Getting Fiscal Stimulus and Central Bank Independence In Synch

Posted by hkarner - 12. Mai 2017

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ECB Walks Fine Line as It Prepares to Signal Possible End to Stimulus

Posted by hkarner - 17. März 2017

Date: 16-03-2017
Source: The Wall Street Journal

Even a slight change in message could rock markets and upset the eurozone’s recovery

The headquarters of the European Central Bank in Frankfurt.

FRANKFURT—The European Central Bank is entering uncharted territory as it prepares to signal a possible retreat from its massive monetary stimulus without triggering a violent market reaction.

Bond markets reeled last week on reports that ECB officials had discussed how they might wind down their easy-money policies, which include a giant bond-purchase program and subzero interest rates.

Top officials have since closed ranks around a uniformly dovish message. But as the bloc’s economy strengthens and inflation picks up, investors are watching closely for any sign of a U-turn from Frankfurt. Den Rest des Beitrags lesen »

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Fiscal Hole Will Test President Donald Trump’s Agenda

Posted by hkarner - 7. Februar 2017

Date: 06-02-2017
Source: The Wall Street Journal

President’s appetite for stimulus comes up against budget realities and some fellow Republicans

President Trump’s stated goal for more spending on infrastructure appears out of step with GOP elected officials.

For an economy that isn’t in recession, the U.S. is facing one of the bleakest fiscal outlooks since World War II. One question that President Donald Trump will soon have to decide: How much is he willing to embrace even wider deficits?

The answer will determine whether Mr. Trump’s domestic agenda lives up to markets’ bold expectations, and his own.

Before Mr. Trump does anything, growing budget deficits are already on a course to push federal debt to record levels as a share of gross domestic product. That will make it extremely difficult to make good on promises to cut taxes and boost spending without spilling more red ink.

Unlike past periods, deficits are swelling not because of an economic downturn or a short-term boost in discretionary spending, but because of the costs of caring for an aging population. Medicare and Social Security are the biggest projected drivers of spending. Ten years ago, some 6,700 Americans turned 65 every day. The number is now 9,800 Americans, and it will rise to 11,700 by 2026. Den Rest des Beitrags lesen »

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European Companies Happily Take ECB’s Cheap Cash, but Don’t Spend It

Posted by hkarner - 23. November 2016

Date: 22-11-2016
Source: The Wall Street Journal

The very reason the ECB started buying corporate bonds—a weak economy—is crimping the program’s success

The European Central Bank began buying billions of euros worth of corporate bonds earlier this year in a high-profile experiment aimed at spurring private investment. So far, the spending hasn’t materialized.

Since June, the ECB has bought €44.3 billion (around $46.9 billion) in corporate debt. Borrowing costs have tumbled, and debt issuance is up.

But the very reason the ECB started buying the bonds—a weak economy—is crimping the program’s success. The ECB buys bonds to stimulate tame growth with corporate spending. However, companies aren’t spending, executives say and data suggest, because they see few opportunities amid feeble growth and because credit was already cheap.

“We just don’t see much evidence that the behavior of corporates has changed as a result of the” corporate bond-buying program, said Hans Lorenzen, head of European credit strategy at Citigroup Inc. “On the whole, corporates in Europe remain very cautious.”

Corporate savings in the eurozone hit their highest level in at least 22 years in the year to June 2016, according to J.P. Morgan Chase. Corporate savings reflect the difference between cash flows and spending. Den Rest des Beitrags lesen »

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China’s Attempt to Export Its Way Out of Glut Threatens World Economy

Posted by hkarner - 13. August 2016

Date: 12-08-2016
Source: YaleGlobal: Börje Ljunggren

China came to the aid of the stricken global economy in 2008 with record stimulus funds. But that stimulus injection encouraged debt and overcapacity in key markets like steel and aluminum, explains Börje Ljunggren, author and former Swedish ambassador to China. The country’s total debt has more than doubled, now exceeding 250 percent of GDP. China accounts for half of global output in steel and is the world’s largest steel exporter. Overcapacity threatens industry, jobs and even China’s leadership. China’s central government has long realized that the current industrial model and trade imbalances with the West are unsustainable, but local officials are keen on creating jobs. To reduce overcapacity and control debt, China must sharply cut its labor force and also provide relief to trade partners in the West. –

China’s stimulus push during 2008 financial crisis protected jobs worldwide, but now threatens steel and aluminum industries

STOCKHOLM: At the height of the 2008 financial crisis, as the world peered into an abyss, China earned global gratitude by pumping a record amount of stimulus into its economy. Ironically, continued stimulus has left the Chinese economy with mounting debt and a production glut threatening world trade. Den Rest des Beitrags lesen »

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Rate of Return is all that matters

Posted by hkarner - 18. Mai 2016

on May 17, 2016 Asia Times

In an interview with the Financial Times, Raghuram Rajan, governor of the Reserve Bank of India, warns governments not to rely too much on fiscal stimulus through cutting taxes or increasing public spending. Before taking such steps, they should first consider the likely returns. While any cost is acceptable to ensure potable water to people, it is not worth spending on infrastructure like roads or bridges if the expected rate of return from such projects is very low

It is difficult to make a man understand something if his salary depends on not understanding it” — Upton Sinclair

We have all known for a while now not only that world’s main central bankers have simply been lying through their teeth; but that it is well nigh impossible to eke out the truth from them whatever the changes in data and ground realities that may occur.

Raghuram Rajan

Raghuram Rajan

If anything, every setback to their rose-tinted projections of what would result from their morally bankrupt policies has simply been used as an excuse to double down on the facile assumption that things would have been a lot worse if they had not embarked on their facile policies in the first place (see “Double or Quits” dated October 6, 2009).

It was also easily predictable that Keynesian policies would persist in the face of such (predictable economic) failures because of course the starting point of all advanced economies since 2009 was their political failure – not having any leaders worth their salt, these economies were always going to grab the most convenient piece of market flotsam they could as long as it did not threaten to bring out the multitudes with their pitchforks.

So it falls upon outsiders such as Raghuram Rajan, governor of the Reserve Bank of India, to call it like he sees it – you see, his job doesn’t depend on not understanding the facile falsehoods peddled by the neo-Keynesians. In an interview with the Financial Times, the former professor and IMF chief economist explained a central tenet of spending:

“Mr Rajan said he was a supporter of stimulus policies to ‘balance things out’ over short periods when households or companies were proving excessively cautious with their spending. But eight years after the financial crisis, we “have to ask ourselves is that the real problem?” Den Rest des Beitrags lesen »

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