Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
This document provides an introduction to macroeconomics. It defines macroeconomics, discusses key questions in the field, and outlines different schools of thought regarding the appropriate role of government intervention in the economy. The document also summarizes different economic goals and debates around activist versus non-activist policy approaches.
3 Jan 2009: a bottom in breakevens, commodities, and global yields?Laeeth Isharc
The response of the authorities has been without precedent - the US has a new president, and perhaps confidence in the new administration may stave off the worst consequences of the epidemic contagion of fear - for now, at least. It is certain that for the time being we shall avoid the 29-33 collapse that was associated with every sovereign issuer in Europe except Britain, and much of Latin America and Asia defaulting as well as large numbers of banks in the US (in the days before deposit insurance).
The US dollar may be bottoming based on several factors:
1) Valuation measures like the Big Mac Index and OECD measures imply the dollar is undervalued by 30-35%
2) Increases in US oil and gas production from shale could reduce US imports and improve the trade balance by a third
3) A turnaround in US economic confidence and growth could support a rise in the dollar through upward revisions to interest rate expectations
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
This chapter discusses debates around stabilization policy. It considers whether policy should be active or passive in response to economic fluctuations, and whether policy should be set by rule or allow discretion. Arguments for active policy include reducing economic hardship, while arguments for passive policy cite lags in policy effects. Rules are argued to increase credibility and avoid time inconsistency, while discretion allows flexibility. Overall there is no clear consensus from history on the best approach.
The document outlines Saxo Bank's annual outrageous predictions for 2014. It begins by stating that central banks and policymakers have failed to enact real reforms and are relying on quantitative easing and optimistic rhetoric. It then discusses three outrageous predictions: 1) The EU will implement a wealth tax of 5-10% due to low growth, signaling a return to Soviet-style policies. 2) A new anti-EU alliance could become the largest group in European parliament, plunging the EU into turmoil. 3) The Bank of Japan may delete its government debt holdings, in an unprecedented move, if deflation persists and the yen rises sharply.
This document provides an introduction to macroeconomics. It defines macroeconomics, discusses key questions in the field, and outlines different schools of thought regarding the appropriate role of government intervention in the economy. The document also summarizes different economic goals and debates around activist versus non-activist policy approaches.
3 Jan 2009: a bottom in breakevens, commodities, and global yields?Laeeth Isharc
The response of the authorities has been without precedent - the US has a new president, and perhaps confidence in the new administration may stave off the worst consequences of the epidemic contagion of fear - for now, at least. It is certain that for the time being we shall avoid the 29-33 collapse that was associated with every sovereign issuer in Europe except Britain, and much of Latin America and Asia defaulting as well as large numbers of banks in the US (in the days before deposit insurance).
The US dollar may be bottoming based on several factors:
1) Valuation measures like the Big Mac Index and OECD measures imply the dollar is undervalued by 30-35%
2) Increases in US oil and gas production from shale could reduce US imports and improve the trade balance by a third
3) A turnaround in US economic confidence and growth could support a rise in the dollar through upward revisions to interest rate expectations
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
This chapter discusses debates around stabilization policy. It considers whether policy should be active or passive in response to economic fluctuations, and whether policy should be set by rule or allow discretion. Arguments for active policy include reducing economic hardship, while arguments for passive policy cite lags in policy effects. Rules are argued to increase credibility and avoid time inconsistency, while discretion allows flexibility. Overall there is no clear consensus from history on the best approach.
The document outlines Saxo Bank's annual outrageous predictions for 2014. It begins by stating that central banks and policymakers have failed to enact real reforms and are relying on quantitative easing and optimistic rhetoric. It then discusses three outrageous predictions: 1) The EU will implement a wealth tax of 5-10% due to low growth, signaling a return to Soviet-style policies. 2) A new anti-EU alliance could become the largest group in European parliament, plunging the EU into turmoil. 3) The Bank of Japan may delete its government debt holdings, in an unprecedented move, if deflation persists and the yen rises sharply.
Fasanara Capital | Investment Outlook June 2012 (published May 25th)Fasanara Capital ltd
1) The document provides an investment outlook from Fasanara Capital discussing recent market movements and their views on the European sovereign debt crisis.
2) They expect further market declines are needed to motivate coordinated policy intervention, but maintain shorts as catalysts like political tensions could accelerate declines and trigger action.
3) Long-term structural issues in Europe like high unemployment and economic imbalances remain unresolved and increase the risks of scenarios like inflation, defaults or countries leaving the Euro.
2009. Jürgen Pfister. The global and European environment for CEE economies. ...Forum Velden
- The presentation discusses the impact of the global financial crisis on Central and Eastern European economies.
- CEE economies experienced a dramatic fall in foreign direct investment inflows and a reversal of private capital flows as a result of the crisis.
- Recovery from the recession will be slow, with an outright upswing not expected until 2011 due to weaknesses in the banking sector and rising unemployment in Europe.
- Medium-term growth prospects for CEE economies remain positive as the process of economic convergence with Western Europe continues, but growth will be dampened in the short-term by slow growth among EU trading partners.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
The document provides information on business cycles, inflation, price indices, and a SWOT analysis of the Indian economy. It defines business cycles as alternating periods of economic expansion and contraction. There are typically four phases in a business cycle: expansion, peak, contraction, and trough. Causes of business cycles include under/over consumption, innovations, and natural disasters. Inflation is defined as a persistent rise in general price levels. Price indices measure changes in prices between periods. The SWOT analysis identifies strengths like agriculture and skilled workforce, weaknesses like population growth and literacy, opportunities in infrastructure and FDI, and threats like global recession and growing inflation.
The document discusses investment outlooks for 2015, focusing on three defining market features and three major trade opportunities. Regarding the defining features, it argues that deflation is just beginning in Europe and will continue driving European Central Bank policy in 2015. It also notes that competitive policy responses among countries are becoming increasingly confrontational. Finally, it suggests Keynesian views advocating government intervention are gaining prominence over Austrian views in academic debates. The three major trade opportunities discussed are related to European deflation, peripheral European bonds offering optionality, and further monetary easing in Japan under Abenomics.
The document discusses the stages of the business cycle in the pharmaceutical industry. It begins with the recovery phase where economic activity and output are increasing as unemployment declines. This is followed by the prosperity phase where output and employment are high, though inflation may rise. The recession phase then occurs as output declines and unemployment rises, potentially leading to deflation. The lowest point is the depression phase, where output and unemployment reach their lowest levels before potentially rebounding. The business cycle in the pharmaceutical industry specifically tends to last between 4.5 to 6 years.
Fasanara Capital Investment Outlook | February 1st 2015
1. Seismic Activity On The Rise
2. No Volatility No Gain
3. The Role Of Optionality
4. Crystal Ball
5. Deflation Is A Multi-Year Process
6. Three Big Trades for 2015
The document discusses business cycles, unemployment, inflation, and the Philippine experience. It covers theories of business cycles and the different phases. It also defines unemployment and inflation, and discusses the government's policies in response to the Philippine recession in the 1980s to promote economic recovery.
Greece negotiations and tier one US data key for traders this weekHantec Markets
Negotiations between Greece and its creditors (the IMF and the EU) continue, but as yet there is no deal. Greek claims
that a deal was close were swiftly rebuffed by the IMF, leaving Greece still without the final €7.2bn bailout tranche it
needs to pay €1.6bn of debt repayments owed to the IMF in June. However, it would appear a 5th June deadline (for a €300m repayment) is not actually a deadline at all. There is an IMF technicality that allows a lumping together of all
payments, to then be paid at the end of the month.
- Emerging markets have experienced weaker economic growth compared to developed markets in 2013.
- Emerging market equities have significantly underperformed developed market equities since 2010, with the underperformance accumulating prior to recent tapering talk.
- Within emerging markets, BRIC countries like Brazil, Russia, India, and China have particularly underperformed the broader emerging market universe.
There is now broad consensus among macroeconomists on key issues:
1) Monetary policy can be used to reduce economic instability by shifting the aggregate demand curve, except in a liquidity trap.
2) Fiscal and monetary policy can limit but not reduce unemployment below the natural rate.
3) Discretionary fiscal policy should be used sparingly due to lags and risk of political business cycles, while monetary policy plays the main stabilization role.
This document provides an investment outlook and analysis from Fasanara Capital. It discusses recent volatility in the bond markets, particularly the German bund market, and provides Fasanara Capital's medium and long-term views. In the medium term, they expect bund yields to fall further, European government bond spreads to tighten, and European equities to rise. In the long term, they believe deflationary trends will continue in Europe and central banks will need to continue monetary stimulus to prevent economic deterioration, which could eventually lead to a break in the euro currency peg.
Prosperity in a Changing World – Structural change and economic growthI W
This document summarizes a policy paper from the Cologne Institute for Economic Research on structural change and economic growth. The paper argues that there is no single superior economic model and different models can successfully deal with structural change. While service sectors have grown in most advanced economies, the level of development and impact of structural change varies significantly between countries. The paper finds no clear relationship between the size of a country's service sector or speed of structural change and its economic prosperity as measured by income, unemployment, and investment. Economic success depends more on how well a country supports key drivers of change like globalization, innovation, and knowledge through flexible markets and value chains.
Global Macro-economics, Trends, Portfolio ImplicationsNikunj Sanghvi
My presentation to the Bombay Chartered Accountants' Society International Economic Study Circle on Global macro-economics, trends, portfolio implications
Aug 7th 2013
Mumbai, India
Western governments are hopelessly addicted to deficit financing while refusing to address looming funding issues - with apologies to the embarrassingly foolish Angela Merkel, politicians can no more successfully “battle” the markets than you and I can successfully “battle” gravity. Petrocapita is an investment trust built around the premise that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil & gas assets directly to their portfolios.
The document discusses various concepts related to inflation including: the classical model of money and prices which states that increases in the money supply lead to equal percentage increases in prices; how governments can raise revenue through printing money which leads to inflation and imposes an "inflation tax"; and how hyperinflation can occur in a self-reinforcing cycle if a government prints too much money. It also covers moderate inflation, disinflation, the output gap, and the relationship between output and unemployment.
In these slides we discuss about Economic Growth & Business Cycle like GDP, Real GDP, Ways of measuring GDP, GNP, Aggregate Demand and Supply, Stages and Shape of Business Cycle, Growth / Expansion, Peak / Boom, Recession, Depression
The document discusses the business cycle, which consists of periodic expansions and contractions in economic activity over time. It describes the four phases of the business cycle: expansion, peak, recession, and trough. Government uses fiscal and monetary policy tools to try to stabilize the economy during fluctuations. The business cycle affects many countries as their economies are linked through trade. While the cycle causes instability, it is an inherent part of economies with private property and competition.
- Tensions with Russia over Ukraine are seen as transitory but could cause market volatility in the near-term. Deflation in Europe is viewed as a more structural issue that will affect markets for the long-term.
- The ECB is expected to take a three step approach - enhancing terms for T-LTROs, finalizing stress tests, and delivering their own version of quantitative easing.
- Three top investment opportunities are seen in European deflation trades benefiting from ECB action, peripheral European equity with upside from an inflated bubble, and Japanese equity benefiting from further stimulus.
This document summarizes the key findings from an analysis of past deleveraging cycles in the US economy in the mid-1970s and early 1990s. Some of the main points include:
- Past deleveraging cycles were actually good periods for stock market performance and saw leadership from consumer discretionary and technology stocks.
- Deleveraging is a lagging phenomenon that typically occurs late in an economic slowdown.
- Housing activity, as measured by building permits, tended to bottom out early in past deleveraging cycles and then rise steadily through the cycle.
- Inflation tended to decline during deleveraging periods, suggesting disinflation may lie ahead.
- Mon
Purchasing Managers' Index Report May 2010Swedbank
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank Economic Outlook - 2010, September 21Swedbank
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Fasanara Capital | Investment Outlook June 2012 (published May 25th)Fasanara Capital ltd
1) The document provides an investment outlook from Fasanara Capital discussing recent market movements and their views on the European sovereign debt crisis.
2) They expect further market declines are needed to motivate coordinated policy intervention, but maintain shorts as catalysts like political tensions could accelerate declines and trigger action.
3) Long-term structural issues in Europe like high unemployment and economic imbalances remain unresolved and increase the risks of scenarios like inflation, defaults or countries leaving the Euro.
2009. Jürgen Pfister. The global and European environment for CEE economies. ...Forum Velden
- The presentation discusses the impact of the global financial crisis on Central and Eastern European economies.
- CEE economies experienced a dramatic fall in foreign direct investment inflows and a reversal of private capital flows as a result of the crisis.
- Recovery from the recession will be slow, with an outright upswing not expected until 2011 due to weaknesses in the banking sector and rising unemployment in Europe.
- Medium-term growth prospects for CEE economies remain positive as the process of economic convergence with Western Europe continues, but growth will be dampened in the short-term by slow growth among EU trading partners.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
The document provides information on business cycles, inflation, price indices, and a SWOT analysis of the Indian economy. It defines business cycles as alternating periods of economic expansion and contraction. There are typically four phases in a business cycle: expansion, peak, contraction, and trough. Causes of business cycles include under/over consumption, innovations, and natural disasters. Inflation is defined as a persistent rise in general price levels. Price indices measure changes in prices between periods. The SWOT analysis identifies strengths like agriculture and skilled workforce, weaknesses like population growth and literacy, opportunities in infrastructure and FDI, and threats like global recession and growing inflation.
The document discusses investment outlooks for 2015, focusing on three defining market features and three major trade opportunities. Regarding the defining features, it argues that deflation is just beginning in Europe and will continue driving European Central Bank policy in 2015. It also notes that competitive policy responses among countries are becoming increasingly confrontational. Finally, it suggests Keynesian views advocating government intervention are gaining prominence over Austrian views in academic debates. The three major trade opportunities discussed are related to European deflation, peripheral European bonds offering optionality, and further monetary easing in Japan under Abenomics.
The document discusses the stages of the business cycle in the pharmaceutical industry. It begins with the recovery phase where economic activity and output are increasing as unemployment declines. This is followed by the prosperity phase where output and employment are high, though inflation may rise. The recession phase then occurs as output declines and unemployment rises, potentially leading to deflation. The lowest point is the depression phase, where output and unemployment reach their lowest levels before potentially rebounding. The business cycle in the pharmaceutical industry specifically tends to last between 4.5 to 6 years.
Fasanara Capital Investment Outlook | February 1st 2015
1. Seismic Activity On The Rise
2. No Volatility No Gain
3. The Role Of Optionality
4. Crystal Ball
5. Deflation Is A Multi-Year Process
6. Three Big Trades for 2015
The document discusses business cycles, unemployment, inflation, and the Philippine experience. It covers theories of business cycles and the different phases. It also defines unemployment and inflation, and discusses the government's policies in response to the Philippine recession in the 1980s to promote economic recovery.
Greece negotiations and tier one US data key for traders this weekHantec Markets
Negotiations between Greece and its creditors (the IMF and the EU) continue, but as yet there is no deal. Greek claims
that a deal was close were swiftly rebuffed by the IMF, leaving Greece still without the final €7.2bn bailout tranche it
needs to pay €1.6bn of debt repayments owed to the IMF in June. However, it would appear a 5th June deadline (for a €300m repayment) is not actually a deadline at all. There is an IMF technicality that allows a lumping together of all
payments, to then be paid at the end of the month.
- Emerging markets have experienced weaker economic growth compared to developed markets in 2013.
- Emerging market equities have significantly underperformed developed market equities since 2010, with the underperformance accumulating prior to recent tapering talk.
- Within emerging markets, BRIC countries like Brazil, Russia, India, and China have particularly underperformed the broader emerging market universe.
There is now broad consensus among macroeconomists on key issues:
1) Monetary policy can be used to reduce economic instability by shifting the aggregate demand curve, except in a liquidity trap.
2) Fiscal and monetary policy can limit but not reduce unemployment below the natural rate.
3) Discretionary fiscal policy should be used sparingly due to lags and risk of political business cycles, while monetary policy plays the main stabilization role.
This document provides an investment outlook and analysis from Fasanara Capital. It discusses recent volatility in the bond markets, particularly the German bund market, and provides Fasanara Capital's medium and long-term views. In the medium term, they expect bund yields to fall further, European government bond spreads to tighten, and European equities to rise. In the long term, they believe deflationary trends will continue in Europe and central banks will need to continue monetary stimulus to prevent economic deterioration, which could eventually lead to a break in the euro currency peg.
Prosperity in a Changing World – Structural change and economic growthI W
This document summarizes a policy paper from the Cologne Institute for Economic Research on structural change and economic growth. The paper argues that there is no single superior economic model and different models can successfully deal with structural change. While service sectors have grown in most advanced economies, the level of development and impact of structural change varies significantly between countries. The paper finds no clear relationship between the size of a country's service sector or speed of structural change and its economic prosperity as measured by income, unemployment, and investment. Economic success depends more on how well a country supports key drivers of change like globalization, innovation, and knowledge through flexible markets and value chains.
Global Macro-economics, Trends, Portfolio ImplicationsNikunj Sanghvi
My presentation to the Bombay Chartered Accountants' Society International Economic Study Circle on Global macro-economics, trends, portfolio implications
Aug 7th 2013
Mumbai, India
Western governments are hopelessly addicted to deficit financing while refusing to address looming funding issues - with apologies to the embarrassingly foolish Angela Merkel, politicians can no more successfully “battle” the markets than you and I can successfully “battle” gravity. Petrocapita is an investment trust built around the premise that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil & gas assets directly to their portfolios.
The document discusses various concepts related to inflation including: the classical model of money and prices which states that increases in the money supply lead to equal percentage increases in prices; how governments can raise revenue through printing money which leads to inflation and imposes an "inflation tax"; and how hyperinflation can occur in a self-reinforcing cycle if a government prints too much money. It also covers moderate inflation, disinflation, the output gap, and the relationship between output and unemployment.
In these slides we discuss about Economic Growth & Business Cycle like GDP, Real GDP, Ways of measuring GDP, GNP, Aggregate Demand and Supply, Stages and Shape of Business Cycle, Growth / Expansion, Peak / Boom, Recession, Depression
The document discusses the business cycle, which consists of periodic expansions and contractions in economic activity over time. It describes the four phases of the business cycle: expansion, peak, recession, and trough. Government uses fiscal and monetary policy tools to try to stabilize the economy during fluctuations. The business cycle affects many countries as their economies are linked through trade. While the cycle causes instability, it is an inherent part of economies with private property and competition.
- Tensions with Russia over Ukraine are seen as transitory but could cause market volatility in the near-term. Deflation in Europe is viewed as a more structural issue that will affect markets for the long-term.
- The ECB is expected to take a three step approach - enhancing terms for T-LTROs, finalizing stress tests, and delivering their own version of quantitative easing.
- Three top investment opportunities are seen in European deflation trades benefiting from ECB action, peripheral European equity with upside from an inflated bubble, and Japanese equity benefiting from further stimulus.
This document summarizes the key findings from an analysis of past deleveraging cycles in the US economy in the mid-1970s and early 1990s. Some of the main points include:
- Past deleveraging cycles were actually good periods for stock market performance and saw leadership from consumer discretionary and technology stocks.
- Deleveraging is a lagging phenomenon that typically occurs late in an economic slowdown.
- Housing activity, as measured by building permits, tended to bottom out early in past deleveraging cycles and then rise steadily through the cycle.
- Inflation tended to decline during deleveraging periods, suggesting disinflation may lie ahead.
- Mon
Purchasing Managers' Index Report May 2010Swedbank
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank Economic Outlook - 2010, September 21Swedbank
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Russia - sharp slowdown and protacted recoverySwedbank
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank's Global Economic Outlook, 2010 AugustSwedbank
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
This document summarizes the Chief Economist's discussion of policy challenges facing the global economy in areas such as monetary policy, fiscal policy, and growth. It notes that while policymakers have successfully managed the crisis, challenges remain in areas like withdrawing monetary stimulus, reducing government debt, and rebalancing global growth. Overall economic growth is expected to be slow over the next few years. Coordinated, realistic policies across many levels will be needed to avoid future crises and promote sustainable growth.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Degroof Petercam Asset Management's chief economist and asset allocator look into whether the reflation trade is for real and inflation is back in the cards.
Swedbank's Global Economic Outlook, 2010 March 18Swedbank
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
As the global financial crisis entered its most dramatic phase, in the second half of 2008, the International Monetary Fund (IMF), many governments and several distinguished scholars advocated expansionary fiscal olicy as the second most effective tool (after monetary stimulus) to fight deep recession and deflation. Now, more than a year later, the previous excitement surrounding the supposed power of fiscal stimulus largely disappeared and instead has been replaced by ising concerns over the sustainability of public finances in many countries. Unfortunately, the previous enthusiasts of the active counter‐cyclical fiscal policy have not always realized the causality between the two.
Authored by: Marek Dąbrowski
Published in 2009
Brian Nash presented on the uneven global recovery. The presentation discussed the global economic outlook, including expectations for stronger US growth led by consumption, moderate growth in China, and challenges in Europe. Central banks are becoming more aggressive in their monetary policies, with the ECB beginning a large quantitative easing program. Geopolitical risks and diverging monetary policies pose risks to the global economy in 2015.
AnsA) When financial markets stood on the verge of collapse in th.pdfsutharbharat59
Ans:
A) When financial markets stood on the verge of collapse in the summer of 2008, two of the
worlds most important central banks, the US Federal Reserve and the Bank of England, began
considering unorthodox policy measures. They turned to Quantitative Easing, or QE: injecting
money into the economy by purchasing assets from the private sector, in the hope of boosting
spending and staving off the threat of deflation. These were desperate measures for desperate
times.
With signs of a fragile economic recovery gathering enough momentum to reassure
policymakers in the US, the policy was expected to be wound down. But in a move that caught
commentators off guard, the Fed instead committed to continue with its existing level of asset
purchases. For the foreseeable future, at least, QE is here to stay. What began as a short-term
crisis measure has now become a key component of Anglo-American growth strategies. Its
important, then, to take stock of QE and the central role it has played within the Anglo-American
response to the financial crisis.
The way the Fed led the policy response to the financial crisis is important in two ways. First, it
reflects the extent to which the Anglo-American economies have become financialised: credit-
debt relations are pervasive throughout all facets of contemporary economic activity and there
has been a deepening, extension and deregulation of financial markets commensurate with this
development. In that context, with the increased competitiveness, scale and global integration of
financial markets intensifying the risk of financial instability, the crisis management capacities of
central banks have become increasingly important.
Second, central bank leadership of the policy response also reflects a key feature of neoliberal
political economy in practice. Despite all the rhetoric of free markets, competition and
deregulation that has been the mainstay of neoliberalism, there is a central contradiction at its
heart: neoliberalism has been extremely reliant upon the active interventions of central banks
within supposedly free markets.
The crisis has been warehoused on the expanding balance sheets of central banks, demonstrating
just how much scope for policy manoeuvre there is when governing elites want it. Government
debt and private assets, including toxic mortgage-backed securities, have been indefinitely
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To the Point, October 27 2009
1. To the Point
Discussion on the economy, by the Chief Economist October 27, 2009
Cecilia Hermansson
Chief Economist
Swedbank
Economic Research Department
+46-8-5859 1588
cecilia.hermansson@swedbank.se
No. 1/2009
It is all about timing
To the Point is a new monthly publication from Swedbank’s Economic Research
Department. It provides discussions on the global economy based on analysis,
economic research and forecasts. The financial crisis – with severe consequences for
business and public institutions – has reminded us to take a holistic perspective, by
combining the macro with micro, as well as economics with psychology and an
understanding of the political reality.
This first publication focuses on the uncertainty regarding the business cycle and the
outlook for price developments. At the centre of the analysis, are the issues of exit
strategies, regulation and macro economic imbalances. Ultimately, timing will be the
key. Will global leaders make necessary regulatory changes in time? Will these
leaders find the exact time to pull back stimulus measures? The world has not become
less fragile: to find the perfect time for action may make the difference between
success and a new collapse.
In this issue, you will find the following topics:
1. Growth will bounce back in the short run, but be sluggish in the medium run.
2. Deflation risks today may become inflation risks tomorrow.
3. Exit strategies from stimulus measures are the global
leadership’s main challenges.
4. Will regulation reform come in time to avoid new bubbles?
5. Global macroeconomic imbalances will not be fixed overnight.
To summarize, the growth outlook looks quite good in the short run, but clouds are
building up for the medium and long term. The deflationary risks, while abating, are
still present and inflation risks for the medium term are increasing. It is unlikely that
governments and central banks will withdraw stimulus at exactly the right time, and it
will be easier to err on the side of too late rather than too soon. Regulatory change is
needed, but the right time may not be now: change must come when the recovery is in
place otherwise financial instability will continue. China and the US are still a couple,
but may need “marriage counselling”. Europe and Japan will bear the main burden of
currency adjustment when the dollar weakens further, unless China joins the group,
by liberalizing the yuan and focusing on stronger private consumption. But all this
will take time.
Improved growth prospects – in the short run
Economic growth has come back earlier than many, including myself, expected. The
main difficulty for analysis was to project which force – deleveraging or stimulus –
would be the strongest. Now we know: stimulus has won – at least in the short run.
Germany, France, Japan and Sweden, all showed GDP-growth in the second quarter –
and the US is set to follow during the third quarter as government spending and a
slower pace of destocking increase activity. In the short run, growth prospects are
decent because of
• gigantic stimulus measures related both to fiscal and monetary policy;
• an inventory cycle that is adding, rather than subtracting from growth;
• increased risk appetite and higher confidence;
• moderately recovering credit markets;
• a resilient Asia that supports world growth; and
• continuing but slow deleveraging.
2. To the Point (continued)
October 27, 2009
2
Many markets are being manipulated
In the US, employment is falling and productivity is
increasing …
… but Germany has taken the opposite route
Watch out for lower potential growth!
Chart 1: Industrial production and leading
indicators in the OECD
Source: Reuters EcoWin
85 87 89 91 93 95 97 99 01 03 05 07
Percentagechange
-20
-15
-10
-5
0
5
10
Industrial production in the OECD
OECD Leading
indicators
Deflationary risks have abated, but can not be
completely ruled out
It makes sense creating four growth and price
scenarios
In the medium to long term, i.e., after 2010-2011, the task of maintaining
growth will become more challenging as support measures will have to be
withdrawn and economic policy will be tightened. At the moment, because
many markets are being manipulated by these measures (bonds, shares,
commodities, houses, cars, etc), it is difficult to estimate “real” demand and
“real” price developments.
In the US, one can be concerned about the high unemployment rate, which
has reached almost 10 %. About 8 million have lost their jobs, and another 9
million are working part time involuntarily. Almost half of those in the labour
force have either lost their jobs, had to accept reduced working time, or seen
their salaries decline during the last year. On the other hand, productivity has
increased rapidly and the US is adjusting to new developments; this could be
positive when the recession ends.
Germany, is the true opposite of the US, as employment has been fairly stable
and productivity has declined. If demand comes back soon, labour hoarding
may have been the right thing to do. More likely, though, German
unemployment will continue to rise, thereby only postponing the necessary
adjustment.
In the medium to long term, the clouds get darker. The expected loss in global
output will be hard to replace. More serious, though, would be lower potential
growth going forward. Investments will be weak as capacity utilization is low,
and that means fewer possibilities to increase productivity from the capital
stock. However, reports from the IT sector show that the willingness to add
new technology remains. Lower potential growth could also come from the
labour markets’ weakening, the financial sector’s shifting into reverse, and
globalization’s slowing. Policy could make a difference – watch out for
protectionism and long-term unemployment!
The OECD has lost 10 years of industrial production due to the financial
crisis and the recession. Leading indicators and Purchasing Managers’
Indexes show improvements – the recovery is starting. However, it will take a
long time – several years – to get back to the pre-downturn 2008 level.
Why there are risks for deflation – but also for
inflation
The deflationary risks have abated as risk appetite and confidence are
increasing, fuelling prospects of higher demand. However, it is still too early
to rule out a deflationary climate. As wages and prices are falling in the US,
as well as in many other parts of the world, the current situation could still be
characterized as deflationary. In many parts of Europe, the CPI is perhaps
more disinflationary, as base effects from high interest rates and commodity
prices during 2008 explain why prices are falling today. Wage negotiations
are still indicating positive wage growth in Germany, Sweden and other
European countries, although at much lower rates than before the crisis.
Below, are four scenarios based on price developments and economic growth.
“No growth” is basically negative or very weak growth, below potential,
while “growth” is something close to or above potential. “Inflation” would be
price increases (core) of around 4-5% or more, while “deflation” could be
either disinflation, i.e., lower inflation due to technological progress, or
deflation (the bad or ugly version where demand and prices fall in a vicious
spiral).
3. To the Point (continued)
October 27, 2009
3
Chart 2: Growth and price scenarios
Deflation Inflation
Growth
X No Growth
The withdrawal of stimulus come in three steps:
1) Absorb liquidity and stop unconventional
monetary policy
2) Increase interest rates and use conventional
monetary policy
3) Increase taxes and cut spending to start
consolidating budgets and reduce public
debt
Chart 3: Central banks’ policy rates
Source: Reuters EcoWin
00 01 02 03 04 05 06 07 08 09
Percent
0
1
2
3
4
5
6
7
Sweden
US
Euroland
UK
Japan
So where do we go from here? The most positive outlook would be for
disinflation and growth, i.e., the arrow moving north. We have seen similar
developments globally during many years as the IT sector increases
productivity and globalisation leads to lower prices. This scenario would
work only if policy makers succeed in pulling back stimulus measures at the
perfect time. If not, we could expect to see the arrow moving north-east into
growth and inflation – or even worse – east into no growth and inflation, i.e.,
stagflation.
What is the most likely scenario? I see a high probability for a period with no
or sluggish growth and deflation (where X is in the matrix), followed by
higher inflation and growth (north-east). The reason? Stimulus is huge. It will
be difficult to succeed with the perfect timing, and most policy makers would
rather err on the side of pulling back too late than too soon. The signals from
Germany’s new government are clear: we would rather boost growth than fix
budget deficits. In other words, we’ll deal with one “hell” at a time.
When and how to exit from stimulus measures
During next year (around summer), major central banks will start hiking
interest rates. Already now, liquidity is being pulled back automatically as
financial institutions no longer need support. For the US Federal Reserve and
the Bank of England, the shrinking of central bank balance sheets could be a
bit more complicated, especially for the US, which will attempt to get rid of
mortgage- backed securities without hurting the recovery on the housing
market. With credit easing and quantitative easing employed as
unconventional policies, exit strategies must include both interest rate hikes
and the selling of assets, such as government bonds. Still, it will take several
years before central bank balance sheets are back to the levels seen before the
crisis.
It will be more difficult to stop fiscal stimulus measures, and new packages to
limit long-term unemployment can not be ruled out, even if the political
reality may hinder such a development – in the US for example. In 2011,
expansionary fiscal policy will be followed by a neutral and then
contractionary policy. Still, public debt in many large economies in the
OECD will reach all-time highs and stay there for a long time. Real interest
rates could increase when problems of crowding out start to be visible.
Looking at the output gaps, which may be as wide as 8-10%, expansionary
policy will make sense for a long time. However, it is difficult to measure
output gaps, and we can not rule out inflation also in a situation where there is
ample capacity. Confidence in central banks’ independence and their
commitment to maintaining price stability is important. This is also why it is
important to make clear on the exit strategies, without hurting the recovery
process helped by the stimulus measures.
Will governments and central bankers succeed in exiting in the right way and
at the right time? Central banks can raise interest rates on banks’ reserves at
the central banks. Government bonds and other assets can be sold. Repo rates
can be increased. And it will be important to coordinate monetary and fiscal
policy. To find the right moment for action, however, is more complicated.
The recovery must be in place, but financial markets and investors should not
have started to be concerned. It is all about timing!
4. To the Point (continued)
October 27, 2009
4
Financial markets have a tendency to create bubbles
Moral hazard is one of the serious side-effects of this
financial crisis and the problem of too big to fail has
increased
Timing may not be right to start the anti-bubble
strategy – but regulatory changes must come when the
recovery is in place
Chart 4: The Euro, Yuan and Yen against the US
dollar (Index 100 = 2007)
Source: Reuters EcoWin
98 99 00 01 02 03 04 05 06 07 08 09
70
80
90
100
110
120
130
140
150
160
170
Yen against the US dollar
Euro against the US dollar
Yuan against the US dollar
The right time for regulatory changes
We can agree that financial markets have a tendency to develop bubbles. The
implication for regulators is clear: markets can not be expected to correct
excesses. Central banks and governments are good at cleaning up after the
bubbles have burst, but they do not have the knowledge on how to avoid
bubbles from being blown up. The current situation is a case in point: low
interest rates for a long time may create new asset price bubbles. It could be
worth creating new bubbles to get the economy going, but doing so could lead
to new problems – perhaps after some time. Then a new cleaning action is
needed.
Already now, Swedish credits to households are growing at full speed, and
their debt ratio (total household debt in relation to disposable income) will
increase from 160% at present to 200% in 2011 if the credit growth continues
at this rate till then. Central banks must keep an eye on credit growth, and
could regulate the way households take variable or fixed interest loans, the
loan-to-value ratio, how much amortization should be required, etc.
Governments could focus on reducing interest rate deductibility, or take other
measures that could cool the housing market. However, no such measures are
likely – neither political nor economic reality would allow it.
On a global scale, banks and other institutions are again increasing risk
appetite, and there is a concern about new systemic risks. Not the least,
because “too big to fail” or “too interconnected to fail” has become a bigger
problem since the crisis. Moral hazard is one of the serious side-effects of this
crisis. As long as governments and central banks focus on cleaning up after
the bubbles have burst, financial institutions can always count on being saved
from collapse.
Will regulations change in time, or will new bubbles be created? Most likely
it will take time for G20-countries to agree on methods. In addition, making it
more difficult for banks to lend right now could be counterproductive and
hurt the recovery. When credit markets have improved in a more robust way
and when the economic recovery is in place, the time for regulatory changes
will have come. The main goal should be to increase the prospects for
financial stability, while maintaining the focus on price stability. This will
require a shift in thinking in central banks – away from a partial analysis of
consumer price inflation targeting and towards a reliance on a more holistic
framework. It has to come – it’s all about timing!
Does the US and China need marriage
counseling?
One of the lessons learnt during the crisis is the need to fix macroeconomic
imbalances between the US (and other current account (C/A) deficit
countries) and China (and other C/A surplus countries). The US C/A deficit
has been sliced in half to some 3% of GDP, but China continues to increase
its surplus. In addition, if economic policy is not changed – which it has not,
as the US gives cash for clunkers to boost car consumption and China
supports export developments and keeps the exchange rate pegged to the US
dollar – a large C/A deficit in the US will return again after some years.
5. To the Point (continued)
October 27, 2009
5
Chart 5: GDP-growth in China, India, Sweden,
Euroland, Germany, Japan and the US (%)
Source: Reuters EcoWin
00 01 02 03 04 05 06 07 08
Percent
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
Japan
Euroland
Sweden
India
Germany US
China
Economic Research Department
SE-105 34 Stockholm, Sweden
Telephone +46-8-5859 1000
ek.sekr@swedbank.com
www.swedbank.com
Legally responsible publishers
Cecilia Hermansson
+46-8-5859 1588
Or perhaps the China-US “marriage” is not working after all? Both parties
may eventually decide they would like a divorce, but not yet. The US needs
China as China continues to buy US treasury bonds, and China can thereby
exacerbate both US fiscal problems and risk a much weaker dollar. China
builds capacity as perhaps 75% of growth now comes from investment
financed to a large extent by the public administration. US is still an
important export market for China.
There is an understanding that both countries need a more balanced growth.
This does not mean it will happen. To increase consumption in China, social
security must be developed including through pensions and reasonable tuition
and health fees. To open up capital markets and liberalize the foreign
exchange system will be a challenge, as the risks for financial instability
increase and lower export prospects create potential for both political and
social instability. The most likely scenario is a slow pace of appreciation, a
process that will start again when world demand is growing more solidly.
Meanwhile, the expectations are asymmetrically geared towards appreciation
– a situation that can build asset price bubbles à la Japan or worse.
For the US, the balancing has started but the question is if it is sustainable.
Households have increased savings, to compensate for great wealth losses.
Still, 70% of GDP is made up of private consumption. To find alternative
growth engines is not easy. For a while, inventories and net exports can
provide some relief. However, to continue growing with the help of the export
sector, the dollar should probably have to weaken further.
The third party – watching the married couple muddle through – is the euro
area. Much of the adjustment falls on the euro, and a much stronger currency
could start to weaken 2010 growth prospects. It is necessary for Japan,
Germany, Sweden, and other “mercantilist” countries to accept a stronger
currency in order to reduce imbalances, but it would make sense if China
could join this group. It will happen – it is only a question of timing – but I
wouldn’t be surprised if it was later rather than sooner.
Cecilia Hermansson
To the Point is published as a service to our customers. We believe that we have used reliable
sources and methods in the preparation of the analyses reported in this publication. However,
we cannot guarantee the accuracy or completeness of the report and cannot be held
responsible for any error or omission in the underlying material or its use. Readers are
encouraged to base any (investment) decisions on other material as well. Neither Swedbank
nor its employees may be held responsible for losses or damages, direct or indirect, owing to
any errors or omissions in To the Point.