Global Financial Markets

Capital Controls and the Global Financial Crisis

2011-02-24T08:38:00.000-08:00

For discussion
Regaining Control? Capital Controls and the Global Financial Crisis
by Kevin Gallagher
February 2011

Government bailout plans failed to kick-start lending

2009-12-05T05:08:00.000-08:00

The FT reports that Bank of Amrica (BofA) is about to repay USD 45bn in TARP funds. Ken Lewis, CEO of BofA, concluded

“In the 12 months since the government first made its investment in BofA, our company originated $760m in new credit.”

This is a ridiculous result given that government has earned USD 3.6bn in dividends for its one year-investment in BofA. This case clearly documents that although government capital injections may be necessary, they are by no means sufficient to kick-start new business lending and the economy. Success crucially depends on the terms of the government's assistance.

Chinas Notenbankchef ...

2009-11-13T01:35:00.000-08:00

... ist laut FAZ der Herrscher der Volkswährung. Im Vergleich etwa zu Ben Bernanke ist Zhou Xiaochuan bisher weitgehend unbekannt, doch das dürfte sich ändern. Textauszug:

Spätestens seit Zhou in einer Rede im März eine Reform des internationalen Währungssystems anmahnte, um eine Wiederholung der Finanzkrise zu vermeiden, achten Politiker, Banker und Investoren in aller Welt auf seine Worte. In seiner Einlassung hatte der Sohn eines ehemaligen chinesischen Industrieministers und einflussreichen Kaders nicht weniger getan, als den Dollar als Weltreservewährung in Frage zu stellen. mehr...

Währungskörbe sind in Mode

2009-11-11T07:03:00.000-08:00

Or at least so it seems. China deutet Kehrtwende in Währungspolitik an meldet das Handelsblatt. Textauszug:

Chinas Notenbank stellt wenige Tage vor dem Antrittsbesuch von US-Präsident Barack Obama einen Kurswechsel in ihrer Währungspolitik in Aussicht. Die Zentralbank signalisierte, den Kurs des Yuan künftig an einem Devisenkorb zu
messen, und deutete damit eine Abkehr von der De-facto-Anbindung an den Dollar an, die seit Mitte 2008 in Kraft ist.

Aus geg. Anlass ...

2009-11-09T09:20:00.000-08:00

... ein Blog-Post zu Deutschland & Europa. Der Fall der Mauer heute vor 20 Jahren führte wenig später zur Wiedervereinigung und zur deutsch-deutschen Währungsunion. Und von da war es nur ein "historischer Katzensprung" bis zur europäischen Währungsunion. Also ist die Frage legitim: Welche Auswirkungen hatten die Wiedervereinigung und die Währungsunion auf die Einigung Europas? Haben sie sie befördert oder behindert? Gäbe es ohne die Wiedervereinigung keine europäische Währungsunion? Oder hätten wir eine "bessere" europäische Währungsunion, wenn wir nicht vorher die deutsch-deutsche Währungsunion gehabt hätten? Dies alles sind zwar hypothetische Fragen, doch nichts scheint spannender zu sein, als solche ex post-Debatten im Konjunktiv.

Den Anfang macht dabei unvermeidlicherweise eine Debatte (wieder mal) des Pro und Contra der Wiedervereinigung und vor allem der Währungsunion. Die Meinungen reichen von "katastrophal gelaufen" (Unverdauter Schock von Thomas Fricke) bis hin zu "im Grund ganz gut gelaufen" (Der Erfolg im Osten von Werner Plumpe). Bei Ökonomen - so meine subjektive Einschätzung - überwiegen eher die skeptischen Urteile, wobei man sich typischerweise an der schnellen Einführung der DM in der DDR und an den Folgen der 1:1-Konversion von Ost- und Westmarkt abarbeitet: Einführung der DM: Kohls großer Fehler (FTD)

Meine erste These dazu lautet: Ohne die Wiedervereinigung & Währungsunion (W&W) wäre kein weiterer Fortschritt der europäischen Einigung möglich gewesen. Und zwar darum:

Die meisten Probleme der (heutigen) neuen Bundesländer wären auch ohne W&W aufgetreten. Dazu zählen auf jeden Fall die Abwanderung und auch die Deindustralisierung.
Stabilität in der Mitte Europas wäre mit einem politisch, wirtschaftlich und währungsmäßig geteilten Deutschland nicht möglich gewesen. Und ohne Stabilität in der Mitte gibt es keine europäische Stabilität schlechthin.

Deshalb mein persönliches Zwischenfazit: Wiedervereinigung und Währungsunion haben zwar nicht zur besten aller Welten à la Dr. Pangloss alias G. W. Leibniz geführt, doch sie haben wichtige Stolpersteine aus dem Weg geräumt, die den Fortgang der europäischen Einigung ansonsten be- oder gar verhindert hätten.

Congress about to pass derivatives legislation

2009-11-06T00:44:00.001-08:00

The House of Representatives has adopted a new bill on derivatives trading. It now just needs the approval of the Senat and the President's signature to enter into force. The core of the bill is a requirement to settle trades in swaps and other derivatives through registered clearing houses. During the breakdown of AIG last year, one of the major systemic risks was posed by credit default swaps (CSD) that AIG had entered into on a massive scale in over-the-counter (OTC) trades. The problem was that theses trades were nowhere registered and that there was thus no information available about the risk they involved.

Der IWF verkauft Gold

2009-11-03T03:48:00.000-08:00

Zur Aufstockung von Finanzmitteln hat der IWF fast alles möglich getan: Allokationen der allgemeinen und einmaligen Sonderziehungsrechte (SZR), Emission der IMF-Anleihen. Nun ist der Goldverkauf. Nach der Angabe des IWF gestern werden 200 Tonnen IWF-Goldreserve an die Reserve Bank of India verkauft, siehe" IMF Announces Sale of 200 metric tons of Gold to the Reserve Bank of India."

Das macht 6.7 Mrd.$ , entspricht 4.2 Mrd. SDR. Der Goldverkauf von 403 Tonnen wurde schon im April beim G20-Gipfel geplant, "use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries," so das Londoner Communique.

Dark Pools: Das wurde auch Zeit!

2009-10-22T07:38:00.000-07:00

Endlich nimmt sich eine hochrangige Stelle der sog. "Dark Pools" an. Das Handelsblatt berichtet: SEC will Dark Pools ausleuchten. Die sog. Dark Pools of Liquidity entziehen den öffentlichen Börsen Liquidität und schaffen neue (private) Handelsplattformen, die sich öffentlicher Aufsicht entziehen, sich an Größe aber leicht mit manchen öffentlichen Börsen messen können. Es wurde Zeit, dass dies als ernstes Problem der Regulierung erkannt wurde.

Pittsburgh: The end of G7

2009-09-25T09:01:00.000-07:00

New York Times announces the end of G7: Global Economic Forum to Expand Permanently. From the article:

Global leaders will announce Friday that the once elite club of rich industrial nations known as the Group of 7 will be permanently replaced as a global forum for economic policy by the much broader Group of 20 that includes China, Brazil, India and other fast-growing developing countries, the White House said. more...

Obama's Financial Regulation Proposal

2009-08-06T02:05:00.000-07:00

There has been much talk about the Obama administration's plan for reforming financial regulation. For those who seek the original text, you can get it here. Inter alia, it is proposed to create a Financial Services Oversight Council that shall collect information on market risks and transfer it to the regulators (why can't the regulators do that themselves?). A new Consumer Financial Protection Agency shall protect investors from financial abuse (what is the SEC doing?). Hedge funds and other private pools of capital shall be required to register.

Quantitative Easing - Time to Think About How to Exit

2009-07-26T09:37:00.000-07:00

In the WSJ, Fed Chairman Ben Bernanke explains the Fed's exit strategy from quantitative monetary easing. It relies on two pillars:

The first pillar is paying interest on bank reserves with the aim of giving banks incentive to redeposit excess liquidity with the Fed instead of letting them push monetary aggregates. It is noteworthy that Bernanke explicitly refers to M1 and M2, not only credit aggregates! Both, paying interest on reserve accounts and looking at monetary aggregates has always been part of the monetary policy framework of the ECB.

The second pillar is curtailing the Fed's balance sheet. For this, Bernanke considers four measures. 1) Reverse repos: they may be suitable if a temporary down scaling is aimed at, but I doubt that it suits if one needs a permanent withdrawal of monetary expansion. 2) The Treasury selling bills and depositing the proceeds with the Federal Reserve: a severe threat to the Fed's independence, without which inflation will be unleashed - it's like casting out devils through Beelzebub. 3) Term deposits: nothing new from a European perspective. 4) Sale of long-term securities into the open market: maybe the most natural way of thinking about curtailing monetary expansion, but there is very little experience with block sales of that size and with these market segments in question.

On of the most interesting questions is whether inflation is more of a problem in the US than in the Euro area. To find an answer one should recognize that 1) monetary policy has been more expansive in the US, and 2) the tools needed to curtail monetary expansion have been already available to the ECB from the outset, so that market participants are more experienced with them in the Euro area than in the US.

Expanding regulatory power of central banks

2009-07-10T22:14:00.000-07:00

There has been a controversial debate going on about whether or not to expand the power of central banks by giving them mandate to regulate and supervise private financial institutions (like banks). As the NYT reports there are many different pros and cons. Among the critics are Allan H. Meltzer (we discussed some of his views already here) and John B. Taylor (we mentioned him here), both distinguished monetary economists, yet each from a different angle. Meltzer is concerned about the Fed's proven inability or unwillingness to do something about financial stress; he therefore claims that the Fed is not the right institution to be charged with financial stability. Taylor says that expanding the Fed’s power would dilute its main mission of steering the economy, create conflicts of interest, reduce its credibility and jeopardize its independence.

From an economist's point of view it is still an open question how financial stability and macroeconomic stability are interlinked and whether a central institution should be in charge of both.

Timelines of the Global Financial Crisis

2009-06-25T11:52:00.000-07:00

The Federal Reserve Bank of New York has a website with two timelines on policy responses to the global financial crisis.

Financial Turmoil Timeline (showing market events, Fed policy actions and other policy actions)
International Responses to the Crisis Timeline (showing bank guarantees, liquidity and rescue interventions, "unconventional" monetary policy and other market interventions.

Thanks go to Manfred Jäger @ Institut der deutschen Wirtschaft Köln for these links.

PS: And here the same from the Bank of England: Timeline of Crisis Events.

Unemployment in OECD countries to approach 10% in 2010

2009-06-24T06:45:00.000-07:00

... says OECD . This may not be surprising given that the world economy faces the sharpest downturn for the last 50 years at least. But I have been stunned by this particular figure

Source: OECD.

Some may think that Germany, the (former) export world champion, may suffer most from the shrinking world economy. But we are not quite there yet - at least in terms of unemployment.

Vortragsankündigung

2009-06-19T12:34:00.000-07:00

Professor Mika Widgren von der Universität Turku hält am kommenden Montag einen öffentlichen Vortrag zum Thema

Strategic vs. Non-strategic Power in the EU Council: The Consultation Procedure

Ort: Institut für Wirtschaftsforschung, Halle (Lage), Konferenzraum
Zeit: Montag, 22. Juni 2009, 14 Uhr c.t. (Dauer: 90 Minuten)

Interessenten sind herzlich eingeladen.

Professor Widgrens Forschungsgebiete sind (u.a.) die Europäische Integration und hier insb. die EU Entscheidungsverfahren. Dabei verwendet er Methoden der Institutionenökonomik und der Spieltheorie.

Weitere Informationen finden sich auf den Webseiten des Graduiertenkollegs Globale Finanzmärkte und auf Professor Widgrens persönlicher Webseite.

PS: Für Gäste von außerhalb, hier Anreiseinformationen in Form einer Google-Karte, wobei A die Tiefgarage am Hansering bezeichnet, B den Standort des IWH. Fußweg über die Rathausstraße: 5 Minuten.

A small step for the U.S. Congress ...

2009-06-19T12:10:00.000-07:00

... but a big step for IMF Reform, says IMF Survey, referring to the final approval of IMF reform in the U.S. Senat on June 18. Key decisions of Congress include, according to the article:

More funding for the IMF to help tackle the global crisis under an expanded borrowing arrangement. The United States has committed to increase its credit line by up to an additional $100 billion to the IMF.
Reform of country representation at the IMF, including greater representation (quotas) for dynamic emerging markets and enhanced voice and participation for low-income countries.
Go-ahead for the so-called “fourth amendment,” a one-time allocation of Special Drawing Rights (SDRs), an international reserve asset created by the IMF in 1969 to supplement the official reserves of member countries.
Providing expanded investment authority to the IMF as a key part of a new income model to finance its activities, making it less dependent on earning revenue from interest paid on loans.
Vote on a proposal for limited gold sales by the IMF, consistent with the agreed framework for the Fund’s new income model. more...

Almost in tandem with the U.S. Senat, the EU Council approved additional IMF funding of €75 billion. Cf. SCHLUSSFOLGERUNGEN DES VORSITZES, paragraph 24 on page 9. Funny, this went largely unnoticed in the news, even though at the current exchange rate the EU's €75m exceed the US's $100bn.

Eine neue Abkürzung: ESRB

2009-06-19T12:00:00.000-07:00

Ergänzung zum vorigen Blog-Post:

ERSB ist das European Systemic Risk Board, was auf Deutsch mit Europäischer Ausschuss für Systemrisiken übersetzt wird. Der Ausschuss wird in Frankfurt bei der Europäischen Zentralbank angesiedelt. Er soll Risiken im Finanzsystem identifizieren, vor Krisen warnen und im Ernstfall Maßnahmen der Krisenbekämpfung koordinieren. Auf der vor wenigen Tagen zu Ende gegangenen Tagung des Europäischen Rats (Brüssel, 18./19. Juni) haben die Briten ihre "Paranoia" überwunden und im Austausch gegen einige Zugeständnisse seitens der anderen Länder die Schaffung dieses zentralen EU-Gremiums für die sog. makroprudenzielle Aufsicht akzeptiert.

Mehr zum Hintergrund dazu bieten folgende Links:

Reuters beschreibt kurz die Ratsbeschlüsse von Brüssel: ECB-dominated EU financial risk board to pick own chair.
Für die ganz Wissbegierigen hier die Originalquelle zu den Ratsbeschlüssen: Schlussfolgerungen des Vorsitzes, wo sich auf Seite 6ff die entscheidenden Passagen finden.
Das Bundesfinanzministerium hat die Problematik im Vorgriff schon ganz gut (und vor allem kurz) zusammengefasst: Starke EU-Finanzaufsicht ist wichtig.
EZB-Ratsmitglied Lorenzo Bini-Smaghi ordnet die Regulierungsbestrebungen der EU in einen breiteren ökonomischen Rahmen ein: Going Forward: Regulation and Supervision after the Financial Turmoil.

Ein neuer "EU-Kontrollrat"

2009-06-19T01:37:00.001-07:00

Kurz nach Draft of President Obama's Financial Regulation Proposal hat der EU-Gipfel bei der umfassenden Reform der europäischen Finanzaufsicht einen Durchbruch erzielt: Künfitig wählen alle 27 Zentralbankchefs die Führung des neuen "EU-Kontrollrates" und soll helfen, Krisen im Banksystem zu verhindern. Konkrete Gesetzesvorschläge will EU-Kommissionspräsident José Manuel Barroso im Herbst vorlegen. So berichteten Zeit-Online und FAZ heute morgen.

Draft of President Obama's Financial Regulation Proposal

2009-06-17T09:40:00.000-07:00

The New York Times reports about President Obama's plan to reshape financial regulation. There is also a link to the original text of Obama's proposal. Also in the NYT there is a background article on how the plan was drafted: Obama Sought a Wide Range of Views on Finance Rules.

With his regulation plan, President Obama wants to meet five key objectives. Reforms should ...

Promote robust supervision and regulation of financial firms
Establish comprehensive regulation of financial markets
Protect consumers and investors from financial abuse
Provide the government with the tools it needs to manage financial crises
Raise international regulatory standards and improve international cooperation

Collateral damage of the financial crisis: US antitrust law?

2009-06-02T11:06:00.000-07:00

George L. Priest, professor of law & economics at Yale Law School and antitrust specialist, sees the Obama administration throwing "... a bomb at modern antitrust law". This is the punchline of his article The Justice Department's Antitrust Bomb in the Wall Street Journal. From the article:

Assistant Attorney General for Antitrust Christine Varney claims that the Justice Department can aid economic recovery by prosecuting businesses that have been successful in gaining large market shares. In her announcement last month she argued that "many observers agree" that our current recession reflects "a failure of antitrust" and "inadequate antitrust oversight." ...

What does Ms. Varney propose as an alternative approach? [...] Her basic proposal is to transform American antitrust law to more closely resemble that of Europe. She states that American antitrust policies have "diverged too frequently" from those of the Europe, and that "[w]e will focus our efforts on working through our previously divergent policies regarding single-firm conduct and pursuing vigorous enforcement on the [monopolization] front." more...

Professor Priest disagrees:

This is a huge mistake. The principal reasons American and European approaches to antitrust diverge are that the operative legal standards are different and that the Europeans have not adopted a tradition of rigorous economic analysis. [...] In the U.S. -- Ms. Varney's views aside -- success in competition is rewarded. In Europe it is suspect [...] more...

Strong stuff!

Buy American, or: The stimulus bill and US trade obligations

2009-05-31T02:00:00.000-07:00

Renowned US trade economists Clyde Hufbauer and Jeffrey Schott warn against US protectionism under President Obama's huge stimulus package: US Free Trade Promises Must Be Honored. Excerpt:

In the stimulus bill, Congress insisted that federal funds could be applied only to projects that used US-made goods, unless that condition violated US trade obligations. But funds for many of the projects funded by the stimulus are funneled to state officials, many of whom ignore or don't know the details of US trade agreements and insist on US content for fear of losing federal windfalls. The federal government designed the stimulus program and provided the funds to pay for it. In our view, simply because a state official tenders the contract doesn't void the international obligation. The WTO and NAFTA judges would surely agree. more...

Publikationshinweis

2009-05-27T09:36:00.000-07:00

Ein kurzer Leitartikel im Wirtschaftsdienst - Zeitschrift für Wirtschaftspolitik ist jetzt online:

Die G-20 in London: Twitter-Gipfel oder historische Wende?

7th Workshop on Money, Banking, and Financial Markets

2009-05-11T05:47:00.000-07:00

The Halle Institute for Economic Research, the Department of Economics at Heinrich-Heine-University Duesseldorf and the European Business School jointly organise the 7th Workshop on “Money, Banking, and Financial Markets”.

The workshop aims at offering a discussion forum particularly for young researchers (PhD students and Postdocs) to present their current theoretical or empirical papers to a competent audience. This year's workshop will take place in Duesseldorf (Germany) on June 8/9, 2009. The program is available here.

Information on earlier workshops in this series can be found here.

European Commission Acts on Hedge Funds

2009-05-08T02:28:00.000-07:00

The European Commission has tabled a proposal for regulating the activities of hedge fund managers. According to the proposed "Directive on Alternative Investment Fund Managers", the managers will need prior authorisation by the authorities in the Member States in which they have their registered office (art. 4). Moreover, the managers - not the funds they manage! - will be required to hold a minimum capital of 125.000 Euros (art. 14).
Besides, the proposed directive contains the "usual suspects" which are included in all such rules, such as the command to act honestly, rules to avoid conflicts of interest, and disclosure requirements.
But one rule in particular stands out: art. 13, which contains a rule on firms that repackage loans into tradable securities or other financial instruments. What is meant thereby are the notorious Asset-Backed Securities (ABS) or Collaterized Debt Obligations (CDOs). According to the proposed rule, hedge funds managers will only be allowed to invest in such securities if the originator of the securitization process retains a "net economic interest" of no less than 5%. Details will be spelled out by implementing measures to be adopted by the Commission. This rule seems somewhat misplaced in the directive, because it deals with problems that are not directly connected to hedge funds and their managers. It is a kind of indirect regulation of ABS and CDOs, which uses hedge fund managers as an anchor instead of the originators, which often sit in other countries. One can doubt whether this is the appropriate way of limiting the risks that these instruments present.
As was to be expected, the proposal has met with criticism by the industry. For instance, the Bundesverband Alternative Investments (BAI) has cautioned against an isolated European approach. It remains to be seen whether the proposal will be adopted as EC legislation.

The return of the Jedi

2009-05-04T22:50:00.000-07:00

In Lucas' (George, not Robert) brilliant Star Wars saga, the dark side of the Force had finally been beaten. The evil converted to the better faith for good.

Incidentally, around the same time this saga started its lasting success, Paul Volcker became chairman of the Federal Reserve. He successfully started to fight inflation (after others made a couple of half-hearted attempts). It was very costly, and - more importantly - it could had been avoided by Volcker's predecessors if they only had considered the long-term consequences of what they were doing in their attempts to prevented the public from seemingly wrong decisions (just like Anakin Skywalker, called Darth Vader, did).

Allan H. Meltzer, a distinguished Monetary Historian, writes in a NYT piece that this lesson has not been well learned by U.S. policy makers and hence, in contrast to the Star Wars saga, the evil is not beaten for good. He claims that economic policy, both fiscal and monetary, are heavily inflationary and that the cost of this policy will come, sooner or later.

[...] no country facing enormous budget deficits, rapid growth in the money supply and the prospect of a sustained currency devaluation as we are has ever experienced deflation. These factors are harbingers of inflation.

He incuses policy makers, both at the Fed and Congress, to sacrifice the independence of the FED which simply has become the monetary arm of the treasury. It is the same independence that Paul Volcker had to fight for, and which was necessary to achieve the goal of lowering inflation rates.

Meltzer also argues that deflation is certainly not the problem, even though headline consumer price inflation approaches zero:

Some of my fellow economists, including many at the Fed, say that the big monetary goal is to avoid deflation. They point to the less than 1 percent decline in the consumer price index for the year ending in March as evidence that deflation is a threat. But this statistic is misleading: unstable food and energy prices may lower the price index for a few months, but deflation (or inflation) refers to the sustained rate of change of prices, not the price level. We should look instead at a less volatile price index, the gross domestic product deflator. In this year’s first quarter, it rose 2.9 percent — a sure sign of inflation.

Finally, Meltzer is not a friend of deficit-financed government programs.

It doesn’t help that the administration’s stimulus program is an obstacle to sound policy. It will create jobs at the cost of an enormous increase in the government debt that has to be financed. And it does very little to increase productivity, which is the main engine of economic growth.

His argument goes further:

[...] big, heavily subsidized programs are rarely good for productivity. Better health care adds to the public’s sense of well-being, but it adds only a little to productivity. Subsidizing cleaner energy projects can produce jobs, but it doesn’t add much to national productivity. Meanwhile, higher carbon tax rates increase production costs and prices but do not increase productivity. All these actions can slow productive investment and the economy’s underlying growth rate, which, in turn, increases the inflation rate.

In this respect, Meltzer hopefully errs.

Chiang Mai Initiative beschließt Krisenfonds für Asien

2009-05-03T09:28:00.000-07:00

Im Rahmen der Jahrestagung der Asian Development Bank vereinbarten die Mitglieder der sog. Chiang Mai Initiative (mehr dazu hier) die Schaffung eines plurilateralen Kreditmechanismus mit dem etwas unhandlichen Namen Chiang Mai Initiative Multilateralisation. Näheres dazu in der Abschlusserklärung der Finanzminister. Textauszug:

The objectives of Chiang Mai Initiative Multilateralisation (CMIM) are (i) to address the short-term liquidity problem in the region and (ii) to supplement the existing international financial arrangements. ... The total size of the CMIM is USD 120 billion with the contribution proportion between ASEAN and the Plus Three countries <d.h. China, Japan, Südkorea (MK)> at 20:80. mehr...

Joseph E. Stiglitz: The Seven Deadly Deficits

2009-04-29T01:23:00.000-07:00

Mit der Fragestellung "What the Bush years really cost us, and how President Obama can get the economy back on track." hat der Nobelpreisträger Joseph E. Stiglitz den Artikel "The Seven Deadly Dificits" verfasst. In diesem Artikel hat er die Wirtschaftspolitik der Bush-Regieung kritisiert und die Fehlentscheidungen der Bush-Regierung in sieben Defizite zusammengefasst, dazu sind: the values deficit, the climate deficit, the equality deficit, the accountability deficit, the trade deficit, the budget deficit, the investment deficit.

Die Ursache, warum das Publikum zu weing Wert auf das Wachstum der Difizite gelegt hat, liegt nach der Meinung Stiglitz in zwei Hypothesen:
"The first is that they simply trusted in supply-side economics—believing that, somehow, the economy would grow so much better with lower taxes that deficits would be ephemeral.The second theory is that by letting the budget deficit balloon, Bush and his allies hoped to force a reduction in the size of government."

Anschließend hat er der Obama-Regierung zwei Maßnahmen vorgeschlagen: Steuererhöhung und Senkung der staatlichen Ausgaben.

IWF plant eigene Anleihe

2009-04-28T12:44:00.000-07:00

Dies wird eine echt Innovation in der internationalen Finanzwelt: Der IWF plant die Begebung einer eigenen Anleihe, um seine Finanzmittel aufzustocken. Hier die Nachricht bei der Financial Times Deutschland: IWF plant erstmals eigene Anleihe. Und hier bei Bloomberg: IMF Considers Bond Issue to Raise Funds for Lending Programs. China hat seine Unterstützung schon angekündigt: China backs possible IMF bond issue.

Der IWF würde damit ein Stückchen mehr wie die Weltbank, die sich schon länger über Anleihen an den internationalen Kapitalmärkten finanziert. Der IWF dagegen hat sich traditionell aus direkten Einzahlungen seiner Mitgliedsländer finanziert.

Das Ende des Washington Consensus?

2009-04-26T01:19:00.000-07:00

Jonathan Holslag, Research Fellow des Brussels Institute of Contemporary China Studies, beerdigt den sog. Washington Consensus: 'Washington Consensus' a thing of the past now. Textauszug:

... the “Washington Consensus” about how the global economy should be run is now a thing of the past. ... the Obama administration is clearly moving towards the kind of government intervention that China has been promoting over the past two decades. In this model, the government, while continuing to benefit from the international market, retains power over the economy’s “commanding heights” through strict control over the financial sector, restrictive government procurement policies, guidance for research and development in the energy sector, and selective curbs on imports of goods and services.
...
As the US backtracks on its liberal standards, it is flirting with what can be called the “Beijing Consensus”, which makes economic development a country’s paramount goal and prescribes that states should actively steer growth in a way that suits national stability. What matters in this worldview is not the nature of any country’s political system, but the extent to which it improves its people’s wellbeing. At the diplomatic level, this implies that national interests, not universal norms, should drive co-operation. mehr...

Starker Tobak!

PS: Als Abrundung hier Hintergrundinformationen zum Washington Consensus.

China: Goldene Zeiten?

2009-04-24T08:11:00.000-07:00

Der Finanz-Blog www.creditwritedowns.com bringt die Meldung, dass China seine Goldreserven seit 2003 nahezu verdoppelt hat. Breaking news: China has been secretly stocking up on gold. Textauszug:

China revealed on Friday that it built up its gold reserves by three quarters since 2003, making it the world’s fifth largest holder of bullion. The move comes as European central banks continue to sell their gold and the International Monetary Fund has discussed selling some of its bullion reserves.

Und:

China is really looking at a lot of other options to get away from the U.S. dollar. The latest report is that it has been building huge gold reserves. There is no doubt that China wants to get out and away from the U.S. dollar now. We have heard SDRs, copper and precious metals all mentioned as plays out of U.S. dollars. How this will play out on currency markets and in the U.S. government bond market is no at all clear. mehr...

Neue Webseite mit Wirtschaftsdaten der G20

2009-04-23T06:47:00.000-07:00

Eine neue Webseite eröffnet den Zugang zu den wichtigsten Wirtschaftsdaten der G20: Principal Global Indicators.

Initiator der neuen Webseite ist (wie die Bundesbank meldet) die Inter-Agency Group on Economic and Financial Statistics. Sie wurde Ende 2008 ins Leben gerufen und setzt sich aus Vertretern der Bank für Internationalen Zahlungsausgleich (BIZ), der Europäischen Zentralbank (EZB), von Eurostat, des Internationalen Währungsfonds (IWF), der Organisation für wirtschaftlicheZusammenarbeit und Entwicklung (OECD), der Vereinten Nationen (UN) sowie der Weltbank zusammen. Den Vorsitz führt der IWF.

Vgl. dazu auch die Pressemeldung des IWF: Inter-Agency Group on Economic and Financial Statistics Launches G-20 Statistical Website

China: Aus dem Dollar-Dilemma ?

2009-04-22T01:54:00.000-07:00

China ist in eine Dollar Falle geraten, so meint Paul Krugmann in seinem Artikel "China's Dollar Trap". Aber was will das Reich der Mitte nun tun, um daraus zu kommen?

1. Vorschlag einer neuen Leitwährung anstatt Dollar
Zhou Xiaochuan, der Chef der Chinas Zentralbank ,hat eine umfassende Reform des internationalen Währungssystems und langfristig eine Ablösung des Dollars als weltweite Leitwährung geforder. ......Mehr
Wen Jiabao, der chinesischer Ministerpräsident, hat in der Jahrestagung des Boao Forum for Asia in der Debatte über eine internationale Reservewähurung nachgelegt. Wen Jiabao forderte von denjenigen Ländern, deren Währung international als Reserve betrachtet wird, namentlich von den Vereinigten Staaten, eine stärkere Überwachung ihres Finanzsystems. Zugleich kündigte er an, die internationale Bedeutung der chinesischen Währung Yuan ausbauen zu wollen. ......Mehr

2. Ausweiterung der wirtschaftlichen Zusammenarbeit in Asien
Zheng Xinli, the executive vice chairman of China Center for international Economic Exchanges, hat eine Verstärkung der wirtschaftlichen Kooperation auf dem Boao Forum for Asia aufgerufen. Textauszug:
First, to protect the safety of US Dollar reserves held by countries, Asian countries should join hands to demand that the U.S. make commitments to peg the value of US treasury bonds to the inflation rates of US Dollar.
Second, to promote the reform of international reserve currency system, Asian countries should, based on the Chiang Mai Initiative, explore the SDR as the Asian reserve currency.
Third, to step up the development of Asian countries, it is suggested to establish the Asian Infrastructure Investment Bank and Asian Agriculture Investment Bank. ......Mehr

3. Diversifikation der Investionen
"Vorsitige Investionen in Eurupa in einem angemessenen Umfang," so sagte der Chef des chinesischen Staatsfonds (CIC) Lou Jiwei am letzten Samstag bei einer Finanzkonferenz in China, "und wir haben hier viele guten Chancen identifiziert.".....Mehr
Zugleich sind die Inverstitionen in Afrika und Südamerika auch wesentlich gestiegen, wobei die meisten in der Energiebranche sind.

G20 London

2009-04-04T01:30:00.000-07:00

All documents from the G20 Summit in London, 2 April 2009, are available at www.g20.org.

BVerfG sieht europarechtlichen Klärungsbedarf in Bezug auf das Finanzmarktstabilisierungsgesetz

2009-04-04T01:26:00.000-07:00

Das Bundesverfassungsgericht sieht nach einem am 3. April 2009 veröffentlichten Nichtannahmebeschluss durchaus europarechtlichen Klärungsbedarf in Bezug auf das Finanzmarktstabilisierungsgesetz. Die Entscheidung ist hier verfügbar.

Freigeld

2009-03-20T03:01:00.000-07:00

Given the current stance of monetary policy, further decreases in interest rates are limited. In response, Greg Mankiw in his recent post seems to make a case für Silvio Gesell's old idea of Freigeld.

Economics in One Easy Lesson

2009-03-17T11:03:00.000-07:00

This is a short piece from slope of hope, a financial markets blog focused on "technical analysis". It begins like this:

Heidi is the proprietor of a bar in Berlin. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. more...

EZB - Stand halten!

2009-03-14T10:44:00.000-07:00

Wie schon in einem früheren Beitrag (und noch früher) dieses Blogs angedeutet, gibt es gute Gründe gegen eine Geldpolitik, die auf eine Senkung des Zinses am Interbankengeldmarkt auf Null Prozent abzielt. Leider scheinen diese Überlegungen in der Öffentlichkeit und in der Politik auf keinen fruchtbaren Boden zu fallen.

Nachtrag (15.03.2009)
Wenigstens nicht so in der EZB: Lorenzo Bini Smaghi, Mitglied des EZB Rats, sagte

[...] An excessively low level of interest rates may also have some unintended consequences in financial markets. It might drive some financial intermediaries out of business, for example money market funds having small, but strictly positive investment fixed costs and not anymore in the position to offer positive net returns to risk averse investors, thus risking large redemptions.

Buy American

2009-03-10T03:42:00.000-07:00

The FT reports that the Buy American strategy of the U.S. government has hit financial institutions in a strange way:

Bank of America has become the first US bank to withdraw job offers made to MBA students graduating from US business schools this summer, citing conditions laid out in its bail-out deal as the reason.
The recently passed $787bn stimulus bill in effect prevents financial institutions that have received money from the government’s troubled asset relief programme from applying for H1-B visas for highly skilled immigrants if they have recently made US workers redundant.

Where is this road taking us...?

Bounded rationality

2009-03-09T00:56:00.000-07:00

Robert Shiller (writing in the Financial Times) identifies the failure to control the animal spirits of financial markets as the key cause of the financial crisis. The Economist's Economics A-Z calls animal spirits the "colourful name that Keynes gave to one of the essential ingredients of economic prosperity: ... 'naive optimism'." In modern economics such behavior is often referred to as boundedly rational. Here is Robert Shiller's explanation of the problem:

Classical theory also tells us that financial markets will also be stable. People will only make trades that they consider to benefit themselves. When entering financial markets – buying stocks or bonds or taking out a mortgage or even very complex securities – they will do due diligence in seeing that what they are buying is worth what they or paying, or what they are selling.

What this theory neglects is that there are times when people are too trusting. And it also fails to take into account that if it can do so profitably, capitalism will produce not only what people really want, but also what they think they want. It can produce the medicine people want to cure their ills. That is what people really want. But if it can do so profitably, it will also produce what people mistakenly want.

It will produce snake oil. Not only that: it may also produce the want for the snake oil itself. That is a downside to capitalism. Standard economic theory failed to take into account that buyers and sellers of assets might not be taking due diligence, and the marketplace was not selling them insurance against risk in the complex securities that they were buying, but was, instead, selling them the financial equivalent of snake oil. more...

In other words: actors in financial markets are only boundedly rational and thus government has the duty to prevent - through appropriate regulation - that they take decisions that could be harmful for themselves, for others and for the market economy as a whole. In brief:

It is the role of the government ... to regulate asset markets so that people are not falsely lured into buying snake-oil assets. more...

See also Robert Shiller's and George Akerlof's new book on Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism.

Key Issues for the G20

2009-03-05T02:43:00.000-08:00

The Centre for Economic Policy Research (CEPR) in London has published a report for the upcoming G20 meeting. It is called "Macroeconomic Stability and Financial Regulation: Key Issues for the G20" and contains contributions by different authors. Among the proposals made are an insurance scheme for countries with strong reserve accumulation and domestic expansion of the economy, an adjustment of the Basel II capital requirements to mitigate procyclicality, a centralized CCP for CDS trades, a requirement to have rating agencies paid by investors rather than issuers, the establishment of a harmonized special bankruptcy regime for banks and the creation of an international financial stability fund. Almost all of this has been heard before. However, the report may be an important indication for the content of the measures the G20 might adopt. Are we witnessing the emergence of a consensus?

China: Record Budget Deficit

2009-03-05T00:39:00.000-08:00

DPA reports: China sets record budget deficit as economic crisis bites. (Found in EarthTimes) By US or European standards even this record deficit is small (less than 3 % of GDP). But its increase raises questions with respect to the financing of the US budget deficit, which will also attain record levels. During recent years the US has relied on Chinese savings to finance its twin deficits. But what if China will now need more of its savings at home to finance its own deficit?

The US Deficit in Global Perspective

2009-03-03T20:00:00.000-08:00

The Big Picture, a well-known economics blog, provides an interesting glimpse of the US budget deficit in global perspective. Question: What do the GDP of Spain, of Brazil, of India, Australia, Switzerland etc. have in common? Answer: Each of them is smaller than the US deficit.

Conclusion (from the blog):

If the government fails in securing funding, a very high probability of systemic collapse.

Geldpolitik in Zimbabwe

2009-03-03T02:57:00.000-08:00

Über die globale Finanzkrise droht eines der größten Dramen der
Gegenwart in Vergessenheit zu geraten. In Zimbabwe hat die Inflationsrate dreistellige Millionenbeträge erreicht. Damit verbunden sind Hunger, Cholera und Verfolgung Oppositioneller.

Eine Gruppe mutiger Menschen im Land diskutiert eine Ordnung nach der Regierung Mugabe. Denn eine weigehende Reform unter Mugabe ist kaum denkbar, trotz der Beteiligung der MDC an der Regierung. Dies mag aber anders sein, wenn es um die Geldpolitik geht, denn auch die Regierung zieht keinen Nutzen mehr aus der Inflation. So ist die Währungspolitik ein Gegenstand dieser Diskussion; sogar von außen gibt es Beiträge. Steven Hanke hat zum Beispiel vorgeschlagen, einen Currency Board zu errichten. In einem kurzen Beitrag im Standard (Zimbabwe), Business Day (Südafrika) und VoxEU (http://voxeu.org/index.php?q=node/3153) diskutieren Peter Draper und ich diesen Vorschlag und vergleichen ihn mit Alternativen, nämlich der Übernahme des Rand als Währung in Zimbabwe sowie einer Anbindung des Zim Dollars an den Rand.

Die Currency Board Lösung kann als unrealistisch gelten, da die nötigen Währungsreserven fehlen. "Randisierung", wie von Südafrikas Präsident Motlanthe vorgeschlagen, ist glaubwürdeig, aber politisch nicht attraktiv, so dass wir die Wechslekursfixierung für die gangbarste Lösung halten, aber die "Randisierung" präferieren. Auf jeden Fall muss bald etwas geschehen, damit die Märkte in Zimbabwe wieder funktionieren können.

G20 Website

2009-02-28T08:26:00.000-08:00

The official website of the G20 is expanding:

https://www.g20.org/index.aspx

There is now a public area with publications and other information sources. The website states that

... as Chair of the G20 in 2009 the UK, working closely with Brazil and Korea 2008 and 2010 Chairs respectively, has established four working groups to advance this work for the next Leaders Summit on 2 April in London. Each working group is co-chaired by two senior officials from the G20, one from a developed and one from an emerging market economy. Each G20 country is represented on each working group. Experts from relevant international financial institutions, standard setting bodies, non G20 countries, business and academia have also been invited by co-chairs to input into the work of the groups.

The four working groups are

Working Group 1 - Enhancing sound regulation and strengthening transparency
Working Group 2 - Reinforcing international co-operation and promoting integrity in financial markets
Working Group 3 - Reforming the IMF
Working Group 4 - The World Bank and other multilateral development banks (MDBs)

The forthcoming London summit has its own website: http://www.londonsummit.gov.uk/en/

Clear Rules of the Road

2009-02-27T02:53:00.000-08:00

President Obama has outlined seven key principles for the future regulation of capital markets. They are remarkably abstract and aloft. Everybody would agree, for instance, that there must be stricter oversight of financial institutions - but what institutions, and who should exercise supervisions? Nobody doubts that markets need to be strengthened - but how? And what does he mean by "actual data on how actual people make financial decisions"? In a statement, the President has underlined that financial markets need "clear rules of the road". But so far, he has not given any indication of what their content might be.

Did math formula cause financial crisis?

2009-02-25T20:00:00.000-08:00

This is the title of a short interview on Marketplace, a US public website which is part of American Public Media. The subject of the interview are copula, a statistical device used in the pricing of collateralized debt obligations (CDOs) and in other applications of financial risk assessment. More on this can be found in Felix Salmon's article Recipe for Disaster: The Formula That Killed Wall Street in Wired Magazine.

New Capital Assistance Program for US Banks

2009-02-24T02:06:00.000-08:00

The latest version of the US government's rescue plan for commercial banks - the Capital Assistance Program (CAP) - was published yesterday by the US Treasury Department: Joint Statement by the Treasury, FDIC, OCC, OTS and the Federal Reserve. The program will begin on February 25. Here is the key passage of the joint statement:

Under this program ... the capital needs of the major U.S. banking institutions will be evaluated under a more challenging economic environment. Should that assessment indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital. Otherwise, the temporary capital buffer will be made available from the government. <...> Any government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory. Previous capital injections under the Troubled Asset Relief Program will also be eligible to be exchanged for the mandatory convertible preferred shares. more...

The new program could result in the nationalization of major US banks, with Citigroup being the first. Cf. the reports in the Washington Post and the New York Times. Paul Krugman argues that nationalization is unavoidable: Isn’t nationalization un-American? No, it’s as American as apple pie. Treasury Sectretary Timothy Geithner disagrees: Nationalization is the wrong strategy.

Protectionism within Europe

2009-02-22T03:00:00.000-08:00

... is rearing its ugly head and the EU Commission is getting increasingly concerned about it, as financial24.org reports:

The European Commission, increasingly concerned about protectionist tendencies in member states, has asked France, Spain and, on Friday, Italy to justify their auto sector aid packages.
The EU's executive arm has some concerns over Italy's plan to aid its ailing auto sector and was writing to Rome Friday to seek more details, a spokesman said Friday. The commission will write to the Italian authorities today asking them to provide precise details on the measures within five working days, he added. One particular area of concern is that the government help seems to be available only to businesses that sign a protocol with the government, he said. Such aid could be discriminatory against companies who do not want to sign and in that case it would be state aid because it would be selective and threaten the free circulation of goods, he added. more...

Barroso calls for curb on bankers' bonuses

2009-02-22T02:39:00.000-08:00

European Commission chief Jose Manuel Barroso calls for curb on bankers' bonuses. This is a report by financial24.org, based on Barroso's interview with Hamburger Abendblatt. (Here the German original: Scheitern darf nicht belohnt werden). Excerpts from the English report:

The payment of excessive bonuses incites financial managers to take ill-considered risks, Barroso told the German daily Hamburger Abendblatt. Rather, a system should be established that curbs the greed to realise quick profits and that doesn't reward failure, he said. The European Commission would examine a proposal to this effect in April or May, he told the newspaper. more...

EU-based central clearing for CDS

2009-02-21T07:20:00.000-08:00

EurActiv.com reports on an agreement reached among banks and brokers involved in the credit default swaps industry: Industry commits to central clearing for credit swaps. Excerpts:

Major banks and brokers involved in the credit default swaps industry committed yesterday (19 February) to use EU-based central clearing for their trades, bowing to pleas from regulators to lower the risks of this business which stands accused of worsening the ongoing financial crisis. ...
Credit default swaps are a particular type of credit derivatives aimed at guaranteeing a creditor against the risk of default or delays in getting back the credit. ... The idea of establishing a central clearing house is considered a moderate way to reduce systemic risks related to derivatives. Instead of being exchanged privately ("over the counter", according to the jargon), they will be processed through a third intermediary, which will decrease costs and risks while raising guarantees. ...
Following pressures from the Parliament and the Commission, the main firms active in the market of credit default swaps agreed to use central counterparty clearing for the "eligible" EU contracts by end-July. They confirmed their engagement with a letter sent to commissioner Charlie McCreevy responsible for the EU internal market. The signatories of the letter are Barclays Capital, Citigroup Global Markets, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley and UBS, all members of the International Swaps and Derivatives Associations (ISDA). more...

The slightly discordant note in this piece of good news is that the agreement seems to refer only to European contracts -- which would contradict the stated intentions of Chancellor Angela Merkel. In Mehr internationale Regeln für Finanzmärkte (also here) she states:

Wir wollen sicherstellen, dass es in Zukunft keine weißen Flecken mehr auf der Landkarte unserer Welt gibt, wenn es um Finanzmarktprodukte geht, wenn es um die Teilnehmer des Marktes geht und wenn es um die Instrumente geht.

Hedge Funds As Innocent Bus Crash Victims

2009-02-19T01:31:00.000-08:00

In the current financial crises, the finger is sometimes pointed to hedge funds, which amass huge amounts of capital without being subject to public oversight. One hedge fund manager has now denied any responsibility. Marshall of Marshall Wace told the U.K. House of Commons Treasury Committee that "Blaming hedge funds is like blaming the passengers in a bus crash."

Banker-Boni

2009-02-19T00:53:00.001-08:00

... sind derzeit im Gespräch. Gier, Neid und Niedertracht -- das Thema hat Massenappeal. Stellvertretend aus einer Vielzahl von Berichten hier ein Artikel aus dem Spiegel: Investmentbanker kassieren Millionen trotz Boni-Stopp. Dies ist keine "typisch deutsche" Neid-Debatte, kein deutscher Sonderweg. Dasselbe Thema erhitzt auch anderswo die Gemüter. Vgl. dazu die Google-Suche zum Stichwort executive pay caps. In der Tat ist es nicht einzusehen, dass Banker Boni in Millionenhöhe kassieren sollen, wenn sie so schlecht gewirtschaftet haben, dass ihre Institute nur mit staatlichen Finanzspritzen überleben können. Dies wirft wirtschaftliche, ethische und juristische Fragen auf.

Aus wirtschaftswissenschaftlicher Sicht macht gerade eine nüchterne empirische Analyse Furore, und zwar die Studie Wages and Human Capital in the U.S. Financial Industry: 1909-2006 von Thomas Philippon (New York University) und Ariel Reshef (University of Virginia). U.a. das Handelsblatt (Banker sind überbezahlt wie schon 1929) und Associated Press (Wall Street's culture of entitlement hard to shake) greifen sie auf. Die Autoren belegen mit ökonometrischen Methoden, dass die Gehaltsentwicklung im US-Finanzsektor nur mit einer anderen historischen Epoche vergleichbar ist: der Boom-Zeit vor der Großen Depression, die mit dem Aktiencrash vom Oktober 1929 endete. O-Ton der Studie:

This finding is prima facie evidence that the financial sector is not in a sustainable labor market equilibrium, and that short term rents are likely to diminish.

Klartext: Die Gehaltsentwicklung im Finanzsektor war nicht nachhaltig. Ein beträchtlicher Rückgang der dort erzielten (bzw. erzielbaren) Einkommen ist unvermeidlich.

Doch das Thema hat auch eine ethische Dimension. Offenbar tut sich hier ein Abgrund auf zwischen dem, was für Normalbürger ethisch selbstverständlich ist, und dem, was in der Welt der Investmentbanker als normal gilt. Unter der Überschrift John Thain fällt in Ungnade*/ macht die LA Times dazu eine kluge Beobachtung:

The long hours many bankers work help feed an attitude of entitlement, Freeman said."I've had former students talk about sleeping under their desks," he said. "This leads to this idea of, I'm entitled to being rewarded. But sometimes, that's disconnected from performance."

Will heißen: Die 24/7-Kultur, die bei Investmentbankern gepflegt wurde (wird?), führt bei ihnen zu dem Gefühl, die Millionenboni verdient zu haben. Dass sie mit ihrer Arbeit -- der Erzeugung von toxischen Finanzprodukten -- keine oder sogar negative Werte geschaffen haben, passt nicht in ihr Weltbild. Anders gesagt: die Investmentbanker beurteilen sich selbst nach ihrem Input (und der ist enorm), der Rest der Welt beurteilt sie nach ihrem Output - und der ist derzeit negativ.

Und schließlich der juristische Aspekt. Angeblich sind die Boni - da arbeitsvertraglich zugesichert - nicht kürzbar. In seinem Interview Geld des Steuerzahlers nicht für Boni erklärt der Staatsrechtler Otto Depenheuer von der Universität zu Köln, warum dem (nach seiner Ansicht) nicht so ist.

*/ John Thain (früher Merrill Lynch) war 2008 der Topverdiener an der Wall Street: Executive Pay: The Bottom Line for Those at the Top aus der New York Times.

Bail out: transatlantic differences

2009-02-18T09:46:00.000-08:00

Recent developments on both sides of the Atlantic are puzzling. Looming defaults of some Euro area countries like Ireland, Spain or Greece put the Euro under pressure while at the same time the imminent danger of a default of California does not cause a weakening in the US dollar (see FTD) .

The most interesting thing about this: For members of the Euro area there is no doubt that a bail out will take place once a member has to default (see the statement given by the German Federal Minister of Finance in the final paragraphs of this piece). As for California, a bail out cannot be taken for granted.

Does this imply that markets do not demand bail outs but actually punish them?!

Maybe the answer is that markets expect that California, as the world's economically strongest region, could afford an increase in taxes for paying down its debt, while this option is not available to Euro area countries like Ireland, Spain and Greece...

Gesetz zur weiteren Stabilisierung des Finanzmarktes

2009-02-18T06:30:00.000-08:00

Hier findet sich der am 18. Februar 2009 vom Bundeskabinett beschlossene Entwurf des Gesetzes zur weiteren Stabilisierung des Finanzmarktes, mit dem u.a. die vieldiskutierten Enteignungen von Banken möglich werden sollen.
Zum Inhalt des Gesetzes heißt es in der offiziellen Vorlage wie folgt:
"Der Entwurf sieht vor allem Anpassungen und Verbesserungen bei den Begleitregelungen im Gesellschafts- und Übernahmerecht vor, damit Stabilisierungsmaßnahmen schnell und effektiv greifen können und Übernahmen zum Zweck der Stabilisierung erleichtert werden. Diese Änderungen gelten nur für Unternehmen, die die Leistungen des Stabilisierungsfonds in Anspruch nehmen oder nehmen wollen. Darüber hinaus schafft der Gesetzentwurf die zeitlich eng befristete Möglichkeit, zur Sicherung des öffentliches Gutes „Finanzmarktstabilität“ Anteile an einem Unternehmen des Finanzsektors und Wertpapierportfolien gegen angemessene Entschädigung zugunsten des Bundes oder des Finanzmarktstabilisierungsfonds zu verstaatlichen. Die Verstaatlichung ist nur zulässig, wenn andere rechtlich und wirtschaftlich zumutbare Lösungen zur Sicherung der Finanzmarktstabilität nicht mehr zur Verfügung stehen."

Aida - nicht von Verdi und auch keine Kreuzfahrt

2009-02-18T06:00:00.000-08:00

Das Handelsblatt beschreibt die sich nunmehr abzeichnende Aida-Lösung für die geplante Bundesanstalt für Bad Banks:

... Kern des Modells sei eine Holding, die nach dem Vorbild der staatseigenen Förderbank KfW von den Vorschriften des Kreditwesengesetzes (KWG) befreit wäre. Diese Holding bildet sozusagen das Dach einer Halle, in der dann die Bad Banks der einzelnen Institute stehen. Sie wären ebenfalls Anstalten des öffentlichen Rechts und damit „Anstalten in der Anstalt“ – kurz Aida. Deshalb heißt das Projekt auch „Aida-Modell“. mehr ...

In German - Wissenschaftliche Beirat beim Bundeswirtschaftsministerium zur Bankenregulierung in der Finanzkrise

2009-02-17T06:41:00.000-08:00

Eine ausführliche Stellungnahme des wissenschaftlichen Beitrages beim BMWi zur Bankenregulierung in der Finanzkrise ist hier verfügbar.

IMF Gains New Funding, Puts Focus on Bank Clean Up

2009-02-16T08:46:00.001-08:00

Warning that the global economic crisis is set to bite emerging markets and low-income countries harder this year, IMF head Dominique Strauss-Kahn says he aims to double the Fund's lendable resources to $500 billion and boost loans for poorest. See here

Bad Banks: transatlantic differences

2009-01-30T03:35:00.000-08:00

Bank rescue packages in Europe and in the USA seem to diverge. While the US administration is thinking about the creation of a national bad bank (e.g. here), a similar proposal in Germany was discussed but seems to have been shelved, as FAZ reports: Nationale "Bad Bank" praktisch vom Tisch

"Bad Banks" for Beginners

2009-01-24T03:06:00.000-08:00

This is the title of an Op-ed by Simon Johnson and James Kwak which gives a short but instructive introduction to using "Bad Banks" to bail out commercial banks with bad assets. Both pros and cons are discussed. It's a useful read, especially so since Bad Bank-proposals are seriously being discussed in Europe and in the United States.

In a nutshell

2009-01-05T05:20:00.000-08:00

Subprime bubble --> Financial crisis --> Credit crunch --> Recession --> Stimulus package --> Buy American!

And what's next?

Update on 30. January: Now it's almost official -- Buy American stimulus ...

Should we fear a trade backlash?

2009-01-01T11:00:00.000-08:00

... is what Barry Eichengreen asks in the Guardian. And his answer seems to be: yes, we should. Reasons are the protectionist rhetoric of the US president-elect and the de facto protectionist measures already in place or at least envisaged, such as government guarantees for the financial industry and bail-out packages for the auto industry.

PS: Arvind Subramanian (Peterson Institute) weighs in: From Financial Folly to Trade Troubles?

The US housing bubble in historical perspective

2008-12-30T11:47:00.000-08:00

Blogger Barry Ritzholtz at The Big Picture presents a diagram with the long-term evolution of US housing prices according to the Case-Shiller index. The diagram shows the extreme overvaluation during the housing bubble that began in the late 90s and burst in 2007. The diagram also suggests that a further massive downward correction is unavoidable during the coming years.

Summers: A Stimulus Must Aim for Long-Term Results

2008-12-27T03:40:00.000-08:00

Larry Summers, designated director of Barack Obama's National Economic Council, has published the first inside statement on Obama's fiscal stimulus package. The focus will be on investment:

Investments in an array of areas -- including energy, education, infrastructure and health care -- offer the potential of extraordinarily high social returns while allowing our country to address some long-standing national challenges and put our economy on a solid footing for years to come. more...

The stimulus package is supposed to create 3 million new jobs:

... more than 80 percent of these 3 million jobs will be in the private sector, including emerging sectors such as environmental technology. This is a bold goal. But economists across the political spectrum recognize that it is far less risky to stand firmly against the forces propelling our economy downward than to be timid in the face of a mounting crisis. more...

For a skeptical view of the proposed stimulus package, see this entry in Greg Mankiw's blog with further links.

Schuldenverbot im Grundgesetz?

2008-12-24T07:49:00.000-08:00

Hans-Jürgen Papier, Präsident des Bundesverfassungsgerichts, warnt in seinem heutigen Interview mit dem Hamburger Abendblatt vor einer fortwährenden Expansion der staatlichen Aufgaben und Ausgaben. "Wenn die Schuldenlast immer größer wird, geht insbesondere in Krisenzeiten die Lenkungs- und Gestaltungsfähigkeit des Staates verloren." Im Hinblick auf die aktuelle Finanz- und Wirtschaftskrise und das geplante schuldenfinanzierte Konjunkturpaket sagt er: "Die Begrenzung der Staatsverschuldung ist vom Bundesverfassungsgericht als ganz zentrale Aufgabenstellung bewertet worden. ... Das Ziel der Haushaltskonsolidierung sollte nicht aus den Augen verloren werden." Auf die Frage, welche Schuldenbremse er sich vorstellen könnte, antwortet er: "... etwa die Verankerung eines absoluten Schuldenverbots im Grundgesetz, das nur in wirklichen Notzeiten durchbrochen werden darf, gegebenenfalls mit qualifizierter Parlamentsmehrheit."

Dazu zwei Einwürfe (von ökonomischer Seite) zur Anregung einer Diskussion:

Die herrschende Meinung unter Ökonomen (= Mainstream-Ökonomie) sieht das anders; sie befürwortet, dass der Staat in der Krise genau nicht auf Haushaltskonsolidierung setzt, sondern sich antizyklisch verhält.
Auch die geltenden Regeln der EU (Stabilitäts- und Wachstumspakt) sehen vor, dass ein Staat im Falle einer schweren Rezession - die ja nach der gegenwärtigen prognostischen Gemengelage tatsächlich droht - von der Pflicht zur Wahrung eines ausgeglichenen Haushalts befreit ist.

A primer on quantitative easing ...

2008-12-23T10:34:00.000-08:00

... on video at vimeo. This link has the imprimatur of Greg Mankiw. More video coverage of the financial crisis can be found at marketplace.org/financialcrisis.

Need more arguments against ZIRP?

2008-12-21T11:53:00.000-08:00

Zero Interest Rate Policy (ZIRP) may be doomed to fail in stimulating a stumbled economy. The reason is that at zero rates financial intermediaries are not inclined or able to raise funds and to lend them out. But it is exactly this kind of business what the Fed needs to get the economy back on track. As the FT reports, ZIRP has taken money market funds hostage-perhaps the only remaining intermediaries that, until recently, continued to create market liquidity.

American Sonderweg?

2008-12-20T01:04:00.000-08:00

While the European Union is working on tighter regulation of hedge funds (see previous post), the Federal Reserve will effectively start acting as a prime broker for them, as the Financial Times reports: Hedge funds gain access to $200bn Fed aid. For a critical discussion, see also the corresponding entry in the investment banker blog naked capitalism with further links.

Hedge funds' access to Federal Reserve credit will take place in the context of TALF, the Term Asset-Backed Securities Loan Facility. (Fed's Press Release on the new rules for TALF.) In opening TALF for hedge funds, the Fed will help them get the leverage they need for their business model. In effect, the Fed will help hedge funds to stay alive in an environment that has become increasingly hostile for them. More on hedge funds' problems in times of the credit crunch can be found in FAZ: Kampf um die Zukunft.

This brings me to my question: Why keep hedge funds alive with public funds? I say: Don't do it! Let them wither away and die a natural death. Let them become the dinosaurs of economic evolution. One less problem to worry about.

Commission launches public consultation on hedge funds

2008-12-18T10:04:00.000-08:00

Today, the European Commission has launched a wide-ranging public consultation on hedge funds. It asks for views on problems such as systemic risks, market integrity and efficiency, risk management and transparency. The text of the consultation can be found here. This consultation must be seen in context with a resolution of the European Parliament of September 23, 2008, which has called for a tighter regulation of hedge funds and private equity. The resolution had been prepared by reports by Poul Nyrup Rasmussen and Klaus-Peter Lehne. It remains to be seen whether the activities of the Parliament and the Commission will result in a European hedge fund regulation.

Why does the ECB hesitate to further slash its policy rates?

2008-12-16T08:14:00.000-08:00

The WSJ reports on differences between the Fed and the ECB: While the former is keen to drive Fed Funds Target Rate to zero, the Europeans are less inclined to further decrease policy rates - at least not as fast as they did since October. Incomprehension prevails about the ECB's apparent reluctance. But the Japanese experience taught us the following (BIS Working Paper No. 188). On page 16 the authors write:

Under the QEP [Quantitative Easing Policy], financial institutions have increased their dependence on the BOJ’s [Bank of Japan] money market operations as a means of adjusting their reserve balances. The financial institutions with a funds shortage have become more dependent on the BOJ’s funds-providing operations, while those with a funds surplus have come to use the BOJ’s funds-absorbing operations as a means of investing funds. Put differently, the BOJ has come to play the role of a money broker. This is the mechanism through which the BOJ has provided ample liquidity. However, when concerns over the financial system’s stability have receded and the precautionary demand for liquidity has declined, the BOJ has often faced difficulties in its attempt to supply liquidity. Specifically, it has experienced undersubscriptions in fund-providing operations: the total amount of bids have fallen short of the amount offered by the BOJ even at the lowest bidding interest rate of 0.001%.

More importantly:

As financial institutions have become more dependent on the BOJ’s money market operations, the size of the call market [...] has contracted further [...] This reduction in the size of the call market reflects lowered trading incentives for the following two reasons: first, the returns on investment in the call market have declined to a level that cannot cover trading costs [...]. Second, credit spreads have been narrowed substantially. A call rate of 0.001% means that the average of all borrowing rates is 0.001%, leaving little room for differences in rates between individual borrowers.

While the second reason may not hold under current conditions (credit spreads have substantially widened since Lehman), the first one is striking: when a central bank wants financial institutions to lend again to each other, policy rates at zero bound may be detrimental!

Econobloggers...

2008-12-08T10:05:00.000-08:00

...are just about to change the way of policymaking. If someone looks for a good reason for blogging, see here.

Rescue Plan for American Automakers

2008-12-06T00:33:00.000-08:00

The U.S. congress stands ready to bail out the auto industry by planning a series of loans to detroit carmakers. These loans are going to be associated with close government oversight to make sure that they will actually be used to reorganize the companies and to make them prepared for competition both in terms of costs and products. Nancy Pelosi, speaker of House of Representatives, said in a statement that “Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long-term viability and competitiveness of the American automobile industry.”

I merely wonder whether the U.S. officials are just about to declare that capitalism has failed. Those who are familiar with the reasons for the current misery in the U.S. auto industry may ask two questions: First, why did the industry not already take the required measures in recent years? Second, why has government to step in and to help the auto industry just in the mid of a financial crisis?

Maybe, answers can be found in Neo-Schumpeterian growth economics. To the first question: as long as the economy has boomed, marginal returns on investments in human capital intensive inventions, innovative and cost-reducing technologies have been small compared to those on investment in increasing capacity (for the simple reason that meeting the high demand in the boom is of first priority). To the second: When the economy stumbles and finds itself in a recession, the former kind of investment is more valuable than the latter one. Owing to dried up company-internal funding sources in these times, those investments have to be financed externally which is rather hard even in normal times because human capital is often not a good collateral for lending. But when there is also a financial crisis around, raising funds for those purposes is almost impossible.

While the second answer seems to be well-suited for the current problems in U.S. auto industry, one may still doubt that the answer to the first question is right.

Worried about the crisis? Have some inflation!

2008-12-05T00:09:00.000-08:00

Two renowned US economists are arguing that inflation is the best way to combat the financial crisis. In their article on the webpages of the Peterson Institute for International Economics they argue that inflation (i) is preferable to deflation and (ii) in times of crisis has many advantages of its own. One of the advantages - according to them - is that inflation in the US induces a depreciation of the US dollar vis-à-vis the euro and thus effectively forces the ECB to engage in a more expansionary monetary policy (whereas in the case of a fiscal stimulus in the US the Europeans would free ride on the US expansion).

If this is a representative opinion among US economists then within the next few months we will see a huge fiscal expansion in the US (announced: fiscal stimulus of up to $700bn) accompanied by a massively expansionary monetary policy deliberately aimed at generating inflation.

My recommendation to the rest of the world: Tighten your seat belts!

PS: One of the two authors is Simon Johnson.

How (not) to combat a banking crisis

2008-12-01T09:03:00.000-08:00

The Latvian authorities are testing a new approach to combat the financial crisis, as the Wall Street Journal reports: Overly pessimitic university teacher arrested. Honestly, I prefer the more traditional approach using monetary and fiscal policy. (Hier auf Deutsch)

A proposal to avoid deep recession

2008-11-27T00:08:00.000-08:00

I am afraid to say this: We have to take Keynes‘ General Theory from our backmost shelf: Financial markets currently exhibit something similar to what Keynes told us is a liquidity trap. Not in a sense of people hoarding money but treasuries. The Fed has finally started to encounter this by a policy of quantitative easing inter alia by taking corrective actions directly in private credit markets.

The recent decline in treasury yields below 3 per cent does not incite private investors to put their money into firms. Given the uncertainty and gloomy prospects it is likely that firms do not want to raise a loan because there is no business to finance. Is that what Keynes called an investment trap?

What remains for policy makers to do about this misery? Taxes down, government expenditures up? Monetary policy? Given that Keynes is even right about effectiveness of economic policy in times of severe distress, lowering direct taxes will not work as private savings will simply eat them up without having any effect on interest rates (rates are already at historical lows). Other riskier investments than treasuries will not be made because of uncertainty and gloomy prospects. Even if savings finally find their way to banks, it is most likely that banks will put most of them into treasuries in order to clear their balance sheets at least as long as the financial crisis continues to hold.

In the light of its importance for economic activity, economic policy must do anything suited to foster consumption. For this we need a temporary and sharp reduction in the real interst rate that rapidly affects foremost consumption. Given dysfunctional financial markets, the traditional interest rate pass through from monetary policy instruments to consumption relevant interest rate is broken. Traditional monetary policy hence does not help. Only if central banks intervene directly in markets for private credit (what the Fed‘s new TARF instrument seems to aim at) one may expect a monetary impulse. This, however, can turn out badly in terms of allocative efficiency as it cannot be warranted that funds will flow where they are needed most. Effective fiscal policy seems more appropriate to boost consumption when it reduces value added tax or sale tax temporarily and surprisingly (admittedly, this proposal is in sharp contrast to what Taylor suggests) because that way the real interest rate that is directly relevant for consumption will decrease.

But there is a problem at least for continental Europe: price rigidity. It cannot be expected that firms will reduce prices in an instant when sale taxes fall even if competition is fierce. However, price rigidity also means that they will not increase simultaneously when consumption gains momentum.

What about this: At the end of, let say, each month, households can present their bills and receipts to fiscal authorities or tax offices to get allowances for their tax expenditures. For this being most effective, sale taxes are refundable in full and limited for one year.

IMF Working Paper - The Task Ahead

2008-11-26T09:11:00.000-08:00

An interesting IMF Working Paper

IMF Working Paper
Research Department
The Tasks Ahead
Prepared by Olivier J. Blanchard
November 2008

Download

Vorträge im Rahmen des Graduiertenkollegs am 27. November in Jena

2008-11-18T08:54:00.000-08:00

Das Graduiertenkolleg
„Global Financial Markets“
der Universitäten Jena und Halle-Wittenberg
lädt zu folgenden Vorträgen ein:

„The Current Financial Crisis: Iceland – A Case Study in Societal Collapse”
Jón Baldvin Hannibalsson
Finanz- und Außenminister Islands 1987-1995

„Die aktuelle Finanzkrise als Herausforderung für Ökonomie und Jurisprudenz“
Prof. Dr. Christoph Ohler, LL.M.
Friedrich-Schiller-Universität Jena

Zeit: 27.11.2008, 16:30 Uhr
Ort: Senatssaal, Universitätshauptgebäude, Universität Jena

Calls for Papers

2008-11-17T09:34:00.000-08:00

Financial Markets and Portfolio Management, the quarterly finance journal published by the Swiss Society for Financial Market Research, has two very interesting Calls for Papers which I find fit very well in our program:

Regulation after the Crisis

Monetary Policy and Financial Markets

German loan guarantees for Adam Opel...

2008-11-17T08:12:00.000-08:00

...might soon prove a huge mistake. Adam Opel, a German carmaker, has been heading for government loan guarantees in order to close its current liquidity gap (although it has been officially declared that this step is only a precautionary step and not a sign of Opel's financial weakness). German government says ready to help Opel.

But what is most likely to happen when government steps in? Will this measure calm financial markets? In a multinational corporation like GM, with the firm internal use of funds being hardly controllable or at least observable by financial markets, it is most likely that headquarters will abuse any additional dollar raised externally. In particular, anyone who is providing fresh funds to GM (or guarantees newly issued debt) will have to face the risk of huge losses in the case of bankruptcy, because of funds having been invested into almost intangible assets. And this danger is real -- given the enormous liabilities which GM has for example vis-a-vis its pensioners. Any dollar that is used to meet the pensioners' demands, though it may help GM in the short-run, could not be recovered in the case of bankruptcy.

Hence, either Opel has to be spun off first, or there is a fair amount of risk that the government will throw its money away by guaranteeing Opel's debt.

The summit labored ...

2008-11-15T12:45:00.000-08:00

... and brought forth a joint declaration. The declaration - together with further information - can be found on the summit website of the White House. The first sentence reads:

We, the Leaders of the Group of Twenty, held an initial meeting in Washington on November 15, 2008, amid serious challenges to the world economy and financial markets.

Quite obviously this is a nod to another famous opening phrase: We the People This sets a high benchmark for the results that should be expected from the work agenda spelled out in the declaration.

Detailed analysis & discussion of the summit declaration will follow on these web pages.

Für eine deutsche Version bitte hier klicken: Der Weltfinanzgipfel kreißt ...

Call for papers - Finlawmetrics 2009

2008-11-15T07:08:00.000-08:00

I just came across this interesting Call for Papers which some of us may be aware of...

http://portale.unibocconi.it/wps/allegatiCTP/call%20for%20papers%20071108.pdf

U.S. Does Not Support a Global Crisis Regulator

2008-11-06T07:17:00.001-08:00

The New York Times reports on the preparations for the world financial summit in Washington on November 15. It becomes increasingly clear that no major decisions on changing the regulatory framework for financial markets can be expected from this summit. The Bush administration is opposed to this, while President-elect Obama clearly distances himself from the summit so as to avoid - according to the article - "being pinned down by commitments made by his predecessor". The article concludes by suggesting that the only concrete result that could be expected from the summit in the given situation is an agreement about a coordinated fiscal stimulus in the leading economies. This would be in line with the latest IMF recommendations.

PS: Dani Rodrik (Harvard) is critical vis-à-vis the current US stance.

EU urges reform of the IMF

2008-11-05T06:40:00.001-08:00

According to EuropeanVoice.com, European leaders have agreed that the International Monetary Fund should be reformed to ensure that the institution is better able to anticipate future financial crises. Among other things, they agreed that developing countries should have a greater say in IMF decision making and that the Financial Stability Forum should be reformed and that its work should be better coordinated with the work of the IMF. While this is unequivocally positive, closer reading reveals the differences between member countries' positions. There are areas of agreement but there are other areas where the member countries agree to disagree. As a result, this European initiative will remain largely a French initiative and will be presented as such at the world financial summit in Washington on November 15 - which undoubtedly will reduce its effectiveness. If we combine this with the news that the President-elect will most likely not attend the summit, we come to the conclusion that no major policy decisions can be expected from this summit. Most likely any far-reaching reforms of the world financial system will have to wait until the new president takes office.

DAX is going crazy due to VW

2008-11-03T04:52:00.000-08:00

Last week has been unique in the history of Germany's most important stock exchange, Deutsche Börse. Although the shares of other companies were in free fall due to the financial crisis, the price of VW shares rose in the first two days of the week by 225% to more than 1000 Euro. This caused the DAX to raise instead to fall. As a consequence, Deutsche Börse was forced to change its rules, which now allow for an extraordinary diminution of a company's weight in the composition of the DAX. Although the reasons for the spectacular rise of VW shares have yet to be investigated, it seems that short sellers, especially hedge funds, needed to cover bets that had gone awry. There have been rumors that Porsche, the majority shareholder, itself has sold stocks to these funds. Legally speaking, this is a problem of “market abuse”. But has the market indeed been abused or have some market participants just bet on the wrong horse? And how much does an index need to be legally protected against transactions like these? It seems that these questions must be answered from an economic perspective.

Ph.D. Scholarships - Applications

2008-11-03T04:33:00.000-08:00

Doctoral Fellowships - Post-Graduate Program
Fundamental Principles of Globalized Financial Markets – Stability and Change
The Ph.D. progamme "Fundamental Principles of Globalized Financial Markets – Stability and Change" is part of the research programme "Global Financial Markets" of the University Jena and the University Halle, Germany. The program initially offers 8 doctoral fellowships.
Candidates should have an excellent academic background and pursue a Ph. D. in the above mentioned fields of research, linking law and economics. Applications from abroad are welcome. The post graduate programme offers an interdisciplinary, four semester study program in German and English examining the current questions of international financial markets. Active participation as well as attendance in the research study program in Jena and Halle is expected from the candidates. The financial grant amounts to 1.150 Euro per month for 3 years maximum. Applications with the usual personal and academic record (vita, certificates, academic publications) have to be electronically submitted to both spokesmen of the post-graduate programme.
Prof. Dr. Christoph Ohler, LL.M. Rechtswissenschaftliche Fakultät Friedrich-Schiller-Universität Jena Carl-Zeiss-Str. 3 D-07743 Jena christoph.ohler@recht.uni-jena.de
Prof. Dr. Christian Tietje, LL.M. Juristische und Wirtschaftswissenschaftlich Fakultät Martin-Luther-Universität Halle Universitätsplatz 5 D-06099 Halle (Saale) christian.tietje@jura.uni-halle.de
Application has to be received by 31. March 2009.

Vortrag Prof. Pohl zur Finanzmarktkrise

2008-11-01T06:54:00.000-07:00

Am 23. Oktober 2008 hielt Prof. Dr. Rüdiger Pohl, Wirtschaftswissenschaftlicher Bereich der Juristischen und Wirtschaftswissenschaftlichen Fakultät der MLU und ehemals Direktor des Instituts für Wirtschaftsforschung Halle (IWH), am Institut für Wirtschaftsrecht der MLU einen Vortrag zum aktuellen Thema “Aus der Balance – Die Krise an den Finanzmärkten”. Die Audioaufnahme des Vortrags sowie Materialien sind hier verfügbar: