Post Tagged with: "sectoral balances"

Trends and prospects for private-sector deleveraging in advanced economies

Trends and prospects for private-sector deleveraging in advanced economies

Major advanced economies have made mixed progress in repairing the private sector’s balance sheets. This column explores private sector deleveraging trends and calls for a set of policies that will return debt to safer levels. Monetary policies should support private sector deleveraging and policymakers should not ignore the positive impact of debt restructuring and write-offs on non-performing loans.

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Monetary offset, fiscal determinism and asset bubbles: a Wynne Godley-style mental model for US economic forecasting (wonkish)

Monetary offset, fiscal determinism and asset bubbles: a Wynne Godley-style mental model for US economic forecasting (wonkish)

Yesterday was a big conference day in Washington, D.C., with the IMF and World Bank meeting and with the Brookings Institution holding an event featuring the Greek and German finance ministers. While I attended the Brookings event, the event I thought most interesting was the 24th Annual Hyman P. Minsky Conference at the National Press Club held by the Levy […]

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Repeat after me: sectoral balances must sum to zero

Repeat after me: sectoral balances must sum to zero

By Frances Coppola I do like sectoral net lending charts. This one is from the OBR’s latest Economic Forecast: The thing to remember about sectoral balances is they must sum to zero. It is not possible to have a negative external balance, as the UK does, with concurrent surpluses in the public, household and corporate sectors. If the UK is […]

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Economic and market themes: 2014-03-07

Economic and market themes: 2014-03-07

Themes for today:

The US faces political constraints in a cyclical downturn that will limit government response
The US private surplus is under assault
Europe is improving and upgrades to bank stocks are bullish
The Fed tends to tighten before wage growth becomes sustainedEM hidden external debt in eastern Europe makes Ukraine a potential point of contagion
EM hidden external debt is large in China, Brazil and Russia

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Auerback: US base growth is less than 2%

Auerback: US base growth is less than 2%

Marshall Auerback was on CNBC yesterday afternoon talking to Kelly Evans and Steve Liesman on Closing Bell. And his read on the US economy is like mine, 1.5-2.0% underlying growth. He thinks the weak Q1 numbers are not just weather-related. My view: Last year, the numbers were boosted by inventory builds and a credit accelerator. But wages are stagnant and […]

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Wynne Godley: Interest rates, growth and the primary balance

Wynne Godley: Interest rates, growth and the primary balance

Godley shows that under all scenarios, debt/gdp stabilises at some combination of interest rate, growth rate and primary deficit/surplus – provided there is full employment. So debt/gdp does not “spiral out of control” if government produces as much of it as people need in order to save. On the contrary, in my view government creating a plentiful supply of safe assets is essential for financial and economic stability.

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On quantitative easing, fiscal policy, and Abenomics

On quantitative easing, fiscal policy, and Abenomics

I was just re-reading Richard Werner’s initial quantitative easing scheme for Germany from 1995. What he says is relevant to today’s situation in Europe and the United States as well as for today’s Japan. I want to highlight a few lines within his brief note and expand on these where they don’t make sense.

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Excess German savings, not thrift, caused the European crisis

Excess German savings, not thrift, caused the European crisis

One of the reasons that it is been so hard for a lot of analysts, even trained economists, to understand the imbalances that were at the root of the current crisis is that we too easily confuse national savings with household savings. By coincidence there was recently a very interesting debate on the subject involving several economists, and it is pretty clear from the debate that even accounting identities can lead to confusion.

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Chart of the Day: Debt Deflation in the Eurozone

Chart of the Day: Debt Deflation in the Eurozone

When I see the chart for Euro zone NPLs and look at the numbers, I think debt deflation. And this is exactly the problem with the euro zone’s policy mix.

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How bond market vigilantes force rates higher

How bond market vigilantes force rates higher

I see that Paul Krugman has shifted his rhetoric in a recent post on British government economic policy. Let me explain how in this post so that I can make a point as to how bond market vigilantes actually work.

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A view from Belgium, where EC officials are now officially saying austerity will end

A view from Belgium, where EC officials are now officially saying austerity will end

The first thing that jumps out at me is the interview with Marco Buti, who says point blank that austerity must end as it is “pointless”. That’s huge because he is Olli Rehn’s right hand man. And Rehn has just confirmed that the EC is relaxing timetables for France along with the Netherlands, Slovenia, and Poland. After the Draghi presser yesterday, in which, Draghi repeatedly pointed only to medium-term consolidation, the relaxed timetable on France and the Netherlands and Macro Buti’s upcoming comments make it clear that we have entered a new era of EU policy, as I remarked yesterday.

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Why austerity in Europe will continue

Why austerity in Europe will continue

The reality of course, is that euro zone governments do have to worry about losing market favour. They cannot rely on the central bank as a debt buyer of last resort the way the Japanese, the British or the Americans can. If, for whatever reason, sovereign debt buyers become skittish about euro zone sovereign obligations, the impact is immediate and yields rise. In a worst case scenario, you get a crisis and default as we did in Greece. So the impetus to keep sovereign debt levels manageable is clear. This makes the euro zone different from other currency areas that have currency sovereignty and flexible nonconvertible currencies.

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