Zipriztin ekonomikoak (28)

(i) Deutsche Bank

Deutsche Bank Tells Investors Not To Worry About Its €46 Trillion1 In Derivatives2

“Having first flagged Deutsche Bank enormous derivative book for the first time back in 2013, it wasn’t until last week that JPMorgan admitted just what the biggest risk facing Deutsche Bank was. In a note by JPMorgan’s Nikolaos Panigirtzoglou, the strategist warned that, “in our opinion it is not so much funding issues but rather derivatives exposures that more likely to trouble markets going forward if Deutsche Bank concerns continue. This is especially true if these concerns propagate into a confidence crisis inducing more rapid unwinding of derivative contracts.”

For those new to the story, Deutsche has one of the world’s largest notional derivatives books — its portfolio of financial contracts based on the value of other assets. As we first noted in 2013, It peaked at over $75 trillion, about 20 times German GDP, but had shrunk to around $46 trillion by the end of last year. That’s around 12% of the total notional value of derivatives outstanding worldwide ($384 trillion), according to the Bank for International Settlements.  It was €46 trillion as of Q2 measured by notional outstanding.

(…) among the most vocal opponents to a boost in overall capital levels is German Finance Minister Wolfgang Schaeuble who has insisted that the Basel Committee not only keep any overall increase in capital requirements to a minimum, but also ensure the rules have no “particularly negative consequences for specific regions,” such as Europe. Or rather, Germany. (…)

Why is Europe, and its biggest bank, “keen” on retaining the existing model-based framework which would not require substantial capital increases for risky banks, of which Deutsche Bank is at the very top? Simple: the largest German lender is already notably undercapitalized, and any further capital needs would only lead to further pressure on its stock, forcing it to seel even more equity when the inevitable capital raising moment arrives; it also means that the models used by DB’s risk managers are likely to materially misrepresent the bank’s true value at risk, not only when it comes to its loan book, and especially Level II and III assets, but more importantly, its derivative book, where while we appreciate Mr. Lewis’ assertion that the bank’s €46 trillion in gross notional derivatives collapse to just €41 billion, we would be far more interested in seeing the math and assumptions behind this calculation.”

(ii) Norvegia

Norway Announces Massive Withdrawals From Sovereign Wealth Fund To Cover Deficits3

Back in August, we noted that, for the first time since it’s creation in 1996, the Norwegian government had started raiding its sovereign wealth fund to cover government deficits.  Now, as noted by Bloomberg, the Nordic country has revealed plans to massively increase withdrawals by over 25% in 2017, to $15 billion.  The money would be used to cover Norway’s budget hole that’s expected to be roughly 8% of GDP

Of course, Norway’s ultimate GDP potential, and therefore budget deficits, are heavily dependent on oil prices so any further weakening of crude could result in even more withdrawals.

(…)

But Finance Minister Siv Jensen dismissed criticism of the withdrawals saying that the administration is using the fund as was intended noting that withdrawals remain below the fund’s annual return target of 4%.   

Now that we are in an extraordinary situation, hit by the biggest oil price shock in 30 years, it would be crazy if we didn’t have an expansionary fiscal policy,” she told Bloomberg. Jensen rejected suggestions that the fund was “vulnerable.” She described it as “rock solid.”

(..)

While we could debate the merits of Norwegian fiscal policy, at least the country is actually funding deficits as they’re incurred.  That would seem to be a “slightly” better approach than the U.S. plan which calls for printing more cash to fund massive deficits while ignoring the long-term impacts of ballooning national debt that can’t possibly ever be repaid.”

Badirudi Norvegian ez dutela ezagutzen MMT (Modern Money Theory), hots, DTM. Bestela, ez lituzkete plazaratuko horrelako zentzu gabeko sasi-argudioak…

(iii) Ekuador

Banco Central Ec@BancoCentral_Ec4

@ptcherneva #RetosBancaCentral: Lucha contra la deflación a través de componentes fiscales de Política Monetaria http://bit.ly/2dNHMhW 

2016 urr. 10

Ekuadorreko Banku zentrala eta Pavlina Tcherneva5

Ponencia: Lucha contra la deflación a través de componentes fiscales de Política Monetaria
El Nuevo Consenso Económico (NEC) se enfrenta a una paradoja en su comprensión de la estabilización macroeconómica a través de la política monetaria en un entorno de deflación. Por un lado, las nuevas investigaciones en el NEC han comenzado a analizar la importancia económica de los regímenes de cambio de soberanía y la capacidad de sus instituciones monetarias para remediar las fuerzas deflacionarias a través de la coordinación entre la política monetaria y fiscal. Esta presentación discutirá los canales y mecanismos de transmisión, a través del cual podría ser posible dicha estabilización. También expondrá varios componentes fiscales de la política monetaria y evaluará su eficacia relativa. Por otro lado, el NEC sigue apoyando la idea de que el gasto del gobierno desplaza a la inversión y el gasto público, ejerciendo de este modo un efecto contractivo. Por lo tanto, existe una paradoja teórica en el corazón de NEC, que impide la teorización y desarrollo de medidas eficaces contra la deflación. La presentación resuelve este conflicto mediante la ilustración de que en todos los casos los déficits públicos crean un efecto de atracción, y se esbozan las líneas de una coordinación monetaria-fiscal alternativa para combatir la deflación. También se analizan los retos de política antes de los sistemas monetarios no soberanos.”

(iv) Europar Batasunaren porrota

Jeff Thomas-en The Demise of the EU6

Back in the ‘90s, when the EU had ceased to be a mere trade agreement and had become a full-blown oligarchy that would eventually gobble up most of Western and Eastern Europe, my belief was that it had not only been a doomed concept, it had additionally been rushed into being far too quickly. Although, at that time, the governments of Europe were gleefully joining up. I said, “I give it twenty years, tops.”

(…) There were three major reasons for its validity.

Good Fences Make Good Neighbors”

First off, the countries of Europe had perennially been at war with each other since long before gunpowder was invented. (…)

Sudden Change Breeds Resentment

Second, the rulings from Brussels came in a torrent after its formation. Nearly every country in Europe was shoehorned into fitting in with Union objectives. As a result, whilst some countries gained some advantages, all countries lost the basic freedom that comes with self-determination. Those who objected were threatened that they’d better behave. Those who suggested departing from the union were further threatened that they’d be shut out of EU trade and destroyed economically.

(…)

The elite in Brussels have grossly overplayed their hand, time and time again, by imposing sudden and dramatic change on the countries of Europe, whilst behaving arrogantly, bringing many of Europe’s people to the boiling point.

It Wasn’t the People that Joined the Union

To add to the tyranny, no country’s population voted in a majority to join the union. Half-hearted referenda were undertaken by some countries, but voter turnouts were often poor. In other countries, the referenda were not binding. In the end, each government went ahead with only minority support and plunged headlong into a union that would benefit them, the leaders, but would not serve their people well.

The EU was, from its inception, the antithesis of “government of the people, by the people, for the people.” It was, instead, an “uber-government of the political leaders, for the political leaders, by the political leaders.”

(…)The important question therefore would then be, “What will be the trigger to begin the collapse?”

As the years passed and the cracks in the EU started to appear, the race was on as to whether the undoing would be as a result of the economic failure of the southern member-states, or by the social strains of immigration that Brussels forced onto its member-countries. In each case, it was predictable that the political leaders would defend the EU policies at all costs, although each would increasingly lose the support of constituents by doing so.

On the economic front, all eyes were on Greece and the other Mediterranean members, (…) Along the way, in order to appease her voters, German Chancellor Angela Merkel stated firmly that the EU would not bail out the Italian banks; that they would have to rely on bail-ins (a measure that had been approved in 2014 for all EU countries). Then the news came that the German Deutsche Bank was on the ropes, threatening to cause a bloodbath for the German people. Germany, having lost billions of its money to the other EU countries, would need $14 billion to pay for Deutsche Bank’s mis-sold mortgage-backed securities and that would just be the beginning.

The German people had paid through the nose to support other EU members, but a line had been drawn in the sand as to future bail-outs, just before Germany realised its own crisis.

Suddenly, Mrs. Merkel has been caught between her obligation as Chancellor to the German people and her personal commitment to the EU. Her problem is exacerbated by the fact that she is up for re-election in 2017.

Ironically, in the race for the collapse of the EU, it may be that the trigger that begins the process is Germany, the country that was most responsible for its creation.

The comparison with the Titanic is an apt one. Like the Titanic, the EU was presented as a “super-state”, one that would be bigger and better than all the others in Europe. It was declared unsinkable. Yet, soon after it was launched, it hit an unexpected iceberg from which it could not recover.

Years from now, historians and economists will debate the identity of the EU iceberg. Some will say Brexit, others will say Deutsche Bank. Still others will cite events that we have not yet seen. However, for our purposes, it matters little. The dominoes have begun to fall and all of us that may be impacted by an EU collapse should make sure that we have all our own ducks in a row – to assure that we are impacted as minimally as possible.”

Editor’s Note: (…)

Doug Casey and his team just released a new video that reveals how a financial shock far greater than 2008 could strike America on December 4, 2016, as Italian voters decide the fate of the European Union itself. Click here to watch it now.

Hala ere,

(1) Gogoratu ondokoa: Zipriztin ekonomikoak (27) —-> Balediko Italexit eta Europar Batasunaren hondamen ekonomikoa

eta

(2) Italiaz eta Euskal Herriaz, gehigarri gisa, ikus Italia (eta Euskal Herria ere) bidegurutzean


1 1 trilioi amerikarra = 1 bilioi europarra.

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