Category : Currency Markets

(Guardian) Germany split on EU's future as some call for a European government

The ideological split within German politics is essentially about whether the European commission should become more political after Brexit, or less so. Almut Möller of the European Council on Foreign Relations thinktank said: “All parties can see that the situation requires political answers, but that the European commission isn’t up to it ”“ that’s the dilemma.”

Henrik Enderlein, the director of the Jacques Delors Insitut in Berlin, said: “There are two possible roles the European commission could take in the future: either as a strong, political body that can take [the] initiative in key policy areas and during a crisis, or as a technocratic body that merely protects the treaties. At the moment, it is a hybrid of the two, and that has to change.”

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Germany, History, Politics in General, Theology

(Independent) Forget Brexit ”” Italy is poised to tear Europe apart

All eyes have turned to Britain’s vote to leave the European Union as having the most drastic political and economic impact onto the 28-nation state but if you look at the country’s economic data, bank issues, and the impending constitutional referendum coming up, Italy is like a bomb waiting to explode.

The Italian financial system, which to put it gently, is in a major state of flux right now. While Britain’s EU referendum in June was seismic in terms of having economic and political repercussions across the bloc, there is another referendum of equal importance, coming up in Italy in October, and the result could fundamentally alter the state of the already delicate Italian economy.

Italians will have a say on reforms to its Senate, the upper house of parliament, in October. The proposed reforms are widespread, and if approved could improve the stability of Italy’s political set up and allow Prime Minister Matteo Renzi to push through laws aimed at improving the country’s economic competitiveness.

Read it all and make sure to take a careful look at the productivity graph.

Posted in * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Italy, Politics in General, The Banking System/Sector, Theology

(FT) Brexit: the world’s most complex divorce begins

The goal is to unwind Britain’s 43-year membership of the bloc, disentangle and sever the legacy of shared sovereignty, and then reshape the biggest single market on earth.
Three fundamental issues arise.
On substance, what political and commercial arrangements will Brexit Britain demand and will the EU accept them?
In execution, will the exit deal ”” the divorce and breaking of old obligations ”” be struck at the same time as a trade agreement covering post-Brexit trade? And if no, is a transition possible to ensure a soft landing?

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, England / UK, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, History, Ireland, Law & Legal Issues, Politics in General, Scotland, Stock Market, Theology, Wales

This looks interesting–The Economist guide on Brexit

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Posted in * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, England / UK, Ethics / Moral Theology, Europe, Foreign Relations, Politics in General, Stock Market, Theology

(FT) Brexit fears trigger market rush for safety

The prospect of Britons voting to leave the EU next week fuelled global market upheaval on Tuesday, with investors rushing for safety and sending the UK currency and stocks to their lowest levels in months.
The accelerating shift, which came after a trio of opinion polls showed Leave leading by significant margins, was most marked in government bonds, where a series of records were smashed as cash flowed into the relative security of sovereign debt.

German 10-year Bunds traded with interest rates below zero for the first time after Japan’s benchmark fell to a new low of minus 0.185 per cent. The UK’s 10-year gilt yield recorded a new low, and the 30-year bond dropped below 2 per cent for the first time.

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Posted in * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, England / UK, Ethics / Moral Theology, Europe, Foreign Relations, Politics in General, Stock Market, Theology

Doug Carswell on Brexit–Remain is Losing because they are fearmongering and Leave is optimistic

What is going on? There is an honorable, decent case for Britain to stay in the union. The problem for the Remain camp is that no one has been making it.

Throughout the campaign, the Remainers have highlighted “experts” from bodies like the International Monetary Fund, the Organization for Economic Cooperation and Development and the Bank of England, which all think that Britain should stay. They talk of being “shut out” of the room where decisions are made in Brussels.
These warnings sound like the neuroses of career politicians, not the concerns of the public, who see things very differently. Ordinary voters are weighing what is best for National Health Service hospitals and public services. By making the case from a political elite’s perspective, the Remain campaign has alienated, even antagonized, voters.

Instead of advancing arguments, Remainers have resorted to a campaign of exaggeration and intimidation. Vote to leave, they suggest, and food prices will rise. Farming will fold, science will suffer, financiers will flee. Trade will tumble, there will be a global recession. And World War III, apparently.

Far from persuading people, these confected claims come across as hectoring and supercilious.

Read it all from todays NYT op-ed page.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, England / UK, Ethics / Moral Theology, Europe, Foreign Relations, Politics in General, Psychology, Stock Market, Theology

(Bloomberg) Most Federal Reserve Officials Saw June Hike Likely If Economy Warrants

Federal Reserve policy makers indicated that a June interest-rate increase was likely if the economy continued to improve, boosting market expectations they will act next month.

“Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the committee’s 2 percent objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June,” according to minutes of the Federal Open Market Committee’s April 26-27 meeting released Wednesday in Washington.

Officials were divided over whether those conditions were likely to be met in time. “Participants expressed a range of views about the likelihood that incoming information would make it appropriate to adjust the stance of policy at the time of the next meeting,” the minutes stated.

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Posted in * Economics, Politics, Credit Markets, Currency Markets, Economy, Federal Reserve, Personal Finance, Stock Market, The U.S. Government

(Fulcrum) Andrew Goddard–The EU Referendum: How Should We Decide?

In deciding how to vote it is important that we recognise that we are answering a different sort of question from that at general elections but, as there, we also need to keep front and centre the test of what it means to love our neighbours and how our vote can serve the common good. That means not deciding on the basis of what is best for me personally (usually understood in simple financial terms) or even for the UK alone but to look at our personal and national good in the context of international society and the importance of good relationships. It also means trying to step back and take in the bigger picture both historically but also in terms of the present nature and likely future development of the EU. At least three broad areas require serious Christian reflection and evaluation in discerning how to vote.

First, as regards its form, the EU is an international legal and political entity based on treaties between national governments. This means considering a Christian attitude to the role and limits of nations and national identity and the dangers of empire as well as consideration of the principle of the free movement of peoples and how it relates to our sense of belonging and place of national borders. Second, the EU also has motives and aims which shape its ethos. Here Christians must evaluate how it has assisted in moving Europe from war to peace, whether and how it has enabled solidarity both within Europe and between Europe and the poorer parts of the world, and whether, particularly in relation to economic life, it is driven by our contemporary idols in the Western world and, through the Euro and austerity, serving or undermining human flourishing. Finally, as the EU is best viewed as a political community it needs, from a Christian perspective, to be assessed in terms of how well it serves the pursuit of justice and whether its political structures are ”“ or can be – representative of its 500 million people and whether they uphold the principle of subsidiarity which seeks to respect local and national governing structures and non-governmental forms of social life.

In the light of all these issues a number of arguments on both sides need to be rejected by Christians but, after exploring each of these areas, I believe it is possible to sketch out potential Christian arguments for each side of the debate focussing on these issues, often neglected in the wider political debate.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, England / UK, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, History, Law & Legal Issues, Politics in General, Religion & Culture, Theology

(Telegraph) Anthony Evans-Pritchard This is a global stock market rout worth celebrating

We toiling workers can allow ourselves a wry smile. For most of the last eight years the owners of wealth and inflated assets have had things their own way, while the real economy has been left behind.

The tables are finally turning. The world may look absolutely ghastly if your metric is the stock market, but it is much the same or slightly better if you are at the coal face.

The MSCI index of world equities has fallen almost 20pc since its all-time high in May of 2015, implying a $14 trillion loss of paper wealth. Yet the world economy has carried on at more or less the same anemic pace, and the OECD’s global leading indicators show no sign that it is suddenly rolling over now.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Asia, China, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Energy, Natural Resources, Ethics / Moral Theology, Euro, Europe, European Central Bank, Federal Reserve, Foreign Relations, Globalization, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, Stock Market, The U.S. Government, Theology

(WSJ) Charles Moore–Western countries must honestly face The Middle-Class Squeeze

Since the financial crisis of 2007-08, which Western leader could boast of spreading ownership in any important way? In the U.S. and Britain, the percentage of citizens owning stocks or houses is well down from the late 1980s. In Britain, the average age for buying a first home is now 31 (and many more people than before depend on “the bank of Mom and Dad” to help them do so). In the mid-’80s, it was 27. My own children, who started work in London in the last two years, earn a little less, in real terms, than I did when I began in 1979, yet house prices are 15 times higher. We have become a society of “have lesses,” if not yet of “have nots.”

In a few lines of work, earnings have shot forward. In 1982, only seven U.K. financial executives were receiving six-figure salaries. Today, tens of thousands are (an enormous increase, even allowing for inflation). The situation is very different for the middle-ranking civil servant, attorney, doctor, teacher or small-business owner. Many middle-class families now depend absolutely on the income of both parents in a way that was unusual even as late as the 1980s.

In Britain and the U.S., we are learning all over again that it is not the natural condition of the human race for children to be better off than their parents. Such a regression, in societies that assume constant progress, is striking. Imagine the panic if the same thing happened to life expectancy.

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Posted in * Culture-Watch, * Economics, Politics, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Federal Reserve, Foreign Relations, Globalization, History, House of Representatives, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Office of the President, Pensions, Personal Finance, Politics in General, Senate, Taxes, The U.S. Government, Theology

(FT) Martin Wolf–China risks an economic discontinuity

There are at least three reasons why China’s growth might suffer a discontinuity: the current pattern is unsustainable; the debt overhang is large; and dealing with these challenges creates the risks of a sharp collapse in demand.

The most important fact about China’s current pattern of growth is its dependence on investment as a source of supply and demand (see charts). Since 2011 additional capital has been the sole source of extra output, with the contribution of growth of “total factor productivity” (measuring the change in output per unit of inputs) near zero. Moreover, the incremental capital output ratio, a measure of the contribution of investment to growth, has soared as returns on investment have tumbled.

The International Monetary Fund argues: “Without reforms, growth would gradually fall to around 5 per cent with steeply increasing debt.” But such a path would be unsustainable, not least because debts are already at such a high level. Thus “total social financing” ”” a broad credit measure ”” jumped from 120 per cent of GDP in 2008 to 193 per cent in 2014. The government can manage this overhang. But it must not let the build-up restart. The credit-dependent part of investment has to shrink.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Asia, China, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Foreign Relations, Globalization, Politics in General, Theology

(Bloomberg) France’s Hollande Proposes Creation of Euro-Zone Government

French President Francois Hollande said that the 19 countries using the euro need their own government complete with a budget and parliament to cooperate better and overcome the Greek crisis.

“Circumstances are leading us to accelerate,” Hollande said in an opinion piece published by the Journal du Dimanche on Sunday. “What threatens us is not too much Europe, but a lack of it.”

While the euro zone has a common currency, fiscal and economic policies remain mostly in the hands of each member state. European Central Bank President Mario Draghi made a plea this week for deeper cooperation between the euro members after political squabbles over Greece almost led to a rupture in the single currency.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, History, Politics in General, The Banking System/Sector, Theology

(Economist Erasmus Blog) The euro, theology and values–The meaning of redemption

When big questions, like the future of Europe, hang in the balance, it can be tempting to toy with grand theories about the ways in which religion affects culture and economics. A famous one was put forward by Max Weber (pictured), who posited a link between capitalism and Protestant ideas of guilt and salvation. Such theories usually contain a grain of truth, but religious determinism shouldn’t be pushed too far because there are always exceptions.

Still, as religious-determinist theories go, an interesting one was put forward by Giles Fraser, a well-known left-wing priest of the Church of England, in a recent radio broadcast. He suggested that behind the financial standoff between Greece and Germany, there was a theological difference (between western and eastern Christians) in the understanding of how humans are reconciled with God.

As Mr Fraser recalled, traditional Protestant and Catholic teaching has presented the self-sacrifice of Christ as the payment of a debt to God the Father. In this view, human sinfulness created a debt which simply had to be settled, but could not be repaid by humanity because of its fallen state; so the Son of God stepped in and took care of that vast obligation. For Orthodox theologians, this wrongly portrays God the Father as a sort of heavenly debt-collector who is himself constrained by some iron necessity; they prefer to see the passion story as an act of mercy by a God who is free. Over-simplifying only a little, Mr Fraser observed: “the idea that the cross is some sort of cosmic pay-back for human sin [reflects] a no-pain-no-gain obsession with suffering,” from an eastern Christian viewpoint.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Christology, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Euro, Europe, European Central Bank, Foreign Relations, G20, Germany, Greece, Politics in General, Religion & Culture, Soteriology, The Banking System/Sector, Theology

(Globe and Mail) Greece bailout deal keeps country in the euro, but for how long?

Greece has received a tentative reprieve from exiting the euro, but the harsh austerity demands piled onto the recession-damaged country may still ultimately force it out the door, economists say.

Some of them think the chances of a Greek exit form the euro ”“ Grexit ”“ have not in any way diminished now that Greece and its creditors have tentatively approved a three-year, €86-billion bailout package that will boost Greece’s debt, increase taxes and trigger privatizations at what will likely be fire-sale prices.

In a note published Monday, Manulife chief economist Megan Greene said the deal, if approved by both sides and the national parliaments of the euro zone countries “will almost certainly be a failure for both political and economic reasons. The immediate risk of Grexit may be slightly lower following the summit conclusions this weekend, but the overall risk of Grexit is materially higher.”

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Posted in * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Greece, Politics in General, The Banking System/Sector, Theology

(FT) Wolfgang Münchau–Greece’s brutal creditors have demolished the eurozone project

The fact that a formal Grexit may have been avoided for the moment is immaterial. Grexit will be back on the table when you have the slightest political accident ”” and there are still many things that could go wrong, both in Greece and in other eurozone parliaments. Any other country that in future might challenge German economic orthodoxy will face similar problems.

This brings us back to a more toxic version of the old exchange-rate mechanism of the 1990s that left countries trapped in a system run primarily for the benefit of Germany, which led to the exit of the British pound and the temporary departure of the Italian lira. What was left was a coalition of countries willing to adjust their economies to Germany’s. Britain had to leave because it was not.

What should the Greeks do now? Forget for a moment the economic debate of the last few months, over issues such as the impact of austerity or economic reforms on growth, and ask yourself this simple question: do you really think that an economic reform programme, for which a government has no political mandate, which has been explicitly rejected in a referendum, that has been forced through by sheer political blackmail, can conceivably work?

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Germany, Globalization, Greece, History, Politics in General, The Banking System/Sector, Theology