PPCC: Pisitófilos Creditófagos. Primavera 2024

[AbiertoPorDemolicion]

La Ranchera
https://www.youtube.com/watch?v=c2wyfmh9sTo

Igual que en los tiiempos de la Union Sovietica decian que los diplomaticos occidentales necesitaban un kemlinologo para interpretar las declaraciones que salian del kremlin,  en este foro vamos a necesitar un suddenologo para que nos explique  el sentido de los memes de Sudden, si es que tienen alguno.

[Derby]

https://abcnews.go.com/Business/wireStory/chinas-xi-jinping-visits-europe-ukraine-trade-investment-109893753

As China's Xi Jinping visits Europe, Ukraine, trade and investment are likely to top the agenda

Ukraine, trade and investment are expected to dominate Chinese leader Xi Jinping's first trip to Europe in five years, which starts in France on Monday

TAIPEI, Taiwan -- Ukraine, trade and investment are expected to dominate Chinese leader Xi Jinping’s first trip to Europe in five years, as the Asian giant rebuilds its foreign relations after a prolonged absence during the Covid-19 pandemic.

Xi will start the tour in Paris on Monday, meeting with French President Emmanuel Macron, who has been stressing the idea of European strategic autonomy from the U.S. On a visit to Beijing last year, Macron courted controversy by saying France would not necessarily always align with the U.S. in foreign policy, an apparent reference to American support for the self-governing republic of Taiwan, which China claims as its own territory to be annexed by force if necessary.

After leaving France, Xi will visit Hungary and Serbia, both seen as China-friendly and close to Russian President Vladimir Putin, rebuffing Western criticism of his full-scale invasion of Ukraine.

Xi’s European visits will be closely followed in Washington for signs of diminishing support for its key foreign policy goals.

The Chinese leader will arrive in France just as Paris is putting the finishing touches on its preparations for hosting the Summer Olympics, an event in which China invests huge amount of national prestige.

France sees Xi's visit, which officially marks 60 years of French-Chinese diplomatic relations, as an important diplomatic moment, and wants to focus on China’s broader relations with the EU. Macron invited European Commission President Ursula von der Leyen to the talks Monday.

It comes a month before Macron, who positions himself as the diplomatic leader of Europe, hosts Biden for a similar state visit.

It is also a sign of “the good vibes from Macron’s visit to China in April last year," said Kerry Brown, professor of Chinese Studies and director of the Lau China Institute at King’s College London.

“This is a highly strategic visit to Europe by Xi. And in his itinerary you can divine the runes of Chinese policy on Europe now, bolstering the traditional links as far as possible, and reinforcing new ones,” Brown said.

Xi's is also visiting Budapest, where Hungarian Prime Minister Viktor Orbán, in power for 14 years, is facing political challenges from the opposition over his authoritarian style.

Hungary has straddled a middle ground between its membership in the EU and NATO and an unusual openness to diplomatic and trade relationships with eastern autocracies such as Russia and China.

Orbán, a right-wing populist who has forged close ties with Russia, delayed Sweden’s entry into NATO for months. China has cited NATO expansion as provoking Russia to invade Ukraine.

Hungary is the first EU member to participate in Xi's signature Belt and Road Initiative that seeks to build billions of dollars of roads, ports, power plants and other infrastructure across Asia, Africa and beyond.

Orbán was the only EU leader to attend a conference in Beijing on the BRI, which has been criticized for burying participating countries in debt and failing to deliver on promised investments, something that prompted Italy to drop out last year.

Despite that, Hungary’s government has deepened its economic ties with China, with the proliferation of Chinese electric vehicle (EV) battery factories across the country gaining the most attention. Near Debrecen, Hungary’s second-largest city, construction is underway of a nearly 550-acre, 7.3 billion euro ($7.9 billion) EV battery plant, Hungary’s largest-ever foreign direct investment.

China has also invested heavily in infrastructure to link Hungary with its southern neighbor Serbia, Xi's next stop on his European tour.

In 2014, Hungary and Serbia concluded an agreement with Beijing to modernize the railway between their capitals of Budapest and Belgrade, part of a Belt and Road plan to link up with the Chinese-controlled port of Piraeus in Greece, to the south, an entry point for Chinese goods to Central and Eastern Europe.

The more than $2 billion project is expected to be completed in 2026, after numerous delays.

In Serbia, Xi will hold talks with President Aleksandar Vucic, with whose government China has built strong relations.

The two countries have a long history of friendship, particularly since 1999, when NATO bombed the Chinese embassy in Belgrade, killing three Chinese nationals, during the air war to end Serbia’s brutal crackdown on ethnic Albanian separatists in Kosovo.

The U.S. apologized, saying faulty target selection was to blame, but the incident led to violent attacks on U.S. diplomatic installations in China and fueled anti-American sentiment in both countries that endures to this day.

In 2022, shortly after the Russian assault on Ukraine, Serbia took semi-secret delivery of a sophisticated Chinese anti-aircraft system flown in on six Chinese Air Force Y-20 transport planes. The arms delivery over the territory of at least two NATO member states, Turkey and Bulgaria, was seen by experts as a demonstration of China’s growing global reach.

China claims neutrality in the Ukraine conflict but Xi and Putin declared their governments had a “no limits friendship” before Moscow’s attack on Ukraine. China has refused to call the Russian assault an invasion and has been accused of bolstering Russia’s capacity to produce weapons and its military advantage against Ukraine, which is awaiting tens of billions in Western military aid.

A U.S. military aid bill passed last week allots $61 billion for Ukraine, as well as $8 billion to counter Chinese threats in Taiwan and the Indo-Pacific, which China has condemned as a dangerous provocation.

China’s foreign ministry said the U.S. position on Chinese defense trade with Russia was hypocritical when considered alongside the amount of military assistance Washington is providing to Kyiv.

China denies selling arms to Russia and the U.S. says it has found no direct evidence of such evidence of such. However, China does sell machine tools, microelectronics and other technology that Moscow in turn is using to produce missiles, tanks, aircraft and other weaponry for use in its war against Ukraine, according to a U.S. assessment.

[Cadavre Exquis]

https://x.com/RnaudBertrand/status/1786272981058220187

https://findingmoneyfilm.com/

Finding The Money | Finding the Money OFFICIAL TRAILER

Resulta que Stephanie Kelton, entrevistadora del film Finding the Money, dio una charla TED en octubre de 2021 sobre TMM que no tiene desperdicio. Pasen y vean...

TED Stephanie Kelton: The big myth of government deficits

Intro

When things break, we have an opportunity. We can pick up the pieces and put them back together the old way, or we can look for better ways to build.

Covid broke everything. It put a spotlight on the many deficits in our economy —in employment, education, health care, housing— and it showed how inequality made it all worse.

Here in the US and around the world, governments did some extraordinary things. They sent money to people directly to help them buy food and pay rent. They provided free Covid testing and expanded health care to cover more of the population. They gave money to businesses to help keep them afloat while much of the economy was temporarily shut down. They offered debt relief to millions of people who borrowed money to go to college. They did all of this and more without raising taxes or having a prolonged battle over the usual question of how to pay for it.

How will you pay for it?

To me, this was exciting, and I'm an economist, so I don't say that a lot. But as someone who's been trying to change the way we think about deficits and government spending, I saw this as an opportunity to show why government budgets don't work like household budgets. Why all of their red ink is really our black ink. And why our nation can afford to keep investing in the things we need even after spending trillions to fight the pandemic.

For a while, it looked like the US and other countries were starting to break the mold on the old way of thinking about deficits and taxes. But now here we are, just a handful of months after all of that bold action, and we're sliding back into our old habits of thought.

Can we build affordable housing and fix crumbling infrastructure? Can we expand Medicare to include dental, vision and hearing? Can we tackle our climate crisis? As Congress debates these questions, everyone is back to asking, how will you pay for it?

It's the wrong question. In fact, the right questions don't involve money at all. Instead of worrying about where the financing will come from, we should be asking, are these things worth doing and do we have the real resources, the people, the equipment, the raw materials and the technology to do them? Well, they make society better off. And do we have the political will to act?

Finding the money

I'm one of a handful of economists who contributed to the body of academic scholarship known as MMT or Modern Monetary Theory.

MMT provides an accurate description of how a fiat currency like the US dollar or the British pound actually works. It reminds us that we're no longer on a gold standard, so finding the money to pay for the things we need is never an issue for countries like the US or the UK. If we're going to fix what's broken in our economy, we have to fix the way we think about the limits on government spending. Let me give you an example of the kind of broken gold standard thinking that still permeates our discourse.

Back in 1983, the prime minister of Great Britain, Margaret Thatcher, said these words: "If the state wishes to spend more, it can do so only by borrowing your savings or by taxing you more, and it is no good thinking that someone else will pay. That someone else is you. There is no such thing as public money. There is only taxpayers' money."

Maybe you've heard the contemporary version of Thatcher's dictum. "There is no magic money tree." It's just another way of saying that everything must be paid for and that the taxpayer is ultimately on the hook for whatever the government spends.

It sounds worrying. As individuals, we know that when we borrow money to go to college, start a business or buy a home, we're personally saddled with that debt. We have to find the money to pay it back. Taking on too much personal debt can lead to all sorts of problems. Even small businesses and large corporations have to walk a fine line when it comes to debt. But the federal government is fundamentally different. Unlike the rest of us, Congress never has to check the balance in its bank account to figure out whether it can afford to spend more. As the issuer of the currency, the federal government can never run out of money. It can afford to buy whatever is available and for sale in its own currency. Now that might mean spending on roads and bridges, a military arsenal or hospitals and schools. Finding the votes to pass a spending bill can be hard, but finding the money is never a problem. They just create it.

So here's how it works. Whenever Congress and the president agree to spend more, the government's bank, the Federal Reserve, works with the rest of the financial system to get that money into our accounts. Everything's done electronically, so there's no physical printing of money involved. If you got a 1,400-dollar check from the federal government earlier this year, or if your company received money to help cover payroll and other expenses, then you received some of the newly minted digital dollars that were created to support our economy. No taxpayers were involved in that process. It was all done using nothing more than a computer keyboard.

So why are we hearing so much about the need to raise taxes to pay for infrastructure and make other investments in our economy? In a word, deficits. We've all been conditioned to worry about deficits, so lawmakers are looking for ways to spend more without adding to the deficit. That's what this whole pay-for game is about.

Deficits

Unfortunately, deficits have gotten a bad rap. They're almost always seen in a negative light. And I would like to change that. When we hear the word "deficit," we probably think of a deficiency or shortfall. A deficit always sounds ominous. So when we hear that the federal government just ran a three-trillion-dollar budget deficit, it can sound worrying. And it can even anger people.

But there's another way to think about government deficits.

Just as a six becomes a nine when we view it from a different angle, a government deficit becomes a financial surplus when we look at it from another perspective

TED Stephanie Kelton: The big myth of government deficits [00:08:39]

A deficit hawk might look at this picture and see nothing but a sea of worrying red ink.

TED Stephanie Kelton: The big myth of government deficits [00:08:51]

That's not how I look at it. Here's what I see.

TED Stephanie Kelton: The big myth of government deficits [00:09:02]

I see what's happening on the other side of the government's ledger.

When the government spends more than it taxes away from us, it makes a financial contribution to some other part of the economy. Their red ink is our black ink.

When you look at it this way, it becomes clear that every deficit is good for someone. The question is for whom and what are those deficits being used to accomplish?

It matters how the money is spent and who ends up with the resulting surplus. Tax cuts that deliver huge windfalls for those at the top without sparking investment and opportunity for the rest of the population don't make good use of deficits. On the other hand, spending trillions to support the economy during the pandemic put the deficit to good use. We just had the shortest recession in US history. To me, that was fiscally responsible Being responsible shouldn't mean running the government's finances like a household. Instead of trying to keep the deficit in check, Congress should be focused on keeping inflation in check. That's the real limit on spending and it's the thing to watch out for if you're thinking about spending trillions on things like infrastructure, health care and free college.

Instead of asking, "How will we pay for it?," Congress should be asking, "How will we resource it?"

To answer that question, think of people, factories, equipment and raw materials like wood and iron. If we're going to build high-speed rail, fix crumbling infrastructure and green our economy, then we'll need concrete, steel and lumber. We'll need construction workers, architects and engineers. We'll need companies that can fill thousands of orders for solar panels, EV charging stations and electric school buses. If our economy has the productive capacity to quickly supply all of those things, then we can easily resource it. Or take health care or free college. Paying the bills to expand Medicare, to include dental, vision and hearing is easy. The challenge is making sure we have enough dentists, optometrists and audiologists to treat everyone who needs care

 And if you want to resource free college, then you need the faculty, the classrooms and the dormitories to teach and house more students. In a full-employment economy, all of the resources you need are, well, fully employed. There's no spare capacity anywhere in the system. So if the government suddenly tried to make all of these investments at once, it would quickly discover that it doesn't have the people or the building materials to do the work. To get the resources it needs, it would have to compete with the private sector, bidding up wages and prices. That would be inflationary and it would be fiscally irresponsible. We are a long way from full employment. We have the resources we need to begin repairing our broken systems. But we have to believe it's possible.

We can't let words like debt and deficits hold us back. With a better understanding of public money, where it comes from and how it works we can take aim at the many real deficits that are bearing down on us. In every crisis lies an opportunity. We can pick up the pieces and try to reassemble the fragile systems that were in place before the pandemic or we can build anew, shaping our bountiful resources into the kind of world we want to live in, one that cares for our people and our planet. I truly hope we choose to be bold.

Thank you.

Saludos.

[Cadavre Exquis]

https://www.diariovasco.com/gipuzkoa/gipuzkoa-provincia-vivienda-cara-precio-usada-supera-20240504065433-nt.html

https://www.diariovasco.com/gipuzkoa/donostia-aventaja-1000-euros-segunda-capital-cara-20240504065339-nt.html

Saludos.

[Betancourt]

La Ranchera
https://www.youtube.com/watch?v=c2wyfmh9sTo

Igual que en los tiiempos de la Union Sovietica decian que los diplomaticos occidentales necesitaban un kemlinologo para interpretar las declaraciones que salian del kremlin,  en este foro vamos a necesitar un suddenologo para que nos explique  el sentido de los memes de Sudden, si es que tienen alguno.

Son tests de Rorschach.
Yo aquí leo "Su tabaco. Gracias"
Luego aplico el sesgo de confirmación con el final QTFUP de Estopa

[Cadavre Exquis]

https://twitter.com/marcvidal/status/1782826707549831651

Saludos.

P.S. Pueden descargar el informe con el avance de resultados del barómetro del CIS correspondiente al mes de marzo de 2024 desde este enlace. (Nota: el informe fue publicado el 13 de marzo)

[R.G.C.I.M.]

La Ranchera
https://www.youtube.com/watch?v=c2wyfmh9sTo

Igual que en los tiiempos de la Union Sovietica decian que los diplomaticos occidentales necesitaban un kemlinologo para interpretar las declaraciones que salian del kremlin,  en este foro vamos a necesitar un suddenologo para que nos explique  el sentido de los memes de Sudden, si es que tienen alguno.

Son tests de Rorschach.
Yo aquí leo "Su tabaco. Gracias"
Luego aplico el sesgo de confirmación con el final QTFUP de Estopa

Que poco escribe y cuán bueno!
Y breve.

No me creerá,  pero en este preciso momento en que le he leído,  estaba pensando en vd.  Sí.  En vd. Cuando me mencionó en art. 30 en en fragor del octubre del 17.

Abrazo.

P.D.  yo creo que es un voigt kamp y pienso si no será el el nexus6.

[Cadavre Exquis]

https://www.eleconomista.es/opinion/noticias/12798550/05/24/un-dato-que-ayuda-a-la-fed-a-bajar-tipos-en-estados-unidos-.html

https://www.eleconomista.es/economia/noticias/12798268/05/24/el-empleo-de-eeuu-le-echa-un-cable-a-la-fed-con-su-enfriamiento-en-abril-se-crearon-menos-de-200000-puestos-y-el-paro-subio-al-39.html

Saludos.

[Cadavre Exquis]

https://www.eleconomista.es/banca-finanzas/noticias/12798685/05/24/la-fusion-bbvasabadell-costara-mas-de-2000-millones-por-rupturas-de-alianzas.html

https://www.eleconomista.es/banca-finanzas/noticias/12798648/05/24/bbva-busca-paliar-la-bajada-de-tipos-en-sus-cuentas-con-el-escudo-de-tsb.html

https://www.eleconomista.es/banca-finanzas/noticias/12798697/05/24/bbva-se-la-juega-los-expertos-ven-margen-para-pagar-a-sabadell-parte-en-cash-y-evitar-el-dano-reputacional-del-fracaso.html

https://www.eleconomista.es/banca-finanzas/noticias/12798611/05/24/radiografia-de-la-banca-espanola-de-55-entidades-a-nueve-en-15-anos-.html

https://www.eleconomista.es/opinion/noticias/12798723/05/24/sabadell-busca-una-oferta-de-bbva-en-cash-no-en-papelitos.html

Saludos.

[Derby]

https://www.ft.com/content/36ae6198-9ee1-4144-96c1-039bd7e32893

Agustín Carstens: ‘the Basel regime has been very good for the banks’

The BIS head on making global banking better



Good morning. It was interesting that so much of the Wall Street commentary on Wednesday’s Fed meeting declared it to have been “dovish”. And it is true that Jay Powell pushed back on the possibility of a rate rise. But he also emphasised that he is prepared to be extremely patient about cutting. What’s really going to be dovish or hawkish is the data. Email me: robert.armstrong@ft.com

Friday interview: Agustín Carstens

Agustín Carstens has been the general manager of the Bank for International Settlements since 2017. Previously, he was governor of the Bank of Mexico, and on the board of the IMF. The BIS serves as the “central bank for central banks”, providing a forum for co-operation and assisting national central banks in managing their foreign exchange reserves. It is also the host of the Basel Committee on Banking Supervision, the pre-eminent global standard setter for the banking industry. Unhedged visited him in his office in Basel last week, where the conversation ranged across bank failures, capital requirements, private credit and the “Finternet”.

Unhedged: The Basel committee is an international advisory body with no treaty power. Its recommendations are just that — recommendations. A bunch of people come together in a room in a mid-sized city in Switzerland and decide what global banking rules should be, and to some degree, the world does what the committee recommends. How is this possible? It looks a little like magic.

Carstens: Whatever happens here at the BIS and whatever happens in the Basel committee, there is a lot of hands-on involvement by [central bank] governors. Compare, for example, the IMF. It has an in-house executive board, and board members — I have been a board member — always have to consult with their capital before they make a decision. Here, governors come, they discuss, they get their hands dirty, and at the end of the day most of the time the important decisions are made by the top leadership in the room. There is a lot of ownership. 

The other thing is the mechanics of how decisions are struck. The fact that governors are very aware of the state of their banking system allows them to know, is this going to fly or is this not going to fly? 

Finally, I think that the Basel principles are a very useful construct for the banking industry. I mean, you hear a lot of complaints about Basel III. But it has become a tremendously effective mechanism to provide signals about how strong an institution is. The fact that you are able to say, ‘I’m Basel III compliant,’ or ‘I am above the minimum standard by so much,’ that provides a lot of information. That has helped a lot of institutions. It has helped the whole system. 

There is always some stress and friction, but I think that friction has led to a reasonable balance, where we as authorities have a sense of how strong an institution is, and the banks have some measure of where they are, and the market takes that into account. Fundamentally, the Basel principles address the right issues. They ring the bells of common sense about what central bankers think about: liquidity, leverage, capital.

Unhedged: You mention friction. Bankers have complained there are 14 different Basel endgames and there is fragmentation at the implementation level. Do you think this is an unsolvable problem, given the many countries and interests involved?

Carstens: Fragmentation is a very strong word. Differentiation is a more accurate description. In a fragmented system, you cannot talk to each other, or there is no engagement between systems. Fragmentation would mean that you could not operate as an integrated entity in different countries. Yes, there is deep differentiation, and the differentiation is there by design because the basic principles establish minimums. The rule is not that you have to comply with this particular figure; you have to at least observe the minimum.

Unhedged: UBS had its annual meeting this week. The headline in the Financial Times was the bank is concerned about high Swiss capital requirements. And we have heard similar complaints from American bankers. How does the BIS respond to the idea that capital requirements have gone too far?

Carstens: I go back to what I said. The Basel regime has been very good for the banks, for the system overall. Today the Gsifis (Global Systemically Important Financial Institutions) are strong, and part of that is because they have observed the standards very well. Since the global financial crisis, they have made tremendous progress. 

Unhedged: A more general question about central banking. When central bankers are asked a hard question — about the effect of zero rates, or it’s about the climate, or some other global issue — they tend to reply, “I’ve got a simple mandate, price stability and full employment.” The consequences of following that mandate are not the banker’s problem. But one might look at the long period of very low rates and the consequences that has had for the economy, for example, and wonder if such a tight mandate is optimal.

Carstens: For me, the question has a relatively simple answer most of the time, if not all the time. A mandate by law is accompanied and by a set of instruments designed to allow the compliance of that mandate. If you want autonomy to work, you need to give the central bank a clear mandate and the instruments to comply with it. And you have to have an accountability regime, where they can explain what they are doing towards the mandate. 

There is the perception that if you command money, you can do many things, and there is always an endless list of things being suggested that the central bank should do. Once you start deviating from the mandate, you enter into territory where you might have to do a trade-off against your mandate, for the simple reason that you might not have been granted the right instrument. And of course no central banker wants to be put in that position.

Unhedged: I’m trying to ask a higher-level question about institutional design, from the point of view of good government. There is a way that central bank autonomy might be too effective. Because the mandate is clear and the bank is autonomous, and the rest of government is kind of messy, central bank policy gets priority, in a way, and maybe it shouldn’t. 

Carstens: Well, let me say the following. I think the whole issue of the mandate needs to echo society’s preferences. Now, one thing that has happened is that once inflation came down in the 1970s, to some extent we forgot about it. That’s the state of nature. But the cost of that is that people started not appreciating the value of keeping inflation low and stable. Why should you be concerned about something that doesn’t exist? And suddenly inflation pops up and now you see it’s a huge issue. I think if you ask people now, do you think it’s important to have an institution within the state whose primary task is to keep inflation under control? I would say that there would be a lot of political and social support, because people have seen the impact of inflation very recently. And that’s what grounds central banks.

Unhedged: Is there a danger that we are not back to a low inflation world? We’re much closer to target than we were, but is it possible that central banks have not done what’s necessary?

Carstens: I think so far things are working quite well. We had a unique inflationary shock. It had the combination of tremendous supply shocks with a very important aggregate demand push, through monetary instruments and fiscal instruments. To bring that inflation under control required very forceful and decisive action. And I think central banks have acted [appropriately]. Now, we warned about the last mile many, many months ago. This is not new. The fact that the last mile will be bumpy is not necessarily news; even more so given that we have had tremendously traumatic events as part of the origin of this inflationary shock. We have never had a situation where the world economy was put under suspended animation to solve a health crisis. That is huge, and 100 per cent new. Did we think that it was going to work like when you turn the lights on and off? The economy doesn’t work that way. If you turn off the economy, different sectors respond in different ways. Supply chains get completely distorted, the labour market gets completely distorted. The government had to respond in a very aggressive way. So for the economy to find its way again will take time. We are in that process; we have to be patient. 

At the end of the day, the last mile is about allowing for the needed relative price adjustments, and there are still many relative price adjustments to be made, and there are still doubts about whether some relative prices will not come back and bite. We know very well that monetary policy acts with a lag. But I see a strong commitment from central banks, and I think they should continue to be persistent. I think we are very close, and I think it is very important to go back to the 2 per cent inflation target.

Unhedged: Last year we had some major banking incidents, one here in Switzerland, several in the United States. What did we learn?

Carstens: In the case of Credit Suisse, it was clear that business plans really make a difference, and business plans are very difficult to assess from a supervisory point of view. Probably the supervisory authorities should have had more strength in being able to influence Credit Suisse, because if you talk to the relevant authorities, the dialogue between them and Credit Suisse was there. But that dialogue didn’t carry enough strength to make Credit Suisse react in time. So I think that giving more [power of] persuasion to the supervisors/regulators would have helped, including sanctions and so on. 

Coming from Latin America, the Credit Suisse saga was like García Márquez’s A Chronicle of a Death Foretold. You could see it coming. I think authorities saw the risks, and they pushed and they pushed and they pushed, but they didn’t get to where they wanted to go, and it took a huge world shock to accelerate the process. So reflecting on the events in the US banks and here in Switzerland last year, I think we authorities should focus more on governance, risk management and business models. Authorities need to have a way to have a more direct impact on the institution. This is not so much in the field of Basel principles, but about how relationships between regulated entities and authorities work, and how at some point, you have to be able to call the bank, have a discussion, and try to steer the bank in the right direction. 

Unhedged: Some observers have expressed the concern that, in the case of Credit Suisse, there is not enough clarity about how the resolution process was supposed to work, and that therefore the resolution couldn’t go as expected or got stuck, leading to the UBS takeover. Do you agree?

Carstens: No, I think the resolution work was there. I think it could have been done. But resolution is an option, not the only option. As an authority, you have to evaluate how it will be less painful. And the way it was engineered, they used many of the principles of resolution. They stabilised the situation effectively. The Swiss taxpayer didn’t lose money. The world economy, the world financial market, did not get traumatised.

Now, going to the US regional banks, there the issue was really very elementary banking mistakes. I think it is important to mention that many of the Basel III principles did not apply to those banks. With the benefit of hindsight, if they were subject to those principles, probably accidents could have been mitigated. And that is being remedied now.

Unhedged: That’s because they would have had more capital and higher liquidity?

Carstens: Yes, and in the case of a Silicon Valley Bank, the marking to market of their positions would have been passed to equity early on. And when you have to do that constantly, the market takes notice early on. Here, once they went out and said to the market that they needed capital, the market said, why do you need capital? Well, we have all these losses that you don’t know about. That is when everything exploded. 

Unhedged: Changing topics, I agree with many of the goals you articulated in your paper about the Finternet — using unified ledgers and tokenisation to reduce the frictions that persist in the global financial system. But I wonder if a more interconnected, frictionless system might increase cyber security risks — if the current patchwork has some security advantages. 

Carstens: With the Finternet, we’re not talking about a monolithic network or a monolithic ledger. We talk about a network of networks. An advantage of this rethinking of the financial system is that you can incorporate these security concerns into the design. One problem we have today is that many systems, not all of them, were not necessarily designed with cyber security in mind, and I think it makes a huge difference if you can incorporate everything from the outset. Cyber security will be an endless battle. But I think that security would be enhanced when you have it in the design from the beginning.

Unhedged: What’s the next step in realising your vision?

Carstens: One of our projects, Agorá, is an effort that is being put together by the BIS and the IFF [the Institute of International Finance]. The BIS are coordinating with seven very important central banks — the Fed, the Bank of England, the ECB, Swiss National Bank, the Bank of Korea, Bank of Japan and the Banco de México. And then the IFF is putting together a group of financial institutions. If you think about the Finternet, a key component would be the circulatory system — the payment links. The payment links will depend on wholesale CBDC [central bank digital currencies] and tokenised deposits. Tokenised deposits is a very unfortunate name. It is better to talk about digital commercial bank money. So, in the Finternet, the payment system would rely on wholesale CBDC, which is very similar to the reserve system we have today, but empowered by programmability and so on; and on commercial bank money, which is exactly what we have today in two-tier systems. So Agorá is going to study all of the consequences of having tokenised central bank money and tokenised commercial bank money, with a very specific application to correspondent banking. Even if we don’t [progress all the way] to the Finternet, this has a lot of value. Because correspondent banking is a system that, by and large, needs huge amounts of fixing. 

Unhedged: Does it concern you — and I don’t want to sound too cynical here — that a lot of banks involved in correspondent banking are, as it were, in the friction business? What we think of as inefficiency, they think of as fee income.

Carstens: A lot of the reasons why correspondent banking is a pain is because it’s very complex, and it’s based on very old technology. A lot of the costs have to do with compliance, have to do with AML-CFT [anti money laundering, combating financing of terrorism] requirements. It has to do with different rules in different places and all that can be streamlined. Many banks have left correspondent banking because it was perceived as a low-margin, high-risk enterprise. And I think with the Finternet you can improve that balance. You can dramatically reduce the risk for the institution. 

Unhedged: There’s been two big changes in the banking world recently. One is we went from a zero rate world to what we might call normal rates. Another big change is that sovereign debt levels are much higher. How will those two big changes affect the work that you do and the work that central bankers do?

Carstens: If — and this is a big if — we settle at a rate that is higher than what we had last decade, I think that’s good for central banks, because it creates some distance with the zero lower bound, and gives more flexibility to monetary policy. And I think having rates back to normal shouldn’t be such a detriment to growth. So I think that’s fine. 

I am concerned about debt over GDP in many countries. And it’s not only not only high debt, it’s also high deficits. It is not very good to have fiscal and monetary policy at cross-currents. And to some extent that is happening. So the work of bringing down inflation becomes more difficult at the margin. And with high debt over GDP, you know the markets will have to carry a larger stock of the “safe asset” [sovereign bonds]. But by how much can you increase the stock of safe assets before their quality, safety, is questioned? If you come from an emerging market, you know that can happen. 

Unhedged: Assets have been rushing to private credit. How do you assess those risks associated with non-bank lending?

Carstens: The Basel committee and the FSB [Financial Stability Board] are looking primarily into the connection of non-bank financial activities with banking activities. Because at this stage, that could the transmission mechanism. There are two important aspects there. One is whenever you make a rule, there will be efforts to try to avoid it. If a lot of the activity is that going on [in non-bank lending] is regulatory arbitrage, that probably is not good for the system overall. And the other important consideration is that we haven’t seen how [new activities in the non-bank financial world] will perform in the full interest rate cycle. We don’t have enough information to say if they are handling the cycle well or not. The banking system, we know how it is going. We don’t know exactly what the exposures are for different sectors, what the interest rate sensitivities are, and so on in non-banking activities. There will be casualties. And we don’t know how high they will be. At least we as authorities should try to have much better information. I’m sure that there are many non-bank activities that are worthwhile and that are safe. But there might be many others that are not. 

[Derby]

https://www.msn.com/en-us/money/realestate/property-s-waiting-game-is-getting-harder/ar-BB1lQsRH

Property’s Waiting Game Is Getting Harder


Property’s Waiting Game Is Getting Harder
© Provided by The Wall Street Journal

Higher-for-longer rates are forcing commercial property owners to rethink their options.

“Restrictive monetary policy needs more time to do its job.” It was the last thing real-estate borrowers wanted to hear from Federal Reserve Chairman Jerome Powell when the central bank held interest rates steady last week.

Last year’s motto in real-estate circles was to “survive until ’25.” Property owners thought the Fed would cut interest rates throughout 2024. If borrowers could just sit tight, it would soon be easier to refinance troubled loans.

Over the past three weeks, borrowers and lenders have both realized this is probably a fantasy. Inflation has been stuck above 3% for three consecutive months. U.S. economic data have remained robust, despite a weaker-than-expected jobs report Friday.

The one-month forward curve shows that investors now think the secured overnight financing rate, or SOFR, which is closely related to the federal-funds rate, will be 4.825% at the start of 2025. This implies up to two small cuts this year. Back in January, six cuts were expected.

One immediate consequence is that the cost of hedging has shot up again. Lenders require borrowers of floating-rate debt to hedge their interest-rate exposure, often through interest-rate caps. These instruments pay out when a benchmark such as SOFR rises above a set strike rate, which reassures lenders that borrowers will be able to meet their repayments even if rates rise.

The cost of these caps has become a major headache for property owners, according to Carol Ng, a managing director at risk-management firm Derivative Logic. The price of a one-year extension for an interest-rate cap on a $100 million mortgage at a 3% strike rate is now $2.1 million. Back in January, when the market expected more rate cuts, the same extension cost $1.3 million.

It isn’t just borrowers who are in a tight spot. The longer rates stay high, the greater the weight of unresolved property loans on lenders’ books as commercial real-estate loans get rolled over. According to the Mortgage Bankers Association, $929 billion of outstanding property loans will mature in 2024—a 41% increase on MBA’s earlier estimate. This is because many loans that were due to be paid off in 2023 were extended, adding to this year’s pile of maturities.

The so-called extend-and-pretend strategy worked well after the global financial crisis because the Fed cut rates from roughly 4% at the start of 2008 to close to zero by the end of the year. Ultralow interest rates turbocharged property valuations in the subsequent years, bailing out bad loans.

But few people expect rock-bottom rates to make a comeback. Stringing things out may be preferable to reporting losses, but it could tie up a lot of capital. Commercial real-estate loans make up more than a fifth of U.S. banks’ overall loan portfolios on average.

The same thing is happening in securitized debt markets, where loans are also being extended rather than repaid. Investors in commercial mortgage-backed securities are becoming frustrated that their money is stuck in notes that may be generating very low returns by today’s standards. A triple-A CMBS bond issued in 2022 can yield as little as 3%.

Higher-for-longer interest rates could also prolong the deep freeze on property deals. Debt costs are so high that it is difficult for buyers to meet lenders’ requirements that the rental income generated by a property cover the debt-service costs by at least 1.25 times. Sellers could capitulate on price to make the math add up, but they are reluctant to take a hit.

This new reality leaves owners of troubled properties with unpleasant choices to make. Before granting extensions on maturing loans, lenders are asking borrowers to show commitment to their buildings by writing fat checks to cut their debts.

Last month, New York landlords SL Green and Vornado coughed up around $100 million to extend a $1.08 billion loan on an office building at 280 Park Avenue, according to CRED iQ analysis. Less deep-pocketed owners may decide their cash would be better spent elsewhere and hand the keys to the lenders. It is becoming harder to persuade landlords to put more money into troubled properties.

According to Alex Killick, a managing director at real-estate services company CWCapital Asset Management, owners have recently started to talk about a plan B: moving early to sell their buildings. This is unappealing as it is still hard to pin down exactly what price a building might fetch. But if they wait, the risk is that a flood of troubled buildings hits the market at the same time, depressing values further.

“Last year, borrowers were saying, ‘I just need three months for rate cuts to kick in’,” says Killick. “We aren’t hearing that anymore. Powell sounded pretty clear that this is the new normal.”

[sudden and sharp]

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Interesante: file:///home/antoine/Downloads/Dialnet-CernunnosYSusAntecedentesOrientales-1369173-1.pdf




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