- Russian elites and offshore companies (OCCRP)
- Mongolian workers, Scottish managers: Foxconn in the Czech Republic (Ning Hui for Echowall)
- Belgian carbon taxes are a mess (Ruben Baetens)
- Banque Havilland and the UAE (Bloomberg)
- Intuitive guide to convolution (Better Explained)
- Intangible assets and invisible value (Adam Keesling/Napkin Math)
- Is central bank digital currency (CBDC) legal? (IMF)
- ABN AMRO exits all its non-European corporate banking activities
- CaixaBank and Bankia are planning a merger
- HSBC wants to sell its French retail network
- Rumors of a merger between Credit Suisse and UBS
The strategy of European banks ever since the Global Financial Crisis has been to focus on profitability1. How do you achieve a higher return on equity? There are two commonly followed options. Either you cut costs, e.g. by merging banks in the same geography and closing down the redundant branches. Or you sell the business, especially when you’re an also-ran outside of your home market.
European Union leaders agreed on a package of measures to support the economy after the damage done by Covid-19.
The summit took four days, because of tensions between member states that will be net payers and those that will be net receivers of EU funds.
However, I had a more elegant alternative, as I explained on Twitter (thread):
The EU missed an opportunity to provide macroeconomic support that matches the size of the corona shock, to increase safe assets and to avoid transfers between member states.
Do deficits automatically lead to default or high inflation? No.
Here are some good reads:
Will deficit spending lead to inflation? There is a difference between developed and developing countries.
Who pays for this? How the United States dealt with its national debt after the Second World War.
Historical lessons from large increases in government debt. The debt was set aside in a sinking fund for repayment at a later date.
Cliché ideas of how the international economy works (see the work of Brad Setser and many others):
- Companies use “financial centers” aka tax havens to minimize their tax bills.
- Financial institutions in surplus countries invest the money abroad, but are not good at it.
Let’s have a look at how the aircraft leasing business works in reality.
Financial center? Check:
“Ireland is one of the biggest centres for airline leasing in the world. Many of the world’s biggest and best airline leasing companies are based in the Republic”, which explains why Ireland has 17,000 aircraft orders. [To be fair, financial centers also benefit from the concentration of specialized workers and firms.]
Financiers from Germany, Japan and China investing in low-margin, high risk businesses? Check:
Between 2010 and 2014, [Dublin-based aircraft leasing company] Avolon also raised US$6.1 billion in debt from the capital markets and a range of commercial and specialist aviation banks including Wells Fargo Securities, Citi, Deutsche Bank, BNP Paribas, Credit Agricole, UBS, DVB, Nord LB and KfW IPEX-Bank. In 2017, Avolon entered the public debt markets and raised a total over US$9 billion in debt finance. In November 2018, Avolon announced that Japanese financial institution, ORIX Corporation had acquired a 30% stake in the business from its shareholder Bohai Capital, part of China’s HNA Group. (source: Wikipedia)
Some interesting articles I came across recently:
Yemen has two governments (civil war), one currency, and two monetary systems.
IT project management horror story at German Apobank (in German).
Overview of the Eurosystem response to the pandemic.
Euro area economic expansions are like Tolkien’s Elves: they don’t die of old age. The most recent one was murdered by corona.
How may clicks to open a bank account? (Built for Mars on the user experience of retail banking)
The Economic Foundations of Industrial Policy: an amazing longread (very long!) on productivity, explaining why rich nations are rich
Ancient history: “In 2003, refinancing via LTROs amounts to 45 bln Euro which is about 20% of overall liquidity provided by the ECB.” (On June 18, 2020, banks borrowed 1.31 trillion euro from the ECB via TLTRO!)
What is the inflation rate during and after lockdowns?
Inflation is already hard to measure in normal times, as I discussed in Bankers are people, too (page 126-129).
But the corona crisis adds further complications. Some services are unavailable due to the corona lockdown, for example restaurant visits and air travel. To discourage hoarding, supermarkets stopped offering discounts.
The abrupt shock causes headaches for statisticians.
For more, you should read Claire Jones’ Alphaville post on the fuzzy inflation figures.
Will millions of businesses fail due to the corona crisis? Are we doomed to years of high unemployment?
But let’s be very clear. A depression is a political choice.
Governments can solve the crisis in the blink of an eye. Transfer money to households and businesses that suddenly lost their income.
There are plenty of financial proposals for dealing with the corona crisis.
More government debt! Eurobonds! Helicopter money! Eliminate sovereign debt held by the ECB! Create a European investment fund!
One thing that greatly annoys me is that people don’t go into the details.
So if you want to convince me of your financial panacea, show me what it means in practice. Who are the winners and losers? What are the consequences of your plan for households, companies, banks, government finances, inflation, employment?
Make me think past the sale, and I might buy your proposal!