Tag Archives: investment

A lot of pseudo-problems arise from confusion about use of terms, especially when key terms are ambiguous. For example, "capital" can be either financial or non-finanacial ("real" or actual).  "Investment" has two different meanings. Financial "investment" is portfolio wealth held as financial instruments a form of savings in contrast to real goods like real estate, physical precious metals, and collectibles like art. "Savings" denotes a stock, and "saving" denotes a flow....

Must-read for anyone interested in MMT.Lars P. Syll’s BlogAbba Lerner and functional financeLars P. Syll | Professor, Malmo University

The Financial Times’ economics editor, Chris Giles, has had a busy few days. He has written several interesting articles, covering the absence of “the deficit” as a big election issue (as a hawk he’s really not happy about that), the OECD’s new forecast for the UK economy, and the marked similarities between the economies of...

The present period of very low interest rates is widely assumed to be temporary, a consequence of the 2008 financial crisis and subsequent central bank action. Because of this, as the financial crisis fades into the mists of time, there is growing political pressure for "normalisation" of interest rates. Here, for example, is William Hague warning that central banks must start to raise rates or face losing their independence: The only way out is for the US Fed to summon the courage to lead...

The chart below comes from Silver Watch on Twitter. I haven't been able to identify the original source, but it illustrates perfectly the point I have been trying to make for quite some time now. Pension funds are not taking on more risky investments because the risk premium has fallen, but because the risk-free rate has fallen: In fact, as the chart shows, the risk-free rate has been falling steadily for over thirty years.  This is not a post-crisis blip. It is a secular trend. Yet pension...

It's not going to come from people working more. Excerpt from the IMF's latest Debt Sustainability Analysis for Greece, just released: Oh dear. Quite apart from the negative contribution to growth, the prospect of unemployment taking 44 years to return to something approaching normality is simply appalling for Greece's population. I've looked in more detail at this here (Forbes).Well, if labour isn't going to drive growth, there's always investment, yes?Er, not really. The outlook for...

This is a silly chart: Why is it silly? Just look at what it implies for government and investor behaviour - and the future of the ratings agency that issued it.S&P forecasts a serious shortage of safe assets by 2050 if the developed nations, in particular, do nothing to adjust their fiscal finances in the light of ageing populations. Clearly, therefore, the price of sovereign bonds in the three "A" categories will rise significantly. S&P doesn't indicate which nations would be the...

Germany's Finance Minister Wolfgang Schaueble has long been critical of ECB monetary policy,. But now, as Reuters says, the gloves are off. In a speech at a prizegiving for an ordoliberal economics foundation last Friday, Dr. Schaeuble demanded that the ECB raise interest rates.The justification? Very low interest rates hurt Germany's savers, which are the bedrock of its economy.There is a political dimension to this. Dr. Schaueble's party, the CDU, is losing popularity and desperate for...

President Juncker's European Fund for Strategic Investments (EFSI) has produced an update on its progress to date. The update is a lovely piece of work, with elegant graphics and breakdowns of projects and investments by country and by sector. Really impressive. Kudos to the content management team.But the content - oh dear, the content. The triumph of image over substance. From the EU-wide State of Play document, here is the total amount invested so far - projects and SME financing - and the...

And particularly in Europe, as this chart shows: The ratings agency Standard & Poors has called for governments everywhere to increase investment spending. It also says they need to improve the efficiency of the spending they are already doing.  Private sector investment spending all over the world fell after the 2008 financial crisis. In Europe, where the crisis started earlier, it started falling in 2007. And it has not recovered. Private sector investors remain risk-averse and...