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Category: Allgemein

“The hikes of others”: some thoughts on the global tightening cycle after the Fed and SNB decisions

While the Fed’s 75bps hike on Wednesday 21st was in line with expectations, the market had priced in a 100 bps hike for the SNB. In this sense the 75bps announcement came as a dovish surprise, even though this still is the biggest SNB rate increase in more than 20 years.

While the SNB explicitly did not rule out further hikes in December and, if necessary, forex market intervention in the interim, it is noteworthy to what extent governor Thomas Jordan emphasized the role of international spillovers through the hiking of other central banks and the role of transitory inflation pressures in his opening statement and the subsequent media Q&A.

Series of video interviews on energy crisis, inflation, (de-) globalization and government debt

Matthias Schober from the German personal finance education portal pfenningfabrik.de invited me for a series of half-hour videos in which we discuss the current global economic situation, ranging from the energy crisis, ECB monetary policy to China and government finances.

The first of the series, covering the energy crsis and inflation available here: https://www.youtube.com/watch?v=o-g2BHOsfPw

Update Sep 14th 2022: The second part , covering global power shifts and the economic outlook for China, US, Europe is now available here: https://www.youtube.com/watch?v=YgmGfuqAa7g

We are currently planning another interview on government debt for in a couple of weeks. Watch this space.

Germany’s first trade deficit since the 1990s…

Before the summer break I gave an interview to the New York-based Global Finance Magazine about what the first German trade deficit in almost three decades means and whether it is reason for deeper worry.

The gist of my argument is that the German public has long fetishised its current account surpluses as a sign of strength. It was not. Our research with Iryna Stewen and Michael Stiefel highlights that high surpluses actually reflected some of Germany’s structural weaknesses and were far from being an unmitigated sign of strength. That also means that a one-off deficit is nothing to worry about. But could the move into deficit reflect deeper challenges to Germany’s growth model? This is indeed likely to be the case. Read the full article here: https://www.gfmag.com/magazine/julyaugust-2022/germany-trade-deficit-surprise

Will sanctions on Russia work?

In a recent TV interview I have given the Swiss channel Tele Z, I had a chance to discuss with my host Claudia Steinmann the implications of sanctions for the Russian and western economies. We also talked about whether or not China is going to benefit from the situation. In this post, I follow up on my interview and elaborate a little more on whether sanctions will work or not. In the next post, I plan to write a little more on how I see the role of China.

Will sanctions work, then? I think, it is important to answer that question at three levels: macroeconomic, political, military-strategic. And at the three levels the respective answer is “yes”, “it depends” and “probably not”. But then there is another level — bear with me….

  • Take the macroeconomic level first. Sanctions are already having a devastating effect on the Russian economy. The bulk of foreign currency reserves has been seized, the ruble has tumbled, domestic inflation is soaring, trade has collapsed, production come to a standstill in many parts of the economy. This is hurting the regime, but it is hurting the average Russian even more. While “oligarchs” have been targeted by the seizure of their overseas assets, the overall effect of the sanctions is clearly much smaller for oligarchs than for the average Russian household. Oligarchs are people with international networks and globally diversified asset portfolios, including access to countries that do not implement any sanctions (the yachts are starting to show up in Turkey already…). Such asset shifting is not really an option for the average Russian, though. Hence, if anything the West should work harder on actually implementing and extending the sanctions on the oligarchs. Actually seizing their assets would be a start, implementation in many countries (including Switzerland, Germany…) is patchy at best so far.

Globalization of Real Estate Network

Mathias Hoffmann is the Scientific Director of a new research network “Globalization of Real Estate Markets” (GREN) at the UZH Center for Urban and Real Estate Management. The objective of the network is to provide an international forum for economic research that examines how the forces of globalization shape housing markets around the world.   To this end, the network collects and aggregates data on international real estate markets and organizes academic conferences,  summer schools and policy events.

China’s role in the global financial crisis

On Nov 29th, I gave a public lecture on China’s role in the origins and the handling of the financial crisis as part of a lecture series commemorating the 10th anniversary of the global financial crisis.

Building on my research with Iryna Stewen and Yi Huang, I argue that global imbalances were an important factor in the run-up of the crisis. But the crisis was ultimately caused by U.S.specific factors (lax supervision, political pressure to increase home ownership, weak incentives for proper screening).

During the crisis, China reacted with a massive fiscal expansion. This contributed to stabilizing global demand but it also exacerbated the misallocation of capital within China.

The lecture slides are available here (password protected — send me an e-mail for access)