washingtonpost--2020-03-13--Analysis | China Knows a Thing or Two About Trader Tantrums

Compare that with China .
Yes , the nation has given the world a big headache .
Still , its sell-off has been fairly mild .
Just look at the MSCI China Index , which is down 10 % this year — peanuts next to the S & P 500 ’ s 23 % slide .
The MSCI index is a better gauge of global investors ’ attitudes about the mainland than the Shanghai benchmark , because most of its component stocks are traded offshore .
More importantly , China ’ s bond market is still open , which lowers @ @ @ @ @ @ @ any unpleasant feedback to stocks .
Case in point : Junk-rated Yanzhou Coal Mining Co. just issued 5 billion yuan ( $ 712 million ) worth of bonds with coupon rates ranging between 2.99 % and 4.29 % .
By comparison , China ’ s 1-year benchmark lending rate is 3.15 % .
This is quite an accomplishment considering an oil price war and the virus have practically shut down high-yield bond markets elsewhere , especially in the energy and mining sectors .
Those less familiar with China might say it ’ s @ @ @ @ @ @ @ in a command economy .
That ’ s certainly true .
If you dig deeper , however , Beijing ’ s policy response has been quite mild .
When financial markets are in a panic , it ’ s not the actual amount of stimulus but the frequency that matters .
You ’ ve got to feed traders with small candies , preferably daily .
Beijing appears to be throwing the kitchen sink at the problem , revising rules on the go and flashing media outlets with grand , empty promises on a @ @ @ @ @ @ @ have gobbled it up and are feeling assured that President Xi Jinping is on this .
What has Beijing done , really ?
The 10 basis point cut to its benchmark rate is nothing compared to the Federal Reserve ’ s inter-meeting 50 basis point reduction last week .
The People ’ s Bank of China has promised 800 billion yuan of re-lending facilities to support virus-hit enterprises as well as smaller businesses .
It has a history of doing much more , such as the 3.5 trillion yuan it has plowed into @ @ @ @ @ @ @ the fiscal side of things .
Beijing has allowed municipal governments to issue special-purpose bonds early — to the tune of 1.8 trillion yuan — and various localities have vowed to spend 3.5 trillion yuan on infrastructure .
Those lofty numbers may well amount to absolutely nothing , as my colleague Anjani Trivedi and I have both written .
This brings us to the problem the Federal Reserve will face next week .
By selling off on Lagarde ’ s response Thursday , markets are just preparing Chairman Jerome Powell for the kind @ @ @ @ @ @ @ traders are already betting the Fed will take its benchmark rate all the way to zero .
Powell may have no choice but to follow the markets .
How did the Fed allow futures markets to fester to such an extent ?
The central bank needs to learn what ’ s already painfully obvious in China : Traders are like children , prone to wild imaginations and tantrums .
You ’ ve got to keep their sugar level steady , like Beijing has done , with frequent policy meetings and banker lunches .
@ @ @ @ @ @ @ time before investors realize China ’ s lofty ambition lacks substance , and stocks will drift lower .
Unlike the rest of the world , we ’ re not seeing 2008-style meltdowns on the mainland yet .
But as the U.S. well knows , such drastic stock declines can trigger a fast deterioration of financial conditions that raises the risk of recession .


washingtonpost--2020-03-13--Analysis | Would You Buy a 10%-Off Cruise Right Now?

Cruising divides opinion at the best of times .
Fans see it as a fun , hassle-free and cost-effective way to explore several often sun-drenched destinations in one go , particularly when food , drinks and entertainment are thrown in .
For others , it conjures up a horror of claustrophobia , seasickness and way too much proximity to other holiday makers .
Headlines about passengers stuck on ships turned away from ports for fear there may be a deadly virus on board will only serve to reinforce their aversion .
The images of Carnival ’ s majestic Grand Princess @ @ @ @ @ @ @ the waters around San Francisco because 21 passengers tested positive for the virus , will be particularly damaging .
As will an unprecedented warning from the U.S. State Department not to take cruises because they hold an elevated risk of Covid-19 infection and potentially landing in quarantine on a foreign shore .
After all , North America is the world ’ s biggest cruise market by some distance .
It ’ s hard to see how a $ 60 billion industry that ’ s already made such an effort to remake its image @ @ @ @ @ @ @ easily overcome this hit .
It still depends in large part on passengers over 50 who may be more likely to think twice getting on board .
And before embarking , those over 70 may even be required to present a doctor ’ s note that they have a clean bill of health , not exactly reassuring for a carefree getaway .
But first for the immediate pain .
The global pandemic could hurt the cruise industry worse than both the 9/11 terrorist attacks in 2001 and the financial crisis of 2008-2009 , @ @ @ @ @ @ @ at Bloomberg Intelligence .
Even before Carnival ’ s decision to suspend its 18 Princess vessels , he was estimating that revenue yields , a measure that reflects both pricing and occupancy leverls , could fall by as much as 20 % this year .
That ’ s a worry for the big U.S. operators — Carnival , Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings Ltd. — as well as TUI AG , the German tour operator that ’ s been developing its ocean-vacation arm to give it an edge against @ @ @ @ @ @ @ a dramatic one .
But more lines could take this option , both to stem losses from operating half-empty vessels and to give them a very deep clean as a way to reassure holidaymakers that they are safe once the pandemic has subsided .
On Friday , travel-to-insurance group Saga Plc said it was spending its cruise operations , cutting profit by up to 15 million pounds ( $ 18.9 million ) .
Alternatively , cruise operators could look to continue filling vessels with deep discounts .
Analysts at Nomura have estimated that @ @ @ @ @ @ @ % this year .
That may encourage enthusiasts to take to the high seas , but at a lower profit .
Yet as the pandemic spreads , and people around the world question how far from home they ’ re willing to travel , it ’ s unclear just how many takers there will be .
And that ’ s before any official travel restrictions , such as President Donald Trump ’ s decision to temporarily curtail European travel to the U.S.
It ’ s understandable that shares have tumbled since the coronavirus @ @ @ @ @ @ @ , Royal Caribbean and Norwegian have boosted liquidity in recent days .
Even so , Royal Caribbean looks to face the most difficult challenges ahead , with net debt reaching 3.7 times Ebitda at the end of this year , according to the Bloomberg consensus of analysts ’ estimates .
That ’ s compared to Norwegian at 3.3 times and Carnival at 2.5 times .
The industry may recover from the latest shock .
After all , demand returned after the Costa Concordia disaster in 2012 , when 32 people died after the @ @ @ @ @ @ @ coast .
But it may never be the same again .
Previous contagious outbreaks had prompted the industry to tighten hygiene standards .
It will have to elevate them further given the spotlight on the dangers of thousands of people living in close quarters .
Additional steps , such as more stringent screening of guests and staff , could raise expenses .
Cruise lines will likely look methodically to ensure they have agreements with all ports on every itinerary so ships with sick passengers can dock .
Putting such arrangements in place would @ @ @ @ @ @ @ With the focus on the heightened risks faced by older travelers , especially those with underlying health conditions , cruise operators will need to intensify efforts to capture younger consumers , with all the associated marketing expense and investment in amenities to attract them .
TUI Cruises is already focused on family vacations , while Walt Disney Co. has plans to almost double its fleet to seven ships by 2023 .
Virgin Voyages , Richard Branson ’ s over-18s luxury cruise offering , recently took delivery of its first liner , boasting Instagrammable @ @ @ @ @ @ @ lineup of shows , although it has postponed the Scarlet Lady ’ s maiden voyage .
Winning over young adults won ’ t necessarily be easy .
Cruise liners are associated with a list of environmental problems .
So while “ cruise shaming ” hasn ’ t yet caught on , expect more focus on the industry ’ s impact on the planet , as well as its role in over-tourism in cities from Barcelona to Venice and Copenhagen .
For the time being though , cruise operators ’ main focus will be @ @ @ @ @ @ @ any ships that do sail are as full as possible .
With ever more alarming headlines , that means more struggles for the Love Boat .

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washingtonpost--2020-03-13--Analysis | Short-Selling Bans Only Delay the Inevitable

And if Europe really wants to take action on short selling in a crisis , it should do it as one .
Otherwise you just encourage the hedge funds to move onto a different target while a localized prohibition is in place .
It ’ s never a happy sign when stock exchange regulators reach for a short-selling ban .
Preventing the free flow of equity markets can just store up problems and deter investors in the longer term .
Both Italy ( 85 stocks ) and Spain ( 69 ) have chosen just the most oversold securities to include @ @ @ @ @ @ @ an understandable reaction following a total meltdown .
South Korea made a more draconian move by banning short selling on all stocks and exchanges for six months .
In a short sale , a trader borrows stock from a broker or bank and sells it at the prevailing market price , betting that a decline will allow him or her to return the shares to the lender after repurchasing them at the new , lower value and pocketing the difference .
For the trade to work , some owner of the shares has @ @ @ @ @ @ @ the short seller .
Governments hate it because short attacks can gather a momentum of their own , which may not reflect fundamental problems in a company or other traded assets .
Banning short selling of equities may seem logical , as it does not prevent current holders from liquidating their holdings , but it does reduce liquidity by curtailing long and short trading .
The prohibition was triggered several times during the euro crisis but it never really had a conclusive effect — it was more a move of desperation .
There @ @ @ @ @ @ @ a ban was in place , and underperformed when it was lifted .
It was also used for certain sovereign bonds and related futures and option contracts .
After European Central Bank President Christine Lagarde ’ s comments on Thursday whacked Italian government bonds , there ’ s a nervousness among traders that these bans might spread across many other European markets .
Perhaps there does need to be a wider discussion about funds lending out stocks in the first place , for other market players to be able to place short positions @ @ @ @ @ @ @ the stance that the world ’ s biggest pension fund is taking against this practice .
In the meantime Europe needs to act as one and present a united front on this , as with everything else coronavirus-related .
Marcus Ashworth is a Bloomberg Opinion columnist covering European markets .
He spent three decades in the banking industry , most recently as chief markets strategist at Haitong Securities in London .


washingtonpost--2020-03-13--Analysis | Why India’s Financial Sector Keeps Blowing Up

The seeds were sown in a debt-fueled economic boom between 2007 and 2012 , when banks increased loans by 400 % .
When the economy began slowing , though , many companies struggled to repay , making banks reluctant to lend more .
That crimped the availability of credit and added a further drag on the economy , heaping pressure on indebted businesses .
Some of the slack was picked up by non-bank lenders , or shadow banks , but one of the most prominent -- Infrastructure Leasing & Financial Services Ltd. -- became the first major blowup in 2018 @ @ @ @ @ @ @ s mini-Lehman moment .
The collapse of IL & FS triggered something of a credit crunch and the Reserve Bank of India stepped in to take control of another shadow lender , Dewan Housing Finance Corp. , to contain the fallout .
A smaller lender also failed in 2019 after allegedly duping investors about its exposure to a property developer .
Then , in March 2020 , the central bank seized Yes Bank Ltd. in India ’ s biggest bank rescue .
Its troubles were rooted in the rapid expansion under its former @ @ @ @ @ @ @ .
In his last full year in charge through March 2018 , Yes Bank had the fastest loan growth of any bank in India .
Credit Suisse had noted in a 2019 report the company had the biggest proportion of outstanding loans to large stressed borrowers .
Authorities are investigating Kapoor for alleged lending impropriety .
He denies wrongdoing .
No .
India ’ s bad-loan problem was caused by a variety of factors , including government policies .
Some borrowers found life harder when authorities suddenly tightened regulations , the courts canceled @ @ @ @ @ @ @ fees , natural gas supplies dwindled , real-estate prices fell and interest rates rose .
Prime Minister Narendra Modi ’ s unprecedented decision in 2016 to overnight invalidate almost all of the nation ’ s physical currency devastated supply chains and created dangerous imbalances in the financial system as Indians rushed to deposit their bills .
Making matters worse , there was long a belief among some corporate executives that they could walk away from debts without facing consequences .
Regulators allege that some bank chiefs handed to their cronies loans that ended @ @ @ @ @ @ @ in 2015 began assessing the bad loans , bringing to light the full scope of the problem .
Gross non-performing assets across the banking sector surged from about 3 % to more than 9 % , then breached 10 % for the highest ratio in the world .
The government has created a new bankruptcy law to aid loan-recoveries but , as the economy decelerates , authorities are also taking steps to spur fresh credit and show more lenience toward certain borrowers and small businesses .
The Reserve Bank warned late last year @ @ @ @ @ @ @ is set to reverse , with soured debt forecast at 9.9 % of total credit by September 2020 , up from the 9 % predicted earlier .
Authorities ’ moves to seize IL & FS and Yes Bank risk tightening access to credit .
Almost certainly .
S & P Global Ratings warns that the bailout of Yes Bank may have “ painful side effects ” soon , given that some holders of so-called hybrid bonds will lose their entire investment under the proposed rescue plan .
Fitch Ratings says India ’ s @ @ @ @ @ @ @ another crisis of confidence , ” which may tighten financing conditions -- adding more strain on debt-laden companies .
And the close links between Yes Bank , the country ’ s fourth-largest private lender , and other banks , mutual funds and insurers risks spreading contagion .
India ’ s slowing economy faces further threat from the disruption caused by the coronavirus pandemic .
The health of India ’ s shadow banking sector has improved , albeit from a shaky position .
The central bank had been concerned about 10 companies on a @ @ @ @ @ @ @ just focused on four .
Healthier shadow lenders could revive credit for consumers buying cars or vacations , potentially giving a shot in the arm to the economy .


washingtonpost--2020-03-13--Pelosi Says Virus-Relief Bill to Get a Vote as GOP Awaits Trump

Trump is scheduled to hold a news conference at 3 p.m. Friday , where he ’ ll declare a national emergency that would open the way for providing more federal money to states and cities as they deal with the spreading virus , according to two people familiar with the matter .
The president has yet to weigh in publicly on the legislation in Congress , other than to dismiss the original bill presented by Democrats earlier in the week as loaded with ideological “ goodies.
” Congressional Republicans are wary of getting behind a plan before knowing whether Trump @ @ @ @ @ @ @ eight times on Friday , according to the speaker ’ s office , after repeated exchanges on Thursday as they negotiated a compromise on legislation to guarantee sick leave for people infected by the novel coronavirus and provide testing and treatment .
Despite Mnuchin ’ s involvement in the negotiations , some Democrats remained unsure whether all Republicans were on board .
Ways and Means Chairman Richard Neal said early Friday that Democrats were largely ready to vote on the package and send it to the Senate for a vote , likely early @ @ @ @ @ @ @ would contain language “ based upon what we believe were agreements.
” But Representative Debbie Dingell of Michigan said finding out whether Republicans and the administration will actually support the bill is still up in the air .
“ We really won ’ t know until we pass this.
” Trump has remained the wild card in the negotiations .
He ’ s scuttled agreements in the past .
He continued to push for a payroll tax cut on Friday , saying on Twitter that was the way to go “ if you @ @ @ @ @ @ @ of people quickly & efficiently.
” But that faces bipartisan skepticism in Congress , and any action on that wouldn ’ t come until later .
Details of the economic relief legislation haven ’ t been released .
Pelosi , in an email to House Democrats , said the plan will include free coronavirus testing , 14 days of paid sick leave , increased funds for Medicaid , and enhanced unemployment benefits and food aid .
But it gave few details .
A Republican official familiar with the negotiations said they are expecting @ @ @ @ @ @ @ with GOP concerns about the Democrats ’ earlier proposal .
Negotiators have agreed to limit the duration of relief in the bill to the outbreak without creating new permanent entitlements , health provisions have been targeted to the COVID-19 virus rather than unrelated treatments , and provisions to prevent taxpayer funding of abortion known as the “ Hyde amendment ” have been restored , according to the person .
The proposed aid to states via Medicaid would also be reduced from the original 8 percentage point boost in the federal match to 6.2 @ @ @ @ @ @ @ I know there will be a bill on the floor by the end of the day , ” Appropriations Chairwoman Nita Lowey said .
“ This is not a partisan issue .
And I would hope that everyone could vote for this even though it may not be perfect.
” The spread of the virus in the U.S. has prompted state and local governments to close schools and , in some cases , restrict gatherings of large numbers of people in any venue .
Professional sports leagues and college teams have suspended play @ @ @ @ @ @ @ along with slowdowns worldwide as financial markets slide .
The S & P 500 traded about 4 % higher at 1:30 p.m. Washington time Friday after plunging 9.5 % on Thursday in the biggest rout since 1987 and fifth-worst on record .
Mnuchin said he ’ s also beginning talks with Trump and congressional leaders about the need to address a “ short-term liquidity issue ” with U.S. airlines .
“ We ’ ll be coming very quickly back on issues dealing with the airline industry , ” Mnuchin said .


washingtonpost--2020-03-13--Analysis | Germany’s Black Zero Rule Really Does Look Dead

Most important of all is that Germany is leading the charge , possibly signaling a fundamental change in the attitude of governments everywhere toward fiscal looseness .
Berlin ’ s Schwarze Null ( Black Zero ) rule , which insists on a budget balanced between fiscal spending and tax receipts , has dominated not just German but all of Europe ’ s budgetary discussions for a decade .
I wrote last month that it might now be gone forever .
The rapid spread of the coronavirus reaffirms that conviction .
The most charitable interpretation of Lagarde ’ s failure on @ @ @ @ @ @ @ do whatever it takes to protect the debt of euro member states , unlike her predecessor Mario Draghi , is that she wanted to maintain the pressure on Berlin to finally succumb to reality and shoulder the fiscal burden for managing this latest crisis .
Only she can answer whether that was her intention , but it ’ s unmistakable that the ECB ’ s dismal inability to reassure the markets forced Europe ’ s — and Germany ’ s — foot-dragging leaders to take action .
On Friday , German Finance Minister @ @ @ @ @ @ @ February promise to loosen the black-zero rules , saying he was prepared to put all of Germany ’ s economic “ weapons on the table.
” This includes taking on increased debt and putting no limit on the credit support available for cash-strapped companies .
The bond markets are taking his latest comments seriously .
The yield on 10-year German government bonds ( known as Bunds ) rose 17 basis points today to -0.57 % .
They ’ re nearly 30 basis points higher than their record low ( which was only set @ @ @ @ @ @ @ rapidly this markets crisis has spiraled ) .
Meanwhile , Italian government bonds have reversed half of their losses from Thursday , enabling a considerable narrowing of the spread between their yields and those of Germany .
This is a key measure of the stability of the euro area , and the one that Lagarde blew a hole in on Thursday by saying it wasn ’ t the ECB ’ s job to worry about the yield spread .
All European stock indices spiked on Friday .
Unless things go horribly wrong again @ @ @ @ @ @ @ will at least go into the weekend in a less fraught place .
But the details of the EU fiscal response , and that of Berlin ’ s , need to be substantiated swiftly if the volatility is to subside properly .
Marcus Ashworth is a Bloomberg Opinion columnist covering European markets .
He spent three decades in the banking industry , most recently as chief markets strategist at Haitong Securities in London .


washingtonpost--2020-03-12--Biden, Sanders Deliver Coronavirus Speeches to Contrast Trump

“ Protecting the health and safety of the American people is the most important job of any president and unfortunately this virus laid bare the severe shortcomings of the current administration , ” Biden said , reading from a TelePrompter in Wilmington , Delaware.On Wednesday night , Trump gave a prime-time address from the Oval Office where he announced new travel restrictions and executive actions to help people and businesses affected by the rapidly spreading virus .
But , after the speech , the administration was forced to correct a number of the president ’ s assertions after he incorrectly @ @ @ @ @ @ @ The coronavirus outbreak comes at a pivotal time in the Democratic primary race as Biden seeks to build his nearly insurmountable lead in the next contests on Tuesday .
But , the outbreak has fundamentally changed the nature of presidential campaigning .
Biden and Sanders , both in their late 70s , have canceled public events and taken to delivering addresses without taking media questions as they try to mitigate their exposure and that of the public to the virus .
In his speech , Biden encouraged Trump to adopt his plan , @ @ @ @ @ @ @ sick leave , mobile test sites and the restoration of biodefense programs that Trump cut .
He also called for rapid acceleration of a vaccine aimed at combating the virus.
“ No president can promise to prevent future outbreaks , but I can promise you this : When I ’ m president , we will be better prepared , respond better and recover better , ” he said .
“ We will lead with science.
” Biden acknowledged that the virus would disrupt Americans ’ everyday lives as he called for a significant @ @ @ @ @ @ @ of the virus.
“ This crisis will hit everyone , but it will hit folks who live paycheck to paycheck the hardest , including working people and seniors , ” he said .
“ Another tax cut to Google or Goldman or millionaires won ’ t get the job done .
Another tax cut for these folks will not get the job done.
” Speaking in Burlington , Vermont , Sanders also described the virus in grave terms and warned about the consequences for those most at-risk , including the elderly , the @ @ @ @ @ @ @ the Trump administration ’ s ” incompetence and recklessness have threatened the lives ” of many Americans .
Sanders also used his address to underscore the need for universal health care , pitching his signature policy proposal , Medicare for All .
He said it was unacceptable that some Americans would not go in for testing or medical care because they could not afford it .
The Vermont senator also called for moratorium on evictions and utility shut offs and loans for small and medium-sized businesses .
The Trump campaign immediately assailed Biden @ @ @ @ @ @ @ vice president has shown “ terrible judgment and incompetence ” in dealing with public health issues in the past.
“ In times like this , America needs leadership and Biden has shown none , ” Communications Director Tim Murtagh said in a statement .
“ President Trump acted early and decisively and has put the United States on stronger footing than other nations .
His every move has been aimed at keeping Americans safe , while Joe Biden has sought to capitalize politically and stoke citizens ’ fears .
”


washingtonpost--2020-03-13--Analysis | Why Japanification and Secular Stagnation Are Bad, Bad News

It ’ s a term used by economists to describe a state of chronically anemic economic growth and feeble inflation or even deflation similar to the conditions faced by Japan since a giant real-estate bubble popped in the early 1990s .
It ’ s used to convey the alarming prospect -- often discussed in Europe , which has staggered economically ever since the 2008 financial crisis -- of sluggishness so deep that it is extremely difficult to escape .
Even after Japan ’ s central bank embraced two extraordinary forms of monetary stimulus -- negative interest rates and asset purchases @ @ @ @ @ @ @ the world ’ s third-largest economy -- the country has yet to return to a positive growth cycle strong enough to generate 2 % inflation after nearly three decades .
It ’ s a term originally coined by the Harvard economist Alvin Hansen in the 1930s to describe the tendency of mature industrial economies to move toward instability in the absence of large amounts of public investment .
It echoed the ideas laid out by John Maynard Keynes in his seminal 1936 treatise , “ The General Theory of Employment , Interest and @ @ @ @ @ @ @ global economy was mired in a deep depression , and theories like Keynes ’ s and Hansen ’ s offered an explanation and a prescription for the way out .
In recent years , amid rock-bottom interest rates in the wake of the biggest global downturn since the 1930s , another Harvard economist -- former U.S. Treasury Secretary Lawrence Summers -- revived the phrase to capture basically the same idea .
Essentially , yes .
Japanification can be seen as a subset of secular stagnation , with characteristics matching those that have specifically @ @ @ @ @ @ @ rapidly aging and shrinking population has contributed to the slowdown of economic activity , and to a high saving-low investment environment despite ultra-low interest rates .
The Bank of Japan also complains about a deflationary mindset that has taken hold of consumers and companies that inhibits higher spending or higher prices .
Japan ’ s example offers other countries an unsettling vision of their possible future .
“ We ’ re essentially at the Japanese place , ” Summers told Bloomberg Television on March 12 .
“ That ’ s a place that @ @ @ @ @ @ @ of.
” Because low growth and low inflation are affecting a much wider range of countries -- and that was before the coronavirus crisis drove stocks in the U.S. and elsewhere into a bear market and briefly sent yields on every Treasury bond crashing below 1 % .
When the Federal Reserve eased policy in an emergency move on March 3 , it did little to reassure markets , which were even more underwhelmed by the ECB ’ s crisis response package .
It ’ s becoming clear that monetary authorities are reaching @ @ @ @ @ @ @ leaving the onus on governments .
A fall in sovereign bond yields below zero in Europe to mirror those of Japan has also added to the impression that the euro region could be getting dragged closer toward a Japan-style policy black hole .
Since the 1980s , the success of the Fed and other central banks in driving down inflation by pushing up interest rates has led to a widespread belief that monetary policy is the best way to manage economic fluctuations .
By influencing the overall cost of credit in the economy @ @ @ @ @ @ @ businesses to stimulate growth by investing and hiring , while leaving decisions on what to spend on and how much in the hands of the private sector .
But after the 2008 crisis , central banks found that even cutting rates to zero didn ’ t provide enough of a jolt to restore growth ; that ’ s why they bought trillions of dollars of bonds and cut some rates below zero .
Concepts like Japanification and secular stagnation mesh with a growing realization of the diminishing returns of monetary policy .
A @ @ @ @ @ @ @ point to the need for governments to take some investment and hiring decisions into their own hands to achieve and maintain robust growth .
It involves governments running budget deficits or heading in that direction -- via increased spending and investment , or reduced taxation , or both -- to boost economic activity .
That ’ s why in Europe , Draghi ’ s successor , Christine Lagarde , has long argued for governments with the capacity to spend to play their part in supporting monetary policy .
In light of the coronavirus @ @ @ @ @ @ @ ambitious and coordinated fiscal policy response.
” Japan has announced additional stimulus to deal with the coronavirus fallout , but the government is facing calls for more .
In the U.S. , Fed Chair Jerome Powell has noted that rate cuts can ’ t fix supply chains thrown into chaos by the pandemic .
President Donald Trump has promised a stimulus package but provided few details .
Fiscal stimulus in response to the Great Depression came in the form of massive spending programs , but in recent decades it ’ s more often @ @ @ @ @ @ @ approach preserves the private sector ’ s role as the primary allocator of economic resources in society , but it doesn ’ t necessarily give the government as much bang for its buck .


washingtonpost--2020-03-13--Analysis | How Short Sellers Become Targets During Market Routs

Short sellers borrow shares and sell them , hoping to buy them back at a lower price to profit from the difference .
But getting the timing right is crucial .
If the stock price rises , they could lose money instead .
Most shorting is done by hedge funds and institutional investors to cushion their investments or to bet that shares have risen too high .
There are also so-called activist shorts , who research companies to find targets that they allege have dodgy business or accounting practices , spread the word ( sometimes anonymously ) and , if @ @ @ @ @ @ @ stock slump .
Many authorities dislike short selling .
The former head of the New York Stock Exchange has described the practice as “ icky and un-American.
” South Korea banned short-selling of shares in the benchmark Kospi index , tech-heavy Kosdaq index and small-cap Konex from March 16-Sept. 15 , its first temporary restriction since 2011 .
Italian and Spanish securities regulators put a one-day ban on short sales of some stocks for Friday March 13 .
The Spanish move covered 69 equities , including all liquid stocks that fell more than @ @ @ @ @ @ @ illiquid stocks that fell more than 20 % .
In Italy , 85 stocks were affected , which includes some bought and sold on U.K. trading venues .
In Thailand , short sales were not banned , but rules are being adjusted .
China ’ s securities regulator suspended securities lending , one of the few short selling tools available in China , in February until further notice , according to people familiar with the situation .
Oh yes .
The U.S. targeted short selling during the Great Depression and joined the likes @ @ @ @ @ @ @ in limiting short selling or banning it during the financial crisis that erupted in 2008 .
China ’ s regulator blamed “ malicious ” short selling in part for a stock market crash in 2015 , placing limits on the practice as well as arresting traders .
It ’ s legal in most major stock markets , though some may issue temporary restrictions during periods of market turmoil .
What is banned either partially or fully in several markets is so-called naked short selling -- betting on a stock ’ s decline without @ @ @ @ @ @


washingtonpost--2020-03-13--Analysis | At Least the Bankers Did Well With Christine Lagarde

ECB President Christine Lagarde was heavily criticized on Thursday over an emergency monetary package that was deemed insufficient ( it left interest rates unchanged ) and for failing to display a willingness to do “ whatever it takes.
” But the menu of relief she offered banks was bold in its breadth and depth .
While she might not have offered much solace to Italian bondholders , she can not be accused of wavering in her support for the finance industry .
Unfortunately , letting banks relax their standards of financial strength won ’ t make it easier for them @ @ @ @ @ @ @ so sorely lacking .
Those tighter capital rules were critical in moving on from previous crises , which exposed serious weaknesses in the financial system .
It ’ s not clear why loosening them will make bank investors feel more secure .
European bank shares are trading at their lowest level since the 1990s — below the previous nadir of the global financial crisis .
The Markit iTraxx Europe index of credit-default swaps on senior unsecured financial debt rose to its highest since 2013 .
Much of the investor angst can be explained @ @ @ @ @ @ @ region ’ s economies , which were frail before the coronavirus hit .
But it ’ s hard to see how the ECB ’ s new measures , well-intentioned as they may be , can make up for that .
In addition to increasing bond purchases , the ECB is offering more ultra-cheap funding to lenders — known as “ targeted long-term repurchase operations ” ( or TLTROs ) — for banks to plow into the economy .
By lowering the cost and increasing the sum that banks will be able to borrow @ @ @ @ @ @ @ as 1.2 trillion euros ( $ 1.3 trillion ) of extra liquidity up for grabs .
That ’ s as strong a signal as it can send .
Although lower borrowing costs will help banks roll over their clients ’ debts , this may not be enough to help banks expand their loan books , unless demand picks up and the economic outlook improves .
And the easing up on financial resilience is a dangerous path .
In a coordinated response with the ECB , the Single Supervisory Mechanism ( the euro zone @ @ @ @ @ @ @ would let lenders do without some capital temporarily , and allow them to use more debt instruments , instead of common equity Tier 1 , to make up their requirements sooner than expected .
Banks are getting a 120 billion-euro boost in capital , according to estimates by Jefferies .
Lenders have been told that they must use this freed-up capital to put money back into the economy , not to line their investor or employee pockets .
And some form of regulatory forbearance was to be expected .
Banks are the main @ @ @ @ @ @ @ medium-sized companies that are the industrial backbone of Germany and Italy .
Businesses and households , coping with the virus impact , will struggle to make debt payments for months to come .
Even when restrictions on movement are eased , companies may not bounce back quickly and demand will be lost .
European banks had been seeking looser rules on bad loans , in an effort to alleviate the hit from an expected wave of overdue debt .
At least the ECB didn ’ t go this far : Easing capital requirements @ @ @ @ @ @ @ investors on bad loans .
The trouble with easing the rules to this degree , and without a clear framework , is that it augments investor fears of bank frailty .
“ Banks can not reasonably run at such low levels , in our view , without being penalized by the market , ” said JPMorgan analysts .
The ECB is also rescheduling bank inspections , giving lenders more time to address previous regulatory recommendations , and regulators have postponed bank stress tests to 2021 .
Investors are going to need to trust @ @ @ @ @ @ @ a region where national politics still determines how banks are treated when they get into trouble , and where a fragmented market makes it difficult for lenders to pursue cross-border mergers , regulatory forbearance could do more harm than good .


washingtonpost--2020-03-16--Analysis | The Stimulus Toolbox to Help Virus-Stricken Economies

Cutting interest rates is often the first move in any rescue effort .
This time , the People ’ s Bank of China was the first to act , trimming its benchmark lending rates on Feb. 16 .
Several central banks around the globe followed suit .
Yet many are running out of space for further cuts .
In the U.S. , the Federal Reserve brought its main interest rate to near zero , in a second set of cuts in March .
But compared with the 5.25 % it was able to reduce rates by on the eve of @ @ @ @ @ @ @ got to zero this time after cutting only by a total of 1.5 % .
The European Central Bank and Bank of Japan already have rates that are below zero ; no rate cut was even on the table when the ECB met in March , and the BOJ held off as well days later .
On top of that , there are those who argue that this isn ’ t the best kind of medicine to treat economies that are facing both a “ supply ” and a “ demand ” shock @ @ @ @ @ @ @ won ’ t do much for factories that are starved of materials , or get worried consumers to keep traveling or eating out .
Born in the 2008 crisis , the once unconventional idea of making huge bond purchases to nudge down long-term rates -- quantitative easing -- is now an established part of the central banks ’ armory .
Yet the strategy is seen as less effective when long-term rates are already low .
Advocates suggest boosting the policy ’ s power by expanding purchases beyond government and corporate bonds as the @ @ @ @ @ @ @ of exchange-traded funds .
In mid-March it doubled its target for net purchases to 12 trillion yen ( $ 112 billion ) , hours after the Fed announced it would buy at least $ 700 billion in bonds in a return to so-called QE .
The ECB had resumed its bond purchases in 2019 and expanded it by 120 billion euros ( $ 135 billion ) as the virus began to take a toll ; other central banks have indicated they would be prepared to take similar steps in the face of weakness @ @ @ @ @ @ @ their limited firepower by delivering a coordinated move , the theory being that joint action might boost confidence more than the sum of its parts .
In 2008 , the Fed , the ECB and four other central banks acted together to lower interest rates .
This time , the Fed united with five others to ensure dollars are available around the world via swap lines .
Some countries may be willing to sacrifice a measure of central bank independence to ensure that monetary and fiscal policies are complementary .
The BOE ’ @ @ @ @ @ @ @ to make financing available to struggling businesses , came on the same day the government announced fiscal stimulus measures .
There are more direct steps that policy makers can take to feed confidence and keep money flowing freely .
Regulators in China have asked banks to be more lenient on bad loans -- providing relief through what ’ s known as forbearance .
The PBOC is extending 800 billion yuan ( $ 115 billion ) of cheaper loans to support smaller and private companies , while the ECB was considering how it might @ @ @ @ @ @ @ .
The Fed announced several other actions , including letting banks borrow from the discount window for as long as 90 days and reducing reserve requirement ratios to 0 % .
The BOJ announced one-year loans at 0 % to banks that pledge corporate debt as collateral .
Central banks exist to be the lender of last resort at times of crisis .
The Fed responded to signs of strain in markets for Treasury bonds and repurchase agreements by offering a cumulative $ 5 trillion in lending , in a signal that the @ @ @ @ @ @ @ takes to keep short-term financing rates from spiking .
The ECB enhanced a loan program with terms that effectively amount to an interest-rate cut for banks that use it to pump money into the economy .
The PBOC injected $ 14.3 billion of one-year funding into the financial system and trimmed the amount of cash some lenders have to hold in reserve , while leaving interest rates unchanged .
Australia boosted cash injections and said it “ stands ready ” to purchase government bonds .
With more people around the globe told to @ @ @ @ @ @ @ , worried consumers everywhere are reluctant to go out and spend .
That ’ s increasing calls to do more to address the “ demand ” side of the equation , too .
Many countries from the U.S. to Singapore are assembling emergency stimulus packages .
Even before the coronavirus appeared , central banks were arguing that fiscal policy -- actions by governments such as lowering taxes or spending more on infrastructure -- should take on a larger role in spurring sluggish economies .
Such moves can shore up demand more directly and @ @ @ @ @ @ @ The thing that fiscal policy , and really only fiscal policy can do , is reach out directly to affected industries , affected workers , ” Fed Chair Jay Powell said after announcing his bank ’ s second big interest rate cut .
By March 12 , about $ 130 billion in budget support had been pledged or was under consideration by governments around the world .
Among them : tax cuts or credits to help companies with cash-flow problems ; enhanced jobless benefits , more generous medical leave and funds for medical @ @ @ @ @ @ @ s happening in some countries : • The U.S. House passed a stimulus package negotiated by Treasury Secretary Steven Mnuchin and Speaker Nancy Pelosi that includes free testing for those who need it , and two weeks of paid sick leave to allow people with the virus to stay home from work and avoid infecting co-workers .
It also includes enhanced jobless benefits , increased food aid for children , senior citizens and food banks , and higher funding for Medicaid benefits .
China has waived requirements for smaller companies to pay into @ @ @ @ @ @ @ June .
The rate of value-added tax for smaller companies has also been reduced temporarily to 1 % from 3 % between March and May .
In the U.S. , Mnuchin said he planned to speak with banking agencies about what regulatory relief might be necessary .
A blockbuster option could be simply handing out cash to citizens .
There ’ s been a robust debate in recent years over whether central banks can boost economic growth this way by simply creating extra cash -- a method known as helicopter money -- but @ @ @ @ @ @ @ few governments , however , have been less circumspect .
Hong Kong , Singapore and Macau all announced plans to give cash payouts or vouchers to people , either through regular budgetary payments or one-time handouts .
In Hong Kong , each permanent resident of the city 18 or older was slated to receive a one-time handout of HK $ 10,000 ( $ 1,284 ) , a move Financial Secretary Paul Chan said would aid a population “ overwhelmed by the heavy atmosphere .
”


washingtonpost--2020-03-16--Analysis | What to Know About Recessions, as Virus Threatens One

The dictionary definition is a period when economic output contracts for two straight quarters .
The National Bureau of Economic Research ’ s Business Cycle Dating Committee , which makes the official U.S. determination , uses a different approach , considering factors such as inflation-adjusted GDP , employment , industrial production and income .
The International Monetary Fund , in designating recessions on a global scale , looks at several indicators including a decline in inflation-adjusted per-capita GDP that ’ s backed up by weakness in industrial production , trade , capital flows , oil consumption and unemployment .
The @ @ @ @ @ @ @ period of relative stability around the globe beginning in the mid-1980s , spawned the view that modern-day recessions don ’ t happen without an unexpected economic shock like a sharp increase in oil prices -- a cause of U.S. downturns of the 1970s and 1980s -- or accumulated imbalances like the massive buildup in the subprime-lending industry that preceded the Great Recession of 2007-2009 .
A global pandemic that stifles travel , shutters businesses , cancels sports events and sends stock markets into freefall certainly has the potential to be that kind of @ @ @ @ @ @ @ risk of a worldwide recession , with the debate shifting to how long and deep the slump will be .
The economies of Japan , Germany , France and Italy were already shrinking or stalled before the virus outbreak , and as of March , China was on course for what could be its first quarterly contraction in decades .
As the virus spreads , the threat grows of a phenomenon economists refer to as a feedback loop -- a vicious cycle in which a country that starts to recover domestically then suffers @ @ @ @ @ @ @ succumb , prolonging the downturn .
The International Monetary Fund has counted only four global recessions tracing back to 1960 , compared to the 11 counted in the U.S. since World War II by NBER .
As of March 10 , a Bloomberg Economics model suggested a 53 % chance that the almost-11-year U.S. expansion will end within a year , with some economists expecting the economy to contract in the second quarter , which ends on June 30 .
The port of Los Angeles , one of the nation ’ s largest @ @ @ @ @ @ @ shipments in February .
Uncertain times may lead to widespread hiring freezes and job losses -- especially among those that work in transportation or the hospitality industry .
All of that means the main engine of the U.S. economy , consumer spending , may crumble .
Not everyone agrees .
The U.S. Treasury secretary , Steven Mnuchin , said on March 15 that he expects the coronavirus pandemic will slow growth but not tip the U.S. economy into recession .
Even if we ’ re in a recession right now , an official @ @ @ @ @ @ @ typically takes about a year to make the call on when a U.S. expansion ends and a recession begins .
A recession could be obvious in the data and widely accepted as reality before any declaration , though .
Its duration , for one thing .
The 2007-2009 recession lasted 18 months , making it the longest since the Great Depression .
The recession of 1980 , by contrast , lasted just six months .
Other measures of a recession ’ s severity are how much the economy contracts and how bad unemployment @ @ @ @ @ @ @ be those paired with some sort of collapse in the financial system , as happened in the U.S. in 1929 and 2008 .
Another driver of a recession ’ s severity is how broadly the economy suffers a contraction .
The relatively short and mild 2001 recession , for instance , was largely confined to the tech sector , with modest fallout to the rest of the economy .
Federal Reserve Bank of Cleveland researchers found little evidence that duration of an expansion influences how bad the subsequent recession .
They did , @ @ @ @ @ @ @ recessions ( like the one that ended in 2009 ) spawn strong expansions .
It ’ s impossible to know .
On the positive side , should the coronavirus lead to a recession , American households are in a good spot .
They ’ re carrying less debt and an increase in mortgage refinancing has put more cash in consumers ’ pockets .
Additionally , unlike the last U.S. recession , which stemmed from a systemic imbalance , the coronavirus is an economic shock .
However , the magnitude of that shock is @ @ @ @ @ @ @ recession , a short and shallow recession or something much darker .
Central banks are already racing to stop a recession either by cutting interest rates , intervening in markets , buying corporate assets or helping banks to keep lending to businesses .
The People ’ s Bank of China has injected billions into the economy , and the Bank of Japan boosted asset purchases to stabilize markets .
The U.S. Federal Reserve cut its benchmark interest rate to near zero .
But this time the onus may be on governments in part @ @ @ @ @ @ @ lot of their interest-rate ammunition over the last decade .
“ The response should be fiscal , first and foremost , ” European Central Bank President Christine Lagarde said .


washingtonpost--2020-03-16--Giant U.S. Banks Vow to Stop Buybacks to Aid Clients, Nation

The eight banks -- deemed by U.S. regulators to be the most important to the financial system -- had set out to collectively repurchase $ 119 billion of shares in the four quarters after the Federal Reserve ’ s stress tests last June .
Spread out evenly , that would mean they will keep roughly $ 30 billion .
They ’ re forgoing the chance to buy back cheaper shares for a bigger cushion to absorb losses on souring loans , or more ammunition to help companies that might draw down their credit lines .
The decision came just as @ @ @ @ @ @ @ interest rates further to soften the economic impact of the coronavirus pandemic .
The move allows the banks to protect capital from a position of strength , averting the possibility of regulators asking one or more of them to pause buybacks .
Still , it comes with a cost , as some investors would ’ ve likely preferred the lenders snatch up billions worth of shares at depressed valuations -- or at least provide some support for stock prices that have fallen at least 22 % this year at all eight firms .
@ @ @ @ @ @ @ Inc. , Wells Fargo & Co. , Goldman Sachs Group Inc. , Morgan Stanley , Bank of New York Mellon Corp. and State Street Corp .
Regional lender U.S. Bancorp separately announced it also will halt buybacks through the second quarter .
The announcements didn ’ t say anything about dividends , but in a separate statement , JPMorgan said its dividend payouts wouldn ’ t change .
The eight banks had said in June they planned to disburse $ 37 billion that way .
The move contrasts with the 2008 credit crisis @ @ @ @ @ @ @ too long to suspend cuts to dividends and buybacks , leaving themselves too thinly capitalized as losses from the housing meltdown piled up .
That led to government bailouts .
Since then , regulators have forced the largest lenders to build up much bigger capital cushions .
The firms are getting ready to submit data for this year ’ s stress tests .
The eight firms said they notified the Fed of their decision .
On Sunday , the central bank cut its benchmark interest rate by a full percentage point to near @ @ @ @ @ @ @ holdings by at least $ 700 billion in a fresh bid to save the U.S. economy amid measures to stop the virus ’ s spread .


washingtonpost--2020-03-16--Trump Says Virus Relief Bill May Be Amended, Delaying Passage

“ We want it for everybody , ” Trump said of the sick leave provisions .
The Senate is working to “ enhance it and make it better and make it fair for everybody , and that ’ s what we ’ re looking to do.
” “ We ’ re here to update the Senate on the existing legislation , ” Mnuchin told reporters .
“ More importantly , we have a lot of work to do here and we ’ re going to start working with the Senate on new bills as well.
” Congressional leaders worked through @ @ @ @ @ @ @ and objections raised by a few Republicans .
It wasn ’ t clear whether the president had consulted with Republican leaders in Congress before suggesting that they should make changes .
As Senate Majority Leader Mitch McConnell entered the Capitol earlier in the day , he said the chamber would take up the bill “ as quickly as we can get consent , ” suggesting a push to get Republicans on board for a vote this week .
GOP Senator Mike Braun of Indiana said he joins Ron Johnson of Wisconsin in thinking @ @ @ @ @ @ @ to administer paying for the sick leave than through a business tax credit .
He also suggested offering the leave incrementally and reassessing every few weeks .
On the other end of the political spectrum , the United Food and Commercial Workers International Union blasted the bill as “ weak ” and “ unacceptable ” because it would exempt big corporations who employ about 80 % of the workforce .
The legislation was already held up in the House Monday by delays in some technical corrections to the bill , which was written @ @ @ @ @ @ @ three days of negotiations between Mnuchin and House Speaker Nancy Pelosi .
Senator Dick Durbin , a member of Democratic leadership said the foot-dragging was delaying the impact the legislation could have and unnecessarily risking exposure of lawmakers to the coronavirus in the Capitol , where several staff members have tested positive .
” We have members of the Senate going in and out of quarantine !
” Durbin said Monday on the Senate floor .
“ We should do our work and do it quickly.
” “ You have to ask yourselves @ @ @ @ @ @ @ , our family or staff , are we being respectful of our responsibility as setting a model for the rest of America ?
” Durbin asked .
Earlier Monday , Texas Representative Louie Gohmert threatened to object to changes in the House bill , saying the legislation wasn ’ t released with enough time for lawmakers to study the text .
Gohmert could stop the House from approving the technical changes this week because the chamber needs unanimous support to pass legislation when lawmakers aren ’ t in Washington , and House members @ @ @ @ @ @ @ unclear when the Senate will vote on the virus bill .
It would take the permission of all 100 senators to move to the virus bill early in the week without going through a more lengthy procedure .
Mnuchin said Sunday that the administration is trying to allay concerns about the legislation , which is aimed at blunting some of the economic impact for workers and families as the coronavirus outbreak spreads in the U.S .
In addition to being on Capitol Hill Monday , Senate Republicans invited Mnuchin to speak at their @ @ @ @ @ @ @ familiar with the matter .
“ We are hearing feedback that certain small businesses are concerned about the burden of this .
We were very focused , we need to get the money to people quickly , ” Mnuchin said on the “ Fox News Sunday ” program .
“ We don ’ t want them to have to deal with big bureaucracy.
” The measure is expected to eventually clear both chambers in some form .
Congressional leaders in both parties also are in the early stages of weighing other legislation aimed @ @ @ @ @ @ @ airlines and other industries .
On Monday morning , the House was almost entirely empty and Gohmert was one of the few lawmakers in the chamber , talking with an aide .
His mere presence signaled that he would object if anyone tried to bring up the fix .


washingtonpost--2020-03-16--Analysis | Airlines Won’t Get Something For Nothing

As with the banks in 2008-2009 , governments may have to put aside any residual ill-feeling and provide cash support to a vital sector .
Though not systemic in the same way that banks are , airlines support domestic and international connectivity and they help carry about one third of global trade by value .
Without assistance , scores could go bust .
Unlike the state of the world ’ s financial plumbing a decade ago , the problem airlines have is a very simple one .
Many are having to ground upwards of 75 % of their fleets due @ @ @ @ @ @ @ future demand .
Forced to provide refunds and without new revenue coming in , they ’ re hemorrhaging cash .
Lower fuel prices are only of limited help in such an environment .
While the best airlines have built a financial cushion for unexpected demand slumps , even the September 11 attacks didn ’ t lead to a situation as economically devastating as this .
Of course , it ’ s essential that airlines do all they can to preserve cash before demanding that governments step in .
Dividends must be axed , @ @ @ @ @ @ @ scaled back and capital expenditures delayed .
Recruitment must be frozen and wage costs curtailed .
Unused credit lines are being drawn down .
Airlines like Lufthansa AG that bought rather than leased aircraft are better placed as these can be used as collateral for new loans .
Already , the European Union has promised to suspend rules that require airlines to keep flying to retain valuable takeoff slots .
Tax holidays and exemption from various charges will doubtless be next .
The role of credit-card acquirers that hold back revenues from struggling @ @ @ @ @ @ @ ’ s doubtful this will be enough .
The virus shows no sign of being under control either in Europe or the United States .
Once it is , air travel bookings might recover only gradually .
“ Coordinated government backing will be required to ensure the industry survives and is able to continue to operate when the crisis is over , ” Easyjet Plc boss Johan Lundgren said on Monday .
Of course , there ’ s a debate to be had about whether all airlines deserve assistance ; some like Norwegian @ @ @ @ @ @ @ financial trouble before the virus crisis struck .
When the perennially struggling British regional airline Flybe collapsed , rivals like Ryanair Holdings Plc were some of the most vocal in saying the government shouldn ’ t step in .
Still , don ’ t be surprised if authorities set aside questions of moral hazard .
Rightly or not , there ’ s still a very strong association between nationhood and having a decent airline .
( The large Gulf airlines are still state-owned , while the French and Dutch governments are anchor shareholders @ @ @ @ @ @ @ t be a loss-making exercise for taxpayers , assuming it is managed properly .
If countries purchase or enlarge existing equity stakes in airlines , these can be sold later once the industry recovers .
Loans can also be repaid once people start flying again .
But any cash assistance should be bound by rules : in the more fragmented European market that might mean nudging airlines to consolidate .
Airlines everywhere need to show their spending is directed towards curtailing carbon emissions in line with Paris climate agreement .
As with the @ @ @ @ @ @ @ aim must be to promote a healthier industry once the current crisis abates .


washingtonpost--2020-03-16--Powell’s Fed Seeks to Limit Pain of Unavoidable Economic Slump

What the Fed is focused on first and foremost , Powell said , is providing liquidity to financial markets so they can function smoothly and supply credit to companies and consumers to tide them over during the fallout from the virus and the necessary distancing actions taken to contain it .
“ We ’ re really going to be looking to see that financial markets are returning to more liquid , more normal functioning , ” Powell said .
“ We take that job very seriously .
It ’ s probably the most important thing that we ’ re doing @ @ @ @ @ @ @ lot at stake .
While the efforts to contain virus will have , in Powell ’ s words , “ a significant effect on economic activity in the near-term , ” whether that metastasizes into a prolonged downdraft depends in part on the what policy makers in response , including whether they succeed in avoiding market dislocations .
“ The task at hand for governments and central banks has been and continues to be to ensure that the recession stays relatively short-lived and doesn ’ t morph into an economic depression , ” @ @ @ @ @ @ @ Pacific Investment Management Co. , said in a report Sunday to clients .
Goldman Sachs Group Inc. economists now expect the economy to stagnate this quarter and shrink 5 % in the subsequent three months .
But they expect recoveries of 3 % and then 4 % in each of the next two quarters .
Besides the 100 basis-point rate cut and $ 700 billion QE program , the Fed reduced rates on its discount-window loans to banks and on its dollar swap lines with major foreign central banks .
It also did @ @ @ @ @ @ @ freeing up what some analysts reckon is close to $ 150 billion for potential loans , as part of a surprise Sunday package .
With interest rates now effectively at zero , many economists -- and seemingly Powell himself -- believe that it ’ s essential that Trump and Congress weigh in with more measures to support demand -- just as happened in the 2008-09 financial crisis .
Trump and fellow Group of Seven leaders are set to discuss the crisis by teleconference later Monday .
Powell argued that the Fed also has @ @ @ @ @ @ @ economy , including forward guidance on the future direction of short-term interest rates and more asset purchases .
He did though seem to rule out taking rates negative -- a tactic that other major central banks have employed .
“ The Fed is now effectively out of the picture , ” JPMorgan Chase & Co. chief U.S. economist Michael Feroli told clients .
“ They did what they could do but they can ’ t do much more.
” Fed watchers said the central bank may need to go further in its efforts @ @ @ @ @ @ @ primary goal at the moment -- keeping the markets functioning and credit flowing -- though it ’ s not clear it can do that on its own .
Besides buying Treasury and mortgage-backed securities , some economists think the Fed should set up emergency lending windows as it did during the financial crisis to support specific segments of the market , such as commercial paper , which provides critical short-term financing for many businesses .
“ The market is in effect saying cutting rates to zero and restoring market functioning in Treasuries and @ @ @ @ @ @ @ condition for restoring credit supply to households and businesses , ” Krishna Guha , head of central bank strategy at Evercore ISI , said in an email .
Powell left the door open to further action on that front , though he also seemed to acknowledge that there was a limit to what the Fed could do .
“ When it comes to directly supporting households and small and medium-sized enterprise facing a temporary sudden halt in income , fiscal policy needs to carry the weight , ” she said .
“ So @ @ @ @ @ @ @ are woefully insufficient , and until Congress does more and a natural peak for the coronavirus emerges , the markets are unlikely to find a bottom .
”


washingtonpost--2020-03-16--U.S. Chamber Backs Payroll Tax Cut, Fed Loans to Face Virus

The chamber called for the payroll tax to be canceled from March to May .
President Donald Trump also has called for a payroll tax cut .
“ No family and no business should go bankrupt just because of the temporary disruption in income caused by this outbreak , ” Neil Bradley , the chamber ’ s chief policy officer , told reporters in a Monday call .
The chamber also pushed for the expansion and streamlining of loan programs for small businesses , including removing requirements that firms show they couldn ’ t access credit before seeking relief from @ @ @ @ @ @ @ suggested creating credit facilities to provide loans and loan guarantees to companies with more than 500 employees if they ’ ve suffered “ significant revenue loss ” due to the virus .
All three proposals would require legislation , the group said .
Bradley added that the chamber had been in regular contact by phone and email with the White House ’ s National Economic Council and Domestic Policy Council , the Treasury Department , congressional leadership and Vice President Mike Pence ’ s office , as he is heading up the virus @ @ @ @ @ @ @ to ease restrictions put in place after the 2008 financial crisis on the Federal Reserve ’ s use of its emergency lending window , with the aim of ensuring credit flows to bigger companies .
It said the Fed should work with other banking regulators and the Treasury Department to establish a system of credit facilities to provide loans and loan guarantees that can be accessed by businesses .
Bradley said he rejected “ the idea that this is somehow a bailout , ” pushing back on concerns expressed by some lawmakers that @ @ @ @ @ @ @ and that congressional action to prop up industries could resemble the unpopular economic packages that were passed to address the Great Recession .
“ This is a very different episode than 2008 , ” Bradley said , emphasizing that the chamber sees the economy returning to strength after the virus and that companies would be able to pay back the loans .
“ To my knowledge , this is the first time where we ’ ve had to essentially halt commerce for a period of time.
” The chamber has been ramping up @ @ @ @ @ @ @ Chief Executive Officer , Tom Donohue , earlier urged consumers to continue shopping and traveling and said , “ Now is not the time to overreact or panic.
” The comments at the March 4 news conference “ were based on the facts and guidance from federal , state and local officials at that time , ” the group said .
“ The situation has evolved rapidly on a daily basis since then , and we are focused on solutions and resources to mitigate the impact of the virus on the American people @ @ @ @


washingtonpost--2020-03-06--Analysis | JPMorgan’s Coronavirus Challenge Just Got Much Tougher

JPMorgan late on Thursday said its co-presidents and co-chief operating officers Daniel Pinto and Gordon Smith were taking over the running of the biggest U.S. lender while their 63-year-old chief executive officer recovers from emergency heart surgery .
Dimon , the only leader left to have steered a global bank through the financial crisis , “ is awake , alert and recovering well , ” JPMorgan said .
Pending his return , it ’ s essential for the firm — and the financial markets — that the bank manages a speedy and smooth transition to his established lieutenants .
Dimon @ @ @ @ @ @ @ him a spokesman for the finance industry , is also the bank ’ s chairman .
That puts a lot of emphasis on the board to get this right .
Dimon , who had held court at the bank ’ s investor day just a couple of weeks back , checked himself into hospital on Thursday morning .
Fortunately , unlike some of its peers , JPMorgan appears to have built some genuine strength on the bench .
Dimon ’ s two effective deputies have had broad responsibilities since their appointments two years @ @ @ @ @ @ @ ’ s biggest divisions .
Pinto has been overseeing the corporate and investment bank , while Smith runs the consumer and community banking division .
Their hands-on expertise will be essential as the coronavirus strikes at the bank ’ s working practices and at its trading and consumer businesses .
Just this week , as the outbreak spread from Asia into Europe and the U.S. , JPMorgan started dividing its sales and trading desks to restrict the disruption that would occur if an outbreak struck a particular team .
Some units are being @ @ @ @ @ @ @ York and London and backup locations such as Brooklyn and New Jersey .
While traders might enjoy a spike in volatility , it ’ s not yet clear how any changes to working practices might affect their operations .
This doesn ’ t just apply to JPMorgan .
Banks have been admirably robust in testing their off-site working capacities .
But it ’ s still not an easy thing to work remotely given the technical and compliance requirements , and — for those working at home — missing the usual cut and thrust @ @ @ @ @ @ @ has also asked thousands of staff across its consumer bank to work remotely as part of resiliency testing .
Dimon ’ s company is critical to the stability to the financial markets .
Under Pinto , its investment bank has grown into a behemoth generating $ 38.3 billion of revenue .
It has a 12 % share of fixed-income trading income among the top banks and an 11 % share of equity trading ; it ’ s the world ’ s biggest derivatives house .
Crucially , with a $ 2.7 trillion balance @ @ @ @ @ @ @ the repo market , the essential part of financial market plumbing that seized up last September prompting emergency measures by the U.S. Federal Reserve .
Even with a solid plan to cover Dimon ’ s temporary absence , it ’ s no surprise that JPMorgan stock fell in pre-market trading .
Investors will want to know what arrangements might be made if Dimon can not come back soon .
Capable as they are , Smith and Pinto aren ’ t necessarily seen as long-term successors , as my Bloomberg News colleague Michelle F. @ @ @ @ @ @ @ saw a number of potential successors depart — from Jes Staley to Bill Winters to Matt Zames — JPMorgan has been grooming Marianne Lake and Jennifer Piepszak for the top job .
Lake has been running the consumer lending division since May after seven years as chief financial officer , while Piepszak took over as CFO after leading the credit-card business .
Doug Petno , who runs commercial banking , and Mary Erdoes , the asset and wealth management chief , are other senior leaders .
The internal succession list is more impressive @ @ @ @ @ @ @ reassigned many of CEO Michael Corbat ’ s deputies last year after the departure of several executives ; HSBC Holdings Plc has been looking for a permanent CEO since August .
JPMorgan at least has some options .


washingtonpost--2020-03-06--Analysis | The Black Hole Engulfing the World’s Bond Markets

The path to a negative yield typically starts when an investor buys a bond for more than its face value .
If the total amount of interest the bond pays over its remaining life is less than the premium the investor paid for the bond , the investor loses money and the bond is considered to have a negative yield .
Typically , bonds are the safest assets on the market , so many investors seek them out at times of heightened market stress -- during a pandemic scare , for instance .
A bond can have a modestly positive @ @ @ @ @ @ @ institution or company , but high demand by investors can push its price up -- and therefore its yield down .
Some funds must buy the bonds regardless of their yield because they are duty-bound to track government bond indexes .
And some investors can still make positive returns on these bonds when adjusted for currency swings .
While negative-yielding debt has retreated from its $ 17 trillion peak in August 2019 , it ’ s on the way back up as central banks around the world embark on more rate cuts .
@ @ @ @ @ @ @ is under water .
That includes all of Germany ’ s government bonds , which is why investors effectively pay the German government 0.7 % for the privilege of buying its benchmark bonds .
None of the U.S. ’ s $ 16 trillion government debt pile yields less than zero , but that privileged position looks under threat amid the spread of the coronavirus .
Ditto for Australia .
Negative rates are at odds with basic principles of the global finance system .
“ One important law of financial logic –- if you @ @ @ @ @ @ @ see a higher return –- has been broken , ” wrote Marcus Ashworth , a Bloomberg Opinion columnist covering European markets .
“ The time value of money has essentially disappeared.
” ( Has it ever : The so-called century bonds issued by Austria two years ago , which mature in 2117 and initially offered a 2.1 % return , now yield about 0.5 % . )
All this can push investors into riskier bets in the hunt for returns , raising the chances of bubbles in financial markets and real estate .
@ @ @ @ @ @ @ to borrow money is never greater than when you are being paid to do so .
Germany , for example , is being subsidized to issue debt over the next 20 years , though that does not necessarily mean it will boost spending .
Companies that issue bonds also reap the benefits of record-low borrowing costs .
So do private-equity firms , which typically use leverage to acquire companies and see greater opportunities when ( and where ) capital is cheap .
Homeowners with variable-rate mortgages also have reason to celebrate .
Pension @ @ @ @ @ @ @ in government bonds , are in a particular predicament : Their liabilities grow steadily as clients age , but often they are required not to take on big risks .
Banks see their margins squeezed .
They ’ re earning next to nothing from lending but still need to offer depositors a rate above zero to keep their business .
In Germany , the European Central Bank has come under political pressure for hurting the returns of savers .
Central banks could run into the problem of hitting the so-called “ reversal rate @ @ @ @ @ @ @ borrowing costs start to harm rather than help the economy , should banks start to restrict loans .
That could deepen any slowdown .
Several of Europe ’ s central banks , otherwise unable to spur growth in the aftermath of the 2008-2009 financial crisis , cut interest rates below zero in 2014 .
Japan soon followed .
The idea was to spur lending by charging financial institutions , rather than rewarding them , for parking money that otherwise could be put to use in the real economy .
Since 2016 , the @ @ @ @ @ @ @ -0.5 % , meaning banks lose 5 euros to store 1,000 euros there .
The sub-zero rates were supposed to be temporary but have endured .
After the Fed cut rates by 50 basis points in an emergency move to combat the economic fallout from the coronavirus , traders are betting that the ECB and the Bank of England will soon follow suit , driving record levels of bond yields below zero .
More than a decade on from the credit crisis , inflation is still scarce , with wages increasing only modestly @ @ @ @ @ @ @ ECB , for example , isn ’ t expected to get to its close-to-2 % inflation target over the next decade , according to a market-derived measure .
And the yield difference between U.S. three-month bills and 10-year Treasuries is inverted , an indication that an economic contraction may be coming .
Aside from the U.S. Federal Reserve , few central banks that slashed interest rates during the credit crunch have managed to raise rates , meaning that during the next downturn they are likely to head further into negative territory .
In @ @ @ @ @ @ @ continent is following the path of Japan ’ s so-called lost decade , where policy makers struggled to revive anemic growth and inflation .
Central banks have been keen to iterate that they still have tools in their locker to combat any slowdown , including rate cuts and more quantitative easing .
Geopolitical tensions over trade , Britain ’ s trade negotiations with the European Union and the coronavirus will keep driving investors into the safest assets , meaning demand will remain high for negative-yielding debt .
But the push to find juicier @ @ @ @ @ @ @ of further fund failures or a new crisis .


washingtonpost--2020-03-06--Analysis | The $505 Billion Puzzle Behind China’s Stock Rally

Hope for a big-ticket fiscal package isn ’ t unfounded .
After the collapse of Lehman Brothers Holdings Inc. , China spent 4 trillion yuan building roads , bridges and railways , successfully pulling itself out of a slump .
And there are tantalizing signs that China will deliver : To grease local governments ’ access to financing , Beijing has allowed its underlings to issue special-purpose bonds early , to the tune of over 1.8 trillion yuan .
But don ’ t get carried away .
These flashy headline figures come from fawning local-government officials , eager to deliver @ @ @ @ @ @ @ done is a different matter .
Some projects are clearly just blueprints awaiting a final nod .
For instance , Yunnan province , the most aggressive of the bunch , is planning a high-speed railway linking its capital Kunming to the resort town of Lijiang .
Beijing may balk at the cost , estimated at 100 billion yuan , or about 5 % of the province ’ s gross domestic product , says Nomura Securities Co. Then there ’ s the fact that Yunnan ’ s books are in poor order .
Over @ @ @ @ @ @ @ save some of its local-government financing vehicles from the brink of bankruptcy .
In early 2018 , it injected 2 billion yuan of capital into a vehicle that defaulted on two trust loans .
Last year , two others saw their offshore dollar bonds tumble : One entity is embroiled in a legal battle with a now-defunct energy trader , and the other had its chairman placed under investigation .
Both bleed cash .
Speaking of finances , how will local governments pay for these billion-dollar projects ?
Last year , their general @ @ @ @ @ @ @ the lowest in a decade , and well below their full-year target of 4.9 % , according to Moody ’ s Investors Service .
A big tax cut in 2019 and an economic slowdown has emptied municipals ’ wallets .
China ’ s infrastructure investment has also been stalling , rising just 3.1 % last year .
For building projects to re-accelerate , local governments will need the help of banking regulators .
For now , municipals are relying on the bond market , avidly issuing special-purpose bonds that get gobbled up by @ @ @ @ @ @ @ not enough .
China ’ s annual infrastructure spending is about 17 trillion yuan , far exceeding the roughly 3 trillion yuan of bonds local governments can issue .
A lot of this comes back to Beijing ’ s crackdown on shadow banking , which began in late 2017 .
For the past five years , China has been relying on public-private partnerships to build roads and railways .
Yet private money essentially fled after new rules forbade wealth management products , typically short-term , to invest in longer-term projects , a.k.a .
@ @ @ @ @ @ @ that China is going to launch another massive fiscal package and any bet on infrastructure will pay off handsomely .
But keep a close eye on sources of information .
If the Ministry of Finance officially raises its fiscal deficit above 3 % — an international gold standard , which Beijing has been careful not to cross — three cheers .
Or if the People ’ s Bank of China reopens lending facilities to its policy banks , enabling projects like the shantytown redevelopment of 2015 , even better .
Boastful municipal officials @ @ @ @ @ @ @ a terribly convincing case .