against all odds

Zap hatte seine kreative Phase. Nur am Ende hatte er sich verrannt. Verhängnisvoll war, sich mit einer bearishen Argumentation an den BT zu binden. Denn die war und ist dort nicht zu finden, eben weil es sich um eine Untergangskirche handelt - tödlich für echte Bären...

One"s financial asset is another"s financial liability. It is a fundamental principle of accounting that for every financial asset there is an equal and offsetting financial liability. The checking deposit is a household"s financial asset, offset by the bank"s liability (or IOU). A government or corporate bond is a household asset, but represents a liability of the issuer (either the government or the corporation). The household has some liabilities, too, including student loans, a home mortgage, or a car loan. These are held as assets by the creditor, which could be a bank or any of a number of types of financial institutions including pension funds, hedge funds, or insurance companies. A household"s net financial wealth is equal to the sum of all its financial assets (equal to its financial wealth) less the sum of its financial liabilities (all of the money-denominated IOUs it issued). If that is positive, it has positive net financial wealth.

Inside wealth vs outside wealth. It is often useful to distinguish among types of sectors in the economy. The most basic distinction is between the public sector (including all levels of government) and the private sector (including households and firms). If we were to take all of the privately-issued financial assets and liabilities, it is a matter of logic that the sum of financial assets must equal the sum of financial liabilities. In other words, net financial wealth would have to be zero if we consider only private sector IOUs. This is sometimes called "inside wealth" because it is "inside" the private sector. In order for the private sector to accumulate net financial wealth, it must be in the form of "outside wealth", that is, financial claims on another sector. Given our basic division between the public sector and the private sector, the outside financial wealth takes the form of government IOUs. The private sector holds government currency (including coins and paper currency) as well as the full range of government bonds (short term bills, longer maturity bonds) as net financial assets, a portion of its positive net wealth.

A note on nonfinancial wealth (real assets). One"s financial asset is necessarily offset by another"s financial liability. In the aggregate, net financial wealth must equal zero. However, real assets represent one"s wealth that is not offset by another"s liability, hence, at the aggregate level net wealth equals the value of real (nonfinancial) assets. To be clear, you might have purchased an automobile by going into debt. Your financial liability (your car loan) is offset by the financial asset held by the auto loan company. Since those net to zero, what remains is the value of the real asset—the car. In most of the discussion that follows we will be concerned with financial assets and liabilities, but will keep in the back of our minds that the value of real assets provides net wealth at both the individual level and at the aggregate level. Once we subtract all financial liabilities from total assets (real and financial) we are left with nonfinancial (real) assets, or aggregate net worth.

http://neweconomicperspectives.org/2011/06/...f-macro-accounting.html

Net private financial wealth equals public debt. Flows (of income or spending) accumulate to stocks. The private sector accumulation of net financial assets over the course of a year is made possible only because its spending is less than its income over that same period. In other words, it has been saving, enabling it to accumulate a stock of wealth in the form of financial assets. In our simple example with only a public sector and a private sector, these financial assets are government liabilities—government currency and government bonds. These government IOUs, in turn, can be accumulated only when the government spends more than it receives in the form of tax revenue. This is a government deficit, which is the flow of government spending less the flow of government tax revenue measured in the money of account over a given period (usually, a year). This deficit accumulates to a stock of government debt—equal to the private sector’s accumulation of financial wealth over the same period. A complete explanation of the process of government spending and taxing will be provided in the weeks and months to come. What is necessary to understand at this point is that the net financial assets held by the private sector are exactly equal to the net financial liabilities issued by the government in our two-sector example. If the government always runs a balanced budget, with its spending always equal to its tax revenue, the private sector’s net financial wealth will be zero. If the government runs continuous budget surpluses (spending is less than tax receipts), the private sector’s net financial wealth must be negative. In other words, the private sector will be indebted to the public sector.

We can formulate a resulting “dilemma”: in our two sector model it is impossible for both the public sector and the private sector to run surpluses. And if the public sector were to run surpluses, by identity the private sector would have to run deficits. If the public sector were to run sufficient surpluses to retire all its outstanding debt, by identity the private sector would run equivalent deficits, running down its net financial wealth until it reached zero.

Rest of world debts are domestic financial assets. Another useful division is to form three sectors: a domestic private sector, a domestic public sector, and a “rest of the world” sector that consists of foreign governments, firms, and households. In this case, it is possible for the domestic private sector to accumulate net claims on the rest of the world, even if the domestic public sector runs a balanced budget, with its spending over the period exactly equal to its tax revenue. The domestic sector’s accumulation of net financial assets is equal to the rest of the world’s issue of net financial liabilities. Finally, and more realistically, the domestic private sector can accumulate net financial wealth consisting of both domestic government liabilities as well as rest of world liabilities. It is possible for the domestic private sector to accumulate government debt (adding to its net financial wealth) while also issuing debt to the rest of the world (reducing its net financial wealth). In the next section we turn to a detailed discussion of sectoral balances.

für unsere Eurozone. Kontraktive Fiskalpolitik, erodierende Nettoinvestitionen und verzweifeltes Sparen der Privaten. Der Rettungsanker 'Export' entfällt zusehends, insofern nun auch andere ihre Hausaufgaben machen....

Until last year, retail investors didn"t believe that the bull market in stocks was sustainable. Instead, they chose to buy bonds. From 2009-2012, bond mutual funds attracted $1,372 billion in net inflows. Over that same period, equity mutual funds had net outflows of $75 billion.

During the first 11 months of 2013, bond funds had net inflows of only $16 billion (with $111 billion in outflows from June through November), while equity funds had net inflows of $193 billion. This may be the start of the so-called "Great Rotation" from bonds to stocks by retail investors. By the way, over the past 12 months through November, the combined net inflows into equity mutual funds and ETFs totaled a record $388 billion.

http://blog.yardeni.com/

Basics of sectoral accounting, relations to stock and flow concepts. Let us continue with our division of the economy into three sectors: a domestic private sector (households and firms), a domestic government sector (including local, state or province, and national governments), and a foreign sector (the rest of the world, including households, firms, and governments). Each of these sectors can be treated as if it had an income flow and a spending flow over the accounting period, which we will take to be a year.

There is no reason for any individual sector to balance its income and spending flows each year. If it spends less than its income, this is called a budget surplus for the year; if it spends more than its income, this is called a budget deficit for the year; a balanced budget indicates that income equalled spending over the year.

From the discussion above, it will be clear that a budget surplus is the same thing as a saving flow and leads to net accumulation of financial assets. By the same token, a budget deficit reduces net financial wealth. The sector that runs a deficit must either use its financial assets that had been accumulated in previous years (when surpluses were run), or must issue new IOUs to offset its deficits. In common parlance, we say that it “pays for” its deficit spending by exchanging its assets for spendable bank deposits (called “dis-saving”), or it issues debt (“borrows”) to obtain spendable bank deposits. Once it runs out of accumulated assets, it has no choice but to increase its indebtedness every year that it runs a deficit budget. On the other hand, a sector that runs a budget surplus will be accumulating net financial assets. This surplus will take the form of financial claims on at least one of the other sectors.

Another note on real assets. A question arises: what if one uses savings (a budget surplus) to purchase real assets rather than to accumulate net financial assets? In that case, the financial assets are simply passed along to someone else. For example, if you spend less than your income, you can accumulate deposits in your checking account. If you decide you do not want to hold your savings in the form of a checking deposit, you can write a check to purchase—say—a painting, an antique car, a stamp collection, real estate, a machine, or even a business firm. You convert a financial asset into a real asset. However, the seller has made the opposite transaction and now holds the financial asset. The point is that if the private sector taken as a whole runs a budget surplus, someone will be accumulating net financial assets (claims on another sector), although activities within the private sector can shift those net financial assets from one “pocket” to another.

Conclusion: One sector’s deficit equals another’s surplus. All of this brings us to the important accounting principle that if we sum the deficits run by one or more sectors, this must equal the surpluses run by the other sector(s). Following the pioneering work by Wynne Godley, we can state this principle in the form of a simple identity:

Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0

For example, let us assume that the foreign sector runs a balanced budget (in the identity above, the foreign balance equals zero). Let us further assume that the domestic private sector’s income is $100 billion while its spending is equal to $90 billion, for a budget surplus of $10 billion over the year. Then, by identity, the domestic government sector’s budget deficit for the year is equal to $10 billion. From the discussion above, we know that the domestic private sector will accumulate $10 billion of net financial wealth during the year, consisting of $10 billion of domestic government sector liabilities.

As another example, assume that the foreign sector spends less than its income, with a budget surplus of $20 billion. At the same time, the domestic government sector also spends less than its income, running a budget surplus of $10 billion. From our accounting identity, we know that over the same period the domestic private sector must have run a budget deficit equal to $30 billion ($20 billion plus $10 billion). At the same time, its net financial wealth will have fallen by $30 billion as it sold assets and issued debt. Meanwhile, the domestic government sector will have increased its net financial wealth by $10 billion (reducing its outstanding debt or increasing its claims on the other sectors), and the foreign sector will have increased its net financial position by $20 billion (also reducing its outstanding debt or increasing its claims on the other sectors).

It is apparent that if one sector is going to run a budget surplus, at least one other sector must run a budget deficit. In terms of stock variables, in order for one sector to accumulate net financial wealth, at least one other sector must increase its indebtedness by the same amount. It is impossible for all sectors to accumulate net financial wealth by running budget surpluses. We can formulate another “dilemma”: if one of three sectors is to run a surplus, at least one of the others must run a deficit.

No matter how hard we might try, we cannot all run surpluses. It is a lot like those children at Lake Wobegone who are supposedly above average. For every kid above average there must be one below average. And, for every deficit there must be a surplus.

http://neweconomicperspectives.org/2011/06/...f-macro-accounting.html

Man sieht, Investment der Privaten konnte den schrumpfenden Staatssektor überkompensieren - anders wäre es zu keinem GDP-Wachstum gekommen. Private investieren, indem sie entsparen oder Kredit ziehen

Economist Martin Wolf explained in July 2012 that government fiscal balance is one of three major financial sectoral balances in the U.S. economy, the others being the foreign financial sector and the private financial sector. The sum of the surpluses or deficits across these three sectors must be zero by definition. Since the foreign and private sectors are in surplus, the government sector must be in deficit. Wolf argued that the shift in the private sector from deficit to surplus in the wake of the subprime mortgage crisis drove the government sector into deficit.
Foreign sector financial balance: This is the capital account. A foreign financial surplus or capital account surplus exists because capital is imported (net) to fund the U.S. trade deficit, the excess of imports over exports.
Private sector financial balance: This is the difference between private savings (mostly by consumers) and private investment (mostly by businesses). In a healthy economy, consumers save and businesses borrow the savings and invest it, with the two figures moving roughly in tandem. However, if consumers increase their saving but businesses do not invest the difference, a surplus develops. In the wake of the subprime mortgage crisis, savings increased but investment declined dramatically, moving this balance from deficit into surplus.
Government sector financial balance: This is the difference between government revenues less spending. In the U.S., it is the sum of federal, state and local budget surpluses or deficits.

For example, the government budget deficit in 2011 was approximately 10% GDP (8.6% GDP of which was federal), offsetting a capital surplus of 4% GDP and a private sector surplus of 6% GDP.[68]

Wolf argued that the sudden shift in the private sector from deficit to surplus forced the government balance into deficit, writing: "The financial balance of the private sector shifted towards surplus by the almost unbelievable cumulative total of 11.2 per cent of gross domestic product between the third quarter of 2007 and the second quarter of 2009, which was when the financial deficit of US government (federal and state) reached its peak...No fiscal policy changes explain the collapse into massive fiscal deficit between 2007 and 2009, because there was none of any importance. The collapse is explained by the massive shift of the private sector from financial deficit into surplus or, in other words, from boom to bust."[68] (wiki)

Note 1: Eine Kreditblase bzw ein Creditcycle endet dann, wenn die Privaten zu sparen beginnen. 2. 'Money Printing' erfolgt über Kreditaufnahme des Staates oder der Privaten, nicht durch die Notenbank.

 

The U.S. Treasury Department released a note today highlighting that the Troubled Asset Relief Program, or TARP, was almost fully wound down. Created in 2008 in response to the financial crisis, TARP invested hundreds of billions of dollars in several dozen large publicly held companies. In essence, TARP provided operating capital from government funds to support important American industries when the banking system effectively froze up.

The Treasury has been gradually winding down its TARP investments for a couple of years now. The department began recovering TARP investments as early as 2009, and has nearly completed the process as of the end of 2013. In 2013, the Treasury completely finalized their investment in General Motors Company (NYSE:GM), recouped almost $6 billion of their investment in Ally Financial Inc (NYSE:GOM), and wound down the vast majority of their remaining financial institution assets. Forty banks also repaid loans and the department auctioned or sold our investments in 81 companies in 2013.

TARP has been a success by almost any standard. Even those who opposed the program on political or philosophical grounds when it was rolled out have to admit the program accomplished its goals. The U.S. economy is clearly greatly improved today, and it turns out TARP actually turned a profit.

According to the Treasury Department"s note, the Treasury has been repaid $432.8 billion in total on all TARP investments – including selling its remaining investment in AIG – compared to the $421.9 billion it disbursed in 2008 and 2009.

http://www.valuewalk.com/2013/12/...mail&utm_campaign=EMAIL_DAILY

Man sieht, ein fallender ISM läuft Bärenmärkten / Recessionen voraus. Insofern ein Kontraindikator für strategisch short:

Um bei schrumpfendem Realeinkommen wie schrumpfendem Staatssektor das Wachstum auf dem zuletzt gesehenen Niveau zu halten, müssten die Haushalte sich noch exzessiver verschulden als vor Lehman. Dies können sie jedoch nicht, weil sie mit der Rückabwicklung dieser letzten Kreditblase noch nicht fertig sind. Insofern kein Wunder, dass das Consummer Sentiment 'hinterherhinkt'...

der Grund, weshalb sie fallen werden:

Bären sollten wissen, dass sie grundsätzlich gegen den übergeordneten Trend antreten. Ein Antizykliker wird deshalb nur dann zum Bären, wenn die Divergence zwischen optimistischer Erwartung und Fundamentals das kritische Niveau anzulaufen droht (also vorher). Permabären hingegen setzen stets auf die grosse Karthasis und reüssieren damit ca alle 7 Jahre als 'Crashpropheten'. Handeln sie tatsächlich entlang ihrer Mentalität, sind sie bis dahin allerdings pleite...

nicht so sehr der radical chic, der via Lehrbuch durchgesetzte Ideologien wie den 'gesunden Menschenverstand'  herausfordert. Sondern natürlich das 'true by definition' in einer postmodernen Welt, in der alle Theorie zur Erzählung mit beschränktem Wahrheitsgehalt herruntergestuft ist. Mit einer Ausnahme: Mathe. Die MMT-Basics werden damit in eleganter Weise unangreifbar, entsprechend hilflos agiert die etablierte Konkurrenz, solange sie die logisch simplen Identitätsgleichungen der MMT in praktischer Hinsicht leugnet. Tatsächlich angreifbar wird MMT in der Sache erst in den Schlussfolgerungen, die sie aus ihren Gleichungen zieht. Den Bogen hat der makroökonomische Stammtisch allerdings noch nicht raus....

Was ist moderne Geldtheorie ?

The crisis has given rise to a range of new ideas and theories to replace the discredited view of the economy. The newest and most imaginative of these is known as Modern Monetary Theory (MMT) and is one of the first theories to owe its growth to the internet. Without a doubt MMT is radical and completely turns established economic thinking on its head. If it is correct then it would change the way we think about the economy forever.

As surprising as it may seem to an ordinary person, economists rarely discuss money or banking, the two topics that most come to mind when one thinks of economics. This is because most of mainstream economics has its roots in the 19th century when the financial sector was tiny and money was not seen as important (to the extent that economists would imagine barter economies for simplicity). MMT is the first theory to recognise the importance of the massive growth in the financial sector and the fundamental role money plays in the economy (especially since it is no longer backed by gold). It addresses head on the idea that perplexes most ordinary people, how is that paper money with no intrinsic value of its own is so valuable and how are banks able to create money “out of thin air”?

weiter: http://robertnielsen21.wordpress.com/2013/09/08/...n-monetary-theory/

der sparende Staat kommt zu früh:

Man sieht schön die Taperdelle. Die Erzählung der Permabären, Tapering würde das 'Kartenhaus' zusammenbrechen lassen, hatte manch Geldanlageprofi für bare Münze genommen:  

Die Nr 1 unter den ideologiekritischen Makroseiten baut ein Forum auf. Im Blog gibt es bereits lebhafte Diskussionen auf hohem Niveau zu Geldtheorie und makro fundierten Tradingstrategien. Die theoretische Herkunft ist postkeynesian, mit der MMT werden die saldenmechanischen basics, nicht jedoch die Implikationen geteilt...

http://pragcap.com/

http://pragcap.com/forums

f the rich are getting richer, and no one else is doing the same, then why are consumer stocks doing so well? There simply aren"t enough of the "1%" to explain the growth in consumer spending, which has boosted the forward revenues and forward earnings of the S&P 500 Consumer Discretionary sector by 51% and 339% since June 2009 and March 2009, respectively. What does the market know about consumers that the "progressives"--the populist proponents of income redistribution--don"t get? Consider the following:

(1) Income before entitlements. The Paradox of Progressivism is that all of the government"s spending on redistributing income and fighting poverty doesn"t seem to be working, requiring even more spending to win the war on poverty and income inequality. That"s because progressives tend to measure progress by focusing on measures of income that exclude the government"s spending to boost the standard of living of people with low incomes!

So they invariably focus on inflation-adjusted mean and median household and family incomes. These measures have stagnated for the past 15 years, but they don"t include entitlement payments and benefits. According to the official source of the data "money income does not reflect the fact that some families receive noncash benefits" such as food stamps, health benefits, and subsidized housing.

(2) Income after entitlements. The monthly measure of personal income includes "government social benefits to persons," which totaled a record $2.4 trillion during November, doubling since the end of 2001. They account for 17.0% of personal income and 16.5% of total National Income, which includes compensation of employees, corporate profits, rents, interest, and dividends.

So while wages and salaries are down to a record low of 49.0% of National Income--with total compensation to employees (including supplements) back down near its record low at 60.8%--total personal income continues to fluctuate around 100% of National Income, as it has been doing since the early 1980s thanks to entitlements. Furthermore, inflation-adjusted pre-tax compensation in personal income per payroll employee has been on an upward trend for the past 15 years, and rose to a record high during November of last year.

http://blog.yardeni.com/