Asta Pravilonytė

Every manager can call him or herself a good strategist if he or she only works within an environment that is favourable; however, it is only in times of stress that one truly learns what one's capabilities are!

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Friday, 3 May 2013

Is a review of inflation targets in demand?

Inflation rate is one of the indicators that central banks observe and make decisions regarding monetary policy changes. However, why economic growth is associated with the increased industrial output due to higher prices and devaluation of currency instead of increased productivity? Moreover, what is the relationship between the inflation rate and nominal currency rate and the importance of the conventional target of healthy inflation of 2 percentages?

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Monday, 15 April 2013

What do economists want and finance managers need?

Even though economists and finance managers have similar objectives to pursue actions those result business growth and economic prosperity, tensions regarding suggested development solutions may arise due to different approaches those economists and finance managers apply in estimation of progress and sustainable development. The minutes of the Federal Open Market Committee held on March 19–20 2013 set the continuation of the low interest rates policy till 2015 and purchases of the Federal Reserve’s assets till 2014. Moreover, according to the Bloomberg records, an investor and philanthropist George Soros who delivered speech about financial crisis management in the conference at King’s College of Cambridge University suggested to the leaders of European Union to accept Eurobonds. He expressed believes that low interest rates are essential to assist undermined European countries. However, why low borrowing costs those economists suggest are not always the most important factor that finance managers concern about in decision making?

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Thursday, 4 April 2013

Can financial institutions protect themselves from the financial shocks?

The Policy Board of the Bank of Japan announced today quantitative and qualitative monetary easing measures approved at the Monetary Meeting on 4 April, 2013. The main decisions involve doubled the monetary base and the amounts outstanding of Japanese government bonds (JGBs) to 270 trillion yen as well as exchange-traded funds (ETFs) to 3.5 trillion yen within two years, and more than doubled the average remaining maturity of JGB purchases to about seven years. The aim of the introduced measures is to achieve the price stability target of 2% in the consumer price index (CIP) at the earliest possible time within two years through reduced risk premia of purchased assets and increased lending to businesses.

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Monday, 25 March 2013

Is €10 billion a sufficient amount to support financial sector of Cyprus?

The Central Bank of Cyprus announced that the Eurogroup Agreement on Cyprus was reached on 25 March 2013. According to the press release of the Central Bank of Cyprus, the Bank of Cyprus will be restructured and fully capitalised by acquiring performing loans, other assets and the insured deposits of the disorderly defaulted Laiki Bank. The Laiki Bank Group pursued restructuring plan which has been approved by the Central Bank of Cyprus; however, reported interim consolidated financial statements of the Laiki Bank Group for the nine months ended 30 September 2012 revealed loss of €1,67 billion, decline in total assets to €30,37 billion and deterioration of customer deposits to €17,86 billion. So, is financial assistance of €10 billion negotiated with the Eurogroup a huge or a small amount for Cyprus?

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Thursday, 14 March 2013

The first step to succeed or the last chance to survive – an invitation to sustainable development

Please Share!

An invitation to policy makers, financial institutions, entrepreneurs and innovators, academics and other interest groups to share their observations and experience those may reveal factors required to attract investors and remove barriers for sustainable development.

Dedicated to support sustainable development trends those strengthen resilience during financial shocks and contractions of economy.

Inflated assets’ bubbles remain the key to financial risks. The other risk is ignorance of markets’ inertia. It seems that financial stability encourages the economic growth, and vice versa, economic growth is required to keep financial stability. But if consumption does not generate enough incomes to cover capital expenditures, is it a sign of bad luck or unconsidered actions those fail to match customers’ preferences? The main criterion of efficient markets is equal opportunities to gather information so that market participants were able to estimate and compare the value of assets. However, with markets’ distortions investors take inadequate higher risks than expected returns. Thus, are there sustainable development strategies those allow companies to generate incomes during economic contractions and enable investors to withstand financial shocks in the financial markets?

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Tuesday, 5 February 2013

How much the purchase power of currency affects prosperity?

It seems that there is no end to the monetary policy easing. According to the Wall Street Journal’s article published on 5 February, 2013, French President F Hollande is calling the euro-zone governments to consider the monetary zone’s policy on foreign exchange. The massive quantitative-easing programmes launched by the US Federal Reserve and the Bank of England as well as policies of the Bank of Japan to keep yen at law rates encourage European leaders to respond with similar decisions. However, how effective is monetary policy easing?

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Friday, 25 January 2013

Risk assessment in liquid assets’ pricing

The agenda of a wide array of topics discussed in the World Economic Forum in Davos is an opportunity for political and industrial leaders to deliver messages to public about the good management practises and future expectations on resilient dynamism. However, despite a review of global development trends and panel discussions on human capital, leadership, energy, healthcare, technology, value chain and other topics, I would like to focus on risk management which is an integral part of financial stability and social-economic outlook.

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Monday, 7 January 2013

Could increased assets' value through currency devaluation lead to higher returns?

The goal to reverse prolonged deflation and yen appreciation is a declared focus of a newly appointed Japanese Prime Minister Shinzo Abe. However, according to the minutes of the Federal Reserve Board and the Federal Open Market Committee published on January 3, 2013, several members expressed concerns that continuing purchase of mortgage backed securities ($40 billion per month) and purchase of long term Treasury securities ($45 billion per month) would contribute to the maximisation of employment and price stability. Consequently, the suggestions to slow down or stop the programme before the end of 2013 were discussed. Decisions on monetary policies are left to the discretions of the national central banks; however, the opposite policies may contradict the reliability of Japan-US alliance.

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Monday, 3 December 2012

Are buybacks suitable gifts for investors and acceptable choice for decision makers?

Everything is fine say whose agree with the new tax regimes imposed to balance sovereign debts. However, those who disagree may find buybacks policies as alternative solutions to satisfy expectations of long term investors. So, are the buybacks appropriate means to ensure markets’ financial stability, suitable to attract investors and acceptable choice for decision makers?

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Tuesday, 27 November 2012

Will Dodd-Frank Wall Street Reform and Consumer Protection Act save the markets from the collapse?

Thanksgiving Day in the US last Friday, 23 November, opened the Christmas shopping season. Massive purchase brought confidence in the retail sector’s stocks. However, was the last Friday also the final rally? Historically, December is a weak month for stocks’ performance. Moreover, the ongoing US officials’ talks about the tighter fiscal discipline most likely will lead to the reduced consumption and decreased economic growth. Going further, the US Securities and Exchange Commission’s statement, published on Monday, 26 November, surprised with Mary Schapiro’s decision to leave the agency on the 14^th of December. So, does it mean that the Chairman of the SEC abandoned started reforms? Then, who will safeguard the markets?

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Tuesday, 30 October 2012

Isn’t it too late to concern about the financial stability of the US banks?

2013 is going to be a challenging year for the global economy. Set US obligations to reduce the growth of budget deficit during 2013 and 2021 years and termination of the reduced taxes from 2013 may weaken consumption and cause double dip recession in the US with the contingency effect on global economy. Moreover, isn’t it too late to concern about the financial stability of the US banks due to approaching fiscal cliff?

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Monday, 15 October 2012

Sold gold reserves held in the IMF may realise frozen capital for economic development

The annual meetings of the World Bank Group and the International Monetary Fund hosted in Tokyo, October 9-14, once again engaged high level representatives from financial organizations and academic communities into the economic growth and financial stability issues. The events started with a brief presentation of the World Economic Outlook (WEO) which emphasised threats of high debts and sluggish economic growth mainly due to weaker demands in advanced economies. Similarly, the press briefing on Global Financial Stability Report (GFSR) highlighted actions restoring market confidence through monetary interventions and financial system reforms related to financial buffers, high-quality capital and sufficient liquidity in advanced economies as well as fiscal discipline in Europe, Japan and the United States. So are there particular circumstances those affect the future economic outlook?

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Sunday, 9 September 2012

The Eurosystem’s Outright Monetary Transactions – the ECB’s intervention in management of sovereign debt

Mario Draghi, a president of the European Central Bank introduced the technical features of the Eurosystem’s Outright Monetary Transactions in secondary sovereign bond markets during the press conference on the 6^th of September. The ECB’s approved conditions of programmes allow intervening in the financial markets and absorbing high yield sovereign debt securities. The special programmes could relief borrowing cost of issued sovereign bonds through the ECB’s purchase of securities those are not accepted by investors. Considerations regarding the monetary and fiscal policies interactions intensified during the period of financial instability. However, interventions of central banks in the management of the sovereign debt are still assessed contrary.

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Monday, 20 August 2012

How stable and liquid is physical gold?

The World Gold Council is an association comprised of 23 members of the world’s leading gold mining companies those represent approximately 60% of global corporate gold production. The main goal of the organization is to develop gold market by stimulating and sustaining demand for gold. Historically, gold is used as a hedge against inflation and deteriorating currencies thus, according to the prolonged financial crisis, the World Gold Council suggested that added gold to the high-quality liquidity buffers could bring stability to the banking system. Additionally, due to gold’s characteristics the World Gold Council expressed believe that gold could be included in banks’ reserve asset portfolios and be used as collateral for liquidity financing. So could gold be acknowledged as a stable and liquid global currency which is equivalent to high-quality capital?

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Wednesday, 1 August 2012

Value creation should be a priority of stability policy, shouldn't it?

US Treasury Secretary Timothy Geithner held private talks with German Finance Minister Wolfgang Schaeuble and ECB’s President Mario Draghi this week. The other confidential meeting was carried between ECB’s President Mario Draghi and Bundesbank Chief Jens Weidmann before the ECB’s monetary policy vote on Thursday, 2 August. Last week M. Draghi’s publicly announced to do whatever it takes in order the Spain’s and Italy’s borrowing costs were reduced and euro stability was maintained. However, Germany’s position remained against resuming the ECB’s government bond buying programme and issuing Eurobonds. Broadcasted the US Treasury Secretary’s interview with Bloomberg on Wednesday, 1 August revealed T Geithner’s concerns about market stability and desires to sustain investors’ confidence, though usage of the euro zone's rescue funds is not clear. Does it mean that €500bn funds of European Stability Mechanism could be used to implement reforms not necessary related to the recapitalization of European banks and sovereign bonds purchase programme?

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Thursday, 19 July 2012

Are negative interest rates a signal of excessive liquidity?

International Monetary Fund warned on increased risks to financial stability in the Global Financial Stability Report released on 16 July, 2012. Excessive European sovereign debts and concerns about the quality of banks assets were mentioned as the main threat to financial stability alongside with the uncertainties on the fiscal outlook and federal debt ceiling in the United States. Financial risks are understood as possibility of losing assets. So, shouldn’t quality of assets remain the main focus and concern?

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Thursday, 5 July 2012

Could leaders of highly regulated institutions be easily replaced?

The FSA has announced about the misleading sales of interest rate hedging products to some SMEs on 29 June and confirmed that it reached agreement with Barclays, HSBC, Lloyds and RBS to provide appropriate redress where mis-selling has occurred. Barclays was fined £290m by authorities in the UK and the US following an investigation into the submission of various interbank offered rates. Chairman of Barclays, Marcus Agius resigned on 2 July, Chief Executive Bob Diamond and Chief Operating Officer Jerry del Missier resigned on 3 July. So, is it difficult to replace leaders of highly regulated and self–running business?

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Wednesday, 27 June 2012

Lack of capital or capabilities?

After the massive warnings from credit rating agencies about the deteriorating creditworthiness of financial institutions and new suggestions for better capitalization and additional injections of liquidity to sustain stability, an open question remains whether additional capital can restore self-sustainability of financial sector. Moreover, during the past several years financial system became more vulnerable and less significant for recovery of economy. Further shortages of funds simply remind that currently held capital is not enough to fulfil all desires.

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Monday, 18 June 2012

How easily euro could be broken?

Central banks of the world’s major economies prepared contingency plans to stabilise markets in case anti-austerity parties won elections in Greece on Sunday, June 17. Moreover, leaders of the G20 meet in Mexico on Monday, June 18 to discuss Europe’s debt crisis and clarify contributions to the pledged IMF‘s fund worth of $430 billion US. It is expected that additional cash injections into the financial system may calm public panic; however, could euro, the second largest reserve currency, be broken easily?

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Monday, 4 June 2012

Goodbye to volatility, hello to arbitrage!

The US Securities and Exchange Commission approved two proposals those are designed to curb volatility in individual securities and the broader US stock market on 31 May, 2012.The national securities exchanges and the Financial Industry Regulatory Authority will implement the approved proposals by 4 February, 2013, for a one-year pilot period, during which the assessment regarding any additional modifications will be made. So, what are the chosen market control measures and how will be the effect estimated during the pilot period?

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Sunday, 27 May 2012

How is Greece going to resolve debt burden with exit from euro zone?

The approaching 17^th of June is remarkable for Greek elections. After the failure to form a coalition government for the third time Karolos Papoulias, a president of Greece dissolved a newly elected parliament with a strong opposition for bailout policies. The political party Syriza led by Alexis Tsipras obtained the second largest amount of seats in the 300-member parliament with pledges to overturn the austerity measures. So what are Greek solutions to resolve debt burden?

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Monday, 14 May 2012

What is missing in management of portfolio of credits?

The JPMorgan Chase & Co. announced $2 billion trading loss on credit derivatives on Thursday, 10 May. Financial institutions use sophisticated financial modelling methodologies those involve estimation of the market price of the derivatives, the derivatives impact on the institutions’ balance sheet and macroeconomic indicators to forecast trends and values of financial products. So what is still missing in management of portfolio of credits?

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Thursday, 26 April 2012

Is current macroeconomic data above the future growth expectations?

The joint meeting of the World Bank and the IMF Development Committee was accomplished with the IMF’s members pledge to contribute over $430 billion to an anti-crisis firewall which is aimed to restore market confidence and support the recovery of global economy growth, the news released at the IMF Survey Magazine on Saturday, 21 April. However, even successfully mobilized global fund ought to strengthen safety net, markets pressure on Monday, 23 April suggested that current macroeconomic data and contraction in Europe is above the future promises. So, are there any surprises for Friday, 27 April 2012?

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Monday, 16 April 2012

The US giants’ earnings – reflection of believe and disappointment

The first quarter’s earnings of the dominating US companies will be released this week and investors’ sentiments will determine further trends of the markets. Will the earnings be strong enough to feed public – public investors, and support the new heights of Americas Stock Indexes? Or will the indexes sag down reflecting investors’ disappointments along with new reproaches on insufficient stimulus?

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Thursday, 15 March 2012

Does infinite growth exist and is sustainable development possible?

Investment rules of pension funds and savings schemes those provide tax shields and encourage chasing assets growth in long term are coincident with the believes of perpetual growth, the concept which is based on sustainable development and assumption that a comfortable retirement is in the interest of all people. However, does infinite growth really exist and is sustainable development possible?

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Wednesday, 29 February 2012

The ECB’s conducted LTRO – could favourable borrowing conditions clean financial system?

The second European Central Bank’s tender, announced on 28 February 2012, attracted 800 participants. €530 billion will be allotted to banks according to the ECB’s policy to support bank lending and liquidity in the euro area money market. A 1% fixed rate will be applied for the conducted longer term refinancing operations with a maturity of 36 months and the option of early repayment after one year. Favourable borrowing conditions enabled banks to access cheap money; however, will the opportunity be turned to their advantage?

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Thursday, 23 February 2012

What could be expected from reduced Chinese banks’ reserve requirements?

Liquidity shortage in China will be reduced by cutting banks’ reserve requirements. Authority’s decision announced in November, 2011 will come into effect on Friday, February 24, Reuters reported on February 20. The same day Bloomberg noticed that the proportion of cash Chinese banks must set aside will drop half a percentage point and more capital will be available for loans. This announcement was made by the central bank on its website on the 18th of February. The amount of additional capital, according to Australia & New Zealand Banking Group’s estimation, may reach 400 billion yuan ($64 billion). Economy stimulation policies define further stakeholders’ actions, so what could be expected?

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Tuesday, 14 February 2012

How much does oil cost?

Financial crisis, recession, deterioration of assets... Alongside that, an assumption regarding Iran’s pursued nuclear programme and evoked protest. Geopolitical sanctions against Iran involve oil embargo which may disturb oil supply and push higher crude oil prices. So, could we add the energy crisis beside the issues that burden recovery?

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Sunday, 15 January 2012

How far unsolved repayment of Greece's debt lead? Straight to the abyss

A joint EU’s and IMF’s financial support similarly imposed even higher burden to Greece. A €110 billion EU/IMF bail-out package approved in May, 2010 followed by the Eurozone’s €12 billion bail-out package in June, 2011 and extra €109 billion support in July, 2011 were agreed in exchange of accepted severe austerity measures those involved spending cuts, tax increases and privatization of public assets. Passed proposed measures without taking a recovery plan into consideration shrank Greece's economy into deeper recession.

According to the remarks mentioned at the IMF’s conference called on Greece in December 13, 2011, the representatives of the mission revised the Greece’s GDP growth down to -6% in 2011, and -3% in 2012. So, could anything worse be expected than deteriorated Greece's economy and increased Greek default probability?

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Monday, 9 January 2012

What bilateral agreements do markets accept?

Germany sold 4.06 billion euros of the bonds on the 4th of January with the average yield of 1.93% on 10 year government bonds. France sold 7.9 billion euros of bonds on the 5th of January with the average yield of 3.29% on 10 year government bonds. It is supposed that Italy’s and Spain’s borrowing in the markets this week could be facilitated as well due to the ECB’s injected liquidity through 3-year refinancing operation worth of 500 billion euros and expectations that the ECB’s Governing Council will cut interest rates on the January 12 meeting. However, despite the European sovereign debt crisis and broken markets’ confidence, China, Japan and South Korea move forward to closer financial cooperation.

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Monday, 19 December 2011

Security’s Beta – an indicator of systematic risk

Assessment of creditworthiness of financial institutions or financial instruments is one of the supervision measures. Standard & Poor downgraded the long-term credit rates for major financial institutions including Bank of America, Goldman Sachs, Barclays and HSBC on 30 November. On16 December, Fitch reported the rating cuts for seven largest banks: Bank of America, Goldman Sachs, BNP Paribas, Barclays, Deutsche Bank and Credit Suisse and Citigroup. Even though the downgrades reflect the assessment of the enhanced rating methodologies those involve systematic risk analyses based on macro indicators, industry and regulatory environment, will the valuation reinforce the discipline of the financial performance and reduce systematic risks?

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Monday, 12 December 2011

The end of 2011 - political and economic changes in Russia

Week lasting demonstrations in Russia is a protest against a possible electoral fraud. According to the statement of the Central Election Committee of Russian Federation prepared on the 5th of December, 2011, the preliminary results, those represent 95 % of the overall counted votes of Russian Legislative Election, 2011, were the following: representatives of United Russia got 49.54% of total votes, Communist Party of the Russian Federation received 19.16%, A Just Russia collected 13.22%, Liberal Democratic Party of Russia got 11.66%, Yabloko received 3.3%, Patriots of Russia gathered 0.97% and Right Cause got 0.59%. However, citizens expressed mistrust in counted votes and dissatisfaction with the dominated United Russia party.

Could it be that a long lasting protest lift the prices of energy resources and diminish value of domestic corporations? Similarly, could a shift in political influence be a reason of transformation of state’s corporations?

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Sunday, 4 December 2011

Should the strategies of Sovereign Wealth Funds

be a subject of regulation?

George Osborne, the Chancellor of the Exchequer of the UK delivered financial statement on Tuesday 29 November, 2011. He announced about the extended Government's enterprise finance guarantee scheme for businesses with annual turnover of up to £44 million. The ceilings were set of £40 billion. The Chancellor also introduced a newly launched National loan guarantee scheme for new loans and overdrafts to businesses with turnover of less than £50 million. The initial £20 billion – worth fund for national loan guarantees will be available within the next two years and it is expected that those guarantees will let to reduce the borrowing interest rates by 1 percentage.

Moreover, along these measures innovative solutions to launch £1 billion business finance partnership was presented. The partnership with other investors such as pension funds and insurance companies could enable the Government to invest in funds those lend directly to mid-sized businesses. Similarly, over 500 investment infrastructure projects to support economic development were identified first time. Alongside the Government guarantee schemes and traditional fund rising through borrowing, the Government had negotiated an agreement with two groups of British pension funds which unlocked an additional £20 billion of private investment for implementation of infrastructure projects.

The Government’s launched partnerships with investors aimed to facilitate funding for development of domestic businesses suggest the following: is it a rudiment of the Sovereign Wealth Fund?

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Friday, 25 November 2011

The road to the sound fundamentals

The European Commission’s released a package of new actions for growth, governance and stability on the 23rd of November, 2011. The new economic priorities for the next year set out in the 2012 Annual Growth Survey are underpinned by two Regulations to tighten economic and budgetary surveillance in the euro area and a Green Paper on Stability Bonds. Taking into account the European economy’s stagnation, excessive sovereign debts and rising borrowing costs those simultaneously affect financial stability of the European Union’s region, strengthening monitoring of strategic development and budget discipline is an inevitable step. However, despite of well understood and accepted fundamentals of sustainable development, the recurrence to basics is sluggish.

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Monday, 14 November 2011

The borrowing costs of European structural reforms

Greece and Italy changed their leaders to restore fiscal discipline. Lucas Papademos, former Governor of the Bank of Greece and Vice-President of the European Central Bank, replaced Prime Minister George A. Papandreou in the 11th of November, 2011 to implement conditions set by European leaders on the 26th of October related to 130 billion European bailout and manage a voluntary debt swap, Prime Minister of Italy Silvio Berlusconi resigned in the 12th of November, 2011 after the 45.5 billion-euro austerity package was approved in parliament and Mario Monti, former European Union Competition Commissioner, is going to form a new Italian government. So, could those changes convince the markets about mastering sovereign debt crisis?

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Thursday, 3 November 2011

MF Global’s bankruptcy – a fail or a mirage?

A mission of MF Global to bring superior market access as well as to provide the powerful trading and hedging solutions to its clients came to the end with the authorization of the board of directors to file for Chapter 11 Bankruptcy Petition on October 31, 2011. According to the quarterly report, MF Global experienced a $191.6 million net loss and Moody’s Investors Service and Fitch Ratings cut the firm’s credit rating to the junk. MF Global announced that regarding to the Europe’s debt crisis, its $6.3 billion worth Short-Term European Sovereign Portfolio deteriorated and the company failed to raise additional capital. However, making loss in derivatives’ trade is almost impossible.

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Friday, 28 October 2011

The aspects of money supply policies

A message delivered on the 27th of October that the firepower of the Europe’s rescue fund will be increased to 1 trillion euros, the bondholders will accept a 50 percent loss on their holdings of Greek government debt, the European banks will be recapitalized to meet the target of the core Tier 1 capital equal to 9 percentage of assets, the bond purchase of distressed European countries will be maintained by the ECB and the EFSF as well as expectations that the IMF and countries those possess excessive foreign exchange reserves will support the European leaders plan revitalized financial markets. It also revealed how political decisions are flexible according to the external threats and prevailing demand to keep stability. As long as the intermediation role of the financial institutions in macroeconomic development is incontrovertible, different aspects of money supply policies should be considered.

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Sunday, 16 October 2011

Proposals of the G20 Finance Ministers’ meeting - temporary solutions to avoid default

The G20 official website provides only the calendar of the G20 meetings and therefore leaving the rest of the public only with expectations regarding the agenda. Moreover, reports about discussed issues and reviews of official statements are also primarily released by public media. However, the main idea of this article is not to criticize the publicly available information. The most important is the objectives of the meetings and the content of proposals discussed.

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Friday, 23 September 2011

Financial transactions are zero NPV and do not have direct effect on the GDP growth

The released Federal Reserve’s decision on the 21th of September to purchase $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell the same amount of Treasury securities with remaining maturities of 3 years or less by the end of June 2012, called as operational twist shrank equity markets, dropped market value of corporations and slashed wealth of investors. The Federal Open Market Committee intended to support stronger economy growth by pushing down long term interest rates those could stimulate borrowing. In the judgement of the stock markets, the Committee approved economic recession. However, do slumped stocks markets equivalent to the state of economy?

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Thursday, 15 September 2011

Coordinated quantitative easing – will intended actions lead to expected outcomes?

Coordinated actions were agreed by the European Central Bank, the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to save the European banking system from the US dollar liquidity crisis on Thursday, September 15. Three fixed rate tenders to repurchase eligible collateral with a maturity of approximately three months will be organized to provide dollar liquidity. Is this decision a strong signal to stop lending in the US dollars, or otherwise – incentive to provide more loans denominated in the US dollars?

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Wednesday, 7 September 2011

Stagnation in the financial markets is a cure for experienced recession

Economic growth is supported by well functioning financial markets. So, coordinated measures to restore the stability of the international financial markets remains the main subject for the G7 finance ministers and central bank governors to discuss on the annual summit in September 9-11, Marseille. However, could the current economic climate be recovered in recent turmoil in financial markets and insufficient liquidity? I guess that it is possible and is already underway.

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Tuesday, 30 August 2011

Banks recapitalization – market value matters

The recent financial markets' volatility forced Greece, Belgium, France, Italy and Spain to extend bans on short-selling. The updated news regarding the measures taken by EU competent authorities to prohibit market abuse were published on the European Securities and Market Authority’s website on August 25, 2011. The other warning to shield financial institutions was reported by Christine Lagarde. The Managing Director of the IMF encouraged speeding European banks’ recapitalization at the Federal Reserve Bank of Kansas City’s annual conference in Jackson Hole on August 27, 2011. So, are the fears of the financial system’s collapse reliable and are protective actions reasonable?

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Wednesday, 10 August 2011

Interventions in financial markets’ shocks

The US congressional leaders’ agreement on an increased debt ceiling until 2013 and a reduction of $2.4 trillion spending over 10 years has retrieved the US bond market; however, the concerns about the ongoing US fiscal and economic challenges and the S&P’s downgraded US long-term credit rating from the AAA to AA+, as well as set a negative outlook for the US economy, has driven down the major stocks indexes and commodities’ prices sharply. The panic in the global financial markets has boosted the gold price above $1,700 per ounce and surged the Swiss franc to 1.350 against the US dollar, these being the prices of the assets considered as secure investment to preserve investors’ capital until the fundamentals of the investments are reassessed.

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Sunday, 24 July 2011

The US solutions on debt ceiling and further recovery policy

Markets are closed at weekends but not political debates. Consequently, the need for constant vigilant remains essential. The political negotiations regarding additional borrowing in the US went quite smoothly last week and it seemed that the deal on a new $2.4 trillion borrowing was reached. However, according to the president Obama's remarks released on the last Friday’s evening, Speaker Boehner was going away from the final deal, therefore, setting up uncertainties regarding the further recovery policy of the US economy.

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Monday, 18 July 2011

The role of the economic policy

The imbalance of the global economy and the threat of the possible double dip recession force to reconsider the role of economic policies. Like never before, functions of states to identify key guidelines of development of domestic economy should be reassessed in order the private and public interests were balanced along with restitution of domestic justice and efficiency.

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Monday, 11 July 2011

Volatility may be provoked

The Governing Council of the ECB decided to increase the key interest rates by 25 basis points to 1.5% on the 7th of July due to the high inflation in euro area. The annual HICP inflation was 2.7% in June 2011 that is inconsistent with the primary objective of the ECB’s monetary policy to maintain inflation rates below, but close to, 2% over the medium term. According to the introductory statement to the press conference such anchoring is a prerequisite condition to the economic growth in euro area. However, the ECB’s attempts to strengthen euro by increased key interest rates may evoke even higher volatility. The results of the EU wide stress test will be announced on Friday, 15 July. Moreover, participants of the financial markets are sensitive to news those increase burden of the “peripheral” countries to manage their debts.

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Monday, 27 June 2011

Could the fixed balance sheets restore financial stability?

The OECD’s Economic Outlook published on the 25th of May and the BIS’s 81st Annual Report brought out on the 26th of June characterize the global recovery as self-sustained. It is projected that the US economy will grow by 2.6% in 2011 and 3.1% in 2012, the GDP in Euro area will rise by 2% in each of upcoming two years and the Japan’s GDP increase by 0.9 % and by 2.2% in 2011 and 2012 accordingly. Consequently, the safeguards of financial stability recommend withdrawing fiscal and monetary stimulus due to the rising inflation. However, these suggestions bear a strong resemblance to the decisions how to fix balance sheets instead of restoring foundations of financial stability.

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Monday, 20 June 2011

Trends of voluntary aid

A meeting of Eurozone finance ministers in Luxemburg today, on 20 June, ended without approval to lend €12bn ($17bn) to Greece until the country’s parliament passes new spending cuts and economic reforms worth of €28bn. The matter is time sensitive as Greece needs the €12bn by July to avoid defaulting on its debt. The Eurozone finance ministers require further austerity measures; however, Greece may also relay on some EU countries’ voluntary aid.

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Thursday, 9 June 2011

The shift of the US monetary policy and the OPEC's disagreement on oil production

Ben S. Bernanke, a chairman of Federal Reserve announced further course of the US monetary policy at the International Monetary Conference held in Atlanta, Georgia on 7 June. He told that the Federal Open Market Committee decided to complete its purchases of $600 billion of Treasury securities by the end of June and will keep low levels for the federal funds rate for an extended period as economic recovery in the US is proceeding in the moderate pace. However, financial strategies those have been designed for the Federal Reserve’s extended QE programme were realized successfully as well.

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Monday, 16 May 2011

Captured media attention - the opportunity to introduce the Greece’s potential

The Greece’s €110bn joint EU-IMF bailout package approved last year won't be enough to stabilize Greek economy. The country needs to find another €60bn to cover its deficit, repay long-term loans and support banks through 2013. However, the S&P downgraded Greece’s credit ratings to B and increased over 16% ten year government bond yields force Greece to negotiate on another rescue package alongside with considerations on debt restructuring. Thus, what else can Greece do to help itself?

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Tuesday, 10 May 2011

Get out from the systematic dependence

According to the article “Bank caves in over PPI mis-selling” published in the Financial Times on the 9th of May, the customers of the Lloyds Banking Group, Barclays, HSBC and Royal Bank of Scotland massively require compensation for mis-sold loan insurance. Some analysts estimated that the compensation may reach £ 8 bn and that this mis-selling case may be the biggest in the UK. It also may imply that customer protection instruments are used in full scale and the tendency to back up financial decisions by insurance is prevailing.

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Thursday, 5 May 2011

Interest rates versus inflation

What is the right interest rate for the low growth and high inflation regions? This is the main issue to consider for the central banks in Europe and US. Moreover, is the increased nominal interest rate an appropriate measure to manage inflation when financial stability is rebuilt by the increased money supply?

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Monday, 25 April 2011

What is the subsequent trend of the US monetary policy?

June is approaching, the time when the Federal Reserve completes the $600 billion US Treasury bonds purchase programme. Thus, how will the Board of Governors of the Federal Reserve System and the Federal Open Market Committee evaluate the efficiency of this programme and its contribution to the main monetary policy goals to promote the maximum employment, stable prices and moderate long term interest rates? Similarly, what are their insights regarding the subsequent monetary trends?

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Monday, 18 April 2011

Current state - the macroeconomic crisis

During the plenary session of International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund in Washington in April 16, 20011 the enhanced role of the IMFC as a key forum for global economic and financial cooperation was welcomed. Also, the members committed to continue working together and intensify efforts to balance global economy growth, strengthen global financial sector’s stability and its ability to support economic recovery.

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Tuesday, 12 April 2011

The leaders' focus on prevention rather than escape of the systematic risks

Deep anxiety over the hardly observable systematic risks that cause financial crises and therefore the fragility of the global financial systems brought me to the Guidance to Assess the Systemic Importance of Financial Institutions, Markets and Instruments: Initial Considerations—Background Paper. The report to the G-20 Finance Ministers and Central Bank Governors was prepared by the staff of the International Monetary Fund and the Bank for International Settlements, and the Secretariat of the Financial Stability Board in October 2009. The questionnaire of the survey was sent to 27 central banks, the central banks of G-20 and central banks of other countries which are treated as host countries of important international banks. The purpose of the study was to find out how countries identify and assess systematic relevance and whether the countries consider any particular sector and individual institution within that sector systematic.

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Friday, 25 March 2011

Is it a financial crisis? Maybe not, it is rather a crisis of sound leadership

The budget preparation and submission for the parliament approval is a test on the political influence. George Osborne, the Chancellor of the Exchequer of the UK passed the challenge on Wednesday, however, José Sócrates the Prime Minister of Portugal resigned after the parliament’s rejection of the austerity plan.

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Friday, 18 March 2011

The outcomes of G-7’s intervention to support Japan’s recovery

G-7 agreed on selling the yen on Thursday night to prevent the Japanese currency from appreciation and help its domestic economy to recover after the natural disaster. The solidarity of the U.S., Japan, U.K., Canada, France, Germany and Italy and the nation’s prompt response to the critical situation is respectful, however let’s view the scenarios and outcomes of such intervention.

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Could the eternal engines be created?

Uncontrollable disasters sweep created wealth momentary and remind about the humans’ vulnerability against the nature powers. Destructive earthquake, tsunami and the explosion of nuclear power reactors in Japan weakened Japanese stock markets and coursed self-acting decline in global markets.

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Friday, 11 March 2011

The rationality of current financial systems

Money is equivalent of value and its main purpose is facilitating swaps of products or services. Thus, does it mean that the value of produced goods or provided services fluctuates by itself according to the volatility in the foreign exchange markets? From my point of view, intrinsic value does not change however, the demand may be affected substantially. In short term, there are measures to hedge market risks but do we have foundations to keep stability of currency?