Politics

US banks shy away from risk

  US banks are becoming much more restrictive in their lending. This is shown by the latest results of the US Federal Reserve’s quarterly Senior Loan Officer Survey among banks. Should there be a wave of insolvencies, the economic recovery is likely to be very sluggish. For that reason, the US Federal Reserve is currently trying to secure the supply of credit almost single-handedly. The standards for commercial loans as well as for loans to private households have tightened dramatically in the wake of the COVID 19 crisis. In the business subcategory, respondents reported that, on balance, credit conditions have been tightened considerably for both large and medium-sized and small firms. In addition, margins for riskier loans have risen sharply and the requirements for collateral have increased considerably. The main reason cited by the credit institutions for the significant tightening of the granting of corporate loans was lower risk tolerance….

BVerfG sets ECB deadline

The Federal Constitutional Court (BVerfG) today handed down a landmark ruling for European monetary policy and the financial markets. It has partially upheld the complainants‘ appeal against the PSPP. The court primarily admonishes the lack of a review of the proportionality of the chosen means and thus also challenges the decision of the European Court of Justice, which had declared the PSPP admissible. In its reasoning, the BVerfG specifically states that the PSPP decisions of the ECB are to be qualified as „ultra vires measures“ despite the ECJ decision. This means that the ECB, as it proceeded, acted outside its competences. However, the Court of First Instance only partially agrees with the complainants, because it in turn denies the allegation of monetary public financing. What exactly follows from the judgment? „The Federal Constitutional Court gives the ECB three months to justify the proportionality of the chosen means to the public…

Climate-friendly cars as an investment programme

For many years the fear of dwindling oil wells dominated the ideas about the end of the combustion engine. In the meantime, however, the revolution in motor vehicle propulsion has already been heralded. While the share of alternative technologies in new passenger car registrations in Germany was still 1.7 percent in 2015, it had already reached 8.8 percent by 2019. The driving force behind the increasing supply of „electric cars“ and hybrids and the equally increasing demand is climate and environmental protection. Currently, the focus is on bans on diesel driving, specifications for the fleet consumption of car manufacturers and the environmental bonus for the purchase of electric vehicles. With regard to the future development of automotive drive concepts, we expect a noticeable increase in the number of electrified vehicles over the next ten years, but we also see a high proportion of vehicles with combustion engines. In 2030 battery…

Everything has its price

The global economy is in a deep crisis. To prevent worse from happening, central banks are cutting interest rates and providing sufficient liquidity, while governments are supporting the real economy with guarantees, loans and government investments. Both have worked extremely well so far. Like everything in life, this has its price. The central banks provide for very low or negative interest rates. Not just now, but probably in the years to come. Corporate bond prices have lost any signalling effect as central banks subsidise the market by buying bonds. In addition, because of the central banks‘ boundless willingness to take risks, liquidity can easily work its way through the markets and lift bond and equity prices upwards. In addition to the positive short-term effects, however, government measures also have medium and long-term consequences that become increasingly negative over time. On the one hand, there is likely to be a crowding-out…

Almost all sectors in Germany with all-time lows in business climate

The Corona pandemic has the German economy firmly in its grip. Many companies were at least temporarily closed or had to remain closed in April. It was foreseeable that this would not be without consequences for the mood of the companies. The business climate index fell from 85.9 points in March to just 74.3 points. For comparison: the lowest level during the financial market crisis was 79.9 points! All-time lows in the business climate were also reported by companies in the manufacturing, wholesale, retail and service sectors. Only the main construction industry can escape this trend somewhat. However, even here expectations have fallen to a historic low. However, a clear majority of construction companies still assess their current business situation positively, in contrast to all other sectors. By contrast, the slump in the business climate in the retail clothing and footwear sector is really dramatic. Nearly all companies in this…

We need a new balance

The path to a common European solution for refinancing the Corona crisis is still a long one. This was shown by the video conference of EU heads of state and government last week (an overview of the main results is given below). The states often go to the limits of what is financially feasible with their current rescue concepts and measures. Countries such as the USA or Germany can certainly afford this so far without having to worry about sustainable financial stability. But even in these countries it is not possible to continue with this unlimited financial willingness to help in the long term. An economy needs sustainable growth and prospects. At least one, or better both, components are necessary for business start-ups and investments. In the coming weeks, policymakers will have to pay more attention to economic issues and, if necessary, change their weighting in weighing up risks. A…

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