Follow Dr. Andreas Höfert
Andreas Höfert is Chief Economist Wealth Management and Regional Chief Investment Officer Europe.
When Shinzō Abe started his second term as Japan's prime minister in December 2012, he introduced an ambitious economic program to pull Japan out from two decades of deflationary slump. This program comprised three so-called "arrows": fiscal stimulus, monetary easing and structural reforms. Meanwhile the first two arrows have been shot but the third is still in the quiver; once again it has been easier for a government to print and spend money than to reform.
The football party is over and Lineker’s famous quip that "football is a simple game; 22 men chase a ball for 90 minutes and in the end Germany always wins" proved prescient. Pundits are now dissecting every statistic from the World Cup to find new trends or to validate old truths. Many are still scratching their heads over how Brazil was crushed 1–7 by Germany in the semifinals, and fell 0–3 to the Netherlands in the match for third place. There seems to be a lesson here that is also important for investors.
A couple of weeks ago, using the example of former Federal Reserve chairmen Alan Greenspan and Ben Bernanke denying (or at least mitigating) any causality between very loose monetary policy and the financial crisis, I discussed what is called “self-attribution bias” in behavioral finance.
In a recent editorial in the Financial Times1 Harvard Professor Kenneth Rogoff discusses an out-of-the-box idea: Why not abolish anonymous paper currency, starting with large-denomination notes? He comes up with good reasons for doing so.
There is a magnificent saying by the late US psychologist Abraham Maslow: "if the only tool you have is a hammer, [it is tempting to treat] everything as if it were a nail." This is how I currently interpret some of the critiques and expectations after the European Central Bank (ECB) finally decided to ease its monetary policy on 5 June.
A record 3.2 billion people watched at least one minute of live World Cup action in 2010. Next Friday the event kicks off again and the record will likely be broken. Billions of people will thrill, suffer and cheer when Lionel Messi, Cristiano Ronaldo, Neymar da Silva and their like perform their football magic.
Many political analysts were expressing this sentiment even before the results of the European Parliamentary elections were known. And in a certain sense they’re right. Even with populist, nationalistic, unorthodox and anti-European parties now accounting for roughly 20% of all seats in the European Parliament (extreme left parties making another 10%), there is no reason to believe that anything fundamental will change in the way policy is made at the European level.
The European first-quarter GDP numbers released last week disappointed the majority of economists and investors. Consensus was expecting a 1.6% annualized growth rate, but barely half that was achieved. More importantly, the last quarter of 2013 showed the six largest Eurozone economies posting growth simultaneously for the first time since the Great Recession of 2008/9, but this could not be confirmed in the latest release.
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