Slow turnaround Are we in the middle of a paradigm shift? Global - - PowerPoint PPT Presentation

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Slow turnaround Are we in the middle of a paradigm shift? Global - - PowerPoint PPT Presentation

Slow turnaround Are we in the middle of a paradigm shift? Global Chief Economist Helge J. Pedersen ICMA Coference, Copenhagen 24h. May 2013 3/15/2013 Wheel of crisis turning in its sixth year 2nd phase 1st phase EFSF/ESM the great financial


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Slow turnaround

Are we in the middle of a paradigm shift?

Global Chief Economist Helge J. Pedersen ICMA Coference, Copenhagen 24h. May 2013

  • 3/15/2013
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Wheel of crisis turning in its sixth year

EFSF/ESM Six-pack and early warning mechanisms Fiscal compact – budget laws Common fiscal policy Growth pact and banking union European Federation Proactive central bank/SMP/OMT

2nd phase the great recession 2008-2009 3rd phase sovereign debt crisis 2009- 1st phase financial crisis 2007-2008

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The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.

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SLIDE 3

Risk perception at pre Lehman levels

Global

Source: Nordea Markets and Reuters Ecowin

06 07 08 09 10 11 12 13 50 75 100 125 150 175 200 225 50 75 100 125 150 175 200 225 Index Nordea Risk Perception - Main Index

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Lehman Greece Eurocrisis Spain, Greek elections Cyprus, Italian elections

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Slow turnaround because of

  • Crisis of confidence
  • Tightening of fiscal policy
  • High oil prices
  • Deleveraging in the private and public sector
  • New financial sector regulation

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DKKbn Capital requirement 70 Liquidity and funding 210 Taxes and reporting 20 Yield demand 11% Change in lending rate 2,2%-point

  • f which SME

>3%-point GDP level (10-year period)

  • 1.75%

Source: The Danish Bankers Association

Macroeconomic consequences of Basel III on Denmark

Foreign effect GDP-level DKKbn (2010- prices)

  • 3%

Derived GDP-effect via exports

  • 1%

Total permanent effect

  • 2.75%

40-45 Source: IIF, DBA, own calculations

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The 2013 economic heat map…

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The ‘old world’ breathes in a monetary policy respirator…

Source: Nordea Markets and Reuters Ecowin

07 08 09 10 11 12 5 10 15 20 25 30 35 5 10 15 20 25 30 35 % of GDP Central bank's balance sheets % of GDP

Fed ECB BoE BoJ

  • “Extraordinary times calls for

extraordinary measures”

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MP‐plus: extraordinarily low interest rates and unconventional monetary policy measures

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…why liquidity will be ample and rates extraordinarily low for long time yet

Source: Nordea Markets and Reuters Ecowin

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 1 2 3 4 5 6 7 1 2 3 4 5 6 7 % % Japan

Easing Easing

Euro area USA

Tightening Tightening

UK

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Global

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…also on government bonds

Source: Nordea Markets and Reuters Ecowin

90 92 94 96 98 00 02 04 06 08 10 12 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 % % 1 0 Y governm ent bond yields USA Denmark

Lines marks beginning of policy tightening The Conondrum era

Germany

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MP‐plus is not without risks. Addiction and new bubbles?

Global

Source: Nordea Markets and Reuters Ecowin

May 12 Jul Aug Sep Oct Nov Dec Jan 13 Feb Mar Apr May

  • 10

10 20 30 40 50 60 70 80

  • 10

10 20 30 40 50 60 70 80 % Nikkei225 OMX40 DowJones DAX30 %

Source: Nordea Markets and Reuters Ecowin

92 94 96 98 00 02 04 06 08 10 12 200 250 300 350 400 450 500 550 600 200 250 300 350 400 450 500 550 600 Index CRB spot Index

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  • IMF warns about property prices in

countries like Hong Kong, France, Brazil, Canada, Norway and Sweden

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Conclusion

  • Euro crisis is fading out
  • Growth in East and West – but everywhere low for longer
  • Monetary policy‐plus for a long time yet

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Thank you!

Helge J. Pedersen Global Chief Economist Economic Research +45 3333 3126 helge.pedersen@nordea.com

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