(Aug 12, 2018) Weekly Topics of Global Economy

[정견만]

(Aug 12, 2018) Weekly Topics of Global Economy

안녕하세요? 입추가 지나도 기온은 높군요. 그래도 좀 나아졌다는 느낌!

1. Erdogan tells Turks to buy plunging lira as Trump turns the screws, Reuters

- 미 Trump대통령이 Turkey산 알루미늄 및 철강 제품에 대해 관세를 2배(각 20%, 50%)로 인상하자, 지난 금요일 Turkey lira 화가 무려 18%나 폭락하였습니다(2001년 금융위기 이후 최대폭)

그러자 Turkey Erdogan 대통령은 국민들에게 금과 달러화로 lira화를 사라고 담화. ㅎㅎ

Lira화 가치는 Turkey경제 침체와 더불어 지속 하락하여 왔지만, 특히 올 들어 Erdogan 대통령의 통화정책 개입과 미국과의 관계 악화가 설상가상 -> 연초 이래 40%이상 급락.

터키 리라화 급락은 금요일 세계 금융시장에 큰 파장을 야기. 특히 Turkey exposer가 큰 유럽계 은행들의 주가가 크게 하락(이어 미국계 은행도 하락). 외채 의존형 경제개발에 집중해온 터기 -> 전세계 투자자들이 전전긍긍

지난 3월 Trump는 national security명목으로 EU 등 다수 동맹국들의 알루미늄 및 철강제품에 대해 10% - 25% 추가 관세를 부과한 바 있는데, Turkey에 대해서는 2배로 인상한 것 -> 미국의 NATO 연합국에 대한 대우가 너무 심하네요

2달전 대선에서 재선된 Erdogan은 미국이 2년전 터키 쿠데타를 지원했으나 실패한 이래 계속 터키를 공격하고 있다고 주장. 새로 취임한 터키 재무장관 (Erdogan의 사위)은 중앙은행의 독립성 보장, 엄격한 예산 통제 등의 새 정책을 내 놓았지만 리라화 방어에 별무 효과(“The tweet is mightier than the Turkish sword”)

<생각>

Trump와 Erdogan 둘다 Populism 성향 -> Global economy에 악 영향 끼칠 소지 다분 -> Bully, loggerhead들 사라졌으면!

2. Ruble Dives the Most Since the Oil Crash in 2015

- 지난 주 미국 의회가 2016년 대선 개입을 이유로 Russia에 대한 경제제재를 대폭 강화하는 법안을 상정하자, Russian Ruble화가 1주일 사이 6.3% 급락하였습니다(2015년 유가 급락 이래 최대 폭)

아직 법안 통과는 볼확실하지만, 공화당과 민주당이 동시 제출하였기 때문에 통과 가능성이 높다고 보는군요(미국의 민주 체제에 외세 개입을 불허하겠다는 의지)

제재 내용도 은행거래 및 국채거래 제한 등으로 러시아 경제에 심대한 타격을 줄 수 있는 것들임(potential sanctions is “just too large”).

러시아 국채의 28%를 외국인들이 보유 중인 만큼 국채가격 하락 및 향후 국채 발행에 나쁜 영향 불가피하고, 은행거래 제한은 더 나쁠 수도 있겠죠.

<생각> 거대하고 오만한 미국의 힘을 느끼게 됩니다.

정견만 드림

1. Erdogan tells Turks to buy plunging lira as Trump turns the screws, Reuters

Behiye Selin Taner, Tuvan Gumrukcu

August 10, 2018 / 9:21 PM / Updated 9 minutes ago

ISTANBUL/ANKARA (Reuters) - President Tayyip Erdogan told Turks on Friday to exchange their gold and dollars into lira, with the currency in free fall as President Donald Trump escalated a feud with Ankara by doubling tariffs on metals imports.

The lira TRYTOM=D3 has long been falling on worries about Erdogan's influence over monetary policy and worsening relations with the United States. That turned into a rout on Friday, with the lira diving as much as 18 percent at one point, the biggest one-day drop since Turkey's 2001 financial crisis.

Reverberations spread through global markets, with European stockmarkets especially hit as investors took fright over banks’ exposure to Turkey. U.S. stocks were also rattled, with banks again in focus.

The lira, which has lost more than 40 percent this year, hit a new record low after Trump took steps to punish Ankara in a wide-ranging dispute. He said he had authorized higher tariffs on imports from the United States’ NATO ally, imposing duties of 20 percent on aluminum and 50 percent on steel.

The lira, he noted on Twitter, “slides rapidly downward against our very strong Dollar!”

“Our relations with Turkey are not good at this time!” he said in an early morning post.

Turkey’s trade ministry said the U.S. tariff moves were against World Trade Organization rules.

Without naming countries, Erdogan said supporters of a failed military coup two years ago, which Ankara says was organized by a U.S.-based Muslim cleric, were attacking Turkey in new ways since his re-election two months ago to a new executive presidency.

The new duties on Turkey are double the level that Trump imposed in March on steel and aluminum imports from a range of countries. The White House said he had authorized them under Section 232 of U.S. trade law, which allows for tariffs on national security grounds.

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While Turkey and the United States are at odds over a host of issues, the most pressing disagreement has been over the detention of U.S. citizens in Turkey, notably Christian pastor Andrew Brunson who is on trial on terrorism charges. Turkish officials held talks in Washington this week but there was no breakthrough.

The lira sell-off has deepened concern over whether over-indebted Turkish companies will be able to pay back loans taken out in euros and dollars after years of overseas borrowing to fund a construction boom under Erdogan.

His characteristic defiance has further unnerved investors. The president, who says a shadowy “interest rate lobby” and Western credit ratings agencies are attempting to bring down Turkey’s economy, appealed to his countrymen’s patriotism.

“If there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks. This is a national, domestic battle,” he told a crowd in the northeastern city of Bayburt.

“Some countries have engaged in behavior that protects coup plotters and knows no laws or justice,” he said. “Relations with countries who behave like this have reached a point beyond salvaging.”

Ankara wants the United States to extradite Fethullah Gulen, a Pennsylvania-based cleric who Turkish authorities say masterminded the 2016 coup attempt in which 250 people were killed. Gulen denies the allegation.

Brunson, an evangelical Presbyterian from North Carolina, was jailed for allegedly supporting a group that Ankara blames for the failed coup.

Brunson denies the charge and his cause resonates with Christian conservative supporters of Trump, who could also be influential as Republicans seek to retain control of Congress in midterm elections in November.

Turkish banks' external assets and liabilities: tmsnrt.rs/2McsLts

“AMERICAN-MADE CRISIS”

Erdogan enjoys the support of many Turks even though food, rent and fuel prices have all surged. “This crisis is created by America,” said Serap, a 23-year-old clerk at a clothes store in central Istanbul.

Some economists were less impressed by the government’s handling of the crisis.

“Confidence needs to be regained. It is obvious how it will be done: since the final decision-maker of all policies in the new regime is the president, the responsibility of regaining confidence is on his shoulders,” said Seyfettin Gursel, a professor at Turkey’s Bahcesehir University.

Turkey’s sovereign dollar-denominated bonds tumbled, with many issues trading at record lows. Hard currency debt issued by Turkish banks suffered similar falls.

Meanwhile the cost of insuring exposure to Turkey’s sovereign debt through five-year credit defaults swaps TRGV5YUSAC=MG has spiraled to the highest level since March 2009, topping levels seen for serial defaulter Greece GRGV5YUSAC=MG, which has three bailouts in the last decade.

THE TWEET AND THE SWORD

New Finance Minister Berat Albayrak - Erdogan’s son-in-law - rolled out the government’s new economic plan on Friday, promising central bank independence and tighter budget discipline, but giving few details to reassure investors.

This did nothing to revive the lira. “The tweet is mightier than the Turkish sword,” Cristian Maggio, head of emerging markets strategy at TD Securities, said in a note to clients, with reference to Trump’s comments. “Albayrak’s plan was uninspiring at best.”

Erdogan, a self-described “enemy of interest rates”, wants cheap credit to fuel growth, but investors fear the economy is overheating. His comments on interest rates — and his choice of a family member as finance minister - have heightened perceptions that the central bank is not independent.

The central bank raised interest rates to support the lira in an emergency move in May, but it did not tighten at its last meeting.

2. Ruble Dives the Most Since the Oil Crash in 2015, Bloomberg

By Natasha Doff

‎2018‎년 ‎8월‎ ‎11‎일‎ ‎오전‎ ‎12‎:‎58

The ruble is suffering its worst weekly slump since the 2015 oil crash as some of Wall Street’s biggest banks warn investors to steer clear of Russian assets amid mounting risks of crippling sanctions from the U.S.

Morgan Stanley turned bearish and UBS Group AG closed its recommendation to buy the Russian currency, with analysts at both banks saying in notes published on Thursday that the risks outweigh the reward for owning the ruble. Diana Amoa, a money manager at JPMorgan Asset Management, puts the likelihood of curbs on Russian sovereign debt at as high as 50 percent.

The ruble is down 6.3 percent this week as contagion from the crisis in Turkey compounded tensions with the U.S. Russia’s currency traded 1.4 percent weaker at 67.5875 versus the dollar as of 6:41 p.m. in Moscow.

A fresh batch of sanctions introduced this week added to mounting concerns that the U.S. is about to start ratcheting up the severity of its restrictions against Russia. The worst-case scenario is a bill introduced in Washington last week that seeks penalties on banking transactions and new Russian sovereign debt as punishment for meddling in the 2016 presidential elections.

“Geopolitics is what keeps us all up,” Amoa said in an interview with Bloomberg Television on Friday. “We’ve seen a lot of sanctions coming through ahead of the mid-term elections. I think there is an incentive to send a strong message that the U.S. will not allow interference in their democratic processes.”

Amoa said she has reduced holdings of Russian assets because the tail risk from potential sanctions is “just too large.” High foreign ownership of Russian sovereign debt means that sanctions would have a big impact on bond yields, she said. Foreigners held about 28 percent of the nation’s outstanding ruble debt as of July 1, according to central bank data.

All About the U.S. Sanctions Aimed at Putin’s Russia: QuickTake

Both Republicans and Democrats in Congress have called for tough measures against Russia in the wake of last month’s summit between President Donald Trump and his counterpart Vladimir Putin. Still, the outlook for passage of the bill submitted last week remains uncertain, particularly since the U.S. Treasury warned that sanctioning sovereign debt could cause instability in global markets.

The U.S. is more likely to apply sanctions selectively to avoid “collateral damage” than to pass the bill in full, according to Tilmann Kolb, an analyst at UBS. Pressure on Russia, however, is only likely to rise further in the near term, he said in a note.

No decision can be taken on the bill until the House returns from summer recess next month, leaving a cloud of uncertainty over markets until then. Analysts at Morgan Stanley said that could leave the Russian Finance Ministry struggling to find enough buyers for the equivalent of $3 billion it can still borrow this year, of which $800 million would be swapped for sovereign bonds that are outstanding.

“The ruble remains highly sensitive to potential new legislation from the U.S.,” Morgan Stanley analysts including Hans Redeker said in a research note. “We think that political risk will weigh on sentiment and increase the ruble risk premium as we head into September.”

------------------------------------

Strong-Arm Governments Are Taking Over the Global Economy, Bloomberg

Populists and authoritarians now oversee the biggest chunk of G20 output. How could that affect economic performance?

By Tom Orlik

and Justin Jimenez

‎2018‎년 ‎8월‎ ‎10‎일‎ ‎오후‎ ‎6‎:‎00

Surveying the end of the Cold War in 1989, political scientist Francis Fukuyama famously argued in an essay titled The End of History? that Western liberal democracy was the culminating form of government. That’s not quite how things have played out. History, you might say, has returned.

Consider the Group of 20. Establishment political parties in those countries, the avatars of Western democracy, have seen their share of the G-20’s total economic output shrink in recent years. The most striking countertrend has been the rise of populism. Populist parties—claiming to defend the common man against corrupt elites, valuing national unity above cosmopolitan inclusion, and offering simplistic solutions against complex policy debate—have been gaining strength since the global financial crisis a decade ago. President Donald Trump in the U.S. is one prominent example. Italy is another. The Northern League and Five Star Movement swept into power there this year. Populists, according to our classification, now manage the largest bloc of the G-20 economies. (For additional Bloomberg Economics research on the topic, run {BI ECON } on the Bloomberg terminal and search for “populism.”)

Here’s how we broke it down: Each year from 1980, we sorted the governments of the G-20 countries plus Spain into four categories—establishment democracy, populist democracy, weak democracy, and authoritarian—and tracked what portion of the G-20’s total gross domestic product they oversaw.

A couple of things emerge from this analysis. First, the populist category jumped in 2016. That reflects our decision to characterize the U.S. as “populist” after Trump’s election and to shift the world’s largest economy into the category.

Second, the rise of China means that authoritarian regimes, with strong central power and limited political freedom, play an expanded role. That’s a significant shift in how the world economy is run. So far it hasn’t had a major negative impact on growth and financial stability. Is it only a matter of time? A deeper look at the relationship of governance to growth reveals some nuance about what’s likely to be important in that regard.

To put some numbers to it: When you add up the nominal output of the G-20 states plus Spain, their combined GDP is about $64 trillion. Populist governments now control 41 percent of that. By contrast, in 2007, before the crisis roiled the world, the figure was only 4 percent.

Mainstream democratic parties, which typically occupy the center of the political spectrum, have gone from dominance to minority. They preside over only 32 percent of the G-20 output. In 2007 they accounted for 83 percent.

Authoritarian regimes—China, Russia, Saudi Arabia, and Turkey are all classified as “not free,” according to Freedom House, a Washington-based think tank whose founders included Eleanor Roosevelt—manage 24 percent of G-20 GDP. China accounts for almost 19 percent, up from 8 percent a decade ago.

There are, of course, issues of judgment. Should the U.S. under Trump fall in the populist or mainstream democratic category? Probably somewhere in between.

So is there another way to tease out a populist trend? One is to examine the share of popular vote garnered by the top two parties, which typically represent mainstream political sentiment. Among major democracies, that share has fallen to 63 percent from 74 percent in 2007. What that misses is the way mainstream parties—particularly the U.S. Republican Party and U.K. politicians after the Brexit vote—have adopted populist agendas to hold on to votes. Even so, the same pattern stands out: The mainstream is losing influence.

What consequences will economies face from the lurch toward populism and authoritarianism? Mainstream parties, and indeed economists, should be humble about how much they know about good policy. Failure to manage the forces that globalization unleashed created the conditions for the rise of populism in the first place.

Even so, as traditional economic logic plays a diminished role in big policy decisions, it seems reasonable to ask if a slide toward populism and authoritarianism will erect barriers to growth. The shift is, after all, producing plenty of violations of the good-policy playbook.

Leaving aside self-interested mismanagement of the economic cycle—goosing growth for short-term political gain, for example, a practice common to both mainstream and populist governments—we’d break the missteps into two categories: First are policies that damage growth potential. Brexit, taking the U.K. out of the world’s biggest free-trade bloc and shrinking markets for the country’s goods and services, is one example.

Second are policies that undermine institutions. That includes everything from the head-spinning reversals of U.S. policy under President Trump, such as his refusal to sign the G-7 communiqué in June (adding to uncertainty), to Turkish President Recep Tayyip Erdogan’s appointment of his son-in-law to a key economic post in July (reducing accountability).

Is it time to get out the placards saying, “The end is nigh”? Not yet. To be sure, Turkey and Italy are flirting with crisis, and the U.K. is underperforming. But looking at the G-20 as a whole, GDP growth rose to 3.8 percent in 2017, the fastest pace since 2011. In part, that’s because populists got lucky. They fed on economic discontent but ultimately inherited an upswing. Pro-cyclical policies, notably the U.S. tax cuts, are giving growth an additional boost. A pro-business stance, with a bonfire of regulations in the U.S., China, and India, is also helping.

Those factors are important. But the persistence of growth reflects something more than just luck and stimulus. Some aspects of governance, it seems, are more important for growth than others.

The World Bank’s Worldwide Governance Indicators project has gathered data in more than 200 countries on six dimensions of governance: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption. An analysis using that data shows that high-quality regulation and government effectiveness correlate more closely with growth than democratic values such as voice and accountability, which track views about citizens’ ability to participate in their government. In those terms, the trajectory on governance in the G-20 looks less alarming. Democratic standards may be deteriorating, but quality of regulation and government effectiveness remain comparatively stable, even edging up in recent years.

Will the new rulers of the world’s major economies really be able to decouple long-term growth from the institutions that underpin good governance? Count us skeptical. Cycles turn. Confidence fades. Government effectiveness and high-quality regulation are tough to maintain in the absence of policy debate and accountability for leaders. The return of history has not, so far, meant the end of growth. But we’re keeping our placards on hand … just in case.

Orlik is chief economist at Bloomberg Economics in Washington. Jimenez is an associate economist in Hong Kong.