The coming big squeeze

Ray Dalio ist ein guter Bekannter bei bto. Der erfolgreiche Hedgefonds-Manager hat immer wieder vor den Folgen der Geldpolitik gewarnt:

→ Ray Dalio hofft auf die Inflationierung – was, wenn die nicht klappt?

und zudem eine sehr gute Sicht auf die Funktionsweise der Wirtschaft:

→ How the economic machine works

Jetzt hat er beim Federal Reserve Bank of New York’s 40th Annual Central Banking Seminar eine Rede gehalten. Die Highlights inklusive einiger Folien:

  • “It is no longer controversial to say that: (…) this isn’t a normal business cycle and we are likely in an environment of abnormally slow growth• …the current tools of monetary policy will be a lot less effective going forward (…) the risks are asymmetric to the downside (…) investment returns will be very low going forward, and (…) the impatience with economic stagnation, especially among middle and lower income earners, is leading to dangerous populism and nationalism.
  • “While these things are now widely agreed, there still isn’t agreement on why these things are true or what to do about them.”
  • “To me an economy is nothing more than the aggregate of the markets:
  • “(…) we see them add up to three main forces that all drive all economies: 1) Productivity growth 2) The short-term debt cycle, also known as the business cycle, which typically takes 5 to 10 years, and 3) The long-term debt cycle, which typically takes 50 to 75 years.” bto: dazu unbedingt den Film anschauen “How the economic Machine works”!
  • “I believe that the most important force that is now driving what is happening and isn’t well understood is the long-term debt cycle. Long-term debt cycles are not well understood because they come along only once in a lifetime.”
  • “There are also three important equilibriums that economies and markets gravitate towards:1) Debt growth has to be in line with the income growth that services those debts 2) Economic operating rates and inflation rates can’t be too high or too low for long, because if an economy is depressed or too hot for long, that will lead to changes to reverse it, and 3) The projected returns of equities have to be above the projected returns of bonds which have to be above the projected returns of cash by appropriate risk premiums.”
  • “The most important differences that will exist in the future that did not exist in the past are that debt will not be able to rise as fast and the capital markets transmission mechanism won’t work as well, as interest rates can’t be lowered and risk premiums of other investments are low and shrinking.”
  • “For these reasons major central banks are facing a “pushing on a string” situation. The last time this happened was in the late 1930s.”
  • “There are two levers that policy makers use to bring about these equilibriums: 1) Monetary policy, which operates via interest rate changes and quantitative easings, (…) 2) Fiscal policy, which depends on political coordination both within the central government and with the central bank’s monetary policy.” bto: Letzteres kommt nun, nachdem Monetary nicht funktioniert hat.
  • “Where does that leave us now? 1) Productivity growth is slow, though properly accounting for it has never been more difficult. (bto: Damit zielt er auf die Diskussion, dass sich die technologische Revolution nicht in den Zahlen zeigt.) 2) The short-term debt/business cycles as measured by GDP gaps are closer to their mid-points than to their extremes. (bto: was ich so übersetze, dass er zur Zeit keine Rezession erwartet) 3) The long-term debt cycles are approaching their very late-stages as debts can’t be raised much and central banks are approaching pushing on a string limitations to their effectiveness.” bto: Wir haben die Verschuldungskapazität ausgeschöpft.
  • “(…) there is only so much one can squeeze out of a debt cycle and most countries are approaching those limits. (…) they are simultaneously approaching both their debt limits and central banks’ pushing on a string limits. (…) This is a global problem. Japan is closest to its limits, Europe is a step behind it, the US is a step or two behind Europe, and China is a few steps behind the United States.”
  • “Unlike in 2007 (…) I don’t see such an abrupt crisis in the immediate future because a) most economies are near the mid-points of the short-term debt cycles and their growth rates are neither dangerously rapid nor dangerously slow and b) debt growth rates in the developed countries have been roughly in line with income growth rates with debts largely in the hands of central bankers who can roll them forward.” bto: also zur Zeit keine Krise, weil die Notenbanker die Schulden übernommen haben.
  • “(…) we see an intensifying financing squeeze emerging from a combination of slow income growth, low investment returns and an acceleration in liabilities coming due both because of the relatively high levels of debt and because of large pension and health care liabilities. The pension and health care liabilities that are coming due are much larger than the debt liabilities in most countries because of demographics.” bto: Das wäre die Mutter aller Krisen, wenn nur das Zusammentreffen dieser Faktoren der Auslöser ist.
  • Holders of debt believe that they are holding an asset that they can sell for money to use to buy things, so they believe that they will have that spending power without having to work. Similarly, retirees expect that they will get the retirement and health care benefits that they were promised without working. So, all of these people expect to get a huge amount of spending power without producing anything. At the same time, workers expect to get spending power that is equal in value to what they are giving. They all can’t be satisfied.”
  • “(…) we are now seeing most central bankers pushing interest rates down to make them extremely unattractive for savers and we are seeing them monetizing debt and buying riskier assets to make debt and other liabilities less burdensome and to stimulate their economies.”
  • “Rarely do we investors get a market that we know is over-valued and that approaches such clearly defined limits as the bond market now. That is because there is a limit as to how negative bond yields can go. Their expected returns relative to their risks are especially bad.”
  • “If interest rates rise just a little bit more than is discounted in the curve it will have a big negative effect on bonds and all asset prices, as they are all very sensitive to the discount rate used to calculate the present value of their future cash flows. That is because with interest rates having declined, the effective durations of all assets have lengthened, so they are more price-sensitive. (bto: Dazu hatte ich hier vor einigen Wochen eine gute Studie, “Eiszeit an den Kapitalmärkten”.) For example, it would only take a 100 basis point rise in Treasury bond yields to trigger the worst price decline in bonds since the 1981 bond market crash. And since those interest rates are embedded in the pricing of all investment assets, that would send them all much lower.”
  • “At existing rates of central bank buying—which I believe will be required for the foreseeable future — central banks are going to start to hit the limits of their existing constraints. Those limits were put into place because they originally thought that they were prudent but they are going to have to go buy other things. Right now, a number of the riskier assets look attractive in relationship to bonds and cash, but not cheap in relationship to their risks. If this continues, holding non-financial storeholds of wealth like gold could become more attractive than holding long duration fiat currency flows with negative yields (which is what bonds are), especially if currency volatility picks up.”
  • “Concerning what policies will likely be required of central bankers given the reduced effectiveness of interest rate cuts and quantitative easing, and assuming that political limitations on fiscal policies and structural reforms remain stringent, it appears to me that there will have to be greater purchases of riskier assets and more direct placements of purchasing power in the hands of spenders (…)” bto: das Helikopter-Geld!
  • “While no period is entirely analogous, the most recent similar period for the world economy as a whole was 1935-45. After the debt-financed bubble of the late 1920s (which was analogous to the debt financed bubbles of the 2005-07 period), and after the 1929-32 stock market and economic dives (like those in 2008), and following the great quantitative easings that caused stock prices and economic activity to rebound (like those we saw since 2008), came “pushing on a string” in 1935, for analogous reasons – i.e. interest rates and risk premiums approached 0 %.”
  • “Similarly, the last 20 years in Japan are analogous in that there has been a similar combination of high levels of indebtedness, interest rates hitting 0 %, risk premiums and asset returns shrinking, growth and inflation being low, and pushing on a string being a problem.”

bto: Leider hört der Beitrag bei LinkedIn hier auf. Denn die Frage ist doch: was nun? Irgendwie müssen die Schulden ja bereinigt werden, das Deleveraging passieren. Vermutlich hat Dalio sich auch dazu geäußert. Wenig wahrscheinlich, dass er eine Wunderlösung hatte.

Hier noch die Abbildungen, mit denen er die Argumentation hinterlegt hat:

→ LinkedIn: “Remarks at the 40th Annual Central Banking Seminar”, 5. Oktober 2016

→ Zero Hedge: “What Bridgewater’s Ray Dalio Told The New York Fed”, 6. Oktober 2016