A Psychology Lesson From the Markets
by Robert J. Shiller
It is no surprise that the Federal Reserve’s discount rate cut has not entirely reassured investors. The Fed can stop a run on the banks, but it cannot control the speculative cycle — a cycle built on psychology and misperceptions that has been sweeping much of the world for the last 10 or 12 years.
I have worked with Karl E. Case ... at Wellesley College ... in conducting ... surveys of recent home buyers. In Los Angeles and San Francisco in 2005, when actual home prices were rising more than 20 percent a year, we found that respondents anticipated big increases far into the future..., the median expected annual climb for the succeeding 10 years was 9 percent.
This expectation would mean that a house valued at an already high level of $650,000 in 2005 would be worth more than $1.5 million in 2015. For most people in 2005, it would also mean that they should buy a house soon, or forever be excluded from owning one — and that it would be better to stretch and buy the most expensive house they could afford...
Now, of course, prices have been falling, and our survey over the last few months shows that in Los Angeles and San Francisco, the median 10-year expected price increase among recent home buyers has come down to 5 percent a year — a number that is likely to decline further if prices continue to drop. As price expectations fall, homeowners lose the incentive to pay off a mortgage on a home they are realizing is beyond their means. They decide to default. We thus have the beginnings of a mortgage crisis.
The problem is fundamental, tied to the imbalance caused by irrationally high home prices and declining optimism that the prices will go higher. Cutting interest rates will not change this basic situation. The problem is fundamental because the speculative cycle afflicts much of the world. ...
Classical economics cannot explain this cycle, because underlying these booms is popular reaction to the price increases themselves. Rising prices encourage investors to expect more price increases, and their optimism feeds back into even more increases, again and again in a vicious circle. As the boom continues, there is less fear of borrowing heavily, or of lending heavily. In this situation, lower lending standards seem perfectly appropriate — and even a fair way to permit everyone to prosper.
Booms cannot go on forever. Downward price feedback sets in. That is when balance sheets become impaired and widening credit problems start to show up.
The puzzle is why this speculative cycle has occurred recently in so much of the world. What do all these countries share that drives them to speculative booms? ...
As we all try to adjust to a rapidly growing and increasingly capitalist world, we have been trying to discover who we are and how we fit into it. This has meant an enormous change in values.
Many people feel that they have discovered their true inner genius as investors and have relished the new self-expression and excitement. Investors across the world have been thinking that they are winners — not recognizing that much of their success is only a result of a boom. Declines in asset prices endanger this very self-esteem.
That is why it is so hard to turn around investor attitudes once a downward psychology sets in. The Fed and other central banks do not have lithium or Prozac in their bag of remedies, and so cannot control it.
par Pancho Villa
publié dans :
Robert Shiller
The taming of 'speculative capitalism'
by Robert Shiller
Nicolas Sarkozy, ...[a] contender in the French presidential election, recently lashed out against what he called "speculative capitalism," and says he wants to "moralize the financial zone" created by the euro. What does Sarkozy mean by "speculative capitalism?" Something immoral, apparently, but what? The term has rarely been used before, and seems to be redundant. After all, capitalism is practically a synonym for speculation, isn't it?
Sarkozy is expressing a wave of sentiment that is neither unique to his party nor to France. At stake with his comments are emerging ideas and attitudes that will inform the 21st century economy. So we should think hard about what "speculative capitalism" means.
Sarkozy has called free trade "a policy of naivete," and wants to take ... steps that would stand in the way of economic globalization. ... Protecting France from speculative capitalism seems to mean interfering with free trade to protect local jobs.
To be sure, Sarkozy is right to note the enormous risks that workers and their communities face in this rapidly globalizing world. But ... this ... should not mean protecting existing jobs come what may. ...
Concerns about free trade similar to Sarkozy's are gaining strength around the world. In an article last year in ... Foreign Affairs, Alan Blinder, a former adviser to President Bill Clinton and vice chair of the U.S. Federal Reserve Board, argued that the process of globalization has the potential to cause massive job loss in the future. Given that electronic communications technology has a powerful potential to replace employees with others who are thousands of miles away, we may now be seeing only the beginning of this process.
Blinder is absolutely right that the problem could get worse. Deniers of the problem -- such as economist Jagdish Baghwati -- cannot prove that the worst will not happen. We ought to prepare for the possibility of massive turmoil in our economies in coming years, even if we cannot prove that it will happen, just as we should take steps against global warming, even if some scientists doubt that it is a problem.
According to Blinder, governments should encourage education for jobs that are harder to outsource overseas. He wants the government to subsidize ... jobs ... which cannot be delivered over the Internet...
Subsidies, of course, interfere with free trade. But Blinder's solution appears to be a creative new idea, and one may think of legitimate justifications for the government to interfere with free markets this way. His idea certainly is more focused and theoretically sound than Sarkozy's plans to protect existing jobs. In fact, Blinder's proposal is only one of many possible government policies aimed at dealing with the Internet-age turmoil in the market for jobs and livelihoods.
Capitalist institutions include risk-management schemes that provide insurance, hedging and diversification. Government can promote the democratization of such institutions so that they protect people from the very risks that they are worrying most about. Such possibilities include livelihood insurance, home equity insurance, income-linked loans, and GDP-linked and home-price-linked securities.
Moreover, government can make our social insurance ... more incentive-compatible and better at managing risks -- and not just the risks of the extreme losers -- by, say, launching inequality-indexation of the tax system. And governments should improve our information infrastructure, so that financial contracts can better capture the outcomes of economic risks.
So Sarkozy shouldn't be lashing out against "speculative capitalism." On the contrary, he should be asking how capitalism can be developed even further, with new institutions in finance and insurance to deal with the very important problem that his campaign has highlighted.
Add.s des commentaires (tres interessants...selon P.-V.) de la part de LaFayette
Shiller: What does Sarkozy mean by "speculative capitalism?" Something immoral, apparently, but what? The term has rarely been used before, and seems to be redundant. After all, capitalism is practically a synonym for speculation, isn't it?
“Something immoral”. Curious phrase. It means Shiller and the Project Syndicate have no notion of business ethics? Probably.
(Speculation: the engagement in business transactions involving considerable risk but offering the chance of large gains, esp. trading in commodities, stocks, etc., in the hope of profit from changes in the market price.)
Speculation is a part of business, but let's not confuse it with risk. When speculation becomes a major component of international exchanges, the consequence of which is to distort competitive advantage of a country simply, for example, through exchange rates … then that is not the sort of gambling that should be tolerated. Gambling is for casinos, not nations.
In other words, in a jargon we might understand, “the ends do not justify the means” . And, anyone with a sense of business ethics would understand that simple phrase. But, in a country where the prevailing motivation is that “greed is good”, what can one expect but cupidity as a primal urge?
Maybe Sarkozy, a presidential candidate of the right (sic!), is ahead of American candidates on this matter? Just like Chirac was sooooo far ahead of Dubya on Iraq? Count on it.
Worse than this minor tempest in a tea pot is the following: After missteps in foreign policy that have given the world an unsightly insight into American values, Uncle Sam is going to be questioned, and even challenged, on a great many issues of worldwide consequence – such as the environment, globalization, economics. Get used to it.
America has depleted its reserves of “good will” that carried it through half a century since WW2 and let people trust America with its leadership in international affairs. From here on out, it will have to earn the respect it seeks.
There are major battles on the horizon as regards the influence of global policy and America should be prepared for them. The "American way" of winner takes all, which distorts income equality, is America's internal business. But, foster this silliness on the world ... well, then your asking for it.
There are many, many, many people on this crowded planet who do not think that the destiny of their lives should be determined principally by one nation, however God-fearing that nation may think of itself.
We ought to prepare for the possibility of massive turmoil in our economies in coming years, even if we cannot prove that it will happen, just as we should take steps against global warming, even if some scientists doubt that it is a problem.
Yes, Shiller has got this prediction right. Though his proposed solution is off the mark.
We should prepare for the possibility of upheaval. Cassandras like Shiller are all over the media with their dire predictions. Shiller himself admits that such predictions are difficult to justify, but he makes several anyway.
The best “insurance” against the sort of turmoil that is possible is to junk the hubris that “America is the greatest country on earth”. This sort of nonsense blinds us to our weaknesses. And, in matters of training and education, we can do much better. When I recount that American students leave university with an average debt to pay of somewhere between 5 and 15 thousand dollars, eyes roll in Europe.
Education/trainig up to the extent of one’s abilities is a birth-right, not a business. Just like basic health care. Governments must assure that education is not only available to all, but all understand its absolute necessity. It is no longer a matter of "would like", but now one of "must". In the future, any child without professional training/qualifications/skills is likely condemning themselves to lifelong economic mediocrity or worse.
The good ole days when America was flush with money and the "wanabees" could dream to their heart's content of over and done with. Reality is settling in, finally.
So, America has a fundamental choice regarding education and health. Do what is right for its citizens, or let K-street help decide what is best for a very minor and select group of those citizens.
… the democratization of such institutions so that they protect people from the very risks that they are worrying most about. Such possibilities include livelihood insurance, home equity insurance, income-linked loans, and GDP-linked and home-price-linked securities.
And, what next? Legislation that will schedule when rain falls on the Great Plains?
This idea is hokum. Especially the “democratization” bit, which already exists – we call it Social Security. Social meaning related to society as a whole, and security meaning freedom from danger, risk, care, anxiety, or doubt.
Insurance companies can’t even get basic personal health insurance right, so they should foster upon us “livelihood insurance”?
Yeah, right … I can see the data miners beavering away now in insurance companies trying to figure out where it would be “optimal” to sell such insurance – that is, where there is the least risk that it is necessary.
WR: If France, or any country for that matter, would democratize access to financial resources they could likely avoid the popular backlash to globilization.
What I Iike most about American English is its elasticity. One can make just about any word mean anything.
For instance, what do you mean by “democratize access to financial resources”? We all vote for access?
Access to capital, that is the ability to access large amounts of capital, is a reason for most of the speculation we see today. Therefore, it is difficult to understand how that will correct matters. More people accessing more capital for purposes of speculation simply means more gamblers.
It is unimaginable how that rectifies the problem of huge amounts of money taking speculative positions, say, on the forex market or derivatives. Or, how China, another example, using its billions to pressure the Thai currency, which it did last year. Want China to dump its dollars to by euros? OK - enjoy the free-fall in the dollar. Hope you've got a parachute ...
Come on, let's get real about the genuine risk involved.
(Merci a Mark Thoma et a LaFayette)
par Pancho Villa
publié dans :
Robert Shiller
L'evolution des prix de l'immobilier aux E.-U. (de 1890 - present) comme si vous y etiez....(attachez vos ceintures...)
Merci a Immobilienblasen et speculativebubble...
par Pancho Villa
publié dans :
Robert Shiller
Things That Go Boom
by Robert Shiller
It seems that no one in the 1990s forecast the doubling of home prices since 2000 in cities in the U.S. and many other countries. ... Books really predicting the housing boom started to appear only after it was well underway, when their forecasts were simple extrapolations. ...
We shouldn't blame these people for not seeing the boom coming. Nobody did. But those economists who say today that the real estate boom has been justified by "fundamentals" have to explain why they weren't able to forecast the high home prices we have today based on those fundamentals.
With the failure of anyone really to predict today's high home prices, one may well conclude that no one can predict ... the housing market... That may be the right conclusion...
On the other hand, there is another perspective on this colossal failure to predict. Maybe it doesn't mean that no one can forecast, but instead that the high home prices today are just an enormous anomaly that will have to correct downward sometime, if not right away.
This has been the biggest housing boom in world history, and when one looks at a long-term chart of U.S. home prices, this boom stands out among the other price increases like the highest kite in the park. It certainly looks anomalous, and maybe it is. Moreover, home-price booms, and sometimes at least real estate busts, seem awfully persistent lately, so that it looks like we should be able to forecast them. ...
Some short-run indicators have been interpreted as showing that the recent weakness in the housing market may be correcting upward. ... But the increase may be attributable in large part to unseasonably warm weather and sales incentives. ... The futures market still predicts home price declines in all traded cities over the next year, though modestly lower declines than in the recent past. ...
The fact that home prices have risen so high relative to construction costs and other indicators suggests that home prices might fall back substantially in some markets -- and maybe that is what is going on. But one can hardly be sure about whether and when it will happen. ...
We are left with a deeply uncertain situation, but one in which it would seem that a sequence of price declines continuing for many years has some substantial probability of happening. Traditional finance theory has trouble reconciling even a semi-predictable sequence of price declines with basic notions of market efficiency. The situation we are facing is a reminder of the glaring inefficiencies and incompleteness of existing markets for residential real estate, and may be regarded as evidence that institutional changes will be coming in future years to fundamentally change the nature of these markets.
par Pancho Villa
publié dans :
Robert Shiller
À quoi pensent les futurs propriétaires ?
Robert J. Shiller
La flambée de l'immobilier touche de nombreux endroits du monde depuis la fin des années 1990. Comme je le disais l'an dernier, dans la deuxième édition de mon livre Irrational Exuberance , ce boom a son origine dans l'investissement spéculatif par des acheteurs immobiliers ordinaires, et il est alimenté en grande partie par la perception mondiale que le capitalisme a triomphé et que chacun doit se débrouiller par soi-même en devenant propriétaire. Convaincus que la propriété privée est devenu un élément essentiel d'une vie à la page, les acheteurs font grimper le prix des logements.
En outre, la crainte de devoir devenir propriétaire avant qu'il ne soit trop tard pousse souvent les gens à faire grimper les prix de l'immobilier encore plus rapidement aujourd'hui. C'est ce qui semble se produire pour la psychologie des marchés en Chine et en Inde, où l'augmentation rapide des revenus et les nouveaux riches vont certainement mettre la pression sur les marchés des terrains, de l'immobilier et des matériaux de construction. Cela fait des années que les grandes villes de ces pays connaissent une flambée de l'immobilier. En Chine, malgré certains signes de faiblesse – le marché de Shanghai est à la baisse, par exemple – la hausse des prix reste robuste dans la plupart du pays.
Mais le boom généré par de telles idées ne peut se poursuivre éternellement, car les prix ne peuvent pas toujours augmenter et les signes annonciateurs d'un atterrissage forcé sont déjà visibles. Aux États-unis, les journaux et les magazines annoncent à grands cris que la flambée de l'immobilier qui dure depuis une dizaine d'années est peut-être en bout de course, et que la bulle pourrait bien exploser. La psychologie a soudain changé d'orientation, provoquant une peur très répandue de soudaines baisses des prix de l'immobilier américain.
Le nouveau marché à terme pour les maisons individuelles du Chicago Mercantile Exchange (que j'ai contribué à établir en mai dernier avec notre société MacroMarkets LLC) prédit que d'ici août prochain, les cours vont baisser entre 6% et 8% dans les 10 villes américaines cotées.
Si les prix de l'immobilier s'effondrent aux États-Unis, bastion du capitalisme, pourraient-ils détruire la confiance et mettre un terme à la flambée dans les autres pays ? Si c'est le cas, une récession mondiale pourrait-elle s'ensuivre ?
Ce scénario est une vraie possibilité, bien qu'il y ait des raisons d'être sceptiques. Le plus important est que les principales sources du boom de l'immobilier, c'est-à-dire la foi dans le capitalisme et la future croissance économique, semblent être solidement implantées.
La tendance à la baisse du marché américain , par exemple, ne semble pas refléter de profonds changements dans la confiance économique à long terme. L'enquête que Karl Case et moi avons menée en mai et juin de cette année, sous les auspices de la Yale School of Management, montre des déclins brusques dans les attentes à court terme concernant les prix de l'immobilier aux États-Unis mais relativement peu de changements à long terme. La plupart des gens pensent encore que l'immobilier est un bon investissement à long terme.
Peut-être les prix de l'immobilier ne retomberont-ils pas à leur niveau d'avant le boom parce que le changement fondamental de perception du capitalisme triomphal s'inscrit dans la durée. Les changements des façons de penser fondamentales des gens ne s'inversent pas si facilement. Par conséquent, leur intérêt pour l'immobilier en tant qu'investissement spéculatif majeur n'est pas près de changer non plus.
La transformation des croyances des investisseurs est frappante. Avant la flambée de l'immobilier de la fin des années 1970, la monté des prix de l'immobilier n'inquiétait pratiquement personne. Il est étonnant de constater qu'une recherche dans des journaux de cette époque ne révèle que très peu d'articles sur les prévisions concernant les prix des logements. Ceux qui abordaient la question semblaient généralement se baser sur la supposition que des fluctuations mineures des coûts de construction, et non d'importants mouvements du marché, étaient responsables des modestes changements des prix de l'immobilier constatés.
En effet, rien de notable sur les prix des logements n'a jamais été signalé, à part un commentaire occasionnel dans un article traitant d'une autre sujet. Par exemple, un article dans The Times of London en 1970 expliquait que l'augmentation des prix de l'immobilier reflétait le passage au nouvel horaire British Standard Time (imposé dans le cadre d'une expérience de trois ans en 1968 pour faciliter le commerce avec l'Europe occidentale en plaçant la Grande-Bretagne dans le même fuseau horaire). L'article prétendait que ce changement faisait grimper les coûts en forçant les ouvriers du bâtiments britanniques à travailler davantage dans une relative obscurité. L'investissement spéculatif n'était que rarement évoqué les rares fois où le prix des logements était abordé.
Pour comprendre la nature du changement qui allait se produire, imaginez qu'il est difficile de nos jours de trouver quiconque s'inquiétant d'une future hausse des prix de l'automobile sous prétexte qu'une hausse de la demande de fer et autres matériaux en Chine et en Inde va rendre l'automobile hors de prix à l'avenir. À part un petit groupe de collectionneurs qui investissent et spéculent sur des voitures anciennes ou de spécialité, l'idée de spéculer sur l'automobile n'existe simplement pas dans la conscience du public. C'était la même chose pour l'immobilier jusqu'à la fin des années 1970.
Maintenant que nos positions ont changé par rapport à l'immobilier, nous ne serons plus jamais les mêmes. Mais évidemment, les prix de l'immobilier ne peuvent augmenter qu'à un certain rythme. Des prix immobiliers élevés et en hausse rapide ont tendance à stimuler l'offre du neuf, ce qui à son tour a tendance à faire chuter les prix. Sur une période de plusieurs années, à mesure que les gens se rendent compte de l'abondance de l'offre dans le neuf, il se peut qu'ils cessent de penser que l'immobilier est un investissement génial, causant une chute progressive mais au final conséquente des prix de l'immobilier.
En effet, si les changements dans les perceptions fondamentales ne se produisent ni facilement, ni rapidement, ils ne devraient jamais être exclus. Les prix des terrains des plus grandes villes japonaises subissent une baisse presque constante depuis 1991, à mesure que s'estompe l'immense foi dans les pouvoirs miraculeux du capitalisme japonais.
Le même genre d'érosion des prix de l'immobilier pourrait se produire dans de nombreuses villes du monde. Il suffit simplement que l'augmentation de l'offre immobilière finisse par entamer la foi des investisseurs dans le capitalisme et ne puisse plus entretenir une croissance aussi rapide de la demande.
par Pancho Villa
publié dans :
Robert Shiller
Growth rate gulf result of opposite approach to saving
by Robert Shiller
The saving rate in China is the highest of any major country. China's gross saving rate ..., which includes both public and private saving, is around 50 percent.
By contrast, the saving rate in the United States is the lowest of any major country - roughly 10 percent of GDP. Differences in saving rates must be a major reason that China's annual economic growth rate is a full six percentage points higher than in the US. ... Unfortunately, explaining saving rates is not an exact science.
Ingrained habits probably explain more about China's saving rate. When incomes are growing rapidly, as they are in China, it is easier to save because people are not yet accustomed to a higher standard of living. They also tolerate enterprise or government policies that encourage high saving.
For example, the uptrend in saving in China began at around the same time as its family planning policy was implemented in 1979. This prevented the birth rate from rebounding after the Cultural Revolution of 1966-76. The late Nobel laureate economist Franco Modigliani, in his last major published paper in 2004 (co-authored with Shi Larry Cao), argued that this demographic change explains much of the increase in the saving rate, as Chinese substituted investment in capital for investment in children.
But income growth and demographics do not explain everything. After all, the virtuous circle of high savings and rapid growth operates more strongly in China than in other developing countries where incomes are rising and birth rates are falling. This suggests that there are other, deeper factors that underlie the differences in Chinese and US saving rates.
For one thing, the Chinese trust their government more. According to a recent World Values Survey, 96.7 percent of Chinese expressed confidence in their government, compared to only 37.3 percent of Americans.
Likewise, 83.5 percent of Chinese thought their country is run for all the people, rather than for a few big interest groups, whereas only 36.7 percent of Americans thought the same of their country. With this relatively higher trust, China's government and enterprises are better able to enact and implement strict policies that promote saving and growth.
Moreover, while economic inequality is on the rise in both countries, Chinese and Americans comprehend this very differently. In the US, widely called "the land of opportunity," the shame of being poor is unbearable, and there are no cultural resources to enable such people to maintain self-esteem... As inequality deepens, many who fall behind struggle to save face, consuming in order to maintain the appearance of success.
By contrast, poor people in China mostly view their personal situation as transitional. There is no shame in being poor in China if one reflects that one's children or grandchildren will be successful.
In the US, one's income is a dark secret that one might not reveal even to one's own spouse. In China, people tell each other how much they earn with relative ease.
Especially in Chinese villages, people know how their neighbors are faring. Conspicuous consumption becomes less important when people already know your income.
Of course, Chinese increasingly consume fancy new cars and designer clothes. But there is relatively less pleasure in public displays of consumption at a time when the prevailing national story is one of triumph over adversity.
China will most likely be saving more than the US for years to come. But, as the next generation takes control in China, this will change.
par Pancho Villa
publié dans :
Robert Shiller
Q.:
…you have another thought, which is basically...whatever the situation is right now, you think that the weakness we’re seeing in housing, is going to escalate, and eventually lead and take this country into a recession… tell us why…
A.:
Yes, there’s a significant probability of that, and I’m not right away, in fact housing prices are still going up generally…
Q:
A significant probability…90 %?...
A:
I would …no, not that high…60%...I’m making that up…and maybe in 2008…ehmm, because the housing-market just doesn’t turn on a dime…but once we see prices actually falling in a number of cities…if that happens…then, that would harm confidence even…we’ve just reported into the confidence numbers…you know…the ‘Michigan?’ number incidentally…is more a long term than the confidence board number….the question goes further up…and I think that a lot of people, are fairly confident about the next 6 months…but not so sure about what’s going to happen and once the oil prices if they continue for a while….and if housing prices start falling…and so the people are uncertain about the more distant future…
Q:
…but…is there…I mean how definitive is your research…and is your correlation, that a housing slow-down will lead to a recession…ehmmm, some would argue that, yes we would see a little bit of a slowdown…and that’s going to be picked up by other areas of the economy…ehmm and there were…the correlation between a slowdown in housing and definitive leading into a recession…doesn’t necessarily always come up…and so I would like to find out from you…why is it that you feel…’One has to lead to the another’…?
A:
Well, doesn’t have to…the other thing is (…but you have been willing this in this situation…)…I have some diffidence even about predicting the housing prices before…because we’ve seen slowdowns in housing prices and that then get reversed…but the thing that really strikes me …if you just look at the broad picture of the data…is that we have had the biggest housing boom in the history of this country…it is just an enormous boom…and it has had an enormous psychology, which has driven the economy…and you can’t go on for ever….in fact its been… from year to year its been generally accelerating …that can’t go on for ever…and so once it stops accelerating and it starts going in reverse…I think there’ll be a big impact in psychology…and that’s what ultimately causes recessions…
par Pancho Villa
publié dans :
Robert Shiller
A bond that insures against instability
By Stephany Griffith-Jones and Robert Shiller
'There has been increasing interest in creating bonds linked to the growth of a countries’ gross domestic product. At the spring meetings of the International Monetary Fund and the World Bank, both potential issuers and investors expressed a clear appetite for such bonds. The servicing of these GDP-linked bonds would be higher in times of rapid growth and lower when growth was slow or negative.
GDP-linked bonds would have important advantages when compared with conventional debt for borrowers and investors, as well as significant externalities for the international financial system. For borrowers, issuing such bonds would help stabilise public spending throughout the cycle as governments would service more debt when they could better afford to, and less in more difficult times. It would also significantly reduce the likelihood of costly and disruptive defaults and debt crises. Defaulting on debt is a last-resort that governments find highly undesirable and costly to the country’s international reputation. A temporary reduction of a country’s debt service when the economy deteriorates would facilitate more rapid recovery.
For investors, defaults are costly as they result in expensive renegotiation and sometimes in very large losses. As GDP-linked bonds would help reduce the probability of default, effective total payments will tend to be higher than with conventional bonds. Furthermore, GDP-linked bonds would give investors the opportunity of taking a position on a range of countries’ growth rates, offering a valuable diversification opportunity. If GDP-linked bonds became widespread across countries, investors could take a position on growth worldwide – the ultimate risk diversification.
For international institutions, there would be benefits from the decreased likelihood of debt crises. Reduced risk of crisis contagion would also benefit other countries. These externalities and the fact that financial innovations are difficult to introduce may justify some initial public action (for example, from the World Bank) to help develop this market instrument. The World Bank could, for instance, make loans whose servicing would be linked to GDP. The loans could then be grouped, securitised and sold to the financial markets.
GDP-linked bonds should be a core element of government financing both for developed and creditworthy developing countries. Both of these could start today. Developed countries are the best equipped to issue GDP-linked bonds immediately, because of the relatively high trust that is placed in their capital markets and in their GDP accounting. Their doing so would have a valuable demonstration effect around the world.
Developing countries stand to gain more from issuing these bonds and they could start issuing GDP-linked bonds now. The issuance of even small quantities of these bonds by creditworthy emerging economies would help set in motion an important process of financial development.
The history of financial innovation is essentially one of learning by doing. Inflation-indexed bonds met initial scepticism, relating to problems such as precise measurement of inflation. In fact, once these bonds started to be issued, inflation statistics improved further. Inflation-indexed bonds are now widely accepted across the world; in the UK, they represent around a quarter of government debt. A similar evolution can be envisaged for GDP-linked bonds.
Introducing GDP-linked bonds would create a market for the economies themselves. The widespread impression that the stock market of a country is a market for the entire economy is mistaken. Stock markets are claims on net corporate profits that can constitute as little as 10 per cent of GDP. ...'
A lire le reste ici:
par Pancho Villa
publié dans :
Robert Shiller
Catastrophes, assurances et mondialisation
Robert J. Shiller
Près de 6 mois après la destruction de la moitié de La Nouvelle-Orléans par l'ouragan Katrina, de nombreuses victimes expriment colère et ressentiment, car tous leurs espoirs de dédommagement ont été balayés. Cette situation est d'autant plus douloureuse que beaucoup d'entre elles se trouvent dans une situation qui aurait pu être évitée : propriétaires de leur logement, elles ont subi des pertes énormes, mais ne sont pas indemnisés parce qu'elles n'étaient pas, ou insuffisamment assurés. Elles pensaient souvent ne pas avoir les moyens suffisants pour souscrire la police d'assurance voulue.
Cette situation risque de se reproduire lors des prochaines catastrophes - tempête, tremblement de terre, tsunami, éruption volcanique, feu de forêt, catastrophe écologique, épidémie ou attentat. Il est donc nécessaire d'en comprendre les causes et de se demander dans quelle mesure les systèmes d'assurance peuvent fournir la protection voulue face aux risques auxquels nous sommes exposés.
Selon un rapport de l'Institut d'information sur l'assurance, les demandes de près de 70% des propriétaires de logement avaient été traitées fin janvier, ceci pour un total de 7,5 milliards de dollars. Cela peut paraître beaucoup, mais étant donné qu'il y a eu près de 200.000 habitations gravement endommagées ou détruites, cela représente moins de 40.000 dollars par habitation, ce qui est manifestement insuffisant.
60% des propriétaires de la Nouvelle-Orléans ne disposaient d'aucune assurance contre les inondations. Et parmi ceux qui étaient assurés, beaucoup ont découvert que des clauses restreignait leur indemnisation. Dans certains cas, les compagnies d'assurance ont invoqué des articles du contrat indiquant que l'indemnisation était moindre si les dégâts étaient dus à une inondation et non à un ouragan. Aux yeux des victimes, cela pouvait donner l'impression de couper les cheveux en quatre, alors qu'elles ont tout perdu, mais telles sont les termes du contrat qu'elles ont signés, sans toujours bien les lire.
Cela a conduit à de nombreux procès, mais finalement, beaucoup de victimes ont dû se rendre à l'évidence, elle doivent se contenter pour toute aide des prêts à faible taux d'intérêt. Pas tout à fait à tort, le président Bush veut limiter l'aide de l'Etat aux quelques 20.000 propriétaires auxquels on ne peut reprocher de ne pas avoir souscrit d'assurance inondation, car ils vivaient en dehors des zones déclarées inondables.
En dépit de cette situation, l'assurance privée reste encore la meilleure protection contre les catastrophes. Les polices d'assurance qui indiquent clairement le montant des indemnisations et le type de dommage qu'elles couvrent sont bien supérieures à l'aide de l'Etat sur laquelle beaucoup de gens semblaient compter. L'assurance privée peut encore être améliorée par l'éducation de la population, de meilleures institutions d'assurance et des coûts plus faibles. Il faut travailler sur tous ces points, car chacun doit avoir son rôle à jouer dans tout plan destiné à faire face à la prochaine catastrophe.
(P.-V.:Mais le role des assurances est aussi de maximiser les profits !, donc ceci n'est au bout du compte pas du tout dans leur interet..."Vive la 'Unbound economy'", si elle implique que: 'Qui lache le morceau a perdu')
Le principal problème ne semble pas résider dans le coût de l'assurance. Selon Robert Klein de l'université d'Etat de Géorgie, en Louisiane, les primes d'assurance ont déjà augmenté de 70% entre 1997 et 2005. Au niveau de l'Etat, les régulateurs de l'assurance s'opposent à ces augmentations, mais ils n'ont pas grand pouvoir, car les assureurs peuvent facilement se déplacer d'un Etat à l'autre.
La NAIC (National Association of Insurance Commissioners) a proposé en décembre que chacun des 50 Etats des USA crée un fond d'assurance couvrant un large éventail de catastrophes parmi les plus coûteuses, à l'image de ce qui existe déjà en France ou en Espagne. Par la suite, le gouvernement fédéral pourrait étendre ce système aux catastrophes exceptionnelles.
Cette proposition est actuellement en discussion. Si elle était adoptée dans son intégralité, ce qui est improbable, ce serait une révolution dans la gestion des risques, analogue à ce qu'à a été la création de la sécurité sociale en 1934. Mais la gestion des risques liés aux catastrophes majeures ne doit pas être exclusivement du ressort du gouvernement. Les marchés financiers peuvent aussi intervenir dans la mesure où ils parviennent à soulever l'attention et l'intérêt des investisseurs.
Ainsi, les obligations liées aux catastrophes (les cat bonds), ne sont pas remboursées si une catastrophe spécifiée se produit. Les compagnies d'assurance qui prennent un risque financier important en couvrant des risques majeurs peuvent négocier ces obligations sur le marché mondial. Si elles parviennent à les vendre pour un montant suffisant, elles diminuent leur risque et peuvent proposer des contrats d'assurance qui ne soient pas trop coûteux.
Ces obligations ont pris de plus en plus d'importance au cours de ces dernières années. Selon la société Lane Financial, leur émission a été à hauteur de 1,8 milliards de dollars en un an, d'avril 2004 à mars 2005. Depuis Katrina, elle a encore augmenté. Après Katrina, de septembre à novembre 2005, il y en a eu pour un montant de 2,1 milliards de dollars. Le montant total de ces obligations est peu de chose par rapport au désastre provoqué par Katrina. Mais comme la tendance est à la sophistication et à l'élargissement des marchés financiers, on peut encore s'attendre à une croissance importante de ce type d'obligations.
A l'échelle de la planète, l'ouragan Katrina et d'autres catastrophes de même ampleur ne représentent pas grand chose. Le montant total des pertes dues à Katrina - selon une étude du secteur de l'assurance, 34,4 milliards de dollars de bien étaient couverts - ne représente qu'une infime fraction de la richesse mondiale. Mais à l'échelle d'un pays, il s'agit de sommes non négligeables. C'est pourquoi la théorie financière recommande de répartir les risques aussi équitablement que possible à travers le monde, plutôt que de les faire supporter par chaque pays individuellement.
Les projets de fond d'aide en cas de catastrophes sont élaborés au niveau purement national. Pourtant, la possibilité de gérer les risques nationaux à l'échelle de la planète est l'un des avantages de la mondialisation et de l'expansion des marchés financiers.
par Pancho Villa
publié dans :
Robert Shiller
Dear Mr Shiller,
as a young man mainly blinded by ambitional 'entrepreneurship' (Ha,ha !) , I probably will not be able to 'argumentally seen' put myself on the side of your 'outspoken' position:
"Shiller’s advice is to diversify and to keep plenty of money in the bank or in “boring” inflation-proofed bonds...."
Supposing that I (P.-V.) am the embryonic (by 'embryonic' I mean young) "Incredible Hulk", I would rather say:
Adrenaline keeps me in the game
Adrenaline you don't even feel the pain
Wilder than your wildest dreams
When you're going to extremes(!)
It takes adrenaline
(You don't feel the pain)
ripe (rīp)
adj., rip·er, rip·est.
1. Fully developed; mature: ripe peaches.
2. Resembling matured fruit, as in fullness.
3. Sufficiently advanced in preparation or aging to be used or eaten: ripe cheese.
4. Thoroughly matured, as by study or experience; seasoned: ripe judgment.
5. Advanced in years: the ripe age of 90.
6. Fully prepared to do or undergo something; ready: “By 1965 the republic was ripe for a coup” (Alex Shoumatoff).
7. Sufficiently advanced; opportune: The time is ripe for great societal changes.
8. Exhibiting overtones of or references to sex; scatological: “The language on the stage was riper than anything I have heard in a lifetime of newspaper work” (John Hughes).
9. Emitting a foul odor, especially body odor.
[Middle English, from Old English rīpe] (P.S.: in german it's 'Reif' (rïv))
ripe'ly adv.
ripe'ness n.
adj., rip·er, rip·est.
1. Fully developed; mature: ripe peaches.
2. Resembling matured fruit, as in fullness.
3. Sufficiently advanced in preparation or aging to be used or eaten: ripe cheese.
4. Thoroughly matured, as by study or experience; seasoned: ripe judgment.
5. Advanced in years: the ripe age of 90.
6. Fully prepared to do or undergo something; ready: “By 1965 the republic was ripe for a coup” (Alex Shoumatoff).
7. Sufficiently advanced; opportune: The time is ripe for great societal changes.
8. Exhibiting overtones of or references to sex; scatological: “The language on the stage was riper than anything I have heard in a lifetime of newspaper work” (John Hughes).
9. Emitting a foul odor, especially body odor.
[Middle English, from Old English rīpe] (P.S.: in german it's 'Reif' (rïv))
ripe'ly adv.
ripe'ness n.
par Pancho Villa
publié dans :
Robert Shiller
