Opinion

James Saft

Stockton, Cyprus, and the savings puzzle: James Saft

Apr 3, 2013 20:09 UTC

April 3 (Reuters) – Whether out of necessity, mistrust or
simply the feel-good factor of soaring asset markets, Americans
appear to be cutting back once again on saving.

The personal savings rate stood at just 2.6 percent in
February, down nearly one percentage point from the year before,
according to the most recent data. Taken with January’s 2.2
percent rate, this makes the first time since 2007 we’ve had two
months in a row below the 3 percent mark.

If low savings are driven by confidence, either in the
bounty of the stock market or the opportunities in the job
market, then the savings rate may stay low but interest rates
may soon need to rise. If, on the other hand, low savings are
being driven by a lack of faith in markets or institutions or
even by a simple lack of capacity, then we may well be looking
at an extended period of low rates and lousy growth.

There is also a third possibility: a winners and losers job
market in which the highly skilled are confident enough not to
save and the rest are simply unable.

TRIUMPH OF MONETARY POLICY?

The first, and perhaps most likely, possibility is that
savings are falling because the Federal Reserve desperately
wants them to, and has engineered conditions in which more money
is flowing to riskier assets such as stocks and real estate.

Stockton, Cyprus, and the savings puzzle

Apr 3, 2013 20:09 UTC

By James Saft

(Reuters) – Whether out of necessity, mistrust or simply the feel-good factor of soaring asset markets, Americans appear to be cutting back once again on saving.

The personal savings rate stood at just 2.6 percent in February, down nearly one percentage point from the year before, according to the most recent data. Taken with January’s 2.2 percent rate, this makes the first time since 2007 we’ve had two months in a row below the 3 percent mark.

If low savings are driven by confidence, either in the bounty of the stock market or the opportunities in the job market, then the savings rate may stay low but interest rates may soon need to rise. If, on the other hand, low savings are being driven by a lack of faith in markets or institutions or even by a simple lack of capacity, then we may well be looking at an extended period of low rates and lousy growth.

A time of unqualified promises: James Saft

Apr 2, 2013 18:59 UTC

April 2 (Reuters) – Just as Mario Draghi’s pledge to “do
whatever it takes” to preserve the euro is being challenged, the
very same unqualified promise, this time to simply stop prices
falling, is about to be put into action in Japan.

In both cases within months we may well discover if it is
the promises or the problems which are without limits.

In Japan, newly appointed Bank of Japan Governor Haruhiko
Kuroda will on Wednesday convene a two-day policy meeting, his
first after assuming office and pledging to do – again those
words – “whatever it takes” to end years of deflation.

A time of unqualified promises

Apr 2, 2013 12:04 UTC

By James Saft

(Reuters) – Just as Mario Draghi’s pledge to “do whatever it takes” to preserve the euro is being challenged, the very same unqualified promise, this time to simply stop prices falling, is about to be put into action in Japan.

In both cases within months we may well discover if it is the promises or the problems which are without limits.

In Japan, newly appointed Bank of Japan Governor Haruhiko Kuroda will on Wednesday convene a two-day policy meeting, his first after assuming office and pledging to do – again those words – “whatever it takes” to end years of deflation.

“Cyprus euro” a boon to U.S. dollar: James Saft

Mar 27, 2013 19:08 UTC

By James Saft

(Reuters) – One clear winner from Cyprus’S imposition of capital controls is the U.S. dollar, which stands to benefit from public and private flows after another round of damage to the euro’s reserve currency status.

The euro fell to its lowest against the U.S. dollar in four months on Wednesday, falling below $1.28 after Cyprus moved to limit the flow of money out of the country in the aftermath of a bank bailout which singed foreign bank lenders and depositors alike. The dollar was just below its 52 week high against a trade-weighted basket of currencies, indicating that its strength was broad-based.

Following a bailout package that includes a substantial hit to uninsured deposits, many of them Russian, Cyprus imposed a limit of 300 euros per day on account withdrawals and set a limit of 5000 euros per month on credit and debit cards used abroad.

COLUMN: “Cyprus euro” a boon to US dollar: James Saft

Mar 27, 2013 19:04 UTC

March 27 (Reuters) – One clear winner from Cyprus’S
imposition of capital controls is the U.S. dollar, which stands
to benefit from public and private flows after another round of
damage to the euro’s reserve currency status.

The euro fell to its lowest against the U.S. dollar in four
months on Wednesday, falling below $1.28 after Cyprus moved to
limit the flow of money out of the country in the aftermath of a
bank bailout which singed foreign bank lenders and depositors
alike. The dollar was just below its 52 week high against a
trade-weighted basket of currencies, indicating that its
strength was broad-based.

Following a bailout package that includes a substantial hit
to uninsured deposits, many of them Russian, Cyprus imposed a
limit of 300 euros per day on account withdrawals and set a
limit of 5000 euros per month on credit and debit cards used
abroad.

Europe chokes moral hazard: James Saft

Mar 26, 2013 05:00 UTC

March 25 (Reuters) – Moral hazard may not be quite dead in
Europe but it has a bad, hacking cough.

A new, tougher policy on banking bailouts, made flesh in
Cyprus and enunciated by Dutch Finance Minister Jeroen
Dijsselbloem, will shrink Europe’s arguably overly-large banking
system and, ultimately, may put unbearable pressure on the
currency union.

Actually the policy, allowing holders of bonds and uninsured
depositors in insolvent banks to actually lose money, is not so
much new as a return to following the rules of capital
structure, with equities taking the first loss and uninsured
deposits the last to suffer.

Learning from Cyprus

Mar 22, 2013 17:20 UTC

By James Saft

(Reuters) – Even if you have zero exposure to the euro, the sad tale of Cyprus teaches investors about important old and new realities.

This tutorial comes compliments of the tiny euro zone island off the coast of Greece, which has been a favored haven for billions of euros from mostly Russian investors but is now facing a financial meltdown.

First, there is still no free lunch. High-reward, low-risk investment products aren’t.

SAFT ON WEALTH: Learning from Cyprus

Mar 21, 2013 19:20 UTC

March 21 (Reuters) – Even if you have zero exposure to the
euro, the sad tale of Cyprus teaches investors about important
old and new realities.

This tutorial comes compliments of the tiny euro zone island
off the coast of Greece, which has been a favored haven for
billions of euros from mostly Russian investors but is now
facing a financial meltdown.

First, there is still no free lunch. High-reward, low-risk
investment products aren’t.

UK unleashes the dogs of subprime: James Saft

Mar 20, 2013 19:26 UTC

March 20 (Reuters) – Cry ‘Bubble!’ and let slip the dogs of
subprime.

Britain on Wednesday unveiled a new budget including 130
billion pounds of mortgage guarantees which will enable patsies,
er, hardworking home-buyers, to buy properties worth as much as
600,000 pounds ($900,000) with as little as 5 percent down.

And no, thank you for asking, Chancellor of the Exchequer
George Osborne did not just wake up after six years in a
medically induced coma.

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