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Antiguo 10-sep-2007, 19:49
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link: http://www.euro-area.org/blog/?p=94

The current woes in the US housing market have also drawn attention to the situation in Spain. The reason for this is that is not hard to see: There are striking similarities between the two countries with respect to the development in both house prices and construction activity over recent years. The current problems in the US market for Residential Mortgage Backed Securities (RMBS) have also been mirrored - if to a lesser extent - in the market for Spanish Cédulas where spreads have widened since the start of this year. Furthermore stock prices - measured on a total return basis - also seem to be discounting some kind of underperformance of the Spanish economy to come: While Germany's DAX30 has risen by 20 % since the start of 2007 and EuroStoxx50 by 11 %, Spain's IBEX35 has gained a relatively meagre 6 %. The consensus of economic forecasters puts the economic outlook for Spain at a rate of real GDP growth at 3.8 % for 2007 and 3.0 % for 2008. That would be some deceleration but not a lot below the average rate of expansion by 3.4 % per annum for the 2001 to 2006 period.

As will be argued in this article, the case can well be made for a (much) more pronounced slowdown in Spain's economic activity. Our current forecast at Union Investment for real GDP growth in 2008 stands at a mere 2.2 %, i.e. clearly below consensus. This is not because we are pessimistic for growth either on a global scale or EMU in particular. In fact, we are quite upbeat for the European growth prospects with a forecast of 2.5 % for 2008 relative to 2.3 % in the consensus forecast. Where we beg to differ, is that we see a strong case to be made that Spain's economy is not just characterised by a sector risk in construction, but that the corporate sector is in insufficient shape to withstand an adjustment in that sector. That is quite in contrast to the US experience where healthy corporate balance sheets have provided a sufficient buffer to avoid a full-blown crisis stemming from the housing sector adjustment.
Let us now first take a look at the Spanish housing market which has shown a very remarkable boom: in 2006, 658,644 housing units were completed and construction of 760,169 housing units was started. To get this into proper comparison: in the 1990s the respective figures were 267.000 and 292.000 per year. So residential construction activity has more than doubled since then. Another comparison would be to compare the number of housing starts to the population, which stands at 40.4 million in Spain. So in 2006 housing starts where sufficient to provide 2 % of the population with new housing. If we take the corresponding figure for the US at the height of the recent construction boom (2.3 million housing starts) relative to a population of 300 million this would have been sufficient to provide 0.8 % of all Americans with new housing facilities. All told, the Spanish construction boom has been extraordinary both in comparison to past experience and relative to the US.
Residential construction accounted for 9.3 % of Spanish GDP in 2006. That is almost twice the average of G7 countries. Also, it is not only residential but also non-residential construction that has boomed. So almost 18 % of GDP are now construction related. As are over 50 % of total loans on the books of Spanish banks.

These figures, of course, only illustrate that there could be some problems down the road, if the boom of recent years were to reverse. But what can give the confidence that this is likely to happen at all or even in the near-term future?

The recent experience in the US suggests that there are three potential triggers for an adjustment in the housing market - all relative to the average rate of mortgage interest. Rental yields, i.e. the level of rents relative to the purchasing price of a home, individual wages and house prices themselves. The first two of which are already flashing negative signals and the last one coming into dangerous territory right now. Let us examine the triggers in turn:

If the rental yield is higher than the average rate of mortgage interest, the purchase of a home is economically sensible because owning is cheaper than renting over the longer term. Until the end of 2003 the Spanish market has seen a difference between the rental yield and mortgage rates of roughly two percentage points. From end-03 to end-05 the rental yield has been slowly but steadily eroded as the growth in rents did not keep up with the rise in home prices. Since early-06 the successive rate hikes by the ECB have driven up the mortgage rate from a low of 2.8 % to 4.4 %. Since November 2006 the rental yield is below the mortgage rate. Put simply: Renting is now economically more attractive than buying.

As for the second trigger, if the mortgage rate is below the rate of growth of individual income the ratio of personal debt relative to income is going to decline even if there were no amortisation of the underlying debt. Although nominal growth in aggregate wage income has been running at almost 7 % over recent years, most of this increase was driven by rising employment rather than individual wages. Since 2006 mortgage rates are once again above the growth rate of individual wages. Meaning that the servicing of mortgage debt will now mean more restraint if the ratio of debt to income is to be kept stable.

Last but not least, a rate of home price inflation above the prevailing mortgage rate means that the worth of the home is rising faster than the debt burden even if there is no debt servicing at all, i.e. if even interest costs are serviced by taking out new mortgage loans. This condition is still being met with home price inflation running at 5.8 % year-over-year and the average mortgage rate at 4.4 %. The difference is eroded fast, however, due to continued ECB rate hikes on the one hand and home price inflation cooling due to the other two indicators pointing in a negative direction on the other.

One question that is always raised in this context is, of course the impact foreign purchases play in that story. Indeed, there is a fairly high correlation between external buyers in the Spanish housing market and price appreciation. However, one has first to put the magnitude into context. At the very peak of external purchasing activity in early 2003, these transactions amounted to 0.9 % of Spanish GDP and have halved since then. Apart from that, foreigners will be driven by the same rationale as domestic buyers, i.e. affordability and economic pay-off. The chances that foreigners will come to the rescue in an environment in which is does not pay to own a home should not be regarded as high.
Next, there is the question of why Spain's ability to cope with a retrenchment in the housing market should be more limited than the one in the US. The answer to this is an entirely different situation in the corporate sector. Part of all our economic analysis at Union Investment is a stringent examination of flow-of-funds statistics especially with regard to the health of the nonfinancial corporate sector. The basic rationale here is that all income flows that have a direct nexus to production originate from this sector (the Ricardian assumption of the wage fund). Then we take a look at how much money flows back to the corporate sector via sales. The difference between the two measures is known as the savings or financing gap. The financing gap can be formally defined as retained earning plus depreciation minus investment spending. In normal times it is slightly negative as investments do not have to pay off in the period of their acquisition. If the savings gap of the corporate sector deteriorates, growth is normally accelerating. This is in line with Schumpeter's famous statement that the entrepreneur uses (credit financed) funds to make an advance contribution to economic growth. Economic booms are therefore associated with deteriorating financing gaps and rising leverage, while slumps are characterised by broad-based retrenchment and decreasing leverage in the nonfinancial corporate sector.

It is here where one can find the striking difference between the US and the Spanish macro developments during the housing boom: In 2000, the US financing gap of nonfinancial corporations stood at -3.5 % of GDP and gross debt at 97 % of GDP. Since then, the financing gap has narrowed to -0.2 % and gross debt was reduced to 79.4 % of GDP. The US corporate sector thus has no fundamental problem to withstand the shock of the housing slump and replace construction as a driver of economic activity. It is even quite surprising that the corporate sector on the far side of the Atlantic is still in such a good shape this far into the economic upswing. By contrast, the Spanish corporate sector exhibited a financing gap of -5.1 % of GDP in 2001 which has until 2006 deteriorated further to -8.1 %. Gross debt has risen from 66 % of GDP to 106 % of GDP over the same period.

The Spanish corporate sector seems, from our perspective, extremely close to a retrenchment itself - even if there were no problems in the housing market. If fact, there are only two other countries we evaluate on a regular basis that have ever come close seeing corporate financing gaps of the magnitude prevailing currently in Spain. One is Japan in 1990, the other is Portugal in 2000. The experience of corporate retrenchment in both cases in the following years has been anything close to pleasant.
With regard to Spain, there is now one open question and one piece of hope. The open question relates to the adjustment within a currency union. Central to a successful retrenchment in the corporate sector is the ability to increase sales and/or reduce costs, i.e. some other sector has to step in to fill the void. This could either be households, the state or the rest of the world. With Spanish private household finances also being stretched, only the government and the rest of the world can do the trick. The open question and the piece of hope both relate to the external sector. The good news for Spain is that the start of the adjustment might come at a time when the world economy is generally in good shape.

Japan had to do its bit at a time when world trade suffered from three consecutive shocks - the US recession of 1991, the breakdown of the European Monetary System of 1993 and the Asian crisis of 1997/98. Portugal had to start its adjustment in 2001 amid the turmoil of the bursting tech-bubble of 2001. While Japan is now out of the woods, Portugal continues to ail. Mostly because it has been unable to improve its price competitiveness vis-à-vis its European trading partners. This can be tracked to the continuation of high pay increases relative to productivity and other European countries.
It will remain to be seen whether Spain can pull off this trick faster than its western neighbour. But it seems a fair bet to envisage a significant slowdown relative to the recent past in Spain even if the general environment remains benign.

David Milleker is chief economist of Union Investment and regular guest contributor to Eurozone Watch.



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  #2  
Antiguo 10-sep-2007, 21:01
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Muy bueno. Sin embargo me parece que el análisis del "finantial gap" y las posibilidades de reinversión por parte de las empresas tiene un pequeño defecto: deberían haber hecho los cálculos excluyendo a las empresas de construcción. Por eso España sale tan mal de la comparación con EEUU. Yo creo que las empresas que están fuera del ámbito de la construcción no están mucho más endeudadas que las americanas, incluso puede que menos.

Aparte de esto comparto buena parte del análisis que hacen.


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Antiguo 10-sep-2007, 21:16
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The good news for Spain is that the start of the adjustment might come at a time when the world economy is generally in good shape.

Oops, esto era antes de Agosto. Ahora está la cosa más chunga.


With Spanish private household finances also being stretched, only the government and the rest of the world can do the trick.

Aquí ya se ha hablado mucho de la dependencia de los ingresos de los Aytos del ladrillo. Este verano leí en el sumplemento de CyLeón del Mundo que el 55% de los ingresos de la Junta derivan de la construcción (ITP, AJD).
A Joderse.


Y aquí de los únicos ajustes que se tiene memoria es con devaluaciones cafres.

Con el euro el ajuste va a significar echar a la p. calle a 4 millones de trabajadores SIN recuperación industrial y CON déficit público > 3%


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Antiguo 10-sep-2007, 22:36
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Iniciado por Eddy Ver Mensaje
Oops, esto era antes de Agosto. Ahora está la cosa más chunga.




Aquí ya se ha hablado mucho de la dependencia de los ingresos de los Aytos del ladrillo. Este verano leí en el sumplemento de CyLeón del Mundo que el 55% de los ingresos de la Junta derivan de la construcción (ITP, AJD).
A Joderse.


Y aquí de los únicos ajustes que se tiene memoria es con devaluaciones cafres.

Con el euro el ajuste va a significar echar a la p. calle a 4 millones de trabajadores SIN recuperación industrial y CON déficit público > 3%

Y el subprime pata negra será el rey, con o sin triple garantía...


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Antiguo 10-sep-2007, 22:36
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Muy interesante, gracias por la aportación.


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Antiguo 11-sep-2007, 01:14
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It is here where one can find the striking difference between the US and the Spanish macro developments during the housing boom: In 2000, the US financing gap of nonfinancial corporations stood at -3.5 % of GDP and gross debt at 97 % of GDP. Since then, the financing gap has narrowed to -0.2 % and gross debt was reduced to 79.4 % of GDP. The US corporate sector thus has no fundamental problem to withstand the shock of the housing slump and replace construction as a driver of economic activity. It is even quite surprising that the corporate sector on the far side of the Atlantic is still in such a good shape this far into the economic upswing. By contrast, the Spanish corporate sector exhibited a financing gap of -5.1 % of GDP in 2001 which has until 2006 deteriorated further to -8.1 %. Gross debt has risen from 66 % of GDP to 106 % of GDP over the same period.

The Spanish corporate sector seems, from our perspective, extremely close to a retrenchment itself - even if there were no problems in the housing market. If fact, there are only two other countries we evaluate on a regular basis that have ever come close seeing corporate financing gaps of the magnitude prevailing currently in Spain. One is Japan in 1990, the other is Portugal in 2000. The experience of corporate retrenchment in both cases in the following years has been anything close to pleasant.

Estos paragrafos se merecen un WOW!
Si lo he entendido bien, en los periodos de crecimiento, el "financing gap" se hace mas negativo por que las empresas se endeudan para invertir en el crecimiento. De hecho se podria decir que este endeudamiento es el motor del crecimiento. A medida que las inversiones se recuperan, o cuando la situacion se dirige a un equilibrio (aunque hablar de equilibrio en economia es algo bastante abstracto) el "financial gap" se mueve hacia los numeros positivos. Esto es lo que ha estado haciendo en USA, mientras que en España este indicador se ha ido hundiendo los ultimos años. O las inversiones no han dado el fruto esperado o las empresas españolas se han embarcado en una espiral absurda de endeudamiento suicida. Yo mas bien me decantaria por la segunda opcion, teniendo en cuenta la exuberante expansion internacional de los ultimos años. Esto deja las empresas españolas en una situacion delicada, en la que dificilmente podran financiar una expansion que compense la caida del sector del ladrillo. Aunque el elevado peso que tiene el sector constructor en el conjunto del empresariado español lo distorsiona todo...

De todas formas... la comparacion con Japon y Portugal es para acojonarse...


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Antiguo 11-sep-2007, 10:36
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Sobre Paul Krugman:

http://es.wikipedia.org/wiki/Paul_Krugman

[quote] A principios de los '90, popularizó el argumento de Laurence Lau and Alwyn Young de que la economías emergentes de Sudeste Asiático no eran el resultado de políticas económicas de un nuevo tipo, como se había argumentado, sino que las altas tasas de crecimiento se debían a elevadas tasas de inversión de capital y aumentos espectaculares en la mano de obra (algo que, tal como explica el propio Krugman, recuerda en parte al "milagro soviético" 1945-1965). De hecho la Productividad Total de los Factores de esos países no se incrementó, lo cual revela que tecnológicamente esas economías no han sido especialmente eficientes. En base a esos hechos, su predicción ha sido que el que la tasa crecimiento de crecimiento del sudeste asiático descenderá a medida que sea más difícil generar crecimiento a base de incrementar los inputs (en inversión y trabajo). Esa situación es similar al frenado que sufrió la URSS a finales de la década de los '60, su estancamiento durante los '70 (que eventualmente degeneró en decrecimiento en los '80).

Estos son los artículos de Krugman sobre la crisis japonesa:

Estan tomados de la web:

http://web.mit.edu/krugman/www/jpage.html

A SPECIAL PAGE ON JAPAN

The state of Japan is a scandal, an outrage, a reproach. It is not, at least so far, a human disaster like Indonesia or Brazil. But Japan's economic malaise is uniquely gratuitous. Sixty years after Keynes, a great nation - a country with a stable and effective government, a massive net creditor, subject to none of the constraints that lesser economies face - is operating far below its productive capacity, simply because its consumers and investors do not spend enough. That should not happen; in allowing it to happen, and to continue year after year, Japan's economic officials have subtracted value from their nation and the world as a whole on a truly heroic scale.

The fault does not, however, lie merely with those officials. Japan has also been badly served by the economics profession, both in Japan and outside. The great majority of economists - including those who specialize in issues of economic stabilization and growth - seem oddly uninterested in Japan's plight, as if the failure of conventional macroeconomic policy in the world's second largest economy were a subject of merely parochial interest, with no lessons for the rest of us. Of those who do make pronouncements on Japan, many if not most have taken the easy way out: blaming the victim, absolving themselves of responsibility for proposing solutions by asserting that Japan's problems are deep, structural, beyond the reach of technical fixes. Well, maybe; but maybe not. Sometimes big problems have small causes; sometimes a simple technical fix can work miracles.

Last spring I decided to sit down and think seriously about Japan's ills, putting aside conventional wisdom and my own prejudices, following the logic of economic analysis wherever it led. And it led to a surprising conclusion: that there is indeed a simple fix for Japan's slump - and that the structural obstacles to a quick recovery lie not in the economy itself but in the minds of policymakers.

What is particularly remarkable about the debate over Japan is that it is a case where straightforward economic analysis and policy orthodoxy are in direct conflict. If you apply the most conventional of macroeconomic models to Japan's unusual plight, you come up with recommendations that are anathema to central bankers and finance ministers. And in this case, I am firmly convinced that the models are right and the officials are wrong.

This page offers direct links to those of my writings that bear directly or indirectly on the problems of Japan. I group these essays into "models" - conceptual frameworks (some but not all mathematical) that attempt to make sense of Japan's predicament - and "diatribes", which focus more on the question of why Japan's policymakers (and too many economic pundits, Japanese and Western) have been unwilling to break out of the habits of thought that are, in my view, the only reason that predicament persists.



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Antiguo 11-sep-2007, 10:38
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Se me olvidaba, los artículos de la página del MIT sin estos:

Sólo aptos para economistas.


Japan's trap (May 1998)

Further notes on Japan's liquidity trap (June 1998)

Setting sun (June 1998)

Babysitting the economy (August 1998)

Japan's bank bailout (October 1998)

Japan: still trapped (November 1998)

Inflation targeting in a liquidity trap: the law of the excluded middle (February 1999)

Can deflation be prevented? (February 1999)

Deflationary spirals (February 1999)

It's back: Japan's slump and the return of the liquidity trap

Time on the cross: Can fiscal policy save Japan? (September 1999)

Thinking about the liquidity trap (December 1999)


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Antiguo 11-sep-2007, 10:44
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Es un pdf:

link - http://www.bis.org/publ/bispap06.pdf

Y han posteado artículos del BIS (Bank for International Settlements)

www.bis.org

The Bank for International Settlements (BIS) is an international organisation which fosters international monetary and financial cooperation and serves as a bank for central banks.

The BIS fulfils this mandate by acting as:
a forum to promote discussion and policy analysis among central banks and within the international financial community
a centre for economic and monetary research
a prime counterparty for central banks in their financial transactions
agent or trustee in connection with international financial operations

The head office is in Basel, Switzerland and there are two representative offices: in the Hong Kong Special Administrative Region of the People's Republic of China and in Mexico City.

Established on 17 May 1930, the BIS is the world's oldest international financial organisation.

As its customers are central banks and international organisations, the BIS does not accept deposits from, or provide financial services to, private individuals or corporate entities.



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Antiguo 11-sep-2007, 10:50
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Buf, no me gustaría estar en el peyejo de los franceses o alemanes, ya que segun el presi y pepiño más quisieran ellos estar como nosotros ... buf....



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