Category Archives: investing

The End of Zero Interest Rates?

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August 14, 2023 — What a difference a year makes!  In 2021, interest rates were close to zero in the US and the UK,  and slightly negative in the eurozone and Japan.  They were expected to remain low indefinitely.  Remarkably, as recently as January 2022, investors thought that the probability the interest rate would rise above 4.0 % within 5 years was only 12% in the US, 4 % for the euro-zone, and 7 % for the UK [p.45].  Those were short-term nominal interest rates.  Correcting for expected inflation, real interest rates were substantially negative and expected to remain so. read more

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Restructuring the Debt of African Commodity-Exporters

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April 28, 2023 —  An estimated 61 countries are currently in debt distress or at risk of it, which is almost one third of the membership of the IMF [32% of 190].  The G20’s Common Framework for Debt Treatment is supposed to facilitate debt restructuring for low-income countries.  But it has made only slow progress.

Many of these countries are in Africa.  Chad restructured its debt in 2021, the first to do so under the Common Framework. Zambia defaulted on its foreign debt in 2020, but has so far been unsuccessful in getting its creditors to agree on how to restructure its debt.  Reluctance of China to participate with other creditors in the traditional Paris Club process is a particular problem in the Zambian case.  Ghana, which defaulted on its external debt in December 2022, has apparently been better able to move forward with restructuring.  Rescheduling of the terms of Ethiopia’s debt was delayed by civil war, but may move forward now.  Angola received 3-year debt relief in September 2020, but remains in trouble. read more

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ESG investing, versus those who would ban it

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February 27, 2023 — The popular ESG movement advocates judging firms, not just by what they generate for shareholders in short-term profits, but by their emphasis on environmental, social, and governance goals.  The movement has its detractors, particularly in the United States.  A counter-movement is gathering steam. It would prohibit some financial institutions from investing in firms that follow ESG practices.

To be sure, ESG does warrant some skepticism.  Often, corporate commitments are essentially mere exercises in public relations.  But those who, in the name of economic freedom, would ban private investors from pursuing ESG goals are logically confused. read more

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