Gold price: So far immune to debt explosion

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In recent weeks, the International Monetary Fund and the Bank for International Settlements have warned two reputable and crisis-ridden institutions of growing financial market risks.

Unhappy times ahead?

Both see, among other things, the debt explosion seen since the “near-collapse” of global financial systems (2008/2009) as a major problem. The reversal of interest rates in the USA is currently causing massive problems for some emerging economies in particular, as they have become indebted in dollars and have come under considerable pressure as a result of the strong dollar strength. In this context, the IMF named above all three countries:

  • Argentina
  • Pakistan
  • Turkey

But the US should not be too happy about its supposedly relative strength. The tax cuts and spending increases announced by Donald Trump are likely to worsen rather than improve the debt sustainability of the “super-superpower”, especially since the Chinese have largely separated themselves from US government bonds in October.

Just to remind you: the Chinese are considered to be the second most important donor of the United States, with over $ 1 trillion in debt, according to the US Federal Reserve. A massive sell-off could catapult US interest rates to new heights and jeopardize the re-financing of the “extremely debt-hungry nation”.

In Europe, Italy is “worrying”

The Europeans also have a big debt problem – one more, the other less. Italy’s 65th post-war government wants to leave the “path of saving”, increase government spending while cutting taxes.

The new government of Lega and populist 5-star movement has been in power for four months now and plans for next year with a budget deficit of 2.4 percent of economic output. This would exceed the value planned by the previous government by a factor of three.

The plans did not go down well with the EU Commission and the bond and stock markets. For ten-year Italian bonds, the yield jumped to over 3.5 percent and thus has a premium of 300 basis points over German government bonds.

Within the eurozone, Italy has been considered ailing for decades in terms of public finances. In 2017, the accumulated public debt amounted to more than 130 percent of the gross domestic product (see table).

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Debt ratios of various states

Surname 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
United States
(in% of GDP)
105.4%% 105.8% 100.8% 103.2% 101.2% 100.1% 96% 91.4% 82.4% 67.7%
euro zone
(in% of GDP)
86.7% 89% 89.9% 91.9% 91.3% 89.4% 86.1% 83.8% 78.4% 68.6%
China
(in% of GDP)
47.6% 44.3% 41.1% 39.9% 37% 34.3% 33.6% 33.7% 34.3% 27%
Japan
(in% of GDP)
253% 250.4% 248% 249.1% 244.5% 238% 231.6% 215.8% 210.2% 191.8%
Germany
(in% of GDP)
64.1% 68.2% 71% 74.7% 77.5% 79.9% 78.7% 81% 72.6% 65.1%
Great Britain
(in% of GDP)
85.3% 82.6% 82.9% 80.5% 78.6% 75.1% 71.4% 64.6% 50.1% 35.4%
India
(in% of GDP)
97% 96.6% 95.6% 94.9% 92.3% 89.5% 85.2% 81.6% 78.9% 68%
Italy
(in% of GDP)
131.8% 132% 131.5% 131.8% 129% 123.3% 116.5% 115.4% 112.5% 102.4%
Spain
(in% of GDP)
98.3% 99% 99.4% 100.4% 95.5% 85.7% 69.5% 60.1% 52.8% 39.5%
Portugal
(in% of GDP)
125.7% 129.9% 128.8% 130.6% 129% 126.2% 111.4% 96.2% 83.6% 71.7%
Greece
(in% of GDP)
178.6% 180.8% 176.8% 178.9% 177.4% 159.6% 172.1% 146.2% 126.7% 109.4%

Source: Trading Economics

Among the particularly unsound, financed eurozone countries, only Greece has an even miserable quota (178.6 percent). Even Spain (98.3 percent) and Portugal (125.7 percent) are better placed than the Italians.

Because Italy’s economy still represents the third largest economy in the eurozone despite several years of “infirmity”, everyone should realize that the rescue packages would not be sufficient for this member state.

The risk of a renewed euro crisis can therefore not be denied. So far, the long-standing crisis protection gold has not benefited from the increased uncertainties. Above all, its biggest advantage over bonds is that it has no counterparty risk and has never suffered a total loss. This purchase argument is sought in other asset classes in vain.

Outlook for the current week

Under the aspect of US sovereign debt , Tuesday should be relatively exciting. In that case, the world of finance learns to what extent foreign countries acquired US government bonds in the month of August. In July, net purchases totaling nearly $ 19 billion were reported. Of course, top-rated government bonds are part of a solid, structured portfolio of securities.

The question is: how much should they be weighted? The fact that prices have been manipulated upward and yields have been manipulated downwards by the ultra-expansionary monetary policy of the central banks points to the danger of blistering.

Investors should not forget this. You can not really speak of a “bubble problem” with gold. As an insurance policy against a comeback of financial crises is “old-fashioned gold” in the form of bars or coins always.

 

Mortgages plummet in Spain due to credit restriction and cash payments

Mortgages plummet in Spain due to credit restriction and cash payments

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  • The signing of mortgage contracts has fallen by 31% in one year, but less than in the previous month, according to the INE.
  • From the Spanish Mortgage Association (AHE), they note that the offer has been restricted and is now limited to “very solvent clients”.
  • Fotocasa analysts point out “Not only are less mortgages granted, but they are granted for much less.
  • Analysts and economists consulted by this newspaper argue that the mortgage loan will begin to grow slowly in 2014.

hipoteca

The mortgage is the key to the owner of a home.

The signing of new mortgages in Spain has accumulated 41 consecutive months of falls in interannual installments. Only last month, this was a year at the National Institute of Statistics (INE). Not only are you signed up for smaller amounts of money.

Of the 14,856 homes mortgaged in September, a figure 5.5% lower than the amount of September 2012. “Not only less mortgages are granted, but also the date of the INE show once again that they are granted for much less money, “says Beatriz Toribio, head of Estudios de Fotocasa. In total, the bank has used 1,445 million euros to finance the acquisition of apartments, houses and apartments, 34.7% less than in the same month of the previous year.

The total number of mortgages was at 0.54%, the average interest rate stood at 4.31%, 4.7%, higher than that registered in the same month of 2012 ” , point out the FOtocasa technicians.

So much has fallen the Spanish mortgage market has fallen to pre-crisis levels. In the date of the Bank of Spain, the total amount was reduced in September by 4.5% compared to 2012. Households, as well, managed to de-borrow more than 40,000 million euros, the lowest level since February 2007 strangulation and the economic difficulties experienced by millions of the Spanish market, although it is not the only reason, as experts and analysts consulted by 20minutos.es point out.

The credit tap, closed

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Not only families are in the process of reducing their debt; also the Spanish banking sector. This is the process of reduction of its credit grant. The macroeconomic environment and the euro crisis have also not helped to turn the tap on.

Sovereign debt registered as a result of the crisis of the euro and the norms approved by the international authorities (the new regulation of Basel III) and II) “together with the Spanish Mortgage Association (AHE) concludes.

Less solvent customers

On the supply side, entities have difficulties in giving more credit. Also on the demand side (the clients), high levels of unemployment and the fall of a large number of households. “From the AHE.”, Explained from the AHE, “The debt capacity of households was impaired by the decrease in their average net income”.

“Requirements from the mortgage company said”. Not only is there ever less demand for mortgage loans, but the conditions for accessing it are tougher. “As detailed from Fotocasa.”

The cost of financing has become more expensive for banks, which has increased credit spreads from 0.5% to 3%. , The Spanish Mortgage Association, with the current levels of unemployment and economic deterioration. mortgage delinquency in Spain exceeded the 5% barrier for the first time in September.

More cash payments

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The high cost of financing to acquire a home has reduced the signature of mortgages and also by the boom of cash payments, those that do not require any credit. “Nearly the same operations are closed in cash as with mortgages,” says Beatriz Toribio.

Several reasons explain the “drastic” increase in those who pay for their housing in cash, as José García Montalvo, economics professor, points out in an article published by the Savings Banks Foundation (Funcas): “First, the sharp reduction in the property In addition, banks have “adjusted their risk parameters”.

Another cause of the increase in payment in the hand comes from abroad. “Foreign buyers are back to the Spanish real estate sector,” says Professor García Montalvo, although he says that Along with foreigners, during the last few months, the arrival of investment funds has increased, interested in properties and promotions in the Spanish territory.

Slow recovery

When will the mortgage loans increase again? The industry is already normalizing during this year. “If the economy recovers we will see an opening of the tap from the next year, although the next few months will continue to be declines”, warn sources of the AHE.

What is cashflow?

What is cashflow?

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Cash flow is one of the main indicators of the financial state of a company that you have to know

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We can define the cashflow as the cash flow.or treasury, although more than a definition is a translation. We will see what information is available on the financial status of our business or company.

A businessman or a manager who knows how to read a balance sheet, is a profit and loss account, is something inexcusable nowadays, no matter how financial is not within his competence. But this is not enough, you have to know how to match it with reality. And the reality is liquidity, the treasury. And what is cashflow?

It is a term that is still used, although it has given way to the advance of others such as EBITDA. In any case, the most important thing is to understand the reasons why it is used, its limitations and how we can use it. In these points we will focus instead of delving into classifications and ways of calculating it,

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The accounting and the cash

One of the main problems when carrying out an accounting analysis is to reconcile with our financial reality. This is the case for the first impression of their accounts, which have empty boxes. In times of crisis, beyond the results, the treasury of the company is taken care of, and that is where we started to run into the concept of cashflow.

We can define the cash flow as the cash flow or treasury. But that, more than a definition, becomes a translation. So let’s look at what usually happens in schools.

Cashflow: Profit + amortizations + provisions

As we can see, a cash flow is an indicator in which amortizations and provisions are added to the benefits in a given period. Why is this done? If we understand the answer to this question, we will begin to realize the task that lies ahead and the size of the problem.

Depreciation is not an outflow of money. They imply a reduction in the result of the year, but do not imply a disbursement. The cash, the treasury is still there. The same happens with provisions.

As we can begin to imagine, which is of capital importance. But it will not be so easy.

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What’s the point of talking about cash flow?

Going beyond the benefits and getting to talk about cashflow can be very useful. It is a first step to know our financial health, the progress of it, its evolution. And we can get to answer the questions about whether we will be able to fulfill our payment commitments.

Do we generate enough cash to meet our suppliers? And with our creditors? How will an investment impact the expected cash flow?

Due to the origin of the different types of cash flow will be due to the origin: the operational call, the one coming from investments or divestments and that derived from financial operations. .

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The limitations to calculate the cash flow

The formula that we have given to calculate the cashflow is the best known and pledged, is the so-called accounting cash flow. It may be interesting, especially for comparative purposes, and it is given by the accrual rule.

The key is that accounting being a treasury, and this is not the case in reality. That we have billed to salt and we have actually collected it. It is a very good thing that it is a deferred sale, and therefore, part of the sales of an exercise. And if things go wrong, those deferred sales will not be charged and we have already counted them as one euro more in our pockets.

It is about understanding its limitations and it is about understanding its limitations. This is the case for direct or indirect estimation of our treasury flows (in situ study of the treasury, evolution of the State of Origin and Applications of Funds, etc.). ).

The limitations of accounting make it necessary to equip them with instruments, whatever they may be, to test the current and anticipated levels of treasury.