samchain/econo-pairs-v1 huggingface dataset:
In other words, asset values should be neither a target nor a goal of monetary policy. The rate of increase in asset values alone seems to tell us very little about underlying and future inflation. Because we know so little about how to assess the appropriateness of asset values against fundamentals, because we have so little capacity to both forecast and predictably affect the future path of asset prices, and because we know relatively little about how changes in wealth affect the real economy and inflation, we cannot use monetary policy responsibly or effectively to achieve specific objectives for asset values. Monetary policy does not today and is unlikely in the future to offer us an effective tool for directly reducing the incidence of large or sustained deviations of asset values from what might turn out to be their fundamental values, what some call bubbles. That said, monetary policy still has to take into account the impact of significant movements in asset values on output and inflation. Financial asset prices, by their nature, allocate resources between the present and the future and thereby affect consumption, investment and future growth. History provides us with numerous examples in which significant movements in asset prices have had sizable effects on the path of output relative to potential and on price stability. And experience suggests that asset values can be very sensitive to movements in monetary policy or to the perceptions of future policy moves.

Philipp Hildebrand: (The) productivity (imperative) Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at Avenir suisse, Zurich, 24 September 2007. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Just a few years ago, the weak growth of the Swiss economy was a dominant topic in public debate. For four years now, the economy has been advancing strongly. Is this merely a cyclical boom? Or has structural change taken place, affecting both productivity and the associated potential growth path? This would have far-reaching implications, not least for monetary policy. A number of factors indicate that structural change is indeed occurring and that this could ultimately result in an increase in the underlying productivity trend. However, time lags and cyclical distortions make it difficult to identify such changes. BIS Review 104/2007  1
24 However, economic costs from stricter capital requirements may arise in the form of higher borrowing rates, reduced lending and an associated weakening in economic  20 21 22 23  Cf. Swiss National Bank, (2016), p. 17, for an overview of the specific requirements. Cf. Swiss Federal Council (2015), p. 1932. Cf. Federal Department of Finance (FDF) (2016). For example, cf. the literature review in FDF (2017), section 3. 24  A number of empirical studies show that bank crises are generally associated with a sharp reduction in growth. For example, cf. Haldane (2017) and, for Switzerland, Junge and Kugler (2013). Page 10/14  growth. Empirical evidence shows that these negative effects are minor, particularly if the capital requirements are increased gradually as planned. 25 Cost-effectiveness also needs to be taken into consideration when deciding on specific regulatory measures. Switzerland made a conscious choice to adopt a lean approach to resolvability requirements. Consequently, the regulations do not directly impact on banks’ business models or organisational structures. Nor do they distinguish between desirable and undesirable banking activities or prohibit certain practices. Rather, the Swiss approach is based on incentives and subsidiarity. Banks ‘only’ have to demonstrate that they are ‘resolvable’ in the event of a crisis. Of course, the calibration of the capital requirements takes international competitiveness into account. The Federal Council’s 2015 evaluation report gives great weight to the comparison of the Swiss regulations with those of other countries.

More progress needs to be made in increasing resilience with regard to the leverage ratio. 25  Rather, higher-capitalised banks tend to grant more loans, not fewer (for example, cf. Cecchetti, 2014, and Gambacorta and Shin, 2016). The minor negative impact can be explained by the fact that, first, more equity capital does not necessarily lead to higher capital costs for banks (Modigliani-Miller offset) and, second, potential higher costs in a competitive banking sector are not passed on in full to borrowers (cf. Junge and Kugler, 2017, for Switzerland). Page 11/14  Moreover, the work that still needs to be done under the second pillar should not be underestimated. The resolution of a bank, especially a globally active big bank, is highly complex. It needs to be planned in a thorough and prudent manner. To ensure that a bank can be resolved in an emergency, further progress is needed in three areas in particular. First, resolution funding plans need to be drawn up, which FINMA, as the competent authority, is currently in the process of doing. These aim to ensure that a bank has sufficient liquidity to implement a resolution. Second, loss-absorbing capacity must be ensured at the level of each individual entity within the big banks. Previously, the focus was on loss-absorbing capacity at consolidated group level. Third, both big banks must further reduce the financial and operational dependencies within the group. In addition, the two banks need to finalise the required emergency plans for Swiss institutions with systemically important functions by end-2019.
Thus, even if global growth were to be robust, it is unlikely that Emerging Market export growth would recover quite as strongly. I would certainly be remiss if I failed to mention another potential risk in Emerging Markets which could have impact on the real economy; that is a rapid buildup in Emerging Market corporate indebtedness. Ultra-loose global monetary policies have made it much easier for firms in Emerging Markets to raise funds – or borrow – especially from abroad. However, in the wake of tighter financial conditions, Emerging Market firms are facing greater difficulty to repay or roll over their debt. In summary, I have highlighted two key sources of volatility: first, continued excess liquidity amid diverging monetary policies, along with shifting market expectations about the future path of monetary policies; and second, the global economic transition to the “new normal” steady state. The process is ongoing, and will probably take some time – and it may not be smooth – before the new steady state is reached. 2  BIS central bankers’ speeches  Ladies and gentlemen, Against the backdrop of such a volatile “new normal” world, I will now turn to the implications for Thailand. The impact will be realized on both our financial markets and the real economy. However, as I shall elaborate, the Thai economy has strong buffers that will make it relatively resilient to external shocks. Let me start by looking at implications for the financial markets and the exchange rate.

In fact, the share of exports to CLMV in our total exports is now on par with the share of our exports to the major trading partners such as the US, Europe, and Japan. Thailand’s exports to the US are also poised to become firmer as the US economy continues to see improvement in its recovery. Our exports of vehicle parts, electronic-appliance parts and electronics to the US have expanded in the past few months, and are likely to continue their growth momentum in 2016 in line with the US economic recovery. Nevertheless, some structural limitations still weigh on long-term growth. The recovery of the export sector will continue to be impeded by a shift in the global trade structure. Some of our products such as apparels and garments have seen a continuing decline in competitiveness, while some others are falling out of technological trend. Simply put, the Thai economy is like a car whose engine is in need of an overhaul. We need structural adjustments in growth drivers to enhance our competitiveness and sustainable economic growth. The private sector needs to invest in new production technology, and improve product quality in response to changes in global demand and consumer preferences. As Mohamed A. El-Erian, then CEO of PIMCO, once said “structural challenges require structural responses”.1 In this context, we welcome many new initiatives by the government to stimulate public and private investment and upgrade Thailand’s value chain.
I take note of the vitality of these policies’ net premium inflows (up 27% in 2016, with inflows for the first 10 months of 2017 at more than twice their levels for the same period in 2016), but they offer no capital protection, and let me remind you of the duty to advise on the real risks incurred by policyholders. Instead, we must encourage the Euro-Growth (Eurocroissance) product, which should be revamped and expanded. The product’s initial calibration has prompted debate; its commercial take-up, though tangible (assets under management of around EUR 1.8 billion), is still slow. I know that certain professionals have their own ideas to address that. And it’s my sincere hope that progress is made on those ideas, and quickly. It is not the responsibility of the public authorities to develop good products – that is down to you –; but it will be our responsibility to encourage them, at the proper time, through the appropriate prudential and even tax-related measures. This struggle, targeted towards life insurance that is more equity-linked and long term, seems more promising to me than the struggle against the flat tax (prélèvement forfaitaire unique); I would like to mention in passing that the flat tax contributes to a neutral stance on the different forms of savings, which is long overdue. The diversification, properly understood, of the investments of French savers towards more equity-based, long-term savings is in everyone’s interest.

I suspect that all of these factors play a role. What public policy can do to address this issue is to ensure that the economy operates closer to the frontier of what is achievable. For example, more efforts to improve job skills would prove beneficial—through retraining and apprentice programs, and better alignment of education and training with business needs. Also, encouraging small business start-ups would help—by removing barriers for entrepreneurs to establish new businesses, and by creating more start-up incubator programs. I also suspect that well-targeted infrastructure spending would be advantageous if it addresses logistical bottlenecks and enables people to commute to areas with good job opportunities. For example, in the New York City metropolitan region, mass transit is old, slow and crowded. As a New Jersey resident, I’m still waiting for that second set of rail tunnels into New York City that should have been built years ago. While higher productivity growth could support better living standards, the benefits for low- and middle-income households depend, in part, on how those gains are distributed between business and labor, and on how labor income is distributed across the workforce. Moreover, income distribution shouldn’t be viewed as a static concept. It is important that people are able to move upward in income through their careers, regardless of their starting point. Over the past several decades, three developments have been discouraging. First, the share of labor income relative to business income has fallen.
4  Immediate concerns and inherent vulnerabilities Against this prospect of net long-term benefits, and indeed if the NMS are to maximize the benefits of euro adoption, they will have to continue making substantial reforms to their economic, financial and social systems. While such changes are in themselves necessary to ensure a smooth adoption of the euro, they will continue to be endogenously engendered once these countries become members of the euro area. In the meantime, however, these reforms are posing major challenges to a number of NMS and are exposing vulnerabilities which, if not addressed, could threaten their successful participation in the euro area. In the course of this seminar first-hand accounts of such challenges, and of the policy responses to deal with them, will no doubt reveal the rich diversity of country situations within an enlarged EU. Some challenges, however, will be common to most new NMS. One such is the need to catch up in terms of per capita income levels with euro area countries. In several NMS this catching-up process is taking place in good part due to the relatively low wage levels and high rates of return on capital in these countries relative to euro area economies. These characteristics of the real sector are creating challenges from a nominal convergence viewpoint. Chief among them are the issues of real exchange rate appreciation and the need to cope with large, and potentially volatile capital inflows.

Famously Alan Greenspan asked “But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions..?” There are two good reasons for care. First policy has to be appropriate for the whole economy; the interest rates which would be needed to have a significant effect, say, on the growth of house prices in recent years might have been far too high for other industries. Secondly central bankers have been cautious to put much weight on their own assessments of when an increase in asset prices is becoming unsustainable. If they get the judgement wrong, they risk slowing growth needlessly and bring inflation persistently below target. Even if central bankers put more weight in future on their judgements of excesses in financial markets, it seems highly desirable also to make the regulatory system more counter-cyclical. BIS Review 94/2008  3  A number of proposals have recently been put forward, which would have the effect of directly increasing a bank's capital requirements during an economic upturn and allow room for capital requirements to fall in a downturn. For instance Professors Goodhart and Persaud have put forward a scheme linking a bank's capital to the growth in its assets. Another possibility is to learn from the Spanish system of requiring banks to set aside general provisions against their loan book in good times which can be a cushion against losses in the downturn.
The second pillar is a broadly based assessment of a wide range of other economic and financial indicators. This all-encompassing and systematic approach guarantees that the Governing Council of the ECB takes into consideration all relevant pieces of information when assessing the outlook for price stability in the medium term. All this shows clearly that the ECB needs to focus on the euro area when conducting its monetary policy. Focusing on domestic objectives is, in fact, the mandate of all major central banks in the world, and rightly so. I strongly believe that the best contribution that the euro area can make to world economic growth is to ensure macroeconomic stability "at home" by pursuing policies which lead to sustainable non-inflationary growth in the euro area. Given the size of the economy of the euro area, a stability-oriented policy will help to create a favourable environment conductive to non-inflationary growth at the global level. The mandate of the ECB is fully consistent with this principle. This is the only reasonable allocation of responsibilities among the large economies in the world. Anything else risks blurring such responsibilities and diluting accountability, which would in turn distort incentives in a perverse way. This notwithstanding, the euro area is not, of course, economically speaking, an island and global developments do affect the euro area economy. Hence, let me also stress that one of the requirements of a globalised world is a frequent exchange of information and views among policymakers.

Having said that, the ECB would welcome an increase of the already substantial contribution of the euro area to global economic growth. However, this should be achieved in a lasting way, by increasing the growth potential of the euro area. The growth potential of an economy, however, is determined by technological and structural factors. Raising its growth potential is an important challenge that the euro area faces, achievement of which would spread its benefits throughout the world. While some reforms have already taken place, additional efforts are needed. Ongoing comprehensive structural reforms of the labour and product markets remain essential in order to improve the functioning of markets in the euro area. Responsibility for these reforms lies with the governments, and with the key national economic agents on the side of labour and industry. It is crucial to increase investment incentives through structural policy measures such as deregulation and privatisation. Fiscal policy should continue along the path of diminishing adverse incentives provided by tax, benefit and pension systems, while reforms on the expenditure side of the budget are also needed for progress along the way towards the medium-term objective of attaining budgetary positions "close to balance or in surplus". To sum up, although monetary policy cannot lift the euro area's growth potential, the benefits of price stability for growth are evident, as stable prices provide the proper environment for structural reforms to work.
12  BIS Review 3/2010  Figure 7 Sweden’s current account and real exchange rate Per cent of GDP and index, 18 November 1992=100  Note. Striped bars and broken lines represent the Riksbank’s forecasts. Sources: Statistics Sweden and the Riksbank. Many indications that krona will continue to appreciate Let me now summarise the Riksbank’s assessment of the more long-term developments in the exchange rate. Our assessment is that the surplus on the current account will decline over the coming years, and this is linked to a stronger real exchange rate. In recent years, growth has been relatively high in Sweden compared with other countries, and our assessment is that this tendency will continue. There are thus good arguments why the real exchange rate should strengthen in the coming period. The real exchange rate can strengthen not merely through an appreciation in the nominal exchange rate, but also by inflation being higher in Sweden than in other countries. However, we have no reason to believe that inflation in Sweden will differ substantially from that of other countries over the coming years. The change in the real and nominal exchange rate could therefore be expected to be roughly the same size (see Figure 3). In addition to the more long-term driving forces that I have taken up, there is a further factor pointing to a stronger krona in the coming period. The severe weakening of the krona as a result of the financial crisis was probably linked to the financial turmoil that arose.

19 Source: https://www.investing.com/crypto/currencies 20 Application of FinCEN Regulations to Persons Administering, Exchanging, or  Using Virtual Currency 21 31 CFR § 1022.10. 22 Chairman Jay Clayton, Securities and Exchange Commission, Statement on  Cryptocurrencies and Initial Coin Offerings (Dec. 2017). Clayton is applying the “Howey” test, a product of the court case SEC v. W.J. Howey Co.,which sets out the criteria for determining whether an instrument qualifies as an “investment contract” (and thus a security) for the purposes of the Securities Act of 1933. 328 U.S. § 293 (1946). An investment contract is “a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.” Id. 23 Securities and Exchange Commission, Statement on Digital Asset Securities  Issuance and Trading (Nov. 2018). 24 Marine Bank v. Weaver, 452 U.S. 551, ___ (1982). 25 The Commodity Exchange Act defines commodity to include, among other things,  “all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in.” 7 U.S.C. § 1a(9). At least to district courts have interpreted this to cover virtual currencies. E.g., CFTC v. My Big Coin Pay, 334 F.Supp.3d 492, 498 (D. Mass., Sept. 26, 2018) 26 CFTC Release Number 7678-18, CFTC Charges Randall Crater, Mark Gillespie,  and My Big Coin Pay, Inc. with Fraud and Misappropriation in Ongoing Virtual Currency Scam (Jan. 24, 2018).
However, in view of the risk exposures and the prevailing uncertainties in the economic environment, it is crucial that the big banks build up a sufficient base of loss-absorbing capital as swiftly as possible during this transition period. After adjusting for the not fully loss-absorbing components, the big banks’ remaining capital buffers are still thin in light of the aforementioned risks. Despite some improvement, leverage for both UBS and Credit Suisse is still high by international standards. Taking only fully loss-absorbing capital into account, the average capital ratio of both big banks amounted to less than 2% of total assets. Against this background, both big banks have already made major strides towards expanding their loss-absorbing capital base. To this end, Credit Suisse issued contingent convertible bonds (CoCos), while UBS retained its earnings. These important first steps have already significantly strengthened the big banks’ loss-absorbing capital base. They also show that the big banks should be in a good position to build up the necessary, additional capital buffer. Situation of domestically focused banks Allow me now to discuss the situation of banks with a domestic focus. The capitalisation of domestically focused banks was almost unchanged in comparison to 2009. The short but sharp recession in Switzerland in 2009 did not have any noticeable impact last year either. Write-downs and provisions were at a historical low. In a long-term comparison, profits remained at a high level overall.

There is still no indication of a general overvaluation based on the current price level, yet several indicators suggest that overheating is already becoming apparent in the owner-occupied apartment and apartment  2  BIS central bankers’ speeches  building segments. There are also considerable regional differences, although there are signs that, already now, real estate prices in some regions are no longer justified by fundamentals. Should real estate prices continue to rise at the current pace and move away from the level justified by fundamentals, a significant price correction is more likely in the medium term. Such a price correction, together with a significant rise in mortgage loan defaults, would pose a threat to financial stability. Overall, however, there is some uncertainty about banks’ risk exposure. Given this uncertainty and signs of potentially adverse developments in the real estate and mortgage markets, there is a need for action in many respects. Therefore, the SNB and FINMA have already taken the first steps and intensified their monitoring of the mortgage market. For this purpose, at the beginning of 2011, the SNB launched a comprehensive quarterly survey of banks. In this survey, detailed information is collected on key risk indicators such as loan-to-value ratios and affordability criteria in the granting of mortgage loans. The survey results, which are expected from the autumn of this year, should contribute to a better analysis of the vulnerability of the Swiss banking sector and close existing gaps in data.