Tremors in the markets – The editor-in-chief’s review

The fact is: The situation for European banks differs from that in the US (the threatening situation of Credit Suisse is more of a special case). And that is also due to the stricter regulation of the entire European banking sector, which bank managers have been moaning about more or less loudly for years. Unlike in the US, small and medium-sized banks in Europe are also subject to strict regulations.

But what is also true: Such a crisis is only triggered to a limited extent by figures on equity ratios. Psychology is often even more important. Within hours, everything that was once considered safe can be called into question. Markets are unstoppable when confidence ebbs, as we saw last week.

It was an illusion to believe after years of zero interest rates, the change in monetary policy would take place without major friction. At a time when money is once again priced, risks are being reassessed across the financial system.

And so we may have to meet again get used to the terms we learned and repressed during the last financial crisis. Credit Default Swaps is one such. Hidden behind credit default swaps, which are suddenly becoming incredibly expensive. Or does anyone else remember him? interbank market, on which the institutes lend each other money? Already is again from subprime loans the speech, that segment for loans to people with poor credit ratings. 15 years ago, American banks contaminated the world financial system with such loans in securitized form and triggered the financial crisis in 2008. At that time it was about subprime mortgage loans. This time about car loans. The first providers are already in trouble.

Another certainty remains after the past week: The regulators worldwide have failed in their goal of making the financial system so secure that banks are no longer “too big to fail”. US Treasury Secretary Janet Yellen made that clear on Thursday when she said that not all banks that get into trouble would be bailed out, only those whose failure would endanger the stability of the financial system.

What else kept us busy this week:

1. The turmoil in the financial markets were also the start of our conversation with Federal Chancellor Olaf Scholz, whom we met in the Chancellery this week. The former finance minister is not afraid of a new financial crisis in Germany and Europe, as he says, because the monetary system is less fragile than it was ten years ago. We also talked about the major issues in his coalition (heating and household), the green conversion of the economy – and the question of whether he had already tried out the chatbot ChatGPT. It was a long, thoughtful conversation, which definitely gives some indication of the political impetus that the Chancellor wants to set in the coming months – and which ones he doesn’t.

The Handelsblatt met with Chancellor Olaf Scholz last week.

(Photo: Jonas Holthaus for Handelsblatt)

2. A sentence by Olaf Scholz kept us busy for a while. He believes that Germany would be in for a real economic miracle as a result of the green restructuring of the economy – which sounds good as a sentence at first. But is that realistic at all? Ifo boss Clemens Fuest examines this question in a text that is well worth reading for us. Just this much in advance: He’s not quite as optimistic as the chancellor, and he has pretty good arguments for it: the energy crisis, the friction in world trade and the shrinking population will undo the miracle.

3. Charles Goodhart goes one step further. The former central banker and economist at the renowned London School of Economics warns in the Handelsblatt that the days of growing prosperity are over because fewer workers have to finance more and more pensioners. Inflation will be between 3.5 and 4 percent. And: mankind will “never again have such good economic times as between the end of the Cold War in the early 1990s and the outbreak of the global economic crisis in 2008”. But enough with pessimism.

4. An earthquake of a completely different kind experienced Silicon Valley this week, where the start-up OpenAI presented a new version of the chatbot ChatGPT. The model can not only evaluate longer texts and makes fewer mistakes – it also captures images in addition to texts. If you show the machine a picture of the contents of the refrigerator, GPT-4 will suggest recipes that can be prepared with it. If users photograph their wardrobe, GPT-4 makes suggestions as to which items of clothing should be taken with them on a trip to Italy or Sweden.

5. When I was in Munich this week stood on stage and asked in the hall who had already tried ChatGPT, almost all hands went up. And that wasn’t a start-up event. It was the gala dinner for the Family Business Hall of Fame, where we, together with KPMG, honor fascinating entrepreneurial personalities every year. ChatGPT was also well known there. The bot is spreading faster than any internet service before it: in just two months, ChatGPT reached 100 million users.

The best family entrepreneurs are honored at the Hall of Fame.

(Photo: argum / Thomas Einberger for Handelsblatt)

6. At the Hall of Fame By the way, this year we honored the managing partner of the cable and adhesive tape specialist Coroplast, Natalie Mekelburger, the founder of the corrugated board and paper manufacturer Progroup, Jürgen Heindl, and the dm founder Götz Werner. Read more about the great evening here.

7. You don’t even have to be particularly interested in cars to find this news exciting. On Wednesday, VW sent a small electric car ID.2 into the race against Tesla. Entry price: less than 25,000 euros. Such small e-cars are the basis for the traffic turnaround that has been eagerly discussed by the traffic lights but has not yet been delivered. This is remarkable because German manufacturers have largely withdrawn from the small car business because of the low margins. And for now, VW appears to be ahead of its US rival. But maybe not for long.

8. French politics experienced dramatic hours on Thursday: Emmanuel Macron decided to put the pension form, probably his most important domestic political project, into effect without the vote of the MPs. Among other things, it is about gradually raising the statutory retirement age to 64 years. A step that is long overdue. Then, on Friday, the opposition voted for a vote of no confidence. If successful, there could be new elections. Politics in Paris is in a kind of limbo right now. It is not yet clear to what extent the protests and strikes against Macron will continue. And whether a vote of no confidence against his government in Parliament on Monday can actually be successful. “Meanwhile, you can see – and smell – the effects of the pension dispute on the streets of Paris,” our Paris correspondent Gregor Waschinski was just telling me. “There are now more than 10,000 tons of uncollected garbage here because the city cleaning department has been on strike for almost two weeks.”

Thomas Rabe: The Bertelsmann and RTL boss has laid off hundreds of employees at the Gruner + Jahr publishing house.

(Photo: Imago (2), dpa, Getty Images)

9. Do you remember, when Bertelsmann boss Thomas Rabe announced a few weeks ago that he would cut 700 of 1900 jobs at Gruner + Jahr and discontinue numerous brands? This news hit me particularly because, being from Hamburg, I once worked for the once proud Hamburg publishing house. My colleagues Michael Scheppe and Hans-Jürgen Jakobs have now researched piquant details. Apparently Rabe had systematically miscalculated the house in Hamburg. My colleagues describe a man who, after a fabulous series of successes, is in danger of failing himself. The text bears the appropriate headline “Sleight of hand tricks in Gütersloh”.

Have a nice weekend.

sincerely
Her
Sebastian Mathes
Editor-in-Chief of the Handelsblatt

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