Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Tim Bartz and Stefan Kaiser on 1 April and published on 9 April 2021, in print on 10 April 2021In the United States, the cyclically adjusted price/earnings ratio is now higher than it was before the financial crisis of 2008.
Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Tim Bartz and Stefan Kaiser on 1 April and published on 9 April 2021, in print on 10 April 2021
- In the United States, the cyclically adjusted price/earnings ratio is now higher than it was before the financial crisis of 2008.
- Have equity and real estate prices reached such heights again that they are bound to implode at some point?
- The collapse of the US hedge fund Archegos has just generated multi-billion losses for large banks such as Credit Suisse and Nomura.
- There is a need to scrutinise the reasons why the banks enabled the fund to leverage up to such an extent.
- The institutions thought that their loans were collateralised by the equity stakes held by Archegos.
- But as the fund was forced to sell these stakes quickly and the prices were plummeting, the collateral was no longer worth much.
- We can be glad that the effect has been limited to just a few players.
- That sounds as if the financial sectors avoidance of more serious consequences was more down to luck than good judgement.
- It is thanks to regulation that the banks have sufficient capital to cushion losses of that nature.
- But more is to be done when it comes to funds, because their regulation is predominantly geared towards protecting investors.
- Nonetheless, it is a warning signal that there are considerable systemic risks that need to be better regulated.
- Are you worried about the prospect of a new, hitherto unregulated currency emerging alongside the euro, dollar and the like?
- In our view it is wrong to describe bitcoin as a currency, because it does not fulfil the basic properties of money.
- What really matters, though, is that the European economy takes off again, in which case the debt will also be manageable.
- All decision-makers, and that includes the ECB, need to ask themselves what they can contribute within their respective mandates.
- First, climate change has a massive impact on the economy, due to natural disasters for instance, and hence also on price stability.
- And second, the ECBs mandate requires it to support the EUs economic policy, in which climate protection plays a leading role.