Decades of cheap money has left businesses in America and Europe addicted to debt. Some companies have been borrowing cash just to dole it out to shareholders. But with interest rates now reaching ...levels not seen in 15 years, those debt-drunk firms are waking up to the threat of a mighty hangover. On this week’s podcast, hosts Tom Lee-Devlin and Alice Fulwood ask if those firms can kick their debt habit. Goldman Sachs’ chief credit strategist, Lotfi Karoui, explains how companies became hooked in the first place—and what will happen when they start cutting back. And Torsten Slok from Apollo, one of the world’s largest private capital managers, tells them why the cost of borrowing isn’t likely to fall any time soon. Sign up for our new weekly newsletter dissecting the big themes in markets, business and the economy at www.economist.com/moneytalks For full access to print, digital and audio editions, subscribe to The Economist at www.economist.com/podcastoffer Hosted on Acast. See acast.com/privacy for more information.
We examine how local newspaper closures affect public finance outcomes for local governments. Following a newspaper closure, municipal borrowing costs increase by 5–11 basis points, costing the ...municipality an additional $650,000 per issue. This effect is causal and not driven by underlying economic conditions. The loss of government monitoring resulting from a closure is associated with higher government wages and deficits and increased likelihoods of costly advance refundings and negotiated sales. Overall, our results indicate that local newspapers hold their governments accountable, keeping municipal borrowing costs low and ultimately saving local taxpayers money.
Abstract
During the coronavirus disease (COVID-19) pandemic, the European Union (EU) took the unprecedented step of borrowing 750 billion euros on capital markets, part of which was to be spent in ...the form of grants. As prior interpretations of the Union’s constitution tended to suggest that it had no power for deficit spending, NextGenerationEU (NGEU) arguably constitutes a major constitutional transformation for the Union. As so often in the literature on the EU, the comparison was made with the federal system of the USA: Commentators likened the Union’s constitutional transformation to the transformation engineered by Hamilton, the financial founding father of the USA, as well as Roosevelt’s New Deal. When the USA was teetering on the brink of bankruptcy, Hamilton transformed the landscape of public debt in the USA by proposing to restructure and assume the debt of the states on the balance sheet of the federal government. For the first time, the public debt of the federal government of the USA played a critical role in its economy. The Great Depression prompted another transformation for the finances of the USA. Roosevelt promised his voters to bring back economic growth. During Roosevelt’s tenure in office, the public borrowing of the USA went up significantly. This contribution examines the constitutional controversies provoked by Hamilton’s and Roosevelt’s transformative policies. It argues that, in spite of some similarities, the question of the constitutionality of deficit spending was controversial neither in Hamilton’s nor in Roosevelt’s day. More fundamentally, it argues that both Roosevelt and Hamilton had a transformative vision for the economy not shared by NGEU.
The Prefix Ta-: From Kambera to Indonesian Malo, Raynesta Mikaela Indri
Phenomena (Universitas Sanata Dharma. Department of English Letters),
10/2023, Volume:
23, Issue:
2
Journal Article
Peer reviewed
Open access
This research explores the borrowing of prefix ta- from bahasa Kambera (BK) to bahasa Indonesia (BI). This study is exceptional since the borrowing is from the non-dominant (as donor) language to the ...dominant language (as recipient) which has never existed before (there is no data of words borrowed from BK to BI). Besides, most borrowing from local languages in Indonesia to BI are in forms of words, not affixes. This descriptive qualitative study finds that, as its function in BK, the prefix ta- also has the same role in BI. It is used to derive the agentless intransitive achievement verbs with no agent. The prefix ta- is attached directly to the roots. The roots mostly are transitive and intransitive verbs, as well as adjectives and the derived forms after ta- is attached are mostly intransitive verbs and limited adjective (used as modifier in noun phrase). The prefix ta- is borrowed through direct borrowing which rely on the knowledge of the speakers. The borrowing occurred in the past when native speaker of Kambera were insisted on using bahasa Indonesia as the formal language. The practical use of the prefix ta- could be the most prominent reason of why this phenomenon happened.
Policies on financially distressed municipalities differ across US states, with some allowing unconditional access to Chapter 9 bankruptcy (Chapter 9 states) and others having proactive policies to ...assist distressed municipalities (Proactive states). These differences significantly affect borrowing costs. In Chapter 9 states, local municipal bond yields are higher, more cyclical, and more sensitive to default events than Proactive states. Default events have a contagion effect in Chapter 9 states, but not Proactive states. Lower local borrowing costs in Proactive states come at the expense of the state via higher intergovernmental revenue transfers in times of weak economic conditions.
Abstract
We study the personal credit market using unique individual-level data covering fintech and traditional lenders. We show that fintech lenders acquire market share by lending first to ...higher-risk borrowers and then to safer borrowers, and rely mainly on hard information to make credit decisions. Fintech borrowers are significantly more likely to default than neighbor individuals with the same characteristics borrowing from traditional financial institutions. Furthermore, they tend to experience a short-lived reduction in the cost of credit, because their indebtedness increases more than non-fintech borrowers after loan origination. However, fintech lenders’ pricing strategies are likely to take this into account.
We study the dynamic effect of the COVID-19 shock on credit card use in 2020. Local case incidence had a strong negative effect on credit card spending in the early months of the pandemic, which ...diminished over time. This time-varying pattern was driven by the fear of the virus, rather than government support programs, consistent with the “pandemic fatigue” of consumers. Local pandemic severity also had a strong effect on credit card repayments. These spending and repayment effects offset each other, resulting in no effect on credit card borrowing, consistent with credit-smoothing behavior. The local stringency of nonpharmaceutical interventions also had a negative effect on spending and repayments, albeit smaller in magnitude. We conclude that the pandemic itself was a more important driver of changes in credit card use than the public health policy response.
A general iron-catalyzed methylation has been developed using methanol as a C1 building block. This borrowing hydrogen approach employs a Knölker-type (cyclopentadienone)iron carbonyl complex as ...catalyst (2 mol %) and exhibits a broad reaction scope. A variety of ketones, indoles, oxindoles, amines, and sulfonamides undergo mono- or dimethylation in excellent isolated yields (>60 examples, 79% average yield).
Abstract
Do different loan application formats affect consumer loan requests? Six studies show that when consumers are asked to provide a preferred monthly payment (MP) (vs. loan amount LA), they ...request different principal amounts. This is because these loan application formats differ in the scale-compatible information they bring to consumers’ mind. When LAs are elicited, consumers think of and request the cost of the expenditure they seek to finance. When MPs are elicited, however, consumers think of their monthly budget slack to construct and then request MPs they perceive to be affordable. For lower cost loans with a given term and interest rate, the MP (vs. LA) format results in larger principal requests. This effect reverses for higher cost acquisitions because individuals’ budget slack caps out around $500 per month. These studies provide insight into how consumer loan application formats can affect consumer borrowing, as well as the psychological underpinnings responsible for the effect. Theoretical, managerial, and consumer welfare implications of the findings are discussed.
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