Trillions of Negative-Yielding Debt Redeem Europe’s Bond Bulls

A deep pool of debt with below-zero returns is increasingly betting on European bonds. In a matter of weeks, German 10-year bond yields fell to the most in July from flirting with zero for the first time in two years, going back to minus 0.46% since the start of 2020. That fall – which has propelled bond prices – has helped push negative-yield debt volumes in Europe to a near six-month high of 7.5 trillion euros ($8.9 trillion).

Traders were alerted by the inflation bet, which initially raised borrowing costs, but lost heights after major central banks insisted on continued support. At the same time, the spread of Covid-19 variants stoked demand for the safest government loans, reviving a business that dominated global markets last year amid the pandemic.

Strategists at HSBC Holdings plc and ABN AMRO Bank NV never shied away from their call for benchmark bond yields at minus 0.50% by the end of 2021, which has been in effect since the first half of last year. That will erase a large portion of this year’s 54-basis point trough-to-peak advance.

The European Central Bank said last month that current inflation is driven by temporary factors, and any change in stance would depend on hitting the new 2% inflation target.

HSBC’s forecast was “based on the assumption that there will be no rate hikes before the end of 2023,” said strategist Chris Atfield. “It is mostly market priced now, helped by the new ECB forward guidance.”

Money markets have quickly cut back on policy tightening after the ECB revised guidance on interest rates, saying it would not react immediately if price hikes exceed that target for a “transient” period.

According to swap contracts, in July, traders wiped out 20 basis points more from rate-increasing bets. This is the biggest decrease in nearly two years, and they suggest they expect the ECB deposit rate to be below zero in five years.

HSBC’s Attfield said that “the new forward guidance criteria for rate hikes since 2008 will not have been met at any point,” highlighting the challenging task facing the ECB as it seeks to open up record monetary stimulus.

The euro area pulled out of recession in the second quarter, and headline inflation climbed to 2.2% last month. According to Mayva Cousin of Businesshala Economics, while rising pressures could push the annual CPI rate to more than 3% in the coming months, the increase will prove to be temporary and inflation is expected to decline sharply in early 2022.

According to a Businesshala survey, strategists see the German 10-year yield as low as minus 0.14% by the end of the year, down from minus 0.035% nearly a month ago. ABN AMRO strategist Flortje Merten sees a drop to minus 0.5%, given the balance between rate expectations and the state of the euro-regional economy.

“Further rate hikes and more optimistic sentiment would be two opposing factors and could keep Bund yields around these low levels,” Merton said.

This week

  • The Bank of England will meet with investors on Thursday to discuss the possibility of a split vote on bond purchases, given recent sharp remarks by some members of the Monetary Policy Committee.
  • European sovereign supplies should remain moderate at around 17.5 billion euros, according to Commerzbank, with auctions in Germany, Austria, France and Spain.

Source: Trillions of Negative-Yielding Debt Redeem Europe’s Bond Bulls

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Critics:

Historically, people give the government their money, instead of spending it, with the promise of being paid back, with interest. Now, governments are essentially getting paid to borrow money, as people become increasingly desperate for a safe haven for their wealth. The cycle becomes self fulfilling as negative rates raise further concerns about the economy.

“Bonds are supposed to pay the owner of capital something to pry the money out of their hands. But no … ” said co-founder of DataTrek, Nicholas Colas. Central banks often lower interest rates to grow the money supply in the economy, fuel demand and provide growth momentum. Other key drivers for monetary policy easing are weakening domestic outlooks, falling annual growth rates, low inflation and weakening business and consumer confidence. And in Europe’s case, make up for the lack of a coordinated fiscal response.

Another reason for negative yielding debt worldwide could be that institutional investors, like pension funds, are forced to keep buying bonds because of liquidity requirements. PIMCO’s global economic advisor Joachin Fels said there are also secular factors like demographics and technology that drive rates lower.

“Rising life expectancy increases desired saving while new technologies are capital-saving and are becoming cheaper – and thus reduce ex ante demand for investment. The resulting savings glut tends to push the “natural” rate of interest lower and lower,” said Fels.

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China’s Internet Tycoons Suffer $13.6 Billion Wealth Drop As Regulatory Crackdown Triggers Market Sell-Off

China’s internet billionaires suffered the biggest losses on the list of the world’s richest people on Monday, as spooked investors continued to dump stocks targeted in Beijing’s widening regulatory crackdown.

Meituan founder Wang Xing, NetEase Chief Executive Williang Ding, Pinduoduo founder Colin Zheng Huang and Tencent Chairman Pony Ma racked up a combined $13.6 billion plunge in their wealth in just one day, according to the World’s Real-Time Billionaires List. The hits to their fortunes come as a sell-off in Chinese education and technology stocks continued to spread to other sectors, with investors pondering which companies could fall under Beijing’s scrutiny next.

“[The crackdown] is a continuation of previous policies of anti-monopoly and stop the disorderly expansion of capital,” says Shen Meng, director of Beijing-based boutique investment bank Chanson and Co. “China also wants to reduce discontent among different factions of the society, and alleviate overall pressure.”

For example, following reports of long working hours and dangerous conditions, regulators are now seeking to adopt safeguards to protect food delivery riders by requiring their employers to pay more in insurance and making sure the couriers earn above minimum wage. The announcement of the new guidelines sent shares of Tencent-backed food delivery giant Meituan, which is already subject to an ongoing anti-trust probe, tumbling by as much as 10% in Hong Kong on Tuesday, after plunging 14% a day earlier.

Tencent, which also backs online marketplace Pinduoduo, lost 5% in Hong Kong today, after regulators ordered the company to give up exclusive music copyrights. The company has already pledged to comply with the directive.

In the meantime, Beijing is also seeking to alleviate some of the financial burden of parents in support of its efforts to boost declining birthrates by targeting after-school tutoring. The sector once grew rapidly as students went online to study during the pandemic, but has recently been plagued by complaints of misleading pricing and false advertising.

NetEase’s New York-listed online learning unit Youdao lost more than 60% of its market value over the last three trading days. The U.S.-listed shares of Chinese education firms Gaotu Techedu, TAL Education and New Oriental Education & Technology all plunged a similar amount, after regulators unveiled a sweeping set of rules over the weekend. It requires tutoring firms seeking to teach school syllabus to register as non-profits, as well as stop offering courses over weekends and during school vacations. The companies are also banned from going public or raising capital.

“To remain listed, they may need to spin off the businesses that are in violation of government rules, ” says Tommy Wang, a Hong Kong-based analyst at China Merchants Securities. He adds that as much as 90% of the companies’ revenues could be hit as after-school tutoring for elementary and middle school students account for the bulk of their sales.

In this uncertain environment, foreign investors would be wise to take into account policy risks and re-assess the outlook for investing in Chinese companies, according to Chanson and Co.’s Shen. The crackdown on education companies, for example, has left global investors ranging from SoftBank to Temasek struggling to find a way out of their positions. They’re among investors who had placed multi-billion dollar bets on Chinese education startups like Yuanfudao, Zuoyebang and Yi Qi Zuo Ye, which are now also being subjected to heightened regulatory scrutiny.

Claudia Wang, a Shanghai-based partner at consultancy Oliver Wyman, says one option for investors is to simply wait, and exit when the startups find a market that is on par with the online education industry that was valued at 257.3 billion yuan in 2020, and transition their business. The wait-and-see attitude is already taking hold among some investors in public markets, according to Nomura securities.

“Bruised and shaken investors are now likely to ponder which other areas could potentially become the next target of expanded state control,” analysts including Chetan Seth and Yunosuke Ikeda wrote in a recent research note. “Until news flow on regulation starts abating (no signs of it yet), we think most foreign investors will likely remain on the sidelines despite some areas of the market looking attractive over medium term on valuation grounds.”

I am a Beijing-based writer covering China’s technology sector. I contribute to Forbes, and previously I freelanced for SCMP and Nikkei. Prior to Beijing, I spent six months as an intern at TIME magazine’s Hong Kong office. I am a graduate of the Medill School of Journalism, Northwestern University. Email: ywywyuewang@gmail.com Twitter: @yueyueyuewang

Source: China’s Internet Tycoons Suffer $13.6 Billion Wealth Drop As Regulatory Crackdown Triggers Market Sell-Off

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Critics:

The Chinese government’s crackdown on big technology companies will likely last for a few years, which means those stocks aren’t a buy for now, a BlackRock portfolio manager said Wednesday.

Since autumn, regulators have ramped up scrutiny on the country’s tech giants such as Alibaba and Tencent. After years of relatively unrestrained rapid growth, becoming some of the biggest companies in the world, the corporations now face fines and new rules aimed at curbing monopolistic practices.

“This regulatory cycle is long-lasting compared to 2018,” Lucy Liu, portfolio manager for global emerging markets equities at BlackRock, said during a mid-year Asia investment outlook event.

In contrast with that period of increased scrutiny, which ran for about six months to a year, she said that this time, “we think it’s going to be a multi-year cycle.”

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Related Contents:

Apple Floats Above China Technology Crackdown For Now

The Chinese government under President Xi Jinping has rattled investors in Chinese technology companies by announcing regulatory measures meant to curb the country’s fast-growing economy while reasserting control over some of its biggest companies. But the big U.S. technology company most exposed to China — Apple Inc. — is likely insulated from the turmoil for the time being.

“The crackdown out of Beijing has caught investors by surprise given the scale and scope,” said Dan Ives, an Apple analyst at Wedbush Securities. “It’s a major overhang on Chinese tech names, but Apple has been able to navigate the China political climate unlike any other U.S technology company in the last thirty years. Apple is able to be more Teflon-like in terms of regulatory focus.”

On Tuesday — when Chinese tech giant Tencent Holdings had its worst day in a decade and Chinese tech companies ranging from food delivery to online tutoring sectors continued a multi-day free fall — Apple underscored its dominance by releasing earnings that topped Wall Street expectations for both sales and profit and reported quarterly revenue that topped $100 billion for the first time. That included strong growth in Apple’s Greater China region, in which it reported $14.8 billion in sales, up 58% from the same quarter a year ago.

Under the premise of tackling the technology industry’s anti-competitive practices and cybersecurity concerns to curbing rising costs of tutoring companies, the Chinese government has sent a clear message: It is not afraid to wipe out massive economic gains in order to pursue its policies. “China goes back and forth on cracking down on their companies,” said Mark Zgutowicz, an analyst at Rosenblatt Securities.

“If you think about Tencent, Alibaba, JD.com — China does not want any of their companies to get too big for them to control. And whenever these companies get too big for their britches, China will come down and say, ‘You know what, we’re going to regulate this or bring in another competitor.’”

Apple’s manufacturing supply chain is based in China and Taiwan, where nearly every iPhone, iPad and Mac computer is made. Over the years, China has proven itself to be both an important customer and partner to Apple.

According to Zgutowicz, Apple’s presence in China is actually a boon to the government’s agenda. Chinese technology companies like Huawei Technologies, Shenzhen Zhixin New Information Technology, Vivo Communication Technology Company and Guangdong Oppo Mobile Telecommunications Corp. have more or the same amount of mobile phone market share in China as Apple, according to data from market research firm Counterpoint.

This means that Apple is simply another player that keeps its domestic companies from getting too big. “Ironically, Apple keeps the other companies in check,” Żgutowicz said. “It keeps things level for the other Chinese manufacturers.”

Apple may not be facing the brunt of the Chinese crackdown, but it has not been totally immune to its regulatory bodies in recent years. In 2017, after China passed a cybersecurity law that required technology companies operating in China to store Chinese users’ data in the country, Apple agreed to build two data centers in the country. Cook assured the public that it would keep that data safe. But a recent New York Times investigation asserted that the company had more or less given up control of the computers inside the data center to the Chinese state.

In August 2020, Apple took down 47,000 applications from its App Store at the request of the Chinese government for not obtaining the appropriate gaming licenses, according to Rich Bishop, CEO of AppInChina, a Beijing-based firm that is a leading publisher of international apps in China and helps developers localize their apps and be compliant with local laws.

This request came after a decade of China turning a blind eye on how Apple operates its App Store in the country. “It is very unclear why the Chinese government has allowed Apple to operate until now without compliance with Chinese law,” said Bishop. “I would imagine it is because Apple contributes a lot to the Chinese economy in terms of manufacturing and sales — or maybe they have solid government relationships.”

The company’s heavy reliance on the region was an effort led in large part by Tim Cook, who worked at Apple for thirteen years under Steve Jobs before becoming its CEO in 2011. In the early 2000s, the Chinese government and its business leaders welcomed Apple, spending billions to build factories, power plants and employee housing. In one instance in 2004, when Apple was looking to expand its footprint in the country, a manufacturing partner in China physically moved a mountain in order to make space for an iPod-building factory.

Chief executives at some of Apple’s largest supply chain partners in China and Taiwan have become billionaires themselves. Zhou Qunfei, who chairs Lens Technology, a smartphone screen supplier that has long been one of Apple’s earliest suppliers for the iPhone, is one of the greater China region’s richest women, worth a cool $12.7 billion. Terry Gou, who founded Foxconn and assembles iPhones for Apple, is the richest person in Taiwan with a net worth of $6.7 billion.

“Part of this tight-wire balancing act for Apple and Cook has been to make sure they are successful in China without any blowback from the ongoing U.S.-China Cold Tech War,” said Ives of Wedbush. “And the reality is that in a peak iPhone cycle, Apple through its supply chain is one of the biggest importers in the whole country of China, potentially employing more than a million employees across the broader supply chain in the country.”

Apple and the greater China region have enjoyed a symbiotic relationship, but the company has made concessions in order to placate an increasingly controlling government. For now, it works — until the Chinese government starts to see Apple as a threat. “China welcomes the competition as long as Apple doesn’t get too big,” said Zgutowicz. “But whenever a company starts to get too big, they will see it from miles away. They do not want companies to get too big and create their own government with their users.”

Follow me on Twitter or LinkedIn. Send me a secure tip.

I am a staff writer at Forbes. Follow me on Twitter or send me an email at aau-yeung@forbes.com.

Source: Apple Floats Above China Technology Crackdown — For Now

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How ‘Chaos’ In The Shipping Industry Is Choking The Economy

Whidbey Island is a lovely place about 30 miles north of Seattle on the Puget Sound. Most days the tranquil sounds of rolling waves and chirping birds provide an escape from the hustle and bustle of the city. But these days, all is not so serene. Residents are complaining about the ruckus created by humongous container ships anchored off their shore.

“We’ve never seen them this close before,” a Whidbey Islander told a local news station. “We’re hearing the throbbing noise at night. … It’s a nuisance.” The noise has been so loud that residents have been complaining to the county sheriff’s office about it.

Whidbey Islanders are getting a front row seat to the growing U.S. trade deficit, which is hitting record highs. It’s fueled by a surge in demand for imports, mostly from East Asia. There’s so much cargo being shipped to the U.S. from Asia right now that the ports of Seattle and Tacoma are chock-full of container ships.

“We are seeing a historic surge of cargo volume coming into our ports,” says Tom Bellerud, the chief operations officer of The Northwest Seaport Alliance, which manages all cargo processing at the ports of Seattle and Tacoma. “The terminals are having a difficult time keeping up with processing all the cargo off these vessels fast enough.”

On both land and at sea, the entire supply chain is struggling to keep up. In the Pacific Northwest, it’s become such a clusterfest that the U.S. Coast Guard has been redirecting boats to anchor off the coast of Whidbey Island and other places they typically don’t park. Ship crews are having to wait days, even weeks, for the chance to dock at the ports and offload their precious goods.

It’s the same story up and down the West Coast. In San Francisco Bay, the traffic jam of container ships has gotten so bad that the U.S. Coast Guard has been asking ships not to enter the bay at all. Robert Blomerth, director of the USCG’s San Francisco Vessel Traffic Service, said last week that there were 16 container ships waiting in the open ocean outside the Golden Gate to get in and unload their cargo. He says it’s “completely abnormal.”

When we spoke to Gene Seroka, the head of the Port of Los Angeles, he said his port had 19 ships waiting to dock and they’re now waiting, on average, about five days to get in. In normal times, they don’t have to wait at all.

Lars Jensen, CEO of Vespucci Maritime, has spent 20 years studying the industry and he says what’s going on is unprecedented. “The container shipping industry is in a state of chaos that I don’t think it has ever been since it was invented,” he says.

The maiden voyage of the first container ship set sail from Newark, N.J., back in 1956. It may be hard to fathom just how big a deal this innovation was. It was just a big ship that carried containers, literally metal boxes. But these metal boxes enabled ships to carry dramatically more cargo, and, by standardizing shipping practices and using new machines to handle the boxes, shippers were able to slash costs and the time it takes to load, unload and transport that cargo.

Economists credit these metal boxes with increasing the efficiency of shipping so much that it stitched the modern global economy together more than anything else — more than all free-trade agreements put together.

Now economists are concerned that the plumbing provided by these miracle boxes and the vessels that transport them is clogged. It’s making it more difficult for stores to restock their shelves, manufacturers, carmakers and builders to get the parts they need, and farmers to export their products. It’s an important reason, analysts say, that we’re seeing consumer prices surge.

How did shipping get topsy-turvy?

In the early days of the pandemic, global trade hit an iceberg and sank into the abyss. The decline of maritime shipping was so dramatic that American scientists saw a once-in-a-lifetime opportunity to study what happened to whales in the absence of a constant deluge of vessels. The noise from the ships apparently stresses them out — kind of like they’re currently stressing out the residents of Whidbey Island.

Greater tranquility for whales in the first half of 2020 was the result of shipping companies canceling their trips and docking their ships. Then the economy rebounded, and American consumers unleashed a tidal wave of demand that swept through the shipping industry when they started shifting their spending patterns. Unable to spend money on going out, many started spending their money (and their stimulus checks) on manufactured goods — stuff that largely comes from China on container ships.

At first, it wasn’t the ships that were the problem; it was the containers. When the buying spree began, Chinese exporters struggled to get their hands on enough empty boxes, many of which were still stranded in the U.S. because of all the canceled trips at the beginning of the pandemic. More importantly, processing containers here has been taking longer because of all the disruptions and inefficiencies brought about by the pandemic. Containers have been piling up at dockyards, and trains and trucks have struggled to get them out fast enough.

“The pandemic has exacerbated longstanding problems with the nation’s supply chain, not just at the ports but in the warehouses, distribution centers, railroads, and other places that need to run smoothly in order for Longshore workers to move cargo off of the ships,” says Cameron Williams.

He’s an official at the International Longshore and Warehouse Union, which represents dock workers, primarily on the West Coast. Dock workers have been working through the pandemic to handle the increased cargo volume, he says, and at least 17 ILWU workers lost their lives to COVID-19. “We continue to work hard and break records month after month to clear the cargo as quickly as the supply chain allows,” Williams says.

It’s been all hands on deck to supply ravenous consumers and businesses with the stuff they want. The resulting traffic jams at West Coast ports means it takes longer to unload stuff, which then extends the time it takes for ships to get back across the Pacific to reload.

That congestion was already creating massive delays on both ends of the shipping supply chain, tying up large numbers of containers and ships and leading to growing backlogs and shortages. Then, in March 2021, the Ever Given, one of the largest container ships in the world, got stuck in the Suez Canal in Egypt. While the blockage didn’t directly affect the Asia-West Coast shipping corridor, it added to the global shortage of ships and containers by stranding even more of them out at sea.

As if all this weren’t enough, last month there was a COVID-19 outbreak at the Yantian International Container Terminal in China, which is normally one of the busiest ports in the world. The Chinese government implemented stringent measures to control the outbreak, and as a result, more than 40 container ships had to anchor and wait. “In terms of the amount of cargo, what’s going on in South China right now is an even larger disturbance than the Suez canal incident,” Jensen says.

The effects on the American economy

With so much shipping capacity bogged down, importers and exporters have been competing for scarce containers and vessels and bidding up the price of shipping. The cost of shipping a container from China/East Asia to the West Coast has tripled since 2019, according to the Freightos Baltic Index. Many big importers pay for shipping through annual contracts, which means they’ve been somewhat insulated from surging prices, but they are starting to feel the pain as they renegotiate contracts.

Rising shipping costs and delays are starving the economy of the stuff it needs and contributing to shortages and inflation. It’s not just consumers and retailers that are affected: American exporters are complaining that shipping companies are so desperate to get containers back to China quickly that they’re making the return trip across the Pacific without waiting to fill up containers with American-made products. That’s bad news for those exporters — and for America’s ballooning trade deficit.

As for when it’s going to get better, none of the people we spoke to believes it’ll be anytime soon. And it’s not even considered peak season for the shipping industry yet. That typically begins in August, when American stores start building their inventories for the back-to-school and holiday seasons. The residents of Whidbey Island may have to continue dealing with the nuisance of gigantic, noisy ships cluttering up the horizon for the foreseeable future.

By:

Source: How ‘Chaos’ In The Shipping Industry Is Choking The Economy : Planet Money : NPR

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References:

Shipbuilding NewsCruise Ship News, Ports News ,Salvage News ,Training News ,Government News, Environment News,Corporate News, Maritime Executive , Volga Targets Market, Nuclear-Powered Cargo Ship, China’s Exports, American Vulkan’s Service Team, JFE Steel, OMSA, OceanManager Inc.

How the New Child Tax Credit Is Helping Parent Entrepreneurs

Eligible parents are slated to receive their monthly child tax credit payments starting Thursday. How you use the money could affect your business or help you start one.

The American Rescue Plan Act of 2021 expanded the tax credit score to $3,600 per baby underneath the age of six and to $3,000 for these aged six to 17. It is in impact only for 2021, although Biden has advocated making it making it everlasting.

Half of the funds might be despatched to folks in installments via December. For instance, a mum or dad with one baby underneath six would obtain $300 per 30 days. Dad and mom can declare the remainder upon submitting taxes for 2021–unless they choose out to allow them to obtain all the cash once they file.

Madilynn A. Beck, founder and CEO of Palm Springs, California-based Fountful–an app that gives “life-style providers” like manicures or DJ appearances on demand–is contemplating that strategy. Beck says that if she meets her enterprise targets this 12 months, Fountful might generate sufficient income to considerably enhance her tax burden come subsequent April. “I am protecting my head above water now,” she says. “What occurs if I’m absolutely underwater then and do not have a life vest?”

The kid tax credit score will have an effect on individuals at a “wide selection” of earnings ranges, says Daniel Milan, managing accomplice at Cornerstone Monetary Providers primarily based in Southfield, Michigan. For aspiring entrepreneurs, it’d offset childcare prices for just a few months whereas they work on getting a enterprise off the bottom. For others, the cash might simply assist alleviate day by day monetary stress.

That is the case for Ruby Taylor, CEO and founding father of Baltimore-based Monetary Pleasure Faculty, which supplies monetary literacy training and produces a card sport that teaches the topic to younger individuals. In April 2021, she and her spouse’s monetary scenario modified consequently of the pandemic however they nonetheless needed to cowl issues like a brand new roof and fence for his or her home.

Their financial savings account dwindled, and Taylor’s nervousness spiked, leading to her occurring blood stress and nervousness treatment. The additional $500 the mom of two expects to obtain means the couple can construct up their security web once more, taking the stress off each of them. “When she’s not pressured, I am not pressured,” Taylor says. It “will assist the enterprise not directly, as a result of I may be extra productive.”

Guardian entrepreneurs face the extra problem of staying current with spouses and kids, says James Oliver Jr., founder and CEO of ParentPreneur Basis, an Atlanta-based nonprofit that helps Black mum or dad founders financially and with an internet neighborhood (of which Beck and Taylor are each members).

 Month-to-month funds “may very well be the distinction of sending the youngsters to summer season camp, shopping for further groceries, taking a bit trip, or taking the youngsters to the amusement park as soon as a month to assist the household bond,” he says.

Source: How the New Child Tax Credit Is Helping Parent Entrepreneurs | Inc.com

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Critics:

The Internal Revenue Service today launched two new online tools designed to help families manage and monitor the advance monthly payments of Child Tax Credits under the American Rescue Plan. These two new tools are in addition to the Non-filer Sign-up Tool, announced last week, which helps families not normally required to file an income tax return to quickly register for the Child Tax Credit. The new Child Tax Credit Eligibility Assistant allows families to answer a series of questions to quickly determine whether they qualify for the advance credit.

The Child Tax Credit Update Portal allows families to verify their eligibility for the payments and if they choose to, unenroll, or opt out from receiving the monthly payments so they can receive a lump sum when they file their tax return next year. This secure, password-protected tool is available to any eligible family with internet access and a smart phone or computer. Future versions of the tool planned in the summer and fall will allow people to view their payment history, adjust bank account information or mailing addresses and other features. A Spanish version is also planned.

Why Wall Street Is Afraid of Government-Backed Digital Dollar

Imagine Imagine logging on to your own account with the U.S. Federal Reserve. With your laptop or phone, you could zap cash anywhere instantly. There’d be no middlemen, no fees, no waiting for deposits or payments to clear.

That vision sums up the appeal of the digital dollar, the dream of futurists and the bane of bankers. It’s not the Bitcoin bros and other cryptocurrency fans pushing the disruptive idea but America’s financial and political elite. Fed Chair Jerome Powell promises fresh research and a set of policy questions for Congress to ponder this summer. J. Christopher Giancarlo, a former chairman of the Commodity Futures Trading Commission, is rallying support through the nonprofit Digital Dollar Project, a partnership with consulting giant Accenture Plc. To perpetuate American values such as free enterprise and the rule of law, “we should modernize the dollar,” he recently told a U.S. Senate banking subcommittee.

For now the dollar remains the premier global reserve currency and preferred legal tender for international trade and financial transactions. But a new flavor of cryptocurrency could pose a threat to that dominance, which is part of the reason the Federal Reserve Bank of Boston has been working with the Massachusetts Institute of Technology on developing prototypes for a digital-dollar platform.

Other governments, notably China’s, are ahead in digitizing their currencies. In these nations, regulators worry that the possibilities for fraud are multiplying as more individuals embrace cryptocurrency. Steven Mnuchin, former President Donald Trump’s treasury secretary, said he saw no immediate need for a digital dollar. His successor, Janet Yellen, has expressed interest in studying it. Support for a virtual greenback cuts across party lines in Congress, which will have a say on whether it becomes reality.

At a hearing in June, Senators Elizabeth Warren, a Massachusetts Democrat, and John Kennedy, a Louisiana Republican, signaled openness to the idea. Warren and other Democrats stressed the potential of the digital dollar to offer free services to low-income families who now pay high banking fees or are shut out of the system altogether.

Kennedy and fellow Republicans see a financial equivalent of the space race that pitted the U.S. against the Soviet Union—a battle for prestige, power, and first-mover advantage. This time the adversary is China, which announced this month that more than 10 million citizens are now eligible to participate in ongoing trials.

The strongest opposition to a virtual dollar will come from U.S. banks. They rely on $17 trillion in deposits to fund much of their core business, profiting from the difference between what they pay in interest to account holders and what they charge for loans. Banks also earn billions of dollars annually from overdraft, ATM, and account maintenance fees. By creating a digital currency, the Federal Reserve would in effect be competing with banks for customers.

In a recent blog post, Greg Baer, president of the Bank Policy Institute, which represents the industry, warned that homebuyers, businesses, and other customers would find it harder and more expensive to borrow money if the Fed were to infringe on the private sector’s historical central role in finance. “The Federal Reserve would gain extraordinary power,” wrote Baer, a former assistant treasury secretary in the Clinton administration.

Some economists warn that a digital dollar could destabilize the banking system. The federal government offers bank depositors $250,0000 in insurance, a program that’s successfully prevented bank runs since the Great Depression. But in a 2008-style financial panic, depositors might with a single click pull all their savings out of banks and convert them into direct obligations of the U.S. government.

“In a crisis, this may actually make matters worse,” says Eswar Prasad, a professor at Cornell University and the author of a book on digital currencies that will be published in September. Whether a virtual dollar is even necessary remains up for debate. For large companies, cross-border interbank payments are already fast, limiting the appeal of digital currencies. Early adopters of Bitcoin may have won an investment windfall as its value soared, but its volatility makes it a poor substitute for a reliable government-backed currency such as the dollar.

Yet there’s a new kind of crypto, called stablecoin, that could pose a threat to the dollar’s dominance. Similar to the other digital currencies, it’s essentially a string of code tracked and authenticated via an online ledger. But it has a crucial difference from Bitcoin and its ilk: Its value is pegged to a sovereign currency like the dollar, so it offers stability as well as privacy.

In June 2019, Facebook Inc. announced it was developing a stablecoin called Libra ( since renamed Diem). The social media giant’s 2.85 billion active users worldwide represent a huge test market. “That was a game changer,” Prasad says. “That served as a catalyst for a lot of central banks.”

Regulators also have concerns about consumer protection. Stablecoin is only as stable as the network of private participants who manage it on the web. Should something go wrong, holders could find themselves empty-handed. That prospect places pressure on governments to come up with their own alternatives.

Although the Fed has been studying the idea of a digital dollar since at least 2017, crucial details, including what role private institutions will play, remain unresolved. In the Bahamas, the only country with a central bank digital currency, authorized financial institutions are allowed to offer e-wallets for handling sand dollars, the virtual counterpart to the Bahamian dollar.

If depositors flocked to the virtual dollar, banks would need to find another way to fund their loans. Advocates of a digital dollar float the possibility of the Fed lending to banks so they could write loans. To help banks preserve deposits, the government could also set a ceiling on how much digital currency citizens can hold. In the Bahamas the amount is capped at $8,000.

Lev Menand, an Obama administration treasury adviser, cautions against such compromises, saying the priority should be offering unfettered access to a central bank digital currency, or CBDC. Menand, who now lectures at Columbia Law School, says that because this idea would likely require the passage of legislation, Congress faces a big decision: to create “a robust CBDC or a skim milk sort of product that has been watered down as a favor to big banks.”

By: Christopher Condon

Source: Cryptocurrency: Why Wall Street Is Afraid of Government-Backed Digital Dollar – Bloomberg

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Critics:

Wall Street is warming up to the idea that the next big disruptive force on the horizon is central bank digital currencies, even though the Federal Reserve likely remains a few years away from developing its own.

Led by countries as large as China and as small as the Bahamas, digital money is drawing stronger interest as the future of an increasingly cashless society. A digital dollar would resemble cryptocurrencies such as bitcoin or ethereum in some limited respects, but differ in important ways.

Rather than be a tradable asset with wildly fluctuating prices and limited use, the central bank digital currency would function more like dollars and have widespread acceptance. It also would be fully regulated and under a central authority.

Myriad questions remain before an institution as large as the Fed will wade in. But the momentum is building around the world. As the Fed and other central banks work through those logistical issues, Wall Street is growing in anticipation over what the future will hold.

“The race towards Digital Money 2.0 is on,” Citigroup said in a report. “Some have framed it as a new Space Race or Digital Currency Cold War. In our view, it doesn’t have to be a zero sum game — there’s a lot of room for the overall digital pie to grow.”

There, however, has been at least the semblance of a race, and China is perceived as taking the early lead. With the launch of a digital yuan last year, some fear that the edge China has ultimately could undermine the dollar’s status as the world’s reserve currency. Though China said that is not its objective, a Bank of America report notes that issuing digital dollars would let the U.S. currency “remain highly competitive … relative to other currencies.”

References:

Global Boom in House Prices Becomes a Dilemma for Central Banks

Surging house prices across much of the globe are emerging as a key test for central banks’ ability to rein in their crisis support.

Withdrawing stimulus too slowly risks inflating real estate further and worsening financial stability concerns in the longer term. Pulling back too hard means unsettling markets and sending property prices lower, threatening the economic recovery from the Covid-19 pandemic.

Bubble Trouble

Countries seeing surging real house price growth

Source: OECD

With memories of the global financial crisis that was triggered by a housing bust still fresh in policy makers minds, how to keep a grip on soaring house prices is a dilemma in the forefront of deliberations as recovering growth sees some central banks discuss slowing asset purchases and even raising interest rates.

Federal Reserve officials who favor tapering their bond buying program have cited rising house prices as one reason to do so. In particular, they are looking hard at the Fed’s purchases of mortgage backed securities, which some worry are stoking housing demand in an already hot market.

In the coming week, central bankers in New Zealand, South Korea and Canada meet to set policy, with soaring home prices in each spurring pressure to do something to keep homes affordable for regular workers.

New Zealand policy makers are battling the hottest property market in the world, according to the Bloomberg Economics global bubble ranking. The central bank, which meets Wednesday, has been given another tool to tackle the issue, and its projections for the official cash rate show it starting to rise in the second half of 2022.

Facing criticism for its role in stoking housing prices, Canada’s central bank has been among the first from advanced economies to shift to a less expansionary policy, with another round of tapering expected at a policy decision also on Wednesday.

The Bank of Korea last month warned that real estate is “significantly overpriced” and the burden of household debt repayment is growing. But a worsening virus outbreak may be a more pressing concern at Thursday’s policy meeting in Seoul.

In its biggest strategic rethink since the creation of the euro, the European Central Bank this month raised its inflation target and in a nod to housing pressures, officials will start considering owner-occupied housing costs in their supplementary measures of inflation.

The Bank of England last month indicated unease about the U.K. housing market. Norges Bank is another authority to have signaled it’s worried about the effect of ultra-low rates on the housing market and the risk of a build-up of financial imbalances.

Beginning of the End of Easy Money: Central Bank Quarterly Guide

The Bank for International Settlements used its annual report released last month to warn that house prices had risen more steeply during the pandemic than fundamentals would suggest, increasing the sector’s vulnerability if borrowing costs rise.

While the unwinding of pandemic-era is support is expected to be gradual for most central banks, how to do so without hurting mortgage holders will be a key challenge, according to Kazuo Momma, who used to be in charge of monetary policy at the Bank of Japan.

“Monetary policy is a blunt tool,” said Momma, who now works as an economist at Mizuho Research Institute. “If it is used for some specific purposes like restraining housing market activities, that could lead to other problems like overkilling the economic recovery.”

But not acting carries other risks. Analysis by Bloomberg Economics shows that housing markets are already exhibiting 2008 style bubble warnings, stoking warnings of financial imbalances and deepening inequality.

New Zealand, Canada and Sweden rank as the world’s frothiest housing markets, based on the key indicators used in the Bloomberg Economics dashboard focused on member countries of the Organisation for Economic Co-operation and Development. The U.K. and the U.S. are also near the top of the risk rankings.

As many economies still grapple with the virus or slow loan growth, central bankers may look for alternatives to interest-rate hikes such as changes to loan-to-value limits or risk weighting of mortgages — so called macro-prudential policy.

Yet such measures aren’t guaranteed to succeed because other dynamics like inadequate supply or government tax policies are important variables for housing too. And while ever cheap money is gushing from central banks, such measures are likely to struggle to rein in prices.

“The best approach would be to stop the further expansion of central bank balance sheets,” according to Gunther Schnabl of Leipzig University, who is an expert on international monetary systems. “As a second step, interest rates could be increased in a very slow and diligent manner over a long time period.”

Another possibility is that house prices reach a natural plateau. U.K. house prices, for example, fell for the first time in five months in June, a sign that the property market may have lost momentum as a tax incentive was due to come to an end.

There’s no sign of that in the U.S. though, where demand for homes remains strong despite record-high prices. Pending home sales increased across all U.S. regions in May, with the Northeast and West posting the largest gains.

While navigating the housing boom won’t be easy for central banks, it may not be too late to ward off the next crisis. Owner-occupy demand versus speculative buying remains a strong driver of growth. Banks aren’t showing signs of the kind of loose lending that preceded the global financial crisis, according to James Pomeroy, a global economist at HSBC Holdings Plc.

“If house prices are rising due to a shift in supply versus demand, which the pandemic has created due to more remote working and people wanting more space, it may not trigger a crisis in the same way as previous housing booms,” said Pomeroy. “The problems may arise further down the line, with younger people priced out of the property ladder even more.”

Read More:
A Housing Frenzy Sparks Bidding Wars From New York to Shenzhen

World’s Bubbliest Housing Markets Flash 2008 Style Warnings

Stimulus ‘Pandexit’ Is Next Challenge as Recovery Quickens

As they tip toe away from their crisis settings, monetary authorities in economies with heavily indebted households will need to be especially careful, said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis who used to work for the ECB and International Monetary Fund.

“Real estate prices, as with other asset prices, will continue to balloon as long as global liquidity remains so ample,” she said. “But the implications are much more severe than other asset prices as they affect households much more widely.”

— With assistance by Theophilos Argitis, and Peggy Collins

By:

Source: Global Boom in House Prices Becomes a Dilemma for Central Banks – Bloomberg

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Critics:

A housing bubble (or a housing price bubble) is one of several types of asset price bubbles which periodically occur in the market. The basic concept of a housing bubble is the same as for other asset bubbles, consisting of two main phases. First there is a period where house prices increase dramatically, driven more and more by speculation. In the second phase, house prices fall dramatically.

Housing bubbles tend to be among the asset bubbles with the largest effect on the real economy, because they are credit-fueled, because a large number of households participate and not just investors, and because the wealth effect from housing tends to be larger than for other types of financial assets.

References

  • Brunnermeier, M.K. and Oehmke, M. (2012) Bubbles, Financial Crises, and Systemic Risk NBER Working Paper No. 18398
  • see eg. Case, K.E., Quigley, J. and Shiller R. (2001). Comparing wealth effects: the stock market versus the housing market. National Bureau of Economic Research, Working Paper No. 8606., Benjamin, J., Chinloy, P. and Jud, D. (2004). ”Real estate versus financial wealth in consumption”. In: Journal of Real Estate Finance and Economics 29, pp. 341-354., Campbell, J. and J. Cocco (2004), How Do Housing Price Affect Consumption? Evidence from Micro Data. Harvard Institute of Economic Research, Discussion Paper No. 2045
  • Stiglitz, J.E. (1990). “Symposium on bubbles”. In: Journal of Economic Perspectives Vol. 4 No. 2, pp. 13-18.
  • Palgrave, R.H. I. (1926), “Palgrave’s Dictionary of Political Economy”, MacMillan & Co., London, England, p. 181.
  • Flood, R. P. and Hodrick, R. J. (1990), “On Testing for Speculative Bubbles”, The Journal of Economic Perspectives, Vol. 4 No. 2, pp. 85–101.
  • Shiller, R.J. (2005). Irrational Exuberance. 3nd. New Jersey: Princeton University Press. ISBN 0-691- 12335-7.
  • Smith, M. H. and Smith, G. (2006), “Bubble, Bubble, Where’s the Housing Bubble?”, Brookings Papers on Economic Activity, Vol. 2006 No. 1, pp. 1–50.
  • Cochrane, J. H. (2010), “Discount Rates”, Working paper, University of Chicago, Booth School of Business, and NBER, Chicago, Illinois, 27 December.Lind, H. (2009). “Price bubbles in housing markets: concept, theory and indicators”. In: International Journal of Housing Markets and Analysis Vol. 2 No. 1, pp. 78-90.

Asia Becomes Epicenter of Market Fears Over Slowdown in Growth

Asia is emerging as the epicenter for investor worries over global growth and the spread of coronavirus variants. While their peers in the U.S. and Europe remain near record highs, Asian stocks have fallen back in recent months amid slowing Chinese economic growth and a glacial rollout of vaccines. The trend accelerated Friday with the benchmark MSCI Asia Pacific Index briefly erasing year-to-date gains for the second time in as many months.

“Asia was seen as the poster child in pandemic response last year, but this year the slow vaccination rollout in most countries combined with the arrival of the delta variant means another lost year,” said Mark Matthews, head of Asia research with Bank Julius Baer & Co. in Singapore. “I suspect Asia will continue to lag as long as vaccination rollouts remain at their relatively sluggish levels and high daily new Covid counts prevent them from lifting mobility restrictions.”

The growing jitters in the region comes as investor concerns shift from runaway inflation to an early withdrawal of stimulus by central banks. China’s authorities signaled earlier this week they may soon unleash more support for the economy, suggesting the world’s fastest-pandemic recovery may be weaker than it appears.

A fresh regulatory crackdown on Chinese tech stocks this week has also impacted investor sentiment in the region. The Hang Seng China Enterprises Index fell briefly into a technical bear market Friday, led by weakness in the sector.

While Asia bore the brunt of the retreat in global equities, havens in other asset classes from Treasuries to the yen have rallied, and the rotation toward economically-sensitive cyclical stocks from their high-priced growth counterparts continued to unwind.

“It’s a sign of how challenging the reopening process is,” Marvin Loh, State Street senior global market strategist, said in an interview with Bloomberg TV. “What the PBOC is going through as well as these variants that keep popping up around the world shows it’s going to be an uneven process. Maybe a normalization tightening policy is not necessarily going to be as fluid.”

Covid Challenge

Covid 19 remains a key challenge. In Japan, Tokyo has declared a renewed state of emergency to combat the resurgent virus, banning spectators from the Olympics and pushing the Nikkei 225 Stock Average toward a correction. South Korea is intensifying social distancing measures in Seoul while Indonesia is battling a virus resurgence that has crippled its health system.

“Asian equities are being particularly impacted by the rebound in coronavirus cases in the region, fears about the impact of that on regional growth and concern that we may now have seen the best of the rebound globally,” said Shane Oliver, head of investment strategy with AMP Capital Investors in Sydney. “Asian shares may have led the way on this but coronavirus concerns may also weigh on global shares generally.”

For the APAC region, recent trade deals will likely invigorate and deepen economic integration over the coming few years. In late 2020, China, Japan, South Korea, Australia, New Zealand and 10 Association of Southeast Asian Nations (ASEAN) members signed the Regional Comprehensive Economic Partnership (RCEP) agreement after eight years of negotiation.

When fully implemented in 2022, RCEP will represent the world’s biggest trading bloc, covering about 30% of global GDP and trade. In addition, China concluded a Comprehensive Agreement on Investment (CAI) with the EU on the last day of 2020. The EU is China’s second-largest trading partner and the CAI will cover broad market access, including to key sectors such as alternative energy vehicles and medical services.

Although these trade deals will not have an immediate economic impact, in the medium term the treaties should cement Asia as the world’s most dynamic economic bloc embracing free trade, investment and globalization. They should also help to counter the disruptive geopolitical tensions and encourage the post-pandemic economic recovery in Asia.

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Critics:
The economy of Asia comprises more than 4.5 billion people (60% of the world population) living in 49 different nations. Asia is the fastest growing economic region, as well as the largest continental economy by both GDP Nominal and PPP in the world. Moreover, Asia is the site of some of the world’s longest modern economic booms, starting from the Japanese economic miracle (1950–1990), Miracle on the Han River (1961–1996) in South Korea, economic boom (1978–2013) in China, Tiger Cub Economies (1990–present) in Indonesia, Malaysia, Thailand, Philippines, and Vietnam, and economic boom in India (1991–present).
 
As in all world regions, the wealth of Asia differs widely between, and within, states. This is due to its vast size, meaning a huge range of different cultures, environments, historical ties and government systems. The largest economies in Asia in terms of PPP gross domestic product (GDP) are China, India, Japan, Indonesia, Turkey, South Korea, Saudi Arabia, Iran, Thailand and Taiwan and in terms of nominal gross domestic product (GDP) are China, Japan, India, South Korea, Indonesia, Saudi Arabia, Turkey, Taiwan, Thailand and Iran.
 
East Asian and ASEAN countries generally rely on manufacturing and trade (and then gradually upgrade to industry and commerce), and incrementally building on high-tech industry and financial industry for growth, countries in the Middle East depend more on engineering to overcome climate difficulties for economic growth and the production of commodities, principally Sweet crude oil.
 
Over the years, with rapid economic growth and large trade surplus with the rest of the world, Asia has accumulated over US$8.5 trillion of foreign exchange reserves – more than half of the world’s total, and adding tertiary and quaterny sectors to expand in the share of Asia‘s economy.

References

 

 

 

 

 

High Turnover? Here Are 3 Things CEOs Do That Sabotage Their Workplace Culture

She has one too many deadlines to deal with

Every CEO wants long-standing employees, but their ineffective leadership causes organizational stress that cripples the workplace culture. Quite often, we read articles or hear of CEOs abusing their power and tarnishing their company’s reputation.

This is due to them neglecting feedback from their team and making decisions based solely on their own judgement. Not only does this erode trust, but it sets a standard that employee and leadership voices are not welcome.

When employees are taken care of, they go above and beyond to drive the company forward. Conversely, when they don’t feel valued, appreciated or kept in the loop, employees quickly become disengaged. The cost of a disengaged employee impacts more than the bottom line.

It decreases productivity, creates negative client experiences and destroys the company culture, to name a few. According to a Gallup survey, the State of the American Workplace 2021, 80% of workers are not fully engaged or are actively disengaged at work.

While CEOs claim to embody a people-first and feedback-driven culture, they believe, due to their position, that they know better than everyone else. Todd Ramlin, manager of Cable Compare, said, “if a person is fortunate to have the opportunity to be a CEO, they need to ask themselves if they can live by the company values, expectations, rules and processes that are in place.” They can’t pick and choose which rules and processes to abide by, yet punish others when they do the same. Doing so cultivates a toxic workplace and demonstrates poor leadership.

Here are three things CEOs do that sabotage their workplace culture.

Embraces Data, Dodges Emotions

The workplace is made up of a diverse group of experiences and perspectives. CEOs who lack the emotional intelligence to understand another person’s viewpoint or situation will find themselves losing their most valuable people. Sabine Saadeh, financial trading and asset management expert, said, “companies that are only data driven and don’t care about the well-being of their employees will not sustain in today’s global economy.”

Businessolver’s 2021 State Of Workplace Empathy report, revealed that “68% of CEOs fear that they’ll be less respected if they show empathy in the workplace.” CEOs who fail to lead with empathy will find themselves with a revolving door of leadership team members and employees. I once had a CEO tell me that he didn’t want emotions present in his business because it created a distraction from the data. His motto was, “if it’s not data, it’s worthless”.

As such, he disregarded feedback of employee dissatisfaction and burnout. Yet, he couldn’t understand why the average tenure of his employees very rarely surpassed one year. Willie Greer, founder of The Product Analyst, asserted, “data is trash if you’re replacing workers because you care more about data than your people.”

Micromanages Their Leadership Team

One of the ways a CEO sabotages a company’s culture is by micromanaging their leadership team. Consequently, this leads to leadership having to micromanage their own team to satisfy the CEOs unrealistic expectations. When leadership feels disempowered to make decisions, they either pursue another opportunity or check out due to not being motivated to achieve company goals.

As such, the executives who were hired to bring change aren’t able to live up to their full potential. Moreover, they’re unable to make the impact they desired due to the CEOs lack of trust in them. Employees undoubtedly feel the stress of their leadership team as it reverberates across the company.

Arun Grewal, founder and Editor-in-chief at Coffee Breaking Pr0, said, most CEOs are specialists in one area or another, which can make them very particular. However, if they want to drive their company forward they need to trust in the experts they hired rather than trying to make all of the company’s decisions.

At one point during my career, I reported to a CEO who never allowed me to fully take over my department. Although he praised me for my HR expertise during the interview, once hired, I quickly realized he still wanted full control over my department. Despite not having HR experience, he disregarded everything I brought to the table to help his company.

I soon began questioning my own abilities. No matter how hard I tried to shield my team from the stress I endured, the CEO would reach out to them directly to micromanage their every move. This left our entire department feeling drained, demoralized and demotivated. Sara Bernier, founder of Born for Pets, said, “CEOs who meddle in the smallest of tasks chip away at the fundamentals of their own company because everything has to run through them”. She added, “this eliminates the employee’s ownership of their own work because all tasks are micromanaged by the CEO.

Neglects Valuable Employee Feedback

Instead of seeking feedback from their leadership team or employees, CEOs avoid it altogether. Eropa Stein, founder and CEO of Hyre, said, “making mistakes and getting negative feedback from your team is a normal part of leading a company, no matter how long you’ve been in business.”

She went on, “as a leader, it’s important to put your ego aside and listen to feedback that will help your business grow. If everyone agrees with you all the time, you’re creating a cult mentality that’ll be detrimental to your business’ success in the long run.” This results in a toxic and unproductive workplace culture.

What’s worse than avoiding constructive feedback is receiving it and disregarding it entirely. Neglecting valuable feedback constructs a company culture where no individual feels safe voicing their concerns. Rather than silence those who give negative feedback, CEOs should embrace them. These are the individuals who are bringing issues forward to turn them into strengths in an effort to create a stronger company.

Follow me on Twitter or LinkedIn. Check out my website.

I’m a Leadership Coach & Workplace Culture Consultant at Heidi Lynne Consulting helping individuals and organizations gain the confidence to become better leaders for themselves and their teams. As a consultant, I deliver and implement strategies to develop current talent and create impactful and engaging employee experiences. Companies hire me to to speak, coach, consult and train their teams and organizations of all sizes. I’ve gained a breadth of knowledge working internationally in Europe, America and Asia. I use my global expertise to provide virtual and in-person consulting and leadership coaching to the students at Babson College, Ivy League students and my global network. I’m a black belt in Six Sigma, former Society of Human Resources (SHRM) President and domestic violence mentor. Learn more at http://www.heidilynneco.com or get in touch at Heidi@heidilynneco.com.

Source: High Turnover? Here Are 3 Things CEOs Do That Sabotage Their Workplace Culture

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Critics:

Organizational culture refers to culture in any type of organization including that of schools, universities, not-for-profit groups, government agencies, or business entities. In business, terms such as corporate culture and company culture are often used to refer to a similar concept.

The term corporate culture became widely known in the business world in the late 1980s and early 1990s. Corporate culture was already used by managers, sociologists, and organizational theorists by the beginning of the 80s. The related idea of organizational climate emerged in the 1960s and 70s, and the terms are now somewhat overlapping,as climate is one aspect of culture that focuses primarily on the behaviors encouraged by the organization

If organizational culture is seen as something that characterizes an organization, it can be manipulated and altered depending on leadership and members. Culture as root metaphor sees the organization as its culture, created through communication and symbols, or competing metaphors. Culture is basic, with personal experience producing a variety of perspectives.

Most of the criticism comes from the writers in critical management studies who for example express skepticism about the functionalist and unitarist views about culture that are put forward by mainstream management writers. They stress the ways in which these cultural assumptions can stifle dissent towards management and reproduce propaganda and ideology. They suggest that organizations do not encompass a single culture, and cultural engineering may not reflect the interests of all stakeholders within an organization.

References

  • Schein, E. H. (1990). Organizational culture. American Psychologist, 45, 109–119. doi:10.1037/0003-066X.45.2.109
  • Compare: Hatch, Mary Jo; Cunliffe, Ann L. (2013) [1997]. “A history of organizational culture in organization theory”. Organization Theory: Modern, Symbolic and Postmodern Perspectives (2 ed.). Oxford: Oxford University Press. p. 161. ISBN 9780199640379. OCLC 809554483. Retrieved 7 June 2020. With the publication of his book The Changing Culture of a Factory in 1952, British sociologist Elliott Jaques became the first organization theorist to describe an organizational culture.
  • Jaques, Elliott (1951). The changing culture of a factory. Tavistock Institute of Human Relations. [London]: Tavistock Publications. p. 251. ISBN 978-0415264426. OCLC 300631.
  • Compare: Kummerow, Elizabeth (12 September 2013). Organisational culture : concept, context, and measurement. Kirby, Neil.; Ying, Lee Xin. New Jersey. p. 13. ISBN 9789812837837. OCLC 868980134. Jacques [sic], a Canadian psychoanalyst and organisational psychologist, made a major contribution […] with his detailed study of Glacier Metals, a medium-sized British manufacturing company.
  • Ravasi, D.; Schultz, M. (2006). “Responding to organizational identity threats: Exploring the role of organizational culture”. Academy of Management Journal. 49 (3): 433–458. CiteSeerX 10.1.1.472.2754. doi:10.5465/amj.2006.21794663.
  • Schein, Edgar H. (2004). Organizational culture and leadership (3rd ed.). San Francisco: Jossey-Bass. pp. 26–33. ISBN 0787968455. OCLC 54407721.
  • Schrodt, P (2002). “The relationship between organizational identification and organizational culture: Employee perceptions of culture and identification in a retail sales organization”. Communication Studies. 53 (2): 189–202. doi:10.1080/10510970209388584. S2CID 143645350.
  • Schein, Edgar (1992). Organizational Culture and Leadership: A Dynamic View. San Francisco, CA: Jossey-Bass. pp. 9.
  • Deal T. E. and Kennedy, A. A. (1982, 2000) Corporate Cultures: The Rites and Rituals of Corporate Life, Harmondsworth, Penguin Books, 1982; reissue Perseus Books, 2000
  • Kotter, J. P.; Heskett, James L. (1992). Corporate Culture and Performance. New York: The Free Press. ISBN 978-0-02-918467-7.
  • Selart, Marcus; Schei, Vidar (2011): “Organizational Culture”. In: Mark A. Runco and Steven R. Pritzker (eds.): Encyclopedia of Creativity, 2nd edition, vol. 2. San Diego: Academic Press, pp. 193–196.
  • Compare: Flamholtz, Eric G.; Randle, Yvonne (2011). Corporate Culture: The Ultimate Strategic Asset. Stanford Business Books. Stanford, California: Stanford University Press. p. 6. ISBN 9780804777544. Retrieved 2018-10-25. […] in a very real sense, corporate culture can be thought of as a company’s ‘personality’.
  • Compare: Flamholtz, Eric; Randle, Yvonne (2014). “13: Implications of organizational Life Cycles for Corporate Culture and Climate”. In Schneider, Benjamin; Barbera, Karen M. (eds.). The Oxford Handbook of Organizational Climate and Culture. Oxford Library of psychology. Oxford: Oxford University Press. p. 247. ISBN 9780199860715. Retrieved 2018-10-25. The essence of corporate culture, then, is the values, beliefs, and norms or behavioral practices that emerge in an organization. In this sense, organizational culture is the personality of the organization.
  • Compare: Flamholtz, Eric; Randle, Yvonne (2014). “13: Implications of organizational Life Cycles for Corporate Culture and Climate”. In Schneider, Benjamin; Barbera, Karen M. (eds.). The Oxford Handbook of Organizational Climate and Culture. Oxford Library of psychology. Oxford: Oxford University Press. p. 247. ISBN 9780199860715. Retrieved 2018-10-25. The essence of corporate culture, then, is the values, beliefs, and norms or behavioral practices that emerge in an organization.
  • Jaques, Elliott (1998). Requisite organization : a total system for effective managerial organization and managerial leadership for the 21st century (Rev. 2nd ed.). Arlington, VA: Cason Hall. ISBN 978-1886436039. OCLC 36162684.
  • Jaques, Elliott (2017). “Leadership and Organizational Values”. Requisite Organization: A Total System for Effective Managerial Organization and Managerial Leadership for the 21st Century (2 ed.). Routledge. ISBN 9781351551311. Retrieved 7 June 2020.
  • “Culture is everything,” said Lou Gerstner, the CEO who pulled IBM from near ruin in the 1990s.”, Culture Clash: When Corporate Culture Fights Strategy, It Can Cost You Archived 2011-11-10 at the Wayback Machine, knowmgmt, Arizona State University, March 30, 2011
  • Unlike many expressions that emerge in business jargon, the term spread to newspapers and magazines. Few usage experts object to the term. Over 80 percent of usage experts accept the sentence The new management style is a reversal of GE’s traditional corporate culture, in which virtually everything the company does is measured in some form and filed away somewhere.”, The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company.
  • One of the first to point to the importance of culture for organizational analysis and the intersection of culture theory and organization theory is Linda Smircich in her article Concepts of Culture and Organizational Analysis in 1983. See Smircich, Linda (1983). “Concepts of Culture and Organizational Analysis”. Administrative Science Quarterly. 28 (3): 339–358. doi:10.2307/2392246. hdl:10983/26094. JSTOR 2392246.
  • “The term “Corporate Culture” is fast losing the academic ring it once had among U.S. manager. Sociologists and anthropologists popularized the word “culture” in its technical sense, which describes overall behavior patterns in groups. But corporate managers, untrained in sociology jargon, found it difficult to use the term unselfconsciously.” in Phillip Farish, Career Talk: Corporate Culture, Hispanic Engineer, issue 1, year 1, 1982
  • Halpin, A. W., & Croft, D. B. (1963). The organizational climate of schools. Chicago: Midwest Administration Center of the University of Chicago.
  • Fred C. Lunenburg, Allan C. Ornstein, Educational Administration: Concepts and Practices, Cengage Learning, 2011, pp. 67
  • “What Is Organizational Climate?”. paulspector.com. Retrieved 2021-05-01.

Iceland Cuts Working Hours With No Productivity Loss, Same Pay

Iceland has achieved the holy grail for working stiffs: same pay for shorter hours.Results from two trials of reduced hours showed no productivity loss or decline in service levels, while employees reported less stress and an improved work-life balance, researchers at U.K.-based think tank Autonomy and Iceland’s Association for Sustainable Democracy said in a report.

Achieving shorter hours with sustained productivity and service levels involved rethinking how tasks were completed, according to the report. That included shortening meetings or replacing them with emails, cutting out unnecessary tasks, and rearranging shifts.

The trials, conducted from 2015 to 2019, cut hours to about 35 a week from 40 with no reduction in pay. Involving about 2,500 workers, equivalent to more than 1% of the Nordic country’s working population, results showed their “wellbeing dramatically increased,” the researchers said. Since then, 86% of Iceland’s entire working population have either moved to shorter hours or can negotiate to do so.

In Nordic peer Finland, Prime Minister Sanna Marin, 35, has suggested a four-day work week is worth looking into, saying employees deserve some of the trickle-down benefits of improved productivity. Even so, her government is currently not working on such policy.

Workers went from a 40-hour weekly schedule to 35- or 36-hour weekly schedules without a reduction in pay. The trials were launched after agitation from labor unions and grassroots organizations that pointed to Iceland’s low rankings among its Nordic neighbors when it comes to work-life balance.

Workers across a variety of public- and private-sector jobs participated in the trials. They included people working in day cares, assisted living facilities, hospitals, museums, police stations and Reykjavik government offices.

Participants reported back on how they reduced their hours. A common approach was to make meetings shorter and more focused. One workplace decided that meetings could be scheduled only before 3 p.m. Others replaced them altogether with email or other electronic correspondence.

Some workers started their shifts earlier or later, depending on demand. For example, at a day care, staff took turns leaving early as children went home. Offices with regular business hours shortened those hours, while some services were moved online.

Some coffee breaks were shortened or eliminated. The promise of a shorter workweek led people to organize their time and delegate tasks more efficiently, the study found.

Working fewer hours resulted in people feeling more energized and less stressed. They spent more time exercising and seeing friends, which then had a positive effect on their work, they said.

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Source: Iceland Cuts Working Hours With No Productivity Loss, Same Pay – Bloomberg

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Critics:

Many countries regulate the work week by law, such as stipulating minimum daily rest periods, annual holidays, and a maximum number of working hours per week. Working time may vary from person to person, often depending on economic conditions, location, culture, lifestyle choice, and the profitability of the individual’s livelihood.

For example, someone who is supporting children and paying a large mortgage might need to work more hours to meet basic costs of living than someone of the same earning power with lower housing costs. In developed countries like the United Kingdom, some workers are part-time because they are unable to find full-time work, but many choose reduced work hours to care for children or other family; some choose it simply to increase leisure time.

Standard working hours (or normal working hours) refers to the legislation to limit the working hours per day, per week, per month or per year. The employer pays higher rates for overtime hours as required in the law. Standard working hours of countries worldwide are around 40 to 44 hours per week (but not everywhere: from 35 hours per week in France to up to 112 hours per week in North Korean labor camps) and the additional overtime payments are around 25% to 50% above the normal hourly payments. Maximum working hours refers to the maximum working hours of an employee. The employee cannot work more than the level specified in the maximum working hours law.

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