The 5 Biggest Stories in Finance News This Year
So far, this year has featured some interesting events in the world of finance. Though the year is only half-way finished, there are several stories in the world of finance that definitely stand out. Greek Default Greece missed a payment valued at roughly 1.7 billion dollars. Failing to pay government debt obligations puts Greece on par with high-risk borrowers such Argentina, Somalia and Iraq. This will have lasting consequences not only for Greece, but for all of Eurozone monetary policy. AIIB Prominence China offered membership to nations interested in investing with the Asian Infrastructure Investment Bank. Notably, the U.S. and Japan chose to shun the AIIB and pressured allies to do likewise, though to no avail. The story signaled that financial cooperation and investment with Chinese-led institutions has become a very prudent and popular move.
Oil Supply and U.S. Shale Since oil prices fell dramatically in 2014, major producers like OPEC and others have fought to maintain market share by keeping up supply. Demand and overall economic growth is comparatively spotty, meaning oil prices are capped and will likely remain so for at least another year. U.S. shale fracking operations are only profitable at higher prices, which are unlikely to happen since there is no pent-up oil demand that might boost prices in the near future. This means that fracking operations will likely falter, affecting shale company employees, investors as well as various U.S. communities that have come to rely on the wealth generated by shale oil operations. Negative Nominal Rates on European Debt While Greek debt has risen to astronomical rates to compensate for ongoing systemic risk, other European countries have seen sovereign debt interest rates dip into negative values. This is a curve ball in terms of financial theory and risk assessment. Any debt corresponds to some level of risk, however low. Even "risk-free" U.S. Treasuries pay a positive rate to lenders. Nominally negative rates on debt are, to a large extent, an unknown variable for policymakers and investors. Affordable Healthcare Act Trends With the Supreme Court upholding premium subsidies throughout the nation, it appears that mild-to-moderate premiums combined with subsidy support will make the Affordable Healthcare Act ("Obamacare") viable in the near future. However, subsidies and insurance "risk corridors" risk blowing up the national debt if the program becomes too overwhelmed with "high risk" patients who are, ironically, exactly the people Obamacare was intended to help. Jonah Engler is a financial expert from New York City.