From FireDogLake:
Yesterday the White House took the last step to owning all three leftover Bush NAFTA-expansion deals with Korea, Colombia and Panama by announcing that they would send them to Congress imminently. The Economic Policy Institute estimates that we’ll lose 159,000 jobs with the Korea deal alone.
At a time of high unemployment, it’s difficult to fathom why the President would be fighting to increase our trade deficit and ship tens of thousands of jobs overseas.
Even more stunning, however, is the loophole in the Obama deal that will hand billions over to North Korea to spend on their nuclear weapons program (PDF).
Under the terms of NAFTA, goods have to have 50% domestic-made content in order to qualify for inclusion. However under KORUS, goods with up to 65% non-South-Korean content qualify, as long as final assembly off goods happens in South Korea. That means 65% of all parts can be made China, Vietnam, wherever — giving rise to fears that the South Korea deal will be a back-door extension of NAFTA for China.
But surely, somebody thought to exclude North Korean content from the deal, right? I mean, with all the huffing and puffing about the need for increased sanctions against North Korea to keep them from funding their nuclear program. At the very least, somebody must have included language in KORUS that makes an exception for US sanctions against North Korea, which would otherwise violate NAFTA’s ban on import licenses.
Well if that’s what you thought, you would be wrong.
Every day, 44,000 North Koreans are marched into a North Korea border sweat shop zone called Kaesong to work for 28 center per hour — of which the Kim regime keeps 55%. In 2007 Ambassador Jay Lefkowitz, the U.S. Special Envoy for Human Rights in North Korea, wrote that Kaesong was one of the only sources of cold hard currency North Korea had to fund its nuclear program:
Because the North Korean government takes a major portion of workers’ salaries, these arrangements provide material support for a rogue government, its nuclear ambitions, and its human rights atrocities.
According to research done by Public Citizen, Obama’s NAFTA-Korea deal not only fails to exclude North Korean content, it allows for a massive expansion of the Kaesong district — and the profits that North Korea will reap (PDF):
The U.S. government estimates that the North Korean government currently collects $3 million to $4 million a month from the Kaesong operations now, prior to a massive planned expansion of the border sweatshop zone. South Korea cut off most trade with North Korea after attacks last year, but left Kaesong trade open. There was $1.9 billion in total trade between the two Koreas in 2009, about half of which was through production by South Korean firms in Kaesong. While $1.9 billion is not a lot of money relative to the U.S. or South Korean economy, it constitutes more than a third of North Korea’s total external trade. Given the Department of Defense estimates that North Korea’s nuclear program cost the regime as little as $200 million to develop, the hard currency generated by North Korean trade flows is sufficient to finance the North’s nuclear proliferation regime several times over.
The North Korean government is projected to receive $9.55 billion in economic gains from Kaesong over nine years under a planned major expansion. This is equivalent to 36 percent of North Korea’s estimated national income. Hyundai and the Korea Land Corporation, the principal developers of Kaesong, plan to enlarge the complex from its current 800 acres to a more than 6,000-acre complex (or nine square miles), where 1,500 South Korean and other foreign firms will employ 350,000 North Korean workers. This would make the complex more than half the size of Alexandria, Virginia.
http://fdlaction.firedoglake.com/2011/06/29/what-obama-fights-for-giving-9-55-billion-to-north-korea-to-spend-on-nukes/
Thursday, June 30, 2011
China Buying Billions of Euros, Yet For How Long?
From the Wall Street Journal:
China's deep pockets are momentarily keeping the euro supported.
But with Greece's financial future still uncertain even after lawmakers passed an austerity package on Wednesday, and the single currency's long-term prospects far from assured, Beijing risks learning a lesson about trying to fight a market more inclined to sell than buy.
For months, whispers of "Asian official buying" have permeated markets when the euro fell below certain levels. That talk has kept euro/dollar hemmed into a tight seven-cent range since late May, even as fears of a Greek default make traders disinclined to hold the single currency.
China, the world's biggest holder of foreign-exchange reserves, has pledged financial support to the distressed euro-zone periphery while touting its economic links to Europe.
http://online.wsj.com/article/BT-CO-20110629-715034.html
China's deep pockets are momentarily keeping the euro supported.
But with Greece's financial future still uncertain even after lawmakers passed an austerity package on Wednesday, and the single currency's long-term prospects far from assured, Beijing risks learning a lesson about trying to fight a market more inclined to sell than buy.
For months, whispers of "Asian official buying" have permeated markets when the euro fell below certain levels. That talk has kept euro/dollar hemmed into a tight seven-cent range since late May, even as fears of a Greek default make traders disinclined to hold the single currency.
China, the world's biggest holder of foreign-exchange reserves, has pledged financial support to the distressed euro-zone periphery while touting its economic links to Europe.
http://online.wsj.com/article/BT-CO-20110629-715034.html
Wednesday, June 29, 2011
Charles Hugh Smith: The U.S. Is A Kleptocracy Too
From Of Two Minds:
Yesterday, I noted that Greece Is a Kleptocracy; the U.S. is a kleptocracy, too. Before you object with a florid speech about the Bill of Rights and free enterprise, please consider the following evidence that the U.S. is now a kleptocracy worthy of comparison to Greece:
1. Neither party has any interest in limiting the banking/financial cartel.
2. Our stock markets are dominated by insiders.
3. The rule of law in the U.S. has been divided into two branches: one in name only for the financial Elites and corporate cartels, and one for the rest of us mere citizens.
4. Just as in Greece, taxes are optional for the nation's financial Elites.
http://www.oftwominds.com/blogjune11/US-kleptocracy6-11.html
Yesterday, I noted that Greece Is a Kleptocracy; the U.S. is a kleptocracy, too. Before you object with a florid speech about the Bill of Rights and free enterprise, please consider the following evidence that the U.S. is now a kleptocracy worthy of comparison to Greece:
1. Neither party has any interest in limiting the banking/financial cartel.
2. Our stock markets are dominated by insiders.
3. The rule of law in the U.S. has been divided into two branches: one in name only for the financial Elites and corporate cartels, and one for the rest of us mere citizens.
4. Just as in Greece, taxes are optional for the nation's financial Elites.
http://www.oftwominds.com/blogjune11/US-kleptocracy6-11.html
Charles Hugh Smith: Greece Is A Kleptocracy
From Of Two Minds:
Despite a veritable flood of financial and political analysis about Greece, nobody seems to have noticed the obvious: Greece is a kleptocracy.
Here's the real dynamic in Greece: The Kleptocracy--broadly, the political and financial Elites of the nation--saw a stupendous opportunity to embezzle hundreds of billions of euros from greed-blinded European banks at super-low rates of interest.
Being kleptocrats, they sniffed out the basics of the bezzle right away, and have been playing it ever since: we're not paying any of these loans back, so go get the money from the European Central Bank (ECB) and the German taxpayers, or declare bankruptcy. Your choice.
The Greek kleptocrats knew all along that the German, Dutch, French and Finnish taxpayers were easy marks, just as they knew the European Union Power Elites would fall all over themselves to "save the euro" which was the centerpiece of their "one Europe" strategy of domination.
Only the Greek kleptocrats just beat them at their own game. The entire game plan of the "one Europe" Elites depends on nation-states actually complying with non-enforceable codes of conduct and on European banks making prudent loans.
Neither condition held: Greece's Elites reckoned they could game the system and string along the Eurocrats, if not forever, then certainly long enough to engorge their Swiss accounts with euros skimmed from the banks, and they've played that hand to perfection.
Their performance is truly a thing of beauty, a masterful display of the Big Con.
http://www.oftwominds.com/blogjune11/Greece-kleptocracy6-11.html
Despite a veritable flood of financial and political analysis about Greece, nobody seems to have noticed the obvious: Greece is a kleptocracy.
Here's the real dynamic in Greece: The Kleptocracy--broadly, the political and financial Elites of the nation--saw a stupendous opportunity to embezzle hundreds of billions of euros from greed-blinded European banks at super-low rates of interest.
Being kleptocrats, they sniffed out the basics of the bezzle right away, and have been playing it ever since: we're not paying any of these loans back, so go get the money from the European Central Bank (ECB) and the German taxpayers, or declare bankruptcy. Your choice.
The Greek kleptocrats knew all along that the German, Dutch, French and Finnish taxpayers were easy marks, just as they knew the European Union Power Elites would fall all over themselves to "save the euro" which was the centerpiece of their "one Europe" strategy of domination.
Only the Greek kleptocrats just beat them at their own game. The entire game plan of the "one Europe" Elites depends on nation-states actually complying with non-enforceable codes of conduct and on European banks making prudent loans.
Neither condition held: Greece's Elites reckoned they could game the system and string along the Eurocrats, if not forever, then certainly long enough to engorge their Swiss accounts with euros skimmed from the banks, and they've played that hand to perfection.
Their performance is truly a thing of beauty, a masterful display of the Big Con.
http://www.oftwominds.com/blogjune11/Greece-kleptocracy6-11.html
Greek Government Austerity Measures
Korea had to accept austerity measures during the 1997 financial crisis. One has to understand the root causes of the Greek crisis and the role of the IMF beneath the surface.
From BBC:
The Greek parliament is debating the latest set of austerity measures, which it needs to pass to qualify for another payment under the bail-out from the European Union and the International Monetary Fund.
The five-year plan was changed last week to allow for more money to be raised through tax increases and less money to be saved through spending cuts.
The plan involves cutting 14.32bn euros ($20.50bn; £12.82bn) of public spending, while raising 14.09bn euros in taxes over five years.
These are some of the austerity measures planned.
TAXATION
• Taxes will increase by 2.32bn euros this year, with additional taxes of 3.38bn euros in 2012, 152m euros in 2013 and 699m euros in 2014.
• A solidarity levy of between 1% and 5% of income will be levied on households to raise 1.38bn euros.
• The tax-free threshold for income tax will be lowered from 12,000 to 8,000 euros.
• There will be higher property taxes
• VAT rates are to rise: the 19% rate will increase to 23%, 11% becomes 13%, and 5.5% will increase to 6.5%.
• The VAT rate for restaurants and bars will rise to 23% from 13%.
• Luxury levies will be introduced on yachts, pools and cars.
• Some tax exemptions will be scrapped
• Excise taxes on fuel, cigarettes and alcohol will rise by one third.
• Special levies on profitable firms, high-value properties and people with high incomes will be introduced.
PUBLIC SECTOR CUTS
• The public sector wage bill will be cut by 770m euros in 2011, 600m euros in 2012, 448m euros in 2013, 300m euros in 2014 and 71m euros in 2015.
• Nominal public sector wages will be cut by 15%.
• Wages of employees of state-owned enterprises will be cut by 30% and there will be a cap on wages and bonuses.
• All temporary contracts for public sector workers will be terminated.
• Only one in 10 civil servants retiring this year will be replaced and only one in 5 in coming years.
SPENDING CUTS
• Defence spending will be cut by 200m euros in 2012, and by 333m euros each year from 2013 to 2015.
• Health spending will be cut by 310m euros this year and a further 1.81bn euros in 2012-2015, mainly by lowering regulated prices for drugs.
• Public investment will be cut by 850m euros this year.
• Subsidies for local government will be reduced.
• Education spending will be cut by closing or merging 1,976 schools.
CUTTING BENEFITS
• Social security will be cut by 1.09bn euros this year, 1.28bn euros in 2012, 1.03bn euros in 2013, 1.01bn euros in 2014 and 700m euros in 2015.
• There will be more means-testing and some benefits will be cut.
• The government hopes to collect more social security contributions by cracking down on evasion and undeclared work.
• The statutory retirement age will be raised to 65, 40 years of work will be needed for a full pension and benefits will be linked more closely to lifetime contributions.
PRIVATISATION
• The government aims to raise 50bn euros from privatisations by 2015, including:
• Selling stakes this year in the betting monopoly OPAP, the lender Hellenic Postbank, port operators Piraeus Port and Thessaloniki Port as well as Thessaloniki Water.
• It has agreed to sell 10% of Hellenic Telecom to Deutsche Telekom for about 400m euros.
• Next year, the government plans to sell stakes in Athens Water, refiner Hellenic Petroleum, electricity utility PPC, lender ATEbank as well as ports, airports, motorway concessions, state land and mining rights.
• It plans further sales to raise 7bn euros in 2013, 13bn euros in 2014 and 15bn euros in 2015.
http://www.bbc.co.uk/news/business-13940431?print=true
From BBC:
The Greek parliament is debating the latest set of austerity measures, which it needs to pass to qualify for another payment under the bail-out from the European Union and the International Monetary Fund.
The five-year plan was changed last week to allow for more money to be raised through tax increases and less money to be saved through spending cuts.
The plan involves cutting 14.32bn euros ($20.50bn; £12.82bn) of public spending, while raising 14.09bn euros in taxes over five years.
These are some of the austerity measures planned.
TAXATION
• Taxes will increase by 2.32bn euros this year, with additional taxes of 3.38bn euros in 2012, 152m euros in 2013 and 699m euros in 2014.
• A solidarity levy of between 1% and 5% of income will be levied on households to raise 1.38bn euros.
• The tax-free threshold for income tax will be lowered from 12,000 to 8,000 euros.
• There will be higher property taxes
• VAT rates are to rise: the 19% rate will increase to 23%, 11% becomes 13%, and 5.5% will increase to 6.5%.
• The VAT rate for restaurants and bars will rise to 23% from 13%.
• Luxury levies will be introduced on yachts, pools and cars.
• Some tax exemptions will be scrapped
• Excise taxes on fuel, cigarettes and alcohol will rise by one third.
• Special levies on profitable firms, high-value properties and people with high incomes will be introduced.
PUBLIC SECTOR CUTS
• The public sector wage bill will be cut by 770m euros in 2011, 600m euros in 2012, 448m euros in 2013, 300m euros in 2014 and 71m euros in 2015.
• Nominal public sector wages will be cut by 15%.
• Wages of employees of state-owned enterprises will be cut by 30% and there will be a cap on wages and bonuses.
• All temporary contracts for public sector workers will be terminated.
• Only one in 10 civil servants retiring this year will be replaced and only one in 5 in coming years.
SPENDING CUTS
• Defence spending will be cut by 200m euros in 2012, and by 333m euros each year from 2013 to 2015.
• Health spending will be cut by 310m euros this year and a further 1.81bn euros in 2012-2015, mainly by lowering regulated prices for drugs.
• Public investment will be cut by 850m euros this year.
• Subsidies for local government will be reduced.
• Education spending will be cut by closing or merging 1,976 schools.
CUTTING BENEFITS
• Social security will be cut by 1.09bn euros this year, 1.28bn euros in 2012, 1.03bn euros in 2013, 1.01bn euros in 2014 and 700m euros in 2015.
• There will be more means-testing and some benefits will be cut.
• The government hopes to collect more social security contributions by cracking down on evasion and undeclared work.
• The statutory retirement age will be raised to 65, 40 years of work will be needed for a full pension and benefits will be linked more closely to lifetime contributions.
PRIVATISATION
• The government aims to raise 50bn euros from privatisations by 2015, including:
• Selling stakes this year in the betting monopoly OPAP, the lender Hellenic Postbank, port operators Piraeus Port and Thessaloniki Port as well as Thessaloniki Water.
• It has agreed to sell 10% of Hellenic Telecom to Deutsche Telekom for about 400m euros.
• Next year, the government plans to sell stakes in Athens Water, refiner Hellenic Petroleum, electricity utility PPC, lender ATEbank as well as ports, airports, motorway concessions, state land and mining rights.
• It plans further sales to raise 7bn euros in 2013, 13bn euros in 2014 and 15bn euros in 2015.
http://www.bbc.co.uk/news/business-13940431?print=true
Tuesday, June 28, 2011
China’s Local Governments Run Up Huge Debts, Risk Defaulting
As mentioned on more than a few occasions, China’s bubble burst would have significant ramifications for the global economy.
From China Daily:
Local governments had an overall debt of 10.7 trillion yuan ($1.65 trillion) by the end of 2010, said China's top auditor on Monday in a report to the National People's Congress.
He warned that some were at risk of defaulting on payments.
It was the first time the world's second-largest economy publicly announced the size of its local governments' debts. The scale amounts to more than one-quarter of its GDP in 2010, which stood at 39.8 trillion yuan.
Concerns are rising that the problem of local government debt could destabilize the financial system of the country if it is not managed properly, especially after the central government's tightening of the housing market, which could affect local fiscal revenue that is highly dependent on land sales and make debt repayment more difficult.
In addition, China's ambitious plan to construct 36 million affordable homes during the coming five years, including 10 million in 2011 and 10 million in 2012, added to worries about increasing capital tension and rising non-performing loans in commercial banks.
About 79 percent of the local government loans were made by banks across the country, according to the NAO.
Lu Zhengwei, chief economist at the Industrial Bank, said the figures released were moderate compared with previous estimates, and risks lying in these loans are quite limited.
"Overdue loans take up only a small proportion of the total lending and local governments didn't pay them in a timely way mainly because deadlines were too concentrated, not because of deteriorated ability to repay."
http://usa.chinadaily.com.cn/epaper/2011-06/28/content_12793025.htm
From China Daily:
Local governments had an overall debt of 10.7 trillion yuan ($1.65 trillion) by the end of 2010, said China's top auditor on Monday in a report to the National People's Congress.
He warned that some were at risk of defaulting on payments.
It was the first time the world's second-largest economy publicly announced the size of its local governments' debts. The scale amounts to more than one-quarter of its GDP in 2010, which stood at 39.8 trillion yuan.
Concerns are rising that the problem of local government debt could destabilize the financial system of the country if it is not managed properly, especially after the central government's tightening of the housing market, which could affect local fiscal revenue that is highly dependent on land sales and make debt repayment more difficult.
In addition, China's ambitious plan to construct 36 million affordable homes during the coming five years, including 10 million in 2011 and 10 million in 2012, added to worries about increasing capital tension and rising non-performing loans in commercial banks.
About 79 percent of the local government loans were made by banks across the country, according to the NAO.
Lu Zhengwei, chief economist at the Industrial Bank, said the figures released were moderate compared with previous estimates, and risks lying in these loans are quite limited.
"Overdue loans take up only a small proportion of the total lending and local governments didn't pay them in a timely way mainly because deadlines were too concentrated, not because of deteriorated ability to repay."
http://usa.chinadaily.com.cn/epaper/2011-06/28/content_12793025.htm
China Will Bail Out Insolvent European Countries
From Zero Hedge:
As expected, China is the new IMF. No surprise there.
• CHINESE PREMIER WEN TELLS BBC WILL LEND TO EUROPEAN COUNTRIES HAVING TROUBLE BORROWING
All this means is that China will do everything in its power to prevent the ECB from launching an outright unsterilized monetization episode, which will double the amount of importable inflation (plunging EUR) to hit the Chinese domestic economy, and destabilize the already shaky stability, so critical for the Chinese communist party. And since the USD and the CNY are pegged, this has the added benefit of devaluaing the CNY instead even more if not against the USD, then against the CNY, which is now importing European sovereign risk and will continue to do so, until China finds itself in the same lock out as half of Europe currently.
As for the IMF popularity contest, better known as "who is thst most feminine", it has just been relegated into complete historic obscurity and irrelevance. Which is sad because Lagarde may have actually had something worthwhile to contribute. Too bad her organization was just been rendered obsolete.
More empty rhetoric from Wen, courtesy of Reuters (http://www.reuters.com/article/2011/06/26/britain-china-wen-idUSL6E7HQ04I20110626):
Chinese Premier Wen Jiabao said on Sunday he had no intention of pursuing a trade surplus and that he wanted balanced, sustainable trade growth for his country.
He was speaking during a tour of MG Motor's Longbridge factory in Birmingham, central England, during a three-day trade and political mission to Britain.
"China has no intention to pursue a trade surplus. What we want is to have balanced and sustainable growth of trade," he told the BBC through an interpreter.
He also said China would lend European countries experiencing trouble borrowing, just as it announced it would do for Hungary earlier this week.
We get it: China will not pursue a trade surplus... It will just happen purely accidentally for the next decade.
http://www.zerohedge.com/article/china-says-it-will-bailout-insolvent-european-countries
As expected, China is the new IMF. No surprise there.
• CHINESE PREMIER WEN TELLS BBC WILL LEND TO EUROPEAN COUNTRIES HAVING TROUBLE BORROWING
All this means is that China will do everything in its power to prevent the ECB from launching an outright unsterilized monetization episode, which will double the amount of importable inflation (plunging EUR) to hit the Chinese domestic economy, and destabilize the already shaky stability, so critical for the Chinese communist party. And since the USD and the CNY are pegged, this has the added benefit of devaluaing the CNY instead even more if not against the USD, then against the CNY, which is now importing European sovereign risk and will continue to do so, until China finds itself in the same lock out as half of Europe currently.
As for the IMF popularity contest, better known as "who is thst most feminine", it has just been relegated into complete historic obscurity and irrelevance. Which is sad because Lagarde may have actually had something worthwhile to contribute. Too bad her organization was just been rendered obsolete.
More empty rhetoric from Wen, courtesy of Reuters (http://www.reuters.com/article/2011/06/26/britain-china-wen-idUSL6E7HQ04I20110626):
Chinese Premier Wen Jiabao said on Sunday he had no intention of pursuing a trade surplus and that he wanted balanced, sustainable trade growth for his country.
He was speaking during a tour of MG Motor's Longbridge factory in Birmingham, central England, during a three-day trade and political mission to Britain.
"China has no intention to pursue a trade surplus. What we want is to have balanced and sustainable growth of trade," he told the BBC through an interpreter.
He also said China would lend European countries experiencing trouble borrowing, just as it announced it would do for Hungary earlier this week.
We get it: China will not pursue a trade surplus... It will just happen purely accidentally for the next decade.
http://www.zerohedge.com/article/china-says-it-will-bailout-insolvent-european-countries
Monday, June 27, 2011
The Credit Default Swaps That Underlie the Greek Crisis
From Jesse’s Café:
This interview will help you to understand the problems surrounding the Greek crisis, the intended looting of their public resources, and the model that is being repeated by the banks around world.
Rickards on Regulatory Capture, Corrupt Banks, and the Credit Default Swaps on Sovereign Defaults
(http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/6/25_Jim_Rickards.html)
A single currency cannot span independent fiscal authorities because it removes the ability of the currency to flucuate in value based on their independent economic health, acts of God, and social policy choices of the different social organizations. This is basic monetary theory. I was surprised that it lasted as long as it did, but it was to the advantage of the financial world to tolerate the attendant deceptions because they were growing fat on it.
And a similar thing can be said for the global currency trading regime based on the dollar and arbitrary valuations subject to national manipulation. It has allowed multinational corporations and banks to achieve tremendous power and advantage over local governments.
In other words, the currency regime and financial deregulation are the setup, and the credit default swaps are the trigger. Why the politicians permit the naked selling and buying of such instruments by banks handling public money is beyond my understanding, save pure, blind greed.
I always thought that a crisis would be put forward as an opportunity for the 'one-worlders' to once again promote their idea of a one world government, and a universal order of central financial authority that eventually and inevitably evolves into a single political system. And that is still very much in the cards.
For this to happen, national governments must be undermined and absorbed, their people brought down to their knees financially. And then their saviors can begin the work of ordering their lives.
http://jessescrossroadscafe.blogspot.com/2011/06/credit-default-swaps-that-underlie.html
This interview will help you to understand the problems surrounding the Greek crisis, the intended looting of their public resources, and the model that is being repeated by the banks around world.
Rickards on Regulatory Capture, Corrupt Banks, and the Credit Default Swaps on Sovereign Defaults
(http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/6/25_Jim_Rickards.html)
A single currency cannot span independent fiscal authorities because it removes the ability of the currency to flucuate in value based on their independent economic health, acts of God, and social policy choices of the different social organizations. This is basic monetary theory. I was surprised that it lasted as long as it did, but it was to the advantage of the financial world to tolerate the attendant deceptions because they were growing fat on it.
And a similar thing can be said for the global currency trading regime based on the dollar and arbitrary valuations subject to national manipulation. It has allowed multinational corporations and banks to achieve tremendous power and advantage over local governments.
In other words, the currency regime and financial deregulation are the setup, and the credit default swaps are the trigger. Why the politicians permit the naked selling and buying of such instruments by banks handling public money is beyond my understanding, save pure, blind greed.
I always thought that a crisis would be put forward as an opportunity for the 'one-worlders' to once again promote their idea of a one world government, and a universal order of central financial authority that eventually and inevitably evolves into a single political system. And that is still very much in the cards.
For this to happen, national governments must be undermined and absorbed, their people brought down to their knees financially. And then their saviors can begin the work of ordering their lives.
http://jessescrossroadscafe.blogspot.com/2011/06/credit-default-swaps-that-underlie.html
Friday, June 24, 2011
Zuckerman: Why the Jobs Situation Is Worse Than It Looks
From U.S. News and World Report:
The Great Recession has now earned the dubious right of being compared to the Great Depression. In the face of the most stimulative fiscal and monetary policies in our history, we have experienced the loss of over 7 million jobs, wiping out every job gained since the year 2000. From the moment the Obama administration came into office, there have been no net increases in full-time jobs, only in part-time jobs. This is contrary to all previous recessions. Employers are not recalling the workers they laid off from full-time employment.
The real job losses are greater than the estimate of 7.5 million. They are closer to 10.5 million, as 3 million people have stopped looking for work. Equally troublesome is the lower labor participation rate; some 5 million jobs have vanished from manufacturing, long America's greatest strength. Just think: Total payrolls today amount to 131 million, but this figure is lower than it was at the beginning of the year 2000, even though our population has grown by nearly 30 million
The inescapable bottom line is an unprecedented slack in the U.S. labor market. Labor's share of national income has fallen to the lowest level in modern history, down to 57.5 percent in the first quarter as compared to 59.8 percent when the so-called recovery began. This reflects not only the 7 million fewer workers but the fact that wages for part-time workers now average $19,000—less than half the median income.
http://www.usnews.com/opinion/mzuckerman/articles/2011/06/20/why-the-jobs-situation-is-worse-than-it-looks_print.html
The Great Recession has now earned the dubious right of being compared to the Great Depression. In the face of the most stimulative fiscal and monetary policies in our history, we have experienced the loss of over 7 million jobs, wiping out every job gained since the year 2000. From the moment the Obama administration came into office, there have been no net increases in full-time jobs, only in part-time jobs. This is contrary to all previous recessions. Employers are not recalling the workers they laid off from full-time employment.
The real job losses are greater than the estimate of 7.5 million. They are closer to 10.5 million, as 3 million people have stopped looking for work. Equally troublesome is the lower labor participation rate; some 5 million jobs have vanished from manufacturing, long America's greatest strength. Just think: Total payrolls today amount to 131 million, but this figure is lower than it was at the beginning of the year 2000, even though our population has grown by nearly 30 million
The inescapable bottom line is an unprecedented slack in the U.S. labor market. Labor's share of national income has fallen to the lowest level in modern history, down to 57.5 percent in the first quarter as compared to 59.8 percent when the so-called recovery began. This reflects not only the 7 million fewer workers but the fact that wages for part-time workers now average $19,000—less than half the median income.
http://www.usnews.com/opinion/mzuckerman/articles/2011/06/20/why-the-jobs-situation-is-worse-than-it-looks_print.html
Charles Hugh Smith: Inevitable Catastrophe: The Fruits of Moral Hazard on a Global Scale
From Of Two Minds:
Identify the common characteristic of these three statements:
1. The Federal Reserve will never let the stock market decline, i.e. the "Bernanke put"
2. The Chinese government will never let property prices decline
3. The European Central Bank will never let Greece default
The answer of course is moral hazard: a person who is insulated from risk will have an insatiable appetite for risky bets because any gains will be theirs to keep but any losses will be covered by the central bank or government. The global financial authorities’ success in propping up assets (stocks in the U.S., real estate in China, banks in Europe, etc.) over the past three years has strengthened this asymmetric disregard for systemic risk into a dangerously quasi-religious faith that central banks and governments have essentially unlimited power to keep asset prices aloft via printing money, manipulation of markets and financialization of their economies.
http://www.oftwominds.com/blogjune11/moral-hazard6-11.html
Identify the common characteristic of these three statements:
1. The Federal Reserve will never let the stock market decline, i.e. the "Bernanke put"
2. The Chinese government will never let property prices decline
3. The European Central Bank will never let Greece default
The answer of course is moral hazard: a person who is insulated from risk will have an insatiable appetite for risky bets because any gains will be theirs to keep but any losses will be covered by the central bank or government. The global financial authorities’ success in propping up assets (stocks in the U.S., real estate in China, banks in Europe, etc.) over the past three years has strengthened this asymmetric disregard for systemic risk into a dangerously quasi-religious faith that central banks and governments have essentially unlimited power to keep asset prices aloft via printing money, manipulation of markets and financialization of their economies.
http://www.oftwominds.com/blogjune11/moral-hazard6-11.html
China Working with IMF to Avoid EU Debt Restructuring
From Market News:
China doesn't want to see a eurozone debt restructuring and is making efforts with the International Monetary Fund and countries related to the sovereign crisis on avoiding it, a government researcher said Friday.
"China, the IMF and related countries are all making efforts...we don't want to see a debt restructuring," Qu Xing, director of the China Institute of International Studies, a Foreign Ministry think tank, told reporters at a briefing here Friday.
http://imarketnews.com/node/32703
China doesn't want to see a eurozone debt restructuring and is making efforts with the International Monetary Fund and countries related to the sovereign crisis on avoiding it, a government researcher said Friday.
"China, the IMF and related countries are all making efforts...we don't want to see a debt restructuring," Qu Xing, director of the China Institute of International Studies, a Foreign Ministry think tank, told reporters at a briefing here Friday.
http://imarketnews.com/node/32703
Wednesday, June 22, 2011
Bill Gross: Set the Date for QE3
From Zero Hedge:
Next Jackson Hole in August will likely hint at QE3/ interest rate caps
http://www.zerohedge.com/article/bill-gross-just-set-date-operation-twist-2-and-qe3
Next Jackson Hole in August will likely hint at QE3/ interest rate caps
http://www.zerohedge.com/article/bill-gross-just-set-date-operation-twist-2-and-qe3
Tuesday, June 21, 2011
Nigel Farage: Greece Must Be Allowed To Default
From Public Service Europe:
The European elite is ignoring the will of the people by protecting Greece from default, claims UKIP leader Nigel Farage MEP
As the European economic crisis unfolds, it is becoming obvious that there are two distinct ideas out there about how to proceed. One is favoured by the international financial elite, the European Union and the political leaderships of member states - and the other is the approach that is gaining purchase outside the chancelleries.
The former is the creation of a true European nation, a fiscal and debt union; the latter is allowing market forces to work and letting Greece unpick its monetary handcuffs and find its own level. I ask whether we would prefer to live under a benevolent dictatorship now because the time for answering it is fast approaching, the fork in the road is upon us and we are going to have to choose. I am not going to argue that one answer is entirely good, and the other entirely bad, but that each has its positives and negatives. It depends on your perspective, that is all.
Those that favour the top-down approach can include almost everybody with political influence on the continent, and many off it. To that number must be added the acting Director of the International Monetary Fund, the American John Lipsky and his director of European operations Antonio Borges. To them stability of the system is all, and protection of the status quo overrules other values - which at other times they might trumpet. In Luxembourg, on Monday, they launched the IMF's latest statement on the eurozone. In the IMF's normal user-friendly way, this study is called the 2011 Article IV mission.
Incomprehensible in title, the importance of this document should not be overlooked. What this report states so baldly is that the interests of the European elite must and will take precedence over the wishes of the people. After all, as is generally accepted, the bailouts are currently transferring institutional and private banking debt from those institutions to the taxpayers. Those taxpayers must therefore have a choice.
But they are to be ignored. Listen to Borges state: "We really believe that many of the current problems result from incomplete integration. In the process of developing monetary union like the United States, which is a fully integrated monetary union, you have obstacles that magnify the problem." What he seems to forget is that final fiscal and monetary union in the US only happened after the then bloodiest war in history, in a country that was already united by language law and customs. It is extraordinary that the IMF is suggesting that this economic crisis is in any way synonymous with what was happening in the US in the 1840s. The only slavery here is of the people to the Eurocrats dream. For without democratic control, we are left with something akin to slavery.
The other option is for Greece to default, leave the euro, find its own level, set its own interest rates and trade itself out of its predicament. The Greeks are no less hard working than any other nation, but have been gulled through the application of economic policies that suit Thüringen not Thessalonica. A wall has been built around the minds of the elite, one in which there is no door marked "exit" merely the ability to build the walls higher. The wall is their political commitment to the euro at all costs; the bricks are their hectoring communiqués.
We must make no bones about it, according to the EU and the IMF there is no alternative. The people of Greece must do as they are told. They cannot countenance default and leaving the single currency. What then is the price of democracy in its birthplace?
http://www.publicserviceeurope.com/article/500/greece-must-be-allowed-to-default
The European elite is ignoring the will of the people by protecting Greece from default, claims UKIP leader Nigel Farage MEP
As the European economic crisis unfolds, it is becoming obvious that there are two distinct ideas out there about how to proceed. One is favoured by the international financial elite, the European Union and the political leaderships of member states - and the other is the approach that is gaining purchase outside the chancelleries.
The former is the creation of a true European nation, a fiscal and debt union; the latter is allowing market forces to work and letting Greece unpick its monetary handcuffs and find its own level. I ask whether we would prefer to live under a benevolent dictatorship now because the time for answering it is fast approaching, the fork in the road is upon us and we are going to have to choose. I am not going to argue that one answer is entirely good, and the other entirely bad, but that each has its positives and negatives. It depends on your perspective, that is all.
Those that favour the top-down approach can include almost everybody with political influence on the continent, and many off it. To that number must be added the acting Director of the International Monetary Fund, the American John Lipsky and his director of European operations Antonio Borges. To them stability of the system is all, and protection of the status quo overrules other values - which at other times they might trumpet. In Luxembourg, on Monday, they launched the IMF's latest statement on the eurozone. In the IMF's normal user-friendly way, this study is called the 2011 Article IV mission.
Incomprehensible in title, the importance of this document should not be overlooked. What this report states so baldly is that the interests of the European elite must and will take precedence over the wishes of the people. After all, as is generally accepted, the bailouts are currently transferring institutional and private banking debt from those institutions to the taxpayers. Those taxpayers must therefore have a choice.
But they are to be ignored. Listen to Borges state: "We really believe that many of the current problems result from incomplete integration. In the process of developing monetary union like the United States, which is a fully integrated monetary union, you have obstacles that magnify the problem." What he seems to forget is that final fiscal and monetary union in the US only happened after the then bloodiest war in history, in a country that was already united by language law and customs. It is extraordinary that the IMF is suggesting that this economic crisis is in any way synonymous with what was happening in the US in the 1840s. The only slavery here is of the people to the Eurocrats dream. For without democratic control, we are left with something akin to slavery.
The other option is for Greece to default, leave the euro, find its own level, set its own interest rates and trade itself out of its predicament. The Greeks are no less hard working than any other nation, but have been gulled through the application of economic policies that suit Thüringen not Thessalonica. A wall has been built around the minds of the elite, one in which there is no door marked "exit" merely the ability to build the walls higher. The wall is their political commitment to the euro at all costs; the bricks are their hectoring communiqués.
We must make no bones about it, according to the EU and the IMF there is no alternative. The people of Greece must do as they are told. They cannot countenance default and leaving the single currency. What then is the price of democracy in its birthplace?
http://www.publicserviceeurope.com/article/500/greece-must-be-allowed-to-default
Charles Hugh Smith: The Death of Demands: The Post-Consumer Debt Economy
From Of Two Minds:
Keynesians claim more debt will goose "demand;" they're wrong. Boosting debt has distorted the economy for 40 years, and the end-game is finally approaching.
Keynesians are constantly demanding more debt be taken on to spark "demand" for more stuff. What if debt-fueled demand is dead, expired of natural causes? If so, then the Keynesians are pushing on a string.
The truth is the U.S. has long been a post-consumer economy. Everybody already had a TV, phone, car, etc. 40 years ago, which is coincidentally when wages began their 40-year stagnation and the nation's public and private debts began exploding higher as the forces of financialization took over.
In other words, the only way to get people to buy more crap was to give them vast quantities of debt.
Now that debts exceed 350% of the nation's GDP, we've reached the end of the financialization process: we can't afford any more debt unless the interest rate is near-zero.
Hey, isn't that the Federal Reserve's policy now, forever and ever, near-zero interest rates? No wonder. If the nation had to pay a historically average rate of interest on its debts, the economy would quickly implode like a supernova star.
Take a look at this chart, courtesy of the excellent Market Ticker. It shows how much GDP has been created by each additional unit of debt. In other words, if we add $1 of debt, how much did that goose the GDP? If you follow the zero line, you will find that $1 of debt rarely boosts the GDP more than $1.
Big picture, this reliance on debt for "growth" has led to the banks owning the government and the economy. This is the Dark Side of Keynesism. The "borrow more, we need more demand!" thumpings of "liberal" economists like Krugman and Reich are completely blind to the fact that the borrowing they demand is precisely what has sold the nation down the river and handed control to the banks and Wall Street.
These structural changes are why the naive bleatings of these same Keynesians to "control the banks" are failing: by making the economy totally dependent on ever more borrowing and debt, the Keynesians created the financialization monster. Now that it controls the economy, they're whining, please Mister Too Big to Fail Bank, please hand back control to us nice economists.
http://www.oftwominds.com/blogjune11/post-consumer-economy6-11.html
Keynesians claim more debt will goose "demand;" they're wrong. Boosting debt has distorted the economy for 40 years, and the end-game is finally approaching.
Keynesians are constantly demanding more debt be taken on to spark "demand" for more stuff. What if debt-fueled demand is dead, expired of natural causes? If so, then the Keynesians are pushing on a string.
The truth is the U.S. has long been a post-consumer economy. Everybody already had a TV, phone, car, etc. 40 years ago, which is coincidentally when wages began their 40-year stagnation and the nation's public and private debts began exploding higher as the forces of financialization took over.
In other words, the only way to get people to buy more crap was to give them vast quantities of debt.
Now that debts exceed 350% of the nation's GDP, we've reached the end of the financialization process: we can't afford any more debt unless the interest rate is near-zero.
Hey, isn't that the Federal Reserve's policy now, forever and ever, near-zero interest rates? No wonder. If the nation had to pay a historically average rate of interest on its debts, the economy would quickly implode like a supernova star.
Take a look at this chart, courtesy of the excellent Market Ticker. It shows how much GDP has been created by each additional unit of debt. In other words, if we add $1 of debt, how much did that goose the GDP? If you follow the zero line, you will find that $1 of debt rarely boosts the GDP more than $1.
Big picture, this reliance on debt for "growth" has led to the banks owning the government and the economy. This is the Dark Side of Keynesism. The "borrow more, we need more demand!" thumpings of "liberal" economists like Krugman and Reich are completely blind to the fact that the borrowing they demand is precisely what has sold the nation down the river and handed control to the banks and Wall Street.
These structural changes are why the naive bleatings of these same Keynesians to "control the banks" are failing: by making the economy totally dependent on ever more borrowing and debt, the Keynesians created the financialization monster. Now that it controls the economy, they're whining, please Mister Too Big to Fail Bank, please hand back control to us nice economists.
http://www.oftwominds.com/blogjune11/post-consumer-economy6-11.html
Monday, June 20, 2011
Japan’s Exports Decline: Second Biggest Trade Deficit in History
Japan, a strong export economy is faltering. Korea is not immune from a worldwide slowdown.
From Bloomberg:
Japan’s exports fell more than economists estimated in May, adding to signs the world’s third- largest economy may struggle to recover from the March 11 earthquake and tsunami.
Exports decreased 10.3 percent from a year earlier after April’s revised 12.4 percent drop, the Finance Ministry said today. The median estimate of 25 economists surveyed by Bloomberg News was for an 8.4 percent decline. The nation posted a trade deficit of 853.7 billion yen ($10.7 billion), the second biggest since comparable data were made available in 1979.
Shortages of power and parts have disrupted production and slowed overseas sales, prompting Japanese companies including Honda Motor Co. to forecast weaker earnings. Higher unemployment in the U.S. and weakening demand in Asia indicate Japan won’t be able to rely on global demand to pull itself out of a slump caused by the quake.
“The state of the global economy is a little worrying,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “Both the U.S. and Europe aren’t doing that great and emerging economies are also tightening at an incredible pace, increasing uncertainty.”
Recent data suggest the economy’s contraction has extended into this quarter. Machinery orders fell 3.3 percent in April, the first decline in four months, a sign companies are reluctant to spend after the March disaster. The unemployment rate climbed and households cut spending in April.
Honda Motor, Japan’s third-largest carmaker, last week forecast a bigger-than-estimated 63 percent decline in full-year profit, citing production disruptions on parts shortages and the strong yen.
Hitachi Ltd., a Japanese electronics and power-equipment maker, projected that net income will drop 16 percent in the year ending March 31 after the disaster crippled its factories.
“Given a slowdown in the overseas economy, it’s difficult to expect a long-term economic expansion, although a recovery in production is becoming clear,” Junko Nishioka, chief economist at RBS Securities in Tokyo, said before the report. “A V-shaped recovery scenario for later this year is looking fragile.”
Shipments to the U.S. fell 14.6 percent in May from a year earlier, compared with a 23.3 percent drop in April, the report showed. Sales to Europe decreased 8.8 percent.
Exports to China, Japan’s largest market, fell 8.1 percent, compared with a 6.8 percent drop in April. Shipments to Asia, where countries from South Korea to the India have raised borrowing costs to quell inflation, slid 8.7 percent.
An increase in energy prices pushed up import bills. Crude oil prices have gained about 20 percent in the past year and Japan gets virtually all of its oil from abroad. Imports rose 12.3 percent in May from a year earlier, today’s report showed.
“Japan’s trade deficit could remain intact for a prolonged period,” Kyohei Morita, chief economist at Barclays Capital in Tokyo, said before the report. Still, “the driver is likely to change from decreasing exports to increasing imports,” which isn’t bad as it reflects domestic demand for reconstruction.
http://www.bloomberg.com/news/2011-06-20/japan-s-exports-declined-more-than-expected.html
From Bloomberg:
Japan’s exports fell more than economists estimated in May, adding to signs the world’s third- largest economy may struggle to recover from the March 11 earthquake and tsunami.
Exports decreased 10.3 percent from a year earlier after April’s revised 12.4 percent drop, the Finance Ministry said today. The median estimate of 25 economists surveyed by Bloomberg News was for an 8.4 percent decline. The nation posted a trade deficit of 853.7 billion yen ($10.7 billion), the second biggest since comparable data were made available in 1979.
Shortages of power and parts have disrupted production and slowed overseas sales, prompting Japanese companies including Honda Motor Co. to forecast weaker earnings. Higher unemployment in the U.S. and weakening demand in Asia indicate Japan won’t be able to rely on global demand to pull itself out of a slump caused by the quake.
“The state of the global economy is a little worrying,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “Both the U.S. and Europe aren’t doing that great and emerging economies are also tightening at an incredible pace, increasing uncertainty.”
Recent data suggest the economy’s contraction has extended into this quarter. Machinery orders fell 3.3 percent in April, the first decline in four months, a sign companies are reluctant to spend after the March disaster. The unemployment rate climbed and households cut spending in April.
Honda Motor, Japan’s third-largest carmaker, last week forecast a bigger-than-estimated 63 percent decline in full-year profit, citing production disruptions on parts shortages and the strong yen.
Hitachi Ltd., a Japanese electronics and power-equipment maker, projected that net income will drop 16 percent in the year ending March 31 after the disaster crippled its factories.
“Given a slowdown in the overseas economy, it’s difficult to expect a long-term economic expansion, although a recovery in production is becoming clear,” Junko Nishioka, chief economist at RBS Securities in Tokyo, said before the report. “A V-shaped recovery scenario for later this year is looking fragile.”
Shipments to the U.S. fell 14.6 percent in May from a year earlier, compared with a 23.3 percent drop in April, the report showed. Sales to Europe decreased 8.8 percent.
Exports to China, Japan’s largest market, fell 8.1 percent, compared with a 6.8 percent drop in April. Shipments to Asia, where countries from South Korea to the India have raised borrowing costs to quell inflation, slid 8.7 percent.
An increase in energy prices pushed up import bills. Crude oil prices have gained about 20 percent in the past year and Japan gets virtually all of its oil from abroad. Imports rose 12.3 percent in May from a year earlier, today’s report showed.
“Japan’s trade deficit could remain intact for a prolonged period,” Kyohei Morita, chief economist at Barclays Capital in Tokyo, said before the report. Still, “the driver is likely to change from decreasing exports to increasing imports,” which isn’t bad as it reflects domestic demand for reconstruction.
http://www.bloomberg.com/news/2011-06-20/japan-s-exports-declined-more-than-expected.html
Sunday, June 19, 2011
Korea’s Mortgage Rates 30-Month High; Concerns over Consumption Slowdown and Household Debts
As noted, Korea’s domestic consumption base has not been that strong to begin with. The Korean government is trying to spur the domestic consumption by introducing several measures as its global export markets falter. And yet, if one understands the fundamentals of the Korean economy and macroeconomic outlook, s/he would know that it is highly unlikely that Korea’s domestic consumption would be boosted anytime soon.
From Yonhap:
South Korean mortgage rates have soared to a near 30-month high due to the central bank's rate hike, sources said Sunday, raising concern that an increase in household interest costs could dampen consumer spending.
Following a two-month freeze, the Bank of Korea on June 10 hiked the benchmark seven-day repo rate by a quarter percentage point to 3.25 percent for this month in an effort to tame persistent inflationary pressure.
According to the sources, top lender Kookmin Bank announced its interest rates on home-backed loans will range from 5.27 percent to 6.57 percent this week, up 0.10 percentage point from the previous week.
The mortgage rates represent the highest level since early January 2009, the sources said.
Analysts said rising mortgage rates will increase households' interest burdens and thus spark a slowdown in their consumption.
"An increase in household interest burdens is expected to put a crimp in household spending," said Kim Chang-base, a senior researcher at the Korea Economic Research Institute. "It could spark a vicious circle of weaker corporate sales, decreased employment, worsened household debt repayment ability and a rise in bad loans."
The mortgage rate increase comes amid growing worries over the level of household debts.
According to a recent BOK report, financial debt held by individuals reached 949 trillion won (US$873 billion) as of end-March, up 11.7 trillion won from three months earlier. But if non-interest bearing debt is taken into account, their financial debt reached 1,006.6 trillion won, marking the first time that such debt has topped the 1,000 trillion won mark.
http://english.yonhapnews.co.kr/business/2011/06/19/39/0503000000AEN20110619000300320F.HTML
From Yonhap:
South Korean mortgage rates have soared to a near 30-month high due to the central bank's rate hike, sources said Sunday, raising concern that an increase in household interest costs could dampen consumer spending.
Following a two-month freeze, the Bank of Korea on June 10 hiked the benchmark seven-day repo rate by a quarter percentage point to 3.25 percent for this month in an effort to tame persistent inflationary pressure.
According to the sources, top lender Kookmin Bank announced its interest rates on home-backed loans will range from 5.27 percent to 6.57 percent this week, up 0.10 percentage point from the previous week.
The mortgage rates represent the highest level since early January 2009, the sources said.
Analysts said rising mortgage rates will increase households' interest burdens and thus spark a slowdown in their consumption.
"An increase in household interest burdens is expected to put a crimp in household spending," said Kim Chang-base, a senior researcher at the Korea Economic Research Institute. "It could spark a vicious circle of weaker corporate sales, decreased employment, worsened household debt repayment ability and a rise in bad loans."
The mortgage rate increase comes amid growing worries over the level of household debts.
According to a recent BOK report, financial debt held by individuals reached 949 trillion won (US$873 billion) as of end-March, up 11.7 trillion won from three months earlier. But if non-interest bearing debt is taken into account, their financial debt reached 1,006.6 trillion won, marking the first time that such debt has topped the 1,000 trillion won mark.
http://english.yonhapnews.co.kr/business/2011/06/19/39/0503000000AEN20110619000300320F.HTML
Russia Continues to Reduce U.S. Debt Holdings
Again, one has to see the bigger picture and larger context regarding where this is all headed.
From the Wall Street Journal:
Russia will likely continue lowering its U.S. debt holdings as Washington struggles to contain a budget deficit and bolster a tepid economic recovery, a top aide to President Dmitry Medvedev said Saturday.
"The share of our portfolio in U.S. instruments has gone down and probably will go down further," said Arkady Dvorkovich, chief economic aide to the president, told Dow Jones in an interview on the sidelines of the St. Petersburg International Economic Forum.
Russian holdings of U.S. Treasury securities fell to $125.4 billion in April 2011 from $176.3 billion in October 2010, Treasury Department data showed.
http://online.wsj.com/article/SB10001424052702303310004576393651050458930.html#articleTabs%3Darticle
From the Wall Street Journal:
Russia will likely continue lowering its U.S. debt holdings as Washington struggles to contain a budget deficit and bolster a tepid economic recovery, a top aide to President Dmitry Medvedev said Saturday.
"The share of our portfolio in U.S. instruments has gone down and probably will go down further," said Arkady Dvorkovich, chief economic aide to the president, told Dow Jones in an interview on the sidelines of the St. Petersburg International Economic Forum.
Russian holdings of U.S. Treasury securities fell to $125.4 billion in April 2011 from $176.3 billion in October 2010, Treasury Department data showed.
http://online.wsj.com/article/SB10001424052702303310004576393651050458930.html#articleTabs%3Darticle
Friday, June 17, 2011
China’s Consumer Spending Growth Fades
Again, China is the largest trading partner of Korea.
From Bloomberg:
At the Haiyang Zhuangshi Co. hardware store in Beijing, sales of paint and aluminum window frames are slowing, one sign of a diminished role for consumer spending in China that’s foiling government objectives.
“It seems the peak days are gone,” said owner Hu Mengbin, 42, whose daily revenue has dropped to about 3,000 yuan ($463) from as much as 4,000 yuan last year after China stepped up efforts to rein in home prices. “Between 2006 and 2008 when the property market was red hot, we could make quick money.”
Hu’s loss underlines the dilemma for Premier Wen Jiabao: his campaign to control inflation is undermining attempts to make consumers a bigger driver of the world’s second-largest economy. Failure to lessen dependence on exports and investment spending leaves the nation more vulnerable to swings in external demand and subject to asset booms and busts.
Government data this week showed retail sales growth slowed to 16.9 percent in May, less than the average of the past five years and a figure that’s inflated by soaring prices for food. By contrast, spending on fixed assets such as factories and property climbed 26 percent, excluding rural households, in the first five months, the fastest pace in almost a year.
Analysts at Capital Economics, a London-based research group, estimate that private consumption may have fallen to 34 percent of gross domestic product last year, the lowest level since China began opening its economy to market mechanisms more than three decades ago. Just 10 years ago, the share was 46 percent, Capital Economics calculates.
“Just at a time when the government in China and a lot of people elsewhere are hoping to see Chinese consumers step up to the plate, actually they’ve been staying away from shops,” said Mark Williams, an economist in London with Capital Economics and a former adviser on China to the U.K. Treasury. “The trend over the past couple of years has been relentlessly downward.”
http://www.bloomberg.com/news/2011-06-16/consumers-fade-in-china-economy-racked-by-inflation-with-peak-days-gone.html
From Bloomberg:
At the Haiyang Zhuangshi Co. hardware store in Beijing, sales of paint and aluminum window frames are slowing, one sign of a diminished role for consumer spending in China that’s foiling government objectives.
“It seems the peak days are gone,” said owner Hu Mengbin, 42, whose daily revenue has dropped to about 3,000 yuan ($463) from as much as 4,000 yuan last year after China stepped up efforts to rein in home prices. “Between 2006 and 2008 when the property market was red hot, we could make quick money.”
Hu’s loss underlines the dilemma for Premier Wen Jiabao: his campaign to control inflation is undermining attempts to make consumers a bigger driver of the world’s second-largest economy. Failure to lessen dependence on exports and investment spending leaves the nation more vulnerable to swings in external demand and subject to asset booms and busts.
Government data this week showed retail sales growth slowed to 16.9 percent in May, less than the average of the past five years and a figure that’s inflated by soaring prices for food. By contrast, spending on fixed assets such as factories and property climbed 26 percent, excluding rural households, in the first five months, the fastest pace in almost a year.
Analysts at Capital Economics, a London-based research group, estimate that private consumption may have fallen to 34 percent of gross domestic product last year, the lowest level since China began opening its economy to market mechanisms more than three decades ago. Just 10 years ago, the share was 46 percent, Capital Economics calculates.
“Just at a time when the government in China and a lot of people elsewhere are hoping to see Chinese consumers step up to the plate, actually they’ve been staying away from shops,” said Mark Williams, an economist in London with Capital Economics and a former adviser on China to the U.K. Treasury. “The trend over the past couple of years has been relentlessly downward.”
http://www.bloomberg.com/news/2011-06-16/consumers-fade-in-china-economy-racked-by-inflation-with-peak-days-gone.html
Thursday, June 16, 2011
Stephen Roach: America Is a Zombie State Just Like Japan
From Credit Writedowns:
Stephen Roach has written an Op-Ed in today’s Financial Times that is worth reading. He outlines his version of Richard Koo’s Balance Sheet Recession theorem, opining that “the global economy is being hobbled by a new generation of zombies – the economic walking dead.”
His main points are:
• American consumers are retrenching. In the 3 1/4 years since 2008 began, real consumption growth has averaged 0.5% on an annualised basis, the lowest since World War II. That data point certainly rhymes with the consumer deleveraging of Koo’s balance sheet recession.
• Zombie companies remain on life support. Roach says the antecedent to this is Japan where Japanese banks extended credit to effectively insolvent companies, postponing a full recovery for two decades. Roach calls this the “Japan disease”. This data point is at odds with Richard Koo’s prescriptions.
Roach’s conclusion:
Washington policymakers are doing everything they can to forestall rational economic adjustments. The Federal Reserve has conducted two rounds of quantitative easing in an effort to get consumers to start spending the wealth effects of a policy-induced rebound in equities. Congress and the White House have embraced home-foreclosure containment programmes and other forms of debt forgiveness.
The aim is to get zombie consumers to ignore their festering problems and start spending again – irrespective of the wrenching balance sheet damage they suffered in the “great recession”. The subtext is Washington condones a revival of reckless behaviour.
That “Washington policymakers are doing everything they can to forestall rational economic adjustments” is certainly the conclusion I have drawn both regarding Japan and regarding the US. I would say, however that the aim is to get zombie banks to ignore their festering problems and start lending again. See the difference? That’s my updated wording. Apologies for not pointing that out in the initial version.
A failure to learn the lessons of Japan – especially that of post-bubble zombie congestion – leaves the US and the global economy in a very tough place for years to come. Growth-hungry financial markets could be very disappointed.
http://www.creditwritedowns.com/2011/06/roach-zombie-nation.html
Stephen Roach has written an Op-Ed in today’s Financial Times that is worth reading. He outlines his version of Richard Koo’s Balance Sheet Recession theorem, opining that “the global economy is being hobbled by a new generation of zombies – the economic walking dead.”
His main points are:
• American consumers are retrenching. In the 3 1/4 years since 2008 began, real consumption growth has averaged 0.5% on an annualised basis, the lowest since World War II. That data point certainly rhymes with the consumer deleveraging of Koo’s balance sheet recession.
• Zombie companies remain on life support. Roach says the antecedent to this is Japan where Japanese banks extended credit to effectively insolvent companies, postponing a full recovery for two decades. Roach calls this the “Japan disease”. This data point is at odds with Richard Koo’s prescriptions.
Roach’s conclusion:
Washington policymakers are doing everything they can to forestall rational economic adjustments. The Federal Reserve has conducted two rounds of quantitative easing in an effort to get consumers to start spending the wealth effects of a policy-induced rebound in equities. Congress and the White House have embraced home-foreclosure containment programmes and other forms of debt forgiveness.
The aim is to get zombie consumers to ignore their festering problems and start spending again – irrespective of the wrenching balance sheet damage they suffered in the “great recession”. The subtext is Washington condones a revival of reckless behaviour.
That “Washington policymakers are doing everything they can to forestall rational economic adjustments” is certainly the conclusion I have drawn both regarding Japan and regarding the US. I would say, however that the aim is to get zombie banks to ignore their festering problems and start lending again. See the difference? That’s my updated wording. Apologies for not pointing that out in the initial version.
A failure to learn the lessons of Japan – especially that of post-bubble zombie congestion – leaves the US and the global economy in a very tough place for years to come. Growth-hungry financial markets could be very disappointed.
http://www.creditwritedowns.com/2011/06/roach-zombie-nation.html
Michael Krieger: Peak Government
From Zero Hedge:
While I spend a lot of time highlighting TPTB’s plan to form a world government, currency and central bank that doesn’t mean I think they will succeed. In fact, just as Wall Street played their hand too aggressively after being bailed out and are now going to go down for the count this round, The Powers That Be have also played their hand way too aggressively and not only will their dream of planetary control through a global fiat money system run by them completely fail, but their policies will fail so spectacularly and publicly that it will lead to what I call ”peak government.” Governments right at the moment are as big as they will ever be in our lifetimes. This is in my opinion a great thing for humanity and freedom but the transition to more localized rule of law will be tricky. We must be rational and help the sheep out as their world crumbles around them. They will be scared and looking for mommy. Governments won’t be in a position to help so we will need to do the heavy lifting.
http://www.zerohedge.com/article/krieger-peak-government
While I spend a lot of time highlighting TPTB’s plan to form a world government, currency and central bank that doesn’t mean I think they will succeed. In fact, just as Wall Street played their hand too aggressively after being bailed out and are now going to go down for the count this round, The Powers That Be have also played their hand way too aggressively and not only will their dream of planetary control through a global fiat money system run by them completely fail, but their policies will fail so spectacularly and publicly that it will lead to what I call ”peak government.” Governments right at the moment are as big as they will ever be in our lifetimes. This is in my opinion a great thing for humanity and freedom but the transition to more localized rule of law will be tricky. We must be rational and help the sheep out as their world crumbles around them. They will be scared and looking for mommy. Governments won’t be in a position to help so we will need to do the heavy lifting.
http://www.zerohedge.com/article/krieger-peak-government
Summary of Sorry State of Greek Affairs
From Mish’s Global Economic Trend Analysis:
1. Greece did not meet the IMF's criteria for more aid
2. The Greek government is collapsing
3. The Greek prime minister threatened to resign
4. An emergence meeting of the Greek Parliament could not gather support for more austerity measures
5. An emergency meeting of EU ministers produced "no results". The EU has no consensus about what to do
6. Two-year interest rates in Greece topped 30%
7. Germany wants bond holders to take a haircut, France does not
8. Greek unions are on strike
9. Riots and violence have escalated
10. Credit default swaps are pricing in an 80% chance of default
http://globaleconomicanalysis.blogspot.com/2011/06/imf-ready-and-willing-to-throw-away.html
1. Greece did not meet the IMF's criteria for more aid
2. The Greek government is collapsing
3. The Greek prime minister threatened to resign
4. An emergence meeting of the Greek Parliament could not gather support for more austerity measures
5. An emergency meeting of EU ministers produced "no results". The EU has no consensus about what to do
6. Two-year interest rates in Greece topped 30%
7. Germany wants bond holders to take a haircut, France does not
8. Greek unions are on strike
9. Riots and violence have escalated
10. Credit default swaps are pricing in an 80% chance of default
http://globaleconomicanalysis.blogspot.com/2011/06/imf-ready-and-willing-to-throw-away.html
Wednesday, June 15, 2011
Bubbles in Korea
Are there sequential bubbles (e.g., equities, real estate, credit bubbles, and higher education bubble) forming in Korea?
Is Korea due for a crash in real estate and equity markets?
If history is any guide, bubbles would pop down the line. Bubbles would wreak financial and even social trouble in its bursting.
As the BOK has raised key interest rates to fight inflation, many home owners have faced increases in their payments. Korean banks have invested in the real estate bubble which the Korean government has been trying to prop up by several measures.
It seems that despite bubbles and structural problems, Korea’s trade surplus has kept the Korean economy going.
Korea doesn’t seem to have enough leverage over their trading partners when the global economic conditions worsen.
As a global economic crisis intensifies, Korea is facing a deeper and harder slowdown. It is highly likely that the middle class would have to bear the pain more than other classes.
Do the Koreans know where they stand at this point in time and make a strategic move accordingly?
Is Korea due for a crash in real estate and equity markets?
If history is any guide, bubbles would pop down the line. Bubbles would wreak financial and even social trouble in its bursting.
As the BOK has raised key interest rates to fight inflation, many home owners have faced increases in their payments. Korean banks have invested in the real estate bubble which the Korean government has been trying to prop up by several measures.
It seems that despite bubbles and structural problems, Korea’s trade surplus has kept the Korean economy going.
Korea doesn’t seem to have enough leverage over their trading partners when the global economic conditions worsen.
As a global economic crisis intensifies, Korea is facing a deeper and harder slowdown. It is highly likely that the middle class would have to bear the pain more than other classes.
Do the Koreans know where they stand at this point in time and make a strategic move accordingly?
Tuesday, June 14, 2011
Japanese Buy Cash Safes To Hide Trillions in Cash
From Bloomberg:
Japanese safe maker Eiko Co. says sales jumped more than 40 percent after the March earthquake and tsunami, a sign that consumers will hoard more cash at home and restrain an economic rebound.
“The television footage of the tsunami destroying everything in its path must have served as a warning for cash- rich people,” said Tsutomu Ishii, head of sales for the Tokyo- based company. “They have cash at home and they don’t want to leave it without any protection anymore.”
The March 11 disaster that left more than 23,000 people dead or missing may discourage spending as households stick to “tansu yokin,” the centuries-old Japanese practice of keeping mattress money. While output is bouncing back, weak demand may slow an economic recovery as officials struggle to boost consumer spending after decades of deflation.
“It’s absolutely essential for Japan to get people to spend,” said Robert Feldman, head of Japan economic research at Morgan Stanley in Tokyo. “Weakness in consumer spending is one of the reasons for the economy contracting -- it’s crucial for the government and the Bank of Japan to work together properly to end deflation.”
Consumer spending slid 0.6 percent in the three months through March as Japan entered a recession according to the textbook definition, two straight quarters of contraction. The Bank of Japan limited extra measures to spur growth to a 500 billion yen ($6 billion) lending program today as it raised its assessment of the economy, citing signs of a pick-up.
Japanese households had 55 percent of their 1,489 trillion yen of financial assets in cash or deposits at the end of last year, about four times the proportion in the U.S., according to the Bank of Japan.
Still, Prime Minister Naoto Kan’s efforts to drive a rebound are hampered by the largest debt burden of any nation. Moody’s Investors Service may downgrade its Aa2 rating for the nation because of faltering growth prospects and “a weak policy response,” the company said May 31.
The government is discussing raising taxes to fund earthquake reconstruction and social security, a prospect that may encourage consumers to set more money aside.
“Households aren’t ready to help the economy by spending,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo.
http://www.bloomberg.com/news/2011-06-13/strongbox-sales-soar-in-japan-as-demand-for-cash-risks-stunting-recovery.html
Japanese safe maker Eiko Co. says sales jumped more than 40 percent after the March earthquake and tsunami, a sign that consumers will hoard more cash at home and restrain an economic rebound.
“The television footage of the tsunami destroying everything in its path must have served as a warning for cash- rich people,” said Tsutomu Ishii, head of sales for the Tokyo- based company. “They have cash at home and they don’t want to leave it without any protection anymore.”
The March 11 disaster that left more than 23,000 people dead or missing may discourage spending as households stick to “tansu yokin,” the centuries-old Japanese practice of keeping mattress money. While output is bouncing back, weak demand may slow an economic recovery as officials struggle to boost consumer spending after decades of deflation.
“It’s absolutely essential for Japan to get people to spend,” said Robert Feldman, head of Japan economic research at Morgan Stanley in Tokyo. “Weakness in consumer spending is one of the reasons for the economy contracting -- it’s crucial for the government and the Bank of Japan to work together properly to end deflation.”
Consumer spending slid 0.6 percent in the three months through March as Japan entered a recession according to the textbook definition, two straight quarters of contraction. The Bank of Japan limited extra measures to spur growth to a 500 billion yen ($6 billion) lending program today as it raised its assessment of the economy, citing signs of a pick-up.
Japanese households had 55 percent of their 1,489 trillion yen of financial assets in cash or deposits at the end of last year, about four times the proportion in the U.S., according to the Bank of Japan.
Still, Prime Minister Naoto Kan’s efforts to drive a rebound are hampered by the largest debt burden of any nation. Moody’s Investors Service may downgrade its Aa2 rating for the nation because of faltering growth prospects and “a weak policy response,” the company said May 31.
The government is discussing raising taxes to fund earthquake reconstruction and social security, a prospect that may encourage consumers to set more money aside.
“Households aren’t ready to help the economy by spending,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo.
http://www.bloomberg.com/news/2011-06-13/strongbox-sales-soar-in-japan-as-demand-for-cash-risks-stunting-recovery.html
Bill Gross: QE3 Is Coming in the Form of "Operation Twist" for the 2 Year
From Zero Hedge:
Bill Gross released a very troubling tweet earlier:
Gross: QE3 likely to take form of “extended period” language or interest rate caps on 2-3 year Treasuries
Why is it odd? Because as David Rosenberg predicted two weeks ago when he expected that Operation Twist could be coming back with the Fed "capping" the 10 Year, Bill Gross, who has Larry "Fed Expert Network" Meyer in his ear and thus knows better than most what is coming, is predicting some "Twisting" though not at the 10 Year mark, but at the very short end. This is very disturbing. Because as we suggested at the end of May, QE3 will in reality be Operation Twist 2...
This means that Rosie's prediction that "the Fed would basically lose control of its balance sheet" could be about to come true, and in fact be far worse than expected, because it would mean that not only is the Fed no longer able to control the 10 Year but is concerned about controlling the 2-3 Year sector, a place on the curve that the Fed chairman has typically never had much to worry about.
http://www.zerohedge.com/article/bill-gross-warning-operation-twist-coming-2-year
Bill Gross released a very troubling tweet earlier:
Gross: QE3 likely to take form of “extended period” language or interest rate caps on 2-3 year Treasuries
Why is it odd? Because as David Rosenberg predicted two weeks ago when he expected that Operation Twist could be coming back with the Fed "capping" the 10 Year, Bill Gross, who has Larry "Fed Expert Network" Meyer in his ear and thus knows better than most what is coming, is predicting some "Twisting" though not at the 10 Year mark, but at the very short end. This is very disturbing. Because as we suggested at the end of May, QE3 will in reality be Operation Twist 2...
This means that Rosie's prediction that "the Fed would basically lose control of its balance sheet" could be about to come true, and in fact be far worse than expected, because it would mean that not only is the Fed no longer able to control the 10 Year but is concerned about controlling the 2-3 Year sector, a place on the curve that the Fed chairman has typically never had much to worry about.
http://www.zerohedge.com/article/bill-gross-warning-operation-twist-coming-2-year
Monday, June 13, 2011
Rosenberg: 99% Chance of Another Recession by 2012
According to David Rosenberg, chief economist at Gluskin Sheff & Associates, there is a 99% chance of another recession by 2012.
In a Bloomberg video:
I think that by 2012, I would give it a 99% chance. I say that because as an economist, you have to be part historian. When you have a manufacturing inventory cycle recession, they are usually separated 5 years apart. But when you have a balance sheet recession, credit contraction, asset deflation (for example residential real estate), the downturn tends to be separated every 2 to 2.5 years. ... Economists call this a soft patch. It's not like this is a soft patch. Basically, when all the stimulus is gone, you get to see what the emperor looks like disrobed. It's not a pretty picture.
http://www.youtube.com/watch?v=cnfoUtVB-nw
In a Bloomberg video:
I think that by 2012, I would give it a 99% chance. I say that because as an economist, you have to be part historian. When you have a manufacturing inventory cycle recession, they are usually separated 5 years apart. But when you have a balance sheet recession, credit contraction, asset deflation (for example residential real estate), the downturn tends to be separated every 2 to 2.5 years. ... Economists call this a soft patch. It's not like this is a soft patch. Basically, when all the stimulus is gone, you get to see what the emperor looks like disrobed. It's not a pretty picture.
http://www.youtube.com/watch?v=cnfoUtVB-nw
Sunday, June 12, 2011
The Boom and Bust of China’s Rise
Those who have read my blog understand a peculiar relationship between the U.S. and China, the so-called Chimerica. Why did China start to peg the Yuan to the USD in the first place and how have they built their industrial power?
Some may or may not agree with this article written by Dee Woo.
Who is playing to the longview by understanding their strengths and weaknesses?
From Zero Hedge:
These are serious challenges Beijing’s now facing and seems to lack adequate policy tools to tackle...
Hedge funds and Fed’s QE2 are not all to blame for all these. The Chinese economy already stands close to the edge. What speculators do is to push it over and profiteer handsomely from the chaos. While the US enjoys the luxury provided by the dollar’s world currency status and diplomatic alliance with many major trade partners to export its liquidity and inflation, China enjoys none of that. They should look at the dollars in their hands with fear and doubt. So called Beijing consensus makes little sense, because the world is fast changing, pegging a country’s growth to a certain set of policy tools or a certain reserve currency (the US dollar) is equally dangerous. The battle between Keynes and Friedman has long proven the only consensus is to adapt and change. Right now China needs to adapt and change fast. Or this will be the best time in history to short China.
http://www.zerohedge.com/article/guest-post-boom-and-bust-chinas-rise
Some may or may not agree with this article written by Dee Woo.
Who is playing to the longview by understanding their strengths and weaknesses?
From Zero Hedge:
These are serious challenges Beijing’s now facing and seems to lack adequate policy tools to tackle...
Hedge funds and Fed’s QE2 are not all to blame for all these. The Chinese economy already stands close to the edge. What speculators do is to push it over and profiteer handsomely from the chaos. While the US enjoys the luxury provided by the dollar’s world currency status and diplomatic alliance with many major trade partners to export its liquidity and inflation, China enjoys none of that. They should look at the dollars in their hands with fear and doubt. So called Beijing consensus makes little sense, because the world is fast changing, pegging a country’s growth to a certain set of policy tools or a certain reserve currency (the US dollar) is equally dangerous. The battle between Keynes and Friedman has long proven the only consensus is to adapt and change. Right now China needs to adapt and change fast. Or this will be the best time in history to short China.
http://www.zerohedge.com/article/guest-post-boom-and-bust-chinas-rise
Friday, June 10, 2011
Rethinking Korea’s Innovation Engine (Part 4): Is Chaebol’s Technological Competitiveness Equivalent to Korea’s Competitiveness?
The way Korea has competed on the global stage is mainly to grow and subsidize cheabols, and then they pursue innovation. Technology being transferred to Korea has been mostly absorbed by Korean chaebols. “Trickle down” hasn’t occurred.
The fact that Korea’s innovation has revolved around the chaebol system to a considerable extent represents a huge problem…
As homegrown chaebols become more of MNCs, they do what they can to increase their profit margins. As a result, their profits are up, but jobs in Korea are gone due to off-shoring of jobs. Korea’s manufacturing base has dwindled as well…
If innovation and technology development are ultimately geared toward boosting living standards of the general public by enhancing the long-term productive capacity, therein lies a significant flaw in Korea’s chaebol-centered innovation approach…
Chaebols’ technological prowess doesn’t necessarily equal Korea’s competitiveness…
(A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.)
The fact that Korea’s innovation has revolved around the chaebol system to a considerable extent represents a huge problem…
As homegrown chaebols become more of MNCs, they do what they can to increase their profit margins. As a result, their profits are up, but jobs in Korea are gone due to off-shoring of jobs. Korea’s manufacturing base has dwindled as well…
If innovation and technology development are ultimately geared toward boosting living standards of the general public by enhancing the long-term productive capacity, therein lies a significant flaw in Korea’s chaebol-centered innovation approach…
Chaebols’ technological prowess doesn’t necessarily equal Korea’s competitiveness…
(A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.)
Charles Hugh Smith: The Bankruptcy of Corporate America
From Of Two Minds:
Corporate America is profoundly bankrupt. Not in a financial sense, of course; the Federal Reserve's slow destruction of the U.S. dollar has boosted corporate profits most handsomely as the majority of their earnings and profits are obtained overseas; when stated in dollars, those outsized profits swell even higher.
No, the bankruptcy of Corporate America is not found on the bottom line; it is measured by altogether more profound metrics than mere money. Corporate America is bankrupt on levels which are difficult to describe; morally and spiritually bankrupt, not just in the pathologies that guide corporate goals and behaviors, but in the Potemkin shell of free enterprise they present to the world in ceaseless propaganda, and in the manner in which they have cut America loose from their corporate souls.
Corporate America only resides in America because it controls the machinery of governance and regulation here for pathetically modest investments in lobbying and campaign contributions. It would be impossible to replace the global Empire that protects and nurtures it, and so Corporate America maintains its headquarters in America, the better to shape policy and skim gargantuan profits from the Empire and its Central State in Washington.
The return on investment for lobbying and campaign contributions is simply unmatchable anywhere else; it is without doubt the highest return on investment on the planet. And the risk-return is immensely favorable; there is simply no risk that the Empire or the Central State will ever go against the "best interests" of its corporate partners.
http://www.oftwominds.com/blogjune11/corporate-america-bankrupt6-11.html
Corporate America is profoundly bankrupt. Not in a financial sense, of course; the Federal Reserve's slow destruction of the U.S. dollar has boosted corporate profits most handsomely as the majority of their earnings and profits are obtained overseas; when stated in dollars, those outsized profits swell even higher.
No, the bankruptcy of Corporate America is not found on the bottom line; it is measured by altogether more profound metrics than mere money. Corporate America is bankrupt on levels which are difficult to describe; morally and spiritually bankrupt, not just in the pathologies that guide corporate goals and behaviors, but in the Potemkin shell of free enterprise they present to the world in ceaseless propaganda, and in the manner in which they have cut America loose from their corporate souls.
Corporate America only resides in America because it controls the machinery of governance and regulation here for pathetically modest investments in lobbying and campaign contributions. It would be impossible to replace the global Empire that protects and nurtures it, and so Corporate America maintains its headquarters in America, the better to shape policy and skim gargantuan profits from the Empire and its Central State in Washington.
The return on investment for lobbying and campaign contributions is simply unmatchable anywhere else; it is without doubt the highest return on investment on the planet. And the risk-return is immensely favorable; there is simply no risk that the Empire or the Central State will ever go against the "best interests" of its corporate partners.
http://www.oftwominds.com/blogjune11/corporate-america-bankrupt6-11.html
BOK Raise Interest Rates Third Time in 2011
The Korean media outlets report that this hike would hit already slow real estate market of Korea.
From Bloomberg:
South Korea’s won extended gains and bonds declined after the central bank raised interest rates for the third time this year to rein in inflation.
Governor Kim Choong Soo boosted the benchmark seven-day repurchase rate to 3.25 percent from 3 percent, following quarter-percent increases in January and March, the central bank said in a statement in Seoul today. Eight of 17 economists surveyed by Bloomberg News predicted the decision with the rest having forecast no change.
http://www.bloomberg.com/news/2011-06-10/south-korean-won-extends-gain-bonds-decline-after-interest-rate-increase.html
From Bloomberg:
South Korea’s won extended gains and bonds declined after the central bank raised interest rates for the third time this year to rein in inflation.
Governor Kim Choong Soo boosted the benchmark seven-day repurchase rate to 3.25 percent from 3 percent, following quarter-percent increases in January and March, the central bank said in a statement in Seoul today. Eight of 17 economists surveyed by Bloomberg News predicted the decision with the rest having forecast no change.
http://www.bloomberg.com/news/2011-06-10/south-korean-won-extends-gain-bonds-decline-after-interest-rate-increase.html
Thursday, June 9, 2011
Korea’s Policy Failure Since the 1997 Financial Crisis
On the surface, the Korean economy has recovered since the 1997 financial crisis. And yet, the bottom line is: how sustainable its recovery has been without significant changes in its fundamentals. Korea has delayed in addressing the core problems and kicked them into the future.
The easy monetary policy and serial bubble blowing exercises have dampened Korea’s economic fundamentals and screwed the middle class over the longer term. Korea’s seeming recovery has been fuelled in part by debt accumulation and global boom. Private debt loads are nearly as horrible as the public debts. The path of the Korean government deficits, private debts and bubble assets indicates that the Korean economy has not really recovered.
Those are in large part due to Korea’s policy actions. Korea’s policy apparatus has bolstered the short-term strength of financial structure and export engine with little regard to long-term consequences.
The difficult dimension was added when the U.S. Fed and other central banks started to engage in loose monetary policies, stoking the monetary bubbles.
The easy monetary policy and serial bubble blowing exercises have dampened Korea’s economic fundamentals and screwed the middle class over the longer term. Korea’s seeming recovery has been fuelled in part by debt accumulation and global boom. Private debt loads are nearly as horrible as the public debts. The path of the Korean government deficits, private debts and bubble assets indicates that the Korean economy has not really recovered.
Those are in large part due to Korea’s policy actions. Korea’s policy apparatus has bolstered the short-term strength of financial structure and export engine with little regard to long-term consequences.
The difficult dimension was added when the U.S. Fed and other central banks started to engage in loose monetary policies, stoking the monetary bubbles.
Wednesday, June 8, 2011
U.S. Structural Unemployment: How Long before the Unemployed Find Jobs or Quit Looking?
The U.S. has experienced high structural unemployment. As noted several time, their purchasing power is diminishing.
From the BLS (Bureau of Labor Statistics):
By the end of 2010, the median number of weeks jobseekers had been unemployed in the month prior to finding work was a little more than 10 weeks. In contrast, prior to the start of the recent recession in 2007, the median was 5 weeks. Unemployment duration also increased among those who eventually quit looking and left the labor force. Unemployed individuals were jobless for about 20 weeks in 2010 before giving up their job search and leaving the labor force. Whereas in 2007, those who were not successful in their job search had been unemployed for about 8.5 weeks before leaving the labor force.
The recent recession has had a profound effect on the length of successful job search. The table shows the distribution of transitions from unemployment to employment by duration of unemployment (in weeks). From 1994 through 2008, roughly half of all unemployed jobseekers found jobs within 5 weeks. In 2007, for example, 49 percent of those who were unemployed in the prior month and employed in the subsequent month had been jobless for less than 5 weeks. During the same year, less than 3 percent of the unemployed who found work had been jobless for more than 52 weeks. In stark contrast, 11 percent of transitions from unemployment to employment exceeded a year in 2010, and only 34 percent lasted less than 5 weeks.
http://www.bls.gov/opub/ils/summary_11_01/unemployed_jobs_quit.htm
From the BLS (Bureau of Labor Statistics):
By the end of 2010, the median number of weeks jobseekers had been unemployed in the month prior to finding work was a little more than 10 weeks. In contrast, prior to the start of the recent recession in 2007, the median was 5 weeks. Unemployment duration also increased among those who eventually quit looking and left the labor force. Unemployed individuals were jobless for about 20 weeks in 2010 before giving up their job search and leaving the labor force. Whereas in 2007, those who were not successful in their job search had been unemployed for about 8.5 weeks before leaving the labor force.
The recent recession has had a profound effect on the length of successful job search. The table shows the distribution of transitions from unemployment to employment by duration of unemployment (in weeks). From 1994 through 2008, roughly half of all unemployed jobseekers found jobs within 5 weeks. In 2007, for example, 49 percent of those who were unemployed in the prior month and employed in the subsequent month had been jobless for less than 5 weeks. During the same year, less than 3 percent of the unemployed who found work had been jobless for more than 52 weeks. In stark contrast, 11 percent of transitions from unemployment to employment exceeded a year in 2010, and only 34 percent lasted less than 5 weeks.
http://www.bls.gov/opub/ils/summary_11_01/unemployed_jobs_quit.htm
China’s Purchase of Japan’s Long-Term Debt Hit Record in April
We understand why the Chinese have bought the government bonds of the U.S., Japan and Korea.
From Bloomberg:
China’s net purchases of Japan’s long-term debt reached a record as the larger nation seeks to diversify the world’s biggest currency reserves.
China bought a net 1.33 trillion yen ($16.6 billion) in Japanese long-term bonds in April, the biggest amount since records began in January 2005, according to data released today in Tokyo by Japan’s Ministry of Finance. The nation sold a net 1.47 trillion yen of short-term debt, the data shows.
“As China tries to diversify its assets with its huge foreign-exchange reserves, it probably wants to have yen- denominated assets to some extent” in the longer term, said Tetsuya Inoue, chief researcher for financial markets for Tokyo- based Nomura Research Institute Ltd. “China has a strong trading relationship with Japan.”
Japanese government debt due in 10 years and longer has handed investors a 2.2 percent gain since the start of April, versus a 1 percent advance for the broad market, based on Bank of America Merrill Lynch data. The Nikkei 225 Stock Average has fallen 2.9 percent over the same period.
http://www.bloomberg.com/news/2011-05-12/china-buys-most-japanese-bonds-since-2005.html
From Bloomberg:
China’s net purchases of Japan’s long-term debt reached a record as the larger nation seeks to diversify the world’s biggest currency reserves.
China bought a net 1.33 trillion yen ($16.6 billion) in Japanese long-term bonds in April, the biggest amount since records began in January 2005, according to data released today in Tokyo by Japan’s Ministry of Finance. The nation sold a net 1.47 trillion yen of short-term debt, the data shows.
“As China tries to diversify its assets with its huge foreign-exchange reserves, it probably wants to have yen- denominated assets to some extent” in the longer term, said Tetsuya Inoue, chief researcher for financial markets for Tokyo- based Nomura Research Institute Ltd. “China has a strong trading relationship with Japan.”
Japanese government debt due in 10 years and longer has handed investors a 2.2 percent gain since the start of April, versus a 1 percent advance for the broad market, based on Bank of America Merrill Lynch data. The Nikkei 225 Stock Average has fallen 2.9 percent over the same period.
http://www.bloomberg.com/news/2011-05-12/china-buys-most-japanese-bonds-since-2005.html
Tuesday, June 7, 2011
How China Just Implemented a Stealth Bailout
Those who have read my blog would know how China has maintained its trade surplus and is paying for the bailout. One has to understand its peculiar relationship with the U.S. China’s political economy has been closely intertwined with the U.S. political economy.
From Zero Hedge:
While the rest of the world is transfixed by the latest pocket change bailout of the Eurozone, China has stealthily conducted an economic rescue bigger than than one and a half TARPs. Dylan Grice's latest note focuses on the key news out of China from last week which oddly received very little media attention, namely the onboarding by the Local Government Financing Vehicles (LGFV) of $463 billion in bad loans made to various infrastructure and development projects as part of the Chinese stimulus package. This is nothing short of a bailout the likes of TARP when Paulson transferred billions of toxic debt to the government's balance sheet. The reason why this is actually a much bigger deal than perceived is that as Grice notes, a "bail-out of $463bn is half the size of the TARP, introduced by Paulson at the nadir of the 2008 crisis, for an economy which is only one-third the size of the US. So adjusted for GDP, China has just announced an emergency bail out of one and a half TARPs!! If we calibrate the magnitude of the economic crisis with the size of the bail-out, one and a half TARPs implies a financial crisis one and half times the order of magnitude of 2008." In other words, China very quietly and stealthily buried a massive bailout with just one passing Reuters mention. And nobody cares... Or more specifically, those who have long held a very bearish view on China, should certainly care, as what happened is that the unwind catalyst, so critical for most China bearish theses, was just pushed back by several years. And since China is full to the gills with excess dollars, all that happened was that the government effectively diverted money that would have been otherwise recycled to purchase US paper, in the form of a government fund to bail out it own. Crisis averted as another centrally planned regime managed to do what the Fed and the ECB have been doing so well for nearly 3 years now.
http://www.zerohedge.com/article/how-china-just-implemented-stealth-bailout-bigger-one-and-half-tarps
From Reuters:
China's regulators plan to shift 2-3 trillion yuan ($308-463 billion) of debt off local governments, sources said, reducing the risk of a wave of defaults that would threaten the stability of the world's second-biggest economy.
As part of Beijing's overhaul of the finances of heavily-indebted local governments, the central government will pay off some of their loans and state banks including some of the "Big Four" will be forced to take some losses on the bad debt, said the sources, both of whom have direct knowledge of the plans.
Part of the debt will also be shifted to newly created companies, while private investors would be welcomed in projects previously off-limits to them, sources said.
Beijing will also lift a ban on provincial and municipal governments selling bonds, a step aimed at bolstering their finances with more transparent sources of funding.
Many analysts see China's pile of local government bad debt as a major risk to the economy, especially as the economy slows, but few see widespread banking fallout as they believe cash-rich Beijing can step in to soak up losses.
http://www.reuters.com/article/2011/05/31/us-china-economy-debt-idUSTRE74U26320110531
From Zero Hedge:
While the rest of the world is transfixed by the latest pocket change bailout of the Eurozone, China has stealthily conducted an economic rescue bigger than than one and a half TARPs. Dylan Grice's latest note focuses on the key news out of China from last week which oddly received very little media attention, namely the onboarding by the Local Government Financing Vehicles (LGFV) of $463 billion in bad loans made to various infrastructure and development projects as part of the Chinese stimulus package. This is nothing short of a bailout the likes of TARP when Paulson transferred billions of toxic debt to the government's balance sheet. The reason why this is actually a much bigger deal than perceived is that as Grice notes, a "bail-out of $463bn is half the size of the TARP, introduced by Paulson at the nadir of the 2008 crisis, for an economy which is only one-third the size of the US. So adjusted for GDP, China has just announced an emergency bail out of one and a half TARPs!! If we calibrate the magnitude of the economic crisis with the size of the bail-out, one and a half TARPs implies a financial crisis one and half times the order of magnitude of 2008." In other words, China very quietly and stealthily buried a massive bailout with just one passing Reuters mention. And nobody cares... Or more specifically, those who have long held a very bearish view on China, should certainly care, as what happened is that the unwind catalyst, so critical for most China bearish theses, was just pushed back by several years. And since China is full to the gills with excess dollars, all that happened was that the government effectively diverted money that would have been otherwise recycled to purchase US paper, in the form of a government fund to bail out it own. Crisis averted as another centrally planned regime managed to do what the Fed and the ECB have been doing so well for nearly 3 years now.
http://www.zerohedge.com/article/how-china-just-implemented-stealth-bailout-bigger-one-and-half-tarps
From Reuters:
China's regulators plan to shift 2-3 trillion yuan ($308-463 billion) of debt off local governments, sources said, reducing the risk of a wave of defaults that would threaten the stability of the world's second-biggest economy.
As part of Beijing's overhaul of the finances of heavily-indebted local governments, the central government will pay off some of their loans and state banks including some of the "Big Four" will be forced to take some losses on the bad debt, said the sources, both of whom have direct knowledge of the plans.
Part of the debt will also be shifted to newly created companies, while private investors would be welcomed in projects previously off-limits to them, sources said.
Beijing will also lift a ban on provincial and municipal governments selling bonds, a step aimed at bolstering their finances with more transparent sources of funding.
Many analysts see China's pile of local government bad debt as a major risk to the economy, especially as the economy slows, but few see widespread banking fallout as they believe cash-rich Beijing can step in to soak up losses.
http://www.reuters.com/article/2011/05/31/us-china-economy-debt-idUSTRE74U26320110531
Monday, June 6, 2011
Charles Hugh Smith: Productive Vs. Unproductive: Manufacturing Vs. Financialization
Smith echoes some of the essential themes of my blog: how the financialization of the economy has hampered the productive side of the economy, the backbone of the wellbeing of a society.
From Of Two Minds:
The Status Quo heavily rewards financialized profiteering and resource extraction while penalizing productive capital investments in manufacturing.
There is so much ideological, quasi-religious fanaticism around "free trade" (there is no such thing as "free trade," there are only various permutations of managed trade) and "industrial policy" (every nation has one, explicit or implicit) that it is difficult to make any sense of the many intertwined issues.
Ideological purity is not a substitute for knowledge, any more than a superficial admiration of machines equals actually knowing how to assemble, maintain and repair them.
As a background context, we might start by noting that Marx outlined how finance capital comes to dominate industrial capital, as industry comes to depend on the credit extended by the banks/finance capital.
The key takeaway: if you don't control the banks, then they will end up dominating industrial capital. In the U.S., we have the worst of both worlds: a dominant financial Elite and various cartels (military-industrial, sickcare, agribusiness, etc.) that have captured what little of the Central State that isn't already beholden to financial capital.
As I repeatedly point out, Apple, Google, Facebook and Twitter together have relatively few domestic employees. As production is overseas, then that's where the design jobs go, too, eventually.
You have to understand the entire value chain, not just the assembly costs.
http://www.oftwominds.com/blogjune11/manufacturing-finance6-11.html
From Of Two Minds:
The Status Quo heavily rewards financialized profiteering and resource extraction while penalizing productive capital investments in manufacturing.
There is so much ideological, quasi-religious fanaticism around "free trade" (there is no such thing as "free trade," there are only various permutations of managed trade) and "industrial policy" (every nation has one, explicit or implicit) that it is difficult to make any sense of the many intertwined issues.
Ideological purity is not a substitute for knowledge, any more than a superficial admiration of machines equals actually knowing how to assemble, maintain and repair them.
As a background context, we might start by noting that Marx outlined how finance capital comes to dominate industrial capital, as industry comes to depend on the credit extended by the banks/finance capital.
The key takeaway: if you don't control the banks, then they will end up dominating industrial capital. In the U.S., we have the worst of both worlds: a dominant financial Elite and various cartels (military-industrial, sickcare, agribusiness, etc.) that have captured what little of the Central State that isn't already beholden to financial capital.
As I repeatedly point out, Apple, Google, Facebook and Twitter together have relatively few domestic employees. As production is overseas, then that's where the design jobs go, too, eventually.
You have to understand the entire value chain, not just the assembly costs.
http://www.oftwominds.com/blogjune11/manufacturing-finance6-11.html
Michael Hudson: Will Greece Let EU Central Bankers Destroy Democracy?
From Counter Punch:
Promoting the financial sector at the economy’s expense
When Greece exchanged its drachma for the euro in 2000, most voters were all for joining the Eurozone. The hope was that it would ensure stability, and that this would promote rising wages and living standards. Few saw that the stumbling point was tax policy. Greece was excluded from the eurozone the previous year as a result of failing to meet the 1992 Maastricht criteria for EU membership, limiting budget deficits to 3 percent of GDP, and government debt to 60 percent.
The euro also had other serious fiscal and monetary problems at the outset. There is little thought of wealthier EU economies helping bring less productive ones up to par, e.g. as the United States does with its depressed areas (as in the rescue of the auto industry in 2010) or when the federal government does declares a state of emergency for floods, tornados or other disruptions. As with the United States and indeed nearly all countries, EU “aid” is largely self-serving – a combination of export promotion and bailouts for debtor economies to pay banks in Europe’s main creditor nations: Germany, France and the Netherlands. The EU charter banned the European Central Bank (ECB) from financing government deficits, and prevents (indeed, “saves”) members from having to pay for the “fiscal irresponsibility” of countries running budget deficits. This “hard” tax policy was the price that lower-income countries had to sign onto when they joined the European Union…..
At issue is whether Europe should succumb to centralized planning – on the right wing of the political spectrum, under the banner of “free markets” defined as economies free from public price regulation and oversight, free from consumer protection, and free from taxes on the rich.
The crisis for Greece – as for Iceland, Ireland and debt-plagued economies capped by the United States – is occurring as bank lobbyists demand that “taxpayers” pay for the bailouts of bad speculations and government debts stemming largely from tax cuts for the rich and for real estate, shifting the fiscal burden as well as the debt burden onto labor and industry.
http://www.counterpunch.org/hudson06062011.html
Promoting the financial sector at the economy’s expense
When Greece exchanged its drachma for the euro in 2000, most voters were all for joining the Eurozone. The hope was that it would ensure stability, and that this would promote rising wages and living standards. Few saw that the stumbling point was tax policy. Greece was excluded from the eurozone the previous year as a result of failing to meet the 1992 Maastricht criteria for EU membership, limiting budget deficits to 3 percent of GDP, and government debt to 60 percent.
The euro also had other serious fiscal and monetary problems at the outset. There is little thought of wealthier EU economies helping bring less productive ones up to par, e.g. as the United States does with its depressed areas (as in the rescue of the auto industry in 2010) or when the federal government does declares a state of emergency for floods, tornados or other disruptions. As with the United States and indeed nearly all countries, EU “aid” is largely self-serving – a combination of export promotion and bailouts for debtor economies to pay banks in Europe’s main creditor nations: Germany, France and the Netherlands. The EU charter banned the European Central Bank (ECB) from financing government deficits, and prevents (indeed, “saves”) members from having to pay for the “fiscal irresponsibility” of countries running budget deficits. This “hard” tax policy was the price that lower-income countries had to sign onto when they joined the European Union…..
At issue is whether Europe should succumb to centralized planning – on the right wing of the political spectrum, under the banner of “free markets” defined as economies free from public price regulation and oversight, free from consumer protection, and free from taxes on the rich.
The crisis for Greece – as for Iceland, Ireland and debt-plagued economies capped by the United States – is occurring as bank lobbyists demand that “taxpayers” pay for the bailouts of bad speculations and government debts stemming largely from tax cuts for the rich and for real estate, shifting the fiscal burden as well as the debt burden onto labor and industry.
http://www.counterpunch.org/hudson06062011.html
Friday, June 3, 2011
Rethinking Korea’s Innovation Engine (Part 3): Business Model Revamped after the 1997 Financial Crisis, Yet No Structural Change Occurred
Korean chaebols learned their painful lessons by weathering the 1997 financial crisis. They restructured their business and upgraded their product portfolio. Their fast follower strategy had worked out beautifully thanks to the global boom and prosperity. Their product portfolio tells it well…
While Korean chaebols have received much of government research funds and subsidies, Korean SMEs have been marginalized, serving mostly as suppliers to chaebols. Korea’s success in IT sectors has been largely limited to chaebols…
In a way, the Korean government has pursued the “extend-and-pretend” solution without fundamentally revamping the broken system since the 1997 financial crisis. The structural problems facing the Korean high-tech sectors also remain unresolved to a considerable extent…
(A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.)
While Korean chaebols have received much of government research funds and subsidies, Korean SMEs have been marginalized, serving mostly as suppliers to chaebols. Korea’s success in IT sectors has been largely limited to chaebols…
In a way, the Korean government has pursued the “extend-and-pretend” solution without fundamentally revamping the broken system since the 1997 financial crisis. The structural problems facing the Korean high-tech sectors also remain unresolved to a considerable extent…
(A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.)
Arnie Gundersen: The Dangers of Fukushima Are Worse and Longer-lived Than We Think
From Chris Martenson’s blog:
I have said it's worse than Chernobyl and I’ll stand by that. There was an enormous amount of radiation given out in the first two to three weeks of the event. And add the wind and blowing in-land. It could very well have brought the nation of Japan to its knees. I mean, there is so much contamination that luckily wound up in the Pacific Ocean as compared to across the nation of Japan - it could have cut Japan in half. But now the winds have turned, so they are heading to the south toward Tokyo and now my concern and my advice to friends that if there is a severe aftershock and the Unit 4 building collapses, leave. We are well beyond where any science has ever gone at that point and nuclear fuel lying on the ground and getting hot is not a condition that anyone has ever analyzed.
http://www.chrismartenson.com/blog/exclusive-arnie-gundersen-interview-dangers-fukushima-are-worse-and-longer-lived-we-think/58689
I have said it's worse than Chernobyl and I’ll stand by that. There was an enormous amount of radiation given out in the first two to three weeks of the event. And add the wind and blowing in-land. It could very well have brought the nation of Japan to its knees. I mean, there is so much contamination that luckily wound up in the Pacific Ocean as compared to across the nation of Japan - it could have cut Japan in half. But now the winds have turned, so they are heading to the south toward Tokyo and now my concern and my advice to friends that if there is a severe aftershock and the Unit 4 building collapses, leave. We are well beyond where any science has ever gone at that point and nuclear fuel lying on the ground and getting hot is not a condition that anyone has ever analyzed.
http://www.chrismartenson.com/blog/exclusive-arnie-gundersen-interview-dangers-fukushima-are-worse-and-longer-lived-we-think/58689
Wednesday, June 1, 2011
Chinese Manufacturing Growth Slowest in Nine Months
We saw this coming. The U.S. policy has debased the USD for some time. QE and stimulus are not working, yet they would continuously repeat it. Their purchasing power has been dwindling. The Asian mercantilist countries’ export machine would stall at some point.
We are at the early stage of global economic debacle.
Again, one has to understand the bigger picture and larger context to see what’s coming.
From MarketWatch:
The official China Federation of Logistics & Purchasing Managers’ Index eased to 52.0 from 52.9 in April, marking the slowest pace of growth in nine months.
The result was below the median forecast of 52.2 in a Reuters survey of economists.
Meanwhile, a separate PMI published by HSBC and compiled by U.K. group Markit, showed headline activity at 51.6, easing from 51.8 in April, the slowest pace of growth in 10 months.
Analysts at Credit Suisse said that the Federation’s PMI showed new orders declining at a faster pace than the slowdown in the overall reading, a sign that manufacturing activity may have already peaked in the current economic cycle.
“Actual economic activity may have cooled down faster than the headline suggests,” said Credit Suisse analysts.
http://www.marketwatch.com/story/china-manufacturing-growth-slows-further-2011-05-31
We are at the early stage of global economic debacle.
Again, one has to understand the bigger picture and larger context to see what’s coming.
From MarketWatch:
The official China Federation of Logistics & Purchasing Managers’ Index eased to 52.0 from 52.9 in April, marking the slowest pace of growth in nine months.
The result was below the median forecast of 52.2 in a Reuters survey of economists.
Meanwhile, a separate PMI published by HSBC and compiled by U.K. group Markit, showed headline activity at 51.6, easing from 51.8 in April, the slowest pace of growth in 10 months.
Analysts at Credit Suisse said that the Federation’s PMI showed new orders declining at a faster pace than the slowdown in the overall reading, a sign that manufacturing activity may have already peaked in the current economic cycle.
“Actual economic activity may have cooled down faster than the headline suggests,” said Credit Suisse analysts.
http://www.marketwatch.com/story/china-manufacturing-growth-slows-further-2011-05-31
U.S. ISM Manufacturing Index Plunges to 53.5, Lowest Since September 2009
From Manufacturing ISM Report on Business:
The PMI registered 53.5 percent and indicates expansion in the manufacturing sector for the 22nd consecutive month. This month's index, however, registered 6.9 percentage points below the April reading of 60.4 percent, and is the first reading below 60 percent for 2011, as well as the lowest PMI reported for the past 12 months. Slower growth in new orders and production are the primary contributors to this month's lower PMI reading. Manufacturing employment continues to show good momentum for the year, as the Employment Index registered 58.2 percent, which is 4.5 percentage points lower than the 62.7 percent reported in April. Manufacturers continue to experience significant cost pressures from commodities and other inputs.
http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942
The PMI registered 53.5 percent and indicates expansion in the manufacturing sector for the 22nd consecutive month. This month's index, however, registered 6.9 percentage points below the April reading of 60.4 percent, and is the first reading below 60 percent for 2011, as well as the lowest PMI reported for the past 12 months. Slower growth in new orders and production are the primary contributors to this month's lower PMI reading. Manufacturing employment continues to show good momentum for the year, as the Employment Index registered 58.2 percent, which is 4.5 percentage points lower than the 62.7 percent reported in April. Manufacturers continue to experience significant cost pressures from commodities and other inputs.
http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942
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