“What is good, and what does the Lord require of you?
To act justly,
to love mercy
and to walk humbly with your God.”
Micah 6:8
A happy and healthy New Year to everyone; thank you all
Saturday, December 31, 2011
Thursday, December 29, 2011
Charting 2011
From the Economist:
In 2008 banks were saved by governments. The question that dominated 2011 was how to save governments. The euro-area sovereign-debt crisis metastasised from a problem affecting small, peripheral states to one that threatens the single currency itself. The rise in Italian bond yields in particular marked a dangerous new stage in the saga (chart 1). European banks, stuffed full of government bonds, have suffered a severe funding squeeze since the summer (chart 2). The euro was oddly resilient against the dollar, but Switzerland and Japan intervened to hold down their currencies as investors sought shelter (chart 3).
Faced with skittish creditors, countries in Europe tried to instil confidence by cutting spending (chart 4). Austerity and growth do not mix, however. Euro-area GDP remains below its pre-crisis level. American output did at least regain that mark in 2011 (chart 5) but US unemployment remained very high.
The emerging economies again outshone their rich-world counterparts in terms of growth and jobs. But fears about inflation (chart 6) slowly gave way to fears about growth as the year went on and Europe’s problems worsened. Emerging-market stocks dropped sharply in the summer as investors put their money into less risky assets (chart 7). Gold also benefited from another year of fear. The metal was set to post its 11th consecutive annual gain in 2011 (chart 8). Google searches for “gold price” rose whenever measures of market uncertainty did (chart 9). If governments aren’t safe, after all, what is?
http://www.economist.com/node/21542191
In 2008 banks were saved by governments. The question that dominated 2011 was how to save governments. The euro-area sovereign-debt crisis metastasised from a problem affecting small, peripheral states to one that threatens the single currency itself. The rise in Italian bond yields in particular marked a dangerous new stage in the saga (chart 1). European banks, stuffed full of government bonds, have suffered a severe funding squeeze since the summer (chart 2). The euro was oddly resilient against the dollar, but Switzerland and Japan intervened to hold down their currencies as investors sought shelter (chart 3).
Faced with skittish creditors, countries in Europe tried to instil confidence by cutting spending (chart 4). Austerity and growth do not mix, however. Euro-area GDP remains below its pre-crisis level. American output did at least regain that mark in 2011 (chart 5) but US unemployment remained very high.
The emerging economies again outshone their rich-world counterparts in terms of growth and jobs. But fears about inflation (chart 6) slowly gave way to fears about growth as the year went on and Europe’s problems worsened. Emerging-market stocks dropped sharply in the summer as investors put their money into less risky assets (chart 7). Gold also benefited from another year of fear. The metal was set to post its 11th consecutive annual gain in 2011 (chart 8). Google searches for “gold price” rose whenever measures of market uncertainty did (chart 9). If governments aren’t safe, after all, what is?
http://www.economist.com/node/21542191
U.S. Auto Industry Drifts Off to China
From testosteronepit:
Though practically every car sold in the US today contains Chinese-made components, the announcement that a few Chinese-made cars would arrive in Canada raised a lot of eyebrows. It would be a Honda Fit assembled in the same plant where the European version, the Jazz, has been built for years. But Chinese-designed and branded vehicles have not made it yet. Chinese automakers, of which there is a whole slew, are scrambling to improve their technologies from nice-looking but shoddy copy-and-paste models to reliable products that would be competitive in developed markets. It’s a government priority. And they’re getting there through the back door.
http://www.testosteronepit.com/home/2011/12/28/the-us-auto-industry-drifts-off-to-china.html
Though practically every car sold in the US today contains Chinese-made components, the announcement that a few Chinese-made cars would arrive in Canada raised a lot of eyebrows. It would be a Honda Fit assembled in the same plant where the European version, the Jazz, has been built for years. But Chinese-designed and branded vehicles have not made it yet. Chinese automakers, of which there is a whole slew, are scrambling to improve their technologies from nice-looking but shoddy copy-and-paste models to reliable products that would be competitive in developed markets. It’s a government priority. And they’re getting there through the back door.
http://www.testosteronepit.com/home/2011/12/28/the-us-auto-industry-drifts-off-to-china.html
Goldman Sachs: BRIC Decade Ends as Growth Peaked
From Bloomberg:
In the past decade, mutual funds poured almost $70 billion into Brazil, Russia, India and China, stocks more than quadrupled gains in the Standard & Poor’s 500 Index and the economies grew four times faster than America’s.
Now Goldman Sachs Group Inc. (GS), which coined the term BRIC, says the best is over for the largest emerging markets.
BRIC funds recorded $15 billion of outflows this year as the MSCI BRIC Index sank 24 percent, EPFR Global data show. The gauge, which beat the S&P 500 by 390 percentage points from November 2001 through September 2010, has trailed the measure for five straight quarters, the longest stretch since Goldman Sachs forecast the countries would join the U.S. and Japan as the top economies by 2050.
“In emerging markets, we’re waiting for things to get worse before they get better,” said Michael Shaoul, the chairman of Marketfield Asset Management in New York who predicted in February that developing-nation stocks would fall this year. The $845 million Marketfield Fund (VONEMBI) has topped 97 percent of peers in 2011, data compiled by Bloomberg show.
“The slowdown we’re seeing in the BRICs will continue for most of the first half,” Mahendran said. “Compared to the U.S., corporate profits haven’t been that good as companies face higher wages, higher interest rates and currency volatility, and at best, we’ll only start to see the effects of monetary policy loosening in the second half of 2012.”
“There will be a lot of volatility, but as people realize the underlying structural weaknesses of the BRIC economies, you’ll see money coming out,” Deutsche Bank’s Smith said in a telephone interview on Dec. 19.
China’s economic data have trailed estimates for the past two months, based on Citigroup Inc.’s Economic Surprise Index, a gauge of how much reports are missing economist projections in Bloomberg News surveys. Chinese manufacturing contracted by the most since 2009 in November, while new home prices declined in 49 of 70 cities tracked by the government the same month.
http://www.bloomberg.com/news/2011-12-27/bric-decade-ends-with-record-stock-outflows-as-goldman-says-growth-peaked.html
In the past decade, mutual funds poured almost $70 billion into Brazil, Russia, India and China, stocks more than quadrupled gains in the Standard & Poor’s 500 Index and the economies grew four times faster than America’s.
Now Goldman Sachs Group Inc. (GS), which coined the term BRIC, says the best is over for the largest emerging markets.
BRIC funds recorded $15 billion of outflows this year as the MSCI BRIC Index sank 24 percent, EPFR Global data show. The gauge, which beat the S&P 500 by 390 percentage points from November 2001 through September 2010, has trailed the measure for five straight quarters, the longest stretch since Goldman Sachs forecast the countries would join the U.S. and Japan as the top economies by 2050.
“In emerging markets, we’re waiting for things to get worse before they get better,” said Michael Shaoul, the chairman of Marketfield Asset Management in New York who predicted in February that developing-nation stocks would fall this year. The $845 million Marketfield Fund (VONEMBI) has topped 97 percent of peers in 2011, data compiled by Bloomberg show.
“The slowdown we’re seeing in the BRICs will continue for most of the first half,” Mahendran said. “Compared to the U.S., corporate profits haven’t been that good as companies face higher wages, higher interest rates and currency volatility, and at best, we’ll only start to see the effects of monetary policy loosening in the second half of 2012.”
“There will be a lot of volatility, but as people realize the underlying structural weaknesses of the BRIC economies, you’ll see money coming out,” Deutsche Bank’s Smith said in a telephone interview on Dec. 19.
China’s economic data have trailed estimates for the past two months, based on Citigroup Inc.’s Economic Surprise Index, a gauge of how much reports are missing economist projections in Bloomberg News surveys. Chinese manufacturing contracted by the most since 2009 in November, while new home prices declined in 49 of 70 cities tracked by the government the same month.
http://www.bloomberg.com/news/2011-12-27/bric-decade-ends-with-record-stock-outflows-as-goldman-says-growth-peaked.html
Wednesday, December 28, 2011
Art Cashin Exposes the Behind the Scenes Panic in Europe
From Zero Hedge:
Think "all is fine" in Europe after today's largely irrelevant Italian bill auction (the auction was for 6 month debt - even Greece can raise that kind of money)? Think again. Here is the Fermentation Committee Chairman explaining why Europe is so hard pressed to create a fake sense of calm, allowing those who know the real story to take advantage of the situation while they still can, and sharing the behind the scenes truth you won't get anywhere else. Certainly not SWIFT.
http://www.zerohedge.com/news/art-cashin-exposes-behind-scenes-panic-europe
Think "all is fine" in Europe after today's largely irrelevant Italian bill auction (the auction was for 6 month debt - even Greece can raise that kind of money)? Think again. Here is the Fermentation Committee Chairman explaining why Europe is so hard pressed to create a fake sense of calm, allowing those who know the real story to take advantage of the situation while they still can, and sharing the behind the scenes truth you won't get anywhere else. Certainly not SWIFT.
http://www.zerohedge.com/news/art-cashin-exposes-behind-scenes-panic-europe
Japan Industrial Output Slumps
Japan has been kicking the can down the road for the last 20 years. Their monetization has worked largely due to its export machine. It is now in trouble.
From Bloomberg:
Japan’s rebound from the March earthquake and tsunami sputtered in November as production and retail sales tumbled, deepening the nation’s return to the deflation that first took hold a decade ago.
Industrial output slumped 2.6 percent from October, more than all the forecasts in a Bloomberg News survey of 29 economists, a government report showed today in Tokyo. Retail sales slid 2.1 percent. Consumer prices excluding fresh food fell 0.2 percent from a year earlier after a 0.1 percent decline the previous month.
The weakening economy, hurt by Europe’s debt crisis and plans by companies from Panasonic Corp. to Nissan Motor Co. to shift production abroad, may undermine Prime Minister Yoshihiko Noda’s plan to raise taxes and cut the world’s largest debt burden. Lawmakers told reporters in Tokyo today that a tax panel set up by Noda’s party has proposed doubling the nation’s sales tax by 2015, a move opposed by some ruling party members who’ve threatened to quit over the issue.
“Fundamentally, Japan’s economy is on a downward slope,” said Yoshimasa Maruyama, chief economist at Itochu Corp. “Exports are falling and negatively impacting Japan’s economy due to the global slowdown.”
Other data also suggest Japan’s recovery may be stalling. Exports fell for the second straight month in November from a year earlier and capital spending in the third quarter dropped 9.8 percent. Large manufacturers are more concerned about business prospects, with the Bank of Japan’s Tankan quarterly index of corporate sentiment falling to minus 4 this month. A negative figure indicates pessimists outnumber optimists.
The financial situation in the euro area, Japan’s third- biggest export destination, also shows no sign of improving, with 10-year Italian government bonds hovering around 7 percent. Fitch Ratings on Dec. 17 lowered the credit outlook of Spain, Italy and AAA-rated France, citing Europe’s failure to find a “comprehensive solution” to its crisis.
The appreciation of the yen is hurting exports, Japan’s finance minister, Jun Azumi, said on Dec. 24. The finance minister has indicated he’s prepared to sell the currency in the foreign-exchange markets. The Finance Ministry said last week that it plans to raise the issuance limit for bills to fund intervention to an unprecedented 195 trillion yen.
http://www.bloomberg.com/news/2011-12-27/japan-factory-output-falls-on-global-slump.html
From Bloomberg:
Japan’s rebound from the March earthquake and tsunami sputtered in November as production and retail sales tumbled, deepening the nation’s return to the deflation that first took hold a decade ago.
Industrial output slumped 2.6 percent from October, more than all the forecasts in a Bloomberg News survey of 29 economists, a government report showed today in Tokyo. Retail sales slid 2.1 percent. Consumer prices excluding fresh food fell 0.2 percent from a year earlier after a 0.1 percent decline the previous month.
The weakening economy, hurt by Europe’s debt crisis and plans by companies from Panasonic Corp. to Nissan Motor Co. to shift production abroad, may undermine Prime Minister Yoshihiko Noda’s plan to raise taxes and cut the world’s largest debt burden. Lawmakers told reporters in Tokyo today that a tax panel set up by Noda’s party has proposed doubling the nation’s sales tax by 2015, a move opposed by some ruling party members who’ve threatened to quit over the issue.
“Fundamentally, Japan’s economy is on a downward slope,” said Yoshimasa Maruyama, chief economist at Itochu Corp. “Exports are falling and negatively impacting Japan’s economy due to the global slowdown.”
Other data also suggest Japan’s recovery may be stalling. Exports fell for the second straight month in November from a year earlier and capital spending in the third quarter dropped 9.8 percent. Large manufacturers are more concerned about business prospects, with the Bank of Japan’s Tankan quarterly index of corporate sentiment falling to minus 4 this month. A negative figure indicates pessimists outnumber optimists.
The financial situation in the euro area, Japan’s third- biggest export destination, also shows no sign of improving, with 10-year Italian government bonds hovering around 7 percent. Fitch Ratings on Dec. 17 lowered the credit outlook of Spain, Italy and AAA-rated France, citing Europe’s failure to find a “comprehensive solution” to its crisis.
The appreciation of the yen is hurting exports, Japan’s finance minister, Jun Azumi, said on Dec. 24. The finance minister has indicated he’s prepared to sell the currency in the foreign-exchange markets. The Finance Ministry said last week that it plans to raise the issuance limit for bills to fund intervention to an unprecedented 195 trillion yen.
http://www.bloomberg.com/news/2011-12-27/japan-factory-output-falls-on-global-slump.html
Tuesday, December 27, 2011
The End Game: Japan Makes Another Move
It is appalling to see how the Japanese government has screwed over its ordinary citizens who don’t seem to know what might lie ahead. The same goes for Korea as well while it has to deal with slightly different issues. The political leadership has failed to act in defense of the general public. That is a tragedy. It is disheartening to see Japan and Korea destroying the future for the next generation.
From testosteronepit:
It’s a doozie. On December 24, the cabinet approved a draft budget for fiscal 2012 whose headline numbers were horrid enough: ¥90.3 trillion ($1.173 trillion) in outlays, ¥42.3 trillion in tax revenues, and a deficit of ¥48 trillion. 49% of the outlays are to be covered by issuing bonds, a record even for Japan. But it gets worse. Accounting shenanigans gloss over the fiasco by removing two items from the general budget: the reconstruction budget of ¥3.8 trillion and pension payments of ¥2.6 trillion. When they’re included, the deficit jumps to ¥54.4 trillion.
Despite the near-zero interest rate policy the Bank of Japan has been pursuing for years, interest expense on the debt—at 230% of GDP by far the highest in the developed world—will eat up ¥21.9 trillion in 2012, a stunning 51.8% of tax revenues! If yields on 10-year JGBs were to rise from 1% to 2%.... Better not think that way. Keeping yields near zero is simply a matter of survival.
Funding these deficits and rolling over the gargantuan debt has been made possible by the institutional setup and cohesive psychology of Japan Inc.: 95% of JGBs are held within Japan. Individuals directly or indirectly hold over 50%. Government-owned or controlled institutions hold over 40%.
But two of the strengths of the Japanese economy that have supported the absurd deficit levels—a high savings rate and a large trade surplus—have collapsed.
http://www.testosteronepit.com/home/2011/12/26/the-endgame-japan-makes-another-move.html
From testosteronepit:
It’s a doozie. On December 24, the cabinet approved a draft budget for fiscal 2012 whose headline numbers were horrid enough: ¥90.3 trillion ($1.173 trillion) in outlays, ¥42.3 trillion in tax revenues, and a deficit of ¥48 trillion. 49% of the outlays are to be covered by issuing bonds, a record even for Japan. But it gets worse. Accounting shenanigans gloss over the fiasco by removing two items from the general budget: the reconstruction budget of ¥3.8 trillion and pension payments of ¥2.6 trillion. When they’re included, the deficit jumps to ¥54.4 trillion.
Despite the near-zero interest rate policy the Bank of Japan has been pursuing for years, interest expense on the debt—at 230% of GDP by far the highest in the developed world—will eat up ¥21.9 trillion in 2012, a stunning 51.8% of tax revenues! If yields on 10-year JGBs were to rise from 1% to 2%.... Better not think that way. Keeping yields near zero is simply a matter of survival.
Funding these deficits and rolling over the gargantuan debt has been made possible by the institutional setup and cohesive psychology of Japan Inc.: 95% of JGBs are held within Japan. Individuals directly or indirectly hold over 50%. Government-owned or controlled institutions hold over 40%.
But two of the strengths of the Japanese economy that have supported the absurd deficit levels—a high savings rate and a large trade surplus—have collapsed.
http://www.testosteronepit.com/home/2011/12/26/the-endgame-japan-makes-another-move.html
Monday, December 26, 2011
Japan Will Raise More Cash from Debt Issuance Than Taxes for Fourth Year in a Row
What is going on in Japan, China, Europe and the U.S. will impact our economy and ordinary folks’ lives in many ways.
From Zero Hedge:
While the world is watching Europe and the US for signs of imminent decoupling, and now has added China to its insolvency focus list, things in Japan, which is "fine" courtesy of a self-destruct autopilot, are just getting plain ridiculous. As we reported earlier this year, Japan's marketable public debt, already the largest in the world at $11.2 trillion compared to America's $10 trillion (of course this assumes the whole SSN sleight of hand is funded, which it isn't), is due to surpass ¥1 quadrillion any month now (aka the exponential phase). And that's just the beginning. As Bloomberg reports, "Bond sales to the market will climb to a record 149.7 trillion yen ($1.9 trillion), while the national budget’s reliance on debt for funding will rise to an unprecedented 49 percent in the year starting April 1, Japan’s government said Dec. 24. The government said it plans to sell 44.2 trillion yen of new bonds to fund 90.3 trillion yen of spending in next fiscal year’s budget. It estimates that tax revenue will total 42.3 trillion yen in fiscal 2012, meaning that new bond sales will exceed tax revenue for a fourth year." In other words, in a world increasingly disconnected form any sort of reality, very soon no taxes at all will be needed: after all each and every government (or uber-union in teh EU's case, once the imploding Eurozone turns to the final Deus Ex - a fiscal protectorate issuing joining Eurobonds) will simply fund all its cash needs by printing its own money. Naturally, anyone daring to suggest that this is beyond idiotic will be given an MMT 101 manual and/or incarcerated for grand treason. And any last voices of sanity will be promptly muted: "I think the reliance on bonds to compile budgets is reaching its limit,” Japanese Finance Minister Jun Azumi said Dec. 24, after the announcement of the budget plan.
http://www.zerohedge.com/news/japan-will-raise-more-cash-debt-issuance-taxes-fourth-year-row
From Zero Hedge:
While the world is watching Europe and the US for signs of imminent decoupling, and now has added China to its insolvency focus list, things in Japan, which is "fine" courtesy of a self-destruct autopilot, are just getting plain ridiculous. As we reported earlier this year, Japan's marketable public debt, already the largest in the world at $11.2 trillion compared to America's $10 trillion (of course this assumes the whole SSN sleight of hand is funded, which it isn't), is due to surpass ¥1 quadrillion any month now (aka the exponential phase). And that's just the beginning. As Bloomberg reports, "Bond sales to the market will climb to a record 149.7 trillion yen ($1.9 trillion), while the national budget’s reliance on debt for funding will rise to an unprecedented 49 percent in the year starting April 1, Japan’s government said Dec. 24. The government said it plans to sell 44.2 trillion yen of new bonds to fund 90.3 trillion yen of spending in next fiscal year’s budget. It estimates that tax revenue will total 42.3 trillion yen in fiscal 2012, meaning that new bond sales will exceed tax revenue for a fourth year." In other words, in a world increasingly disconnected form any sort of reality, very soon no taxes at all will be needed: after all each and every government (or uber-union in teh EU's case, once the imploding Eurozone turns to the final Deus Ex - a fiscal protectorate issuing joining Eurobonds) will simply fund all its cash needs by printing its own money. Naturally, anyone daring to suggest that this is beyond idiotic will be given an MMT 101 manual and/or incarcerated for grand treason. And any last voices of sanity will be promptly muted: "I think the reliance on bonds to compile budgets is reaching its limit,” Japanese Finance Minister Jun Azumi said Dec. 24, after the announcement of the budget plan.
http://www.zerohedge.com/news/japan-will-raise-more-cash-debt-issuance-taxes-fourth-year-row
China Insolvency Wave Begins
From Zero Hedge:
Remember, back in the day, when a bankruptcy was simply called a bankruptcy? Naturally, this was well before ISDA came on the scene and footnoted the living feces out of everything by claiming that a bankruptcy is never a bankruptcy, as long as the creditors agree to 99.999% losses at gunpoint, with electrodes strapped to their testicles, submerged in a tank full of rabid piranhas, it they just sign a piece of paper (preferably in their own blood) saying the vaseline-free gang abuse was consensual. Well, now we learn that as the global insolvency wave finally moves to China, a bankruptcy is now called something even less scary: "deferred loan payments" (and also explains why suddenly Japan is going to have to bail China out and buy its bonds, because somehow when China fails, it is the turn of the country that started the whole deflationary collapse to step to the plate). After all, who in their right mind would want to scare the public that the entire world is now broke. Certainly not SWIFT. And certainly not that paragon of 8%+ annual growth, where no matter how many layers of lipstick are applied, the piggyness of it all is shining through ever more acutely. Because here are the facts, from China Daily, and they speaks for themselves: "China's biggest provincial borrowers are deferring payment on their loans just two months after the country's regulator said some local government companies would be allowed to do so....Hunan Provincial Expressway Construction Group is delaying payment on 3.11 billion yuan in interest, documents governing the securities show this month. Guangdong Provincial Communications Group Co, the second-largest debtor, is following suit. So are two others among the biggest 11 debtors, for a total of 30.16 billion yuan, according to bond prospectuses from 55 local authorities that have raised money in capital markets since the beginning of November." So not even two months in and companies are already becoming serial defaulters, pardon, "loan payment deferrers?" And China is supposed to bail out the world? Ironically, in a world in which can kicking is now an art form, China will show everyone just how it is done, by effectively upturning the capital structure and saying that paying interest is, well, optional. In the immortal words of the comrade from Georgia, "no coupon, no problem."
http://www.zerohedge.com/news/china-insolvency-wave-begins-nations-biggest-provincal-borrowers-defer-loan-payments
Remember, back in the day, when a bankruptcy was simply called a bankruptcy? Naturally, this was well before ISDA came on the scene and footnoted the living feces out of everything by claiming that a bankruptcy is never a bankruptcy, as long as the creditors agree to 99.999% losses at gunpoint, with electrodes strapped to their testicles, submerged in a tank full of rabid piranhas, it they just sign a piece of paper (preferably in their own blood) saying the vaseline-free gang abuse was consensual. Well, now we learn that as the global insolvency wave finally moves to China, a bankruptcy is now called something even less scary: "deferred loan payments" (and also explains why suddenly Japan is going to have to bail China out and buy its bonds, because somehow when China fails, it is the turn of the country that started the whole deflationary collapse to step to the plate). After all, who in their right mind would want to scare the public that the entire world is now broke. Certainly not SWIFT. And certainly not that paragon of 8%+ annual growth, where no matter how many layers of lipstick are applied, the piggyness of it all is shining through ever more acutely. Because here are the facts, from China Daily, and they speaks for themselves: "China's biggest provincial borrowers are deferring payment on their loans just two months after the country's regulator said some local government companies would be allowed to do so....Hunan Provincial Expressway Construction Group is delaying payment on 3.11 billion yuan in interest, documents governing the securities show this month. Guangdong Provincial Communications Group Co, the second-largest debtor, is following suit. So are two others among the biggest 11 debtors, for a total of 30.16 billion yuan, according to bond prospectuses from 55 local authorities that have raised money in capital markets since the beginning of November." So not even two months in and companies are already becoming serial defaulters, pardon, "loan payment deferrers?" And China is supposed to bail out the world? Ironically, in a world in which can kicking is now an art form, China will show everyone just how it is done, by effectively upturning the capital structure and saying that paying interest is, well, optional. In the immortal words of the comrade from Georgia, "no coupon, no problem."
http://www.zerohedge.com/news/china-insolvency-wave-begins-nations-biggest-provincal-borrowers-defer-loan-payments
A Few Chinese Bad News
Some good data points on China
From EconMatters:
From what we discussed so far, it is evident a pronounced China slowdown in the next year or so is inevitable with the nation's export-centric economy struggling with waning global demand, while undergoing domestic structural economic and demographic shifts. Moreover, there could be some hidden debt bombs as a recent Bloomberg finding suggests that China's banks may be understating their exposure to runaway local borrowing by possibly billions of dollars that is raising fears of a government bailout.
How Beijing steers its economic and monetary policies in the next 2-3 years will be key to balance the country's inflation, growth and stability. While we see a very low probability of a hard landing case for China, but if Jim O'Neill is right about how much the world depends on China's growth, then don't count on that much world prosperity, at least in 2012.
http://www.econmatters.com/2011/12/few-chinese-bad-news-bears-that-could.html
From EconMatters:
From what we discussed so far, it is evident a pronounced China slowdown in the next year or so is inevitable with the nation's export-centric economy struggling with waning global demand, while undergoing domestic structural economic and demographic shifts. Moreover, there could be some hidden debt bombs as a recent Bloomberg finding suggests that China's banks may be understating their exposure to runaway local borrowing by possibly billions of dollars that is raising fears of a government bailout.
How Beijing steers its economic and monetary policies in the next 2-3 years will be key to balance the country's inflation, growth and stability. While we see a very low probability of a hard landing case for China, but if Jim O'Neill is right about how much the world depends on China's growth, then don't count on that much world prosperity, at least in 2012.
http://www.econmatters.com/2011/12/few-chinese-bad-news-bears-that-could.html
Friday, December 23, 2011
Quotes of the Day: Ron Paul Edition
From the Burning Platform:
THOSE IN POWER FEAR RON PAUL AND HIS MESSAGE OF LIBERTY, FREEDOM, AND RESPONSIBILITY. THE QUOTES BELOW ARE THE TRUE REFLECTION OF THE MAN AND HIS IDEAS. IDEAS CAN CHANGE THE WORLD. DO YOUR PART TO FIGHT THE MISINFORMATION CAMPAIGN BEING WAGED BY THE CORPORATE MEDIA AND THEIR POLITICAL HACKS BY SENDING THIS LIST OF QUOTES TO EVERYONE IN YOUR EMAIL ADDRESS BOOK.
“Liberty is lost through complacency and a subservient mindset. When we accept or even welcome automobile checkpoints, random searches, mandatory identification cards, and paramilitary police in our streets, we have lost a vital part of our American heritage. America was born of protest, revolution, and mistrust of government. Subservient societies neither maintain nor deserve freedom for long.”
- Ron Paul
“Failure of government programs prompts more determined effort, while the loss of liberty is ignored or rationalized away…whether is it is the war on poverty, drugs, terrorism…or the current Hitler of the day, an appeal to patriotism is used to convince the people that a little sacrifice of liberty, here or there, is a small price to pay…The results, though, are frightening and will soon become even more so.”
- Ron Paul
“When the federal government spends more each year than it collects in tax revenues, it has three choices: It can raise taxes, print money, or borrow money. While these actions may benefit politicians, all three options are bad for average Americans.”
- Ron Paul
“A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.”
- Ron Paul
“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and wealth are in jeopardy.”
- Ron Paul
“It is no coincidence that the century of total war coincided with the century of central banking.”
- Ron Paul, End the Fed
http://www.theburningplatform.com/?p=26739
THOSE IN POWER FEAR RON PAUL AND HIS MESSAGE OF LIBERTY, FREEDOM, AND RESPONSIBILITY. THE QUOTES BELOW ARE THE TRUE REFLECTION OF THE MAN AND HIS IDEAS. IDEAS CAN CHANGE THE WORLD. DO YOUR PART TO FIGHT THE MISINFORMATION CAMPAIGN BEING WAGED BY THE CORPORATE MEDIA AND THEIR POLITICAL HACKS BY SENDING THIS LIST OF QUOTES TO EVERYONE IN YOUR EMAIL ADDRESS BOOK.
“Liberty is lost through complacency and a subservient mindset. When we accept or even welcome automobile checkpoints, random searches, mandatory identification cards, and paramilitary police in our streets, we have lost a vital part of our American heritage. America was born of protest, revolution, and mistrust of government. Subservient societies neither maintain nor deserve freedom for long.”
- Ron Paul
“Failure of government programs prompts more determined effort, while the loss of liberty is ignored or rationalized away…whether is it is the war on poverty, drugs, terrorism…or the current Hitler of the day, an appeal to patriotism is used to convince the people that a little sacrifice of liberty, here or there, is a small price to pay…The results, though, are frightening and will soon become even more so.”
- Ron Paul
“When the federal government spends more each year than it collects in tax revenues, it has three choices: It can raise taxes, print money, or borrow money. While these actions may benefit politicians, all three options are bad for average Americans.”
- Ron Paul
“A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.”
- Ron Paul
“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and wealth are in jeopardy.”
- Ron Paul
“It is no coincidence that the century of total war coincided with the century of central banking.”
- Ron Paul, End the Fed
http://www.theburningplatform.com/?p=26739
Brandon Smith: The Economic Solutions of Vampires
From Alt-Market:
Just as in nature, the economic world has its own bloodsucking vermin in the form of banking elites which are a wretched drain on the whole of the human race. Without their vicious and predatory presence, I envision a world so rapturously above and beyond what we wallow in today that it is impossible to describe. The disgust many feel when considering the virulent feeding habits of the common mosquito or the slithering leech does nothing to compare to the utter gut churning revulsion I feel when studying the financial habits of banks like the Federal Reserve and the “too big to fails”. They are without a doubt the most malignant form of social cancer imaginable.
And yet, after nearly four years of ongoing fiscal exsanguination, a sizable portion of the American populace is still looking to these pests for economic comfort and reassurance, just like farm animals consistently grazing near the entrance of a vampire bat cave, as if it is a shelter from harm. Worst of all is the willingness by which investors still, to this day, commit their savings and their livelihoods to the stock market meat grinder. Let’s be honest; the typical American daytrading investor is a complete moron. They have absolutely no sense of the fundamentals of our financial structure nor the eccentric rules by which it operates. They only have the faintest inkling of the functions of the highly manipulated stock market. They foolishly believe that what little money they make today riding the wave of an illegitimate liquidity driven rally they will actually get to keep. For them, stock investment is no different from buying a scratch-off lotto ticket at a hillbilly gas station; it is a cheap and tawdry game rife with failure but exciting to play, if only for a fleeting guilt addled thrill.
To be fair, they play because the game is indeed “rewarding”, at least, initially. The first taste is so sweet that it soils the plasma; the very skin of the cellular membrane of the financial mind becomes saturated. It swells within the weakening heart of a culture, and overrides its sense of logic. It makes us do terrible and stupid things, and we clasp our hands together and pray that it will never end. But, of course, an ending is painfully inevitable. The more we indulge, the more it takes down the road to satisfy us. We become an addict nation, riding the chemical wave of a pharmaceutical roller coaster fed by the opiates of fiat and fantasy.
The bottom line; we are being drained of our lifeblood as a country.
http://www.alt-market.com/articles/438-the-economic-solutions-of-vampires
Just as in nature, the economic world has its own bloodsucking vermin in the form of banking elites which are a wretched drain on the whole of the human race. Without their vicious and predatory presence, I envision a world so rapturously above and beyond what we wallow in today that it is impossible to describe. The disgust many feel when considering the virulent feeding habits of the common mosquito or the slithering leech does nothing to compare to the utter gut churning revulsion I feel when studying the financial habits of banks like the Federal Reserve and the “too big to fails”. They are without a doubt the most malignant form of social cancer imaginable.
And yet, after nearly four years of ongoing fiscal exsanguination, a sizable portion of the American populace is still looking to these pests for economic comfort and reassurance, just like farm animals consistently grazing near the entrance of a vampire bat cave, as if it is a shelter from harm. Worst of all is the willingness by which investors still, to this day, commit their savings and their livelihoods to the stock market meat grinder. Let’s be honest; the typical American daytrading investor is a complete moron. They have absolutely no sense of the fundamentals of our financial structure nor the eccentric rules by which it operates. They only have the faintest inkling of the functions of the highly manipulated stock market. They foolishly believe that what little money they make today riding the wave of an illegitimate liquidity driven rally they will actually get to keep. For them, stock investment is no different from buying a scratch-off lotto ticket at a hillbilly gas station; it is a cheap and tawdry game rife with failure but exciting to play, if only for a fleeting guilt addled thrill.
To be fair, they play because the game is indeed “rewarding”, at least, initially. The first taste is so sweet that it soils the plasma; the very skin of the cellular membrane of the financial mind becomes saturated. It swells within the weakening heart of a culture, and overrides its sense of logic. It makes us do terrible and stupid things, and we clasp our hands together and pray that it will never end. But, of course, an ending is painfully inevitable. The more we indulge, the more it takes down the road to satisfy us. We become an addict nation, riding the chemical wave of a pharmaceutical roller coaster fed by the opiates of fiat and fantasy.
The bottom line; we are being drained of our lifeblood as a country.
http://www.alt-market.com/articles/438-the-economic-solutions-of-vampires
Wednesday, December 21, 2011
Japan Records Trade Deficit in October: Japan Balance of Trade Chart
As noted, Japan’s robust trade balance has propped up its ponzi game until recently. It’s now in trouble, and it wouldn’t get better any time soon.
From Trading Economics:
Japan reported a trade deficit equivalent to 274 Million JPY in October of 2011. Exports have been the main engine of Japan's economic growth in the past six years. Japan imports raw materials and processes them into high technology products. Japan’s major exports are: consumer electronics, automobiles, semiconductors, optical fibers, optoelectronics, optical media, facsimile and copy machines. Its main trading partners are The United States, China and European Union. This page includes: Japan Balance of Trade chart, historical data and news.
http://www.tradingeconomics.com/japan/balance-of-trade
From Trading Economics:
Japan reported a trade deficit equivalent to 274 Million JPY in October of 2011. Exports have been the main engine of Japan's economic growth in the past six years. Japan imports raw materials and processes them into high technology products. Japan’s major exports are: consumer electronics, automobiles, semiconductors, optical fibers, optoelectronics, optical media, facsimile and copy machines. Its main trading partners are The United States, China and European Union. This page includes: Japan Balance of Trade chart, historical data and news.
http://www.tradingeconomics.com/japan/balance-of-trade
Tuesday, December 20, 2011
ECB's Balance Sheet Now Far Bigger Than Fed's, More Levered Than Lehman, PIIGS Exposure Up 50% in 6 Months
From Zero Hedge:
While well-known to most, what may be lost on all those calling for the ECB to commence outright printing, is that as today's Bloodmberg chart of the day shows, the ECB's balance sheet is not only far greater than the Fed, at $3.2 trillion compared to $2.9 trillion for Ben Bernanke, but at 30x leverage, has the same risk as Lehman did at its peak. However, one major distinction between the Fed and the ECB is that while the Fed continues to be shrouded in almost impenetrable secrecy on an absolute basis, it is transparent as a wet t-shirt competition during Spring Break at Panama City Beach compared to the ECB. From Bloomberg: "Without information on the quality of assets on the ECB’s balance sheet or how far it’s willing to allow leverage to increase, investors may doubt the bank’s ability to prop up the financial system, and demand higher yields to buy some countries’ bonds, he said. "Sovereign spreads could rise again if investors become uncomfortable with ECB leverage without a fully detailed rescue package,” said Tyce. “The ECB is providing liquidity and confidence to the banking system, yet all the while its own leverage and balance sheet size is hitting new highs. It seems likely that the market will begin to watch the rising leverage with interest and growing concern."
http://www.zerohedge.com/news/ecbs-balance-sheet-now-far-bigger-feds-more-levered-lehman-piigs-exposure-50-6-months
While well-known to most, what may be lost on all those calling for the ECB to commence outright printing, is that as today's Bloodmberg chart of the day shows, the ECB's balance sheet is not only far greater than the Fed, at $3.2 trillion compared to $2.9 trillion for Ben Bernanke, but at 30x leverage, has the same risk as Lehman did at its peak. However, one major distinction between the Fed and the ECB is that while the Fed continues to be shrouded in almost impenetrable secrecy on an absolute basis, it is transparent as a wet t-shirt competition during Spring Break at Panama City Beach compared to the ECB. From Bloomberg: "Without information on the quality of assets on the ECB’s balance sheet or how far it’s willing to allow leverage to increase, investors may doubt the bank’s ability to prop up the financial system, and demand higher yields to buy some countries’ bonds, he said. "Sovereign spreads could rise again if investors become uncomfortable with ECB leverage without a fully detailed rescue package,” said Tyce. “The ECB is providing liquidity and confidence to the banking system, yet all the while its own leverage and balance sheet size is hitting new highs. It seems likely that the market will begin to watch the rising leverage with interest and growing concern."
http://www.zerohedge.com/news/ecbs-balance-sheet-now-far-bigger-feds-more-levered-lehman-piigs-exposure-50-6-months
Monday, December 19, 2011
Japan’s Nearly ¥1 Quadrillion in Debt
From Zero Hedge:
Scouring through the news screens, we nearly fell of the proverbial chair after reading the following Bloomberg headline paraphrasing a Nikkei report: "Japan May Buy Chinese Govt Bonds, Nikkei Says....Japan is seeking to diversify forex funds and strengthen economic cooperation with China by helping make yuan more international. Japan may purchase a total of $10b worth in stages." Naturally, there are two interpretations: the ugly one is that Japan, the 3rd largest holder of US debt after the Fed and China, is considering gradually abandoning the dollar or, as the term is better known in polite circles "diversifying." The second one, and the far more amusing one, is that Japan will somehow bail out China by providing the much needed credit money that will translate into GDP (at a sub 100% ratio of course, because as is well known by now the world has reached the stage where one unit of debt generates less than one unit of incremental growth). The reason why this is amusing is because as the chart below shows, Japan's debt is now a hair's width below ¥ 1.... quadrillion. And yes, ignore the fact that the demographic squeeze in Japan is already forcing households to proceeds to monetize the largely domestically held debt. So, we wonder, where will the JGB debt curve go next in the deflationary basketcase that is Japan? As for where it has been, see below.
http://www.zerohedge.com/news/quick-look-japans-nearly-%C2%A51-quadrillion-debt
Scouring through the news screens, we nearly fell of the proverbial chair after reading the following Bloomberg headline paraphrasing a Nikkei report: "Japan May Buy Chinese Govt Bonds, Nikkei Says....Japan is seeking to diversify forex funds and strengthen economic cooperation with China by helping make yuan more international. Japan may purchase a total of $10b worth in stages." Naturally, there are two interpretations: the ugly one is that Japan, the 3rd largest holder of US debt after the Fed and China, is considering gradually abandoning the dollar or, as the term is better known in polite circles "diversifying." The second one, and the far more amusing one, is that Japan will somehow bail out China by providing the much needed credit money that will translate into GDP (at a sub 100% ratio of course, because as is well known by now the world has reached the stage where one unit of debt generates less than one unit of incremental growth). The reason why this is amusing is because as the chart below shows, Japan's debt is now a hair's width below ¥ 1.... quadrillion. And yes, ignore the fact that the demographic squeeze in Japan is already forcing households to proceeds to monetize the largely domestically held debt. So, we wonder, where will the JGB debt curve go next in the deflationary basketcase that is Japan? As for where it has been, see below.
http://www.zerohedge.com/news/quick-look-japans-nearly-%C2%A51-quadrillion-debt
GS’s Take on Kim Jong-il’s Demise
From Zero Hedge:
Following the sudden and surprising death of North Korea's "Dear Leader", many are wondering what this means for risk, especially in the Pacific rim. In other words, was last night's selloff warranted? For what it's worth, here is Goldman's Goohoon Kwon with a take of how the institutional audience is trying to comfort itself that all shall be well, and that power vacuums are all inherently rational and perfectly predictable. Just ask Egypt. And Robespierre.
http://www.zerohedge.com/news/goldmans-take-kim-jonh-ils-demise
Following the sudden and surprising death of North Korea's "Dear Leader", many are wondering what this means for risk, especially in the Pacific rim. In other words, was last night's selloff warranted? For what it's worth, here is Goldman's Goohoon Kwon with a take of how the institutional audience is trying to comfort itself that all shall be well, and that power vacuums are all inherently rational and perfectly predictable. Just ask Egypt. And Robespierre.
http://www.zerohedge.com/news/goldmans-take-kim-jonh-ils-demise
China Engaging in New Form of Imperialism: Beats Out World Bank as Biggest Lender to Africa
From Shanghaiist:
In accordance with rapidly-waning Western influence on the African continent, China has surpassed the World Bank as biggest lender to the credit-poor developing world in the past year, according to US-based Asia Society.
China has signed a multitude of billion dollar deals with some of the world's poorest nations, ranging from investments in hospitals, malls and power stations to new roads, railways, and other institutions. African countries such as Zambia and Angola see the footprint most visibly, where billboards, road signs, and even ATMs are now displaying Chinese characters. And then there's the plethora of Chinese trade delegations flying over to sign deals some consider to be a new form of imperialism.
http://shanghaiist.com/2011/12/14/china_lending_more_than_world_bank.php
In accordance with rapidly-waning Western influence on the African continent, China has surpassed the World Bank as biggest lender to the credit-poor developing world in the past year, according to US-based Asia Society.
China has signed a multitude of billion dollar deals with some of the world's poorest nations, ranging from investments in hospitals, malls and power stations to new roads, railways, and other institutions. African countries such as Zambia and Angola see the footprint most visibly, where billboards, road signs, and even ATMs are now displaying Chinese characters. And then there's the plethora of Chinese trade delegations flying over to sign deals some consider to be a new form of imperialism.
http://shanghaiist.com/2011/12/14/china_lending_more_than_world_bank.php
Sunday, December 18, 2011
Friday, December 16, 2011
Japanese Manufacturing Slides on European Crisis
From Bloomberg:
Japan’s largest manufacturers became more pessimistic than economists expected and China reported the first decline in foreign direct investment since 2009 as Europe’s crisis drags down the global economy.
The Tankan large manufacturer index of sentiment fell to minus 4 in December, the Bank of Japan (8301) said today in Tokyo, worse than the median estimate for a reading of minus 2 by 24 economists surveyed by Bloomberg News. Investment in China slid 9.8 percent from a year earlier to $8.76 billion, the Ministry of Commerce said.
In Japan, manufacturers from Toyota Motor Corp. (7203) to TDK Corp. (6762) are also under threat from a yen that rose to a postwar record against the dollar on Oct. 31 as investors seek a haven from turmoil in Europe.
TDK, the world’s biggest maker of magnetic heads for disk drives, is among Japanese companies cutting jobs, while Panasonic Corp. (6752) has picked Malaysia as the site for a solar-cell plant, to hedge against currency risks. At Toyota, poised to lose its crown as the world’s largest automaker, currency gains have forced price increases, threatening to further erode global market share after production disruptions from the temblor and floods in Thailand.
“We raised prices of some our models on the high yen, and this is very difficult for us to admit, but we expect a drop in sales from this,” Satoshi Ozawa, chief financial officer at Toyota, said this month. “Still, the yen is too strong, and we had to sacrifice some unit sales.”
http://www.bloomberg.com/news/2011-12-15/japan-s-tankan-large-manufacturer-sentiment-index-falls-more-than-forecast.html
Japan’s largest manufacturers became more pessimistic than economists expected and China reported the first decline in foreign direct investment since 2009 as Europe’s crisis drags down the global economy.
The Tankan large manufacturer index of sentiment fell to minus 4 in December, the Bank of Japan (8301) said today in Tokyo, worse than the median estimate for a reading of minus 2 by 24 economists surveyed by Bloomberg News. Investment in China slid 9.8 percent from a year earlier to $8.76 billion, the Ministry of Commerce said.
In Japan, manufacturers from Toyota Motor Corp. (7203) to TDK Corp. (6762) are also under threat from a yen that rose to a postwar record against the dollar on Oct. 31 as investors seek a haven from turmoil in Europe.
TDK, the world’s biggest maker of magnetic heads for disk drives, is among Japanese companies cutting jobs, while Panasonic Corp. (6752) has picked Malaysia as the site for a solar-cell plant, to hedge against currency risks. At Toyota, poised to lose its crown as the world’s largest automaker, currency gains have forced price increases, threatening to further erode global market share after production disruptions from the temblor and floods in Thailand.
“We raised prices of some our models on the high yen, and this is very difficult for us to admit, but we expect a drop in sales from this,” Satoshi Ozawa, chief financial officer at Toyota, said this month. “Still, the yen is too strong, and we had to sacrifice some unit sales.”
http://www.bloomberg.com/news/2011-12-15/japan-s-tankan-large-manufacturer-sentiment-index-falls-more-than-forecast.html
China Is ‘Not Too Optimistic’ about Exports Next Year
From Bloomberg:
Chinese Commerce Minister Chen Deming said he is “not too optimistic” about exports next year after a decline in the growth margin for trade in December.
“The growth rate for exports in December is going to slow down,” Chen told journalists in Geneva today. In every month of the fourth quarter, “exports were 2 percentage points down compared with same period last year.”
Exports in the first part of 2011 were better than those in the second half “so the growth rate will still look pretty good this year,” he said. The growth rate for imports this year will be about 5 percentage points higher than that for exports, he said.
http://www.bloomberg.com/news/2011-12-15/china-is-not-too-optimistic-about-exports-next-year-chen-deming-says.html
Chinese Commerce Minister Chen Deming said he is “not too optimistic” about exports next year after a decline in the growth margin for trade in December.
“The growth rate for exports in December is going to slow down,” Chen told journalists in Geneva today. In every month of the fourth quarter, “exports were 2 percentage points down compared with same period last year.”
Exports in the first part of 2011 were better than those in the second half “so the growth rate will still look pretty good this year,” he said. The growth rate for imports this year will be about 5 percentage points higher than that for exports, he said.
http://www.bloomberg.com/news/2011-12-15/china-is-not-too-optimistic-about-exports-next-year-chen-deming-says.html
China’s Epic Deleveraging Hangover Begins: Credit and Property Bubbles Popping
From The Telegraph:
China's credit bubble has finally popped. The property market is swinging wildly from boom to bust, the cautionary exhibit of a BRIC's dream that is at last coming down to earth with a thud.
"Investors are massively underestimating the risk of a hard-landing in China, and indeed other BRICS (Brazil, Russia, India, China)... a 'Bloody Ridiculous Investment Concept' in my view," said Albert Edwards at Societe Generale.
"The BRICs are falling like bricks and the crises are home-blown, caused by their own boom-bust credit cycles. Industrial production is already falling in India, and Brazil will soon follow."
"There is so much spare capacity that they will start dumping goods, risking a deflation shock for the rest of the world. It no surpise that China has just imposed tariffs on imports of GM cars. I think it is highly likely that China will devalue the yuan next year, risking a trade war," he said.
China's $3.2 trillion foreign reserves have been falling for three months despite the trade surplus. Hot money is flowing out of the country. "One-way capital inflow or one-way bets on a yuan rise have become history. Our foreign reserves are basically falling every day," said Li Yang, a former central bank rate-setter.
The reserve loss acts as a form of monetary tightening, exactly the opposite of the effect during the boom. The reserves cannot be tapped to prop up China's internal banking system. To do so would mean repatriating the money – now in US Treasuries and European bonds – pushing up the yuan at the worst moment.
"The reality is that China's economy today requires significantly more financing to achieve the same level of growth as in the past," said China analyst Charlene Chu.
Ms Chu warned that there had been a "massive build-up in leverage" and fears a "fundamental, structural erosion" in the banking system that differs from past downturns. "For the first time, a large number of Chinese banks are beginning to face cash pressures. The forthcoming wave of asset quality issues has the potential to become uglier than in previous episodes".
Investors had thought China was immune to a property crash because mortgage finance is just 19pc of GDP. Wealthy Chinese often buy two, three or more flats with cash to park money because they cannot invest overseas and bank deposit rates have been minus 3pc in real terms this year.
But with price to income levels reaching nosebleed levels of 18 in East coast cities, it is clear that apartments – often left empty – have themselves become a momentum trade.
Mark Williams from Capital Economics said the great hope was that China would use is credit spree after 2008 to buy time, switching from chronic over-investment to consumer-led growth. "It hasn't work out as planned. The next few weeks are likely to reveal how little progress has been made. China may ride out the storm over the next few months, but the dangers of over-capacity and bad debt will only intensify".
In truth, China faces an epic deleveraging hangover, like the rest of us
http://www.telegraph.co.uk/finance/china-business/8957289/Chinas-epic-hangover-begins.html
China's credit bubble has finally popped. The property market is swinging wildly from boom to bust, the cautionary exhibit of a BRIC's dream that is at last coming down to earth with a thud.
"Investors are massively underestimating the risk of a hard-landing in China, and indeed other BRICS (Brazil, Russia, India, China)... a 'Bloody Ridiculous Investment Concept' in my view," said Albert Edwards at Societe Generale.
"The BRICs are falling like bricks and the crises are home-blown, caused by their own boom-bust credit cycles. Industrial production is already falling in India, and Brazil will soon follow."
"There is so much spare capacity that they will start dumping goods, risking a deflation shock for the rest of the world. It no surpise that China has just imposed tariffs on imports of GM cars. I think it is highly likely that China will devalue the yuan next year, risking a trade war," he said.
China's $3.2 trillion foreign reserves have been falling for three months despite the trade surplus. Hot money is flowing out of the country. "One-way capital inflow or one-way bets on a yuan rise have become history. Our foreign reserves are basically falling every day," said Li Yang, a former central bank rate-setter.
The reserve loss acts as a form of monetary tightening, exactly the opposite of the effect during the boom. The reserves cannot be tapped to prop up China's internal banking system. To do so would mean repatriating the money – now in US Treasuries and European bonds – pushing up the yuan at the worst moment.
"The reality is that China's economy today requires significantly more financing to achieve the same level of growth as in the past," said China analyst Charlene Chu.
Ms Chu warned that there had been a "massive build-up in leverage" and fears a "fundamental, structural erosion" in the banking system that differs from past downturns. "For the first time, a large number of Chinese banks are beginning to face cash pressures. The forthcoming wave of asset quality issues has the potential to become uglier than in previous episodes".
Investors had thought China was immune to a property crash because mortgage finance is just 19pc of GDP. Wealthy Chinese often buy two, three or more flats with cash to park money because they cannot invest overseas and bank deposit rates have been minus 3pc in real terms this year.
But with price to income levels reaching nosebleed levels of 18 in East coast cities, it is clear that apartments – often left empty – have themselves become a momentum trade.
Mark Williams from Capital Economics said the great hope was that China would use is credit spree after 2008 to buy time, switching from chronic over-investment to consumer-led growth. "It hasn't work out as planned. The next few weeks are likely to reveal how little progress has been made. China may ride out the storm over the next few months, but the dangers of over-capacity and bad debt will only intensify".
In truth, China faces an epic deleveraging hangover, like the rest of us
http://www.telegraph.co.uk/finance/china-business/8957289/Chinas-epic-hangover-begins.html
Charting China’s Take Over of the Banking World…And a Stark Warning
From Zero Hedge:
In what may come as a surprise to some, the top 3 banks in the world by market cap, are not based in the US, nor the UK, nor, obviously, Europe. All three are Chinese, namely ICBC, CCB and the Agricultural Bank of China. The top two US banks by market cap, Wells and JPM, are 4th and 6th respectively. And what is probably scarier, and what is not shown on the chart, is the amount of "assets" that these banks need to hold on their balance sheets to generate the returns needed to maintain this market cap: off the top of our head we would imagine that the US banks, when adding derivative exposure, have balance sheet risk that is orders of magnitude higher than that of China. Yet the most fascinating aspect is the amazing speed with which China took over the banking world (and with which market caps have increased), in the past 20 years. Without a single bank in the top 10 as recently as 2005, China now has 4 banks among the ten biggest in the world. Yet should China be worried and is history poised to repeat? Back in 1991, 6 of the top 10 largest banks in the world... were Japanese. Now not one of the 6 is to be found anywhere.
http://www.zerohedge.com/news/charting-chinas-take-over-banking-world-and-stark-warning
In what may come as a surprise to some, the top 3 banks in the world by market cap, are not based in the US, nor the UK, nor, obviously, Europe. All three are Chinese, namely ICBC, CCB and the Agricultural Bank of China. The top two US banks by market cap, Wells and JPM, are 4th and 6th respectively. And what is probably scarier, and what is not shown on the chart, is the amount of "assets" that these banks need to hold on their balance sheets to generate the returns needed to maintain this market cap: off the top of our head we would imagine that the US banks, when adding derivative exposure, have balance sheet risk that is orders of magnitude higher than that of China. Yet the most fascinating aspect is the amazing speed with which China took over the banking world (and with which market caps have increased), in the past 20 years. Without a single bank in the top 10 as recently as 2005, China now has 4 banks among the ten biggest in the world. Yet should China be worried and is history poised to repeat? Back in 1991, 6 of the top 10 largest banks in the world... were Japanese. Now not one of the 6 is to be found anywhere.
http://www.zerohedge.com/news/charting-chinas-take-over-banking-world-and-stark-warning
Investment in China Drops As U.S. Drags
From Reuters over Finance Yahoo:
Foreign direct investment growth in China fell year-on-year for the first time in 28 months, with November's $8.8 billion of commitments down 9.8 percent and hurt by a sharp drop in inflows from the United States, Commerce Ministry data showed Thursday.
The fall -- the first since July 2009's 35.7 percent year-on-year collapse to $5.4 billion -- saw year-to-date FDI flows ease to 13.2 percent from 15.9 percent previously, bringing the total to a robust $103.8 billion and still leaving 2011 poised to be a record-breaking year for FDI.
The slowdown in the rate of FDI growth comes on top of recent data which showed the first net capital outflow from China in four years in October, part of a recent trend of capital flight from emerging markets largely inspired by Europe's festering debt crisis.
But he noted that rising costs in China and a slowdown in the global economy were forcing some low-end manufacturers to relocate to other regions.
"For those that rely heavily on cheap labor as an advantage, China may seem to be an increasingly unwelcoming place," he said.
Economists say fine-tuning of economic policy towards a pro-growth setting is already under way. Data showed Chinese banks made 562 billion yuan of new loans in November, a shade more than forecast as Beijing gently eases tight credit conditions.
Bank lending is a focal point in China's monetary policy as it is controlled by the government to steer economic growth and control inflation.
Inflation appears to be coming off the boil, having fallen from a three-year high of 6.5 percent in July to 4.2 percent in November, but stability-obsessed Beijing is wary of any policy that might fire up prices again.
Periods of high inflation have historically been accompanied by periods of social tension, making the leaders of China's ruling Communist Party particularly sensitive to sharp price rises or a sudden erosion of consumer spending power.
http://finance.yahoo.com/news/china-fdi-flows-stumble-november-044037193.html?l=1
Foreign direct investment growth in China fell year-on-year for the first time in 28 months, with November's $8.8 billion of commitments down 9.8 percent and hurt by a sharp drop in inflows from the United States, Commerce Ministry data showed Thursday.
The fall -- the first since July 2009's 35.7 percent year-on-year collapse to $5.4 billion -- saw year-to-date FDI flows ease to 13.2 percent from 15.9 percent previously, bringing the total to a robust $103.8 billion and still leaving 2011 poised to be a record-breaking year for FDI.
The slowdown in the rate of FDI growth comes on top of recent data which showed the first net capital outflow from China in four years in October, part of a recent trend of capital flight from emerging markets largely inspired by Europe's festering debt crisis.
But he noted that rising costs in China and a slowdown in the global economy were forcing some low-end manufacturers to relocate to other regions.
"For those that rely heavily on cheap labor as an advantage, China may seem to be an increasingly unwelcoming place," he said.
Economists say fine-tuning of economic policy towards a pro-growth setting is already under way. Data showed Chinese banks made 562 billion yuan of new loans in November, a shade more than forecast as Beijing gently eases tight credit conditions.
Bank lending is a focal point in China's monetary policy as it is controlled by the government to steer economic growth and control inflation.
Inflation appears to be coming off the boil, having fallen from a three-year high of 6.5 percent in July to 4.2 percent in November, but stability-obsessed Beijing is wary of any policy that might fire up prices again.
Periods of high inflation have historically been accompanied by periods of social tension, making the leaders of China's ruling Communist Party particularly sensitive to sharp price rises or a sudden erosion of consumer spending power.
http://finance.yahoo.com/news/china-fdi-flows-stumble-november-044037193.html?l=1
50 Economic Numbers from 2011 That Are Almost Too Crazy To Believe
From the Economic Collapse Blog:
The following are 50 economic numbers from 2011 that are almost too crazy to believe....
#1 A staggering 48 percent of all Americans are either considered to be "low income" or are living in poverty.
#2 Approximately 57 percent of all children in the United States are living in homes that are either considered to be "low income" or impoverished.
#3 If the number of Americans that "wanted jobs" was the same today as it was back in 2007, the "official" unemployment rate put out by the U.S. government would be up to 11 percent.
#4 The average amount of time that a worker stays unemployed in the United States is now over 40 weeks.
#5 One recent survey found that 77 percent of all U.S. small businesses do not plan to hire any more workers.
#6 There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.
#7 Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.
#8 According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006. Today, that number has shrunk to 14.5 million.
#9 A Gallup poll from earlier this year found that approximately one out of every five Americans that do have a job consider themselves to be underemployed.
#10 According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.
#11 Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.
#12 Back in 1969, 95 percent of all men between the ages of 25 and 54 had a job. In July, only 81.2 percent of men in that age group had a job.
#13 One recent survey found that one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.
#14 The Federal Reserve recently announced that the total net worth of U.S. households declined by 4.1 percent in the 3rd quarter of 2011 alone.
#15 According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.
#16 As the economy has slowed down, so has the number of marriages. According to a Pew Research Center analysis, only 51 percent of all Americans that are at least 18 years old are currently married. Back in 1960, 72 percent of all U.S. adults were married.
#17 The U.S. Postal Service has lost more than 5 billion dollars over the past year.
#18 In Stockton, California home prices have declined 64 percent from where they were at when the housing market peaked.
#19 Nevada has had the highest foreclosure rate in the nation for 59 months in a row.
#20 If you can believe it, the median price of a home in Detroit is now just $6000.
#21 According to the U.S. Census Bureau, 18 percent of all homes in the state of Florida are sitting vacant. That figure is 63 percent larger than it was just ten years ago.
#22 New home construction in the United States is on pace to set a brand new all-time record low in 2011.
#23 As I have written about previously, 19 percent of all American men between the ages of 25 and 34 are now living with their parents.
#24 Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.
#25 According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980. Today they account for approximately 16.3%.
#26 One study found that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt.
#27 If you can believe it, one out of every seven Americans has at least 10 credit cards.
#28 The United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.
#29 It is being projected that the U.S. trade deficit for 2011 will be 558.2 billion dollars.
#30 The retirement crisis in the United States just continues to get worse. According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.
#31 Today, one out of every six elderly Americans lives below the federal poverty line.
#32 According to a study that was just released, CEO pay at America's biggest companies rose by 36.5% in just one recent 12 month period.
#33 Today, the "too big to fail" banks are larger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.
#34 The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined.
#35 According to an analysis of Census Bureau data done by the Pew Research Center, the median net worth for households led by someone 65 years of age or older is 47 times greater than the median net worth for households led by someone under the age of 35.
#36 If you can believe it, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.
#37 A higher percentage of Americans is living in extreme poverty (6.7%) than has ever been measured before.
#38 Child homelessness in the United States is now 33 percent higher than it was back in 2007.
#39 Since 2007, the number of children living in poverty in the state of California has increased by 30 percent.
#40 Sadly, child poverty is absolutely exploding all over America. According to the National Center for Children in Poverty, 36.4% of all children that live in Philadelphia are living in poverty, 40.1% of all children that live in Atlanta are living in poverty, 52.6% of all children that live in Cleveland are living in poverty and 53.6% of all children that live in Detroit are living in poverty.
#41 Today, one out of every seven Americans is on food stamps and one out of every four American children is on food stamps.
#42 In 1980, government transfer payments accounted for just 11.7% of all income. Today, government transfer payments account for more than 18 percent of all income.
#43 A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.
#44 Right now, spending by the federal government accounts for about 24 percent of GDP. Back in 2001, it accounted for just 18 percent.
#45 For fiscal year 2011, the U.S. federal government had a budget deficit of nearly 1.3 trillion dollars. That was the third year in a row that our budget deficit has topped one trillion dollars.
#46 If Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.
#47 Amazingly, the U.S. government has now accumulated a total debt of 15 trillion dollars. When Barack Obama first took office the national debt was just 10.6 trillion dollars.
#48 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.
#49 The U.S. national debt has been increasing by an average of more than 4 billion dollars per day since the beginning of the Obama administration.
#50 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.
http://theeconomiccollapseblog.com/archives/50-economic-numbers-from-2011-that-are-almost-too-crazy-to-believe/comment-page-1#comment-91369
The following are 50 economic numbers from 2011 that are almost too crazy to believe....
#1 A staggering 48 percent of all Americans are either considered to be "low income" or are living in poverty.
#2 Approximately 57 percent of all children in the United States are living in homes that are either considered to be "low income" or impoverished.
#3 If the number of Americans that "wanted jobs" was the same today as it was back in 2007, the "official" unemployment rate put out by the U.S. government would be up to 11 percent.
#4 The average amount of time that a worker stays unemployed in the United States is now over 40 weeks.
#5 One recent survey found that 77 percent of all U.S. small businesses do not plan to hire any more workers.
#6 There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.
#7 Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.
#8 According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006. Today, that number has shrunk to 14.5 million.
#9 A Gallup poll from earlier this year found that approximately one out of every five Americans that do have a job consider themselves to be underemployed.
#10 According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.
#11 Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.
#12 Back in 1969, 95 percent of all men between the ages of 25 and 54 had a job. In July, only 81.2 percent of men in that age group had a job.
#13 One recent survey found that one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.
#14 The Federal Reserve recently announced that the total net worth of U.S. households declined by 4.1 percent in the 3rd quarter of 2011 alone.
#15 According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.
#16 As the economy has slowed down, so has the number of marriages. According to a Pew Research Center analysis, only 51 percent of all Americans that are at least 18 years old are currently married. Back in 1960, 72 percent of all U.S. adults were married.
#17 The U.S. Postal Service has lost more than 5 billion dollars over the past year.
#18 In Stockton, California home prices have declined 64 percent from where they were at when the housing market peaked.
#19 Nevada has had the highest foreclosure rate in the nation for 59 months in a row.
#20 If you can believe it, the median price of a home in Detroit is now just $6000.
#21 According to the U.S. Census Bureau, 18 percent of all homes in the state of Florida are sitting vacant. That figure is 63 percent larger than it was just ten years ago.
#22 New home construction in the United States is on pace to set a brand new all-time record low in 2011.
#23 As I have written about previously, 19 percent of all American men between the ages of 25 and 34 are now living with their parents.
#24 Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.
#25 According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980. Today they account for approximately 16.3%.
#26 One study found that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt.
#27 If you can believe it, one out of every seven Americans has at least 10 credit cards.
#28 The United States spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.
#29 It is being projected that the U.S. trade deficit for 2011 will be 558.2 billion dollars.
#30 The retirement crisis in the United States just continues to get worse. According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.
#31 Today, one out of every six elderly Americans lives below the federal poverty line.
#32 According to a study that was just released, CEO pay at America's biggest companies rose by 36.5% in just one recent 12 month period.
#33 Today, the "too big to fail" banks are larger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.
#34 The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined.
#35 According to an analysis of Census Bureau data done by the Pew Research Center, the median net worth for households led by someone 65 years of age or older is 47 times greater than the median net worth for households led by someone under the age of 35.
#36 If you can believe it, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.
#37 A higher percentage of Americans is living in extreme poverty (6.7%) than has ever been measured before.
#38 Child homelessness in the United States is now 33 percent higher than it was back in 2007.
#39 Since 2007, the number of children living in poverty in the state of California has increased by 30 percent.
#40 Sadly, child poverty is absolutely exploding all over America. According to the National Center for Children in Poverty, 36.4% of all children that live in Philadelphia are living in poverty, 40.1% of all children that live in Atlanta are living in poverty, 52.6% of all children that live in Cleveland are living in poverty and 53.6% of all children that live in Detroit are living in poverty.
#41 Today, one out of every seven Americans is on food stamps and one out of every four American children is on food stamps.
#42 In 1980, government transfer payments accounted for just 11.7% of all income. Today, government transfer payments account for more than 18 percent of all income.
#43 A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.
#44 Right now, spending by the federal government accounts for about 24 percent of GDP. Back in 2001, it accounted for just 18 percent.
#45 For fiscal year 2011, the U.S. federal government had a budget deficit of nearly 1.3 trillion dollars. That was the third year in a row that our budget deficit has topped one trillion dollars.
#46 If Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.
#47 Amazingly, the U.S. government has now accumulated a total debt of 15 trillion dollars. When Barack Obama first took office the national debt was just 10.6 trillion dollars.
#48 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.
#49 The U.S. national debt has been increasing by an average of more than 4 billion dollars per day since the beginning of the Obama administration.
#50 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.
http://theeconomiccollapseblog.com/archives/50-economic-numbers-from-2011-that-are-almost-too-crazy-to-believe/comment-page-1#comment-91369
IMF Says Europe Crisis Escalating, Needs External Assistance; Russia Will Use Proceeds From Sales of U.S. Treasuries To Help Europe
From Zero Hedge:
And so risk assets go to the OFF position following the latest statement from the IMF's Christine Lagarde, who until very recently was France's FinMin, and thus personally responsible for the current economic crunch:
• IMF'S LAGARDE SAYS EUROPE DEBT CRISIS `ESCALATING'
• IMF'S LAGARDE: CRISIS REQUIRES ACTION BY COUNTRIES OUTSIDE EU
Well, we know the UK is now out, courtesy of idiotic statements such as this one by Christina Noyer. So who will step up? Why Russia it seems.
• RUSSIA CONSIDERS PROVIDING UP TO $20B TO IMF, DVORKOVICH SAYS
Why's that? Because like China (more on that in a second), Russia just dumped US bonds for the 12th straight month and instead both Russia and China are now focusing on making Europe their vassal state. So now we know where the money is coming from - sales of US debt of course!
http://www.zerohedge.com/news/imf-says-europe-needs-external-assistance-russia-pledges-use-proceeds-sale-us-treasurys-help-eu
And so risk assets go to the OFF position following the latest statement from the IMF's Christine Lagarde, who until very recently was France's FinMin, and thus personally responsible for the current economic crunch:
• IMF'S LAGARDE SAYS EUROPE DEBT CRISIS `ESCALATING'
• IMF'S LAGARDE: CRISIS REQUIRES ACTION BY COUNTRIES OUTSIDE EU
Well, we know the UK is now out, courtesy of idiotic statements such as this one by Christina Noyer. So who will step up? Why Russia it seems.
• RUSSIA CONSIDERS PROVIDING UP TO $20B TO IMF, DVORKOVICH SAYS
Why's that? Because like China (more on that in a second), Russia just dumped US bonds for the 12th straight month and instead both Russia and China are now focusing on making Europe their vassal state. So now we know where the money is coming from - sales of US debt of course!
http://www.zerohedge.com/news/imf-says-europe-needs-external-assistance-russia-pledges-use-proceeds-sale-us-treasurys-help-eu
Thursday, December 15, 2011
Central Bank Appetite and Monetary Case for $10,000 Gold
From Forbes:
What do you get when you mix negative real interest rates with stimulative money supply efforts by global central banks?
An exceptionally potent formula for higher gold prices that could send gold to the unimaginable level of $10,000 an ounce. Negative real interest rates and strong money supply growth are two key factors of what I refer to as the Fear Trade.
Negative real interest rates occur when the inflationary rate, or CPI, is greater than the current interest rate. A quick account of the G-7 and E-7 countries shows that the majority have negative real interest rates.
Across the developed G-7 countries, British citizens are the worst off with real interest rates in the U.K. sitting at negative 4.5 percent. U.S investors aren’t doing much better with rates at negative 3.25 percent and the Fed has all but guaranteed rates will remain there. Only Japan has a positive real interest rate among the G-7 and that rate is barely above zero.
Conversely, the most populous nations making up the E-7 have mostly positive real interest rates. However, the grouping’s grandest economic powerhouses, China and India, have negative real interest rates sitting around negative 2 percent.
Simply put, investors in those countries who have parked their savings in cash and low-yielding investments, such as Treasury bills and money market accounts in the U.S., are actually losing money due to inflation.
That can be tough for any investor, but when you’re the central bank of a country with millions of dollars in reserves, it can be catastrophic. This is why central banks around the globe have sought protection by diversifying their foreign-exchange reserves into gold bullion this year.
http://www.forbes.com/sites/greatspeculations/2011/12/12/central-bank-appetite-and-the-monetary-case-for-10000-gold/
What do you get when you mix negative real interest rates with stimulative money supply efforts by global central banks?
An exceptionally potent formula for higher gold prices that could send gold to the unimaginable level of $10,000 an ounce. Negative real interest rates and strong money supply growth are two key factors of what I refer to as the Fear Trade.
Negative real interest rates occur when the inflationary rate, or CPI, is greater than the current interest rate. A quick account of the G-7 and E-7 countries shows that the majority have negative real interest rates.
Across the developed G-7 countries, British citizens are the worst off with real interest rates in the U.K. sitting at negative 4.5 percent. U.S investors aren’t doing much better with rates at negative 3.25 percent and the Fed has all but guaranteed rates will remain there. Only Japan has a positive real interest rate among the G-7 and that rate is barely above zero.
Conversely, the most populous nations making up the E-7 have mostly positive real interest rates. However, the grouping’s grandest economic powerhouses, China and India, have negative real interest rates sitting around negative 2 percent.
Simply put, investors in those countries who have parked their savings in cash and low-yielding investments, such as Treasury bills and money market accounts in the U.S., are actually losing money due to inflation.
That can be tough for any investor, but when you’re the central bank of a country with millions of dollars in reserves, it can be catastrophic. This is why central banks around the globe have sought protection by diversifying their foreign-exchange reserves into gold bullion this year.
http://www.forbes.com/sites/greatspeculations/2011/12/12/central-bank-appetite-and-the-monetary-case-for-10000-gold/
The Free Market vs. Crony Capitalism
From ThinkMarkets:
Nearby is a Venn diagram showing the intersection between Goldman Sachs and the federal government: people who before or after were attached to both.
This is one reason that the current political-economic system will continue to fail. Those who exercise positions of political influence are not about the let particular so-called private institutions go under (there have been exceptions, of course). The idea is that they will use the ill-defined systemic-risk notions to preserve the status-quo. This is why I floated, two years ago, the idea that perhaps the government must break up the large financial institutions so that they can fail without dragging us all (particularly me) down with them. My positive program for laissez-faire, so to speak.
A picture is worth a thousand words!
http://thinkmarkets.wordpress.com/2011/12/11/the-free-market-versus-crony-capitalism/
Nearby is a Venn diagram showing the intersection between Goldman Sachs and the federal government: people who before or after were attached to both.
This is one reason that the current political-economic system will continue to fail. Those who exercise positions of political influence are not about the let particular so-called private institutions go under (there have been exceptions, of course). The idea is that they will use the ill-defined systemic-risk notions to preserve the status-quo. This is why I floated, two years ago, the idea that perhaps the government must break up the large financial institutions so that they can fail without dragging us all (particularly me) down with them. My positive program for laissez-faire, so to speak.
A picture is worth a thousand words!
http://thinkmarkets.wordpress.com/2011/12/11/the-free-market-versus-crony-capitalism/
Kyle Bass on Shortening Collateral Chains; Or the Gradual Evisceration of Shadow Banking
From Zero Hedge:
Kyle Bass presented us with a preview of what to expect in his monthly letter in a David Faber interview yesterday; today he delivers the full monty with his extended analysis of "shortening collateral chains" in his latest investor letter - a topic that we have been discussing broadly ever since we starting focusing on Shadow Banking two years ago (and why, as we have been pounding the table, it is the central bankers' primary prerogative to offset the collapse in the shadow banking system more than anything), and narrowly, since the realization of how tenuous the rehypothecation system is. The below analysis leads Bass to come to the one logical conclusion: "As European leaders press forward with failed attempt after failed attempt to suppress borrowing costs, control spending, reduce deficits and prop up what the markets have already told us is a broken monetary system, the data tells us that the citizens of the most troubled and profligate nations are losing confidence in the Euro dream. Trust has been lost, confidence in the system is being lost, and the ultimate consequence of this break down - sovereign defaults —are imminent. We continue to move ever closer to a great restructuring of sovereign debt."
http://www.zerohedge.com/news/presenting-kyle-bass-analysis-shortening-collateral-chains-or-gradual-evisceration-shadow-banki
Kyle Bass presented us with a preview of what to expect in his monthly letter in a David Faber interview yesterday; today he delivers the full monty with his extended analysis of "shortening collateral chains" in his latest investor letter - a topic that we have been discussing broadly ever since we starting focusing on Shadow Banking two years ago (and why, as we have been pounding the table, it is the central bankers' primary prerogative to offset the collapse in the shadow banking system more than anything), and narrowly, since the realization of how tenuous the rehypothecation system is. The below analysis leads Bass to come to the one logical conclusion: "As European leaders press forward with failed attempt after failed attempt to suppress borrowing costs, control spending, reduce deficits and prop up what the markets have already told us is a broken monetary system, the data tells us that the citizens of the most troubled and profligate nations are losing confidence in the Euro dream. Trust has been lost, confidence in the system is being lost, and the ultimate consequence of this break down - sovereign defaults —are imminent. We continue to move ever closer to a great restructuring of sovereign debt."
http://www.zerohedge.com/news/presenting-kyle-bass-analysis-shortening-collateral-chains-or-gradual-evisceration-shadow-banki
Wednesday, December 14, 2011
Kyle Bass on Rehypothecation and Other Keynesian Endgame Scenarios
From Zero Hedge:
If readers have the sense there has been a deluge of Kyle Bass reading (and viewing) materials on Zero Hedge in the past two weeks, it is because there has been: and why not - after all, unlike all other cheap talking heads, and know-nothing pundits who merely need a suit to make an appearance on one of the TV's financial comedy channels, Kyle has been consistent in the most important thing - telling the truth. Today, he took his resurgent popularity to CNBC which always knows which way the winds blow, and told David Faber more or less everything that Zero Hedge readers know already about Europe's collapse, on why the ECB will print but only after a default, and about the inevitable global debt restructuring. There was a twist: as most regulars here know, the key topic of the past week, of December, and potentially of 2011, is the limitless "fractional Prime Broker lending" of assets-cum-liabilities (and when it comes to the realization that one's gold itself may be rehypothecated, via GLD, it is no surprise why paper gold is plunging, with the expected delayed effect of slow comprehension) in an infinite loop of daisy chained counterparty exposure, also known as rehypothecation. Which is precisely what what Bass touches on 9 minutes 30 seconds into the interview when the discussion shifts to "shortening collateral chains." Must watch for everyone who enjoys not being lied to.
http://www.zerohedge.com/news/kyle-bass-rehypothecation-and-other-keynesian-endgame-scenarios
If readers have the sense there has been a deluge of Kyle Bass reading (and viewing) materials on Zero Hedge in the past two weeks, it is because there has been: and why not - after all, unlike all other cheap talking heads, and know-nothing pundits who merely need a suit to make an appearance on one of the TV's financial comedy channels, Kyle has been consistent in the most important thing - telling the truth. Today, he took his resurgent popularity to CNBC which always knows which way the winds blow, and told David Faber more or less everything that Zero Hedge readers know already about Europe's collapse, on why the ECB will print but only after a default, and about the inevitable global debt restructuring. There was a twist: as most regulars here know, the key topic of the past week, of December, and potentially of 2011, is the limitless "fractional Prime Broker lending" of assets-cum-liabilities (and when it comes to the realization that one's gold itself may be rehypothecated, via GLD, it is no surprise why paper gold is plunging, with the expected delayed effect of slow comprehension) in an infinite loop of daisy chained counterparty exposure, also known as rehypothecation. Which is precisely what what Bass touches on 9 minutes 30 seconds into the interview when the discussion shifts to "shortening collateral chains." Must watch for everyone who enjoys not being lied to.
http://www.zerohedge.com/news/kyle-bass-rehypothecation-and-other-keynesian-endgame-scenarios
China Affirms Property Curbs Even Amid ‘Grim’ Outlook
From Bloomberg:
China’s leaders affirmed they will stick next year with a campaign to bring down property prices even as a “very grim” global outlook threatens growth in the second-largest economy.
The nation will target “basically stable” consumer prices and “unswervingly” implement real-estate curbs, according to a statement after an annual economic planning meeting in Beijing. At the same time, officials will seek “steady and relatively fast growth,” Xinhua News Agency said.
“The authorities are cautious about a premature or aggressive easing of policy, while committed to be pre-emptive and flexible to roll out supportive policies if needed,” said Chang Jian, a Hong Kong-based economist at Barclays Capital, who formerly worked for the World Bank. “The policy focus will be shifting from managing inflation to supporting growth.”
In China, the theme for next year is “progress amid stability,” Xinhua said. “Stability means to maintain macro- economic policies basically stable, maintain steady and relatively fast growth, keep overall price levels basically stable and maintain social stability.”
Policies will be fine-tuned as needed and the nation will press on with economic reforms, the statement said. The global outlook “remains very grim” with China facing pressure for growth to slow and prices to rise, operational difficulties at some companies, and “a grim situation in energy saving,” the statement from Xinhua said.
In December last year, the government officially shifted its monetary policy stance to “prudent” from “moderately loose.” The party’s 25-member Politburo said last week that that label will remain unchanged for 2012 and fiscal policy will remain “proactive.”
China will speed construction of “ordinary commercial residential housing” and seek to return home prices to a reasonable level, today’s statement said. The yuan’s exchange rate will be kept “basically stable,” it said.
http://www.bloomberg.com/news/2011-12-14/china-affirms-property-curbs-even-as-global-outlook-very-grim-economy.html
China’s leaders affirmed they will stick next year with a campaign to bring down property prices even as a “very grim” global outlook threatens growth in the second-largest economy.
The nation will target “basically stable” consumer prices and “unswervingly” implement real-estate curbs, according to a statement after an annual economic planning meeting in Beijing. At the same time, officials will seek “steady and relatively fast growth,” Xinhua News Agency said.
“The authorities are cautious about a premature or aggressive easing of policy, while committed to be pre-emptive and flexible to roll out supportive policies if needed,” said Chang Jian, a Hong Kong-based economist at Barclays Capital, who formerly worked for the World Bank. “The policy focus will be shifting from managing inflation to supporting growth.”
In China, the theme for next year is “progress amid stability,” Xinhua said. “Stability means to maintain macro- economic policies basically stable, maintain steady and relatively fast growth, keep overall price levels basically stable and maintain social stability.”
Policies will be fine-tuned as needed and the nation will press on with economic reforms, the statement said. The global outlook “remains very grim” with China facing pressure for growth to slow and prices to rise, operational difficulties at some companies, and “a grim situation in energy saving,” the statement from Xinhua said.
In December last year, the government officially shifted its monetary policy stance to “prudent” from “moderately loose.” The party’s 25-member Politburo said last week that that label will remain unchanged for 2012 and fiscal policy will remain “proactive.”
China will speed construction of “ordinary commercial residential housing” and seek to return home prices to a reasonable level, today’s statement said. The yuan’s exchange rate will be kept “basically stable,” it said.
http://www.bloomberg.com/news/2011-12-14/china-affirms-property-curbs-even-as-global-outlook-very-grim-economy.html
Tuesday, December 13, 2011
Credit Suisse: ‘Long-Term Pain’ for Chinese Property Market
From Forbes:
China’s overheated real-estate market has become a source of fascination and dread for investors. With a significant share of the economy tied up in construction, and global commodity prices hanging on Chinese demand, the recent drop in property prices could prove a turning point. China Vanke, the largest developer and a bellwether for the industry, said Monday that sales in November fell down 36%, year-on-year. This marks the company’s fourth consecutive month of double-digit drops in revenues. So how much further might house prices fall, and what would be the impact on developers’ balance sheets? Is it time to push the panic button? In a new report, Credit Suisse predicts an average drop of 20% from a peak in mid-2011 to the end of 2012.
If a 20% fall sounds dire, consider that some Chinese media outlets have begun speculating on the possibility of a much more severe correction to what is widely seen as a bubble. Some reports flout the idea of 40-50% slump, which would have huge implications for China’s political economy.
http://www.forbes.com/sites/simonmontlake/2011/12/06/long-term-pain-for-chinese-property-market-says-credit-suisse/
China’s overheated real-estate market has become a source of fascination and dread for investors. With a significant share of the economy tied up in construction, and global commodity prices hanging on Chinese demand, the recent drop in property prices could prove a turning point. China Vanke, the largest developer and a bellwether for the industry, said Monday that sales in November fell down 36%, year-on-year. This marks the company’s fourth consecutive month of double-digit drops in revenues. So how much further might house prices fall, and what would be the impact on developers’ balance sheets? Is it time to push the panic button? In a new report, Credit Suisse predicts an average drop of 20% from a peak in mid-2011 to the end of 2012.
If a 20% fall sounds dire, consider that some Chinese media outlets have begun speculating on the possibility of a much more severe correction to what is widely seen as a bubble. Some reports flout the idea of 40-50% slump, which would have huge implications for China’s political economy.
http://www.forbes.com/sites/simonmontlake/2011/12/06/long-term-pain-for-chinese-property-market-says-credit-suisse/
Monday, December 12, 2011
Steel Is True Indicator of Chinese Hard Landing
From Zero Hedge:
Last week we pointed out some curious observations from Fortress on commodities and the state of the Chinese market courtesy of secondary industrial metals, notably steel: "The investment landscape for industrial metals is becoming increasingly more difficult to navigate. As highlighted in last month’s letter, we are continuing to see a rapid deceleration of growth in China, specifically within the cyclical industries. A recent trip to visit steel companies outside Beijing underlined the impact of extremely tight liquidity and continued restrictive policy in the Chinese housing market. Steel capacity cuts – through idling or accelerated maintenance outages – are now commonplace and the speed of these cuts has certainly surprised the market. Construction is the principal end-market blamed for this weakness; given the very large inventory overhang and the continued lack of liquidity, this is not surprising. In our equity universe, we have also seen numerous companies expressing concerns regarding China construction demand. Zoomlion, China’s second largest construction machinery company, recently said, "Demand for construction machinery has shrunken drastically and growth will no doubt continue to slow next year." Within the context of declining housing starts, plummeting transaction volumes and the beginning of a meaningful move down in housing prices, these shifts in the steel market have been an interesting harbinger of more substantial problems in the Chinese economy. Our principal concern is the extension of housing weakness into the banking system through the mechanism of both failing developers as well as the opaque and informal lending. We are concerned that the recent strength in iron ore, steel and copper has been misinterpreted by the market. In our view, any suggestion that the Chinese market is undergoing a substantial restock is misplaced." Today, we get a confirmation of just this warning courtesy of Citigroup which has charted weekly Iron Ore China port inventories and of broad steel inventories. Needless to say, domestic steelmakers, who better than anyone know the state of domestic end product demand, have seen the writing on the wall, and have one message for the world: short Brazil and Australia.
http://www.zerohedge.com/news/forget-copper-steel-true-indicator-chinese-hard-landing
Last week we pointed out some curious observations from Fortress on commodities and the state of the Chinese market courtesy of secondary industrial metals, notably steel: "The investment landscape for industrial metals is becoming increasingly more difficult to navigate. As highlighted in last month’s letter, we are continuing to see a rapid deceleration of growth in China, specifically within the cyclical industries. A recent trip to visit steel companies outside Beijing underlined the impact of extremely tight liquidity and continued restrictive policy in the Chinese housing market. Steel capacity cuts – through idling or accelerated maintenance outages – are now commonplace and the speed of these cuts has certainly surprised the market. Construction is the principal end-market blamed for this weakness; given the very large inventory overhang and the continued lack of liquidity, this is not surprising. In our equity universe, we have also seen numerous companies expressing concerns regarding China construction demand. Zoomlion, China’s second largest construction machinery company, recently said, "Demand for construction machinery has shrunken drastically and growth will no doubt continue to slow next year." Within the context of declining housing starts, plummeting transaction volumes and the beginning of a meaningful move down in housing prices, these shifts in the steel market have been an interesting harbinger of more substantial problems in the Chinese economy. Our principal concern is the extension of housing weakness into the banking system through the mechanism of both failing developers as well as the opaque and informal lending. We are concerned that the recent strength in iron ore, steel and copper has been misinterpreted by the market. In our view, any suggestion that the Chinese market is undergoing a substantial restock is misplaced." Today, we get a confirmation of just this warning courtesy of Citigroup which has charted weekly Iron Ore China port inventories and of broad steel inventories. Needless to say, domestic steelmakers, who better than anyone know the state of domestic end product demand, have seen the writing on the wall, and have one message for the world: short Brazil and Australia.
http://www.zerohedge.com/news/forget-copper-steel-true-indicator-chinese-hard-landing
Art Cashin: The Bank of the United States’ Failure, the Start of U.S. Bank Runs and the Great Depression
From Zero Hedge:
Art Cashin recalls how it all started 81 years ago. Naturally, it "ended" with World War 2. Will history rhyme, or will "this time be different"?
From UBS
On this day (-1) in 1930, American savers, the Federal Reserve and a Republican President all got a nasty surprise. The banking system had been shaky for a year or two but it looked like things might finally be beginning to stabilize. That is until today.
On this day, a major financial institution, The Bank of the United States went belly up. And, with it went the savings, "in whole or in part", of over 400,000 depositors.
The Bank of the United States has been a historically unlucky name for several institutions. The first “Bank of the United States” was proposed by no less than Alexander Hamilton. It was a privately held central bank for the United States some 125 years before the Fed was created. It was very controversial as Southerners saw it as a boon and tool of the mercantile North while the South’s main industry, agriculture, didn’t need strong banking. The bank’s charter was allowed to expire and the bank disappeared.
Without a strong central bank, however, the young government had found it very difficult to finance the War of 1812. So, Congress proposed another Bank of the United States. This one succeeded for a while until Andrew Jackson and his Southern coalition determined to kill it. They succeeded and the result, many feel, was the Panic of 1837, one of the worst economic contractions in American history.
Now back to the other Bank of the United States.
In the early 1900’s, immigrants were pouring through Ellis Island and onto the streets of New York. A fellow immigrant and a very successful garment merchant realized they would need a place to put their meager earnings and savings. Perhaps to convey an image of governmental security or even an implied guarantee, he named his enterprise, “The Bank of the United Sates”.
As previously noted, when it went under it had over 400,000 depositors. They all began to scramble for money anywhere which tended to strain the other banks. The large New York garment industry was pushed to the edge and merchants desperately sought credit. Lines began to form at other banks. Soon the nation was sinking into the Depression.
To celebrate meet a couple of auditors at the Olde TARP Trust Lounge. Have a few perfect Rob Roys and explain that these days’ surprises are federally reserved for things like birthdays - not economic events. Crises, like dinosaurs, are now ancient history. Then have several more sips.
The stock market slumbered its way to another 180 point gain. The impetus was the European Summit.
http://www.zerohedge.com/news/cashin-anniversary-bank-united-states-failure-start-us-bank-runs-and-great-depression
Art Cashin recalls how it all started 81 years ago. Naturally, it "ended" with World War 2. Will history rhyme, or will "this time be different"?
From UBS
On this day (-1) in 1930, American savers, the Federal Reserve and a Republican President all got a nasty surprise. The banking system had been shaky for a year or two but it looked like things might finally be beginning to stabilize. That is until today.
On this day, a major financial institution, The Bank of the United States went belly up. And, with it went the savings, "in whole or in part", of over 400,000 depositors.
The Bank of the United States has been a historically unlucky name for several institutions. The first “Bank of the United States” was proposed by no less than Alexander Hamilton. It was a privately held central bank for the United States some 125 years before the Fed was created. It was very controversial as Southerners saw it as a boon and tool of the mercantile North while the South’s main industry, agriculture, didn’t need strong banking. The bank’s charter was allowed to expire and the bank disappeared.
Without a strong central bank, however, the young government had found it very difficult to finance the War of 1812. So, Congress proposed another Bank of the United States. This one succeeded for a while until Andrew Jackson and his Southern coalition determined to kill it. They succeeded and the result, many feel, was the Panic of 1837, one of the worst economic contractions in American history.
Now back to the other Bank of the United States.
In the early 1900’s, immigrants were pouring through Ellis Island and onto the streets of New York. A fellow immigrant and a very successful garment merchant realized they would need a place to put their meager earnings and savings. Perhaps to convey an image of governmental security or even an implied guarantee, he named his enterprise, “The Bank of the United Sates”.
As previously noted, when it went under it had over 400,000 depositors. They all began to scramble for money anywhere which tended to strain the other banks. The large New York garment industry was pushed to the edge and merchants desperately sought credit. Lines began to form at other banks. Soon the nation was sinking into the Depression.
To celebrate meet a couple of auditors at the Olde TARP Trust Lounge. Have a few perfect Rob Roys and explain that these days’ surprises are federally reserved for things like birthdays - not economic events. Crises, like dinosaurs, are now ancient history. Then have several more sips.
The stock market slumbered its way to another 180 point gain. The impetus was the European Summit.
http://www.zerohedge.com/news/cashin-anniversary-bank-united-states-failure-start-us-bank-runs-and-great-depression
Sunday, December 11, 2011
“Their false idols utter nonsense, and seers tell visions that lie, with false dreams and empty consolations. Therefore the people wander like sheep, oppressed for lack of a shepherd.”
Zechariah 10:2
성경 말씀을 올해에 특히 더 감사히 느끼며 받아들이고 있는데 블로그에 올리고 있는 성경 귀절도 정기적으로 클릭해 주시는 분들이 계셔서 무언의 공감과 감사를 공유하고 있는 듯해서 고마운 마음이다.
한 해를 마무리 지어가는 이 시점에 정기적으로 방문해 주시는 분들께 감사의 마음을 다시금 진심으로 전하고 싶다. 내가 쓰고 있는 글들과 관련된 현안 이슈들과 쓰고 있는 원고의 일부를 지인들과 소통할 목적으로 잡기장처럼 시작한 블로그에 미국, 유럽, 한국, 아시아, 러시아 등에서 꾸준히 방문해 주시어 조회수가 꽤 늘었다. 조회수가 늘다보니 여러 검색엔진에서 특정 검색어를 치면 상위에 내 블로그가 잡히고 그러다 보니 방문해 주시는 분들이 늘고 있다. 교육 수준이 높으시고 혁신과 경제에 관심이 많으신 분들로 추정된다.
믿고 사랑하는 하나님의 계획과 은혜가 함께하심이 무한히 감사하다.
미국과 유럽, 한국, 일본, 중국 등에서 진행되고 있는 일들이 fix가 되려면 실력과 전문성을 갖춘 올곧은 지도자가 정책을 세우고 실행해야 하고 또 이러한 과정을 check할 인식과 통찰력을 갖춘 시민들이 많아야 비로소 가능하기 때문에 이 블로그가 이러한 과정에 조금이나마 기여했으면 한다.
2003년도에 발간된 책이 나온지 얼마 되지 않았을 때 모 대형문고 온라인 서점에 서평을 써주신 (싸이트가 개편되면서 서평이 없어졌는데) 익명의 독자분의 코멘트를 잊지 않고 있다. 하이테크 산업과 혁신에 대한 insight을 가지신 매우 intelligent하신 분으로 생각되는데 번호까지 매겨 주요 용어는 영어로 쓰시면서 내 책이 보완해야 할 점을 조목조목 적어 주셨다. 사회적으로 의미있는 글쓰기를 하고 싶은 나의 의중을 내 책에서 살피시고 더 나은 책을 기대하시는 그분의 뜻이 너무 감사했었다. 그 중 한 포인트는 내가 공부가 부족해서 그분이 의미하시는 바를 이해하지 못했지만 머리 한편에 남아져 있었다. 그러다가 리먼 붕괴이후 공부를 해 가면서 그분이 쓰신 코멘트가 무슨 의미였는지를 알게 되었고 쓰고 있는 책들에 반영하고 있다. 혹시 그분께서 이 블로그를 방문해 주셨다면 주신 input을 쓰고 있는 책들에 반영하고 있다고 감사하다는 마음을 전하고 싶다.
블로그에 올리고 있는 글들과 현안 이슈들은 집필하고 있는 몇 권의 책들과 관련된 내용들인데 그 중 한 권의 framework에 대한 간단한 설명은 다음과 같다:
In order to understand how innovation/productive capacity has built, yet why it is dwindling and what purpose it has served and how innovation apparatus is coupled with the health of the economy, one needs a holistic perspective that places the functions of innovation/productive capacity at the global, national and individual levels in the context of the external and internal forces and the dynamics of various actors.
Zechariah 10:2
성경 말씀을 올해에 특히 더 감사히 느끼며 받아들이고 있는데 블로그에 올리고 있는 성경 귀절도 정기적으로 클릭해 주시는 분들이 계셔서 무언의 공감과 감사를 공유하고 있는 듯해서 고마운 마음이다.
한 해를 마무리 지어가는 이 시점에 정기적으로 방문해 주시는 분들께 감사의 마음을 다시금 진심으로 전하고 싶다. 내가 쓰고 있는 글들과 관련된 현안 이슈들과 쓰고 있는 원고의 일부를 지인들과 소통할 목적으로 잡기장처럼 시작한 블로그에 미국, 유럽, 한국, 아시아, 러시아 등에서 꾸준히 방문해 주시어 조회수가 꽤 늘었다. 조회수가 늘다보니 여러 검색엔진에서 특정 검색어를 치면 상위에 내 블로그가 잡히고 그러다 보니 방문해 주시는 분들이 늘고 있다. 교육 수준이 높으시고 혁신과 경제에 관심이 많으신 분들로 추정된다.
믿고 사랑하는 하나님의 계획과 은혜가 함께하심이 무한히 감사하다.
미국과 유럽, 한국, 일본, 중국 등에서 진행되고 있는 일들이 fix가 되려면 실력과 전문성을 갖춘 올곧은 지도자가 정책을 세우고 실행해야 하고 또 이러한 과정을 check할 인식과 통찰력을 갖춘 시민들이 많아야 비로소 가능하기 때문에 이 블로그가 이러한 과정에 조금이나마 기여했으면 한다.
2003년도에 발간된 책이 나온지 얼마 되지 않았을 때 모 대형문고 온라인 서점에 서평을 써주신 (싸이트가 개편되면서 서평이 없어졌는데) 익명의 독자분의 코멘트를 잊지 않고 있다. 하이테크 산업과 혁신에 대한 insight을 가지신 매우 intelligent하신 분으로 생각되는데 번호까지 매겨 주요 용어는 영어로 쓰시면서 내 책이 보완해야 할 점을 조목조목 적어 주셨다. 사회적으로 의미있는 글쓰기를 하고 싶은 나의 의중을 내 책에서 살피시고 더 나은 책을 기대하시는 그분의 뜻이 너무 감사했었다. 그 중 한 포인트는 내가 공부가 부족해서 그분이 의미하시는 바를 이해하지 못했지만 머리 한편에 남아져 있었다. 그러다가 리먼 붕괴이후 공부를 해 가면서 그분이 쓰신 코멘트가 무슨 의미였는지를 알게 되었고 쓰고 있는 책들에 반영하고 있다. 혹시 그분께서 이 블로그를 방문해 주셨다면 주신 input을 쓰고 있는 책들에 반영하고 있다고 감사하다는 마음을 전하고 싶다.
블로그에 올리고 있는 글들과 현안 이슈들은 집필하고 있는 몇 권의 책들과 관련된 내용들인데 그 중 한 권의 framework에 대한 간단한 설명은 다음과 같다:
In order to understand how innovation/productive capacity has built, yet why it is dwindling and what purpose it has served and how innovation apparatus is coupled with the health of the economy, one needs a holistic perspective that places the functions of innovation/productive capacity at the global, national and individual levels in the context of the external and internal forces and the dynamics of various actors.
Friday, December 9, 2011
European Securities Warns of Total Carnage and Meltdown as BNP Paribas Sold $2 Billion French Swap
From Bloomberg:
BNP Paribas SA (BNP), France’s biggest bank, sold a net 1.5 billion euros ($2 billion) of credit- default swaps on the nation’s sovereign debt, according to data compiled by the European Banking Authority.
UniCredit SpA (UCG), Italy’s biggest lender, and Banca Monte dei Paschi SpA (BMPS) are net insurers of more than 500 million euros each of their government’s bonds, and Oesterreichische Volksbanken AG (VBPS), the Austrian lender which has yet to pay interest on 1 billion euros of state aid received in 2009, has guaranteed a net 839 million euros of its national debt, EBA data show.
European leaders have blamed credit-default swaps for exacerbating the region’s debt crisis and have gone out of their way to prevent a payout of insurance on any euro area country. The European Union is moving closer to banning the use of derivatives on government bonds for any reason other than hedging risk.
“Some of this is trading rather than pure hedging,” said Gary Jenkins, head of fixed income at Evolution Securities Ltd. in London. “If European counties the size of France or Italy actually defaulted and triggered CDS, there would be total carnage and meltdown. It would be the end of the world, and at that stage it’s likely your counterparty would be the least of your worries.”
http://www.bloomberg.com/news/2011-12-09/bnp-paribas-sold-2-billion-swap-protection-on-france-eba-says.html
BNP Paribas SA (BNP), France’s biggest bank, sold a net 1.5 billion euros ($2 billion) of credit- default swaps on the nation’s sovereign debt, according to data compiled by the European Banking Authority.
UniCredit SpA (UCG), Italy’s biggest lender, and Banca Monte dei Paschi SpA (BMPS) are net insurers of more than 500 million euros each of their government’s bonds, and Oesterreichische Volksbanken AG (VBPS), the Austrian lender which has yet to pay interest on 1 billion euros of state aid received in 2009, has guaranteed a net 839 million euros of its national debt, EBA data show.
European leaders have blamed credit-default swaps for exacerbating the region’s debt crisis and have gone out of their way to prevent a payout of insurance on any euro area country. The European Union is moving closer to banning the use of derivatives on government bonds for any reason other than hedging risk.
“Some of this is trading rather than pure hedging,” said Gary Jenkins, head of fixed income at Evolution Securities Ltd. in London. “If European counties the size of France or Italy actually defaulted and triggered CDS, there would be total carnage and meltdown. It would be the end of the world, and at that stage it’s likely your counterparty would be the least of your worries.”
http://www.bloomberg.com/news/2011-12-09/bnp-paribas-sold-2-billion-swap-protection-on-france-eba-says.html
Tim Staermose: One Alarming Indicator from China
From Sovereign Man:
Put simply, every year since 2005, more than 50% of China's GDP has consisted of construction-related spending. The law of diminishing marginal returns says this simply cannot continue.
It represents a misallocation of the household sector's hard-earned savings on a colossal scale, and I believe it will end badly. Not a day goes by that there aren't riots and protests somewhere in China (including cyberspace) as the downtrodden man in the street reaches his froggy boiling point.
Increasingly in China, though, those who see the writing on the wall can see that the days of system stability are numbered. And they're not hanging around.
For a number of years, mainland Chinese buyers have accounted for nearly all new apartment sales in Melbourne and Sydney. On numbers I've seen, they have been investing between A$2 billion and $3 billion a year.
An increasing number of mainland Chinese are establishing permanent residency and sending their child(ren) to school and university in Australia. And Simon recently reported that from an offshore strategies conference in Shanghai that the room was packed full of Chinese people learning how to diversify abroad.
They all want to have their options open when China's economy and political system hits turbulence.
Judging by the poor economic numbers coming out of China, this day of reckoning is drawing ever closer. One alarming indicator is that the Chinese renminbi has traded down to the lower limit of its strictly controlled trading band for SEVEN TRADING SESSIONS IN A ROW.
This suggests that there is more money leaving China than being earned from overseas trade or invested there. The exchange rate may be only one simple indicator, but it's a great barometer for what is going on: China is not going to be the savior of the global economy, but rather another casualty.
http://www.sovereignman.com/expat/one-alarming-indicator-from-china/
Put simply, every year since 2005, more than 50% of China's GDP has consisted of construction-related spending. The law of diminishing marginal returns says this simply cannot continue.
It represents a misallocation of the household sector's hard-earned savings on a colossal scale, and I believe it will end badly. Not a day goes by that there aren't riots and protests somewhere in China (including cyberspace) as the downtrodden man in the street reaches his froggy boiling point.
Increasingly in China, though, those who see the writing on the wall can see that the days of system stability are numbered. And they're not hanging around.
For a number of years, mainland Chinese buyers have accounted for nearly all new apartment sales in Melbourne and Sydney. On numbers I've seen, they have been investing between A$2 billion and $3 billion a year.
An increasing number of mainland Chinese are establishing permanent residency and sending their child(ren) to school and university in Australia. And Simon recently reported that from an offshore strategies conference in Shanghai that the room was packed full of Chinese people learning how to diversify abroad.
They all want to have their options open when China's economy and political system hits turbulence.
Judging by the poor economic numbers coming out of China, this day of reckoning is drawing ever closer. One alarming indicator is that the Chinese renminbi has traded down to the lower limit of its strictly controlled trading band for SEVEN TRADING SESSIONS IN A ROW.
This suggests that there is more money leaving China than being earned from overseas trade or invested there. The exchange rate may be only one simple indicator, but it's a great barometer for what is going on: China is not going to be the savior of the global economy, but rather another casualty.
http://www.sovereignman.com/expat/one-alarming-indicator-from-china/
Thursday, December 8, 2011
Egon von Greyerz: There Is No Deus Ex Machina Left
From Gold Switzerland:
With most of the world’s major economies as well as the financial system bankrupt, there is only one solution that can save the world economy. Like in the Greek tragedies, Deus ex Machina is now the only way that the world can avoid a total economic collapse. This would involve God being lowered down onto the world stage and miraculously saving the plot.
For those few who believe in this, may God bless them. But since this is a very unlikely solution most people will instead rely on governments and central banks to save us. But how can anyone possibly believe that totally incompetent and clueless politicians and central bankers could solve anything. They created the problem in the first place and are therefore totally unsuitable to play the role of Deus. The main objective of governments is to stay in power and thus to buy votes. Therefore they are incapable of taking the right decisions. And the opposition, aspiring to power is even less suitable since they will lie through their teeth and promise the earth in order to be elected. (We know that there are exceptions like Ron Paul, but the voters will most probably find his medicine too strong to swallow.).
What about central bankers, can’t they save us? Unfortunately any sensible person who becomes a central banker loses all his senses and becomes a prisoner of the political system.
So if there is no Deus ex Machina and if governments or bankers can’t rescue the world, who can and what is the solution. Let us return to the wise von Mises to look at the options available now:
“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS A RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION, OR LATER AS A FINAL OR TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED”
Ludwig von Mises
http://goldswitzerland.com/index.php/deus-ex-machina-egonvongreyerz/
With most of the world’s major economies as well as the financial system bankrupt, there is only one solution that can save the world economy. Like in the Greek tragedies, Deus ex Machina is now the only way that the world can avoid a total economic collapse. This would involve God being lowered down onto the world stage and miraculously saving the plot.
For those few who believe in this, may God bless them. But since this is a very unlikely solution most people will instead rely on governments and central banks to save us. But how can anyone possibly believe that totally incompetent and clueless politicians and central bankers could solve anything. They created the problem in the first place and are therefore totally unsuitable to play the role of Deus. The main objective of governments is to stay in power and thus to buy votes. Therefore they are incapable of taking the right decisions. And the opposition, aspiring to power is even less suitable since they will lie through their teeth and promise the earth in order to be elected. (We know that there are exceptions like Ron Paul, but the voters will most probably find his medicine too strong to swallow.).
What about central bankers, can’t they save us? Unfortunately any sensible person who becomes a central banker loses all his senses and becomes a prisoner of the political system.
So if there is no Deus ex Machina and if governments or bankers can’t rescue the world, who can and what is the solution. Let us return to the wise von Mises to look at the options available now:
“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS A RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION, OR LATER AS A FINAL OR TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED”
Ludwig von Mises
http://goldswitzerland.com/index.php/deus-ex-machina-egonvongreyerz/
Wednesday, December 7, 2011
Pivot Capital Management: China’s Investment-Led Growth and Pending Credit Bust
From Zero Hedge:
The will-they, won't-they argument over the sustainability of China's capex-driven growth and the transition from an investment-led/high-growth economy to a consumption-driven/lower-growth model is becoming more polarized every day. Pivot Capital Management's take on the slowing growth and muddling transition will make the shift more painful and will likely lead to a credit bust. Their thesis focuses on the balance sheet transformation of the Chinese economy that has attempted to postpone such a transition at a time when the pro-cyclical shadow of global growth expectations demand it. They expound on three main reasons for the proximity of credit bust in China: shadow banking pushing credit expansion to the edge of a crisis (as the regulated markets lose control), real estate and infrastructure investment are at a critical juncture (as worsening fundamentals significantly dampen flows), and interdependence in China's financial system. They fully expect the upcoming credit bust to require government intervention, they expect this to dramatically slow the investment-led growth model and obviously this would be a global event as the world's reliance on China's 'economic miracle' is brought into question.
http://www.zerohedge.com/news/pivot-capital-chinas-investment-boom-and-pending-bust
The will-they, won't-they argument over the sustainability of China's capex-driven growth and the transition from an investment-led/high-growth economy to a consumption-driven/lower-growth model is becoming more polarized every day. Pivot Capital Management's take on the slowing growth and muddling transition will make the shift more painful and will likely lead to a credit bust. Their thesis focuses on the balance sheet transformation of the Chinese economy that has attempted to postpone such a transition at a time when the pro-cyclical shadow of global growth expectations demand it. They expound on three main reasons for the proximity of credit bust in China: shadow banking pushing credit expansion to the edge of a crisis (as the regulated markets lose control), real estate and infrastructure investment are at a critical juncture (as worsening fundamentals significantly dampen flows), and interdependence in China's financial system. They fully expect the upcoming credit bust to require government intervention, they expect this to dramatically slow the investment-led growth model and obviously this would be a global event as the world's reliance on China's 'economic miracle' is brought into question.
http://www.zerohedge.com/news/pivot-capital-chinas-investment-boom-and-pending-bust
Samsung Biologics Signs Agreement with Biogen to Develop Biosimilars
All in all, Samsung’s strategic move has been successful. Samsung seems to see new growth engine lying in phamarceutical and medical instrument sectors in which Korea is far behind and which are also more recession-resistant than scale-intensive electronics business, and it has acted accordingly. As noted, Samsung has moved its electronics manufacturing overseas in the name of globalization.
Too much dependence on a single company is still a structural problem for Korea. Further, Samsung has been aggressively seeking profits outside manufacturing sector.
Samsung has been an important pillar that supports the so-called Korea Inc.
From Korea Herald:
Samsung Group announced Tuesday that its affiliate Samsung Biologics signed an agreement with U.S.-based Biogen Idec to set up a biosimilar joint venture by March.
With plans to build the biosimilar research and development center in Songdo, Incheon, next year, the two firms have agreed to invest $300 million for the joint venture. The joint venture has already hired 100 employees who will work at the new R&D center and expects to expand that figure to 200-300 people, said Samsung officials.
Biosimilars are officially approved copycat medicines developed after patents for the original biopharmaceuticals expire.
Samsung Biologics will take an 85 percent share in the joint venture, while Biogen Idec will take the remaining 15 percent, according to Samsung officials.
The signing of the agreement comes after the group declared earlier this year that it will expand into the healthcare business, designating it a new growth engine for the country’s largest conglomerate.
The group said it now has all necessary capabilities ― such as product development, clinical testing, manufacturing and marketing ― to transform into a global pharmaceutical company that has the possibility of becoming the group’s future cash cow.
Samsung Biologics is Samsung’s biopharmaceutical manufacturing unit formed earlier in April by merging it with U.S.-based Quintiles as the conglomerate aimed to diversify its business portfolio, looking for new cash sources.
http://www.koreaherald.com/business/Detail.jsp?newsMLId=20111206000857
Too much dependence on a single company is still a structural problem for Korea. Further, Samsung has been aggressively seeking profits outside manufacturing sector.
Samsung has been an important pillar that supports the so-called Korea Inc.
From Korea Herald:
Samsung Group announced Tuesday that its affiliate Samsung Biologics signed an agreement with U.S.-based Biogen Idec to set up a biosimilar joint venture by March.
With plans to build the biosimilar research and development center in Songdo, Incheon, next year, the two firms have agreed to invest $300 million for the joint venture. The joint venture has already hired 100 employees who will work at the new R&D center and expects to expand that figure to 200-300 people, said Samsung officials.
Biosimilars are officially approved copycat medicines developed after patents for the original biopharmaceuticals expire.
Samsung Biologics will take an 85 percent share in the joint venture, while Biogen Idec will take the remaining 15 percent, according to Samsung officials.
The signing of the agreement comes after the group declared earlier this year that it will expand into the healthcare business, designating it a new growth engine for the country’s largest conglomerate.
The group said it now has all necessary capabilities ― such as product development, clinical testing, manufacturing and marketing ― to transform into a global pharmaceutical company that has the possibility of becoming the group’s future cash cow.
Samsung Biologics is Samsung’s biopharmaceutical manufacturing unit formed earlier in April by merging it with U.S.-based Quintiles as the conglomerate aimed to diversify its business portfolio, looking for new cash sources.
http://www.koreaherald.com/business/Detail.jsp?newsMLId=20111206000857
Tuesday, December 6, 2011
Samsung Setting Up New Semiconductor Plant in China
Samsung has been planning on transferring its manufacturing operation to overseas for some time. More manufacturing job loss for Korea.
From Yonhap:
Samsung Electronics Co., the world's second-largest maker of memory chips, said Tuesday it is seeking to build a new production line in China to manufacture flash memory chips in response to rising demand for mobile devices.
The company applied for a permit from the South Korean government to build its second overseas production line for producing NAND flash devices based on the 20-nanometer class process technology, it said in a statement. If authorization is given and construction begins on schedule, production at the factory will begin in 2013.
http://english.yonhapnews.co.kr/news/2011/12/06/0200000000AEN20111206006600320.HTML
From Yonhap:
Samsung Electronics Co., the world's second-largest maker of memory chips, said Tuesday it is seeking to build a new production line in China to manufacture flash memory chips in response to rising demand for mobile devices.
The company applied for a permit from the South Korean government to build its second overseas production line for producing NAND flash devices based on the 20-nanometer class process technology, it said in a statement. If authorization is given and construction begins on schedule, production at the factory will begin in 2013.
http://english.yonhapnews.co.kr/news/2011/12/06/0200000000AEN20111206006600320.HTML
Has the Global Business Cycle Ended?
From MacroBusiness:
So, global PMIs for November have passed. Where do they suggest that the global economy is heading?
So, what does all of this say about the global business cycle? Firstly, we’d have to say that without the US, global production would be in big trouble. Everywhere else is slowing swiftly. I’d describe where we are as stall speed for the global economy. In my view, it cannot stay here sustainably. Either employment losses will accererate as businesses seek to claw back profits lost to declining demand or the new stimulus that’s being pumped in will turn demand around, lift production and job creation as inventories fall. Unfortunately, the Eurozone is doing the opposite of stimulus: austerity. Likewise, China’s seeming determination to keep a lid on property is preventing any rapid loosening there too. My bet remains, therefore, that we see further slowing from here into next year irrespective of any credit event that would repeat 2008′s dizzying plunge.
http://www.macrobusiness.com.au/2011/12/has-the-global-business-cycle-ended/
So, global PMIs for November have passed. Where do they suggest that the global economy is heading?
So, what does all of this say about the global business cycle? Firstly, we’d have to say that without the US, global production would be in big trouble. Everywhere else is slowing swiftly. I’d describe where we are as stall speed for the global economy. In my view, it cannot stay here sustainably. Either employment losses will accererate as businesses seek to claw back profits lost to declining demand or the new stimulus that’s being pumped in will turn demand around, lift production and job creation as inventories fall. Unfortunately, the Eurozone is doing the opposite of stimulus: austerity. Likewise, China’s seeming determination to keep a lid on property is preventing any rapid loosening there too. My bet remains, therefore, that we see further slowing from here into next year irrespective of any credit event that would repeat 2008′s dizzying plunge.
http://www.macrobusiness.com.au/2011/12/has-the-global-business-cycle-ended/
The U.S. Education Bubble
From Case Research:
In the world of finance, there is always talk of bubbles – mortgage bubbles, tech stock bubbles, junk bond bubbles. But bubbles don’t develop only in financial markets. In recent years, there's been another one quietly inflating, not capturing the attention of most observers.
It's an education bubble – just not the one of student debt that has graced the pages of the New York Times and so many other publications in recent months.
The problem is not that we are overeducating ourselves as many would have you believe. Rather, it’s that we are spending a fortune to undereducate ourselves.
The United States has always been a very educated country. But it is becoming less and less so, especially in the areas that matter to our individual and collective economic futures. Our undereducation begins with a stubbornly high dropout rate among secondary education students. About a quarter of those who begin high school don't finish.
In an educational system where graduation from high school at a minimum level often means no grasp of mathematics beyond basic arithmetic, no training in basic personal finance, and no marketable professional skills, this is an obvious problem We can and should do more to prepare high school graduates for the world they now live in.
The big problems aren't rooted in high school education, however, but with the decisions we as a nation are making in the education we get beyond the compulsory level.
http://www.caseyresearch.com/editorial.php?page=articles/uss-education-bubble&ppref=ZHB428ED1211A
In the world of finance, there is always talk of bubbles – mortgage bubbles, tech stock bubbles, junk bond bubbles. But bubbles don’t develop only in financial markets. In recent years, there's been another one quietly inflating, not capturing the attention of most observers.
It's an education bubble – just not the one of student debt that has graced the pages of the New York Times and so many other publications in recent months.
The problem is not that we are overeducating ourselves as many would have you believe. Rather, it’s that we are spending a fortune to undereducate ourselves.
The United States has always been a very educated country. But it is becoming less and less so, especially in the areas that matter to our individual and collective economic futures. Our undereducation begins with a stubbornly high dropout rate among secondary education students. About a quarter of those who begin high school don't finish.
In an educational system where graduation from high school at a minimum level often means no grasp of mathematics beyond basic arithmetic, no training in basic personal finance, and no marketable professional skills, this is an obvious problem We can and should do more to prepare high school graduates for the world they now live in.
The big problems aren't rooted in high school education, however, but with the decisions we as a nation are making in the education we get beyond the compulsory level.
http://www.caseyresearch.com/editorial.php?page=articles/uss-education-bubble&ppref=ZHB428ED1211A
Monday, December 5, 2011
Earnings Outlook Deteriorating Rapidly
From Reuters (over Yahoo):
Earnings season is just over a month away, but the early signals are not comforting.
Companies cutting forecasts outpace those raising estimates by the greatest ratio in 10 years, and some sectors, such as materials, have seen a dramatic fall in expectations for the soon-to-be ended fourth quarter, according to Thomson Reuters data.
It is a stark reminder that even as U.S. economic data has improved in recent weeks, the euro zone debt crisis and concerns about slowing growth in China still cast a long shadow.
Estimates for fourth-quarter S&P earnings growth have tumbled over the past two months as global macroeconomic headwinds prompted analysts to slash forecasts.
According to Thomson Reuters, 88 S&P companies have issued negative earnings preannouncements for the fourth quarter, compared with 25 positive announcements, creating a ratio of 3.5, the largest since the second quarter of 2001.
http://finance.yahoo.com/news/analysis-earnings-outlook-may-deteriorating-232908720.html?l=1
Earnings season is just over a month away, but the early signals are not comforting.
Companies cutting forecasts outpace those raising estimates by the greatest ratio in 10 years, and some sectors, such as materials, have seen a dramatic fall in expectations for the soon-to-be ended fourth quarter, according to Thomson Reuters data.
It is a stark reminder that even as U.S. economic data has improved in recent weeks, the euro zone debt crisis and concerns about slowing growth in China still cast a long shadow.
Estimates for fourth-quarter S&P earnings growth have tumbled over the past two months as global macroeconomic headwinds prompted analysts to slash forecasts.
According to Thomson Reuters, 88 S&P companies have issued negative earnings preannouncements for the fourth quarter, compared with 25 positive announcements, creating a ratio of 3.5, the largest since the second quarter of 2001.
http://finance.yahoo.com/news/analysis-earnings-outlook-may-deteriorating-232908720.html?l=1
Over 46 Million Americans on Foodstamps for First Time Ever
From Zero Hedge:
While the capital markets may be cheering that in the past month 120,000 people supposedly found jobs, even if these were largely temporary or part-time just in time for the year end shopping sprees, we wonder how they will react when learning that according to the latest update from the Supplemental Nutrition Assistance Program (SNAP), some 423,000 Americans found their way to minimum way subsistence, courtesy of Food Stamp handouts from Uncle Sam. Since the start of the Second Great Depression, food stamp participation has increased by 18.7 million, and is now at an all time higher 46.3 million. All Bush's fault, or something. At least the chart below appears to be plateauing... Actually, sorry, no isn't.
http://www.zerohedge.com/news/over-46-million-americans-foodstamps-first-time-ever
While the capital markets may be cheering that in the past month 120,000 people supposedly found jobs, even if these were largely temporary or part-time just in time for the year end shopping sprees, we wonder how they will react when learning that according to the latest update from the Supplemental Nutrition Assistance Program (SNAP), some 423,000 Americans found their way to minimum way subsistence, courtesy of Food Stamp handouts from Uncle Sam. Since the start of the Second Great Depression, food stamp participation has increased by 18.7 million, and is now at an all time higher 46.3 million. All Bush's fault, or something. At least the chart below appears to be plateauing... Actually, sorry, no isn't.
http://www.zerohedge.com/news/over-46-million-americans-foodstamps-first-time-ever
Gregor Mcdonald: It's Time To Give Up on Mainstream Economics
From Chris Martenson’s blog:
Prior to 2008 it was generally understood that the profession hardly merited its claims of its own predictive utility. So the failure to assign enough risk to such a crisis as befell the developed world in 2008 was, frankly, no surprise. But in the aftermath of the crisis, economics, in its professional form, has revealed itself to be damagingly disconnected from observable reality.
A glaring example of this is how it cannot come to any agreement as to how the debt crisis occurred, and accordingly remains quite confused in its proffered solutions.
Mostly the profession remains curiously naive about the nature of debt, an understanding of which is more critical than ever as the developed world enters a 'slow' to 'no-growth' phase of its history. Indeed, many of the papers, interviews, and op-eds from central bankers and economists in the face of our present-day sovereign debt crisis are little more than an eerie restatement of the discussions which took place about private-sector debt from 2006-2008.
http://www.chrismartenson.com/blog/time-give-up-mainstream-economics/66001
Prior to 2008 it was generally understood that the profession hardly merited its claims of its own predictive utility. So the failure to assign enough risk to such a crisis as befell the developed world in 2008 was, frankly, no surprise. But in the aftermath of the crisis, economics, in its professional form, has revealed itself to be damagingly disconnected from observable reality.
A glaring example of this is how it cannot come to any agreement as to how the debt crisis occurred, and accordingly remains quite confused in its proffered solutions.
Mostly the profession remains curiously naive about the nature of debt, an understanding of which is more critical than ever as the developed world enters a 'slow' to 'no-growth' phase of its history. Indeed, many of the papers, interviews, and op-eds from central bankers and economists in the face of our present-day sovereign debt crisis are little more than an eerie restatement of the discussions which took place about private-sector debt from 2006-2008.
http://www.chrismartenson.com/blog/time-give-up-mainstream-economics/66001
Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress
From Bloomberg:
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
$7.77 Trillion
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
$7.77 Trillion
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
Sunday, December 4, 2011
Friday, December 2, 2011
Signs of Dwindling Innovation Apparatus of Korea
It is widely recognized that a few Korean high tech firms like Samsung have become top notch contenders in some industries such as semiconductor, display and mobile phones. Despite Korea’s impressive success in certain fields, there are signs Korea may be losing its technological prowess and innovation potential.
Some of them are:
-Dwindling manufacturing base caused by offshoring/outsourcing
-Further erosion of industrial base due to global demand slowdown
-Scale-intensive export model not working
-Persistent dissonance between manufacturing and financial sectors
-Stifled entrepreneurial spirit and discipline
-Waning technology-based small businesses
-Chaebols’ monopolistic practices with innovative small firms
-Rise of China
-Some high-tech chaebols like LG losing their competitiveness on the global stage
-Korean chaebols engaging in non-productive activities
-Unpopular top engineering schools; Smart kids not willingly getting into those schools
-No technology trickle down effect
-Inefficient NIS
Some of them are:
-Dwindling manufacturing base caused by offshoring/outsourcing
-Further erosion of industrial base due to global demand slowdown
-Scale-intensive export model not working
-Persistent dissonance between manufacturing and financial sectors
-Stifled entrepreneurial spirit and discipline
-Waning technology-based small businesses
-Chaebols’ monopolistic practices with innovative small firms
-Rise of China
-Some high-tech chaebols like LG losing their competitiveness on the global stage
-Korean chaebols engaging in non-productive activities
-Unpopular top engineering schools; Smart kids not willingly getting into those schools
-No technology trickle down effect
-Inefficient NIS
Kyle Bass on the New World Order
I’ve posted the interviews with Kyle, hedge fund manager and his letters several times. His points make sense in the context of global sovereign debt crisis.
From Zero Hedge:
Unlike the broad consensus of prognosticators who feel the road for the US is a decade or more, Bass sees a three-to-five year window for a credible solution to the debt saturation or else kicking the can will cease to have any impact. The reason for the proximity is the acceleration of what happens in Europe and Japan with that respective chronology his central view - which he sees as critical in understanding for every money manager.
In this extended interview at AmeriCatalyst, he points to the optimistic self-deception biases that leave people unable to comprehend the scenarios as they either lead to a really bad outcome or a nominally bad outcome.
Using the Lehman moment as an example, Bass explains how we have been conditioned to believe there is always a backstop or savior...now those backstops at a corporate and sovereign level (central banks and the IMF for example) are being called into question in their roles (being seen for what they are - as just promises) and it is the chasm between what we want to believe and what does happen that is enormous and leaves the extreme volatility, risk-on/risk-off market the way it is.
Reiterating how critical the psychology of today's situation, Bass goes on to debunk the optimism of globalization (at least for the Western world), destroy the myth of a 50% greek writedown solution, Japanese xenophobia and savings losses, structural versus cyclical implications for US equity deterioration, why you should never trust what government says, the US decifit and housing issues, increasing global debt saturation and how this tearing at the social fabric of the world will lead to - war.
http://www.zerohedge.com/news/kyle-bass-explains-new-world-order
Full Interview with Kyle over YouTube:
http://www.youtube.com/watch?v=5V3kpKzd-Yw
From Zero Hedge:
Unlike the broad consensus of prognosticators who feel the road for the US is a decade or more, Bass sees a three-to-five year window for a credible solution to the debt saturation or else kicking the can will cease to have any impact. The reason for the proximity is the acceleration of what happens in Europe and Japan with that respective chronology his central view - which he sees as critical in understanding for every money manager.
In this extended interview at AmeriCatalyst, he points to the optimistic self-deception biases that leave people unable to comprehend the scenarios as they either lead to a really bad outcome or a nominally bad outcome.
Using the Lehman moment as an example, Bass explains how we have been conditioned to believe there is always a backstop or savior...now those backstops at a corporate and sovereign level (central banks and the IMF for example) are being called into question in their roles (being seen for what they are - as just promises) and it is the chasm between what we want to believe and what does happen that is enormous and leaves the extreme volatility, risk-on/risk-off market the way it is.
Reiterating how critical the psychology of today's situation, Bass goes on to debunk the optimism of globalization (at least for the Western world), destroy the myth of a 50% greek writedown solution, Japanese xenophobia and savings losses, structural versus cyclical implications for US equity deterioration, why you should never trust what government says, the US decifit and housing issues, increasing global debt saturation and how this tearing at the social fabric of the world will lead to - war.
http://www.zerohedge.com/news/kyle-bass-explains-new-world-order
Full Interview with Kyle over YouTube:
http://www.youtube.com/watch?v=5V3kpKzd-Yw
Thursday, December 1, 2011
China Manufacturing Contracts for First Time Since 2009; HSBC China Manufacturing PMI Plunges to 32-Month Low of 47.7
From Bloomberg:
China’s manufacturing contracted for the first time since February 2009 as the property market cooled and Europe’s crisis cut export demand, a survey showed.
The Purchasing Managers’ Index fell to 49.0 in November from 50.4 in October, the China Federation of Logistics and Purchasing said in a statement today.
The central bank last night announced the first cut in banks’ reserve requirements since 2008, moving two hours before the U.S. Federal Reserve led a global effort to ease Europe’s sovereign-debt crisis. The move will add about 370 billion yuan ($58 billion) to the financial system and more reductions may follow as the government seeks to support growth, Citigroup Inc. said.
Today’s report “clearly adds to the urgency for easing,” said Yao Wei, a Hong Kong-based economist with Societe Generale SA. “The PMI is showing weakness across the board and this would seem to be the reason the government cut banks’ reserve requirements. If this trend continues we should see another cut pretty soon.”
A gauge of new orders contracted for the first time since January 2009 and the output index expanded at the slowest pace since the same month, today’s survey showed. New export orders fell below 50 for a second straight month.
http://www.bloomberg.com/news/2011-12-01/china-s-manufacturing-shrinks-for-first-time-since-2009-on-europe-impact.html
From HSBC Purchasing Managers’ Index Press Release:
November data showed Chinese manufacturing sector operating conditions deteriorating at the sharpest rate since March 2009. Behind the renewed contraction of the sector were marked reductions in both production and incoming new business.
The latest survey findings also showed a marked easing in price pressures, with average input costs falling for the first time in 16 months. In response, manufacturers reduced their output charges at a marked rate.
After adjusting for seasonal variation, the HSBC Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy – dropped from 51.0 to a 32-month low of 47.7 in November, signalling a solid deterioration in manufacturing sector performance. Additionally, the month-on-month decline in the index was the largest in three years.
Manufacturing production in China fell for the first time in four months during November, with the rate of decline the fastest since March 2009. Panelists generally attributed reduced output to falling new business. The latest decline in new orders was marked, and the steepest in 32 months. Moreover, the month-on-month decline in the respective index was among the greatest since data collection began in April 2004.
http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8859
China’s manufacturing contracted for the first time since February 2009 as the property market cooled and Europe’s crisis cut export demand, a survey showed.
The Purchasing Managers’ Index fell to 49.0 in November from 50.4 in October, the China Federation of Logistics and Purchasing said in a statement today.
The central bank last night announced the first cut in banks’ reserve requirements since 2008, moving two hours before the U.S. Federal Reserve led a global effort to ease Europe’s sovereign-debt crisis. The move will add about 370 billion yuan ($58 billion) to the financial system and more reductions may follow as the government seeks to support growth, Citigroup Inc. said.
Today’s report “clearly adds to the urgency for easing,” said Yao Wei, a Hong Kong-based economist with Societe Generale SA. “The PMI is showing weakness across the board and this would seem to be the reason the government cut banks’ reserve requirements. If this trend continues we should see another cut pretty soon.”
A gauge of new orders contracted for the first time since January 2009 and the output index expanded at the slowest pace since the same month, today’s survey showed. New export orders fell below 50 for a second straight month.
http://www.bloomberg.com/news/2011-12-01/china-s-manufacturing-shrinks-for-first-time-since-2009-on-europe-impact.html
From HSBC Purchasing Managers’ Index Press Release:
November data showed Chinese manufacturing sector operating conditions deteriorating at the sharpest rate since March 2009. Behind the renewed contraction of the sector were marked reductions in both production and incoming new business.
The latest survey findings also showed a marked easing in price pressures, with average input costs falling for the first time in 16 months. In response, manufacturers reduced their output charges at a marked rate.
After adjusting for seasonal variation, the HSBC Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy – dropped from 51.0 to a 32-month low of 47.7 in November, signalling a solid deterioration in manufacturing sector performance. Additionally, the month-on-month decline in the index was the largest in three years.
Manufacturing production in China fell for the first time in four months during November, with the rate of decline the fastest since March 2009. Panelists generally attributed reduced output to falling new business. The latest decline in new orders was marked, and the steepest in 32 months. Moreover, the month-on-month decline in the respective index was among the greatest since data collection began in April 2004.
http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8859
BOK Buys More Gold in November
From Yonhap:
South Korea's central bank said Friday it had raised its holdings of gold in four months in November in an effort to diversify its portfolio of foreign exchange reserves worth more than US$300 billion.
South Korea purchased 15 tonnes of gold, raising the country's gold holding to 54.4 tonnes at a value of US$2.17 billion at the end of November, according to the Bank of Korea (BOK).
The move marked the BOK's second purchase of the precious metal so far this year. It bought 25 tonnes of gold bullion in June and July for the first time in 13 years.
The BOK has been making efforts to diversify its foreign exchange reserves by curtailing the portion of its U.S. dollar-denominated assets. Gold bullion accounted for 0.7 percent out of the total reserves as of the end of November.
Foreign reserves consist of securities and deposits denominated in overseas currencies, along with International Monetary Fund reserve positions, special drawing rights and gold bullion.
As of the end of October, South Korea was the world's eighth-largest holder of foreign exchange reserves.
http://english.yonhapnews.co.kr/business/2011/12/01/65/0503000000AEN20111201010500320F.HTML
South Korea's central bank said Friday it had raised its holdings of gold in four months in November in an effort to diversify its portfolio of foreign exchange reserves worth more than US$300 billion.
South Korea purchased 15 tonnes of gold, raising the country's gold holding to 54.4 tonnes at a value of US$2.17 billion at the end of November, according to the Bank of Korea (BOK).
The move marked the BOK's second purchase of the precious metal so far this year. It bought 25 tonnes of gold bullion in June and July for the first time in 13 years.
The BOK has been making efforts to diversify its foreign exchange reserves by curtailing the portion of its U.S. dollar-denominated assets. Gold bullion accounted for 0.7 percent out of the total reserves as of the end of November.
Foreign reserves consist of securities and deposits denominated in overseas currencies, along with International Monetary Fund reserve positions, special drawing rights and gold bullion.
As of the end of October, South Korea was the world's eighth-largest holder of foreign exchange reserves.
http://english.yonhapnews.co.kr/business/2011/12/01/65/0503000000AEN20111201010500320F.HTML
Kyle Bass: Japan’s Bond Crisis in the Next Two Years without European Debt Crisis
From Zero Hedge:
In his latest letter to LPs, Kyle Bass of Hayman Capital Management, offers his tell-tale clarity on what may lie ahead for Europe and Japan. With his over-arching thesis of debt saturation becoming more plain to see around every corner, Bass bundles the simple (and somewhat unarguable) facts of quantitative analysis with a qualitative perspective on the cruel self-deception that we all see and read every day about Europe.
His Japanese scenario is no less convicted, as we have discussed a number of times, with the accelerant of this debt-bomb being the very-same European debacle and his time-frame for this is set to begin in the next few months.
http://www.zerohedge.com/news/imminent-defaults-and-self-deception-kyle-bass-prepares-worst
In his latest letter to LPs, Kyle Bass of Hayman Capital Management, offers his tell-tale clarity on what may lie ahead for Europe and Japan. With his over-arching thesis of debt saturation becoming more plain to see around every corner, Bass bundles the simple (and somewhat unarguable) facts of quantitative analysis with a qualitative perspective on the cruel self-deception that we all see and read every day about Europe.
His Japanese scenario is no less convicted, as we have discussed a number of times, with the accelerant of this debt-bomb being the very-same European debacle and his time-frame for this is set to begin in the next few months.
http://www.zerohedge.com/news/imminent-defaults-and-self-deception-kyle-bass-prepares-worst
China’s Major General Zhaozhong: China Will Not Hesitate to Protect Iran Even with a Third World War
From Zero Hedge:
Fast forward to 2:08: "It is puzzling to some that Major General Zhang Zhaozhong, a professor from the Chinese National Defense University, said China will not hesitate to protect Iran even with a third World War... Professor Xia Ming: "Zhang Zhaozhong said that not hesitating to fight a third world war would be entirely for domestic political needs...." And don't forget Russia, which recently said it is preparing to retaliate against NATO and has put radar stations on combat alert: "Russia is another ally of Iran, with similar policy to that of China. Toward Iran." Watch, and please forward the entire video, for an explanation of how China is approaching the situation not only in Iran, but a perspective of how they view the western "threat", as well as what tensions they face domestically.
http://www.zerohedge.com/news/china-will-not-hesitate-protect-iran-even-third-world-war
Fast forward to 2:08: "It is puzzling to some that Major General Zhang Zhaozhong, a professor from the Chinese National Defense University, said China will not hesitate to protect Iran even with a third World War... Professor Xia Ming: "Zhang Zhaozhong said that not hesitating to fight a third world war would be entirely for domestic political needs...." And don't forget Russia, which recently said it is preparing to retaliate against NATO and has put radar stations on combat alert: "Russia is another ally of Iran, with similar policy to that of China. Toward Iran." Watch, and please forward the entire video, for an explanation of how China is approaching the situation not only in Iran, but a perspective of how they view the western "threat", as well as what tensions they face domestically.
http://www.zerohedge.com/news/china-will-not-hesitate-protect-iran-even-third-world-war
Currency Wars: Fed Acts To "Increase the Availability of Dollars Outside the United States"
From Jesse’s Café:
I had also suggested after the bell that there would be an effort to blow off the downgrade of the big money center banks. I suspected there would be a more singular effort to pump up the SP futures from the Fed's house banks, but it appears the Central Banks, led by the Fed, decided to hit the markets with a major sugar rush of cheap dollars. That is US dollars.
The Chinese cut reserve requirement ratio on their banks by .5 percentage points. This will help them release more of their huge hoard of US dollars back into the global financial system.
This action, led by the US Fed, has had a marked effect on commodity prices in dollars. So the beneficiaries, or at least those protecting their wealth, are those holding precious metals and positions in dollar sensitive commodities.
Although the Fed will say that there is no potential loss in this to US taxpayers, in fact there is ALWAYS a loss to be realized at some point in the deliberate mispricing of risk. This loss will be taken by all holders of US dollars.
This is not QE3 and does little to help the US economy per se. This is just a big serving of a quick energy drink to ease the short term liquidity problem in Eurodollars. It is also timed to dull the news impact of the bank downgrades.
When the sugar rush wears off, and it will because this is does little to help the average person in the real economy, we will see how the markets react to the ever growing piles of paper dollars covering the landscape of a mismanaged and ruined economy.
But it was extraordinarily kind of the Fed to announce this just in time for the banks and the hedge funds to repair some of the damage from the stock market decline before they close their trading books on November.
The Eurozone problems have not been solved by this. The US domestic economy has not been improved by this, except to weaken the dollar and increase commodity prices.
It has only bought the Western banks some time, and further addicted the world to US dollars. This is government of the one percent, by the one percent, and for the one percent.
http://jessescrossroadscafe.blogspot.com/2011/11/fed-enlarges-conduits-to-increase.html
I had also suggested after the bell that there would be an effort to blow off the downgrade of the big money center banks. I suspected there would be a more singular effort to pump up the SP futures from the Fed's house banks, but it appears the Central Banks, led by the Fed, decided to hit the markets with a major sugar rush of cheap dollars. That is US dollars.
The Chinese cut reserve requirement ratio on their banks by .5 percentage points. This will help them release more of their huge hoard of US dollars back into the global financial system.
This action, led by the US Fed, has had a marked effect on commodity prices in dollars. So the beneficiaries, or at least those protecting their wealth, are those holding precious metals and positions in dollar sensitive commodities.
Although the Fed will say that there is no potential loss in this to US taxpayers, in fact there is ALWAYS a loss to be realized at some point in the deliberate mispricing of risk. This loss will be taken by all holders of US dollars.
This is not QE3 and does little to help the US economy per se. This is just a big serving of a quick energy drink to ease the short term liquidity problem in Eurodollars. It is also timed to dull the news impact of the bank downgrades.
When the sugar rush wears off, and it will because this is does little to help the average person in the real economy, we will see how the markets react to the ever growing piles of paper dollars covering the landscape of a mismanaged and ruined economy.
But it was extraordinarily kind of the Fed to announce this just in time for the banks and the hedge funds to repair some of the damage from the stock market decline before they close their trading books on November.
The Eurozone problems have not been solved by this. The US domestic economy has not been improved by this, except to weaken the dollar and increase commodity prices.
It has only bought the Western banks some time, and further addicted the world to US dollars. This is government of the one percent, by the one percent, and for the one percent.
http://jessescrossroadscafe.blogspot.com/2011/11/fed-enlarges-conduits-to-increase.html
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