"If I speak in the tongues of men and of angels, but have not love, I am only a resounding gong, a clanging cymbal.
If I have the gift of prophecy and can fathom all the mysteries and knowledge, and if I have a faith that can move mountains, but have not love, I am nothing.
If I give all I possess to the poor and surrender my body to the flames, but have not love, I gather together nothing.
Love is patient, love is kind. It does not envy, it does not boast, it is not proud.
It is not rude, it is not self-seeking, it is not easily angered, it keeps no record of wrongs.
Love does not delight in evil but rejoices with the truth.
It always protects, always trusts, always hopes, always perseveres.
Love never fails. But where there are prophecies, they will cease; where there are tongues, they will be stilled; where there is knowledge, it will pass away.
For we know in part and we prophesy in part, but when perfection comes, the imperfect disappears.
When I was a child, I talked like a child, I thought like a child, I reasoned like a child. When I became a man, I put childish things behind me.
Now we see as in a glass, darkly; then we shall see face to face. Now I know in part; then I shall know fully, even as I am fully known.
And now these three remain: faith, hope and love. But the greatest of these is love."
1 Corinthians 13
Sunday, February 19, 2012
Concerns Grow over China Hard Landing: China Cuts Bank Reserve Requirements; Exports Slide
China seems to be more concerned with housing bubble tanking than inflationary pressure. How are they going to stimulate domestic consumption given a further decline in exports coming? How are they going to tackle non-performing loans?
We are concerned that odds are pointing at China hard landing.
From Bloomberg:
China cut the amount of cash that banks must set aside as reserves for the second time in three months to spur lending as Europe’s debt crisis and a cooling property market threaten economic growth.
Reserve requirements will fall by 50 basis points effective Feb. 24 the People’s Bank of China said on its website this evening. Before today’s move, the ratio for the nation’s largest lenders stood at 21 percent.
Premier Wen Jiabao aims to steer the world’s second-biggest economy through a property market slowdown and the weakest export growth since 2009, with the commerce ministry last week calling the trade outlook “grim.” The International Monetary Fund said this month that China’s expansion may be cut almost in half if Europe’s debt crisis worsens.
“Growth remains the top concern for policy makers,” Zhu Haibin, a Hong Kong-based economist for JPMorgan Chase & Co. (JPM), said before today’s release. “Monetary policy will be biased toward easing this year.”
China’s exports and imports fell for the first time in two years last month and new lending was the lowest for a January in five years.
Before today's announcement, Ken Peng, a Beijing-based economist at BNP Paribas SA, said the government needs to be “careful not to overshoot monetary loosening, as it did in the financial crisis.” Lingering effects of record lending in 2009 and 2010 include the risk for banks that local government financing vehicles will default, saddling lenders with bad loans.
The government also aims to avoid fueling consumer and property prices. Inflation unexpectedly rebounded to 4.5 percent in January, accelerating for the first time in six months, as a week-long Chinese New Year holiday boosted spending and prices.
http://www.bloomberg.com/news/2012-02-18/china-cuts-banks-reserve-ratios-a-second-time-as-europe-threatens-growth.html
From Zero Hedge:
It was one short week ago that both Australia surprised with hotter than expected inflation (and no rate cut), and a Chinese CPI print that was far above expectations. Yet in confirmation of Dylan Grice's point that when it comes to "inflation targeting" central planners are merely the biggest "fools", this morning we woke to find that the PBOC has cut the Required Reserve Ratio (RRR) by another largely theatrical 50 bps. As a reminder, RRR cuts have very little if any impact, compared to the brute force adjustment that is the interest rate itself. As to what may have precipitated this, the answer is obvious - a collapsing housing market (which fell for the fourth month in a row) as the below chart from Michael McDonough shows, and a Shanghai Composite that just refuses to do anything (see China M1 Hits Bottom, Digs). What will this action do? Hardly much if anything, as this is purely a demonstrative attempt to rekindle animal spirits. However as was noted previously, "The last time they stimulated their CPI was close to 2%. It's 4.5% now, and blipping up." As such, expect the latent pockets of inflation where the fast money still has not even withdrawn from to bubble up promptly. That these "pockets" happen to be food and gold is not unexpected. And speaking of the latter, it is about time China got back into the gold trade prim and proper. At least China has stopped beating around the bush and has now joined the rest of the world in creating the world's biggest shadow liquidity tsunami.
First, here is a chart showing the collapse in the Chinese housing market in all its glory - without a shadow of a doubt the primary reason for the PBOC to do what it did today:
Will the PBOC be able to redirect the "Austrian" money flow into ponzi encouraging prospects? Here is Sean Corrigan with some thoughts:
Chinese Real M1 joins that of parts of Europe, the UK, India, and several other, key EM nations in dropping into negative territory and hence strangling the monetary impetus towards both dubious short-term output gains and more certain quickening of the pace of price appreciation which has driven so much of the recovery so far. This means that only the US is left creating sufficient real new money to keep things supported at present - a phenomenon not surprisingly being reflected in its run of somewhat improved macro numbers in recent months.
We are concerned that odds are pointing at China hard landing.
From Bloomberg:
China cut the amount of cash that banks must set aside as reserves for the second time in three months to spur lending as Europe’s debt crisis and a cooling property market threaten economic growth.
Reserve requirements will fall by 50 basis points effective Feb. 24 the People’s Bank of China said on its website this evening. Before today’s move, the ratio for the nation’s largest lenders stood at 21 percent.
Premier Wen Jiabao aims to steer the world’s second-biggest economy through a property market slowdown and the weakest export growth since 2009, with the commerce ministry last week calling the trade outlook “grim.” The International Monetary Fund said this month that China’s expansion may be cut almost in half if Europe’s debt crisis worsens.
“Growth remains the top concern for policy makers,” Zhu Haibin, a Hong Kong-based economist for JPMorgan Chase & Co. (JPM), said before today’s release. “Monetary policy will be biased toward easing this year.”
China’s exports and imports fell for the first time in two years last month and new lending was the lowest for a January in five years.
Before today's announcement, Ken Peng, a Beijing-based economist at BNP Paribas SA, said the government needs to be “careful not to overshoot monetary loosening, as it did in the financial crisis.” Lingering effects of record lending in 2009 and 2010 include the risk for banks that local government financing vehicles will default, saddling lenders with bad loans.
The government also aims to avoid fueling consumer and property prices. Inflation unexpectedly rebounded to 4.5 percent in January, accelerating for the first time in six months, as a week-long Chinese New Year holiday boosted spending and prices.
http://www.bloomberg.com/news/2012-02-18/china-cuts-banks-reserve-ratios-a-second-time-as-europe-threatens-growth.html
From Zero Hedge:
It was one short week ago that both Australia surprised with hotter than expected inflation (and no rate cut), and a Chinese CPI print that was far above expectations. Yet in confirmation of Dylan Grice's point that when it comes to "inflation targeting" central planners are merely the biggest "fools", this morning we woke to find that the PBOC has cut the Required Reserve Ratio (RRR) by another largely theatrical 50 bps. As a reminder, RRR cuts have very little if any impact, compared to the brute force adjustment that is the interest rate itself. As to what may have precipitated this, the answer is obvious - a collapsing housing market (which fell for the fourth month in a row) as the below chart from Michael McDonough shows, and a Shanghai Composite that just refuses to do anything (see China M1 Hits Bottom, Digs). What will this action do? Hardly much if anything, as this is purely a demonstrative attempt to rekindle animal spirits. However as was noted previously, "The last time they stimulated their CPI was close to 2%. It's 4.5% now, and blipping up." As such, expect the latent pockets of inflation where the fast money still has not even withdrawn from to bubble up promptly. That these "pockets" happen to be food and gold is not unexpected. And speaking of the latter, it is about time China got back into the gold trade prim and proper. At least China has stopped beating around the bush and has now joined the rest of the world in creating the world's biggest shadow liquidity tsunami.
First, here is a chart showing the collapse in the Chinese housing market in all its glory - without a shadow of a doubt the primary reason for the PBOC to do what it did today:
Will the PBOC be able to redirect the "Austrian" money flow into ponzi encouraging prospects? Here is Sean Corrigan with some thoughts:
Chinese Real M1 joins that of parts of Europe, the UK, India, and several other, key EM nations in dropping into negative territory and hence strangling the monetary impetus towards both dubious short-term output gains and more certain quickening of the pace of price appreciation which has driven so much of the recovery so far. This means that only the US is left creating sufficient real new money to keep things supported at present - a phenomenon not surprisingly being reflected in its run of somewhat improved macro numbers in recent months.
For China itself, this is unprecedented - at least in the last 15 years or so during which China has assumed the role of marginal buyer of inputs a fortiori - and it represents the latest stage in a jarring, screeching, airbag-triggering deceleration from 2010's extraordinary 37.5% growth rate. You don't have to be an Austrian to see what this must imply for all the non-remunerative, hyper-Keyensian, 'stimulus' projects launched to offset the Western slump, post-LEH/AIG which litter the Middle Kingdom's landscape, both figuratively and literally.
While we must be slightly tentative in our inferences - due to the disruptive arithmetical effect of that highly moveable feast which is the Lunar New Year - it cannot be denied that several other indicators - imports, container traffic, power consumption, for example - are also flashing Hard Landing Red here.
Watch this space...
http://www.zerohedge.com/news/china-cuts-rrr-50-bps-despite-latent-inflation-cushion-housing-market-collapse
Friday, February 17, 2012
Limitations of the East-Asian Growth Model and Lessons to Be Learned for Developing Countries
Models have their limits. The East-Asian growth model is no exception. There are lessons to be learned for developing countries which are willing to emulate the East-Asian growth model.
Some of them are:
-Recognize the limits of a command economy. They have developed the institutional setup for the so-called Japan Inc. and Korea Inc. to grow. This institutional setup was good for a command economy, but not necessarily good for the free market system. The entrenched oligarchy system formed has persisted, hampering the rule of law, which is an important part of the wealth creating mechanism.
-Their productive capacity and innovation apparatus have been icing on the cake to some extent. Their solid industrial output and export mechanism boosted the manufacturing employment and standard of living. Yet it is dwindling. Innovation/productive capacity is a crucial part that comprises the health of a nation, and yet it has to be accompanied by other factors…
-Dissonance between manufacturing and finance sectors has hindered the productive capacity.
-State’s control of the financial system and central planning of money have fundamental flaws and the privatization of the financial institutions without proper regulations has drawbacks as well…
-Excessive government interventions do more harm than good, and bloated government has impeded the real economy…
-As noted, the East Asian countries’ growth model was flawed from the start and was bound to hit the wall. Their rapid growth model has come with a cost. The strengths of the model had turned into a liability due to several factors…
-Losing the manufacturing job base has far-reaching consequences…
-Once their manufacturing advantage started to lose its steam, the financialization of the economy has taken hold. In order to mask the real loss that is in progress, they have engaged in wealth destroying activities…
-The East Asian economic development model is highly susceptible to the U.S. policies…
-Recognize the perils of big business-centered economic model…
-Beware global forces in collusion with each country’s oligarchy system behind the rise and looming decline of East Asian countries
(A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.)
Some of them are:
-Recognize the limits of a command economy. They have developed the institutional setup for the so-called Japan Inc. and Korea Inc. to grow. This institutional setup was good for a command economy, but not necessarily good for the free market system. The entrenched oligarchy system formed has persisted, hampering the rule of law, which is an important part of the wealth creating mechanism.
-Their productive capacity and innovation apparatus have been icing on the cake to some extent. Their solid industrial output and export mechanism boosted the manufacturing employment and standard of living. Yet it is dwindling. Innovation/productive capacity is a crucial part that comprises the health of a nation, and yet it has to be accompanied by other factors…
-Dissonance between manufacturing and finance sectors has hindered the productive capacity.
-State’s control of the financial system and central planning of money have fundamental flaws and the privatization of the financial institutions without proper regulations has drawbacks as well…
-Excessive government interventions do more harm than good, and bloated government has impeded the real economy…
-As noted, the East Asian countries’ growth model was flawed from the start and was bound to hit the wall. Their rapid growth model has come with a cost. The strengths of the model had turned into a liability due to several factors…
-Losing the manufacturing job base has far-reaching consequences…
-Once their manufacturing advantage started to lose its steam, the financialization of the economy has taken hold. In order to mask the real loss that is in progress, they have engaged in wealth destroying activities…
-The East Asian economic development model is highly susceptible to the U.S. policies…
-Recognize the perils of big business-centered economic model…
-Beware global forces in collusion with each country’s oligarchy system behind the rise and looming decline of East Asian countries
(A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.)
한국 제조업의 쇠퇴를 염려한다
제 블로그를 통해 강조하고 또 강조하고 있는 점의 하나는 한 국가가 생산적인 역량(productive capacity)을 잃어 갈 때, 이는 곧 중산층의 와해와 연결되고 이는 경제적, 정치적, 사회적 발전의 밑받침이 되는 사회 기반의 붕괴를 의미하기 때문에 이것이 약화되는 것을 막아야 한다는 것이다. 여기에서 생산적인 역량은 단지 high end product design, engineering만을 의미하지 않고 전반적인 생산 제조시설과 일자리도 의미한다.
그런데 염려스럽게도 한국은 이미 deindustrializing 과정이 진행되고 있다는 것을 data points는 가리키고 있다.
한국 기업들이 공장을 개발도상국가로 옮기기 시작한 것은 IMF가 터지기 전이었다. 그러다가 IMF 이후에 그 과정이 가속화되었고, 중산층도 약해지고 있다.
중국 시장으로 한국의 제조회사들이 옮겨간 데에는 여러 가지 이유가 있지만 저렴한 인건비는 작은 이유에 불과하다. 미국의 달러정책이 큰 요인이었고, 미국이 중국으로 하여금 제조산업을 급속히 성장시킬 수 있도록 여러 가지 우호적인 정책을 폈기 때문이다. 물론 미국은 이에 대한 이득이 있었기 때문인데 대다수 국민들을 위한 이익이 아니라 소수의 oligarchy를 위한 것임은 제 블로그를 읽어 오신 분들은 아실 것이다.
여하튼 많은 다국적 기업들이 이미 중국으로 옮겨가 중국이 제조 인프라와 suppliers를 구축했기 때문에 미국이나 한국, 일본에서 이미 옮겨간 제조 일자리는 다시 본국으로 돌아가기가 힘든 실정이다.
미국, 일본의 예에서 볼 수 있듯이 deindustrialization 과정이 사회에 미치는 부정적인 영향은 매우 크다. 한국이 고부가가치를 창출하는 소수의 사업부를 남긴 채 제조는 외국으로 outsourcing해도 괜찮다는 생각은 잘 못된 것이다. 우리보다 먼저 이 과정을 거친 미국과 일본의 예가 이를 잘 보여주고 있다.
미국이 산업시설을 중국에 내주고 여러 버블을 의도적으로 일으키면서 경제를 finacialization화 해 왔기 때문에 오늘날의 어려움에 처하고 있다는 것은 주지의 사실이다. 물론 미국은 부가가치가 놓은 IT, 제약, finance 분야에서 세계 제일이지만 이것만 갖고 중산층을 support하지 못하고 있다. 우리보다 한 걸음 먼저 산업화를 이룩하고 우리의 모델이 돼 왔으며 거품이 붕괴된 일본 사례가 시사하는 바도 크다. 일본의 경우 많은 젊은 세대들이 양질의 일자리를 얻지 못하고 미래에 대한 희망을 잃어가고 있다는 점에 주목해야 할 것이다.
한국은 어떻게서든지 제조업의 붕괴를 막아야 한다. 이를 위해서 더 이상 기업들이 해외로 생산시설을 옮겨가지 못하도록 전반적인 정책을 수립하고, 경영진들도 사회적 책무를 다하고, 노사간의 합의를 이끌어내고, 중소기업의 지속적 사업창출과 성공을 위해 제반 인프라를 구축하고 역량을 키워 나가야 한다.
제가 재벌 위주의 산업구조를 개선해야 한다고 강조하는 이유중의 하나도 기본적으로 재벌 기업들이 한국의 일자리 창출에 기여하는 부분이 미미하고 (많은 협력업체를 통해 일자리 창출을 하고 있다고 주장할 수 있지만 이는 시장을 왜곡해서 만든 일자리라 한계가 있다) 장기적으로 일자리를 제공할 새로운 기업과 사업기회의 창출 그리고 entrepreneurship을 억누르기 때문이다.
그런데 염려스럽게도 한국은 이미 deindustrializing 과정이 진행되고 있다는 것을 data points는 가리키고 있다.
한국 기업들이 공장을 개발도상국가로 옮기기 시작한 것은 IMF가 터지기 전이었다. 그러다가 IMF 이후에 그 과정이 가속화되었고, 중산층도 약해지고 있다.
중국 시장으로 한국의 제조회사들이 옮겨간 데에는 여러 가지 이유가 있지만 저렴한 인건비는 작은 이유에 불과하다. 미국의 달러정책이 큰 요인이었고, 미국이 중국으로 하여금 제조산업을 급속히 성장시킬 수 있도록 여러 가지 우호적인 정책을 폈기 때문이다. 물론 미국은 이에 대한 이득이 있었기 때문인데 대다수 국민들을 위한 이익이 아니라 소수의 oligarchy를 위한 것임은 제 블로그를 읽어 오신 분들은 아실 것이다.
여하튼 많은 다국적 기업들이 이미 중국으로 옮겨가 중국이 제조 인프라와 suppliers를 구축했기 때문에 미국이나 한국, 일본에서 이미 옮겨간 제조 일자리는 다시 본국으로 돌아가기가 힘든 실정이다.
미국, 일본의 예에서 볼 수 있듯이 deindustrialization 과정이 사회에 미치는 부정적인 영향은 매우 크다. 한국이 고부가가치를 창출하는 소수의 사업부를 남긴 채 제조는 외국으로 outsourcing해도 괜찮다는 생각은 잘 못된 것이다. 우리보다 먼저 이 과정을 거친 미국과 일본의 예가 이를 잘 보여주고 있다.
미국이 산업시설을 중국에 내주고 여러 버블을 의도적으로 일으키면서 경제를 finacialization화 해 왔기 때문에 오늘날의 어려움에 처하고 있다는 것은 주지의 사실이다. 물론 미국은 부가가치가 놓은 IT, 제약, finance 분야에서 세계 제일이지만 이것만 갖고 중산층을 support하지 못하고 있다. 우리보다 한 걸음 먼저 산업화를 이룩하고 우리의 모델이 돼 왔으며 거품이 붕괴된 일본 사례가 시사하는 바도 크다. 일본의 경우 많은 젊은 세대들이 양질의 일자리를 얻지 못하고 미래에 대한 희망을 잃어가고 있다는 점에 주목해야 할 것이다.
한국은 어떻게서든지 제조업의 붕괴를 막아야 한다. 이를 위해서 더 이상 기업들이 해외로 생산시설을 옮겨가지 못하도록 전반적인 정책을 수립하고, 경영진들도 사회적 책무를 다하고, 노사간의 합의를 이끌어내고, 중소기업의 지속적 사업창출과 성공을 위해 제반 인프라를 구축하고 역량을 키워 나가야 한다.
제가 재벌 위주의 산업구조를 개선해야 한다고 강조하는 이유중의 하나도 기본적으로 재벌 기업들이 한국의 일자리 창출에 기여하는 부분이 미미하고 (많은 협력업체를 통해 일자리 창출을 하고 있다고 주장할 수 있지만 이는 시장을 왜곡해서 만든 일자리라 한계가 있다) 장기적으로 일자리를 제공할 새로운 기업과 사업기회의 창출 그리고 entrepreneurship을 억누르기 때문이다.
SocGen: “The Time for Patching It Up Is Over”
From SocGen over Zero Hedge:
The time for patching it up is over; Greece looks as if it can no longer stop the seams from falling apart. Restructuring (an economy) in a low (negative) growth environment simply does not work. The prescribed medicine (austerity) has failed; debt forgiveness (PSI) can't be agreed; and we are heading for debt default. The iterative process which defines the political response on these occasions has been unsuccessful, but the time for reflection will come later. It's been a tumultuous two years. The immediate investment case now focuses on contagion and its containment. Now we ask whether we're really better placed to handle a default - whatever form it takes? Orderly/disorderly, much of the corporate credit universe should come through relatively unscathed, but risk asset pricing will be impacted nonetheless. Technicals of sidelined cash and an opening New Year frenzy have got us here, boosted by ECB manipulation of peripheral risk (sovereign and bank) through the LTRO. However, nearing the end game of the Greek situation now sees us with a different reality. Spreads are moving wider, the periphery is suffering the most, while turnover and secondary market liquidity have fallen off a cliff as evidenced through widening bid-offer spreads. It’s not quite the November phenomenon, because then we had massive selling of French risk in particular, so as long as investors stay with it, the widening should be contained. As ever, we’ll be fighting against the market’s mantra over the past two years, which has been to shoot first and ask questions later.
http://www.zerohedge.com/news/socgen-sums-it-time-patching-it-over
The time for patching it up is over; Greece looks as if it can no longer stop the seams from falling apart. Restructuring (an economy) in a low (negative) growth environment simply does not work. The prescribed medicine (austerity) has failed; debt forgiveness (PSI) can't be agreed; and we are heading for debt default. The iterative process which defines the political response on these occasions has been unsuccessful, but the time for reflection will come later. It's been a tumultuous two years. The immediate investment case now focuses on contagion and its containment. Now we ask whether we're really better placed to handle a default - whatever form it takes? Orderly/disorderly, much of the corporate credit universe should come through relatively unscathed, but risk asset pricing will be impacted nonetheless. Technicals of sidelined cash and an opening New Year frenzy have got us here, boosted by ECB manipulation of peripheral risk (sovereign and bank) through the LTRO. However, nearing the end game of the Greek situation now sees us with a different reality. Spreads are moving wider, the periphery is suffering the most, while turnover and secondary market liquidity have fallen off a cliff as evidenced through widening bid-offer spreads. It’s not quite the November phenomenon, because then we had massive selling of French risk in particular, so as long as investors stay with it, the widening should be contained. As ever, we’ll be fighting against the market’s mantra over the past two years, which has been to shoot first and ask questions later.
http://www.zerohedge.com/news/socgen-sums-it-time-patching-it-over
Central Banks Flooded the World in Liquidity
From Zero Hedge:
There are those who have been waiting to buy undilutable precious metals in response to a headline announcement from the Fed that it is starting to buy up hundreds of billions of Treasurys or MBS. This is understandable - after all that is precisely the trigger that the headline scanning robots which account for 90% of market action in the past year are programmed to do. And the worst thing that one can do is put on the right trade at the wrong time. Yet it may come as a surprise to some, that while the world was waiting, and waiting, and waiting, for Bernanke to hit the Print button, virtually every other central bank was quietly unleashing it own mini tsunami of liquidity. In fact, as Morgan Stanley puts it, "the Great Monetary Easing Part 2 is in full swing." But wait, there's more: in an Austrian world, where fundamentals don't matter and only how much additional nominal fiat is created is relevant, it is sheer idiocy to assume that the printers will stop here... or anywhere for that matter. They simply can't, now that the marginal utility of every dollars is sub 1.00 relative to GDP creation. This means that by the time the Global Weimar is in full swing, we will see much, much more easing. Sure enough, MS anticipates an unprecedented additional round of easing in the months ahead. So for those waiting to buy gold et al at the same time as DE Shaw's correlation quants do, the time will be long gone. Because slowly everyone is realizing that it is not the Fed that is the marginal creator of fake money. It is everyone.
http://www.zerohedge.com/news/while-you-were-sleeping-central-banks-flooded-world-liquidity
There are those who have been waiting to buy undilutable precious metals in response to a headline announcement from the Fed that it is starting to buy up hundreds of billions of Treasurys or MBS. This is understandable - after all that is precisely the trigger that the headline scanning robots which account for 90% of market action in the past year are programmed to do. And the worst thing that one can do is put on the right trade at the wrong time. Yet it may come as a surprise to some, that while the world was waiting, and waiting, and waiting, for Bernanke to hit the Print button, virtually every other central bank was quietly unleashing it own mini tsunami of liquidity. In fact, as Morgan Stanley puts it, "the Great Monetary Easing Part 2 is in full swing." But wait, there's more: in an Austrian world, where fundamentals don't matter and only how much additional nominal fiat is created is relevant, it is sheer idiocy to assume that the printers will stop here... or anywhere for that matter. They simply can't, now that the marginal utility of every dollars is sub 1.00 relative to GDP creation. This means that by the time the Global Weimar is in full swing, we will see much, much more easing. Sure enough, MS anticipates an unprecedented additional round of easing in the months ahead. So for those waiting to buy gold et al at the same time as DE Shaw's correlation quants do, the time will be long gone. Because slowly everyone is realizing that it is not the Fed that is the marginal creator of fake money. It is everyone.
http://www.zerohedge.com/news/while-you-were-sleeping-central-banks-flooded-world-liquidity
Thursday, February 16, 2012
한국 휴대폰 판매 세계시장 석권, 그러나 해외 생산 대부분
한국 휴대폰 제조업체들이 세계시장에서 선전할 수 있는 데에는 한국정부의 backing이 있었기 때문에 가능했다. 그러나 결국 이러한 정책들이 궁극적으로 누구의 이익을 위한 것이었는가? 다시 한번 강조하자면 제조업 일자리의 감소는 중산층의 약화와 전반적인 사회 기반의 쇠퇴와 연결되어있다. 미국과 일본의 예가 이를 여실히 보여주고 있다.
한겨례로부터:
삼성전자는 지난해 9740만대가 넘는 스마트폰을 팔았다. 애플을 따돌린 세계 1등이었다. 스마트폰 덕택에 삼성전자는 연간 매출 165조원, 영업이익 16조2500억원 달성이란 금자탑을 쌓아올릴 수 있었다. 하지만 그 ‘주연’은 지금의 삼성 휴대폰을 있게 한 구미공장이 아니었다. 중국과 베트남 등 해외에 있는 공장들이었다. 삼성 휴대폰 10대중 9대는 우리나라 밖에서 생산되는 게 현실이다.
이 때문에 삼성 휴대폰이 지구촌 곳곳에서 불티나게 팔려나가고 있지만, 정작 국내 구미공장의 일자리는 늘어나지 않고 있다. 삼성 구미공장 관계자는 “휴대폰 생산 인력은 9500~1만명 사이”라고 말했다. 삼성이 지난 2007년 베트남 진출로 국내 생산기반 축소를 우려하는 여론을 달래려 당시 1만명 수준이던 구미 공장 인력을 더 늘리겠다는 약속을 내놨지만, 5년이 지나도록 지키지 않고 있는 것이다.
이런 휴대폰 산업의 ‘외화내빈’ 현상은 비단 삼성에서만 일어나는 것은 아니다. 엘지와 팬택도 마찬가지다. 우리나라 휴대폰 업체들이 글로벌기업으로 고속성장한 이면에는 국내 일자리와 수출의 정체란 불편한 진실이 놓여 있는 것이다.
16일 지식경제부에 따르면, 지난해 말 기준 국내 휴대폰 업체의 해외 생산비중이 78.4%에 이르는 것으로 나타났다. 삼성, 엘지, 팬택 등의 로고가 찍힌 휴대폰 10대 중 8대가 해외에서 만들어지고 있는 것이다. 해외 생산비중은 2007년의 35.9%에서 불과 4년 만에 두 배 이상 급증했다.
삼성은 구미공장에서 월 500만대의 휴대폰을 생산할 수 있지만, 중국의 텐진•신천•해주 등 3곳과 베트남, 브라질, 인도의 삼성 공장은 모두 월 3500만대 안팎의 생산 능력을 갖추고 있다. 구미공장에서 생산되는 휴대폰은 2000년대 중반만 하더라도 월간 600만대가량이었으나, 지금은 되려 월간 100만대 수준으로 줄었다. 이제 삼성 휴대폰 대부분은 ‘메이드 인 차이나’ 또는 ‘메이드 인 베트남’인 셈이다.
엘지전자도 평택 공장(월 500만대)보다 중국과 브라질, 인도 등지에서 더 많은 약 800만대의 휴대폰을 찍어내고 있다. 팬택(외주 제외)은 김포에서 85만대, 중국에서 30만대의 월간 생산 능력을 갖췄다.
http://www.hani.co.kr/arti/economy/economy_general/519386.html
한겨례로부터:
삼성전자는 지난해 9740만대가 넘는 스마트폰을 팔았다. 애플을 따돌린 세계 1등이었다. 스마트폰 덕택에 삼성전자는 연간 매출 165조원, 영업이익 16조2500억원 달성이란 금자탑을 쌓아올릴 수 있었다. 하지만 그 ‘주연’은 지금의 삼성 휴대폰을 있게 한 구미공장이 아니었다. 중국과 베트남 등 해외에 있는 공장들이었다. 삼성 휴대폰 10대중 9대는 우리나라 밖에서 생산되는 게 현실이다.
이 때문에 삼성 휴대폰이 지구촌 곳곳에서 불티나게 팔려나가고 있지만, 정작 국내 구미공장의 일자리는 늘어나지 않고 있다. 삼성 구미공장 관계자는 “휴대폰 생산 인력은 9500~1만명 사이”라고 말했다. 삼성이 지난 2007년 베트남 진출로 국내 생산기반 축소를 우려하는 여론을 달래려 당시 1만명 수준이던 구미 공장 인력을 더 늘리겠다는 약속을 내놨지만, 5년이 지나도록 지키지 않고 있는 것이다.
이런 휴대폰 산업의 ‘외화내빈’ 현상은 비단 삼성에서만 일어나는 것은 아니다. 엘지와 팬택도 마찬가지다. 우리나라 휴대폰 업체들이 글로벌기업으로 고속성장한 이면에는 국내 일자리와 수출의 정체란 불편한 진실이 놓여 있는 것이다.
16일 지식경제부에 따르면, 지난해 말 기준 국내 휴대폰 업체의 해외 생산비중이 78.4%에 이르는 것으로 나타났다. 삼성, 엘지, 팬택 등의 로고가 찍힌 휴대폰 10대 중 8대가 해외에서 만들어지고 있는 것이다. 해외 생산비중은 2007년의 35.9%에서 불과 4년 만에 두 배 이상 급증했다.
삼성은 구미공장에서 월 500만대의 휴대폰을 생산할 수 있지만, 중국의 텐진•신천•해주 등 3곳과 베트남, 브라질, 인도의 삼성 공장은 모두 월 3500만대 안팎의 생산 능력을 갖추고 있다. 구미공장에서 생산되는 휴대폰은 2000년대 중반만 하더라도 월간 600만대가량이었으나, 지금은 되려 월간 100만대 수준으로 줄었다. 이제 삼성 휴대폰 대부분은 ‘메이드 인 차이나’ 또는 ‘메이드 인 베트남’인 셈이다.
엘지전자도 평택 공장(월 500만대)보다 중국과 브라질, 인도 등지에서 더 많은 약 800만대의 휴대폰을 찍어내고 있다. 팬택(외주 제외)은 김포에서 85만대, 중국에서 30만대의 월간 생산 능력을 갖췄다.
http://www.hani.co.kr/arti/economy/economy_general/519386.html
Chinese Credit Growth Slows
From MacroBusiness:
A week ago Phat Dragon was oozing calm in relation to what the January credit figures would say about the economy. Either an even 1 trillion yuan would be disbursed (the consensus), which would been fine, or a larger number would print, which would mean that the turnaround in monetary policy, as expressed through bank lending, was unambiguously here. Having now seen the new lending figure – a genuine tiddler at just 738 billion – (if that were a hooked fish, you’d throw it back in disgust) that state of calm has rapidly evaporated. The last time that a January month produced a smaller nominal new lending flow was in 2007. The economy has expanded by 77% since that time. Unless new lending jumps sharply in February – and by sharply Phat Dragon means a lift beyond even the extravagances of 2009 – then an annual loan supply north of 8 trillion yuan (and thus a total social financing provision that keeps pace with nominal GDP) is under serious threat. A huge problem with relying on that to happen is that February lending has exceeded January lending exactly … let me just count this on my talons , … exactly, … bear with me … – exactly never. If an appropriate credit supply is not forthcoming, downside risks to already decelerating aggregate demand will emerge swiftly. In sum, Phat Dragon will reconsider his baseline 2012 forecasts if February loans do not break all sorts of records in addition to the Sinitic laws of seasonal motion.
http://www.macrobusiness.com.au/2012/02/phat-dragon-sees-choked-credit/
A week ago Phat Dragon was oozing calm in relation to what the January credit figures would say about the economy. Either an even 1 trillion yuan would be disbursed (the consensus), which would been fine, or a larger number would print, which would mean that the turnaround in monetary policy, as expressed through bank lending, was unambiguously here. Having now seen the new lending figure – a genuine tiddler at just 738 billion – (if that were a hooked fish, you’d throw it back in disgust) that state of calm has rapidly evaporated. The last time that a January month produced a smaller nominal new lending flow was in 2007. The economy has expanded by 77% since that time. Unless new lending jumps sharply in February – and by sharply Phat Dragon means a lift beyond even the extravagances of 2009 – then an annual loan supply north of 8 trillion yuan (and thus a total social financing provision that keeps pace with nominal GDP) is under serious threat. A huge problem with relying on that to happen is that February lending has exceeded January lending exactly … let me just count this on my talons , … exactly, … bear with me … – exactly never. If an appropriate credit supply is not forthcoming, downside risks to already decelerating aggregate demand will emerge swiftly. In sum, Phat Dragon will reconsider his baseline 2012 forecasts if February loans do not break all sorts of records in addition to the Sinitic laws of seasonal motion.
http://www.macrobusiness.com.au/2012/02/phat-dragon-sees-choked-credit/
Cathy O’Neil: How Big Pharma Cooks Data – The Case of Vioxx and Heart Disease
From Naked Capitalism:
Yesterday I caught a lecture at Columbia given by statistics professor David Madigan, who explained to us the story of Vioxx and Merck. It’s fascinating and I was lucky to get permission to retell it here.
Madigan has been a paid consultant to work on litigation against Merck. He doesn’t consider Merck to be an evil company by any means, and says it does lots of good by producing medicines for people. According to him, the following Vioxx story is “a line of work where they went astray”.
Yet Madigan’s own data strongly suggests that Merck was well aware of the fatalities resulting from Vioxx, a blockbuster drug that earned them $2.4b in 2003, the year before it “voluntarily” pulled it from the market in September 2004. What you will read below shows that the company set up standard data protection and analysis plans which they later either revoked or didn’t follow through with, they gave the FDA misleading statistics to trick them into thinking the drug was safe, and set up a biased filter on an Alzheimer’s patient study to make the results look better. They hoodwinked the FDA and the New England Journal of Medicine and took advantage of the public trust which ultimately caused the deaths of thousands of people.
http://www.nakedcapitalism.com/2012/02/25244.html
Yesterday I caught a lecture at Columbia given by statistics professor David Madigan, who explained to us the story of Vioxx and Merck. It’s fascinating and I was lucky to get permission to retell it here.
Madigan has been a paid consultant to work on litigation against Merck. He doesn’t consider Merck to be an evil company by any means, and says it does lots of good by producing medicines for people. According to him, the following Vioxx story is “a line of work where they went astray”.
Yet Madigan’s own data strongly suggests that Merck was well aware of the fatalities resulting from Vioxx, a blockbuster drug that earned them $2.4b in 2003, the year before it “voluntarily” pulled it from the market in September 2004. What you will read below shows that the company set up standard data protection and analysis plans which they later either revoked or didn’t follow through with, they gave the FDA misleading statistics to trick them into thinking the drug was safe, and set up a biased filter on an Alzheimer’s patient study to make the results look better. They hoodwinked the FDA and the New England Journal of Medicine and took advantage of the public trust which ultimately caused the deaths of thousands of people.
http://www.nakedcapitalism.com/2012/02/25244.html
Russia Dumps Treasuries for 14 Consecutive Months; China Slashes Holdings to Lowest in over a Year
From Zero Hedge:
Today's disappointing TIC report confirmed what Zero Hedge reported back in January, namely the record dumping of Treasurys by foreign entities as tracked by the Fed's custodial account. And while we will spare you the details of the report (found here), two things bear pointing out: the very demonstrative selling of US paper by Russia continues, and is now in its 14th consecutive month (as has been reported here consistently), as total USTs in Putin's possession declined to a fresh multi-year low of $88.4 billion, half of the $176 billion in October 2010. Also confirming that the Asian anti-USD axis is now one which consists of at least Russia and China (and certainly Iran), was the stepwise dump of US paper by Beijing which sold $32 billion in US bonds in December, bringing its total to a new post 2010 low of $1100.7 billion. And lastly, this was not isolated to just these two: in December the grand total of US Treasury holding by foreigners declined from $4.75 trillion to $4.732 trillion. The question then is: just what are China and Russia buying (ahem stockpiling) with all the dollars that are not recycled back into Treasurys?
http://www.zerohedge.com/news/russia-dumps-treasurys-14-consecutive-months-china-slashes-holdings-lowest-over-year
Today's disappointing TIC report confirmed what Zero Hedge reported back in January, namely the record dumping of Treasurys by foreign entities as tracked by the Fed's custodial account. And while we will spare you the details of the report (found here), two things bear pointing out: the very demonstrative selling of US paper by Russia continues, and is now in its 14th consecutive month (as has been reported here consistently), as total USTs in Putin's possession declined to a fresh multi-year low of $88.4 billion, half of the $176 billion in October 2010. Also confirming that the Asian anti-USD axis is now one which consists of at least Russia and China (and certainly Iran), was the stepwise dump of US paper by Beijing which sold $32 billion in US bonds in December, bringing its total to a new post 2010 low of $1100.7 billion. And lastly, this was not isolated to just these two: in December the grand total of US Treasury holding by foreigners declined from $4.75 trillion to $4.732 trillion. The question then is: just what are China and Russia buying (ahem stockpiling) with all the dollars that are not recycled back into Treasurys?
http://www.zerohedge.com/news/russia-dumps-treasurys-14-consecutive-months-china-slashes-holdings-lowest-over-year
Tuesday, February 14, 2012
Japan ‘More Than Hollowing Out’ with First Trade Gap Since 1980; BOJ Announces $130 Billion QE, One Percent Inflation Target
From Bloomberg:
Japan’s first annual trade gap since 1980, driven by an energy-import surge as nuclear plants shut down and by a shift of manufacturing overseas, threatens to undermine the nation’s status as the world’s largest creditor.
A third straight monthly merchandise trade deficit in December capped an annual shortfall of 2.49 trillion yen ($32 billion), the finance ministry said in Tokyo today. The data reflect the impact of the record earthquake in March, which sparked a nuclear crisis that shut most reactors, as well as longer-term shifts such as Nissan Motor Co.’s decision to move some production to lower-cost Thailand.
“This is more than hollowing out -- the government hasn’t found any solutions to electricity and at this point I don’t see that we’re going to have nuclear power back again,” said Masaaki Kanno, chief economist in Tokyo at JPMorgan Securities Japan Co. The deficit will “expand in coming years,” he said.
http://www.bloomberg.com/news/2012-01-25/japan-has-first-trade-deficit-since-1980-on-quake-disruption-global-slump.html
From Reuters:
In a move that surprised markets, the central bank added 10 trillion yen ($130 billion) to its asset buying and lending scheme, under which it buys government and private debt and lends cheap funds against various types of collateral. The entire increase amount will be for purchases of long-term government bonds, the BOJ said.
The BOJ also said it will set consumer inflation of 1 percent as its price goal for the time being, making a clearer commitment to end deflation than before when it defined the level as its "understanding" on long-term price stability.
BOJ Governor Masaaki Shirakawa was grilled in parliament last week by lawmakers threatening to revise the BOJ law to give the government more scope to intervene in monetary policy, while the economics minister urged the bank to explore ways to make its price commitment easier to understand.
The central bank has pledged to keep ultra-low interest rates until an end to deflation is in sight, and defined desirable long-term price growth as consumer inflation of 2 percent or lower with the median for the nine-member board at 1 percent.
It had described this as the board's "understanding" of desirable inflation rather than an explicit price target, for fear of having its hands tied on policy. But this has drawn criticism as too vague compared with the Fed's 2 percent inflation target announced last month
http://www.reuters.com/article/2012/02/14/us-japan-economy-boj-idUSTRE81D07L20120214
Japan’s first annual trade gap since 1980, driven by an energy-import surge as nuclear plants shut down and by a shift of manufacturing overseas, threatens to undermine the nation’s status as the world’s largest creditor.
A third straight monthly merchandise trade deficit in December capped an annual shortfall of 2.49 trillion yen ($32 billion), the finance ministry said in Tokyo today. The data reflect the impact of the record earthquake in March, which sparked a nuclear crisis that shut most reactors, as well as longer-term shifts such as Nissan Motor Co.’s decision to move some production to lower-cost Thailand.
“This is more than hollowing out -- the government hasn’t found any solutions to electricity and at this point I don’t see that we’re going to have nuclear power back again,” said Masaaki Kanno, chief economist in Tokyo at JPMorgan Securities Japan Co. The deficit will “expand in coming years,” he said.
http://www.bloomberg.com/news/2012-01-25/japan-has-first-trade-deficit-since-1980-on-quake-disruption-global-slump.html
From Reuters:
In a move that surprised markets, the central bank added 10 trillion yen ($130 billion) to its asset buying and lending scheme, under which it buys government and private debt and lends cheap funds against various types of collateral. The entire increase amount will be for purchases of long-term government bonds, the BOJ said.
The BOJ also said it will set consumer inflation of 1 percent as its price goal for the time being, making a clearer commitment to end deflation than before when it defined the level as its "understanding" on long-term price stability.
BOJ Governor Masaaki Shirakawa was grilled in parliament last week by lawmakers threatening to revise the BOJ law to give the government more scope to intervene in monetary policy, while the economics minister urged the bank to explore ways to make its price commitment easier to understand.
The central bank has pledged to keep ultra-low interest rates until an end to deflation is in sight, and defined desirable long-term price growth as consumer inflation of 2 percent or lower with the median for the nine-member board at 1 percent.
It had described this as the board's "understanding" of desirable inflation rather than an explicit price target, for fear of having its hands tied on policy. But this has drawn criticism as too vague compared with the Fed's 2 percent inflation target announced last month
http://www.reuters.com/article/2012/02/14/us-japan-economy-boj-idUSTRE81D07L20120214
S&P 500 Deflated by Gold
Jesse presents a good graph of the S&P deflated by gold.
From Jesse’s Café:
Much of the recent rally, that nominally looks like a straight shot higher is really due to the monetization going on in the US and Europe.
Such distribution of money through asset bubbles can provide the appearance of vitality, but it is not self-sustaining.
But as we saw in the tech and the housing bubbles, they can go quite far, and inflict serious damage on real economy, before they collapse.
http://jessescrossroadscafe.blogspot.com/2012/02/sp-500-deflated-by-gold.html
From Jesse’s Café:
Much of the recent rally, that nominally looks like a straight shot higher is really due to the monetization going on in the US and Europe.
Such distribution of money through asset bubbles can provide the appearance of vitality, but it is not self-sustaining.
But as we saw in the tech and the housing bubbles, they can go quite far, and inflict serious damage on real economy, before they collapse.
http://jessescrossroadscafe.blogspot.com/2012/02/sp-500-deflated-by-gold.html
Samsung Chairman Lee Kun-hee Sued by Elder Brother for Inheritance
From Yonhap:
The eldest son of Samsung Group founder Lee Byung-chull has filed an inheritance suit against his younger brother and Samsung Electronics Co. chairman Lee Kun-hee, seeking the return of a massive amount of stocks he claimed the chairman secretly incorporated into his assets, a Seoul court said Tuesday.
In the complaint filed with the Seoul Central District Court, Lee Maeng-hee asked the court to order Lee Kun-hee to return 8.24 million shares in Samsung Life Insurance Co. and 20 stocks in Samsung Electronics Co., along with 100 million won (US$89,000), according to the court's records.
http://english.yonhapnews.co.kr/national/2012/02/14/34/0302000000AEN20120214011800315F.HTML
The eldest son of Samsung Group founder Lee Byung-chull has filed an inheritance suit against his younger brother and Samsung Electronics Co. chairman Lee Kun-hee, seeking the return of a massive amount of stocks he claimed the chairman secretly incorporated into his assets, a Seoul court said Tuesday.
In the complaint filed with the Seoul Central District Court, Lee Maeng-hee asked the court to order Lee Kun-hee to return 8.24 million shares in Samsung Life Insurance Co. and 20 stocks in Samsung Electronics Co., along with 100 million won (US$89,000), according to the court's records.
http://english.yonhapnews.co.kr/national/2012/02/14/34/0302000000AEN20120214011800315F.HTML
Monday, February 13, 2012
FT: China Extends Loans to Avoid Mass Default
China seems to have quickly learned how to get the ponzi game going from the Western world.
From the Financial Times:
A mountain of debt is coming due and the principal is unpayable, so governments have agreed to extend maturities.
This could be a description of a bail-out package for Greece. Instead, it is what China is doing to prevent scores of provinces and cities from defaulting on bank loans.
The flaws in China’s fiscal system were savagely exposed during the global financial crisis when Beijing introduced a stimulus package that was largely implemented by local governments.
Lacking sufficient funding and prohibited from even borrowing money because of past excesses, provinces and cities created thousands of financing vehicles to get around the rules and raise capital in the quickest way possible. They tapped state-owned banks which, encouraged by Beijing, were happy to oblige with enormous loans.
From relatively little debt at the start of 2008, local governments finished 2010 owing Rmb10.7tn ($1.7tn). The national auditor has reported that more than a third of that debt will have matured by the end of this year.
“We are not talking about a cash flow problem. We are talking about a big cash shortfall problem,” said Zhu Ning, deputy director of the Shanghai Advanced Institute of Finance.
Critics have pointed to dangers in the loan rollover plan. Repayment delays will hinder banks’ lending abilities. Some bad loans will simply be prolonged instead of recognized. Problems will remain concealed.
Standard & Poor’s has warned the extension would be a “backward step” for the Chinese banking sector that could “shake investors’ confidence”
http://www.ft.com/intl/cms/s/0/08d45414-553c-11e1-b66d-00144feabdc0.html#axzz1mDTEHA5l
From the Financial Times:
A mountain of debt is coming due and the principal is unpayable, so governments have agreed to extend maturities.
This could be a description of a bail-out package for Greece. Instead, it is what China is doing to prevent scores of provinces and cities from defaulting on bank loans.
The flaws in China’s fiscal system were savagely exposed during the global financial crisis when Beijing introduced a stimulus package that was largely implemented by local governments.
Lacking sufficient funding and prohibited from even borrowing money because of past excesses, provinces and cities created thousands of financing vehicles to get around the rules and raise capital in the quickest way possible. They tapped state-owned banks which, encouraged by Beijing, were happy to oblige with enormous loans.
From relatively little debt at the start of 2008, local governments finished 2010 owing Rmb10.7tn ($1.7tn). The national auditor has reported that more than a third of that debt will have matured by the end of this year.
“We are not talking about a cash flow problem. We are talking about a big cash shortfall problem,” said Zhu Ning, deputy director of the Shanghai Advanced Institute of Finance.
Critics have pointed to dangers in the loan rollover plan. Repayment delays will hinder banks’ lending abilities. Some bad loans will simply be prolonged instead of recognized. Problems will remain concealed.
Standard & Poor’s has warned the extension would be a “backward step” for the Chinese banking sector that could “shake investors’ confidence”
http://www.ft.com/intl/cms/s/0/08d45414-553c-11e1-b66d-00144feabdc0.html#axzz1mDTEHA5l
209 Hedge Funds Rejoice as Apple Passes $500
From Zero Hedge:
Why is this good news for the "financial industry?" Because Apple is now the financial industry, with a record 209 hedge funds holding it (a number that has likely surged in the past 3 months). As Apple goes, so goes not only the entire Tech index, the NASDAPPLE, the global capital markets, but the entire 2 and 20 model. We wonder how long until LPs ask their hedge fund advisors why they paying management fees when everyone can just put their money into AAPL outright and bypass the whole "hegde fund" mockery.
http://www.zerohedge.com/news/aapl-500
Why is this good news for the "financial industry?" Because Apple is now the financial industry, with a record 209 hedge funds holding it (a number that has likely surged in the past 3 months). As Apple goes, so goes not only the entire Tech index, the NASDAPPLE, the global capital markets, but the entire 2 and 20 model. We wonder how long until LPs ask their hedge fund advisors why they paying management fees when everyone can just put their money into AAPL outright and bypass the whole "hegde fund" mockery.
http://www.zerohedge.com/news/aapl-500
Moody's Downgrades Italy, Spain, Portugal and Others; Puts UK, France on Outlook Negative
From Zero Hedge:
You know there is a reason why Europe just came crawling with an advance handout looking for US assistance: Moody's just went apeshit on Europe. In other news, we wouldn't want to be the company that insured Moody's Milan offices.
Moody's actions can be summarised as follows:
- Austria: outlook on Aaa rating changed to negative
- France: outlook on Aaa rating changed to negative
- Italy: downgraded to A3 from A2, negative outlook
- Malta: downgraded to A3 from A2, negative outlook
- Portugal: downgraded to Ba3 from Ba2, negative outlook
- Slovakia: downgraded to A2 from A1, negative outlook
- Slovenia: downgraded to A2 from A1, negative outlook
- Spain: downgraded to A3 from A1, negative outlook
- United Kingdom: outlook on Aaa rating changed to negative
Please see the individual country specific statements below for more detailed information relating to the rating rationale and the sensitivity analysis for each affected sovereign issuer.
http://www.zerohedge.com/news/moodys-downgrades-italy-spain-portugal-and-other-puts-uk-france-outlook-negative-full-statement
You know there is a reason why Europe just came crawling with an advance handout looking for US assistance: Moody's just went apeshit on Europe. In other news, we wouldn't want to be the company that insured Moody's Milan offices.
Moody's actions can be summarised as follows:
- Austria: outlook on Aaa rating changed to negative
- France: outlook on Aaa rating changed to negative
- Italy: downgraded to A3 from A2, negative outlook
- Malta: downgraded to A3 from A2, negative outlook
- Portugal: downgraded to Ba3 from Ba2, negative outlook
- Slovakia: downgraded to A2 from A1, negative outlook
- Slovenia: downgraded to A2 from A1, negative outlook
- Spain: downgraded to A3 from A1, negative outlook
- United Kingdom: outlook on Aaa rating changed to negative
Please see the individual country specific statements below for more detailed information relating to the rating rationale and the sensitivity analysis for each affected sovereign issuer.
http://www.zerohedge.com/news/moodys-downgrades-italy-spain-portugal-and-other-puts-uk-france-outlook-negative-full-statement
Greece: The Morning After: 48 Buildings on Fire, 150 Looted, Hundreds Arrested in Athens
From Athens News:
Athenians swept rocks and broken glass from the streets of their city on Monday after a night of violence that gave MPs a taste of the challenge they face in implementing a deeply unpopular austerity bill demanded by the troika.
Firefighters doused the smouldering remains of several buildings, set ablaze by hooded youths during protests against the package of pay, pension and job cuts adopted by parliament just after midnight, on Monday morning, after 10 hours of debate.
Police said 150 shops were looted in the capital and 48 buildings set ablaze. Some 100 people – including 68 police – were wounded and 130 detained, a police official said on Monday.
There was also violence in cities across the country, including Thessaloniki and the islands of Corfu and Crete.
Athenians were shocked at the burnt buildings that included the neoclassical home to the Attikon cinema dating from 1870.
"We are all very angry with these measures but this is not the way out," said Dimitris Hatzichristos, 30, a public sector worker surveying the debris.
Many citizens believe their living standards are collapsing already and the new measures will deepen their misery.
"Enough is enough!" said 89-year-old Manolis Glezos, one of country’s most famous leftists. "They have no idea what an uprising by the Greek people means. And the Greek people, regardless of ideology, have risen."
Glezos is a national hero for sneaking up the Acropolis at night in 1941 and tearing down a Nazi flag from under the noses of the German occupiers, raising the morale of Athens residents.
http://www.athensnews.gr/portal/1/53270
Athenians swept rocks and broken glass from the streets of their city on Monday after a night of violence that gave MPs a taste of the challenge they face in implementing a deeply unpopular austerity bill demanded by the troika.
Firefighters doused the smouldering remains of several buildings, set ablaze by hooded youths during protests against the package of pay, pension and job cuts adopted by parliament just after midnight, on Monday morning, after 10 hours of debate.
Police said 150 shops were looted in the capital and 48 buildings set ablaze. Some 100 people – including 68 police – were wounded and 130 detained, a police official said on Monday.
There was also violence in cities across the country, including Thessaloniki and the islands of Corfu and Crete.
Athenians were shocked at the burnt buildings that included the neoclassical home to the Attikon cinema dating from 1870.
"We are all very angry with these measures but this is not the way out," said Dimitris Hatzichristos, 30, a public sector worker surveying the debris.
Many citizens believe their living standards are collapsing already and the new measures will deepen their misery.
"Enough is enough!" said 89-year-old Manolis Glezos, one of country’s most famous leftists. "They have no idea what an uprising by the Greek people means. And the Greek people, regardless of ideology, have risen."
Glezos is a national hero for sneaking up the Acropolis at night in 1941 and tearing down a Nazi flag from under the noses of the German occupiers, raising the morale of Athens residents.
http://www.athensnews.gr/portal/1/53270
Greek Parliament Passes Latest Austerity Vote
From Zero Hedge:
The Greek parliament just passed the latest proposed austerity plan with a majority voting Yes. Judging by the reaction of the EURUSD, which experienced a modest 40 pip short covering squeeze in the last few minutes, one would imagine that today's Greek vote outcome is surprising. It isn't: after all, all Greece has done is promise to do something it won't do in hope it can get another bailout package, this time amounting to €210 billion (of which its people will pocket a de minimis 19%). As we said earlier: "The only real questions are i) what the Greek population may do in response to this latest selling out of a population "led" by an unelected banker, which if history is any precedent, the answer is not much, and ii) how Germany will subvert this latest event, and put the bail [sic] back in Greece's court once again." Sure enough, to paraphrase what we said before, the question now is what the popular Greek response will be having learned its politicians sold it out yet again, which will likely be nothing much, as it is 1 am local time, and as everyone knows revolutions in heavily socialist countries only start between 9 am and 5 pm, with a 2 hour break for siesta. More importantly, keep a close eye on headlines out of Germany. That is all that matters.
http://www.zerohedge.com/news/greek-parliament-passes-latest-austerity-vote
The Greek parliament just passed the latest proposed austerity plan with a majority voting Yes. Judging by the reaction of the EURUSD, which experienced a modest 40 pip short covering squeeze in the last few minutes, one would imagine that today's Greek vote outcome is surprising. It isn't: after all, all Greece has done is promise to do something it won't do in hope it can get another bailout package, this time amounting to €210 billion (of which its people will pocket a de minimis 19%). As we said earlier: "The only real questions are i) what the Greek population may do in response to this latest selling out of a population "led" by an unelected banker, which if history is any precedent, the answer is not much, and ii) how Germany will subvert this latest event, and put the bail [sic] back in Greece's court once again." Sure enough, to paraphrase what we said before, the question now is what the popular Greek response will be having learned its politicians sold it out yet again, which will likely be nothing much, as it is 1 am local time, and as everyone knows revolutions in heavily socialist countries only start between 9 am and 5 pm, with a 2 hour break for siesta. More importantly, keep a close eye on headlines out of Germany. That is all that matters.
http://www.zerohedge.com/news/greek-parliament-passes-latest-austerity-vote
Sunday, February 12, 2012
"Trust in the Lord and do good; dwell in his lands and enjoy safe pastures. Take delight in the Lord, and he will give you the fulfillment of your heart. Commit your ways to the Lord; trust in him and he will make your righteous efforts shine like the dawn, and your vindication like the sun. Be still before the Lord and wait patiently for him; do not worry when people succeed in their evil ways, when they carry out their wicked schemes."
Psalm 37:3-7
아직 한창 일하실 나이에 이번 주에 소천하신 최선생님의 명복을 빈다. 한국 최고의 대학을 나와 누릴 수 있는 기득권을 포기한 채 소외된 사람들의 친구가 되라는 기독교의 가르침과 대학생 친구를 절실히 원했던 고 전태일씨의 육필일기에 영향을 받아 노동 현장에 뛰어들어 두 차례나 옥고를 치르는 등 노동운동가로서 인생의 반을 보내셨고, 대부분의 노동운동가들이 정치에 입문하는 데 비해 경제적 부가가치를 구체적으로 생산하는 분야에 기여하고 싶어 첨단소재 전문 중소기업에서 전문 경영인으로서 중국시장을 개척하면서 인생의 반을 보내신 최선생님의 인생 여정은 후배들에게 시사하는 바가 크다. 우리 주위에 좋은 환경에서 좋은 교육을 받고 좋은 직장에서 본인과 가족을 위해 성실히 일하시는 분들은 많이 보지만 가족들의 희생을 감수하면서까지 사회 정의를 생각하고 나라와 사회를 위한 뜻있는 구체적인 일에 헌신하시는 분들은 그리 많지 않은 현실을 생각할 때 더욱 그러하다.
Psalm 37:3-7
아직 한창 일하실 나이에 이번 주에 소천하신 최선생님의 명복을 빈다. 한국 최고의 대학을 나와 누릴 수 있는 기득권을 포기한 채 소외된 사람들의 친구가 되라는 기독교의 가르침과 대학생 친구를 절실히 원했던 고 전태일씨의 육필일기에 영향을 받아 노동 현장에 뛰어들어 두 차례나 옥고를 치르는 등 노동운동가로서 인생의 반을 보내셨고, 대부분의 노동운동가들이 정치에 입문하는 데 비해 경제적 부가가치를 구체적으로 생산하는 분야에 기여하고 싶어 첨단소재 전문 중소기업에서 전문 경영인으로서 중국시장을 개척하면서 인생의 반을 보내신 최선생님의 인생 여정은 후배들에게 시사하는 바가 크다. 우리 주위에 좋은 환경에서 좋은 교육을 받고 좋은 직장에서 본인과 가족을 위해 성실히 일하시는 분들은 많이 보지만 가족들의 희생을 감수하면서까지 사회 정의를 생각하고 나라와 사회를 위한 뜻있는 구체적인 일에 헌신하시는 분들은 그리 많지 않은 현실을 생각할 때 더욱 그러하다.
중국 시장을 어떻게 볼 것인가
제 블로그를 방문해 주시는 독자 분들은 중국의 급속한 성장은 미국과의 딜이 있었기 때문에 가능했다는 것을 아실 것이다.(덕분에 중국은 역사상 유래가 없는 trade imbalance를 유지해 왔다.)
중국 시장에 대해 관심을 가지고 지켜보아야 할 여러 가지 거시적인 요소들이 있지만 미국의 정책들, 중국의 재정정책, 중국의 부동산 거품이 언제까지 지속될 것인가 등등이 포함된다. 예를 들어 미국은 2014년까지 돈 찍어 내겠다고 (소위 Fed의 QE 정책) 이미 표명을 했고 이러한 정책은 달러의 debase화가 서서히 진행되고 있고, 개발도상국가에 인플레이션을 계속 수출한다는 것을 의미한다. 또한 이번 주에 중국은 돈을 풀지 않겠다고 한 반면 유럽은 계속 돈을 찍어낼 모양이다. 글로벌 시장이 중앙은행의 정책들로 인해 왜곡되고 있기 때문에 이들 정책 방향에 따른 시나리오를 수립하는 것이 필요하다.
물론 소위 smart money의 흐름도 지켜보아야 할 것이다. 중국은 investment-led growth를 해 왔다는 것은 주지의 사실이다. 서방 언론들이 중국의 cool-down을 보도하기 시작했다는 것은 이미 smart money들이 싱가폴 (이들이 park되어 있는 기지로서의 역할을 하고 있다) 등지로 빠져나갔다는 것을 의미할 지도 모른다.
중국의 발전 경로를 보면서 한국의 초기 산업화 시기와 유사한 점이 많음을 발견하셨을 것이다. 중국의 power elite들은 이미 일본의 산업발전 경로와 Plaza Accord 이후에 일본이 어떤 길을 겪어야 했는지를 잘 알고 있는 듯 하다. 따라서 쉽게 서방국가들의 정책에 휘둘리지 않을 것으로 보인다.
내가 영어로 쓴 몇몇 포스팅에서 언급했듯이 공산주의의 실체에 대해 환상을 가지지 말아야 한다는 것이다. 중국의 모든 정책기조가 과연 대다수의 국민의 이익에 우선순위를 두고 있느냐는 것이다. 중국의 Communist Party가 스스로 변화할 것인지 외부에서 변화를 강요당할 때까지 변화하지 않을 것인지는 아직 미지수이다.
글로벌 부채 싸이클이 수학적으로 한계점에 도달하고 있지만 그 과정은 서서히 진행되고 있고 이 가운데에서도 사업기회는 많기 때문에 이를 잘 발굴해 나가는 것이 필요하다.
다국적 기업들이 이미 중국으로 옮겨갔고 중국이 제조 인프라와 suppliers를 구축했기 때문에 제조산업이 쉽게 사그라들지는 않을 것으로 보인다. 그러나 중국의 급속한 경제성장에는 제동이 걸릴 것이고 시간이 걸리겠지만 일본이나 미국의 예에서도 알 수 있듯이 결국 거품은 빠질 것이고 글로벌 비지니스 싸이클의 영향을 받아 painful한 조정을 거칠 것으로 보인다.
중국이 선진국에로의 생산 전진기지로서의 마력을 잃을 때 과연 중국의 내수시장이 이를 대체할 것인가에 대해서는 부정적이다. 중국의 급속한 성장과정에서 부를 축적한 소수들의 구매능력은 매력적일 테지만 중국 중산층의 구매력이 선진국의 구매력을 대체할 만큼 확대되기를 기대하기는 어렵다고 본다.
영어로 쓴 포스팅들에서 여러 번 강조했지만 큰 그림을 파악하고 5년, 10년 후를 내다봐야 할 것이다. 삼성의 이건희 회장이 최근의 한 인터뷰에서 삼성은 어떠한 상황에서도 수익을 낼 수 있다고 자신감을 피력한 것도, 또 삼성이 왜 의료기기, 제약산업에 뛰어들고 있는 것도 이미 큰 그림을 이해하고 이를 바탕으로 시나리오를 세웠기 때문으로 보인다. 자금력과 필요한 인재를 두루 갖춘 대기업과는 달리 중소기업은 여러 가지 도전에 더욱 잘 대처해 나가야 한다.
수출 위주의 성장을 걸어온 한국도 내수시장의 확대를 단기간에 기대하기는 어려운 만큼 중국 시장의 비중이 큰 게 사실이다. 그러나 중국 시장뿐만 아닌 다른 나라와도 다각화를 꾀하는 것이 필요할 지 모른다. 한국은 특히 장수하는 하이테크 중소기업이 매우 드물기 때문에 어려운 여건 속에서도 깊이 넓게 읽고 보는 역량을 키워 단기적인 성공뿐만 아니라 지속적인 성장을 이룩해 가는 기업을 키우는 것이 한국 사회를 위한 길이기도 하기 때문이다
중국 시장에 대해 관심을 가지고 지켜보아야 할 여러 가지 거시적인 요소들이 있지만 미국의 정책들, 중국의 재정정책, 중국의 부동산 거품이 언제까지 지속될 것인가 등등이 포함된다. 예를 들어 미국은 2014년까지 돈 찍어 내겠다고 (소위 Fed의 QE 정책) 이미 표명을 했고 이러한 정책은 달러의 debase화가 서서히 진행되고 있고, 개발도상국가에 인플레이션을 계속 수출한다는 것을 의미한다. 또한 이번 주에 중국은 돈을 풀지 않겠다고 한 반면 유럽은 계속 돈을 찍어낼 모양이다. 글로벌 시장이 중앙은행의 정책들로 인해 왜곡되고 있기 때문에 이들 정책 방향에 따른 시나리오를 수립하는 것이 필요하다.
물론 소위 smart money의 흐름도 지켜보아야 할 것이다. 중국은 investment-led growth를 해 왔다는 것은 주지의 사실이다. 서방 언론들이 중국의 cool-down을 보도하기 시작했다는 것은 이미 smart money들이 싱가폴 (이들이 park되어 있는 기지로서의 역할을 하고 있다) 등지로 빠져나갔다는 것을 의미할 지도 모른다.
중국의 발전 경로를 보면서 한국의 초기 산업화 시기와 유사한 점이 많음을 발견하셨을 것이다. 중국의 power elite들은 이미 일본의 산업발전 경로와 Plaza Accord 이후에 일본이 어떤 길을 겪어야 했는지를 잘 알고 있는 듯 하다. 따라서 쉽게 서방국가들의 정책에 휘둘리지 않을 것으로 보인다.
내가 영어로 쓴 몇몇 포스팅에서 언급했듯이 공산주의의 실체에 대해 환상을 가지지 말아야 한다는 것이다. 중국의 모든 정책기조가 과연 대다수의 국민의 이익에 우선순위를 두고 있느냐는 것이다. 중국의 Communist Party가 스스로 변화할 것인지 외부에서 변화를 강요당할 때까지 변화하지 않을 것인지는 아직 미지수이다.
글로벌 부채 싸이클이 수학적으로 한계점에 도달하고 있지만 그 과정은 서서히 진행되고 있고 이 가운데에서도 사업기회는 많기 때문에 이를 잘 발굴해 나가는 것이 필요하다.
다국적 기업들이 이미 중국으로 옮겨갔고 중국이 제조 인프라와 suppliers를 구축했기 때문에 제조산업이 쉽게 사그라들지는 않을 것으로 보인다. 그러나 중국의 급속한 경제성장에는 제동이 걸릴 것이고 시간이 걸리겠지만 일본이나 미국의 예에서도 알 수 있듯이 결국 거품은 빠질 것이고 글로벌 비지니스 싸이클의 영향을 받아 painful한 조정을 거칠 것으로 보인다.
중국이 선진국에로의 생산 전진기지로서의 마력을 잃을 때 과연 중국의 내수시장이 이를 대체할 것인가에 대해서는 부정적이다. 중국의 급속한 성장과정에서 부를 축적한 소수들의 구매능력은 매력적일 테지만 중국 중산층의 구매력이 선진국의 구매력을 대체할 만큼 확대되기를 기대하기는 어렵다고 본다.
영어로 쓴 포스팅들에서 여러 번 강조했지만 큰 그림을 파악하고 5년, 10년 후를 내다봐야 할 것이다. 삼성의 이건희 회장이 최근의 한 인터뷰에서 삼성은 어떠한 상황에서도 수익을 낼 수 있다고 자신감을 피력한 것도, 또 삼성이 왜 의료기기, 제약산업에 뛰어들고 있는 것도 이미 큰 그림을 이해하고 이를 바탕으로 시나리오를 세웠기 때문으로 보인다. 자금력과 필요한 인재를 두루 갖춘 대기업과는 달리 중소기업은 여러 가지 도전에 더욱 잘 대처해 나가야 한다.
수출 위주의 성장을 걸어온 한국도 내수시장의 확대를 단기간에 기대하기는 어려운 만큼 중국 시장의 비중이 큰 게 사실이다. 그러나 중국 시장뿐만 아닌 다른 나라와도 다각화를 꾀하는 것이 필요할 지 모른다. 한국은 특히 장수하는 하이테크 중소기업이 매우 드물기 때문에 어려운 여건 속에서도 깊이 넓게 읽고 보는 역량을 키워 단기적인 성공뿐만 아니라 지속적인 성장을 이룩해 가는 기업을 키우는 것이 한국 사회를 위한 길이기도 하기 때문이다
Michael Pettis: When Will China Emerge from the Global Crisis
Michaebl Pettis’ site has been blocked from the U.S. and Korea (I don’t know about other countries). The arguments made by Wang Lan and Guo Yuhua reflect some of the key points I’m trying to get across on this blog in the Korean context.
From Mish’s Global Economic Trend Analysis:
Caixin, one of my favorite magazines, has an interview with Liu Mingkang, former China Banking Regulation Commission chairman. In it Liu says: I've said in the past, that this economic crisis will spread from the United States to Europe and finally land in Asia. Now we can see that it's already begun influencing Asia.
In 2008 and 2009 I argued that the crisis we were undergoing would affect every major economy in the world, but not necessarily at the same pace. I suggested that the US typically is quick to adjust and, given the pace of deleveraging that was already taking place, I expected that it would be the first major economy out of the crisis, probably in the next two to three years, as private debt levels continue to decline and public debt growth slows.
By now I think the prediction that the US will be among the first and China among the last to escape the crisis no longer seems as eccentric. Others are making similar predictions. There is growing awareness that China has not yet addressed the changes forced upon it by the global crisis, and will have to do so soon. It has certainly become easier to see how the crisis has spread, as Liu points out, first from the US and then to Europe and now to Asia.
It is important to note that it is not just Liu who is thinking along these lines. There were for example two other interesting articles last week in Caixin which I think are useful in understanding China. The first article, by Wang Lan, addresses the problem of State-Owned-Enterprises (SOEs) in China.
In Stifling the Nation's Vitality Wang addresses one consequence of state investment.
The vitality of the Chinese economy is being stifled by SOEs, especially central-level, or top, SOEs, and this is borne out by research. In 2010, the capital of 102 central-level SOEs was equivalent to 61.4 percent of GDP, and their earnings equaled 42.2 percent of GDP.
The second national economic census taken in 2008 reported profits of nearly 900 billion yuan by finance industry central-level SOEs. Banks accounted for 64 percent of that profit.
These gargantuan SOEs have not only failed to lead us toward a new stage of development, but they have actually inhibited the vitality of the Chinese economy by distorting resource allocation.
Wang recommends that Beijing begin a privatization process to wean SOEs from their addiction to excessively cheap capital, monopoly power, and distorted governance. This, he says, will force the SOEs to address and resolve their role in wasting capital, stifling innovation, and concentrating wealth. It will also allow China to grow in a much healthier and balanced way.
I have always thought that the least painful way for China to rebalance its economy requires that it radically redistribute income and wealth away from the state sector and to the household sector. There are many ways this can happen, some better and some worse, but privatizing SOEs and using the proceeds to clean up the banks (whose Non-Perfgorming-Loans are a future claim on households), to shore up the social safety net, and to permit SME’s more scope in which to compete is, in my opinion, the most efficient ways to do so. It would also weaken sectors that are able to restrain change in the economy.
Returning to the System
For many years we were told that privatization was pretty much out of the question in China. I disagree, and have argued often that within two or three years the constraints imposed by the current growth model will ensure that policymakers and their advisors in Beijing will be discussing privatization much more actively.
This discussion actually ties into the second Caixin article, by Tsinghua University sociology professor Guo Yuhua China: A Country Where No One is Secure.
Guo starts by referring to a deep malaise in the country:
What is the most common feeling in China today? I think many people would say disappointment. This feeling comes from the insufficient improvement in their lives that people are achieving amid rapid economic growth. It also comes from the contrast between the degree to which individual social status is rising and the idea of the "rise of a great and powerful nation."
Guo asks for a more robust social system in which the benefits of economic growth are not so heavily skewed towards a political elite and in which members of the various strata below the elite have increased opportunities of participating in the economic process:
Power is becoming too formidable and cruel. It is out of control, and without limits. It has kidnapped society and strangled reform. Facing this, finding a solution is a matter of vital importance. In a situation where special interest groups have choked off the possibility of various types of progress, building a just society and enacting reform is difficult. Moreover, there is not a ready-made civil society waiting to settle into the void.
Civil society is produced by the participation of citizens. Extrication from stagnation and the restoration of social vitality can only come from the start of civil consciousness and civil action. Only by empowering society and enlightening citizens can the strength to reform be developed.
This is becoming a pretty contentious debate. Over the past several months, in fact, we have seen a noticeable surge in articles and reports like this one – often by very prominent academics and policy advisors – criticizing the power of special interests in China. Their main concern seems to be over the constraints these special interests impose on further Chinese development, with the entrenched interests that have benefited over the last decade or two having become so powerful that they are making it increasingly difficult for China to adjust.
I apologize for the rather abstract and dry description in this and the three previous paragraphs of what is actually a gripping and very interesting topic, but for perhaps obvious reasons this is something about which I am reluctant to say too much. Still, anyone trying to predict China’s economic outlook for the next few years should be very aware of this fierce debate.
http://globaleconomicanalysis.blogspot.com/2012/02/suspended-michael-pettis-china.html?x#echocomments
From Mish’s Global Economic Trend Analysis:
Caixin, one of my favorite magazines, has an interview with Liu Mingkang, former China Banking Regulation Commission chairman. In it Liu says: I've said in the past, that this economic crisis will spread from the United States to Europe and finally land in Asia. Now we can see that it's already begun influencing Asia.
In 2008 and 2009 I argued that the crisis we were undergoing would affect every major economy in the world, but not necessarily at the same pace. I suggested that the US typically is quick to adjust and, given the pace of deleveraging that was already taking place, I expected that it would be the first major economy out of the crisis, probably in the next two to three years, as private debt levels continue to decline and public debt growth slows.
By now I think the prediction that the US will be among the first and China among the last to escape the crisis no longer seems as eccentric. Others are making similar predictions. There is growing awareness that China has not yet addressed the changes forced upon it by the global crisis, and will have to do so soon. It has certainly become easier to see how the crisis has spread, as Liu points out, first from the US and then to Europe and now to Asia.
It is important to note that it is not just Liu who is thinking along these lines. There were for example two other interesting articles last week in Caixin which I think are useful in understanding China. The first article, by Wang Lan, addresses the problem of State-Owned-Enterprises (SOEs) in China.
In Stifling the Nation's Vitality Wang addresses one consequence of state investment.
The vitality of the Chinese economy is being stifled by SOEs, especially central-level, or top, SOEs, and this is borne out by research. In 2010, the capital of 102 central-level SOEs was equivalent to 61.4 percent of GDP, and their earnings equaled 42.2 percent of GDP.
The second national economic census taken in 2008 reported profits of nearly 900 billion yuan by finance industry central-level SOEs. Banks accounted for 64 percent of that profit.
These gargantuan SOEs have not only failed to lead us toward a new stage of development, but they have actually inhibited the vitality of the Chinese economy by distorting resource allocation.
Wang recommends that Beijing begin a privatization process to wean SOEs from their addiction to excessively cheap capital, monopoly power, and distorted governance. This, he says, will force the SOEs to address and resolve their role in wasting capital, stifling innovation, and concentrating wealth. It will also allow China to grow in a much healthier and balanced way.
I have always thought that the least painful way for China to rebalance its economy requires that it radically redistribute income and wealth away from the state sector and to the household sector. There are many ways this can happen, some better and some worse, but privatizing SOEs and using the proceeds to clean up the banks (whose Non-Perfgorming-Loans are a future claim on households), to shore up the social safety net, and to permit SME’s more scope in which to compete is, in my opinion, the most efficient ways to do so. It would also weaken sectors that are able to restrain change in the economy.
Returning to the System
For many years we were told that privatization was pretty much out of the question in China. I disagree, and have argued often that within two or three years the constraints imposed by the current growth model will ensure that policymakers and their advisors in Beijing will be discussing privatization much more actively.
This discussion actually ties into the second Caixin article, by Tsinghua University sociology professor Guo Yuhua China: A Country Where No One is Secure.
Guo starts by referring to a deep malaise in the country:
What is the most common feeling in China today? I think many people would say disappointment. This feeling comes from the insufficient improvement in their lives that people are achieving amid rapid economic growth. It also comes from the contrast between the degree to which individual social status is rising and the idea of the "rise of a great and powerful nation."
Guo asks for a more robust social system in which the benefits of economic growth are not so heavily skewed towards a political elite and in which members of the various strata below the elite have increased opportunities of participating in the economic process:
Power is becoming too formidable and cruel. It is out of control, and without limits. It has kidnapped society and strangled reform. Facing this, finding a solution is a matter of vital importance. In a situation where special interest groups have choked off the possibility of various types of progress, building a just society and enacting reform is difficult. Moreover, there is not a ready-made civil society waiting to settle into the void.
Civil society is produced by the participation of citizens. Extrication from stagnation and the restoration of social vitality can only come from the start of civil consciousness and civil action. Only by empowering society and enlightening citizens can the strength to reform be developed.
This is becoming a pretty contentious debate. Over the past several months, in fact, we have seen a noticeable surge in articles and reports like this one – often by very prominent academics and policy advisors – criticizing the power of special interests in China. Their main concern seems to be over the constraints these special interests impose on further Chinese development, with the entrenched interests that have benefited over the last decade or two having become so powerful that they are making it increasingly difficult for China to adjust.
I apologize for the rather abstract and dry description in this and the three previous paragraphs of what is actually a gripping and very interesting topic, but for perhaps obvious reasons this is something about which I am reluctant to say too much. Still, anyone trying to predict China’s economic outlook for the next few years should be very aware of this fierce debate.
http://globaleconomicanalysis.blogspot.com/2012/02/suspended-michael-pettis-china.html?x#echocomments
Wolf Richter: Japan Inc. Seeks Salvation Overseas
Again, Korea is modeled after Japan. Those who have read my blog know what “Japan Inc.” means. Korea is facing similar problems Japan has to deal with (e.g., wage and currency arbitrage).
From Testosterone Pit
Japanese companies spent $70 billion on acquisitions overseas in 2011—a record. Healthcare was the largest sector, $20.6 billion. Armed with a ferociously strong yen, they’re trying to escape the pressures at home. After the Fukushima disaster, one nuclear power plant after another has been taken off line for maintenance. And they stay off line. Now, only four of the 54 are still operating. Fossil fuel plants cannot keep up with demand during peak periods, and electricity rationing—a Third-World phenomenon—has become part of corporate life. Companies also face a stagnant economy and a dwindling working-age population.
And so they seek their fortunes overseas. For example, Sumitomo Mitsui Financial Group and Sumitomo Corp. are acquiring the aircraft leasing business of bailed-out Royal Bank of Scotland for $7.3 billion. But even smaller companies, including many that had not ventured abroad before, are jumping into the fray. For example, Takara Tomy Group acquired US toymaker RC2, and Toyo Seikan bought US based Stolle Machinery.
In addition, Japanese multinationals are expanding their existing production capacity overseas. On the forefront are the automakers. Mired in stagnation, high costs, and energy challenges at home, they’re now shifting production to plants overseas. Most recently, it was Honda and Nissan with investments in China, Mexico, and, yes, the US to produce cars for local and export markets. And one of them is outright exciting. Read.... Manufacturing Supercars in America.
Electronics makers are also struggling in Japan. Last year was particularly rough: the March 11 earthquake and tsunami, Thailand's historic floods that shut down whole segments of the components industry, the strong yen, a hesitating global economy, and shrinking consumer demand at home. And then, in the fourth quarter, TV sales cratered.
But there are consequences. Shifting investment and production to locations overseas contributed to the first annual trade deficit in more than 30 years—just when Japan can least afford it: national debt will surpass one quadrillion yen by March 2013, the end of the next fiscal year, the Ministry of Finance announced in January. About $14 trillion. A breathtaking 240% of GDP. By comparison, Greece’s debt is a paltry 160% of GDP.
The forecast is based on the budget that the cabinet approved on Christmas Eve when it hoped that no one would pay attention, apparently. After excluding two acknowledged accounting shenanigans, the deficit jumps to a horrid ¥54.4 trillion. The government will have to borrow 56.2% of every yen it spends in 2012, a record even for Japan. But the government has an ingenious solution: a miracle. For more on that vertigo-inducing debacle, read... The Endgame: Japan Makes A Move.
The other solution is a consumption tax hike from the current 5% to 8% by April 2014 and to 10% by October 2015. To make it more palatable, government officials have gone on roadshows. The revenues would be used to stabilize the tottering social security system and reinforce the welfare system, they claimed—rather than for corporate subsidies or for the bailout of TEPCO, owner of the Fukushima nuke. But sales taxes hit low-income workers the hardest. And according to recent polls, 79.5% of the Japanese are opposed to them.
Once it starts, it’s never enough. On Saturday, Prime Minister Yoshihiko Noda said that the consumption tax could be raised even beyond the 10% currently proposed. So the trend is clear.
http://www.testosteronepit.com/home/2012/2/6/the-endgame-japan-inc-seeks-salvation-overseas.html
From Testosterone Pit
Japanese companies spent $70 billion on acquisitions overseas in 2011—a record. Healthcare was the largest sector, $20.6 billion. Armed with a ferociously strong yen, they’re trying to escape the pressures at home. After the Fukushima disaster, one nuclear power plant after another has been taken off line for maintenance. And they stay off line. Now, only four of the 54 are still operating. Fossil fuel plants cannot keep up with demand during peak periods, and electricity rationing—a Third-World phenomenon—has become part of corporate life. Companies also face a stagnant economy and a dwindling working-age population.
And so they seek their fortunes overseas. For example, Sumitomo Mitsui Financial Group and Sumitomo Corp. are acquiring the aircraft leasing business of bailed-out Royal Bank of Scotland for $7.3 billion. But even smaller companies, including many that had not ventured abroad before, are jumping into the fray. For example, Takara Tomy Group acquired US toymaker RC2, and Toyo Seikan bought US based Stolle Machinery.
In addition, Japanese multinationals are expanding their existing production capacity overseas. On the forefront are the automakers. Mired in stagnation, high costs, and energy challenges at home, they’re now shifting production to plants overseas. Most recently, it was Honda and Nissan with investments in China, Mexico, and, yes, the US to produce cars for local and export markets. And one of them is outright exciting. Read.... Manufacturing Supercars in America.
Electronics makers are also struggling in Japan. Last year was particularly rough: the March 11 earthquake and tsunami, Thailand's historic floods that shut down whole segments of the components industry, the strong yen, a hesitating global economy, and shrinking consumer demand at home. And then, in the fourth quarter, TV sales cratered.
But there are consequences. Shifting investment and production to locations overseas contributed to the first annual trade deficit in more than 30 years—just when Japan can least afford it: national debt will surpass one quadrillion yen by March 2013, the end of the next fiscal year, the Ministry of Finance announced in January. About $14 trillion. A breathtaking 240% of GDP. By comparison, Greece’s debt is a paltry 160% of GDP.
The forecast is based on the budget that the cabinet approved on Christmas Eve when it hoped that no one would pay attention, apparently. After excluding two acknowledged accounting shenanigans, the deficit jumps to a horrid ¥54.4 trillion. The government will have to borrow 56.2% of every yen it spends in 2012, a record even for Japan. But the government has an ingenious solution: a miracle. For more on that vertigo-inducing debacle, read... The Endgame: Japan Makes A Move.
The other solution is a consumption tax hike from the current 5% to 8% by April 2014 and to 10% by October 2015. To make it more palatable, government officials have gone on roadshows. The revenues would be used to stabilize the tottering social security system and reinforce the welfare system, they claimed—rather than for corporate subsidies or for the bailout of TEPCO, owner of the Fukushima nuke. But sales taxes hit low-income workers the hardest. And according to recent polls, 79.5% of the Japanese are opposed to them.
Once it starts, it’s never enough. On Saturday, Prime Minister Yoshihiko Noda said that the consumption tax could be raised even beyond the 10% currently proposed. So the trend is clear.
http://www.testosteronepit.com/home/2012/2/6/the-endgame-japan-inc-seeks-salvation-overseas.html
Japan Machine Orders Fall 7.1% as Yen Climbs
Again, one has to understand what’s going on in Japan in the larger context, considering many macro factors.
From Bloomberg:
Japan’s machinery orders fell at the fastest pace in three months in December as a faltering global economy and gains by the yen dimmed the outlook for exporters.
Bookings, an indicator of capital spending, decreased 7.1 percent from the previous month, the Cabinet Office said in Tokyo today, after surging 15 percent in November. The median estimate of 29 economists surveyed by Bloomberg News was for a 5 percent decline.
Japan’s exports fell for three straight months through December as European leaders grappled with the debt crisis that is driving the euro region into a recession. Spending may rebound as earthquake reconstruction work kicks in and today’s report showed companies forecasting a 2.3 percent increase in orders this quarter.
Japan’s lower house of parliament on Feb. 3 approved Prime Minister Yoshihiko Noda’s 2.5 trillion yen ($32 billion) recovery package from the earthquake and tsunami, the fourth supplementary budget since the disaster. The government forecast in December that Japan’s economy will grow 2.2 percent in the year starting April after a projected 0.1 percent contraction this fiscal year.
The International Monetary Fund estimates that Japan’s economy will grow 1.7 percent this year, compared with a likely 1.8 percent expansion for the U.S. and an estimated 0.5 percent contraction for the euro area
http://globaleconomicanalysis.blogspot.com/2012/02/japan-machine-orders-drop-71-exports.html
From Bloomberg:
Japan’s machinery orders fell at the fastest pace in three months in December as a faltering global economy and gains by the yen dimmed the outlook for exporters.
Bookings, an indicator of capital spending, decreased 7.1 percent from the previous month, the Cabinet Office said in Tokyo today, after surging 15 percent in November. The median estimate of 29 economists surveyed by Bloomberg News was for a 5 percent decline.
Japan’s exports fell for three straight months through December as European leaders grappled with the debt crisis that is driving the euro region into a recession. Spending may rebound as earthquake reconstruction work kicks in and today’s report showed companies forecasting a 2.3 percent increase in orders this quarter.
Japan’s lower house of parliament on Feb. 3 approved Prime Minister Yoshihiko Noda’s 2.5 trillion yen ($32 billion) recovery package from the earthquake and tsunami, the fourth supplementary budget since the disaster. The government forecast in December that Japan’s economy will grow 2.2 percent in the year starting April after a projected 0.1 percent contraction this fiscal year.
The International Monetary Fund estimates that Japan’s economy will grow 1.7 percent this year, compared with a likely 1.8 percent expansion for the U.S. and an estimated 0.5 percent contraction for the euro area
http://globaleconomicanalysis.blogspot.com/2012/02/japan-machine-orders-drop-71-exports.html
iEconomy: How Apple Distorts the Market
From Zero Hedge:
As rumors of the imminent iPad3 (and FoxConn hacking) spread across the web and a general sense of cult-like euphoria washes away the reality of a considerably weaker earnings picture (and outlook) than even downgraded expectations had prepared for, we present two charts, via JPMorgan, of just how grossly distorted the picture of US economic health (implicitly via US corporate earnings) has become, thanks to Apple. While ignoring Apple as a provider of 'wealth' is akin to Monty Python's "What Have The Romans Ever Done For Us?" comment, we worry that so much 'expectations' burden should fall on the shoulders of a company that relies on constant 'successful' innovation and constant low cost wages (no growth) to merely maintain current growth and earnings while facing constant and massive competitive threats from every side of its business (especially with austerity/recession/credit-constrained Europe as the largest sequential growth driver in the last surprising quarter). While 'Let Them Eat PSI' is the clear message for the Greeks, it would appear the US investor is truly satisfied by its extra large helping of iPad meals, even as 'explicit' job creation in the US via this main driver of US earnings remains de minimus (recognizing of course the peripheral impact of developers into this infrastructure that however do not amount to too much in terms of earnings or GDP as is painfully obvious from these charts). As goes AAPL, so goes the US?
http://www.zerohedge.com/news/ieconomy-demonstrating-how-apple-distorts-market
As rumors of the imminent iPad3 (and FoxConn hacking) spread across the web and a general sense of cult-like euphoria washes away the reality of a considerably weaker earnings picture (and outlook) than even downgraded expectations had prepared for, we present two charts, via JPMorgan, of just how grossly distorted the picture of US economic health (implicitly via US corporate earnings) has become, thanks to Apple. While ignoring Apple as a provider of 'wealth' is akin to Monty Python's "What Have The Romans Ever Done For Us?" comment, we worry that so much 'expectations' burden should fall on the shoulders of a company that relies on constant 'successful' innovation and constant low cost wages (no growth) to merely maintain current growth and earnings while facing constant and massive competitive threats from every side of its business (especially with austerity/recession/credit-constrained Europe as the largest sequential growth driver in the last surprising quarter). While 'Let Them Eat PSI' is the clear message for the Greeks, it would appear the US investor is truly satisfied by its extra large helping of iPad meals, even as 'explicit' job creation in the US via this main driver of US earnings remains de minimus (recognizing of course the peripheral impact of developers into this infrastructure that however do not amount to too much in terms of earnings or GDP as is painfully obvious from these charts). As goes AAPL, so goes the US?
http://www.zerohedge.com/news/ieconomy-demonstrating-how-apple-distorts-market
Thursday, February 9, 2012
Kiss Hopes of Chinese Easing Goodbye: January Inflation in China Soars to Highest Since October
From Zero Hedge:
Yesterday when we discussed the surprising non-cut in the Australia cash rate, we asked "is China re-exporting the lagging US inflation it imported over 2011? " and said that "It means that Chinese inflation continues to be far higher than what is represented... and wonder: did the RBA just catch the PBOC lying about its subdued inflation?" Lastly, we concluded: "Furthermore, the PBOC did 26 billion yuan in repos, meaning it is set to conduct a net liquidity withdrawal for this week according to Credit Agricole. Withdrawing liquidity when the market expects RRR cuts?" Sure enough, as usually happens when assuming sentiment manipulation by a centrally planned powerhouse such as the US, and in far lesser degree these days, China, we were right. The news just out of China is that January inflation soared far beyond expectations, with CPI printing at 4.5% Y/Y, compared to estimates of a decline to 4% from December's 4.1%. This was the highest inflation since October. We will simply repeat our conclusion from yesterday, which while speculation then is now confirmed: "Chinese easing is a long way off... and in a market defined solely by hopes for central bank intervention this is not good." Practically, this means that the PBOC just told the world that no easing will come from China in a long time, and that the Fed and the ECB are alone in reliquifying the market. It also means that one can kiss the Chinese growth dynamo story goodbye, and once the US finally recouples with the rest of the world, the only hope will be a new announcement of QE in March so it hits its maximum efficiency in time for Obama's reelection campaign.
http://www.zerohedge.com/news/kiss-hopes-chinese-easing-goodbye-january-inflation-china-soars-highest-october
Yesterday when we discussed the surprising non-cut in the Australia cash rate, we asked "is China re-exporting the lagging US inflation it imported over 2011? " and said that "It means that Chinese inflation continues to be far higher than what is represented... and wonder: did the RBA just catch the PBOC lying about its subdued inflation?" Lastly, we concluded: "Furthermore, the PBOC did 26 billion yuan in repos, meaning it is set to conduct a net liquidity withdrawal for this week according to Credit Agricole. Withdrawing liquidity when the market expects RRR cuts?" Sure enough, as usually happens when assuming sentiment manipulation by a centrally planned powerhouse such as the US, and in far lesser degree these days, China, we were right. The news just out of China is that January inflation soared far beyond expectations, with CPI printing at 4.5% Y/Y, compared to estimates of a decline to 4% from December's 4.1%. This was the highest inflation since October. We will simply repeat our conclusion from yesterday, which while speculation then is now confirmed: "Chinese easing is a long way off... and in a market defined solely by hopes for central bank intervention this is not good." Practically, this means that the PBOC just told the world that no easing will come from China in a long time, and that the Fed and the ECB are alone in reliquifying the market. It also means that one can kiss the Chinese growth dynamo story goodbye, and once the US finally recouples with the rest of the world, the only hope will be a new announcement of QE in March so it hits its maximum efficiency in time for Obama's reelection campaign.
http://www.zerohedge.com/news/kiss-hopes-chinese-easing-goodbye-january-inflation-china-soars-highest-october
Nomura: The “Alarming Fall” in Chinese Electricity Consumption
Again, one has to understand the bigger picture and macro factors re what’s going on in China.
From Business Insider:
We mentioned this first last night, that data for January showed a shock 7.5% year-over-year fall in Chinese electricity consumption -- the first such fall on record excluding the crisis.
Here's a chart from Nomura's Zhiwei Zhang and Wendy Chang comparing electricity production to industrial production. They call it an "alarming fall."
Speaking of China, here's a great chart from Reuters' Scotty Barber on Germany, and its exports to both America and China.
http://www.businessinsider.com/nomura-on-the-alarming-fall-in-chinese-electricity-consumption-2012-2
From Business Insider:
We mentioned this first last night, that data for January showed a shock 7.5% year-over-year fall in Chinese electricity consumption -- the first such fall on record excluding the crisis.
Here's a chart from Nomura's Zhiwei Zhang and Wendy Chang comparing electricity production to industrial production. They call it an "alarming fall."
Speaking of China, here's a great chart from Reuters' Scotty Barber on Germany, and its exports to both America and China.
http://www.businessinsider.com/nomura-on-the-alarming-fall-in-chinese-electricity-consumption-2012-2
Wednesday, February 8, 2012
Bud Conrad: The Fed Resumes Printing
As noted many times, the Fed’s policy is impacting the lives of ordinary folks around the globe.
From Casey Research:
The problem with printing money and promising to do so for years ahead of time is that the negative consequences of inflation only happen after a delay. As a result, it's difficult to know if a policy has gone too far until years down the road at times. Unfortunately, if confidence in the dollar is lost, the consequences cannot be easily reversed. One problem for the Fed itself is that it holds long-term securities that will lose value if rates rise. The federal government faces an even more serious problem when interest rates rise, as higher rates on its debt mean greater interest payments to service. Due to this federal-government debt burden, the Fed has an incentive to keep rates low, even if the long-term result is higher inflation. However, for now the Fed's statement suggests it sees inflation as "subdued," so it's putting those concerns aside for now.
http://www.caseyresearch.com/articles/fed-resumes-printing?ppref=ZHB420ED0212B
From Casey Research:
The problem with printing money and promising to do so for years ahead of time is that the negative consequences of inflation only happen after a delay. As a result, it's difficult to know if a policy has gone too far until years down the road at times. Unfortunately, if confidence in the dollar is lost, the consequences cannot be easily reversed. One problem for the Fed itself is that it holds long-term securities that will lose value if rates rise. The federal government faces an even more serious problem when interest rates rise, as higher rates on its debt mean greater interest payments to service. Due to this federal-government debt burden, the Fed has an incentive to keep rates low, even if the long-term result is higher inflation. However, for now the Fed's statement suggests it sees inflation as "subdued," so it's putting those concerns aside for now.
http://www.caseyresearch.com/articles/fed-resumes-printing?ppref=ZHB420ED0212B
Country Specific Blog Censorship by Google
Mish의 블로그를 수년째 읽어왔다. 물론 그의 의견에 다 동의하는 것은 아니지만 그가 블로그를 통해 전하려는 메시지의 본질을 이해하고 있고, 그로부터 많이 배웠고 고맙다는 말을 그에게 몇 번 했다. 부인이 많이 아파 생에 대해 어느 정도 통달한 듯한 느낌도 받는다. 구글에 로그인 할 때마다 거의 로그인 중인 불이 켜져 있어 도대체 언제 잠을 자나 싶을 정도이다. 주로 내 블로그에서 그의 블로그로 클릭해서 넘어가는데 다행히 한국에서는 아직 괜찮은 것 같다. Keep the faith, Mish!
From Mish’s blog:
Today I learned my blog is being redirected to another URL name in some countries. This is a new "feature" in Blogger that Google added beginning a few weeks back.
Instead of exposing a single "Blogger" to the world then censoring it to meet the requirements of local governments, Google decided to mirror content into country-specific domains then redirect users from foreign countries to the mirror associated with their country. If that country decides to censor something, it will somehow be noted on any page so the reader knows they're seeing a filtered view.
http://globaleconomicanalysis.blogspot.com/2012/02/country-specific-blog-sensorship-by.html
From Mish’s blog:
Today I learned my blog is being redirected to another URL name in some countries. This is a new "feature" in Blogger that Google added beginning a few weeks back.
Instead of exposing a single "Blogger" to the world then censoring it to meet the requirements of local governments, Google decided to mirror content into country-specific domains then redirect users from foreign countries to the mirror associated with their country. If that country decides to censor something, it will somehow be noted on any page so the reader knows they're seeing a filtered view.
http://globaleconomicanalysis.blogspot.com/2012/02/country-specific-blog-sensorship-by.html
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