Political Fallout Begins: Former Cyprus President Named In Loan Write-Offs Leading To Banking Insolvency

The Cyprus situation teaches us a lot.  It’s appalling to see how things unfold there, making the lives of the most people miserable.  We can see how global forces are threatening Cyprus’ sovereignty.  And yet, as I pointed out many times, global forces are no excuse for policy error and corruption.

One thing I’d like to emphasize is the importance of the rule of law.  It is one of the key foundations of a democracy.  Moreover, the wealth creating activities involves not only skilled labor and technology but the rule of law.

From Zero Hedge:

A few days ago, when news hit that Cyprus has begun investigating who the people were who had managed to pull cash out of nation's insolvent banks, both during the capital control "blackout" period and previously, we asked "how much longer will the rule of law remain in Cyprus once full blown class warfare is unleashed, and the 99% are generously handed the list of the 1% who were "informed" enough to pull their money from the flaming sovereign equivalent of Bernie Madoff, while every other uninsured depositor is facing losses of up to 80%, and soon 100%?" We may get the answer much sooner than expected, as the first iteration of this list: one naming the beneficiaries of millions of loans written off by the now insolvent Cyprus banks and therefore indirectly responsible for the "impairment" of the banks' depositors, was released yesterday by Greece's daily Ethnos newspaper. But what virtually assures substantial political fallout is that among the people listed is Cyprus' former president, George Vassiliou.

And so on. What the common theme here is that the very same Members of Parliament who were so vocal in rejecting the insured depositors' impairment just to save their skins from a public mutiny (but so quick to sacrifice the wealthier citizens and small and medium corporations to a haircut that may be as deposit large as 100%), did everything in their power to avoid a vote on the final bank "resolution" which effectively handed over the country's sovereignty into the hands of the Troika and its liquidators, but not before they themselves were among the key beneficiaries of the impairments on the banking system's asset side.

It is these bad assets and impaired losses, as well as investing money in Greek bonds, and other worthless "assets", that ultimately ended up forcing the restructuring of the bank and the cram up of the liability side up to and including the unsecured loans known as deposits.

Perhaps if the Cypriot public wants to find a scapegoat to its troubles, it should focus its anger not only at the Russian Oligarchs and the Troika, but to those who were most complicit in betraying the public's trust: the same politicians who were elected to protect their citizens and the country's constitution (flagrantly abused as per yesterday's revelations), including the very president of the nation. That is, of course, if the local apathetic population has not been zombified too much to even care about why billions in wealth was just confiscated from it. Because if that is indeed the case, they, and everyone else who just sits idly by and does nothing as the global banking syndicate appropriates ever more middle-class wealth, deserves everything coming their way.

http://www.zerohedge.com/news/2013-03-30/political-fallout-begins-former-cyprus-president-named-loan-write-offs-leading-banki

The Abenomics Farce Continues

As data points in the post below indicate, Japan's monetary policy is not working.  As Japan's inflation rises, the ordinary people suffer.  Japan has monetized its debt without revamping its broken system.  What is responsible for the lack of reform which led to Japan's lost decades?  Its oligarchy system.  Japan Inc. which once made Japan's rapid economic growth possible has turned into a liability.

Korea was modeled after Japan.  It's a matter of degree, yet Korea is emulating Japan's strategy.  While 95% of Japan's debt is internally owned, Korea's debt owned by foreign investors has increased.

From Zero Hedge:

It's not been a great evening so far for the leadership in Japan. We are now six months into the greatest monetary policy bluff of all time and thanks to the sound and fury from Abe (and now his henchmen) the JPY has devalued by an impressive 25%. The goal, of course, to target inflation and combat the dreaded deflation - that Abe himself today said "can take a long time." So how are we doing? Not so great it seems. Just as the US went 4-for-4 today in dismal data so Japan is 3.5-for-4 as the much-watched 'inflation' missed expectations once again with a -1% print (that would be deflation) - the worst level since August 2010; Japanese Industrial Production slumped 11% year-over-year, far in excess of the consensus 5.8% drop (biggest miss since Feb 2009) and the biggest collapse (ex-Fukushima) since October 2009; and to top it all off, Japanese unemployment ticked up higher than expectations to 4.3% - equal worst in 7 months. The one saving grace was a PMI above 50 (but driven by an 18-month high print in input costs and accompanied by a drop in backlogs and slump in employment sub-indices - so not exactly bursting with euphoria). Need moar Abenomics...

The Bold Strategy...


The Results...


Of course, living by the Keynesian easy money credo of "If at first you don't succeed, devalue moarer..." we can look forward to more bold easing down the road.

http://www.zerohedge.com/news/2013-03-28/abenomics-farce-continues

Why European Monetary Policy Is Now Impotent

Another post explaining why the easy mony policies are not working.  Korea has engaged in it and is poised to do more easing.

From Zero Hedge:

For the last year or so, Mario Draghi (the omnipotent head of the ECB) has discussed 'market fragmentation' as a major concern. The reason is clear - his easy money policies are entirely ineffectual in a monetary union when his actions do not 'leak' out to the real economy. Nowhere is this fragmentation more obvious than in the inexorable rise in peripheral lending rates (to small business) compared to the drop (over the last 18 months) in the core. Simply put, whether it is demand (balance sheet recessionary debt minimization) or supply (banks hoarding for safety), whatever the punch ladeled from the ECB's bowl, it is not helping the most needy economies. Of course, that was never really the point anyway - as we have pointed out many times; the actions of the ECB are (just as with the Fed) to enable the banking system to live long enough to somehow emerge from the black hole of loan losses and portfolio destruction that they heaped upon themselves. This chart is yet another example of proof that monetary policy is entirely ineffectual in the new normal - and yet the central planners push for moar...



http://www.zerohedge.com/news/2013-03-29/why-european-monetary-policy-now-impotent

Youth Unemployment Rates: US, Germany, Italy, Spain, France, Greece

From Mish's blog:

Here are some unemployment charts I put together via Ycharts.

Youth Unemployment Rates US vs. Europe



Spain and Greece have youth unemployment over 50%. Germany, at 7.9%, has the only youth unemployment rate under 10%. US has second-best 16.8%, nothing to brag about except in relative terms.

Unemployment Rates US vs. Europe



Once again, notice the tight clustering at the start of the recession vs. the huge spreads today. As with youth unemployment, Spain and Greece lead the pack with overall unemployment rates above 25%.

http://globaleconomicanalysis.blogspot.kr/2013/03/youth-unemployment-rates-us-germany.html

"I have called you to righteousness; I will take hold of your hand. I will keep you and will make you to be a covenant for the people and a light for the world: to open eyes that are blind, to free captives from their bindings, and to release the afflicted from their darkness."
Isaiah 42:6-7

"And my bible tells me that Good Friday comes before Easter. Before the crown we wear, there is the cross that we must bear. Let us bear it--bear it for truth, bear it for justice, and bear it for peace. Let us go out this morning with that determination. And I have not lost faith. I'm not in despair, because I know that there is a moral order. I haven't lost faith, because the arc of the moral universe is long, but it bends toward justice."
Martin Luther King

Happy Easter!

Have a happy and joyous Easter.

Korea Goes All-Out To Boost Economy; Exports, Investment and Consumption Remain Weak

We have seen what a debt-fuelled stimulus package has done to other countries' economies including the U.S. and Japan.  It hasn't worked.  Despite this fact, Korea seems to be poised to do the same.  We are amazed the so-called financial pudits argue Korea needs more stimulus measures.  The bond bubble may be the last bubble to blow.  We are stealing money from our next generation.

From Yonhap:

South Korea's sharp downgrade of its growth outlook for this year and the pursuit of an additional budget mirror the government's somber reality check on how serious the economic conditions for the country have become over the past months, experts said Thursday.

   The finance ministry lowered its growth outlook for this year from 3 percent to 2.3 percent. It also vowed to pursue an additional budget aimed at stimulating job creation and boosting the overall economic growth.

   The downgrade is seen as reflecting the current dire economic conditions confronting South Korea, Asia's fourth-largest economy.

   South Korea's gross domestic product grew less than 1 percent on-quarter for the seventh straight quarter, which is the longest streak of such low growth rates. The economy grew 2 percent in 2012, the slowest gain in three years.

   Exports, investment and consumption all remain weak.

   Exports dropped 8.6 percent on-year in February, a turnaround from the previous month's double-digit growth. In January, the country's industrial output also contracted for the first time in five months.

   Businesses remain reluctant to hire and invest amid prolonged uncertainty over market and policy directions of the government.

   Facility investment plunged 13.6 percent on-year in January, marking the ninth straight month of contractions. Retail sales also dropped 2 percent last month from a month earlier.

   The ministry makes no secret about its pessimistic views of the current situations, saying that there are few signs that investment and consumption will bounce back any time soon. It, instead, promised to make all-out efforts to turn the economy around.

   For starters, the ministry said that the government will front-load more than 60 percent of its existing fiscal spending plans during the first half. It will also unveil separate measures to stimulate investment and domestic consumption by the end of May.

   As for the prolonged slumping real estate market, the ministry said that it will announce a comprehensive set of measures to thaw the frozen transactions. This is in response to worries that the slumping real estate market is weighing on investment and consumption, and eventually hurting the overall economic growth.

   What is drawing more attention is that the government is seeking to draw up a supplementary budget, which would mark the first time in four years that it's come up with one. In 2009, it came up with 28.4 trillion won in extra spending in the middle of the global financial crisis.

   The government did not unveil the scale of the supplementary budget, saying that the final decision will be made in April.

   However, given that the country's tax revenue shortfall will reach 6 trillion won for this year, the amount may well go beyond 6 trillion won. Some expect that the government will come up with a budget exceeding 10 trillion won.

  Concerns are being raised that additional spending could hurt the country's fiscal health, which the government has maintained even in the face of the prolonged global financial crisis.

http://english.yonhapnews.co.kr/national/2013/03/28/97/0302000000AEN20130328006900320F.HTML

Currency Wars (환율 전쟁)

From Jesse's Cafe:

I have concluded that it is almost impossible to understand what is happening in the precious metal markets without understanding that the world is in a currency war,  And this includes how the currency war is being conducted, and why.

The US dollar reserve currency arrangement to support world trade was created in the waning days of World War II, with the demise of the gold standard and the ascendancy of the Pax Americana.  It is called the Bretton Woods System.  It evolved quite a bit since then, especially when Nixon closed the gold window in 1971 and declared the US dollar a purely fiat currency.  Since then the world has gotten by on what some have called Bretton Woods II.

After sixty years, it is fairly clear that the dollar trading regime has had a good run, but has now outlasted its effective life span. The nail in the coffin is the economic instability in the US, and the need for the Federal Reserve to go to ZIRP and print buckets of money to support their domestic policy needs.

While this makes sense for the US, it does not make sense for the rest of the world. This is similar to the reason why the Eurozone is failing. The ECB conducts monetary policy to suit the needs of a few core countries, and the periphery suffers. And that monetary policy is covering up the rot at the core I might add.

The situation is similar with the dollar and world trade. The Anglo-American Banking cartel grew up around the US dollar reign, and is still very powerful, being supported by most of the systemically important international banks.

But all things come to an end, and the world is looking for a better solution to the world as it is now, not how it was sixty years ago. But change comes slowly and with difficulty.

I will be very surprised if gold and silver do not play a role in what is to come.

I did remark on this and also on bitcoin intraday. You can read it here.

Great changes are occurring, that cut across political and economic lines.  And these are manifesting as a 'currency war' that is much broader than a mere race to devalue and manipulate national currencies to support industrial trade policies.  Always keep that in mind.

http://jessescrossroadscafe.blogspot.kr/2013/03/gold-daily-and-silver-weekly-charts_27.html

So Who Knew? In February Cyprus Deposit Outflows Soared To A Three Year High

From Zero Hedge:

The decision to crush Cypriot depositors (first all of them, then just the uninsured ones) came in March, without any prior hints of the carnage that was about to be unleashed upon Cypriot bank unsecured liabilities. Or so the media narrative goes, because the last thing needed is to give skeptics any indication the "ad hoc" Troika plan was not so ad hoc after all, and some individuals - notably the whale depositors - were warned in advance, sparing them the indignity of pulling a few billion at €300 per day. Alas, as just released central bank data shows, there may be cracks in the narrative because in February, at a time when the Eurozone was supposedly getting better every day and the Dow Jones was on the verge of its all time high, Cypriot depositors pulled the largest amount of cash in over three years.



Add this curious finding to the to do list for the 'task force' investigating who not only circumvented the capital controls, but had advance knowledge it was coming. Surely they will get right on top of that.

Source: Goldman

http://www.zerohedge.com/news/2013-03-28/so-who-knew-february-cyprus-deposit-outflows-soared-three-year-high

Wolf Richter: The Stunning Differences in European Costs of Labor: Or Why “Competitiveness” Is A Beggar-Thy-Neighbor Strategy

From Testosterone Pit:

The ominous term, “competitiveness” has been bandied about as the real issue, the one that causes European countries, in particular some of those stuck in the Eurozone, to sink ever deeper into their fiasco. To fix that issue, “structural reforms,” or austerity, have been invoked regardless of how much blood might stain the streets. And a core element of these structural reforms is bringing down the cost of labor.

In Europe’s private-sector, the cost of labor—gross earnings plus employer-paid social contributions, pensions, disability, etc.—is marked by stunning differences. At the bottom of the spectrum is Bulgaria: the average private sector employee costs a company €3.70 per hour worked; in manufacturing even less, €2.90. Romania is right there at €4.50 and €3.80 respectively. Near the top of the spectrum is Belgium at €40.40 and €41.90 per hour worked. But no one beats the Swedes: €41.90 and €43.80. Per hour worked, the average Swedish employee costs a manufacturer over 15 times more than an employee in Bulgaria.

So, relocate all manufacturing plants from Sweden to Bulgaria? Or Romania? Even Greece would be a great place. The cost of labor there is only €14.70 per hour worked, about a third of what it costs up north. It’s the only country in the EU where the average cost of labor actually fell in 2012—and by 6.8%!

But in Spain, which struggles with a similar unemployment problem, cost of labor rose by 1.1% to €20.90, in Italy by 1.7% to €21.90, in Germany by 2.8% to €31, in France by 1.9% to €34.90. The biggest gainers in percentage terms were at the bottom: in Bulgaria, cost of labor rose 6.4%, a whopping €0.24 per hour! In euro terms, the biggest gainers were at the top: cost of labor in Sweden rose 3.5%, or about €1.50 per hour! The cost of labor at the top is running away.

Based on data from the German statistical agency Destatis, this is what it looked like in 2012:


But if enough Swedish companies—and not just manufacturers but all kinds of companies—packed up their machines and robots and cubicles and headed south, unemployment would rise in Sweden. Once unemployment pushes deeply into the double digits, executives will defend their delocalization decisions by lamenting the cost of labor, and soon the government will be talking feverishly about “structural reforms,” without meaning it, and that’s where France is right now. But eventually the situation might deteriorate and pressure wages and associated costs. This has happened in Greece. And they’re all competing with the US, China, Mexico, Bangladesh.... Because competitiveness is not just a beggar-thy-neighbor system.

Alas, the rejuvenated “sick man of Europe,” Germany, isn’t surviving just by cutting its cost of labor. At €31 per hour, it was 32% higher than the EU average, though 11% lower than in France. In manufacturing, it was even more striking: Germany’s cost of labor of €35.20 per hour was 47% higher than the EU average, but still 3% lower than in France. Productivity, infrastructure, transportation costs, corruption, training and education, etc. all figure prominently into this equation. Cost of labor is not the only factor.

Yet German workers have been hit hard: between 2001 and 2010, the cost of labor grew 16%, less than the rate of inflation, while in France, for example, it grew 35%, and in southern countries it jumped far more. In 2011 and 2012, Germany’s cost of labor began to rise with renewed vigor, up 5.9%, but so did France’s at 5.4%.

Much of this money was absorbed by the costs of social contributions, pensions, etc. And they can be breathtaking. The graph below shows these additional costs to the employer per €100 in gross wages paid.

So an average worker in Sweden who earns €100 for a certain number of hours in gross wages costs his employer an additional €51, for a total cost of €151. A Maltese worker, who’d work about three times as long for the same pay, would cost the employer only an additional €10, so €110. And a Bulgarian worker who’d work about 15 times as long for the same pay would cost an additional €18, so €118. This is a conundrum looking for a solution.

Over time, “competitiveness” hollows out the middle and lower classes in some “rich” countries—this has been happening in the US and Germany for years—balloon the middle class in other countries, and make the top in all countries immensely rich. For many people, it’s nothing to look forward to.

Italy has Beppe Grillo, but with European governments reeling from self-inflicted crises, and the euro debacle descending into a tragi-comic farce, one wonders who the real clowns are – especially here in Spain, where ministers gorge themselves on the public purse, leaving behind a trail of evidence so obvious that even the mainstream media can’t ignore it. Read.... Will the Real Clowns Please Stand Up?

http://www.testosteronepit.com/home/2013/3/27/the-stunning-differences-in-european-costs-of-labor-or-why-c.html

Marc Faber: "I Am Sure Governments Will One Day Take Away 20-30% Of My Wealth"

From Zero Hedge:

We cautioned readers in 2011 that in a broke world in which the ridiculously named "muddle-through" has miserably failed, a global wealth tax seeking to expropriate some 30% of all financial assets is coming. Few took it seriously, and why should they - after all the market has been blissfully rising before and ever since then, which implies everything was ok, right? Wrong, as those who are lining up right now in the Cyprus late of night not to buy a shiny new iTrinket, but to access a measly €300 of their own money would promptly admit. Naturally, if more of our Cypriot readers had paid attention, they would have far more of their own money at their disposal right now, instead of having to beg Merkel's emissaries for a €300 handout tomorrow. Now, a year and a half later, the realization that the global wealth tax is not only coming but is inevitable in practically every developed country, is finally sinking in, as this interview with Marc Faber confirms: "Until now, the bailouts in Europe and the U.S. were at the expense of the taxpayer. And from now onwards, in my view, the bailouts will also be at the expense of the asset holders, the well-to-do people. So if you have money I am sure the governments will one day take away 20-30% of my wealth."

He is correct, but probably optimstic.

http://www.zerohedge.com/news/2013-03-27/marc-faber-i-am-sure-governments-will-one-day-take-away-20-30-my-wealth

Jim Quinn: 'Available'

From Zero Hedge:

It is clear now that we must have been wrong about the economy. No more proof is needed than the fact the Dow has gone up 1,500 points. Everyone knows the stock market reflects the true health of the nation – multi-millionaire Jim Cramer and his millionaire CNBC talking head cohorts tell us so. Ignore the fact that the bottom 80% only own 5% of the financial assets in this country and are not benefitted by the stock market in any way. It is time to open your eyes and arise from your stupor. Observe what is happening around you. Look closely. Does the storyline match what you see in your ever day reality? It is them versus us. Whether you call them the invisible government, ruling class, financial overlords, oligarchs, the powers that be, ruling elite, or owners; there are powerful wealthy men who call the shots in this global criminal enterprise. No amount of propaganda can cover up the physical, economic, social, and psychological descent afflicting our world. There’s a bad moon rising and trouble is on the way.

Considering that 71% of GDP is dependent upon consumer spending (versus 62% in 1979 before the financialization of America), the dreadful results of retailers and restaurants even before the Obama tax increases confirms the country has been in recession since the second half of 2012. In 1979 the economy was still driven by domestic investment that accounted for 19% of GDP. Today, it wallows at all-time lows of 13%. In addition, our trade deficits, driven by debt fueled consumption, subtract 3.5% from GDP. These facts are reflected in the depressed outlook of small business owners who are the backbone of growth, hiring and entrepreneurship in this country. Small businesses of 500 employees or less employ half of all the private industry workers in the country and account for 65% of all new jobs created. There are approximately 27 million small businesses versus 18,000 large businesses. The chart below does not paint an improving picture. The small business optimism has dropped from an already low 92.8 in September 2012 to 90.8 in March 2013.

The head of the NFIB couldn’t make the situation any clearer:

“While the Fortune 500 is enjoying record high earnings, Main Street earnings remain depressed. Far more firms report sales down quarter over quarter than up. Washington is manufacturing one crisis after another—the debt ceiling, the fiscal cliff and the Sequester. Spreading fear and instability are certainly not a strategy to encourage investment and entrepreneurship. Three-quarters of small-business owners think that business conditions will be the same or worse in six months. Until owners’ forecast for the economy improves substantially, there will be little boost to hiring and spending from the small business half of the economy.” – NFIB chief economist Bill Dunkelberg

If consumers, who account for 71% of the economy, aren’t spending, and small business owners, who do 65% of all the hiring in the country, are petrified with insecurity, why is the stock market hitting all-time highs and the corporate media proclaiming happy days are here again? It can be explained by the distribution of wealth and income in this country. Every media pundit, politician, Wall Street shill, Ivy League PhD economist, and corporate titan you see on CNBC, Fox or any corporate media outlet is 1%er or better. The chart below shows the bottom 99% saw their real incomes decline between 2009 and 2011, while the top 1% reaped the stock market gains and corporate bonuses for using “creative” accounting to generate record corporate profits. The trend in 2012 through today has only widened this gap, as real worker wages have continued to decline and the stock market has advanced another 20%.

The feudal financial industry lords are feasting on caviar and champagne in their mountaintop manors while the serfs and peasants scrounge in the gutters for scraps and morsels. This path has been chosen by the king (Obama) and enabled by his court jester (Bernanke). Money printing and inflation are their weapons of choice. We are living in a 21^st Century version of the Dark Ages.

http://www.zerohedge.com/news/2013-03-26/guest-post-available

Student Loan Write-Offs Hit $3 Billion In First Two Months Of Year Up More Than 36% YOY

From Reuters:

Banks wrote off $3 billion of student loan debt in the first two months of 2013, up more than 36 percent from the year-ago period, as many graduates remain jobless, underemployed or cash-strapped in a slow U.S. economic recovery, an Equifax (EFX.N) study showed.

The credit reporting agency also said Monday that student lending has grown from last year because more people are going back to school and the cost of higher education has risen.

"Continued weakness in labor markets is limiting work options once people graduate or quit their programs, leading to a steady rise in delinquencies and loan write-offs," Equifax Chief Economist Amy Crews Cutts said in a statement.

The cost of earning a 4-year undergraduate degree has gone up by 5.2 percent per year in the last decade, according to the CFPB, forcing more students to take out loans. While other forms of debt went down, student loan debt continued to rise through the economic crisis.

Delinquencies have spiked in the last eight years, with about 17 percent of the nearly 40 million student loan borrowers at least 90 days past due on their repayments, a February report from the New York Federal Reserve Bank showed.

http://www.reuters.com/article/2013/03/25/us-usa-studentloans-delinquency-idUSBRE92O11K20130325?feedType=RSS&feedName=businessNews

가계·기업·정부 부채 GDP 대비 283%…역대 최대

Korea is in the danger zone.

연합뉴스로부터:

우리나라 가계·기업·정부가 전체 경제 규모보다 세 배나 더 큰 빚더미 위에 앉아 있는 것으로 파악됐다.

27일 한국은행의 자금순환표를 보면 지난해 말 현재 가계, 비영리단체·비(非)금융 민간기업, 일반정부의 부채 총액은 3천607조3천억원이다.

작년 명목 국내총생산(GDP·1천272조5천억원) 대비 부채 총액의 비율은 283%다. 해당 통계가 작성된 이래 가장 큰 수치다. 외환위기(1998~1999년·227%)나 금융위기(2008년 274%, 2009년 278%) 당시보다 더 높다.

GDP 대비 가계·기업·정부 부채의 비율은 10년 전인 2003년까지만 해도 221%에 머물렀다.

이후 2006년 236%, 2007년 246%로 오르더니 금융위기를 맞은 2008년에 274%로 훌쩍 뛰었다. 그리고 다시 지난해 280% 선을 돌파했다.

GDP 대비 부채 비율이 치솟은 것은 2000년대 들어 경제주체들의 빚이 눈덩이처럼 불어났기 때문이다.

2003년 148조1천억원에 불과했던 정부(중앙+지방)부채는 2012년 469조6천억원으로 3.2배로 늘어났다.

비금융법인(민간기업+공기업·주식 및 출자지분, 직접투자 제외)부채 역시 같은 기간 988조6천억원에서 1천978조9천억원으로, 가계·비영리단체는 559조3천억원에서 1천158조8천억원으로 각각 2배 이상 수준으로 증가했다.

경제성장 속도는 '빚의 속도'를 따라잡지 못했다. 명목 GDP는 이 기간 767조1천억원에서 1천272조5천억원으로 늘어났다. 기껏 1.7배 수준으로 증가한 것이다.현대경제연구원 임희정 연구위원은 "정부·가계·기업의 부채가 모두 악화하는 상황이다"며 "정부는 경제활력과 성장세를 회복하고 경제주체들이 재무 건전성을 개선할 수 있도록 노력해야 한다"고 전했다.

http://media.daum.net/economic/newsview?newsid=20130327063606072

Charles Hugh Smith: Why The Government Is Desperately Trying To Inflate A New Housing Bubble

From Of Two Minds:

Many people claim the Federal government and Federal Reserve are trying to inflate a new housing bubble to trigger a new "wealth effect," i.e. people seeing their home equity rising once again will feel encouraged to borrow and blow money like they did in 2001-2008. But if we look at current income (down) and debt levels (still high), there is little hope for a renewed wealth effect from housing. That leaves us with this conclusion: The Federal government and Federal Reserve are trying to inflate another housing bubble to save the "too big to fail" banks from a richly deserved day of reckoning.

The housing bubble enabled big banks to skim tens of billions of dollars in profits from originating mortgages to marginal buyers and securitizing mortgages into MBS. This is the heart of what I call the Neocolonial Model of Financialization: rather than make risky sovereign-debt loans to international borrowers, the big U.S. banks came home and exploited the low-risk domestic housing/mortgage market.

When the bubble burst, as all speculative bubbles eventually do, the banks were rendered insolvent: their collateral (the mortgaged housing) had lost much of its value, and mortgages that had been sold as essentially risk-free were revealed as defaults waiting to happen.

The Fed and Federal government immediately stepped in to save their treasured partner, the parasitic banking sector, from righteously earned destruction. The bailouts, guarantees and backstops totaled about $23 trillion, roughly 150% of the entire American Gross Domestic Product (GDP), and roughly twice the 2008 value of all U.S. residential mortgages (almost $12 trillion).

http://charleshughsmith.blogspot.kr/2013/03/why-government-is-desperately-trying-to.html

Dilemma in President Park Guen-hye’s Policy Undertaking (박근혜 정부의 정책 딜레마)

Korea is in for a rough ride (For instance, the overall debt level is mounting; The Korean economy is easily shaken by the foreign financial entities; The income disparity is growing; The currency war is looming, and so on) The Park Geun-hye administration may be the last regime for Korea to turn things around given a dire economic situation around the globe.

The Korean people have high hopes for the Park Guen-hye administration.(The following post titled “Park Urges Chaebols To Share Growth With Community and Promises SMEs Support; 박 당선인 중소기업 대통령 되겠다” explains the reason for it: http://innovationandeconomicanalysis.blogspot.kr/2012/12/park-urges-chaebols-to-share-growth.html)  I have argued that any policy apparatus should be geared toward serving the broader social interest.  The president has promised to become a president of SMEs.  If the present genuinely cares for serving the best interests of the most people (I believe she does) she needs to push for a reform.

If she is really serious about job creations by putting SMEs on center stage in the Korea’s economic landscape, she may have to overhaul the centrally-planned command economy and adopt the free enterprise system with proper regulations.  This means that keeping her promise requires breaking down the institutional setup which his late father, President Park Chung-hee engineered to run the command economy. The very system which contributed to Korea’s rapid economic growth in the early stage of industrialization incurred structural risks. (I have discussed this in another post titled “Comparison of Two Critical Regimes in Korea: The Park Chunghee Regime vs. Kim Daejung Regime (박정희 정권과 김대중 정권의 비교) http://innovationandeconomicanalysis.blogspot.kr/2012/09/comparison-of-two-critical-regimes-in.html)  This system encompasses the centrally-planned economic/innovation model (Please see this posting titled "The Fallacy of Korea’s Economic and Innovation Model (한국 경제와 혁신 모델의 오류)" http://innovationandeconomicanalysis.blogspot.kr/2012/10/the-fallacy-of-koreas-economic-and.html), the oligarchy system, and the chaebol system.  The Korean model of concentrated political power in a partnership between the government and chaebols has hindered any reform effort.  President Park needs to reform the old system which has hampered the free enterprise system.  She has to set up institutional arrangements for the free enterprise system to grow and flourish.  Therein lie her biggest challenge and dilemma.

I have argued that innovation endeavor has to serve the best interests of the most people.  I am glad that President Park is determined to pursue this goal.  Then, the Park administration may have to develop a policy making apparatus in line with this goal.  In this context, the Park administration may have to limit its role in providing the conditions in which innovation and entrepreneurship can flourish on a level playing field, rather than directly intervening in the markets.  Furthermore, since innovation and production go hand in hand, the Park government also has to make an earnest effort to keep the manufacturing under wraps.  In this framework, the Park administration has to come up with ways to allocate resources efficiently in productive capacity, create incentives for citizens to gain necessary skills, draft and enact the necessary regulations, or provide tax breaks to encourage entrepreneurship and invest in new businesses in emerging technologies.  

The major policy agenda for the Park administration is building a creative economy(창조경제) to create more jobs.  Toward this, the new administration has promised to stop the power abuse by conglomerates while protecting the Korean SMEs.  President Park Guen-hye pledged her administration would play an active role in job creations by expanding investment in science technology and the information and communication technology.  Will the Park administration perform the market-forming role in a bid to generate the short-term return on investment which will stifle the entrepreneurship in the long-term as the case of the mobile phone did?  The very act of the Korean government promoting a specific industry (e.g., the ICT industry) may be hindering the reform effort Korea needs to pursue in order to transform from the command economy into the free enterprise system.  Letting the market forces run their course may be better than employing wrong policy measures that would work in the short term, if history is any guide (For example, please see a post titled “How the U.S. Government Policy Prolonged the Depression” http://innovationandeconomicanalysis.blogspot.kr/2013/03/how-us-government-policy-prolonged.html)

It has been reported the newly formed economic team of the Park administration would announce a stimulus package this week including issuing the government bonds.  We have seen what Japan, another strong command economy, has done during the last two decades.  It hasn’t worked and experienced a 23-year deflationary spiral. (I posted numerous postings on this)

It may be too early to tell, yet I’m concerned that considering the way things play out, the new administration may end up another experiment.

Update: Korea Goes All-Out To Boost Economy; Exports, Investment and Consumption Remain Weak (http://innovationandeconomicanalysis.blogspot.kr/2013/03/korea-goes-all-out-to-boost-economy.html)

If Cyprus Really Wants To Be The Next Iceland...

I posted an interview of Iceland's president before (http://innovationandeconomicanalysis.blogspot.kr/2013/01/how-iceland-overthrew-banks-only-3.html).  I also posted a good article on VoxEU re what we can learn from the Iceland's financial crisis (http://innovationandeconomicanalysis.blogspot.kr/2010/02/lessons-from-icelands-financial-crisis.html).

From Zero Hedge:

Since Cyprus is currently here, in its contentious relationship with the Eurozone...

(h/t @FGoria via @TheEconomist)
Perhaps it will consider going the full monti and taking a page out of the full Iceland playbook

(h/t @estebiza)

http://www.zerohedge.com/news/2013-03-23/if-cyprus-really-wants-be-next-iceland

BOK: "한국 소비부진은 소득저하·가계빚·소득불평등 탓"

I've said all along that without median income increase, they won't be a genuine recovery.  Furthermore, Korea needs to transition to more domestic consumption oriented model.  The article below echoes what I have contended.

연합뉴스로부터:

금융위기 이후 민간소비가 경제성장률을 밑도는 현상은 소득저하·가계부채·소득불평등 등 우리 경제의 구조적 문제가 합쳐진 결과란 주장이 나왔다.

최근과 같은 소비형태가 지속하면 결국 경제의 취약성을 키워 안정적이고 지속 가능한 경제성장을 저해할 수 있다는 경고다.

한국은행 조사국 나승호 차장·임준혁 조사역·인사경영국 정천수 과장은 24일 이러한 분석을 담은 '구조적 소비제약 요인 및 정책과제'란 보고서를 발표하며 당국의 정책적 대응을 촉구했다.

우리나라 민간소비 증가율은 2010년 4.4%, 2011년 2.3%, 2012년 1.8%로 계속 낮아졌다. 같은 기간 크게 떨어진 경제성장률(6.3%→3.6%→2.0%)에도 못 미친다.

나 차장 등은 소비 부진 이유로 가계소득 증가세가 미진한 점을 들었다. 그는 "2011년 노동생산성이 3.0% 올랐지만, 물가를 고려한 실질임금은 4.7% 떨어졌다"며 "최근 수년간 성장과 가계소득이 괴리를 보이고 있다"고 평가했다.

또 자영업자의 소득이 갈수록 줄어들고 국민연금, 건강보험을 포함한 4대 보험 등 사회부담금이 가계소득보다 더 빨리 증가하며 가계의 소비 여력을 줄였다고 지적했다.

그는 가계부채 역시 민간소비를 저해했다고 봤다.

부채는 여윳돈을 공급해 소비를 늘리는 측면과, 원금·이자 부담을 가중해 소비를 위축시키는 측면이 있는데 2008년 이후부터는 원리금상환 부담이 훨씬 커지며 결과적으로 부채가 소비를 줄였다는 것이다.

특히 이런 현상은 고소득층보다는 저소득층에서 뚜렷하게 나타난다고 그는 설명했다.

그가 꼽은 마지막 요인은 소득분배구조 악화다. 2000년대 이후 양극화가 진행되며 저소득층의 소비 여력이 줄었다는 것이다. 소득격차가 확대될수록 국민경제의 평균 소비성향이 낮아졌다는 연구 결과도 소개했다.

나 차장은 민간소비가 위축되면 우리 경제가 현재보다 더 대외경기에 휘둘리게 된다고 우려했다. 민간소비가 줄고 내수시장이 축소할수록 경제의 수출의존도가 커질 수밖에 없기 때문이다.

http://www.yonhapnews.co.kr/economy/2013/03/22/0301000000AKR20130322202200002.HTML

Chris Martenson Warns "Market Risks Today Are Higher than Ever"

From Zero Hedge:

For those still with capital in the paper markets, Peak Prosperity's Chris Martenson believes there are dangerous risks re-building. In particular, he sees an unacceptably high and growing risk of a cascading series of corrections in the bond markets (corporate and sovereign), which would have a much greater impact on destroying wealth worldwide than any stock market crash could. The return of reckless practices like CDOs and overuse of derivatives indicates that we are far along the timeline in repeating a 2008-like contraction -- but worse. Despite today's heady elevated prices, it's time to get to the sidelines, and use your paper - while it still has the purchasing power it does - to park your wealth in hard assets.

(Source)

http://www.zerohedge.com/news/2013-03-22/chris-martenson-warns-market-risks-today-are-higher-ever

Goldman Sachs: The Global Industrial Cycle Squarely in the 'Slowdown' Phase

From Zero Hedge:

Goldman's 'Swirlogram' places the global industrial cycle squarely in the 'Slowdown' phase as growth momentum fades rapidly. Driven by plunges in aggregate confidence levels and New Orders (less inventories) - as well as CAD and AUD data - this reinforces last month's preliminary view of a slowdown beginning. Goldman notes we could potentially see weaker global activity over the coming months. Is it any wonder we are seeing bellweather names missing in a big (un-unique) way.



http://www.zerohedge.com/news/2013-03-21/global-slowdown-accelerates-driven-confidence-new-orders-plunge

"As the father has loved me, so I have loved you.  If you keep my commanments, you shall abide in my love, even as I have obeyed the father and abide in his love.  These things I have said, so that my joy might remain, and be completed in you.  This is my commandment: That you love one another, as I have loved you.  Greater love hath no man than to lay down his life for his friends.  You are mine if you abide in my love.  Henceforth I will not call you servants, but my friends."
John 15:9-15

Japan Posts Longest Run of Trade Deficits in Three Decades

Abenomics doesn’t seem to be working as Japanese February exports fell 2.9% more than expected.  In other words, Japan’s centrally-planned, mercantilist economic approach is failing.  While a pundit like Kyle Bass warns about Japan’s looming insolvency, 95% of Japan’s debt is internally owned. 

In fact, I am more concerned for Korea as the Korean economy can be easily shaken by foreign financial entities.  Korea was modeled after Japan.  The similarities between Korea and Japan are so there in terms of export-dependent industrialization strategy, technology accumulation trajectory, financial bubbles, deindustrialization, currency conundrum, demographic changes, policy mistakes (e.g., monetary policy), etc.  Korea should heed the lesson of post bubble Japan.

From Bloomberg:

Japan’s exports fell more than economists forecast and the nation’s trade deficit persisted, underscoring challenges to Prime Minister Shinzo Abe’s campaign to revive the world’s third-biggest economy.

Shipments dropped 2.9 percent in February from a year earlier, the Finance Ministry said in Tokyo today. The median estimate of 22 economists surveyed by Bloomberg News was for a 1.7 percent decrease. Imports rose 11.9 percent, leaving a trade shortfall of 777.5 billion yen ($8 billion).

http://www.bloomberg.com/news/2013-03-21/japan-february-exports-fall-2-9-with-yen-effect-yet-to-kick-in.html

From Zero Hedge:

It appears Abe and his henchmen had better stop doing things and say something as the huge devaluation of the JPY so far is NOT having the effect he had hoped for. Exports dropped 2.9% - more than expected - and while imports rose less than expected, the currency drop still meant an 11.9% surge in imports. All this means is that on a seasonally-adjusted basis, the Japanese Trade Balance just hit a new all-time record low (negative). USDJPY is strengthening on the news... it seems that well-placed non-news headline at 2am Japan time is well worth it now to cover this debacle... We assume the lesson is - just wait, "if we devalue, they will come."



http://www.zerohedge.com/news/2013-03-20/japanese-exports-drop-more-expected-smashing-adj-trade-balance-new-record-low

Samsung, LG In Row Over Eye-Tracking Technology

From Yonhap:

South Korean manufacturers Samsung Electronics Co. and LG Electronics Inc. are in a patent row over technology that enables users to control their smartphones with their eyes, upping the ante between them as they both plan to release flagship devices next month, market watchers said Tuesday.

Samsung Electronics and LG Electronics both incorporated eye-tracking technology in their latest flagship smartphones -- the Galaxy S4 and the Optimus G Pro -- which are set for release in April.

The feature, which Samsung Electronics calls "smart pause" and LG Electronics calls "smart video," pauses a video when a user looks away then resumes it when the user turns back to the device.

Both companies have been promoting the eye-tracking technology as one of the key user experience features of their latest flagship smartphones.

While the eye recognition technology was touted as one of the key features of the Galaxy S4 and was announced through product teasers, LG Electronics claims it already applied for the technology patent in August 2009.

http://english.yonhapnews.co.kr/news/2013/03/19/28/0200000000AEN20130319005600320F.HTML

“또 창조경제… 또 국민행복…” 노이로제 걸린 정부 산하기관들

Korea is in for a rough ride.  The Park Geun-hye administration may be the last regime for Korea to turn things around.  Rather than directly intervening in the markets, the Park administration may have to limit its role in providing a structure in which resources are efficiently allocated in productive capacity.  Overseeing the national R&D funding system is a part of it.

서울신문으로부터:

“창조경제의 대표적인 사례가 워킹화와 스크린골프라고요? 그럼 정부출연연구소는 도대체 뭘 연구해야 하는 거죠.”

19일 오후 서울 중구 수하동 페럼타워. 한국과학기술기획평가원(KISTEP)이 주최한 ‘창조경제포럼’ 행사장은 발 디딜 틈 없이 붐볐다. KISTEP은 당초 170명 규모로 행사를 준비했지만 400명에 가까운 사람들이 모였다. 참석자는 대부분 출연연, 국책연구소 등에서 온 사람들이었다. 창조경제 전문가로 꼽히는 이민화 한국과학기술원 교수, 유환익 전국경제인연합회 산업본부장 등이 연사로 나섰지만 참석자들의 표정은 행사 내내 굳어 있었다. 한 출연연 관계자는 “마치 창조경제학 원론을 듣고 있는 느낌”이라며 “도통 뭘 어떻게 해야 한다는 건지 모르겠다”고 푸념했다.

정부 산하기관과 출연연구소, 국책 연구소들이 ‘창조경제’, ‘국민행복’ 노이로제를 호소하고 있다. 창조경제와 국민행복은 박근혜 정부의 핵심 국정 기조다. 정부 예산으로 목표를 설정하고 결과를 내야 하는 산하기관 입장에서 국정 기조에 맞춰 연구와 정책의 방향을 바꾸는 것은 당연한 일이자 생존의 이유이기도 하다. 하지만 보고서나 연구과제 등을 일방적으로 틀에 맞추려다 보니 보고서의 제목이나 행사 현수막만 바꿔 다는 경우가 많다는 지적이 일고 있다.

최근 교육과학기술부와 지식경제부 산하 출연연들은 회의와 보고서 작성에 전력투구하고 있다. 연구소마다 창조경제와 국민행복을 기치로 내건 내부 태스크포스(TF) 조직이 별도로 운영될 정도다. 대덕연구단지 A출연연 관계자는 “부처에 보고되는 모든 안건은 물론 조직의 운영 및 연구 방향조차 창조경제나 국민행복과 연결되지 않으면 우선순위에서 제외된다”고 말했다.

대다수 연구소들은 창조경제와 국민행복의 의미 자체를 이해하지 못하겠다는 입장이다. B출연연 관계자는 “창조적이지 않은 과학이 어디에 있고, 국민이 불행해지는 기술이 어디 있겠느냐”면서 “처음엔 브레인스토밍을 좀 하다가 최근에는 연구소마다 기존 보고서와 로드맵을 창조경제와 국민행복으로 포장하는 작업만 하고 있는 것으로 안다”고 밝혔다.

국책 연구기관들이 주최하는 학술대회나 토론회도 하나같이 창조경제와 국민행복만 부르짖고 있다. 국무총리실 산하 과학기술정책연구원(STEPI)은 2월과 3월 잇따라 창조경제 관련 보고서를 내놨다. 지난 12일에는 ‘창조경제 실현을 위한 과학기술 정책 방향’ 포럼을 개최했다. 14일에는 산업기술연구회가 ‘창조경제 견인을 위한 산업기술 추진전략 포럼’을 열었다. 고용노동부가 21일 창조경제론 강의를 여는 등 정부 부처도 사정은 다르지 않다. 한 기관 관계자는 “개념이 명확하게 제시된 것도 아니라서 나오는 보고서마다 중구난방이고 포럼 내용도 원론적인 얘기만 늘어놓는 경우가 대부분”이라며 “이런 식이라면 창조경제는 탁상공론으로 끝날 것”이라고 비판했다.

http://www.seoul.co.kr/news/newsView.php?id=20130320005004

Nigel Farage Message To Europeans: "Get Your Money Out While You Can"

From Zero Hedge:

In Nigel Farage's first TV appearance since the Cypriot wealth tax was announced, the Englishman pulls no punches. In all his years and all his experience of the desperation of the European Union's leadership "never did [he] think they would resort to stealing money from people's savings accounts." The simple fact is that they know they cannot let any country leave, no matter how small, for "once one country goes, the whole deck of cards will come tumbling down." There is now "clear irreconcilable differences" between the North and the South of Europe and now that they have done this in one country, "they are quite capable of doing it in Italy, Spain and anywhere." The message that sends to people is "get your money out while you can." As far as his British constituents, he strongly recommends George Osborne (UK Chancellor) urge ex-pats to remove all their money and do monthly transfers from home. "Do Not Invest In The Euro-Zone," he concludes, "you have to be mad to do so - as it is now run by people who do not respect democracy, the rule of law, or the basic principles upon which Western civilization is based."

http://www.zerohedge.com/news/2013-03-19/nigel-farage-message-europeans-get-your-money-out-while-you-can

Korea Pushes For 10 Trillion Won Extra Budget By Issuing Government Bonds

We have seen how Japan's centrally-planned, debt-funded stimulus thing has afflicted Japan.  We have also seen what Korea's policy apparatus bolstering the short-term strength of financial structure and export engine with little regard to long-term consequences has done to the Korean economy since 1997.  Korea's private banks hold so much government paper that any severe decline in bond prices could collapse them.

From Yonhap:

South Korea is seeking to draw up an extra budget worth about 10 trillion won (US$8.96 billion) as part of efforts to resuscitate its slowing economic recovery, government sources said Tuesday.

The finance ministry sources said that the government will hold a closed-door meeting on Friday to determine whether to push for the extra budget. The meeting will be chaired by President Park Geun-hye.

The scale of the envisioned additional budget will be about 10 trillion won, which will likely be raised mostly by issuing government debts, they said. The ministry is in charge of budget affairs.

The move comes after Park's nominee for finance minister, Hyun Oh-seok, hinted during his confirmation hearing last week that he will explore diverse ways including an extra budget by taking into account current economic situations.

http://english.yonhapnews.co.kr/business/2013/03/19/88/0502000000AEN20130319007600320F.HTML

Why Europe Is Still In Peril, In Two Charts

From Zero Hedge:

A lot of analysts have given the European situation a rest since last year. There were certainly some 'market' signs that the ECB and IMF had slowed (if not stopped) the deterioration by providing liquidity backstops to the addled banking system. But perhaps that was just the calm before the storm. In truth, things were still probably just as perilous as ever up until yesterday when the ECB and IMF decided to start a banking panic by enforcing a haircut of up to 10% on bank depositors. That was literally the stupidest thing that anyone has done since the Euro crisis began, and while it may not lead to utter disaster, there is a significant chance that it will. If bank runs materialise across Europe next week, the unemployment situation is most likely to worsen even further. If that happens, expect more and more unemployed, underemployed and angry Europeans to start voting for increasingly radical political parties. This is suicidal.




http://www.zerohedge.com/news/2013-03-17/guest-post-why-europe-still-peril-two-charts

장년기 접어든 한국 경제, 시스템 힐링으로 재도약해야

서울경제로부터:

"이제 '나를 따르라' 식 리더십이 아닌 상대방과 대화하고 타협해서 융합에너지를 만들어내는 '멀티플레이어(multiplier) 리더십'이 반드시 필요합니다."

강봉균(사진) 군산대 석좌교수는 대한민국 시스템 개조를 위해 가장 필요한 것은 대화와 협상이라는 어려운 과정을 이끌 수 있는 리더십이라고 강조했다. 상대방을 인정하고 능동적으로 협상할 수 있는 리더십이 있어야 우리 사회의 병리현상을 치유할 수 있다는 것이다.

입법부(국회의원)와 행정부(재정경제부 장관)에서 두루 경륜을 쌓은 그는 박근혜 대통령이 '제2의 한강의 기적'을 만들자고 주창했지만 현재 우리는 첫 번째 기적을 만들 때와 전혀 다른 시대에 살고 있다는 점을 강조했다. 강 교수는 "1960~1970년대만 해도 한국경제는 20대 청년 같은 성장에너지를 갖고 있었지만 지금은 50대 장년기에 들어서 여기저기 아픈 곳을 먼저 고치지 않고는 건강을 유지하기 힘들다"고 비유했다.

그가 가장 큰 병리현상으로 꼽은 것은 정치다. 강 교수는 "박 대통령은 노무현ㆍ이명박 전 대통령처럼 여의도와 거리를 두고 여야의 싸움정치를 구경하는 대통령이 돼서는 안 된다"며 "국민들은 양보할 것은 양보하고 타협할 것은 타협하는 변화된 모습을 갈망하고 있다"고 설명했다.

강 교수는 특히 현재 자신이 몸담고 있는 교육과 관련, 개혁 대상인 '교수집단'을 설득해야 한다고 했다. 강 교수는 "교수집단은 전공학과별 칸막이를 제거하면 자신들의 생존이 보장되지 않는다고 생각해 융합인재 양성에 흔쾌히 협력하지 않을 것"이라며 "대기업도 정부가 추진하는 대학교육 개혁을 도와줘야 인재난에서 벗어날 수 있다"고 주장했다.

http://economy.hankooki.com/lpage/economy/201303/e2013031717051070070.htm

Europe Does It Again: Cyprus Depositor Haircut "Bailout" Turns Into Saver "Panic", Frozen Assets, Bank Runs, Broken ATMs; Could The "Cyprus Fiasco" Occur In The United States?

From Zero Hedge:

Europe has done it again.

Late last night, after markets closed for the weekend, following an extended discussion the European finance ministers announced their "bailout" solution for Russian oligarch depositor-haven Cyprus: a €13 billion bailout (Europe's fifth) with a huge twist: the implementation of what has been the biggest taboo in European bailouts to date - the  impairment of depositors, and a fresh, full blown escalation in the status quo's war against savers everywhere.  Specifically, Cyprus will impose a levy of 6.75% on deposits of less than €100,000 - the ceiling for European Union account insurance, which is now effectively gone following this case study - and 9.9% above that. The measures will raise €5.8 billion, Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area ministers, said. But it doesn't stop there: a partial "bail-in" of junior bondholders is also possible, as for the first time ever the entire liability structure of a European bank - even if it is a Cypriot bank - is open season for impairments. The logical question: why here, and why now? And what happens when the Cypriot bank run that has taken the country by storm this morning spreads everywhere else, now that the scab over Europe's biggest festering wound is torn throughout the periphery as all the other PIIGS realize they too are expendable on the altar of mollifying voters and investors in the other countries that make up Europe's disunion.

http://www.zerohedge.com/news/2013-03-16/europe-does-it-again-cyprus-depositor-haircut-bailout-turns-saver-panic-bank-runs-br

From Zero Hedge:

Politics aside, the bottom line is that the Rubicon has been crossed, and deposits have now been forcefully confiscated in what Europe promises to be a standalone case. What is certain, is that nobody will wait to find out how long it takes before Europe's class of increasingly more desperate and ill-meaning despots is found to be have lied once more (as it has about everything else since the start of the European crisis). And while the mainstream media will be focused primarily on Europe in the coming days, as BCG and we have warned, the topic of "wealth taxation" is now front and center, and it stars not only Europe, but the US as well.  The question then becomes: what does the funding structure of the US private depository institutions look like, and is there any possibility of Cyprus "wealth tax" recurring on the other side of the Atlantic. To answer this question, we present the summary layout of the consolidated US depository system, which according to the Fed's December 31, 2012 Flow of Funds report had a grand total of $15 trillion in assets, and a matched number of liabilities, of which 72%, or a total of $10.9 trillion was in the form of deposits. So, if the US was to go the Cyprus route, and begin impairing balance sheet liabilities to remark assets, there would be precious little space (with just $4.3 trillion in total other funding liabilities), before one would need to start eating into the deposit base, should Congress decide to implement a very "fair and just" financial asset tax in the US next.

http://www.zerohedge.com/news/2013-03-17/could-cyprus-fiasco-occur-united-states

The Decline of the Middle Class Both in the U.S. and Korea (미국과 한국의 중산층 쇠퇴); 박근혜 정부는 중산층 재건에 총력을 다해야

박근혜 정부는 일자리 창출을 국정운영의 핵심과제로 삼고 있다.  따라서 창조경제니 과학기술과 ICT 융합 육성이니 하는 얘기도 고용창출을 위한 수단일 뿐이다.  그런데 왜 일자리 창출을 해야 하는 지에 대한 국정 철학을 정립할 필요가 있다고 본다.  이는 대다수의 국민이 행복한 삶을 누리기 위해서 전제되는 일이기 때문일 것이다.  결국 고용창출도 중산층의 재건과 확대를 도모하는데 필요하기 때문이다.  이는 또한 공고한 민주사회와도 직결되어 있음을 역사는 말해 주고 있다.

밑의 기사들에서 알 수 있듯이 미국도 중산층이 쇠퇴해 왔고 한국도 마찬가지이다.  여기에는 여러 이유가 있겠지만 제조업의 쇠퇴와 밀접한 관련이 있다.  이런 맥락에서 박근혜 정부는 제조업의 부흥에 무엇보다도 애를 써야 한다고 누차 강조하는 것이다. 

박근혜 대통령 아버지 시대의 제조업의 성장과 융성은 양질의 일자리 창출로 이어졌고 이는 중산층의 확대와 훗날 민주화 과정을 활성화시키는 밑거름이 되었다. (이에 대해서는 다음 포스팅을 참조하기 바란다. Comparison of Two Critical Regimes in Korea: The Park Chunghee Regime vs. Kim Daejung Regime (박정희 정권과 김대중 정권의 비교) http://innovationandeconomicanalysis.blogspot.kr/2012/09/comparison-of-two-critical-regimes-in.html) 한국이 labor arbitrage 때문에 제조업은 다른 국가로 이전하고 R&D에서 성장동력을 찾는 것은 국민 대다수의 이익을 위해 working 하지 않을 것이라는 것을 미국의 예가 여실히 보여주고 있다.  미국의 경우 제조업은 외국에 offshoring 하고 경제를 financialization 시켜 경제가 무너지고 있다.

또한 오늘날의 경제상황은 박대통령 아버지 시대와는 매우 다르다는 것, 재차 강조하지만 국가가 주도적으로 직접적인 interventions을 통해 특정산업을 육성하기 보다는 장기적인 안목에서 기술혁신과 기업가 정신이 번성할 수 있게 전반적인 mechanism과 infrastructure를 구축하는 간접적인 정책을 펼쳐야 한다는 것이다.  우리가 산업기반이 부족하여 catch up 전략이 유효하게 작용했던 산업발전 초창기에는 정부주도의 집중기술육성이 주효했지만 이 접근방식은 또한 폐해도 나았다는 점도 고려해야 할 것이다.

이 블로그에서 강조하는 점 중의 하나가 혁신의 사회적 역할이다.  기술혁신을 도모하는 정책도 결국 많은 국민들에게 혜택이 가는 방향으로 수립되어야 함을 거듭 강조하고 싶다.  이런 맥락에서 정부는 개별기업들이 잘 경쟁할 수 있도록 혁신생태계를 조성해 주는 등 간접적인 방안에 더욱 주력해야 한다고 강조하는 것이다.  왜냐하면 특정산업 육성은 그 혜택이 중장기적으로 소수에게만 돌아가게 되기가 쉽기 때문이다.  한국의 휴대폰 산업이 대표적인 예이다. (이에 대해 다음의 포스팅을 참조하기 바란다. http://innovationandeconomicanalysis.blogspot.kr/2012/02/blog-post_16.html ) 결국 휴대폰 산업의 집중 육성도 몇몇 주도 기업에만 그 혜택이 돌아갔고 한국의 휴대폰 제조업체들은 공장을 해외에 계속 이전시키고 있어 한국의 생산적 일자리를 줄이는데 일조를 하고 있다.  다시 한 번 강조하자면 제조업 일자리의 감소는 중산층의 약화와 전반적인 사회 기반의 쇠퇴와 연결되어 있다.

From Zero Hedge:

Beneath the positive headlines Bloomberg's Joe Brusuelas notes that there is evidence that a good portion of consumers continue to face a difficult adjustment to the $125 billion tax hike in January and the 15 percent increase in gasoline prices during the past four months. Spending among the upper quintile of income earners is masking weakness elsewhere but it is jobs headlines that are really hiding the dismal reality in America. As the following chart shows, confirming our earlier discussion, the middle-class income-earner is becoming an endangered species (with no 'conservation group' willing to stand up for them) as the government holds the lowest income earners' hand and Bernanke the highest.



Charts: Bloomberg

http://www.zerohedge.com/news/2013-03-14/progressing-extinction-us-middle-class

내일신문으로부터:

중산층 붕괴가 지난 20년간 심화된 것으로 나타났다. 중산층이 총 가구에서 차지하는 비중은 물론 전체 소득에서 차지하는 점유율도 지속적으로 하락추세를 보이고 있다. 박근혜정부가 중산층 복원을 주요 공약 중 하나로 내세운 가운데 관련 정책에 관심이 모일 것으로 예상된다.

남상호 한국보건사회연구원 연구위원이 2013 경제학 공동학술대회에 제출한 '우리나라 중산층의 규모와 변화 추이 분석' 논문에 따르면 과거 20년간 중산층은 꾸준히 축소돼 왔다.

20년 전인 1991년만 해도 총가구에서 중산층이 차지하는 비중이 76.2%에 이르렀지만 2011년에는 67.7%로 쪼그라들었다. 20년간 8.5%p가 줄어든 것이다.

중산층이 전체 가구소득에서 차지하는 소득점유율도 줄기는 마찬가지였다. 1991년 67.6%에서 60.1%로 줄어 60%선에 겨우 턱걸이했다. 금융위기가 닥친 2008년 이후 소득점유율은 50%대로 하락했다. 그 뒤 약간 상승했지만 예전 수준을 회복하기까진 멀어보인다.

중산층은 중위소득(전체 국민을 소득 순으로 한 줄로 세웠을 때 정확히 중간에 있는 사람의 소득)의 50~150%에 해당하는 층이다. 2011년을 기준으로 하면 월중위소득은 350만원으로 월소득이 175만~525만원 사이에 있는 가구는 모두 중산층으로 잡힌다.

남 연구위원은 "지난 20년간 중산층 축소가 진행됐다"면서 "1990년부터 2000년까지는 중산층의 대부분이 상위 소득층으로 옮겨갔지만 2000년부터 2010년까지 10년 동안에는 중산층이 저소득층으로도 옮겨가 빈곤심화와 더불어 양극화가 진행됐다는 점이 특징"이라고 분석했다.

http://www.naeil.com/News/politics/ViewNews.asp?nnum=703742&sid=E&tid=9