South Korea's Economy Unexpectedly Contracts As Exports Crash Most In 33 Years

We saw this coming.  Looking at Korea’s economic policy, we wonder if policy makers understand there should be a fundamental shift in Korea’s export-driven economic model, as I mentioned many times.

From Zero Hedge:

For only the 4th time since 1999 (and for the first time since Lehman), South Korea's economy unexpectedly shrank in Q4 (contracting 0.4% QoQ against expectations of 0.1% expansion), busting the global-synchronized-growth narrative.

Government spending rose 0.5% QoQ, and while private consumption rose 1.09% QoQ, construction investment tumbled 3.8% QoQ

Exports were the biggest driver - plunging 5.4% QoQ - the biggest drop since 1985...

As Goldman notes, Korea's 2017 Q4 GDP contracted 0.2% quarter on quarter (seasonally adjusted), slowing sharply from 1.5% in Q3 and falling for the first time in nine years. The figure was well below consensus and as well as our expectations. Main points:

1. Korea's 2017 Q4 GDP contracted 0.2% quarter on quarter (seasonally adjusted), slowing sharply from a high base of 1.5% in Q3 and recording the first sequential decline in nine years.

2. Domestic demand's total contribution to sequential GDP growth moderated to 0.6pp, from 0.8pp in the previous quarter.  Facilities investment fell 0.6% qoq sa, and the contraction was more pronounced in construction activities (-3.8% qoq sa).

3. Net exports' contribution to sequential growth fell back to -0.8pp. Exports recorded a sequential contraction of -5.4% qoq sa, but slowing from a sharp growth of 6.1% in Q3. Imports also declined 4.1% due mostly to lower machinery imports according to the Bank of Korea press release.

4. By industry, manufacturing contracted 2.0% qoq sa, the weakest print since Q1 2009. While the detailed breakdown by sectors is not yet available, the BOK press release highlights that the weakness was concentrated in transport equipment production including autos. In contrast, services continued positive growth at 0.4%, although moderating from 1.1% in the previous quarter.

5. For the full year of 2017, Korea's real GDP grew 3.1%, up from 2.8% growth during the previous two years (2015-2016). 

 So Q4 2017 saw the worst economic environment since Q4 2008...

But stocks were soaring...

And PMIs said "everything was awesome"...

Perhaps most worrisome is that South Korea is often termed 'the canary in the world trade coalmine' and this downside surprise will do nothing to confirm the 'globally synchronized growth' narrative.

With The Won soaring to four-year highs...

How long before South Korea rejoins the currency wars?

https://www.zerohedge.com/news/2018-01-24/global-synchronized-recovery-narrative-stunned-south-korean-exports-collapse

Martin Luther King Day - Still a Dark Day In Our Nation

From Jesse's Cafe:

"It is a dark day in our nation when high-level authorities will seek to use every method to silence dissent. But something is happening, and people are not going to be silenced."

Martin Luther King, Riverside Church, 30 April 1967


"Take a stand for that which is right, and the world may misunderstand you and criticize you, but you never go alone, for somewhere I read that 'One with God is a majority,' and God has a way of transforming a minority into a majority. Walk with him this morning and believe in him and do what is right and he'll be with you even until the consummation of the ages.

Yes, I've seen the lightning flash, I've heard the thunder roll, I've felt sin's breakers dashing trying to conquer my soul but I heard the voice of Jesus saying still to fight on, he promised never to leave me, never to leave me alone; no, never alone, no, never alone. He promised never to leave me, never to leave me alone. 

Wherever you are going this morning, my friends, show the world that you're going with truth. You are going with justice, you are going with goodness, and you will have an eternal companionship. 

And the world will look at you and they won't understand you, for your fiery furnace will be around you, but you'll go on anyhow.

But if not, I will not bow, and God grant that we will never bow, before the gods of evil."

Martin Luther King, Ebenezer Baptist Church, 5 November 1967


"If you want to say that I was a drum major, say that I was a drum major for justice. Say that I was a drum major for peace. I was a drum major for righteousness. And all of the other shallow things will not matter. I won't have any money to leave behind. I won't have the fine and luxurious things of life to leave behind. But I just want to leave a committed life behind."

Martin Luther King, 4 February 1968


"We've got some difficult days ahead. But it really doesn't matter with me now, because I've been to the mountaintop. And I don't mind. Like anybody, I would like to live a long life — longevity has its place. 

But I'm not concerned about that now. I just want to do God's will. And He's allowed me to go up to the mountain. And I've looked over, and I've seen the Promised Land. I may not get there with you. But I want you to know tonight, that we, as a people, will get to the promised land. 

So I'm happy, tonight. I'm not worried about anything, I'm not fearing any man. Mine eyes have seen the glory of the coming of the Lord."

Martin Luther King, 3 April 1968


The next day Dr. Martin Luther King, Jr. was murdered in Memphis, Tennessee, 4 April 1968.

"It is a dark day in our nation when high-level authorities will seek to use every method to silence dissent. But something is happening, and people are not going to be silenced."

Martin Luther King, Why I Am Opposed to the War in Vietnam'  30 April 1967

And, some might observe, this sermon, given at Riverside Church in April 1967, began his year long march towards the mountain top, and his murder in Memphis in April of the following year.

Are we not exceptional?  Are you not entertained?

http://jessescrossroadscafe.blogspot.kr/2018/01/martin-luther-king-day-dark-day-in-our.html

In memory of Fr. Lee Tae-Seok

 It has been 8 years since you passed away.  I feel like you are still alive in South Sudan, diagnosing and delivering care.  You may be teaching music to Sudanese youth.  Of course, you pray with Sudanese people.  I understand that things have not changed much in South Sudan: poverty, illness, and fighting are still going on while some people’s angel-like smiles and warm hearts still shine over gloomy reality.  You had been in South Sudan as a friend and resident, not as a missionary doctor for a short-term stay.

South Sudan is one of the poorest regions in the world and living conditions were extremely poor including the food you ate.  However, you stayed there without losing your precious smile and sense of humor.  Faith is reflected in our lives, and you were a living proof of that.  You can see that I am doing all I can to improve the health and wellbeing of people across the globe.  I am doing it in part in memory of you.  I am aware that without God’s help and blessing I can’t do it and I have to do his work.

I almost lost my vision in my left eye, and my right eye is in danger of requiring another eye surgery.  You know that I almost died when my brain got injured several years ago.  I think God saved me because I still have things to do.  God has committed some work to me.  I have my mission.Fr. Lee, please help me do good and simply obey God’s will, whatever may come.

I still maintain a close relationship with John.  I cherish him, calling him your spiritual son.  He was supposed to come to Seoul to take Korean medical license exam last summer.  I don’t think he did.  His Korea is now fluent, yet he has communicated with me only in English.  He has not said much, and I am waiting for him to talk about what has been going on.  I sent him a text message saying that my prayer is with him and God will lead our ways.  I believe he has his mission as well.  I sincerely hope that he would go back to Sudan to bring healthcare to his people.  I’d like to support clinics set up by doctors like John for financially-strained people.  Fr. Lee, please give him strength and help him make up his mind wisely.

I miss you.

Nomi Prins: My financial roadmap for 2018

From Naked Capitalism:

Some crystal ball gazing for 2018.

Yves here. While we don’t give financial advice, a forecast here and there gives readers something to debate. Prins gives a much wider ranging set of predictions than most commentators do. I’m not on board with all of her views (as you will see, she’s far more sanguine about Brexit than we are), but many of her points, particularly that central bank tightening will be mainly bark and hardly any bite, seem sound.

In last year’s roadmap, I forecast that 2017 would end with gold prices up and the dollar index down, both of which happened.  I underestimated the number of Fed hikes by one hike, but globally, average short term rates have remained around zero. That will be a core pattern throughout 2018.

Central banks may tweak a few rates here and there, announce some tapering due to “economic growth”, or deflect attention to fiscal policy, but the entire financial and capital markets system rests on the strategies, co-dependencies and cheap money policies of central banks.  The bond markets will feel the heat of any tightening shift or fears of one, while the stock market will continue to rush ahead on the reality of cheap money supply until debt problems tug at the equity markets and take them down.

Central bankers are well aware of this. They have no exit plan for their decade of collusion. But a weak hope that it’ll all work out. They have no dedicated agenda to remove themselves from their money supplier role, nor any desire to do so. Truth be told, they couldn’t map out an exit route from cheap money even if they wanted to.

The total books of global central banks (that hold the spoils of QE) have ballooned by $2 Trillion in assets (read: debt) over 2017. That brings the amount of global central banks holdings to more than $21.7 trillion in assets. And growing. Teasers about tapering have been released into the atmosphere, but numbers don’t lie. 

That’s a hefty cushion for international speculation. Every bond a central bank buys or holds, gets a price-lift. Trillions of dollars of such buys have artificially lifted all bond prices, and stocks because of the secondary-lift effect and rapacious search for self-perpetuating returns. Financial bubbles pervade the world.

Central bank leaders may wax hawkish –manifested in strong words but tepid actions. Yet, overall, policies will remain consistent with those of the past decade to combat this looming crisis. US nationalistic trade policies will push other nations to embrace agreements with each other that exclude the US and shun the US dollar.

Meanwhile, here are some themes to watch for 2018:

1) Central Bank “Tightening” and “Tapering”: More Talk than Action

2) Rising Stock Markets for Now; But on Shakier Ground

3) Expanding Debt and Corporate Defaults

4) Weakening Dollar, Rising Gold and Silver Prices

5) Ongoing Economic Power Shift from the West to the East

6) Easy ECB policy / Sterling Rising into Brexit

7) Infrastructure Focus

8)  Cryptomania Grips More Tightly

9) Going Digital and Green

10) Dangers of Trump’s Deregulation Entourage

https://www.nakedcapitalism.com/2018/01/nomi-prins-financial-road-map-2018.html