As China Demonstrates Another Month Of Strong PMI, Should Investors Begin To Shift Focus?: By Matt Schilling:
On Tuesday evening well after the U.S. markets were closed, the investment community received some very impressive news out of China. The HSBC Flash China Manufacturing PMI number came in at 49.1 for October versus the 47.9 number that was recorded in September which resulted into a month-over-month increase of roughly 2.5%.
According to comments by Hongbin Qu, HSBC's chief economist for china, "October's flash PMI reading continues to recover for the second month, thanks in part to a gradual improvement in the new orders index which picked up to a six-month high (albeit marginally below 50). This is helped by the filtering-through of the earlier easing measures. However, external challenges are still abound and the pressures on job market are lingering. This calls for a continuation of policy easing in the coming months to secure a firmer growth recovery." In my opinion we could begin to see such PMI
Complete Story »
miércoles, 24 de octubre de 2012
domingo, 21 de octubre de 2012
HKMA Steps in as U.S. Dollar Hits HK$7.75
HKMA Steps in as U.S. Dollar Hits HK$7.75: The Hong Kong Monetary Authority sold 4.67 billion Hong Kong dollars in the foreign-exchange market Friday New York time to prevent the Hong Kong dollar from strengthening beyond its peg to the U.S. dollar.
sábado, 20 de octubre de 2012
"The Clock Is Running, The Cash Is Almost Gone And Make-Believe Will No Longer Suffice"
"The Clock Is Running, The Cash Is Almost Gone And Make-Believe Will No Longer Suffice":
From Mark Grant, author of Out Of The Box
This is the piece I wrote on Friday afternoon.
Grant’s Dictionary
Let’s start with the bank supervisor. Germany said no money for the banks without a European supervisor for the banks. France, Spain and the rest responded by saying fine then let’s have a bank supervisor in place and functioning by January 2013. The German response was not so fast and maybe by 2014 and maybe the ECB is not the right instrument and maybe not for all of the banks. On the surface you might think that these points are all distinct and separate but if you do; you are incorrect. The translation here is that Germany does not want to fund the European banks and so has set up a road block, a diversion, to stand in between “we will not fund the banks directly” and the desires of France and the rest who want a harmonized Europe where every country pays for everything for all of them; a socialized Europe. You see, the diversion is the bank supervisor and it allows Germany to thwart the desires of the needy countries without having to address the problem directly. It is a head fake and an effective one and it is just one of the instances where we are getting a quite clear Northern European response; “We will not fund.”
Did you think that Germany, Austria and the rest were going to just come right out and say, “We will not fund?” This is not the Simpsons you know and the politicians in Europe, think of them what you like, are not quite that stupid. As a matter of fact the only time the Germans have come right out and said “Nein” was concerning Eurobonds and that is because the stigma attached to them in Germany is so great that any German allowance of them would probably topple the government. Consequently, as in the case of the ECB and the “limitless” speech of Mr. Draghi; it is only limitless if the condition of EU approval is met and so if the condition never happens then there is no ECB bond buying at all. In each case there is a condition and Germany can manipulate the condition at will which prevents or stops the ECB bond purchasing or the direct funding of the European banks.
Please note that on the opposite side of the fence that the same type of strategy is in place. France, Spain, Italy, Cyprus and Greece are not going to come out and say, “We want the Germans to pick up the check for the financial difficulties of our countries” so that ask for Eurobonds, direct bank recapitalization, lines of credit from the ECB, bond buying by the ECB of their sovereign debt and all manner of things which are structured and presented to get Germany, the Netherlands, Finland et al to pay for their shortcomings. “More Europe” in the troubled countries means that Germany and her amigos should foot the bill for the Continent while “More Europe” in the fiscally sound countries means control and oversight and domination if you will as exemplified by Ms. Merkel’s proposal that there be one central European approval office for all of the national budgets in Europe. A concept quickly rejected by France, Britain and a host of other countries. Think of a very expensive mid-day meal; lunch is over and everyone wants everyone else to pick up the check and so they sit there and politely banter and try to contrive schemes so that it will be anyone but them. The actuality is that the numbers have grown so large, the meal has become so expensive, that no one can pick up the bill without quite severe consequences.
Let’s focus on Greece for a moment. In two or three weeks Greece will run out of money. We have already done the “Public Sector Involvement” trick and the last bit of magic was the ECB handing money to the Greek banks who then bought private sovereign debt issued by Greece, got the bonds, then pledged the bonds back to the ECB and got their money back. This is how they did the short term funding of Greece while everyone winked and blinked and went on about their business. The actual truth is; a form of Eurobonds was used, just under the letterhead of the European Central Bank. Now however, the IMF has said they will not fund as Greece couldn’t pay the money she owes unless the goddess Hera shows up with some loot. The IMF has shorted the fuse box and they want the EU or the ECB to take an “Official Sector Involvement” hit which you may translate into “Debt Forgiveness” which would probably be the end of the governments in more than one Northern European nation. Europe then is faced with writing off the debt of Greece, never mind the fancy words, or having the ECB take the hit which would mean a recapitalization of the ECB as they only have $18 billion of paid-in capital or the IMF refusing to fund the next tranche of Greek aid which means that the European Stabilization Funds would have to pick up the bill and that local politics may collapse without the IMF’s participation.
In the case of Spain it is not Mr. Rajoy “assessing the situation” but a very concentrated effort to get “Euros for Nothing and Conchitas for Free.” Not only does Spain have several of its integral regions calling for succession but it has a regional debt problem exceeding $50 billion in my estimation and a bank problem that is several multiples of that. The Oliver Wyman bank stress tests had all of the validity of a three toed sloth residing in your living room as there was no verification, no audits and nothing but garbage pressed into the shredding machine and so “garbage in is garbage out” and let’s not deceive ourselves that it was anything else. Once again, one more time, we have an example of a country trying to get anyone else, everyone else, to pick up the bill because they cannot afford it. Germany, in the meantime, says that Spain does not need the money and so the bills go unpaid and the crisis worsens.
From Mark Grant, author of Out Of The Box
This is the piece I wrote on Friday afternoon.
Having had any number of questions since I wrote this I thought that it might be helpful to provide some further explanation. It is really a question of translation and some definition of “political-speak” because all of the wrangling in Europe now can get quite confusing and literal translations can lead you to incorrect conclusions. In Europe the old adage is firmly in play; “appearances can be deceiving.”“I would say that we have entered the crisis stage of Europe now. We have a stand-off between France and the southern nations, the troubled countries, in one corner and Germany, Austria, Finland and the Netherlands in the other. The last summit yielded nothing and worse than nothing because the two camps are worlds apart and sharply divided. They couldn't agree on the banking supervision issue. They have no agreed upon path for Spain, for Greece, for Cyprus, for Ireland or for Portugal. Germany has drawn a line in the concrete concerning legacy sovereign issues, legacy bank issues and Ms. Merkel has stated quite dramatically that Germany will not allow the new ESM to be used for old problems and that the individual nations will have to foot the bill for them. The "Muddle" is over in my opinion and the "Crisis" has now begun. The long, long road of "put it off" has reached its conclusion and there is no agreement and no compromise on how to proceed. We have finally reached the "Danger Zone" and I advise you to note the change!”
Grant’s Dictionary
Let’s start with the bank supervisor. Germany said no money for the banks without a European supervisor for the banks. France, Spain and the rest responded by saying fine then let’s have a bank supervisor in place and functioning by January 2013. The German response was not so fast and maybe by 2014 and maybe the ECB is not the right instrument and maybe not for all of the banks. On the surface you might think that these points are all distinct and separate but if you do; you are incorrect. The translation here is that Germany does not want to fund the European banks and so has set up a road block, a diversion, to stand in between “we will not fund the banks directly” and the desires of France and the rest who want a harmonized Europe where every country pays for everything for all of them; a socialized Europe. You see, the diversion is the bank supervisor and it allows Germany to thwart the desires of the needy countries without having to address the problem directly. It is a head fake and an effective one and it is just one of the instances where we are getting a quite clear Northern European response; “We will not fund.”
Did you think that Germany, Austria and the rest were going to just come right out and say, “We will not fund?” This is not the Simpsons you know and the politicians in Europe, think of them what you like, are not quite that stupid. As a matter of fact the only time the Germans have come right out and said “Nein” was concerning Eurobonds and that is because the stigma attached to them in Germany is so great that any German allowance of them would probably topple the government. Consequently, as in the case of the ECB and the “limitless” speech of Mr. Draghi; it is only limitless if the condition of EU approval is met and so if the condition never happens then there is no ECB bond buying at all. In each case there is a condition and Germany can manipulate the condition at will which prevents or stops the ECB bond purchasing or the direct funding of the European banks.
Please note that on the opposite side of the fence that the same type of strategy is in place. France, Spain, Italy, Cyprus and Greece are not going to come out and say, “We want the Germans to pick up the check for the financial difficulties of our countries” so that ask for Eurobonds, direct bank recapitalization, lines of credit from the ECB, bond buying by the ECB of their sovereign debt and all manner of things which are structured and presented to get Germany, the Netherlands, Finland et al to pay for their shortcomings. “More Europe” in the troubled countries means that Germany and her amigos should foot the bill for the Continent while “More Europe” in the fiscally sound countries means control and oversight and domination if you will as exemplified by Ms. Merkel’s proposal that there be one central European approval office for all of the national budgets in Europe. A concept quickly rejected by France, Britain and a host of other countries. Think of a very expensive mid-day meal; lunch is over and everyone wants everyone else to pick up the check and so they sit there and politely banter and try to contrive schemes so that it will be anyone but them. The actuality is that the numbers have grown so large, the meal has become so expensive, that no one can pick up the bill without quite severe consequences.
Let’s focus on Greece for a moment. In two or three weeks Greece will run out of money. We have already done the “Public Sector Involvement” trick and the last bit of magic was the ECB handing money to the Greek banks who then bought private sovereign debt issued by Greece, got the bonds, then pledged the bonds back to the ECB and got their money back. This is how they did the short term funding of Greece while everyone winked and blinked and went on about their business. The actual truth is; a form of Eurobonds was used, just under the letterhead of the European Central Bank. Now however, the IMF has said they will not fund as Greece couldn’t pay the money she owes unless the goddess Hera shows up with some loot. The IMF has shorted the fuse box and they want the EU or the ECB to take an “Official Sector Involvement” hit which you may translate into “Debt Forgiveness” which would probably be the end of the governments in more than one Northern European nation. Europe then is faced with writing off the debt of Greece, never mind the fancy words, or having the ECB take the hit which would mean a recapitalization of the ECB as they only have $18 billion of paid-in capital or the IMF refusing to fund the next tranche of Greek aid which means that the European Stabilization Funds would have to pick up the bill and that local politics may collapse without the IMF’s participation.
In the case of Spain it is not Mr. Rajoy “assessing the situation” but a very concentrated effort to get “Euros for Nothing and Conchitas for Free.” Not only does Spain have several of its integral regions calling for succession but it has a regional debt problem exceeding $50 billion in my estimation and a bank problem that is several multiples of that. The Oliver Wyman bank stress tests had all of the validity of a three toed sloth residing in your living room as there was no verification, no audits and nothing but garbage pressed into the shredding machine and so “garbage in is garbage out” and let’s not deceive ourselves that it was anything else. Once again, one more time, we have an example of a country trying to get anyone else, everyone else, to pick up the bill because they cannot afford it. Germany, in the meantime, says that Spain does not need the money and so the bills go unpaid and the crisis worsens.
Here is the issue of legacy liabilities. Here Germany has been fairly clear. The new ESM fund will not pick up the check and it is up to each country to pay for their own past problems. You may translate this piece of jargon into a “No” to Ireland that the ESM will not pick up the bill for the Irish banks and the same response for Spain. This new German definition puts Portugal, Greece, Spain and Ireland back at square one and effectively closes the door on any further negotiations. While all of this wrangling continues the tone at the summit was no longer the nicey-nice repartee of past meetings. Cyprus needs money, Spain needs money, Portugal probably needs more money and Greece is just about out of money. The summit was held, the meeting is over and the worth of any accomplishments is about at Zero as the only agreement was a plan to have a plan to deal with bank supervision. This is not an inch forward, this is not a millimeter forward; this is quicksand where they are all stuck as both money and time run out as the Socialists scream for alms while the landed gentry, utilizing head fakes and other polite deceptions, refuse to provide it. The clock is running, the cash is almost gone and make-believe will no longer suffice. The crisis phase, in my opinion, has been entered.“As long as there are individual national budgets, I regard the assumption of joint liability as inappropriate and from our point of view this isn’t up for debate...The Spanish government will be liable for paying back the loans to recapitalize its banks. Plans to give the Euro rescue fund the power to inject cash directly into banks won’t be made retroactive.”
-German Chancellor Merkel
“Heh, heh, heh! Lisa! Vampires are make-believe... like elves, gremlins and Eskimos.”
-Homer Simpson
"The Clock Is Running, The Cash Is Almost Gone And Make-Believe Will No Longer Suffice"
"The Clock Is Running, The Cash Is Almost Gone And Make-Believe Will No Longer Suffice":
From Mark Grant, author of Out Of The Box
This is the piece I wrote on Friday afternoon.
Grant’s Dictionary
Let’s start with the bank supervisor. Germany said no money for the banks without a European supervisor for the banks. France, Spain and the rest responded by saying fine then let’s have a bank supervisor in place and functioning by January 2013. The German response was not so fast and maybe by 2014 and maybe the ECB is not the right instrument and maybe not for all of the banks. On the surface you might think that these points are all distinct and separate but if you do; you are incorrect. The translation here is that Germany does not want to fund the European banks and so has set up a road block, a diversion, to stand in between “we will not fund the banks directly” and the desires of France and the rest who want a harmonized Europe where every country pays for everything for all of them; a socialized Europe. You see, the diversion is the bank supervisor and it allows Germany to thwart the desires of the needy countries without having to address the problem directly. It is a head fake and an effective one and it is just one of the instances where we are getting a quite clear Northern European response; “We will not fund.”
Did you think that Germany, Austria and the rest were going to just come right out and say, “We will not fund?” This is not the Simpsons you know and the politicians in Europe, think of them what you like, are not quite that stupid. As a matter of fact the only time the Germans have come right out and said “Nein” was concerning Eurobonds and that is because the stigma attached to them in Germany is so great that any German allowance of them would probably topple the government. Consequently, as in the case of the ECB and the “limitless” speech of Mr. Draghi; it is only limitless if the condition of EU approval is met and so if the condition never happens then there is no ECB bond buying at all. In each case there is a condition and Germany can manipulate the condition at will which prevents or stops the ECB bond purchasing or the direct funding of the European banks.
Please note that on the opposite side of the fence that the same type of strategy is in place. France, Spain, Italy, Cyprus and Greece are not going to come out and say, “We want the Germans to pick up the check for the financial difficulties of our countries” so that ask for Eurobonds, direct bank recapitalization, lines of credit from the ECB, bond buying by the ECB of their sovereign debt and all manner of things which are structured and presented to get Germany, the Netherlands, Finland et al to pay for their shortcomings. “More Europe” in the troubled countries means that Germany and her amigos should foot the bill for the Continent while “More Europe” in the fiscally sound countries means control and oversight and domination if you will as exemplified by Ms. Merkel’s proposal that there be one central European approval office for all of the national budgets in Europe. A concept quickly rejected by France, Britain and a host of other countries. Think of a very expensive mid-day meal; lunch is over and everyone wants everyone else to pick up the check and so they sit there and politely banter and try to contrive schemes so that it will be anyone but them. The actuality is that the numbers have grown so large, the meal has become so expensive, that no one can pick up the bill without quite severe consequences.
Let’s focus on Greece for a moment. In two or three weeks Greece will run out of money. We have already done the “Public Sector Involvement” trick and the last bit of magic was the ECB handing money to the Greek banks who then bought private sovereign debt issued by Greece, got the bonds, then pledged the bonds back to the ECB and got their money back. This is how they did the short term funding of Greece while everyone winked and blinked and went on about their business. The actual truth is; a form of Eurobonds was used, just under the letterhead of the European Central Bank. Now however, the IMF has said they will not fund as Greece couldn’t pay the money she owes unless the goddess Hera shows up with some loot. The IMF has shorted the fuse box and they want the EU or the ECB to take an “Official Sector Involvement” hit which you may translate into “Debt Forgiveness” which would probably be the end of the governments in more than one Northern European nation. Europe then is faced with writing off the debt of Greece, never mind the fancy words, or having the ECB take the hit which would mean a recapitalization of the ECB as they only have $18 billion of paid-in capital or the IMF refusing to fund the next tranche of Greek aid which means that the European Stabilization Funds would have to pick up the bill and that local politics may collapse without the IMF’s participation.
In the case of Spain it is not Mr. Rajoy “assessing the situation” but a very concentrated effort to get “Euros for Nothing and Conchitas for Free.” Not only does Spain have several of its integral regions calling for succession but it has a regional debt problem exceeding $50 billion in my estimation and a bank problem that is several multiples of that. The Oliver Wyman bank stress tests had all of the validity of a three toed sloth residing in your living room as there was no verification, no audits and nothing but garbage pressed into the shredding machine and so “garbage in is garbage out” and let’s not deceive ourselves that it was anything else. Once again, one more time, we have an example of a country trying to get anyone else, everyone else, to pick up the bill because they cannot afford it. Germany, in the meantime, says that Spain does not need the money and so the bills go unpaid and the crisis worsens.
From Mark Grant, author of Out Of The Box
This is the piece I wrote on Friday afternoon.
Having had any number of questions since I wrote this I thought that it might be helpful to provide some further explanation. It is really a question of translation and some definition of “political-speak” because all of the wrangling in Europe now can get quite confusing and literal translations can lead you to incorrect conclusions. In Europe the old adage is firmly in play; “appearances can be deceiving.”“I would say that we have entered the crisis stage of Europe now. We have a stand-off between France and the southern nations, the troubled countries, in one corner and Germany, Austria, Finland and the Netherlands in the other. The last summit yielded nothing and worse than nothing because the two camps are worlds apart and sharply divided. They couldn't agree on the banking supervision issue. They have no agreed upon path for Spain, for Greece, for Cyprus, for Ireland or for Portugal. Germany has drawn a line in the concrete concerning legacy sovereign issues, legacy bank issues and Ms. Merkel has stated quite dramatically that Germany will not allow the new ESM to be used for old problems and that the individual nations will have to foot the bill for them. The "Muddle" is over in my opinion and the "Crisis" has now begun. The long, long road of "put it off" has reached its conclusion and there is no agreement and no compromise on how to proceed. We have finally reached the "Danger Zone" and I advise you to note the change!”
Grant’s Dictionary
Let’s start with the bank supervisor. Germany said no money for the banks without a European supervisor for the banks. France, Spain and the rest responded by saying fine then let’s have a bank supervisor in place and functioning by January 2013. The German response was not so fast and maybe by 2014 and maybe the ECB is not the right instrument and maybe not for all of the banks. On the surface you might think that these points are all distinct and separate but if you do; you are incorrect. The translation here is that Germany does not want to fund the European banks and so has set up a road block, a diversion, to stand in between “we will not fund the banks directly” and the desires of France and the rest who want a harmonized Europe where every country pays for everything for all of them; a socialized Europe. You see, the diversion is the bank supervisor and it allows Germany to thwart the desires of the needy countries without having to address the problem directly. It is a head fake and an effective one and it is just one of the instances where we are getting a quite clear Northern European response; “We will not fund.”
Did you think that Germany, Austria and the rest were going to just come right out and say, “We will not fund?” This is not the Simpsons you know and the politicians in Europe, think of them what you like, are not quite that stupid. As a matter of fact the only time the Germans have come right out and said “Nein” was concerning Eurobonds and that is because the stigma attached to them in Germany is so great that any German allowance of them would probably topple the government. Consequently, as in the case of the ECB and the “limitless” speech of Mr. Draghi; it is only limitless if the condition of EU approval is met and so if the condition never happens then there is no ECB bond buying at all. In each case there is a condition and Germany can manipulate the condition at will which prevents or stops the ECB bond purchasing or the direct funding of the European banks.
Please note that on the opposite side of the fence that the same type of strategy is in place. France, Spain, Italy, Cyprus and Greece are not going to come out and say, “We want the Germans to pick up the check for the financial difficulties of our countries” so that ask for Eurobonds, direct bank recapitalization, lines of credit from the ECB, bond buying by the ECB of their sovereign debt and all manner of things which are structured and presented to get Germany, the Netherlands, Finland et al to pay for their shortcomings. “More Europe” in the troubled countries means that Germany and her amigos should foot the bill for the Continent while “More Europe” in the fiscally sound countries means control and oversight and domination if you will as exemplified by Ms. Merkel’s proposal that there be one central European approval office for all of the national budgets in Europe. A concept quickly rejected by France, Britain and a host of other countries. Think of a very expensive mid-day meal; lunch is over and everyone wants everyone else to pick up the check and so they sit there and politely banter and try to contrive schemes so that it will be anyone but them. The actuality is that the numbers have grown so large, the meal has become so expensive, that no one can pick up the bill without quite severe consequences.
Let’s focus on Greece for a moment. In two or three weeks Greece will run out of money. We have already done the “Public Sector Involvement” trick and the last bit of magic was the ECB handing money to the Greek banks who then bought private sovereign debt issued by Greece, got the bonds, then pledged the bonds back to the ECB and got their money back. This is how they did the short term funding of Greece while everyone winked and blinked and went on about their business. The actual truth is; a form of Eurobonds was used, just under the letterhead of the European Central Bank. Now however, the IMF has said they will not fund as Greece couldn’t pay the money she owes unless the goddess Hera shows up with some loot. The IMF has shorted the fuse box and they want the EU or the ECB to take an “Official Sector Involvement” hit which you may translate into “Debt Forgiveness” which would probably be the end of the governments in more than one Northern European nation. Europe then is faced with writing off the debt of Greece, never mind the fancy words, or having the ECB take the hit which would mean a recapitalization of the ECB as they only have $18 billion of paid-in capital or the IMF refusing to fund the next tranche of Greek aid which means that the European Stabilization Funds would have to pick up the bill and that local politics may collapse without the IMF’s participation.
In the case of Spain it is not Mr. Rajoy “assessing the situation” but a very concentrated effort to get “Euros for Nothing and Conchitas for Free.” Not only does Spain have several of its integral regions calling for succession but it has a regional debt problem exceeding $50 billion in my estimation and a bank problem that is several multiples of that. The Oliver Wyman bank stress tests had all of the validity of a three toed sloth residing in your living room as there was no verification, no audits and nothing but garbage pressed into the shredding machine and so “garbage in is garbage out” and let’s not deceive ourselves that it was anything else. Once again, one more time, we have an example of a country trying to get anyone else, everyone else, to pick up the bill because they cannot afford it. Germany, in the meantime, says that Spain does not need the money and so the bills go unpaid and the crisis worsens.
Here is the issue of legacy liabilities. Here Germany has been fairly clear. The new ESM fund will not pick up the check and it is up to each country to pay for their own past problems. You may translate this piece of jargon into a “No” to Ireland that the ESM will not pick up the bill for the Irish banks and the same response for Spain. This new German definition puts Portugal, Greece, Spain and Ireland back at square one and effectively closes the door on any further negotiations. While all of this wrangling continues the tone at the summit was no longer the nicey-nice repartee of past meetings. Cyprus needs money, Spain needs money, Portugal probably needs more money and Greece is just about out of money. The summit was held, the meeting is over and the worth of any accomplishments is about at Zero as the only agreement was a plan to have a plan to deal with bank supervision. This is not an inch forward, this is not a millimeter forward; this is quicksand where they are all stuck as both money and time run out as the Socialists scream for alms while the landed gentry, utilizing head fakes and other polite deceptions, refuse to provide it. The clock is running, the cash is almost gone and make-believe will no longer suffice. The crisis phase, in my opinion, has been entered.“As long as there are individual national budgets, I regard the assumption of joint liability as inappropriate and from our point of view this isn’t up for debate...The Spanish government will be liable for paying back the loans to recapitalize its banks. Plans to give the Euro rescue fund the power to inject cash directly into banks won’t be made retroactive.”
-German Chancellor Merkel
“Heh, heh, heh! Lisa! Vampires are make-believe... like elves, gremlins and Eskimos.”
-Homer Simpson
martes, 9 de octubre de 2012
Global Economy: Some Bad News and Some Hope
Global Economy: Some Bad News and Some Hope:
By Olivier Blanchard
The world economic recovery continues, but it has weakened further. In advanced countries, growth is now too low to make a substantial dent in unemployment. And in major emerging countries, growth that had been strong earlier has also decreased.
Let me give you a few numbers from our latest projections in the October World Economic Outlook released in Tokyo.
Relative to the IMF’s forecasts last April, our growth forecasts for 2013 have been revised down from 1.8% to 1.5% for advanced countries, and from 5.8% down to 5.6% for emerging and developing countries.
The downward revisions are widespread. They are however stronger for two sets of countries–for the members of the euro area, where we now expect growth close to zero in 2013, and for three of the large emerging market economies, China, India, and Brazil.
Familiar story
The forces at work are for the most part familiar. Let me start with the advanced economies.
The main force pulling up growth is accommodative monetary policy. Central banks continue not only to maintain very low policy rates, but also to experiment with programs aimed at decreasing rates in particular markets, at helping particular categories of borrowers, or at helping financial intermediation in general.
But two forces continue to pull growth down—fiscal consolidation, and a still weak financial system.
In most countries, fiscal consolidation is proceeding according to plan. While this consolidation is needed, there is no question that it is weighing on demand, and the evidence increasingly suggests that, in the current environment, the fiscal multipliers are large—larger than in normal times.
The financial system is still not functioning efficiently. In many countries, more so in Europe than in the United States, banks are still weak, and their position is made worse by low growth. As a result, many borrowers still face tight borrowing conditions.
And more seems to be at work than these mechanical forces, call it a general feeling of uncertainty about the future. Worries about the ability of European policymakers to control the euro crisis, worries about the failure of U.S. policymakers to agree so far on a fiscal plan, worries about the ability of Japanese policymakers to reduce their budget deficit further–all appear to play an important role, although one which is hard to nail down.
Let me turn to emerging market and developing economies.
A constant theme of our IMF forecasts has been the degree to which the world economy is interconnected, be it through trade or through capital flows. And this time is no exception.
Low growth in advanced countries is affecting emerging and developing economies through exports. As was the case in 2009, trade channels are surprisingly strong, with, for example, lower exports accounting for most of the decrease in growth in China, and through supply chains, much of the decrease in growth in Asia.
Alternative risk-off and risk-on episodes, triggered by progress and regress on policy actions, are triggering volatile capital flows, in particular to Asia and to Latin America.
Adding to these are some home grown woes, policy uncertainty in India affecting domestic demand, tighter policies in Brazil in response to an earlier boom.
We do not see these developments as signs of a hard landing in any of these countries. Indeed, we see positive policy measures being taken in all three countries. But they suggest lower growth for some time, lower than we have seen in the recent past.
What should be done?
The general strategy is clear. Continue with accommodating monetary policy, which is a very powerful force for growth, and limit the adverse effects of the brakes holding things back. Continue with steady fiscal consolidation; our advice still holds: not too slow, not too fast. Continue to repair the financial system. Decrease policy uncertainty. In other words, deliver fiscal consolidation and maintain growth.
In the short run however, the main issue continues the state of the euro area, and this is what I shall concentrate my remaining remarks on.
Over the past few months, it is clear that there has been an important change in attitudes in the euro area, and the realization that an ambitious architecture must be put in place.
The lessons of the past few years are now clear: euro area countries can be hit by strong shocks. Weak banks can considerably amplify the adverse effects of these shocks. And, if it looks like the sovereign itself might be in trouble, sovereign/bank interactions can further worsen the outcome.
Thus a new architecture must aim at reducing the amplitude of the shocks in the first place; at putting in place a system of transfers to soften the effects of the shocks. It must aim at moving the supervision, the resolution, the recapitalization process of banks to the euro level.
It is good to see these issues being seriously explored, and some of these mechanisms being put together. In the short term however, more immediate measures are needed.
Spain and Italy must follow through with adjustment plans which reestablish competitiveness and fiscal balance, and maintain growth. To do so, they must be able to recapitalize their banks, if needed, without adding to their sovereign debt. And they must be able to borrow at reasonable rates. Most of these pieces are in the process of falling into in place, and if the complex puzzle can be rapidly completed, one can reasonably hope that the worst might be behind us.
If uncertainty is indeed partly behind the current slowdown, and if the adoption and implementation of these measures decrease it, things may turn out better than our forecasts, not only in Europe, but also in the rest of the world. The case for an upside scenario is a bit stronger than it has been for a while.
By Olivier BlanchardThe world economic recovery continues, but it has weakened further. In advanced countries, growth is now too low to make a substantial dent in unemployment. And in major emerging countries, growth that had been strong earlier has also decreased.
Let me give you a few numbers from our latest projections in the October World Economic Outlook released in Tokyo.
Relative to the IMF’s forecasts last April, our growth forecasts for 2013 have been revised down from 1.8% to 1.5% for advanced countries, and from 5.8% down to 5.6% for emerging and developing countries.
The downward revisions are widespread. They are however stronger for two sets of countries–for the members of the euro area, where we now expect growth close to zero in 2013, and for three of the large emerging market economies, China, India, and Brazil.
Familiar story
The forces at work are for the most part familiar. Let me start with the advanced economies.
The main force pulling up growth is accommodative monetary policy. Central banks continue not only to maintain very low policy rates, but also to experiment with programs aimed at decreasing rates in particular markets, at helping particular categories of borrowers, or at helping financial intermediation in general.
But two forces continue to pull growth down—fiscal consolidation, and a still weak financial system.
In most countries, fiscal consolidation is proceeding according to plan. While this consolidation is needed, there is no question that it is weighing on demand, and the evidence increasingly suggests that, in the current environment, the fiscal multipliers are large—larger than in normal times.
The financial system is still not functioning efficiently. In many countries, more so in Europe than in the United States, banks are still weak, and their position is made worse by low growth. As a result, many borrowers still face tight borrowing conditions.
And more seems to be at work than these mechanical forces, call it a general feeling of uncertainty about the future. Worries about the ability of European policymakers to control the euro crisis, worries about the failure of U.S. policymakers to agree so far on a fiscal plan, worries about the ability of Japanese policymakers to reduce their budget deficit further–all appear to play an important role, although one which is hard to nail down.
Let me turn to emerging market and developing economies.
A constant theme of our IMF forecasts has been the degree to which the world economy is interconnected, be it through trade or through capital flows. And this time is no exception.
Low growth in advanced countries is affecting emerging and developing economies through exports. As was the case in 2009, trade channels are surprisingly strong, with, for example, lower exports accounting for most of the decrease in growth in China, and through supply chains, much of the decrease in growth in Asia.
Alternative risk-off and risk-on episodes, triggered by progress and regress on policy actions, are triggering volatile capital flows, in particular to Asia and to Latin America.
Adding to these are some home grown woes, policy uncertainty in India affecting domestic demand, tighter policies in Brazil in response to an earlier boom.
We do not see these developments as signs of a hard landing in any of these countries. Indeed, we see positive policy measures being taken in all three countries. But they suggest lower growth for some time, lower than we have seen in the recent past.
What should be done?
The general strategy is clear. Continue with accommodating monetary policy, which is a very powerful force for growth, and limit the adverse effects of the brakes holding things back. Continue with steady fiscal consolidation; our advice still holds: not too slow, not too fast. Continue to repair the financial system. Decrease policy uncertainty. In other words, deliver fiscal consolidation and maintain growth.
In the short run however, the main issue continues the state of the euro area, and this is what I shall concentrate my remaining remarks on.
Over the past few months, it is clear that there has been an important change in attitudes in the euro area, and the realization that an ambitious architecture must be put in place.
The lessons of the past few years are now clear: euro area countries can be hit by strong shocks. Weak banks can considerably amplify the adverse effects of these shocks. And, if it looks like the sovereign itself might be in trouble, sovereign/bank interactions can further worsen the outcome.
Thus a new architecture must aim at reducing the amplitude of the shocks in the first place; at putting in place a system of transfers to soften the effects of the shocks. It must aim at moving the supervision, the resolution, the recapitalization process of banks to the euro level.
It is good to see these issues being seriously explored, and some of these mechanisms being put together. In the short term however, more immediate measures are needed.
Spain and Italy must follow through with adjustment plans which reestablish competitiveness and fiscal balance, and maintain growth. To do so, they must be able to recapitalize their banks, if needed, without adding to their sovereign debt. And they must be able to borrow at reasonable rates. Most of these pieces are in the process of falling into in place, and if the complex puzzle can be rapidly completed, one can reasonably hope that the worst might be behind us.
If uncertainty is indeed partly behind the current slowdown, and if the adoption and implementation of these measures decrease it, things may turn out better than our forecasts, not only in Europe, but also in the rest of the world. The case for an upside scenario is a bit stronger than it has been for a while.
domingo, 7 de octubre de 2012
China HSBC China Services PMI rises to 54.3 in Sep from 52
China HSBC China Services PMI rises to 54.3 in Sep from 52: FXstreet.com (Barcelona) For more information, read our latest forex news.
For more information, read our latest forex news.
For more information, read our latest forex news.
World Bank: A Risk that the Slowdown in China could get Worse and Last Longer than Expected.
World Bank: A Risk that the Slowdown in China could get Worse and Last Longer than Expected.:
The World Bank cut its economic growth forecasts for the East Asia and Pacific region on Monday and said there was a risk the slowdown in China could get worse and last longer than expected.
“China’s slowdown this year has been significant, and some fear it could still accelerate,” the World Bank said in its latest East Asia and Pacific Data Monitor, which was released in Singapore.
Ambitious investment plans announced by several local governments could face funding constraints, “not least because governments are feeling the pinch of a cooling real estate market, which lowers land sales revenues”, the international lender added.
China’s economy will likely expand by 7.7 percent this year, down from a May estimate of 8.2 percent, while the growth forecast for 2013 was cut to 8.1 percent from an earlier 8.6 percent.
via Reuters
The World Bank cut its economic growth forecasts for the East Asia and Pacific region on Monday and said there was a risk the slowdown in China could get worse and last longer than expected.
“China’s slowdown this year has been significant, and some fear it could still accelerate,” the World Bank said in its latest East Asia and Pacific Data Monitor, which was released in Singapore.
Ambitious investment plans announced by several local governments could face funding constraints, “not least because governments are feeling the pinch of a cooling real estate market, which lowers land sales revenues”, the international lender added.
China’s economy will likely expand by 7.7 percent this year, down from a May estimate of 8.2 percent, while the growth forecast for 2013 was cut to 8.1 percent from an earlier 8.6 percent.
via Reuters
domingo, 26 de agosto de 2012
Forex Flash: China GDP forecast downgraded - HSBC
Forex Flash: China GDP forecast downgraded - HSBC: FXstreet.com (Barcelona) - China's latest data flows suggested that the global headwinds facing...
For more information, read our latest forex news.
For more information, read our latest forex news.
Which Asset Classes Are Most Vulnerable To 'Policy' Disappointment?
Which Asset Classes Are Most Vulnerable To 'Policy' Disappointment?:
The lull in market activity over the past weeks is poised to give way to a multitude of events that could potentially determine the market direction for the remainder of the year. Policy responses from both sides of the Atlantic are awaited, though nuances rather than headlines may be more important. In the short run however, Deutsche Bank notes some indicators suggest that risky assets may be vulnerable. Specifically, relative to fundamentals they also find that the US equity rally over the past quarter has now been excessive relative to the US economic leading indicators. Looking at cross asset valuations by comparing the level of asset prices today vs. their peaks and troughs since Sep-2008 we also find that the S&P500 appears to be the richest relative to fundamentals.
Deutsche Bank: The cross asset view: Equities could be vulnerable in the short term
In the table below, we calculate a ‘pointer’ for each asset, corresponding to the position of today’s price relative to its historical peak and trough. A pointer equal to 0% means that the current price is equal to the historical trough, a pointer equal to 100% means the current price is equal to the historical peak. We use the pointer of the global PMI Composite as a benchmark (pointer of 68.5%). In this simple framework, assets with a pointer above/below this level have under-reacted or over-reacted to the deterioration of global fundamentals.
For the market to move further into a risk-on mode from current levels, positive developments regarding one or more of the following issues would be required:
The lull in market activity over the past weeks is poised to give way to a multitude of events that could potentially determine the market direction for the remainder of the year. Policy responses from both sides of the Atlantic are awaited, though nuances rather than headlines may be more important. In the short run however, Deutsche Bank notes some indicators suggest that risky assets may be vulnerable. Specifically, relative to fundamentals they also find that the US equity rally over the past quarter has now been excessive relative to the US economic leading indicators. Looking at cross asset valuations by comparing the level of asset prices today vs. their peaks and troughs since Sep-2008 we also find that the S&P500 appears to be the richest relative to fundamentals.
Deutsche Bank: The cross asset view: Equities could be vulnerable in the short term
In the table below, we calculate a ‘pointer’ for each asset, corresponding to the position of today’s price relative to its historical peak and trough. A pointer equal to 0% means that the current price is equal to the historical trough, a pointer equal to 100% means the current price is equal to the historical peak. We use the pointer of the global PMI Composite as a benchmark (pointer of 68.5%). In this simple framework, assets with a pointer above/below this level have under-reacted or over-reacted to the deterioration of global fundamentals.
For the market to move further into a risk-on mode from current levels, positive developments regarding one or more of the following issues would be required:
- Spain will need to make a formal application for the aid program, which, as Draghi mentioned, is a necessary though not sufficient condition for bond purchases by the ECB
- Political developments in Italy signaling an intention to follow Spain in seeking aid via the ECB/EFSF/ESM bond buying program
- Further clarity on the mechanism of ECB bond purchases: whether the ECB would target yields levels or pre-commit a potential size of asset purchases. Setting an explicit cap on yields could be politically contentious as it commits the ECB, at least theoretically, to unlimited bond purchases. In addition, a justification of the level of cap would be onerous
- Draghi mentioned that the ECB is working to address the seniority issue of ECB bond purchases, though exact details are yet to be specified. Ultimately, there will always be a risk that, in extreme situations, ECB does not fulfill its pledge of not being explicitly senior. The ECB could nevertheless make its commitment more credible by either (1) an explicit specification of the parri-passu nature of the purchases via a guarantee from the EFSF/ESM for any ECB on these purchases or (2) by retroactively being more supportive of the Greek PSI by allowing T-bill issuance refinanced at the Greek central bank to pay for redemption of bonds held by the ECB
- Resolution over the Greek negotiations: We maintain the view that a compromise agreement between Greece and the EU leaders is likely to be reached, with more time to Greece for fiscal adjustments. Recent political commentary does appear to suggest that a compromise may be feasible. Implementation, however, will continue to remain a concern, and Greece’s adherence to fiscal plans may be revisited again in the future.
- 30th August: Italian BTP auction
- 31st August: Bernanke’s Jackson Hole speech
- 6th September: Spanish bond auction
- 6th September: ECB meeting
- 6th September: Meeting between Rajoy and Merkel
- 12th September: German constitutional court ruling on the ESM
- 12th September: Dutch elections
- 12th/13th September: Fed meeting
- 14/15th September: EcoFin meeting
The soy price shock in the US will reverberate across China
The soy price shock in the US will reverberate across China:
The Chicago Board of Trade soy futures hit a new record Sunday evening as attention now shifts from corn to soy. Traders are coming to the realization that soy supply may not last long enough to be replenished by crops from South America.
Again, a number of analysts continue to argue that the North American drought should not have a significant impact on Asia. That is just not true. Some economists simply don't appreciate just how global agricultural markets have become.
The Chicago Board of Trade soy futures hit a new record Sunday evening as attention now shifts from corn to soy. Traders are coming to the realization that soy supply may not last long enough to be replenished by crops from South America.
Bloomberg: - “Corn was the story going into the crop tour and now soybeans are the story after leaving the fields this week,” Peter Meyer, a senior director of agriculture commodities at PIRA Energy Group in New York, said in an interview in Owatonna, Minnesota, after completing his sixth Pro Farmer tour. “Mother Nature shut down the soybean crop well before it reached its potential. The U.S. may run out of soybeans before the start of the South America harvests in February.”
 |
| Soy nearby contract (Bloomberg) |
Bloomberg: - China, the world’s largest buyer and consumer, purchased 165,000 metric tons of soybeans and 55,000 tons of soybean oil from the U.S., the USDA reported yesterday. China may import a record 59.5 million tons of soybeans in the year that begins Oct. 1, the agency said Aug. 10.Tight global supply of soy will translate into government subsidies and/or food inflation in China and elsewhere in Asia. Fear of food inflation is one of the reasons China has not been as aggressive with its stimulus programs in spite of slowing economy. Here is a quote from the LA Times that describes how these skyrocketing soy prices will reverberate across China.
World soybean supplies may shrink by 33 million to 35 million tons in September to February, compared with a year earlier, forcing China to reduce imports by 4 million tons, researcher Oil World said Aug. 21.
LA Times: - Construction laborer Yi Jichun has never heard of Illinois or Iowa. But the migrant worker's favorite comfort food comes straight out of the U.S. Midwest: soybean oil.
The world's biggest consumers of edible oils, Chinese households have developed a taste for the stuff that would make a county fair fry cook proud. Be it a simple stir-fry, poached fish or deep-fried pork ribs, many Chinese diners love their grub covered in an oily sheen. Jugs of the golden liquid make popular gifts for Chinese New Year.
"Without the oil, it would taste too plain," Yi said as he tucked into a lunch of sliced cucumbers and chicken drumsticks slathered with grease. "I wouldn't want to finish it."
And that has officials in Beijing worried. The worst U.S. drought in half a century is sending global grain prices soaring. The fallout is almost certain to be felt at dinner tables across China. The No. 1 foreign buyer of American soybeans, which are pressed into cooking oil and used for animal feed, China last year purchased about half of U.S. exports, more than $10.4 billion worth, according to the American Soybean Assn. China has also stepped up purchases of U.S. corn and wheat to feed the nation's growing appetite.
Poor U.S. harvests could fuel Chinese food inflation and social discontent. China has already begun tapping its grain reserves to ensure price stability. The government has ordered the nation's biggest cooking oil producers twice in recent months to keep their prices in check. And it's scouring the globe for alternative supplies.
It won't be easy. More than two-thirds of cooking oil consumed in China comes from soybeans, and most of those soybeans are supplied by the U.S., according to Ma Wenfeng, an analyst with Beijing Orient Agribusiness Consultant Co. For now, Chinese consumers are bound to the fortunes of farmers in the American heartland.
"Soybean oil is the most important edible oil in China ... which makes us vulnerable to the drought" gripping the U.S., Ma said.
SoberLook.com
www.SoberLook.com
The Next 21 Days
The Next 21 Days:
Bloomberg.com – ECB Said to Await German ESM Ruling Before Settling Plan
European Central Bank President Mario Draghi may wait until Germany’s Constitutional Court rules on the legality of Europe’s permanent bailout fund before unveiling full details of his plan to buy government bonds, two central bank officials said. With the court set to rule on Sept. 12, investors looking for Draghi to announce a definitive purchase program at his Sept. 6 press conference might be disappointed, according to the officials, who spoke on condition of anonymity because the deliberations are not public. The program is still being worked on and staff may not be able to finalize it by then, said the officials, who are familiar with thinking on the ECB Governing Council. An ECB spokesman in Frankfurt declined to comment.
Bloomberg.com – Dutch Elections Risk Muddying Merkel’s Crisis-Fighting Efforts
Next month’s Dutch elections risk complicating Europe’s efforts to resolve its debt crisis, with the coalition government that emerges likely to reflect both anti-European sentiment and resistance to more austerity. A third of Dutch voters in the run-up to the Sept. 12 vote back the Socialists, who oppose more spending cuts and refuse to hand over more sovereignty to Europe, or the Freedom Party, which seeks an exit from the European Union and the euro. That will make it tough for caretaker Prime Minister Mark Rutte’s Liberals to find support from perhaps three or four parties for a majority in parliament and keep cutting the deficit.
Comment
The quiet summer is about to give way to a three week period that will settle a lot of things. Consider:
Right now the odds of Obama winning the election are 57% on Intrade. According to Gallup, his approval rating is still below 50. So while he is leading, it is not a comfortable lead.
Next week is the Republican convention (starts Monday in Tampa, which is now under a hurricane watch). A week after that is the Democratic convention. If history is a guide (see the “D” and “R” on the chart below), a week after the last convention we should expect to see one of the candidates take a more commanding lead in the polls.
Click to enlarge:
Source: Bianco Research
Bloomberg.com – ECB Said to Await German ESM Ruling Before Settling Plan
European Central Bank President Mario Draghi may wait until Germany’s Constitutional Court rules on the legality of Europe’s permanent bailout fund before unveiling full details of his plan to buy government bonds, two central bank officials said. With the court set to rule on Sept. 12, investors looking for Draghi to announce a definitive purchase program at his Sept. 6 press conference might be disappointed, according to the officials, who spoke on condition of anonymity because the deliberations are not public. The program is still being worked on and staff may not be able to finalize it by then, said the officials, who are familiar with thinking on the ECB Governing Council. An ECB spokesman in Frankfurt declined to comment.
Bloomberg.com – Dutch Elections Risk Muddying Merkel’s Crisis-Fighting Efforts
Next month’s Dutch elections risk complicating Europe’s efforts to resolve its debt crisis, with the coalition government that emerges likely to reflect both anti-European sentiment and resistance to more austerity. A third of Dutch voters in the run-up to the Sept. 12 vote back the Socialists, who oppose more spending cuts and refuse to hand over more sovereignty to Europe, or the Freedom Party, which seeks an exit from the European Union and the euro. That will make it tough for caretaker Prime Minister Mark Rutte’s Liberals to find support from perhaps three or four parties for a majority in parliament and keep cutting the deficit.
Comment
The quiet summer is about to give way to a three week period that will settle a lot of things. Consider:
Right now the odds of Obama winning the election are 57% on Intrade. According to Gallup, his approval rating is still below 50. So while he is leading, it is not a comfortable lead.
Next week is the Republican convention (starts Monday in Tampa, which is now under a hurricane watch). A week after that is the Democratic convention. If history is a guide (see the “D” and “R” on the chart below), a week after the last convention we should expect to see one of the candidates take a more commanding lead in the polls.
Click to enlarge:
- On August 31 Bernanke speaks in Jackson Hole. The Federal Reserve always tells us nothing ofpolicy substance will be in the speech. Last year Bernanke laid out Operation Twist and two years ago he laid out QE2. So, we’ll see.
- On September 6 the ECB governing council meets. Draghi was expected to detail his “whatever it takes” bond purchase program. But, as the story above says, this might be put on hold until September 12 (below).
- On September 7 the always-important payroll report will be released.
- On September 12 the German court rules on the constitutionality of the eurozone’s permanent rescue fund. This ruling is critical to Europe.
- On September 12 the Dutch election could have big implications on all of Europe, as noted above.
- The September 12/13 FOMC meeting is shaping up as the make-or-break moment for QE3. At this meeting the FOMC members update their forecasts and Bernanke holds a press conference. These events lend themselves well to policy changes (adding QE3), which is another reason many expect action at this meeting. Additionally, the next meeting is not until late October and that is perceived to be too close to the election.
Source: Bianco Research
The Up-To-The-Minute Guide For Understanding Europe
The Up-To-The-Minute Guide For Understanding Europe:
From Mark Grant, author of Out of the Box
THE UP-TO-THE-MINUTE GUIDE FOR UNDERSTANDING EUROPE
From the Merriam-Webster Dictionary: "To express in different terms and especially different words: Paraphrase (2): to express in more comprehensible terms: Explain, Interpret"
EUROSPEAK:
“I hail, I congratulate”—little or no meaning; words spoken by every politician in Europe when someone does something, anything and has an actual value of about zero. A reference to Roman times where Caesar hailed the conquering heroes which is a species that has been extinct on the Continent for some years now.
“I (we) will do everything to save the Euro”---we got ourselves into this mess and we will try to do something/anything to get out of it; rhetoric, hyperbole and more zero value talk. I am the head of the European Central Bank and this sentence was found in Chapter 18, paragraph three, “what to say to the Press when you have run out of things to say.” Chapter 18, paragraph four, by the way, is “divine right” and “the full support of God” so you may expect this shortly.
“End corruption, a more efficient tax system, sell government assets, debt to GDP ratio by (pick a date/any date), stop government waste, just asking for a delay, need more time, extension”---these are all Greekspeak for “Give us more money” and no other meaning should be appended to these phrases. These are all terms of the first sentence and then since any/all might be granted the second sentence will be since this or that has been granted that more money will be required to get there (about $50 billion at the present time).
“The debt to GDP ratio (pick a country/any country) will be X by the year (pick a year/any year)” has no bearing to anything in the real world and is not a mathematically based conclusion. These statements are manufactured by the IMF and created in the special secret room there built by Walt Disney & Co.
An example of practical usage:
“We will decide after we have seen the Troika report.”---Is it cheaper to give them another $50 billion or tell them “no more money?” If we give them more money they will ask for another $50 billion in three months and we have elections coming up. We must balance the economic cost against the political cost. I like being Chancellor and don’t intend to lose the job because of the idiots in Athens.
“It is a great victory for Europe…we are not negotiating with either the IMF or the EU…the money is for the banks and not the country…we have valued the Real Estate correctly…the numbers are accurate;” all from the Prime Minister of Spain. Here we have proof positive that Spain is a major drug producing country. They are not only producing various white powders but strong hypnotics, hallucinogens and other mind altering substances. Don Quixote has been found in Valencia and he is living with Timothy O’Leary and Elvis has returned to the house.
“We will raise the tax on the rich to 75%...we will increase Real Estate taxes for anyone that has had some success...all new taxes will be retroactive…everyone making any money will have to give most of it to everyone else so they can sit in the cafes and enjoy the croissants.” The President of France once took a course in economics at the Acadamie du Comedie but flunked it which is not public information and protected by the French courts. It turned out that the professor was from Marseilles and Hollande could not understand his accent. “Let them eat cake” worked for Marie Antoinette and it might work again. Where is Robespierre when we need him? Find Madame Defarge and offer her the Finance Ministry.
“There will be no Referendum in Britain.” I know the country is a democracy but as Prime Minister this is an inappropriate question. The people in Dover and Manchester can’t spell Referendum much less understand what it means. The British people hated taking Latin in school and it is bad politics to remind them of the experience. I won’t get invited anymore to the fancy dinners in Brussels and our laws don’t allow for Champagne on the dinner vouchers. Britain doesn’t make any decent red wines and I will be cut-off and have to suffer. I am not a “Bangers and Mash” kind of chap.
“Mark Grant is writing mischievous comments.” This was found on the official government website of Ireland eighteen days before they went bankrupt. This phrase may soon appear on the Spanish website (“Mark Grant está escribiendo comentarios maliciosos”) and after that perhaps on the Italian website (“Mark Grant scrive commenti maliziosi”). The translation of “mischievous” here is quite tricky. It means reading the writing on the wall, utilizing the complex mathematical propositions of addition and subtraction, having a rational basis for a conclusion and stating the obvious when those in power do not wish to hear it. [Please refer to “Eurospeak for Foreign Dummies” for a further explanation.]
“I want Greece to remain part of the Eurozone…”---Merkel, Hollande, Rajoy, Cameron, Kenney, Coelho, Katainen et al. This phrase is taken from the movie, “The Wizard of Oz,” and is generally attributed to Judy Garland and her famous song, “Somewhere over the Rainbow.”
Someday I'll wish upon a star
And wake up where the clouds are far behind me.
Where troubles melt like lemon drops,
High above the chimney tops,
That's where you'll find me.
"We are not asking for more money. We are asking for air to breathe as we plunge to the depths."
-Greek Prime Minister Antonis Samaras on August 24, 2012
Here we have the new revival, the newest rendition of the Trojan horse; the play made famous by Odysseus, the famous Greek actor. It is a time tested Athens stratagem where, having gained admission, Pandora’s Box is unleashed. You will recall Virgil's famous line "Timeo Danaos et dona ferentes" (I fear Greeks even those bearing gifts). So it is not all Greek to you; the correct translation of Mr. Samaras’ comment is “Knock, Knock; Please let me in.”
"I don’t envisage, not even for one second, Greece leaving the euro area. This is nonsense. This is propaganda. We have to respect Greek democracy…
and
"When it becomes serious, you have to lie."
-Jean-Claude Juncker
No translation necessary
From Mark Grant, author of Out of the Box
THE UP-TO-THE-MINUTE GUIDE FOR UNDERSTANDING EUROPE
From the Merriam-Webster Dictionary: "To express in different terms and especially different words: Paraphrase (2): to express in more comprehensible terms: Explain, Interpret"
EUROSPEAK:
“I hail, I congratulate”—little or no meaning; words spoken by every politician in Europe when someone does something, anything and has an actual value of about zero. A reference to Roman times where Caesar hailed the conquering heroes which is a species that has been extinct on the Continent for some years now.
“I (we) will do everything to save the Euro”---we got ourselves into this mess and we will try to do something/anything to get out of it; rhetoric, hyperbole and more zero value talk. I am the head of the European Central Bank and this sentence was found in Chapter 18, paragraph three, “what to say to the Press when you have run out of things to say.” Chapter 18, paragraph four, by the way, is “divine right” and “the full support of God” so you may expect this shortly.
“End corruption, a more efficient tax system, sell government assets, debt to GDP ratio by (pick a date/any date), stop government waste, just asking for a delay, need more time, extension”---these are all Greekspeak for “Give us more money” and no other meaning should be appended to these phrases. These are all terms of the first sentence and then since any/all might be granted the second sentence will be since this or that has been granted that more money will be required to get there (about $50 billion at the present time).
“The debt to GDP ratio (pick a country/any country) will be X by the year (pick a year/any year)” has no bearing to anything in the real world and is not a mathematically based conclusion. These statements are manufactured by the IMF and created in the special secret room there built by Walt Disney & Co.
An example of practical usage:
“We are waiting for the Troika report.”---Of course we have seen the Troika report. It makes you want to throw up. We have everyone from the Finance Ministry to the janitor looking at it trying to figure out if there is anything at all that can be spun positively without invoking laughter in the Press. We have sent it to every government on the Continent and so far the best suggestion has been to use it for wallpaper in the lieu. We are using the computer at the Particle Accelerator in Cern, Switzerland in hopes that they can find something and the process time ends October 16 so we are waiting until then to make any announcements.“Christine what number should we use this time?”
“I don’t know Angela what does Mario think?”
“To which Mario are you referring Christine?”
“Do you think it really matters Angela?”
“Where is the Ouija Board anyway?”
“We will decide after we have seen the Troika report.”---Is it cheaper to give them another $50 billion or tell them “no more money?” If we give them more money they will ask for another $50 billion in three months and we have elections coming up. We must balance the economic cost against the political cost. I like being Chancellor and don’t intend to lose the job because of the idiots in Athens.
“It is a great victory for Europe…we are not negotiating with either the IMF or the EU…the money is for the banks and not the country…we have valued the Real Estate correctly…the numbers are accurate;” all from the Prime Minister of Spain. Here we have proof positive that Spain is a major drug producing country. They are not only producing various white powders but strong hypnotics, hallucinogens and other mind altering substances. Don Quixote has been found in Valencia and he is living with Timothy O’Leary and Elvis has returned to the house.
“We will raise the tax on the rich to 75%...we will increase Real Estate taxes for anyone that has had some success...all new taxes will be retroactive…everyone making any money will have to give most of it to everyone else so they can sit in the cafes and enjoy the croissants.” The President of France once took a course in economics at the Acadamie du Comedie but flunked it which is not public information and protected by the French courts. It turned out that the professor was from Marseilles and Hollande could not understand his accent. “Let them eat cake” worked for Marie Antoinette and it might work again. Where is Robespierre when we need him? Find Madame Defarge and offer her the Finance Ministry.
“There will be no Referendum in Britain.” I know the country is a democracy but as Prime Minister this is an inappropriate question. The people in Dover and Manchester can’t spell Referendum much less understand what it means. The British people hated taking Latin in school and it is bad politics to remind them of the experience. I won’t get invited anymore to the fancy dinners in Brussels and our laws don’t allow for Champagne on the dinner vouchers. Britain doesn’t make any decent red wines and I will be cut-off and have to suffer. I am not a “Bangers and Mash” kind of chap.
“Mark Grant is writing mischievous comments.” This was found on the official government website of Ireland eighteen days before they went bankrupt. This phrase may soon appear on the Spanish website (“Mark Grant está escribiendo comentarios maliciosos”) and after that perhaps on the Italian website (“Mark Grant scrive commenti maliziosi”). The translation of “mischievous” here is quite tricky. It means reading the writing on the wall, utilizing the complex mathematical propositions of addition and subtraction, having a rational basis for a conclusion and stating the obvious when those in power do not wish to hear it. [Please refer to “Eurospeak for Foreign Dummies” for a further explanation.]
“I want Greece to remain part of the Eurozone…”---Merkel, Hollande, Rajoy, Cameron, Kenney, Coelho, Katainen et al. This phrase is taken from the movie, “The Wizard of Oz,” and is generally attributed to Judy Garland and her famous song, “Somewhere over the Rainbow.”
Someday I'll wish upon a star
And wake up where the clouds are far behind me.
Where troubles melt like lemon drops,
High above the chimney tops,
That's where you'll find me.
"We are not asking for more money. We are asking for air to breathe as we plunge to the depths."
-Greek Prime Minister Antonis Samaras on August 24, 2012
Here we have the new revival, the newest rendition of the Trojan horse; the play made famous by Odysseus, the famous Greek actor. It is a time tested Athens stratagem where, having gained admission, Pandora’s Box is unleashed. You will recall Virgil's famous line "Timeo Danaos et dona ferentes" (I fear Greeks even those bearing gifts). So it is not all Greek to you; the correct translation of Mr. Samaras’ comment is “Knock, Knock; Please let me in.”
"I don’t envisage, not even for one second, Greece leaving the euro area. This is nonsense. This is propaganda. We have to respect Greek democracy…
and
"When it becomes serious, you have to lie."
-Jean-Claude Juncker
No translation necessary
GM Seeks Bigger Credit Line To Shrink Pension Obligations; Déjà Vu Pension Woes
GM Seeks Bigger Credit Line To Shrink Pension Obligations; Déjà Vu Pension Woes: Going into debt to fund pensions seems like a ridiculous thing to do, especially for a company had a chance to shed more of those pension obligations in bankruptcy.
Please consider the Wall Street Journal story GM Wants to Up Credit Line
On June 1, 2012 the Chicago Tribune reported GM to cut about one-fourth of U.S. pension liability
Inquiring minds investigating GM's Balance sheet will notice about $32 billion in cash, $11 billion in securities, and another $11 billion or so in accounts receivable.
However, GM has $10 billion in long-term debt and another $43 billion in other liabilities. Current liabilities are roughly $56 billion. Total Liabilities are $110 billion of which at least $31 billion are pension and retirement benefits.
Assets include a very questionable $28 billion in goodwill, and a questionable $25 billion in property.
The balance sheet above does not seem to match the Tribune's calculation of $83 billion in pension liabilities (109-26). The $109 billion figure does match total liabilities.
Déjà Vu Pension Woes
Borrowing $5 billion to shore up its pension plan certainly would have worked well in 2009. However, GM wants to do it now, a foolish undertaking in my opinion.
Pension obligations helped sink GM the first time, and it may happen again, especially if GM borrows money to throw at the stock market. If stocks decline and auto sales decline as well, GM will be in serious trouble once again.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Please consider the Wall Street Journal story GM Wants to Up Credit Line
General Motors Co. is in preliminary talks with banks to potentially double its $5 billion line of credit as the auto maker looks to strengthen its balance sheet and shrink pension obligations, according to people with knowledge of the discussions.GM's Pension Liabilities
The world's largest auto maker by sales is in no danger of running short on cash. The Detroit company has very little debt and held about $33 billion in available cash at June 30. Analysts believe it needs roughly $20 billion to operate comfortably. It currently has an available line of credit of $5 billion.
But GM could have hefty cash needs ahead. Its European operations are racking up major losses, it is increasing capital spending on new vehicles, and it may want to repurchase shares held by the U.S. Treasury. GM also wants to reduce its U.S. pension obligations. Pensions for hourly, union workers and retirees are underfunded by about $10 billion and have been a major concern for investors.
GM is spending around $4 billion to shift responsibility of its $26 billion salaried retiree pension program to Prudential Financial Inc. PRU +1.52% in a deal set to close by year-end. A bigger drag on the company is the $71 billion in pension obligations it has to union-represented hourly workers and retirees. That account is underfunded by $10 billion, according to public filings.
On June 1, 2012 the Chicago Tribune reported GM to cut about one-fourth of U.S. pension liability
General Motors Co will cut nearly a quarter of its U.S. pension obligation by transferring the management of its pension plans for 118,000 white-collar retirees to a third party and offering lump-sum buyouts.GM's Balance Sheet
The two moves unveiled on Friday will cut $26 billion from the automaker's massive U.S. pension liability of nearly $109 billion. GM's pension overhang is a top concern for investors. It was one of a handful of issues left untouched during GM's U.S.-financed bankruptcy restructuring three years ago.
UAW PENSIONS IN FOCUS
A growing concern for decades as U.S. automakers lost market share to foreign-based automakers in their home country, pension costs became an albatross for the U.S. industry with the sector's downturn five years ago.
Inquiring minds investigating GM's Balance sheet will notice about $32 billion in cash, $11 billion in securities, and another $11 billion or so in accounts receivable.
However, GM has $10 billion in long-term debt and another $43 billion in other liabilities. Current liabilities are roughly $56 billion. Total Liabilities are $110 billion of which at least $31 billion are pension and retirement benefits.
Assets include a very questionable $28 billion in goodwill, and a questionable $25 billion in property.
The balance sheet above does not seem to match the Tribune's calculation of $83 billion in pension liabilities (109-26). The $109 billion figure does match total liabilities.
Déjà Vu Pension Woes
Borrowing $5 billion to shore up its pension plan certainly would have worked well in 2009. However, GM wants to do it now, a foolish undertaking in my opinion.
Pension obligations helped sink GM the first time, and it may happen again, especially if GM borrows money to throw at the stock market. If stocks decline and auto sales decline as well, GM will be in serious trouble once again.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
GM Seeks Bigger Credit Line To Shrink Pension Obligations; Déjà Vu Pension Woes
GM Seeks Bigger Credit Line To Shrink Pension Obligations; Déjà Vu Pension Woes: Going into debt to fund pensions seems like a ridiculous thing to do, especially for a company had a chance to shed more of those pension obligations in bankruptcy.
Please consider the Wall Street Journal story GM Wants to Up Credit Line
On June 1, 2012 the Chicago Tribune reported GM to cut about one-fourth of U.S. pension liability
Inquiring minds investigating GM's Balance sheet will notice about $32 billion in cash, $11 billion in securities, and another $11 billion or so in accounts receivable.
However, GM has $10 billion in long-term debt and another $43 billion in other liabilities. Current liabilities are roughly $56 billion. Total Liabilities are $110 billion of which at least $31 billion are pension and retirement benefits.
Assets include a very questionable $28 billion in goodwill, and a questionable $25 billion in property.
The balance sheet above does not seem to match the Tribune's calculation of $83 billion in pension liabilities (109-26). The $109 billion figure does match total liabilities.
Déjà Vu Pension Woes
Borrowing $5 billion to shore up its pension plan certainly would have worked well in 2009. However, GM wants to do it now, a foolish undertaking in my opinion.
Pension obligations helped sink GM the first time, and it may happen again, especially if GM borrows money to throw at the stock market. If stocks decline and auto sales decline as well, GM will be in serious trouble once again.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Please consider the Wall Street Journal story GM Wants to Up Credit Line
General Motors Co. is in preliminary talks with banks to potentially double its $5 billion line of credit as the auto maker looks to strengthen its balance sheet and shrink pension obligations, according to people with knowledge of the discussions.GM's Pension Liabilities
The world's largest auto maker by sales is in no danger of running short on cash. The Detroit company has very little debt and held about $33 billion in available cash at June 30. Analysts believe it needs roughly $20 billion to operate comfortably. It currently has an available line of credit of $5 billion.
But GM could have hefty cash needs ahead. Its European operations are racking up major losses, it is increasing capital spending on new vehicles, and it may want to repurchase shares held by the U.S. Treasury. GM also wants to reduce its U.S. pension obligations. Pensions for hourly, union workers and retirees are underfunded by about $10 billion and have been a major concern for investors.
GM is spending around $4 billion to shift responsibility of its $26 billion salaried retiree pension program to Prudential Financial Inc. PRU +1.52% in a deal set to close by year-end. A bigger drag on the company is the $71 billion in pension obligations it has to union-represented hourly workers and retirees. That account is underfunded by $10 billion, according to public filings.
On June 1, 2012 the Chicago Tribune reported GM to cut about one-fourth of U.S. pension liability
General Motors Co will cut nearly a quarter of its U.S. pension obligation by transferring the management of its pension plans for 118,000 white-collar retirees to a third party and offering lump-sum buyouts.GM's Balance Sheet
The two moves unveiled on Friday will cut $26 billion from the automaker's massive U.S. pension liability of nearly $109 billion. GM's pension overhang is a top concern for investors. It was one of a handful of issues left untouched during GM's U.S.-financed bankruptcy restructuring three years ago.
UAW PENSIONS IN FOCUS
A growing concern for decades as U.S. automakers lost market share to foreign-based automakers in their home country, pension costs became an albatross for the U.S. industry with the sector's downturn five years ago.
Inquiring minds investigating GM's Balance sheet will notice about $32 billion in cash, $11 billion in securities, and another $11 billion or so in accounts receivable.
However, GM has $10 billion in long-term debt and another $43 billion in other liabilities. Current liabilities are roughly $56 billion. Total Liabilities are $110 billion of which at least $31 billion are pension and retirement benefits.
Assets include a very questionable $28 billion in goodwill, and a questionable $25 billion in property.
The balance sheet above does not seem to match the Tribune's calculation of $83 billion in pension liabilities (109-26). The $109 billion figure does match total liabilities.
Déjà Vu Pension Woes
Borrowing $5 billion to shore up its pension plan certainly would have worked well in 2009. However, GM wants to do it now, a foolish undertaking in my opinion.
Pension obligations helped sink GM the first time, and it may happen again, especially if GM borrows money to throw at the stock market. If stocks decline and auto sales decline as well, GM will be in serious trouble once again.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
martes, 14 de agosto de 2012
The Economic 'Recovery' In Historical Context
The Economic 'Recovery' In Historical Context:
How does the current 'recovery', which according to the NBER officially began in June 2009, compare to those of the past? The Council on Foreign Relations updates its recovery chartbook and succinctly notes that "the current recovery remains an outlier among post-war recoveries along several dimensions." Consumers remain reluctant to take on new debt and the stock of debt is lower than it was when the recovery officially began. The global economic slowdown is beginning to manifest itself in world trade. After staging the strongest recovery of the post–World War II era, growth in world trade has begun to decelerate.
How does the current 'recovery', which according to the NBER officially began in June 2009, compare to those of the past? The Council on Foreign Relations updates its recovery chartbook and succinctly notes that "the current recovery remains an outlier among post-war recoveries along several dimensions." Consumers remain reluctant to take on new debt and the stock of debt is lower than it was when the recovery officially began. The global economic slowdown is beginning to manifest itself in world trade. After staging the strongest recovery of the post–World War II era, growth in world trade has begun to decelerate.
- Real GDP is growing, but less rapidly than in any other postwar recovery.
- Thirty-six months after the start of the economic recovery, GDP is only 6.7 percent higher than it was when the recovery officially began.
- As of the second quarter of this year, real GDP is 1.7 percent above its pre-crisis peak, having first surpassed this peak in the fourth quarter of 2011.
- Although housing starts have recently recovered, nominal home prices have yet to follow.
- Soft home prices have been central to the weakness of the recovery. Prices have continued to fall even after the recession officially ended.
- The continued weakness of nominal home prices is a postwar anomaly.
- In every previous postwar recovery, the stock of household debt has risen as the recovery has begun.
- In the current recovery, the collapse in home prices has severely damaged household balance sheets. As a result, consumers have avoided taking on new debt.
- The result is weak consumer demand and a slow recovery.
- The relative weakness of this recovery is obvious in the labor market.
- Job losses continued throughout the first eight months of the recovery.
- Payrolls have increased for the past twenty-two consecutive months, but there are still five million fewer Americans on nonfarm payrolls than there were at the start of 2008.
- Because of the depth of the recent recession, one might expect stronger-than-average improvement in industrial production.
- Despite the predicted snapback, the increase in industrial production during this recovery has been fairly typical of postwar recoveries.
- Capacity in manufacturing, mining, and electric and gas utilities usually grows steadily from the start of a recovery; however, during the current recovery, investment was initially so slow that capacity declined.
- Since the start of last year, this trend has reversed itself and industrial capacity has been steadily rising.
- The pace of growth in world trade has slowed in recent months as global economic growth has decelerated.
- World trade volume initially recovered more quickly than in any other post–World War II recovery; however, this reflected the depth of the fall during the recession.
- The federal deficit was much larger at the start of this recovery than it was in any other postwar recovery.
- Although the deficit as a percent of GDP has shrunk slightly, its level creates significant challenges for policymakers and the economy.
New “China Beige Book” Sees Growth Rebounding
New “China Beige Book” Sees Growth Rebounding: A private research firm has taken a leaf out of the Federal Reserve's book by creating a "Beige Book" for China.
By Prabha Natarajan
A private research firm has taken a leaf out of the Federal Reserve’s book by creating a “Beige Book” for China.
The quarterly report, similar to the Fed’s snapshots of U.S. regional conditions (which come out eight times a year), is an effort to provide foreign investors with a better understanding of the economic workings of China. The report drills down to sectors, and to China’s eight regions, including Tibet. It doesn’t focus on broad macroeconomic data like GDP or manufacturing.
“The data helps investors understand the evolving dynamics on the ground in China,” said Leland Miller, president of CBB International, the publisher of China Beige Book.
While working independently of the Fed, the firm relies on the U.S. central bank’s methodology and questionnaires for its research. When it comes to China, people are worried about the quality of the data, their comprehensiveness and ability to span the country’s diverse and complex industries, said Craig Charney, director of research at CBB International.
“It’s hard to ensure the quality of data,” Mr. Charney said, but he relies on extensive pretesting and surveys to ensure clean readings.
In its second China Beige Book released last month to clients, the report noted there were signs of a rebound largely fueled by increased retail sales, but problems continue to persist in industries like mining and minerals. While metro regions continued to see the strongest surges in retail spending, there were also sizeable spending increases in the central and northern regions, Mr. Charney said.
There are also signs of government stimulus in addition to monetary easing throughout the economy, he said. For instance, state-owned firms are investing in mining and transportation. There also are policies geared to boost consumer spending, including purchases of homes and cars. Consumer spending and services are picking up the slack in exports and some manufacturing sectors, according to the report.
“The data is fresh and we put it out so fast that it will serve as an early indicator of what is coming in official data later,” Mr. Miller said.
By Prabha Natarajan
A private research firm has taken a leaf out of the Federal Reserve’s book by creating a “Beige Book” for China.
The quarterly report, similar to the Fed’s snapshots of U.S. regional conditions (which come out eight times a year), is an effort to provide foreign investors with a better understanding of the economic workings of China. The report drills down to sectors, and to China’s eight regions, including Tibet. It doesn’t focus on broad macroeconomic data like GDP or manufacturing.
“The data helps investors understand the evolving dynamics on the ground in China,” said Leland Miller, president of CBB International, the publisher of China Beige Book.
While working independently of the Fed, the firm relies on the U.S. central bank’s methodology and questionnaires for its research. When it comes to China, people are worried about the quality of the data, their comprehensiveness and ability to span the country’s diverse and complex industries, said Craig Charney, director of research at CBB International.
“It’s hard to ensure the quality of data,” Mr. Charney said, but he relies on extensive pretesting and surveys to ensure clean readings.
In its second China Beige Book released last month to clients, the report noted there were signs of a rebound largely fueled by increased retail sales, but problems continue to persist in industries like mining and minerals. While metro regions continued to see the strongest surges in retail spending, there were also sizeable spending increases in the central and northern regions, Mr. Charney said.
There are also signs of government stimulus in addition to monetary easing throughout the economy, he said. For instance, state-owned firms are investing in mining and transportation. There also are policies geared to boost consumer spending, including purchases of homes and cars. Consumer spending and services are picking up the slack in exports and some manufacturing sectors, according to the report.
“The data is fresh and we put it out so fast that it will serve as an early indicator of what is coming in official data later,” Mr. Miller said.
domingo, 5 de agosto de 2012
Treasury Audits the NY Fed’s Gold Vault
Treasury Audits the NY Fed’s Gold Vault:
This is cool shit, the Treasury Dep't has been quietly auditing the gold vaults of the New York Fed, in part to put persistent conspiracy theories to rest. They've been counting and testing and even drilling into some of the ingots according to a story at the Chicago Tribune:
Source:
What's in your vault? Uncle Sam audits its stash of gold at the New York Fed (Chicago Tribune)
This is cool shit, the Treasury Dep't has been quietly auditing the gold vaults of the New York Fed, in part to put persistent conspiracy theories to rest. They've been counting and testing and even drilling into some of the ingots according to a story at the Chicago Tribune:
In New York, about $21 billion in U.S. gold is locked inside the Fed's vault. It's stored alongside bullion from three dozen other countries and organizations such as the International Monetary Fund. All told, about 23% of the world's official gold reserves are stored in the central bank's vaults.No Bruce Willis and/or Jeremy Irons do not show up, but the whole thing is worth a read.
The audit, which began in January, took place 80 feet below the Fed's limestone and sandstone Italian Renaissance building in Manhattan's financial district. Visitors to the vault make their way through a steel and concrete entrance where a 90-ton door rotates open.
Inside, a massive scale is ringed by 122 blue cages that hold about 530,000 gold bars — 34,021 of which belong to Uncle Sam. The auditing team counted the U.S. stash, selecting more than 350 bars from which to extract samples for assaying.
Source:
What's in your vault? Uncle Sam audits its stash of gold at the New York Fed (Chicago Tribune)
HOT: Merkel’s Coalition Members Signal Acceptance Of ECB Bond-Buying
HOT: Merkel’s Coalition Members Signal Acceptance Of ECB Bond-Buying: Members of German Chancellor Angela Merkel’s coalition parties signaled they won’t stand in the way of European Central Bank chief Mario Draghi’s plan to buy government bonds, Bloomberg is reporting..
The envisaged move to purchase troubled euro states’ government bonds is “a wise middle way” to solve the region’s debt crisis, Elmar Brok, a European Parliament lawmaker and executive-committee
The envisaged move to purchase troubled euro states’ government bonds is “a wise middle way” to solve the region’s debt crisis, Elmar Brok, a European Parliament lawmaker and executive-committee
Pimco’s El-Erian Says World in Serious Slowdown
Pimco’s El-Erian Says World in Serious Slowdown: Pacific Investment Management Co.’s Mohamed El-Erian called the recent declines in purchasing manager indexes in Europe and Asia “frightening” and said the world economy is suffering its severest slowdown since the global recession ended in 2009, reports Bloomberg.
“This is a serious, synchronized slowdown,” El-Erian said in an interview today.
El-Erian is correct. He may not know what is
“This is a serious, synchronized slowdown,” El-Erian said in an interview today.
El-Erian is correct. He may not know what is
domingo, 29 de julio de 2012
Eurogroup Head Confirms "It Has Become Serious", As He Is Back To Lying
Eurogroup Head Confirms "It Has Become Serious", As He Is Back To Lying:
The insolvent banana continent is back. Recall back in May 2011:
From Suddeutsche Zeitung:
We leave it up to readers to figure out which of the above two is telling the truth, but in the meantime, here are some other soundbites from the man who is back to desperation pleading with markets:
"All talk about the emergence of Greece is unhelpful"
Of course, it is much better to stick one's head in the sand and avoid the only possible outcome of this tragic farce that the implosion of Europe has become, and truly best to completely avoid any discussion of what happens in case of Plan B.
To summarize, from Reuters:
i) since the head of the Eurogroup is back to outright refuting what Germany said a day earlier, Europe is once again back to Plan B - lying, which means things are again on the verge of an all out collapse, and plunge in the EURUSD, which, as a reminder, is precisely what the German export industry wants more than anything, and
ii) just like in the June 29 summit, beggars are again hoping they can be choosers, and can force Germany, by way of a full blown media onslaught in which they represent that a vague possibility is now a certain outcome, and thus have already set expectations about 5% higher than it would be otherwise, to succumb to the will of the beggars, and allow full blown debt monetization.
And like back then, so now, all we can say to the broke periphery, which now apparently include France, but as David Einhorn said, it will take bond traders a little longer to figure it out, is good luck. It will be desperately needed.
As an appendix, here is Juncker's hillarious attempt to justify lying to Spiegel magazine at critical inflection points:
SPIEGEL: Mr. Prime Minister, you are a Christian Democrat and a Catholic, which is why we want to talk to you about the Ten Commandments.
Juncker: I already have an idea of what you are getting at.
SPIEGEL: Are you familiar with the Eighth Commandment?
Juncker: Of course. Thou shalt not bear false witness against thy neighbour.
SPIEGEL: Apparently you don't take it very seriously. More than two weeks ago, you denied a report by SPIEGEL ONLINE about a secret meeting of several European Union finance ministers to discuss the situation in Greece, even though the official limousines were already pulling up in Luxembourg.
Juncker: The most important commandment is not to inflict harm on others. Although it isn't stated quite that way in the Ten Commandments, it follows from them. The finance ministers of several Euro Group nations had agreed to meet on Friday with the president of the European Central Bank (ECB), Jean-Claude Trichet. Because the financial markets in Europe were still open and trading was still underway on Wall Street, we had to deny the existence of the meeting. Otherwise the course of the euro against the dollar, which had already fallen as a result of your report, would have plunged disastrously.
SPIEGEL: With this false denial, you not only harmed your own credibility, but that of European financial policy as well.
Juncker: And it didn't exactly enhance the credibility of SPIEGEL ONLINE to disseminate the false report that we were meeting in Luxembourg to discuss Greece's withdrawal from the monetary union.
SPIEGEL: Forgive us for saying so, but SPIEGEL ONLINE had obtained information to that effect from government sources, as well as a working document prepared specifically for this meeting for the German finance minister.
Juncker: It is not unusual for finance ministers to have documents with them that contain all of the issues being discussed in public. And the question of Greece's withdrawal from the monetary union is certainly being discussed in public. But that's a far cry from saying that the issue is on the agenda of a meeting. As a result, I had to be all the more careful to ensure that no unnecessary turbulence would occur in the markets.
SPIEGEL: Are you saying that, as a finance minister in the age of global capital markets, you cannot tell people the truth?
Juncker: I do not have a ready answer to your question. My main concern is to protect people from detriment. That's why I feel practically compelled to make sure that no dangerous rumors begin to circulate. I'm certainly not going to go to confession because of a false denial. God understands more about the financial markets than many who write about them.
...
SPIEGEL: When secret meetings are held and the truth isn't always being told, people gain the impression that there must be something wrong with this Europe.
Juncker: People understand perfectly well that politicians have to discuss sensitive issues behind closed doors. I had 10 seconds to decide how to react to the report in SPIEGEL ONLINE. Let us say, hypothetically, that I had said: "Okay, we are having a meeting, but I'm not going to tell you what we intend to talk about." That would have triggered a tsunami in the financial markets. Instead, I chose to produce a small wave of outrage over a white lie.
SPIEGEL: Nevertheless, we'd like to try aiming for the truth.
and so on
The insolvent banana continent is back. Recall back in May 2011:
“When it becomes serious, you have to lie." -Jean Claude JunckerErgo, things in Europe are very serious again because the Eurogroup's head, who until recently promised he was quitting his post because "he had gotten tired of the Franco-German interference in managing the region's debt crisis", only to spoil the fun and say he was lying about that too, is back to doing what he does best - lying. To wit: "the euro countries are preparing together with the bailout fund EFSF and the European Central Bank to buy government bonds if necessary clip euro countries." And now cue Schauble: "Federal Finance Minister Wolfgang Schaeuble has rejected speculation about impending purchases of government bonds by Spanish EFSF and ECB."
From Suddeutsche Zeitung:
"No time to lose": The chairman of the €-group sees a crucial point of the debt crisis has arrived. Jean-Claude Juncker supports plans by ECB chief Draghi for the purchase of government bonds - and Germany are partly to blame for the crisis. Berlin treats the euro area "as a branch." Also called "chatter on the withdrawal of Greece" is not helpful.And to think only yesterday the only person whose opinion matters, Germany's Finance Minister, "denied plans for a new aid program for Spain, according to newspaper Welt am Sonntag, after the media reported European Union leaders aim for Spanish government bond purchases by the European rescue fund and the European Central Bank."
Juncker confirmed that the euro countries are preparing together with the bailout fund EFSF and the European Central Bank to buy government bonds if necessary clip euro countries. Because there is no doubt, he said. "It is still necessary to decide exactly what we will do and when." This depended "on the developments of the next few days and from reacting as fast as we need."
We leave it up to readers to figure out which of the above two is telling the truth, but in the meantime, here are some other soundbites from the man who is back to desperation pleading with markets:
- JUNCKER SAYS MUST USE ALL AVAILABLE TOOLS TO SAFEGUARD EURO
- JUNCKER: EMU READYING FOR EFSF/ECB INTERVENTION
- JUNCKER SAYS MARKET REACTION ON SPAIN, ITALY INAPPROPRIATE - indeed, central planners always know best
"All talk about the emergence of Greece is unhelpful"
Of course, it is much better to stick one's head in the sand and avoid the only possible outcome of this tragic farce that the implosion of Europe has become, and truly best to completely avoid any discussion of what happens in case of Plan B.
To summarize, from Reuters:
The euro zone is at a decisive point and leaders will work with the European Central Bank (ECB) to demonstrate their commitment to the stability of the single currency, Eurogroup head Jean-Claude Juncker said in interviews with European newspapers.To summarize:
Juncker told Germany's Sueddeutsche Zeitung and France's Le Figaro in reports made available on Sunday that leaders would decide in the next few days what measures to take to tackle Spanish bond yields which last week touched euro-era highs. They had "no time to lose," he said.
Asked whether it was true that France wanted the bailout fund to buy government bonds, under an agreement made by euro zone leaders at their summit in June, but that Germany was resisting, Juncker answered:
"I have no doubt that we will implement the agreements of the last summit. We still need to decide what we will do when. That depends on the developments of the next days."
The European bailout fund, the European Financial Stability Fund (EFSF), will work together with the ECB without affecting its independence, he said.
"We will work in close agreement with the ECB, and we will, as <ECB President> Mario Draghi said, see results. I don't want to drive expectations, but I must say, we have reached a decisive phase."
Draghi said on Thursday he would do whatever was necessary to protect the euro zone from collapse, prompting expectations of a new bond-buying program.
"The euro countries have reached a point where we have to use all means possible to show that we are determined to protect the stability of the euro zone... nobody should doubt the will of those involved, to prove our determination," Juncker said.
i) since the head of the Eurogroup is back to outright refuting what Germany said a day earlier, Europe is once again back to Plan B - lying, which means things are again on the verge of an all out collapse, and plunge in the EURUSD, which, as a reminder, is precisely what the German export industry wants more than anything, and
ii) just like in the June 29 summit, beggars are again hoping they can be choosers, and can force Germany, by way of a full blown media onslaught in which they represent that a vague possibility is now a certain outcome, and thus have already set expectations about 5% higher than it would be otherwise, to succumb to the will of the beggars, and allow full blown debt monetization.
And like back then, so now, all we can say to the broke periphery, which now apparently include France, but as David Einhorn said, it will take bond traders a little longer to figure it out, is good luck. It will be desperately needed.
As an appendix, here is Juncker's hillarious attempt to justify lying to Spiegel magazine at critical inflection points:
SPIEGEL: Mr. Prime Minister, you are a Christian Democrat and a Catholic, which is why we want to talk to you about the Ten Commandments.
Juncker: I already have an idea of what you are getting at.
SPIEGEL: Are you familiar with the Eighth Commandment?
Juncker: Of course. Thou shalt not bear false witness against thy neighbour.
SPIEGEL: Apparently you don't take it very seriously. More than two weeks ago, you denied a report by SPIEGEL ONLINE about a secret meeting of several European Union finance ministers to discuss the situation in Greece, even though the official limousines were already pulling up in Luxembourg.
Juncker: The most important commandment is not to inflict harm on others. Although it isn't stated quite that way in the Ten Commandments, it follows from them. The finance ministers of several Euro Group nations had agreed to meet on Friday with the president of the European Central Bank (ECB), Jean-Claude Trichet. Because the financial markets in Europe were still open and trading was still underway on Wall Street, we had to deny the existence of the meeting. Otherwise the course of the euro against the dollar, which had already fallen as a result of your report, would have plunged disastrously.
SPIEGEL: With this false denial, you not only harmed your own credibility, but that of European financial policy as well.
Juncker: And it didn't exactly enhance the credibility of SPIEGEL ONLINE to disseminate the false report that we were meeting in Luxembourg to discuss Greece's withdrawal from the monetary union.
SPIEGEL: Forgive us for saying so, but SPIEGEL ONLINE had obtained information to that effect from government sources, as well as a working document prepared specifically for this meeting for the German finance minister.
Juncker: It is not unusual for finance ministers to have documents with them that contain all of the issues being discussed in public. And the question of Greece's withdrawal from the monetary union is certainly being discussed in public. But that's a far cry from saying that the issue is on the agenda of a meeting. As a result, I had to be all the more careful to ensure that no unnecessary turbulence would occur in the markets.
SPIEGEL: Are you saying that, as a finance minister in the age of global capital markets, you cannot tell people the truth?
Juncker: I do not have a ready answer to your question. My main concern is to protect people from detriment. That's why I feel practically compelled to make sure that no dangerous rumors begin to circulate. I'm certainly not going to go to confession because of a false denial. God understands more about the financial markets than many who write about them.
...
SPIEGEL: When secret meetings are held and the truth isn't always being told, people gain the impression that there must be something wrong with this Europe.
Juncker: People understand perfectly well that politicians have to discuss sensitive issues behind closed doors. I had 10 seconds to decide how to react to the report in SPIEGEL ONLINE. Let us say, hypothetically, that I had said: "Okay, we are having a meeting, but I'm not going to tell you what we intend to talk about." That would have triggered a tsunami in the financial markets. Instead, I chose to produce a small wave of outrage over a white lie.
SPIEGEL: Nevertheless, we'd like to try aiming for the truth.
and so on
Biggest EPS Miss Since Lehman, And This Time It's Not The Tsunami's Fault
Biggest EPS Miss Since Lehman, And This Time It's Not The Tsunami's Fault:
Yes, we know it doesn't matter because Ben & Mario have got our backs at whatever multiple is required to levitate the economy market, but as Citi's credit desk points out; despite the constant chatter about EPS beats (despite top-line misses), the trick is that analysts have been dragging down expectations since the earnings-cycle began and so judging 'misses' must be done against a 'frozen' pre-earnings number. If we do this 'fair' approach to considering expectations, the percentage miss in the S&P 500's EPS for Q2 2012 is as bad as the Q2/Q3 2011 Tsunami-driven miss - and the worst we have seen since Lehman Brothers shuffled off this mortal coil. So as usual, be careful what truth you believe and consider just how much more 'hope' is now in this market given this reality.
Citi Credit Weekly
Yes, we know it doesn't matter because Ben & Mario have got our backs at whatever multiple is required to levitate the economy market, but as Citi's credit desk points out; despite the constant chatter about EPS beats (despite top-line misses), the trick is that analysts have been dragging down expectations since the earnings-cycle began and so judging 'misses' must be done against a 'frozen' pre-earnings number. If we do this 'fair' approach to considering expectations, the percentage miss in the S&P 500's EPS for Q2 2012 is as bad as the Q2/Q3 2011 Tsunami-driven miss - and the worst we have seen since Lehman Brothers shuffled off this mortal coil. So as usual, be careful what truth you believe and consider just how much more 'hope' is now in this market given this reality.
Citi Credit Weekly
Source: CitiUndoubtedly, part of the reason that Spain and Greece have come back into focus is that the earnings of US companies continue to be so uneven. With more than half of S&P500 companies having reported, we’re only now starting to get the full picture, and viewed from the top down perspective it’s far less pretty than even last week led us to believe. Relative to expectations, top line revenues have been especially weak, with nearly all sectors surprising to the downside, even as EPS and EBITDA have tended to beat.
But even those sorts of statistics tend to hide the true weakness because equity analysts tend to revise expectations down while earnings season is still ongoing, which explains why some 72% of S&P500 companies manage to beat expectations in a weak quarter.
To get a truer picture of the magnitude of disappointment, it’s necessary to freeze estimates prior to the start of earnings season, so that those companies reporting later don’t get the benefit of having the bar set lower by the early reporters. And viewed this way, we see that earnings surprises have been about as bad as the third quarter of 2011, which were impacted by the Japanese earthquake and the debt ceiling debate.
A Completely Screwed Up System
A Completely Screwed Up System:
The following chart from the Congressional Budget Office (CBO) shows who pays federal income taxes in America.
It should come as no surprise that individuals with the highest incomes pay the most in taxes. The top 20% pay 94% of all income taxes according to the CBO. It should also be no surprise that the bottom two rungs (40%) of the income groups pay very little taxes. But it was surprising to me that the bottom 40% actually pay a negative income tax.
How does one pay negative taxes? Tax transfers to low income groups exceed their tax liabilities. Two examples of these transfers are the EITC (Earned Income Tax Credit) and ACTC (Additional Child Tax Credit). The following chart from the Congressional Research Service (CRS) describes the effective negative tax rate phenomenon.
For those earning up to $26,000, there are no income taxes levied, but those individuals pay FICA (Social Security taxes). The value of the tax credits available to those individuals is greater than their SS taxes. Therefore, the group, ends up with a negative tax rate.
I favor this type of income redistribution. I think high-income groups should end up supporting lower income groups. I have no problem with negative effective tax rates for individuals and households that are at, or below, the poverty line.
But….
The CRS reported:
“How is this possible?” How could illegal workers end up receiving federal tax credits? The IRS is encouraging the process.
The IRS issues two kinds of tax identification numbers. A traditional SS# is available for all legal residents. Illegal residents can obtain an ITIN (Individual Tax Identification Number). The use of ITIN has exploded 10-fold over the past decade. In 2010 3.2m people used these numbers to file tax returns and obtain refunds.
The use of ITINs is just one component of the problem. The Social Security Actuary estimated that 75% of illegal workers are using a fraudulently obtained SS# to get work. The IRS/SS knowingly collects this tainted money.
Combining the ITIN data with the 75% estimate by SSA leads to an estimate of 12m taxpayers contributing (and getting refunds) who shouldn’t be in the system at all. (Note: the Census Bureau put the number of unauthorized aliens at 11.2m in 2010.)
What happens when a cash incentive to have children is made available to people who live in the country? They have babies, of course. From the CRS:
Do existing laws permit illegal workers to get tax rebates and benefits?
For refundable tax credits like the EITC and ACTA, the answer is a very clear “No!” But that hasn’t stopped the IRS from allowing this to happen.
However, it is completely legal for an illegal worker to obtain Social Security benefits. Illegal workers who have contributed to SS (FICA taxes) for a minimum of 10 years are illegible to receive retirement benefits on the same schedule and terms as an individual who works legally. (Note: I was shocked when I first learned this, but it is true {Link}).
How many undocumented workers are there that might be eligible to get Social Security benefits? Pew answers that:
Based on the Pew numbers, 62% of the 12m unauthorized aliens will be eligible to receive benefits in their lifetimes. These workers have contributed to SS, so the law says they can get monthly checks. But the reality is that a significant percentage in this group is paying negative effective tax rates after taking into consideration the refundable tax credits described above. In the end, the lower 30% of income groups (including undocumented workers) end up “paying” for SS out of one pocket, while getting a similar sized refund check in the other pocket.
What are my points/objectives in writing about this?
- Our immigration laws (and how they are applied) are completely idiotic.
- The IRS is facilitating the problem by allowing refunds to be paid to those filing with illegal SS#s (or legally obtained, but fraudulently used ITINs).
- Stirring the pot on the issue of illegal workers and their rights to receive Social Security benefits. It is now more than two years since the Chief Actuary of the SSN, Stephen Goss, spoke about this matter (Link). This is a political issue. The country deserves an update on how big this problem is before November. The candidates should be asked what they plan to do about it. Illegal workers have contributed as much as $240Bn to SS (10% of all assets).
- Stimulate a discussion on a very complex and emotive topic.
Notes:
In my heart I have a soft spot for illegal immigrants. My father came from Europe in 1939.
I know many illegal families. I like them. They are good parents. They are hard workers. They would be happy to pay taxes as regular citizens do. They want to own property, cars and have their children get an education.
But the numbers are too large, and the consequences too significant. In the end, this about the law.
So I don’t know what to do.
.
The following chart from the Congressional Budget Office (CBO) shows who pays federal income taxes in America.
It should come as no surprise that individuals with the highest incomes pay the most in taxes. The top 20% pay 94% of all income taxes according to the CBO. It should also be no surprise that the bottom two rungs (40%) of the income groups pay very little taxes. But it was surprising to me that the bottom 40% actually pay a negative income tax.
How does one pay negative taxes? Tax transfers to low income groups exceed their tax liabilities. Two examples of these transfers are the EITC (Earned Income Tax Credit) and ACTC (Additional Child Tax Credit). The following chart from the Congressional Research Service (CRS) describes the effective negative tax rate phenomenon.
For those earning up to $26,000, there are no income taxes levied, but those individuals pay FICA (Social Security taxes). The value of the tax credits available to those individuals is greater than their SS taxes. Therefore, the group, ends up with a negative tax rate.
I favor this type of income redistribution. I think high-income groups should end up supporting lower income groups. I have no problem with negative effective tax rates for individuals and households that are at, or below, the poverty line.
But….
The CRS reported:
individuals who were not authorized to work in the United States received $4.2 billion by claiming the refundable portion of the child tax credit—the additional child tax credit (ACTC).
“How is this possible?” How could illegal workers end up receiving federal tax credits? The IRS is encouraging the process.
The IRS issues two kinds of tax identification numbers. A traditional SS# is available for all legal residents. Illegal residents can obtain an ITIN (Individual Tax Identification Number). The use of ITIN has exploded 10-fold over the past decade. In 2010 3.2m people used these numbers to file tax returns and obtain refunds.
The use of ITINs is just one component of the problem. The Social Security Actuary estimated that 75% of illegal workers are using a fraudulently obtained SS# to get work. The IRS/SS knowingly collects this tainted money.
Combining the ITIN data with the 75% estimate by SSA leads to an estimate of 12m taxpayers contributing (and getting refunds) who shouldn’t be in the system at all. (Note: the Census Bureau put the number of unauthorized aliens at 11.2m in 2010.)
What happens when a cash incentive to have children is made available to people who live in the country? They have babies, of course. From the CRS:
Do existing laws permit illegal workers to get tax rebates and benefits?
For refundable tax credits like the EITC and ACTA, the answer is a very clear “No!” But that hasn’t stopped the IRS from allowing this to happen.
However, it is completely legal for an illegal worker to obtain Social Security benefits. Illegal workers who have contributed to SS (FICA taxes) for a minimum of 10 years are illegible to receive retirement benefits on the same schedule and terms as an individual who works legally. (Note: I was shocked when I first learned this, but it is true {Link}).
How many undocumented workers are there that might be eligible to get Social Security benefits? Pew answers that:
35% of unauthorized adults have resided in the United States for 15 years or more and that 28% have resided for 10 to 14 years. The report also found that the proportion of unauthorized aliens who have been in the country at least 15 years has more than doubled since 2000.
Based on the Pew numbers, 62% of the 12m unauthorized aliens will be eligible to receive benefits in their lifetimes. These workers have contributed to SS, so the law says they can get monthly checks. But the reality is that a significant percentage in this group is paying negative effective tax rates after taking into consideration the refundable tax credits described above. In the end, the lower 30% of income groups (including undocumented workers) end up “paying” for SS out of one pocket, while getting a similar sized refund check in the other pocket.
What are my points/objectives in writing about this?
- Our immigration laws (and how they are applied) are completely idiotic.
- The IRS is facilitating the problem by allowing refunds to be paid to those filing with illegal SS#s (or legally obtained, but fraudulently used ITINs).
- Stirring the pot on the issue of illegal workers and their rights to receive Social Security benefits. It is now more than two years since the Chief Actuary of the SSN, Stephen Goss, spoke about this matter (Link). This is a political issue. The country deserves an update on how big this problem is before November. The candidates should be asked what they plan to do about it. Illegal workers have contributed as much as $240Bn to SS (10% of all assets).
- Stimulate a discussion on a very complex and emotive topic.
Notes:
In my heart I have a soft spot for illegal immigrants. My father came from Europe in 1939.
I know many illegal families. I like them. They are good parents. They are hard workers. They would be happy to pay taxes as regular citizens do. They want to own property, cars and have their children get an education.
But the numbers are too large, and the consequences too significant. In the end, this about the law.
So I don’t know what to do.
.
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