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
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