United Kingdom: For the record. The British economy slid into recession, Reuters reported 25 April. The British Office for National Statistics said gross domestic product fell 0.2 percent in the first quarter of 2012 after falling 0.3 percent in the final quarter of 2011.
Comment: Prepare for turbulence in financial markets.
Thompson previously served as president of the Federal Reserve Board's Federal Advisory Committee
So, the $800 billion question (to my mind anyway) is how come the inflation is not up in a major way? There were many predictions of even hyper-inflation with all the money that the GoTUS pumped into the economy but no signs of that so far. Why?Hari Seldon wrote:^^^ Whocuddanode, eh?
BTW, its safe to assume that the great financial crisis (GFC) has now been almost safely managed by the powers that be in the central banks of the world.
Yada yada. Sound familiar?Land sales make up 30pc of total tax revenue for the central government and 70pc for local government. (For those of us who watched the Irish state balloon on the back of property taxes – when they had a fat budget surplus – this has a familiar ring.)
Construction makes up 10pc of total jobs, and a further 20pc indirectly in cement, steel, metallurgy etc. The government is building 36m homes for the poor, but that will start to run down in two years or so.
Residential investment typically peaks at 8pc to 9pc of GDP for emerging nations during their catch-up growth spurts. It is already 12pc in China.
Japan’s ratio peaked in 1973, long before the property price bubble burst. China has almost certainly peaked too on this crucial measure.
The minimum down-payment rate on mortgages is 30pc, so leverage is in theory low. (How this can be the case when the IMF says that the house price to incomes ratio is 16 to 18 times in the Eastern cities of Beijing, Tinajing, Shanghai, Shenzhen, and Guangzhou has long been a mystery).
More yada yada. I recall such dire prophecies made in 2007 as well.A week ago I heard a talk at the ChunQiu Institute in London by Nobel laureate Edmund Phelps (one of the truly great Nobel economists who first debunked "Keynesian" misuse of the growth/unemployment trade-off or Phillips Curve and has devoted the last part of his academic life to trying to understand China).
His view is that China has already reached the point where it can no longer offset soaring wage costs with productivity gains imported through Western technology. It has hit the time-honoured wall. Diminishing returns are setting in, and there lies the "middle-income trap" that ensnares most challengers.
Yawn.Be that as it may, Xianfang Ren said China has the means to bail out the banking system and property market in this cycle, and will use them if need be. "Housing is way too important to allow a hard landing."
These include deposits (170pc of GDP), government revenues (30pc), the assets of state behemoths (75pc), foreign reserves (50pc) of GDP – I don’t agree on this last point since the FX reserves cannot be repatriated without a big currency rise and a shock for exporters. It would amount to monetary tightening.
"At first sight China looks fine. Unfortunately, there is a big problem of misclassification of loans. The financial system has much larger exposure to real estate than appears, and the weak links are the real estate trusts and non-bank lending. The smaller developers are cash-flow constrained and will find it hard to roll over debts. Any defaults will have to be recognised immediately."
The commodity prices are set at the trading where speculation and hedge fund money are driving the prices.VikramS wrote:Inflation is a monetary phenomenon. Right now the velocity of money is low. There is an AEP article talking about falling M2 globally. As long as those deflationary trends stay in place inflation will not go up. Once things start returning to normal, it will then be unleashed.
http://www.bloomberg.com/news/2012-01-2 ... -baum.html
Right now we are seeing inflation in commodities. Crude oil does not want to stay below $100 in spite of muted global growth. Gold/Silver etc. are all nicely up from 2008.
I think I get the gist of the above; however, when the TARP emergency release of funds was made, the refrain from Wall St. and D.C. was that without banks lending to the small businesses, individual consumers etc., most or all economic activity would freeze/stop.The unsaid implication was that the banks had to keep lending for the day-to-day economic activty to take place, meaning money has to flow from banks to businsses to people to industry etc. It was made out to be an emergency situation.VikramS wrote:Inflation is a monetary phenomenon. Right now the velocity of money is low. There is an AEP article talking about falling M2 globally. As long as those deflationary trends stay in place inflation will not go up. Once things start returning to normal, it will then be unleashed.
The inflation in commodity prices, for example oil crossing $ 100 a barrel, the cost of gold touching new highs, all are the consequence of the injection of cash into the US financial world. Previously there was a yen-carry trade. Traders borrowed in yen, which was for practical purpose at zero interest rate and speculated widely. The interest rates rose in Japan, before fukushima and they fell in US. The Yen-carry trade got converted to Dollar-carry trade.SriKumar wrote:I think I get the gist of the above; however, when the TARP emergency release of funds was made, the refrain from Wall St. and D.C. was that without banks lending to the small businesses, individual consumers etc., most or all economic activity would freeze/stop.The unsaid implication was that the banks had to keep lending for the day-to-day economic activty to take place, meaning money has to flow from banks to businsses to people to industry etc. It was made out to be an emergency situation.VikramS wrote:Inflation is a monetary phenomenon. Right now the velocity of money is low. There is an AEP article talking about falling M2 globally. As long as those deflationary trends stay in place inflation will not go up. Once things start returning to normal, it will then be unleashed.
But now, 4 years later, the unprecedented amount of TARP money injected into the banks has not inflated the prices much. How come? Could the reason(s) be that either the money mostly stayed in the banks and was never lent out, OR, if indeed it was lent out to small businesses, consumers etc., the amounts were not large enough to inflate (since this category of money, IMHO, should come into circulation fairly quickly and start to inflate prices).
http://timesofindia.indiatimes.com/home ... 938861.cms
TIMES VIEW-COUNTERVIEW
Ruchir Sharma’s new book gives India a 50:50 chance to emerge as a breakout nation
May 1, 2012, 12.00AM IST
TIMES VIEW: Economic miracle will come
The new book Breakout Nations, by Morgan Stanley head of emerging markets Ruchir Sharma, has got analysts buzzing over the future of the Indian economy. Sharma contends that the possibility of India growing at a brisk and sustained pace in future is only 50:50. Such an analysis is fuelled by undue pessimism due to the current phase of low growth, persisting inflation, policy paralysis, innumerable corruption scams and so on.
Apparently, India’s political class can never get it together for the economy to deliver the goods. But this is only on the surface. The India story is not over yet, and the country hasn’t shifted permanently to a lower gear. In fact, it’s precisely the present crisis that has triggered a necessary debate about reforms, one that the country was not having earlier.
The economic history of the country shows that it is very much capable of reform. The liberalisation policies of 1991, brought on by the balance-of-payments crisis, are a case in point. Similarly, the reforms initiated during the second phase of the NDA regime allowed for high growth during the first tenure of the UPA dispensation. Besides, there are several factors in India’s favour. As Sharma points out, the country’s low per capita income allows greater headroom for growth. Add to this India’s growing middle class and large youth population, and there’s no doubt that the country’s demographic fundamentals are favourable for a sustained growth spurt. All that is required to catalyse the available resources are market-oriented reforms that incentivise competition, bring in FDI, observe fiscal prudence and invest in critical infrastructure. Aspirations have exploded across the country - thanks in no small part also to the information revolution - and the genie cannot be put back in the bottle any longer.
COUNTERVIEW: India growth story is over
Ajay Vaishnav
Given the sluggishness of the Indian economy over the last couple of years, there would be few takers for India making it into the ranks of "breakout nation" category. It is naive to hope that India can post a turnaround on the back of sustained and systematic economic reforms. Rather the country’s chances of getting into an economic slump are high considering policy paralysis, political uncertainty, coalition compulsions, an anti-reforms mindset and corrupt governance. For starters, the country’s much-touted growth story has fizzled out.
The Indian economy being the world’s talking point is by now yesterday’s story. It may have posted a growth rate of 8.4% in 2010, but this had slumped to 6.1% by the last quarter of 2011. More worryingly, the fiscal deficit climbed to 5.9% of GDP in 2011-12. Oil prices are set to rise further. But the government cannot dare to pass on the rising cost to the consumer because of coalition compulsions, which will make the fiscal deficit balloon further and leave a great deal of suppressed inflation in the system. That coalition politics has stymied reforms and growth was highlighted by none other than the government’s chief economic adviser in Washington.
It’s easier said than done to address India’s economic problems. Not only does the blame rest with fractious allies and an unrelenting opposition, the Congress too accorded low priority to economic reforms. The governing party’s sole focus has been social spending, without caring much about revenue generation. But even if the UPA loses the next Lok Sabha election, the polity is too fragmented for a cohesive government to take shape in future. Many countries haven’t had an economic miracle, there’s no reason to believe India will.
This is basics and all countries which moved from this stage have raised the std of living. ASEAN countries are the example.ramana wrote:Please critique these two opposing points:
As Sharma points out, the country’s low per capita income allows greater headroom for growth. Add to this India’s growing middle class and large youth population, and there’s no doubt that the country’s demographic fundamentals are favourable for a sustained growth spurt. All that is required to catalyse the available resources are market-oriented reforms that incentivise competition, bring in FDI, observe fiscal prudence and invest in critical infrastructure. Aspirations have exploded across the country - thanks in no small part also to the information revolution - and the genie cannot be put back in the bottle any longer.
Rather the country’s chances of getting into an economic slump are high considering policy paralysis, political uncertainty, coalition compulsions, an anti-reforms mindset and corrupt governance. For starters, the country’s much-touted growth story has fizzled out.
That coalition politics has stymied reforms and growth was highlighted by none other than the government’s chief economic adviser in Washington.
But even if the UPA loses the next Lok Sabha election, the polity is too fragmented for a cohesive government to take shape in future. Many countries haven’t had an economic miracle, there’s no reason to believe India will.
For thousands of years, families devoted the majority of their lives to food. Their waking hours were spent growing and harvesting crops, and most of their income from growing and harvesting went right back into eating. Deep into the late pre-industrial era, unskilled laborers worked grueling hours in fields to earn an income that could often barely feed their family. As Gregory Clark explained in his book A Farewell to Alms, up until the 1700s, the English diet consisted, monotonously, of mostly bread and beer, won only after hours that would make a modern i-banker blush. Food output per person was so meager that "British farm laborers by 1863 had just reached the median consumption of [primitive] forager and subsistence societies."Today, food is faster. The Big Mac takes very little work for any one person. It is a product of as much automated manufacturing as human labor. Even U.S. food-prep workers, by some measures the poorest-paid major occupation in America, earn enough to buy more than two Big Macs -- that's 1,000+ calories -- in just an hour of their work.
The Rise of the West. Countries get rich because they become particularly skilled in certain industries that they can sell in exchange for money.The gap between poor and rich nations has bedeviled economists for decades. But one elegant explanation, known as the Balassa-Samuelson hypothesis, says it comes down to worker productivity in sectors that can "trade" their goods and services abroad. If a country gets better at making, say, cars, it can sell cars to foreigners and become rich. As income and investment flow into a country, incomes and prices rise across the board. People have more money to buy burgers. The price of burgers rises, and the price of workers who prepare those burgers rises too.Ashenfelter finds evidence for this elegant theory in his data, which demonstrates that developed countries, including the US, Canada, Japan, and Western Europe have similar wages for McDonald's workers -- they can all buy between two and three Big Macs with each hour of work.
The Rise of the Rest: For the last few decades, real income growth has been flat in the U.S. and other developed countries. Manufacturing and other middle class jobs went overseas and fed rising living standards in other countries. McDonald's can tell this story, too.
Wage growth was "entirely confined to the developing countries of Russia, India, and China during the period 2000‐2007," Ashenfelter writes. This graph shows percentage-growth in Big Macs-per-hour-of-work in the last decade. It's a striking picture of flat purchasing-power growth in the developed world juxtaposed to a gosh-wow boom out of China, India and Russia (which started the decade in a recession and got a big lift from oil prices through 2007). Upshot: It's not just top-line GDP that's growing in the developed world. The wealth is trickling down. Middle-class families can buy more for each hour of work.
About 1,780 expatriates gave up their nationality at US embassies last year, up from 235 in 2008, according to Andy Sundberg, secretary of Geneva's Overseas American Academy, citing figures from the government's Federal Register. The embassy in Bern, the Swiss capital, redeployed staff to clear a backlog as Americans queued to relinquish their passports.
The US, the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside, is searching for tax cheats in offshore centers, including Switzerland, as the government tries to curb the budget deficit. Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a US passport.
+1.Singha wrote:+1 sir. there is not enough energy in the sun to suffice if everyone started using as much energy and resources as the americans and canadians.
Are assets from the first world open to purchase by foreign wealth funds?vic wrote:As West is printing currency, India and China will have to bite the bullet to let their currency appreciate otherwise we will face massive inflation and our assets will be taken over in return for paper.
1.4×10^19 J yearly electricity consumption in the U.S. as of 2009[139][152]
1.4×10^19 J yearly electricity production in the U.S. as of 2009[153][154]
6.4×10^19 J yearly electricity consumption of the world as of 2008[155][156]
6.8×10^19 J yearly electricity generation of the world as of 2008[155][157]
5.0x10^20 J total world annual energy consumption in 2010
1.5×10^22 J total energy from the Sun that strikes the face of the Earth each day[145][166]
2.4×10^22 J estimated energy contained in the world's coal reserves as of 2010[158][167]
2.9×10^22 J identified global uranium-238 resources using fast reactor technology[160]
3.9×10^22 J estimated energy contained in the world's fossil fuel reserves as of 2010[158][168]
4×10^22 J estimated total energy released by the magnitude 9.1-9.3 2004 Indian Ocean Earthquake[169]
there isnotenough energy in the sun to suffice if everyone started using as much energy and resources as the americans and canadians.
None.vishvak wrote:Are assets from the first world open to purchase by foreign wealth funds?vic wrote:As West is printing currency, India and China will have to bite the bullet to let their currency appreciate otherwise we will face massive inflation and our assets will be taken over in return for paper.
Chinese have not bought off a lot of important first world European/USA assets over last 10 years.
So where do all the big-time buyers turn to? I wonder. Per richest investment banker Warren Buffet linkabhischekcc wrote:None.vishvak wrote: Are assets from the first world open to purchase by foreign wealth funds?
Chinese have not bought off a lot of important first world European/USA assets over last 10 years.
The free market propogandists in Washington do not like it when colored people beat them at their own game.
Remember US rejection of Chinese attempts to buy Unocal.
the nation’s lenders have “liquidity coming out of their ears” and are in better shape than European rivals.
That would require ingenuity for sure, but if you want to be the top dog then you will have to invent on how to do it.abhischekcc wrote:And how are you going to harvest all that bounty? Cover the earth with solar panels?
Maybe there is enough energy, but it cannot be reached.