What's really behind sluggish economic growth?

At a recent International Monetary Fund (IMF) conference, former US Treasury Secretary Lawrence Summers argued that today's growth blues have deep roots that pre-date the global financial crisis. Summers placed particular emphasis on the need for more infrastructure investment, a sentiment that most economists wholeheartedly share, especially if one is referring to genuinely productive investment.
Jeffrey Sachs, for example, has argued that the US economy needs to confront a plethora of structural impediments to sustained growth, including offshoring, skill mismatches, and decaying infrastructure.

The internet entrepreneur Peter Thiel and the chess champion Garry Kasparov have suggested that the malaise runs even deeper, as has the economist Robert Gordon. They argue that the technology engine that has driven mankind from one economic plateau to the next over the past 200 years is running out of steam. Simply put, the internet may be cool, but it is hardly as essential as running water, electrification, or the internal combustion engine.
  The Gordon-Kasparov-Thiel thesis is extremely interesting, though I have challenged their negative conclusions, both in print and in a debate at Oxford. Personally, I think the greater risk is that the pace of technological progress will accelerate too much for societies to adapt, though the experience so far has basically been positive.
Certainly, today's advanced economies urgently need to address all kinds of technological, social, and political deficiencies. Nevertheless, the subpar growth of the past half-decade still bears all the hallmarks of a typical sluggish recovery from a deep systemic financial crisis, as Carmen Reinhart and I documented in our 2009 book This Time is Different.
Of course, structural reform is essential after a financial crisis, as are policies to maintain aggregate demand while the economy heals. To my mind, the biggest failure of post-2008 economic policy has consisted in governments' inability to find creative ways to write down unsustainable debts, for example in US mortgage markets, and in Europe's periphery. This includes the failure to issue public debt where necessary to facilitate restructuring, particularly if overall economy-wide (or eurozone-wide) debt could be reduced in the same operation.
But Summers is certainly right that productive infrastructure investment is the low-hanging fruit. Of course, governments should be concerned about the long-term trajectory of public debt, all politically charged and polemical nonsense to the contrary. But productive infrastructure investment that generates long-term growth pays for itself, so there need not be any conflict between short-term stabilisation and risks to long-term debt sustainability. 
It is also far from clear why virtually all infrastructure needs to be publicly financed. There are still huge pools of private wealth sitting on the sidelines that can be rapidly mobilised to support productive infrastructure. The government needs to help with rights of way before construction, and with strong regulation to protect the public interest afterwards.
The important point is that the case for expanding productive infrastructure investment does not rest on one narrow ideological viewpoint or economic theory. Whether Summers is right about secular stagnation in advanced economies, or whether we are still mainly suffering the aftermath of the financial crisis, it is time to break the political gridlock and restore growth.

Keneth Rogoff
Former chief economist of the IMF
Professor of economics and public policy at Harvard University.

China is now ready to turn on the world’s biggest 4G network

"We knew that China will get 4G starting on December 18 , but there remained the not so trivial matter of government-issued LTE operating licenses. Today that issue is finally cleared up, with all three of China’s telcos getting their licenses.

According to the Shanghai Daily, China Mobile gets the homegrown TD-LTE license, while rivals China Telecom and China Unicom  are assigned both domestically developed TD-LTE and the more international FDD-LTE licenses.

Lots of major Chinese cities have had 4G trials for the past couple of years, but December 18 marks China’s official ‘nationwide’ 4G turn-on. However, only major cities like Beijing, Guangzhou, and Chongqing will get 4G on that day, with more cities being added gradually. China Mobile aims to have its new 4G network cover 100 cities and 500 million people soon, but it’s not fully ready to roll on day one.

China Mobile, the world’s biggest telco by subscriber base, is the most 4G ready, with China Telecom and China Unicom not ready to roll out nationwide services on the 18th.

Big boost for Apple

China Mobile’s awkward 3G TD-SCDMA network meant it could never support the iPhone, so 4G means a new era of Apple compatibility for the telco. Some analysts expect China Mobile to start official iPhone sales on December 18, but the company has remained silent on that matter".

Source: TECHINASIA

Dow, S&P 500 drop for fourth straight day; Fed a concern

The Dow and the S&P 500 finished lower for the fourth consecutive session on Wednesday after investors found few reasons to make big moves, with uncertainty remaining over when the Federal Reserve will start to slow its stimulus.

Stocks fell for much of the session, but edged closer to break-even levels in the last hour of trading. Still, the losses were broad, with eight of the 10 S&P 500 sector indexes ending lower for the day on concerns that the market's recent rally to record levels was not justified.

About 60 percent of the shares traded on the New York Stock Exchange closed lower for the day, while 56 percent of Nasdaq-listed stocks closed down.

Many market participants expect the Fed to announce a cut in its $85 billion in monthly bond purchases in March, but recent economic data increased expectations that the move may come sooner. The Fed has said it would slow its stimulus program when certain economic measures meet its targets, including a decline in the U.S. unemployment rate.

The ADP National Employment Report showed private-sector employers added 215,000 jobs in November, more than expected. This was the latest in a string of reports suggesting that the economy's outlook was brightening.

Source: Reuters

Future World Energy demand driven by trends in Developing Countries

EIA's International Energy Outlook 2013 (IEO2013) projects that growth in world energy use largely comes from countries outside of the  OECD. Energy use patterns for countries inside the OECD are relatively stable between 2010 and 2040 as primary energy use is projected to grow by 0.5% per year, roughly the same rate as population growth in those countries. In non-OECD countries, faster growing economies and changing habits in highly concentrated populations drive significant increases in energy use. Energy use in non-OECD countries is projected to grow by 2.2% per year, and the share of non-OECD energy use is expected to rise from 54% of total world energy use in 2010 to 65% in 2040.

Between 2010 and 2040, IEO2013, shows that primary energy use per capita is expected to change little from its 2010 level of 196 million British thermal units (MMBtu) in the OECD but grows from 50 MMBtu to 73 MMBtu per capita in non-OECD countries. In addition to already being home to most of the world's population in 2010, the non-OECD countries are also expected to experience most of the world's population growth through 2040. Population growth is most pronounced in African countries, but energy use per capita is low across the continent and is projected to stay almost constant through 2040. India also accounts for a large portion of world population growth—adding more than twice as many people as expected to be added in the entire group of OECD countries between 2010 and 2040. Unlike African countries, India's energy use per capita is expected to grow during the period.

In 2040, the total gross domestic product (GDP), measured in purchasing power parity (PPP), of non-OECD countries is projected to be much higher than the GDP of OECD countries, but the amount of energy used per unit of GDP is virtually the same. At the same time, the ratio of GDP relative to population remains much higher in OECD countries. This higher GDP-to-population ratio allows citizens in OECD countries to spend more resources on energy-consuming services that provide productivity, leisure, and comfort, and keeps energy consumption on a per capita basis much higher in the OECD. As the economies in the non-OECD countries continue to experience relatively fast growth, those countries will also be able to spend more for energy-consuming services.

Source: EIA

Drilling for oil in the Falklands now punishable with 15 years in jail

"The Argentinian government has dramatically increased the pressure on British companies drilling for oil off the disputed Falkland Islands by passing laws that could impose 15-year jail sentences on their executives.
A statement provided by the Argentinian embassy in London said "the law provides for prison sentences for the duration of up to 15 years; fines equivalent to the value of 1.5m barrels of oil; the banning of individuals and companies from operating in Argentina; and the confiscation of equipment and any hydrocarbons that would have been illegally extracted".
The Falklands have been at the centre of a sovereignty dispute between Britain and Argentina for almost 200 years, with the two countries going to war in 1982.

But the Falklands row has been exacerbated by Premier moving towards the first oil development project – known as Sea Lion.

The independent oil and gas company has said it hoped to extract 284m barrels of oil from the north part of the field before moving on to get a further 110m barrels from the south.

Most of the oil "majors" such as BP have so far steered clear of the area fearing it could jeopardise their chances of working on the mainland".

Source: theguardian

Growth Signs Pick Up Ahead of Key Fed Meeting

   According to a to an article published today on the Wall Street Journal,the central bank's beige book, which assesses the economic environment in the Fed's 12 districts, cited strength in the U.S. manufacturing sector and consumer spending. Seven districts reported steady growth rates and four districts indicated a less robust expansion than the others. One region simply said economic activity continued to expand.

The snapshot, based on information gathered from early October through Nov. 22, comes two weeks before the Fed's Dec. 17-18 policy meeting. The Fed will decide at that meeting whether to start pulling back its $85 billion-a-month bond-buying program, which is aimed at lowering borrowing costs to spur stronger spending, hiring and growth.

Uncertainty about the Fed's next steps remains a key risk hanging over investors and employers. Fed officials expect to start scaling back the program "in coming months," if the overall economy and labor market continue to improve, according to minutes from its last policy meeting in October.

A separate survey released Wednesday by the Business Roundtable, a group of top corporate executives, found CEOs the most bullish they've been about the economy in almost two years. The survey's economic-outlook index for the fourth quarter rose to its highest point since early 2012. Executives said clearer signals from Washington could help the economy accelerate.

"We have an economy that is on the cusp of growing at more than the 2-to-3% we've seen," said Boeing Co. CEO Jim McNerney, who is chairman of the group. 

"They've chosen to keep interest rates very low, to keep the economy in a very highly liquid state," he said. "I think we're all mindful of the fact that tapering does need to happen somewhere along the line or we're going to have a very difficult inflationary environment here. Exactly when, we don't know."

  The overall economy is beginning to stabilize,new home sales rose 25% in October from the prior month to an annual rate of 444,000. 

Private-sector jobs rose by 215,000 last month, while the October increase was revised to 184,000 from 130,000 reported a month ago.

The Fed will decide at its December 17-18 policy meeting, whether to start pulling back its $85 billion-a-month bond-buying program, which is aimed at lowering borrowing costs to spur stronger spending, hiring and growth.

Iran names big oil companies it wants to welcome back

"Iran has named western oil companies it wants back in its vast oil and gas fields once international sanctions are lifted. The oil minister, Bijan Zanganeh, said contract terms would be offered next April. The seven companies named are: Total of France, Royal Dutch Shell, Italy's ENI, Norway's Statoil, Britain's BP and US companies Exxon Mobil and ConocoPhillips.

Iran has the world's fourth largest proved national reserves of oil – most of it cheap to produce – and is also home to the biggest proved reserves of natural gas, some 18% of the global total. But the oil companies were thrown out in a nationalisation programme following the 1979 revolution. Iran's share of world oil production fell from 55% in the 1970s to below 40% by 1997. Its gas output was negligible.

Oil companies from around the world drifted back in the 1990s, and Zanganeh oversaw their return as minister under the reformist government of 1997-2005.

Total returned to onshore fields in 1997 and Shell in 1999, both while Zanganeh was minister and both in defiance of the US sanctions of the time, even though in 1995 the then president, Bill Clinton, had blocked a Conoco project.

But Iran's production stagnated through the 2000s amid growing international tensions over its nuclear programme. The more effective sanctions instituted in 2012 have choked out foreign investment and sent output down to 2.65m barrels a day in November from an average of 4.3m in 2011.

Iran last month reached an interim deal with six western powers to limit its nuclear programme, under which sanctions on oil investment and trade with Iran may be lifted next year.

Speaking at an Opec meeting, Zanganeh said he was already talking with some companies, although so far not those from the US"

Source: theguardian.

President Calls on Congress to Increase Minimum Wage

   According to a report from the Wall Street Journal,''Liberal groups and many Democrats in Congress have long sought measures to address income inequality and pushed for an increase in the minimum wage''. Mr. Obama used his 2013 State of the Union address to urge Congress to increase the federal minimum wage to $9 an hour and index it to inflation. 

The president listed a series of statistics to highlight what he said was troubling economic inequality in the U.S. "Since 1979, when I graduated from high school, our productivity is up by more than 90%, but the income of the typical family has increased by less than 8%," he said.

He said inequality has also made it difficult for Americans to improve their economic standing, and noted that it is easier for people in countries such as Canada, Germany and France to move up.

Mr. Obama echoed many of the ideas he's offered before: closing tax loopholes and using the increased revenue for infrastructure projects; unwinding the across-the-board spending cuts known as the sequester; and raising the federal minimum wage, now at $7.25 an hour.

Internetworldstats: INTERNET USAGE STATISTICS The Internet Big Picture

INTERNET USAGE STATISTICS The Internet Big Picture World Internet Users and Population Stats

WORLD INTERNET USAGE AND POPULATION STATISTICS June 30, 2012 World Regions Population ( 2012 Est.) Internet Users Dec. 31, 2000 Internet Users Latest Data Penetration (% Population) Growth 2000-2012 Users % of Table Africa 1,073,380,925 4,514,400 167,335,676 15.6 % 3,606.7 % 7.0 % Asia 3,922,066,987 114,304,000 1,076,681,059 27.5 % 841.9 % 44.8 % Europe 820,918,446 105,096,093 518,512,109 63.2 % 393.4 % 21.5 % Middle East 223,608,203 3,284,800 90,000,455 40.2 % 2,639.9 % 3.7 % North America 348,280,154 108,096,800 273,785,413 78.6 % 153.3 % 11.4 % Latin America / Caribbean 593,688,638 18,068,919 254,915,745 42.9 % 1,310.8 % 10.6 % Oceania / Australia 35,903,569 7,620,480 24,287,919 67.6 % 218.7 % 1.0 % WORLD TOTAL 7,017,846,922 360,985,492 2,405,518,376 34.3 % 566.4 % 100.0 % NOTES: (1) Internet Usage and World Population Statistics are for June 30, 2012. (2) CLICK on each world region name for detailed regional usage information. (3) Demographic (Population) numbers are based on data from the US Census Bureau and local census agencies. (4) Internet usage information comes from data published by Nielsen Online, by the International Telecommunications Union, by GfK, local ICT Regulators and other reliable sources. (5) For definitions, disclaimers, navigation help and methodology, please refer to the Site Surfing Guide. (6) Information in this site may be cited, giving the due credit towww.internetworldstats.com. Copyright © 2001 - 2013, Miniwatts Marketing Group. All rights reserved worldwide.

the guardian Editorial. Britain and China: the wheel turns

"China's first stretch of railway track was built by a British firm in 1876, but soon dismantled on the orders of Chinese imperial officials who regarded it as a fiendish foreign invention. The second was built in 1881 under the supervision of Claude Kinder, an English civil engineer. This one survived, and its first locomotive, in tribute to Robert Stephenson, was called the Rocket of China.

Kinder went on to become one of the men, many British, who shaped the extensive steam railway system that transformed the Chinese economy and ushered Chinese society into the modern age. Kinder, created a mandarin of the Red Button by the imperial government for his services would no doubt be amazed at the thought that Chinese engineers could soon be on their way to Britain to help build a railway here. How the wheel turns! Britain has almost completely lost the skills that made us the first railway nation and which we exported on a vast scale, while the Chinese are in the process of gaining them.

The Chinese bullet train network was created with help from German, Japanese and Canadian firms, but its newer trains and track are to its own design, and it is now poised to sell them to the rest of the world.

Whether David Cameron, who sometimes seems lacking in a sense of history, had any thought for this bitter dimension when he announced in Beijing, with the Chinese prime minister, Li Keqiang, standing next to him, that Britain welcomed Chinese investment in our own HS2 project, we cannot know.

What applies to railways applies with equal force to nuclear science, where Britain was within living memory a pioneer, but now must turn to others, including China, for help with new power stations. Yet this turning of the technological tables can be overemphasised. Comparative advantage shifts, as it always does. Britain is not so far gone, scientifically and industrially, and China is not so far advanced as a black and white comparison between 1881 and 2013 might suggest.

That is why, among other reasons, it is regrettable that the British approach to China under the coalition has come to have about it something mendicant, cap in hand, and unduly deferential. Mr Cameron began in office determined to stand up to China on human rights issues and to indicate disapproval of China's policies in Tibet. He even met the Dalai Lama. The Chinese, of course, regard any encounter with a man who is widely regarded as among the sanest and most decent people on the planet as a vicious outrage that must be immediately punished, and Britain was duly shoved out and cold-shouldered.

The British government then changed its position on Tibet, and was rewarded with permission for the large trade mission that arrived in China on Monday. The prime minister chose to herald the trip withanartcleina Chinese publication, claiming that Britain was China's best friend, most assiduous advocate, and most willing partner in the world. If this is not fawning, it is pretty close to it.

True, Britain is not alone in this pro-Chinese litany. Every member of the European Union has sung the same song at one time or another, all discarding principle as they sought to secure a share of the Chinese market and, these days, a share of the money China now has to invest abroad. Much sniggering behind the menu card at the Chinese foreign trade banquet can be heard as competitors blot their copybooks on human rights matters. Britain struggled for years, for example, to get the best possible deal for the people of Hong Kong while other countries resolutely looked the other way.

Japan now has less support on South China Sea issues than it should have, for the same reason, which is that the approach of trade-hungry nations to China positively invites a divide and rule response.

There may be poetic justice in the fact that once upon a time European nations divided China and now China finds it easy to divide us. But it  is not in the end good for either side that this should be so".

U.S. The trade deficit improved in October

The trade deficit improved in October and for the right reason-exports were up. The October trade gap narrowed to $40.6 billion from $43.0 billion in September. October was close to analysts' expectations for a $40.2 billion deficit. Exports rebounded 1.8 percent after slipping 0.1 percent in September. Imports rose 0.4 percent in October, following a 1.6 percent increase the month before.

The shrinking of the trade shortfall was led by goods excluding petroleum which narrowed to $39.3 billion from $41.8 billion in September. The petroleum deficit nudged down to $19.6 billion from $19.9 billion in September. The services surplus improved to $19.6 billion from $19.4 billion. 

On a not seasonally adjusted basis, the October figures show surpluses, in billions of dollars, with Hong Kong $2.8 ($3.2 for September), Brazil $1.7 ($1.0), and Australia $1.4 ($1.5), among others. Deficits were recorded, in billions of dollars, with China $28.9 ($30.5), European Union $14.3 ($8.0), Germany $6.9 ($6.1), Japan $6.4 ($5.5), OPEC $5.6 ($5.9), Mexico $4.1 ($5.3), Ireland $3.2 ($1.8), Saudi Arabia $3.1 ($3.2), and Canada $3.0 ($3.2) among others.

The October trade numbers indicate that the recovery may be benefitting again from exports. This likely will result in upward revisions to forecasts for fourth quarter GDP growth.

Source: Bloomberg

Private-sector employment picked up in November, as employers added 215,000 jobs

Private-sector employment picked up in November, as employers added 215,000 jobs, Automatic Data Processing Inc. reported Wednesday. Economists use ADP'sdata to get a feeling for the U.S. Labor Department's employment report, which will be released Friday and covers government jobs in addition to the private sector.

Source: MarketWatch

Biden calls for trust with China amid airspace dispute

U.S. Vice President Joe Biden said on Wednesday that relations between Washington and Beijing had to be based on trust, amid a dispute over a new Chinese air defence zone which has rattled nerves regionally.

Beijing's decision to declare an air defence identification zone in an area that includes disputed islands has triggered protests from the United States, Japan and South Korea and dominated Biden's talks in Tokyo on Tuesday.

The United States has made clear it will stand by treaty obligations that require it to defend the Japanese-controlled islands, but it is also reluctant to get dragged into any military clash between rivals Japan and China.

Biden told Chinese President Xi Jinping he believed Xi was a candid and constructive person.

Xi said the international situation and regional landscape were "undergoing profound and complex changes".

"Regional issues keep cropping up and there are more pronounced global challenges such as climate change and energy security. The world is not tranquil," he added.

As Biden arrived, the official English-language China Daily, said in a strongly worded editorial that he "should not expect any substantial headway if he comes simply to repeat his government's previous erroneous and one-sided remarks".

"If the U.S. is truly committed to lowering tensions in the region, it must first stop acquiescing to Tokyo's dangerous brinkmanship. It must stop emboldening belligerent Japanese Prime Minister Shinzo Abe to constantly push the envelope of Japan's encroachments and provocations."

 The Global Times, published by the Communist Party's official People's Daily, noted that Biden had not come down heavily on Japan's side, saying he failed to "sate Japan's appetite" for strong words.

"Biden needs to be reminded that Japan holds the key to peacefully solving the East China Sea dispute, because it is the Abe administration's recalcitrant denial of the existence of a dispute that has prevented Beijing and Tokyo from conducting meaningful communication and crisis control," it said.

Source: Reuters

EU Commission to fine banks 1.7 billion euros for benchmark rigging

A group of leading European and American banks will be fined a record 1.7 billion euros (£1.4 billion) by the European Commission for the rigging of interest-rate benchmarks, a source familiar with the matter told Reuters on Wednesday.

The penalty is the biggest yet to be handed down to banks for rigging the benchmarks used to determine the cost of lending, one of the most brazen violations of conduct seen during the financial crisis.

The banks to be fined are Citigroup, Deutsche Bank, Royal Bank of Scotland, JPMorgan, Barclays and Societe Generale, sources have said.

Source:  Reuters