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Thursday, 12 September 2013
Abe to raise sales tax to 8% as scheduled
Prime Minister Shinzo Abe has decided to raise the consumption tax rate to 8 percent next April as planned, emphasizing the need to demonstrate fiscal discipline by making good on a pledge to the international community, a source close to him said Thursday.
Abe, who has been trying to shake the economy out of nearly two decades of deflation, is also considering implementing a stimulus package worth ¥5 trillion to prevent the tax hike from slowing down the economy, the source said.
Abe vows to boost Japan defence amid "provocations"
Japanese Prime Minister Shinzo Abe on Thursday vowed to beef up his country's defence capability amid a blistering row with China, saying he would deal firmly with any "provocations".
Abe, the commander-in-chief of Japan's well-equipped armed forces, told 180 senior uniformed officers he would not bury his head in the sand."We can't avert our eyes from the reality... (that there has been) a flurry of provocations against our country's sovereignty," he told troops in an apparent reference to tensions with China over disputed islands.
"I'm pushing for the regeneration of our country's security by looking squarely at reality," the premier said, without elaboration.
Tokyo and Beijing have repeatedly butted heads over the ownership of the Japan-controlled Senkakus, which Beijing claims as the Diaoyus, with official Chinese ships and aircraft regularly testing Japanese forces.
Abe, who had reviewed a guard of honour with defence minister Itsunori Onodera, has long agitated for a more muscular military, and has spoken openly of his desire to reinterpret rules governing its deployment to allow it to play a more active role in any possible conflict.
"I'm pushing for the regeneration of our country's security by looking squarely at reality," the premier said, without elaboration.
Tokyo and Beijing have repeatedly butted heads over the ownership of the Japan-controlled Senkakus, which Beijing claims as the Diaoyus, with official Chinese ships and aircraft regularly testing Japanese forces.
Abe, who had reviewed a guard of honour with defence minister Itsunori Onodera, has long agitated for a more muscular military, and has spoken openly of his desire to reinterpret rules governing its deployment to allow it to play a more active role in any possible conflict.
How Emerging Markets Went From ‘Hot’ to ‘Not’ In Four Short Months
"Up until a few months ago, emerging markets were widely heralded as the next great “growth engine” that would drive the global economy forward as the ailing economies of the U.S., Europe and Japan took a back seat in the wake of the global financial crisis. Unfortunately, the events of recent months have sent emerging market assets reeling and capital pouring out even faster than it flowed in.
When the most acute phase of the global financial crisis came to an end in mid-2009, record-low interest rates in the U.S., Europe and Japan encouraged investors to move their funds into higher-yielding emerging market assets. In the past four years, $4 trillion worth of capital has flowed into emerging markets, helping to inflate bubbles in bonds, property and, to a lesser extent, equities.
In late 2012, two of the world’s most powerful central banks launched aggressive monetary stimulus programs that helped to fuel a parabolic rally in non-BRIC emerging market stocks – the U.S. Federal Reserve’s $85 billion per month QE3 and the Bank of Japan’s deflation-fighting "Abenomics" program.
The first EM sell-off catalyst, which arose in March and April, was rising expectations of a tapering or slowing of the Fed’s QE3 program by late-2013.
Secondly, in mid-May, markets began to doubt the efficacy of the BoJ’s Abenomics program, sending the Nikkei down by over 20% in less than a month while causing the yen to rally, which punished carry traders who borrowed cheaply in yen to invest in high-yielding EM assets. By the end of May, violent Turkish protests and the rapidly-declining South African rand pushed emerging market assets over the edge, sending them into a tailspin for the rest of June. Again global markets panicked as China experienced a sharp credit crunch in mid-June after their central bank cracked down on the nation’s shadow banking system.
Rising taper expectations and fund outflows have pushed global bonds into a bear market, popping what many people consider to have been a global bond bubble , causing U.S. 30-year bonds yields to rise from 2.8% to nearly 4%, and 10-year note yields to rise from 1.6% to nearly 3% in the past four months. Climbing U.S. bond yields have caused emerging market bond yields to surge in lock-step, slamming EM bonds down by an average of 12.8% as investors removed over $20 billion of their capital.
Early 2013's best-performing emerging stock markets have fallen very sharply , with Turkish stocks plunging by 30%, Indonesian stocks by 25%, Thai stocks by 20%, and Philippine stocks by 20% since the start of the rout, as over $20 billion of capital has been pulled from EM stocks.
The torrent of liquidity flowing out of emerging markets has caused sharp declines in those countries’ currencies, the worst being the Indian rupee’s 22% plunge against the U.S. dollar that brought it to all-time lows. In addition, the Turkish lira has seen a 21% decline, the Brazilian real is down 16%, and the Indonesian rupiah is down 13%. The common denominator among the EM countries with the hardest-hit currencies is that they each run current account deficits in the range of 2-7% of their GDP.
Rapidly depreciating EM currencies are causing their import prices to rise, leading to inflation.
Other emerging market economies are slowing down dramatically as well. In an effort to shore up their sliding currencies, emerging market central banks are raising interest rates, which will be the catalyst that eventually pops the numerous EM credit and property bubbles when combined with rising bond yields".
Source: Jesse Colombo
Yahoo Finance
When the most acute phase of the global financial crisis came to an end in mid-2009, record-low interest rates in the U.S., Europe and Japan encouraged investors to move their funds into higher-yielding emerging market assets. In the past four years, $4 trillion worth of capital has flowed into emerging markets, helping to inflate bubbles in bonds, property and, to a lesser extent, equities.
In late 2012, two of the world’s most powerful central banks launched aggressive monetary stimulus programs that helped to fuel a parabolic rally in non-BRIC emerging market stocks – the U.S. Federal Reserve’s $85 billion per month QE3 and the Bank of Japan’s deflation-fighting "Abenomics" program.
The first EM sell-off catalyst, which arose in March and April, was rising expectations of a tapering or slowing of the Fed’s QE3 program by late-2013.
Secondly, in mid-May, markets began to doubt the efficacy of the BoJ’s Abenomics program, sending the Nikkei down by over 20% in less than a month while causing the yen to rally, which punished carry traders who borrowed cheaply in yen to invest in high-yielding EM assets. By the end of May, violent Turkish protests and the rapidly-declining South African rand pushed emerging market assets over the edge, sending them into a tailspin for the rest of June. Again global markets panicked as China experienced a sharp credit crunch in mid-June after their central bank cracked down on the nation’s shadow banking system.
Rising taper expectations and fund outflows have pushed global bonds into a bear market, popping what many people consider to have been a global bond bubble , causing U.S. 30-year bonds yields to rise from 2.8% to nearly 4%, and 10-year note yields to rise from 1.6% to nearly 3% in the past four months. Climbing U.S. bond yields have caused emerging market bond yields to surge in lock-step, slamming EM bonds down by an average of 12.8% as investors removed over $20 billion of their capital.
Early 2013's best-performing emerging stock markets have fallen very sharply , with Turkish stocks plunging by 30%, Indonesian stocks by 25%, Thai stocks by 20%, and Philippine stocks by 20% since the start of the rout, as over $20 billion of capital has been pulled from EM stocks.
The torrent of liquidity flowing out of emerging markets has caused sharp declines in those countries’ currencies, the worst being the Indian rupee’s 22% plunge against the U.S. dollar that brought it to all-time lows. In addition, the Turkish lira has seen a 21% decline, the Brazilian real is down 16%, and the Indonesian rupiah is down 13%. The common denominator among the EM countries with the hardest-hit currencies is that they each run current account deficits in the range of 2-7% of their GDP.
Rapidly depreciating EM currencies are causing their import prices to rise, leading to inflation.
Other emerging market economies are slowing down dramatically as well. In an effort to shore up their sliding currencies, emerging market central banks are raising interest rates, which will be the catalyst that eventually pops the numerous EM credit and property bubbles when combined with rising bond yields".
Source: Jesse Colombo
Yahoo Finance
Nobel laureates pinpoint new engines for Chinese growth
Robert Mundell, a 1999 Nobel Prize-winning economist, said Thursday on the sidelines of the Nobel Laureates Beijing Forum that China's policies are very important for the world due to its significant role in sustaining growth in the global economy.
As the biggest trader and the second largest economy in the world, China accounts for more than 10 percent of the global economy and plays a major role in sustaining global economic growth, Mundell said.
However, sluggish overseas demand and the government's reluctance to ease policies have trapped the country in a protracted slowdown, as its growth dipped to 7.5 percent in the second quarter of this year from 7.7 percent in the first three months and 7.9 percent in the final quarter of 2012.
Instead of initiating a massive stimulus plan, authorities are moving cautiously by speeding up shantytown renovation, accelerating railway and infrastructure investment, and reducing taxes for small businesses to spur growth while pushing forward reforms.
Recently, there have been strong signs that the economy has stepped out of the lengthy downturn, as shown by many economic barometers, including the purchasing managers' index (PMI), exports and industrial production.
The signs of a stronger economy are mainly brought about by policy changes of the Chinese government, Mundell said.
The country's PMI for the manufacturing sector rose to 51 percent in August, the highest level this year, data from China Federation of Logistics and Purchasing showed.
China's industrial production gained traction in August with its value-added output expanding at its fastest pace in 17 months, while its exports rose 7.2 percent year on year last month, 2.1 percentage points faster than that of July.
Mundell said the country should not rely too much on exports for driving its growth, but rather turn to consumption and investment.
He said "consumption in China is underrepresented" as it contributes to only around 40 percent of GDP growth compared to 70 to 80 percent in developed countries.
Mundell added that China should also increase the role of services in the economy as it is a major source of employment."Increasing consumption and increasing services in the economy are changes that have to be made by the government,".
Edmund Phelps, winner of the 2006 Nobel Prize for Economic Sciences, emphasized the significant role of innovation in economic growth.
"I think what China should be aiming for is more business innovations, conducted by business people and inspired by their ideas," Phelps said.
To the extent that there is such innovation, there will be increased business investment demand and increased jobs. "That's the way to go," he said.
Phelps said the country should encourage the financial sector to develop the capabilities to lend to businesses for their innovative investment projects.
"There is certainly room for redirecting investment expenditures from the construction of skyscrapers to financing business investment," he said
Source: Xinhua
Investors(shrug) and companies(act) on higher interest rates
According to an article published today in the Wall Street Journal:"The S&P 500 has risen every day in September and sits only 1.2% off record highs. Yet the rally comes amid the sharp rise in the benchmark 10-year Treasury yield over the past several months. Last week it flirted with 3%, a level not seen in more than two years. On Wednesday the 10-year note yielded 2.920%.
Normally rising rates aren’t an issue for stocks until the 10-year yield gets above 5%, which tends to coincide with a pickup in inflation.“But the pace at which yields head higher matters at any level,” Mr. Kleintop Chief market strategist at LPL Financial said in a note to clients earlier this week.
Even companies that haven't waded into debt markets in years are jumping in now. Last week, Starbucks Corp. sold $750 million of bonds, its first bond sale in six years. The 10-year bonds carried interest of 3.85%, much lower than the 6.25% the coffee retailer paid on similar bonds it sold in 2007.
At the same time, however, higher rates are also affecting foreign-currency exchange rates in several countries, including India and Brazil. As investors shift their bond holdings to safer and higher-yielding U.S. government debt, the value of the dollar is strengthening against trading partners.
U.S. companies exporting to Brazil and Japan and India have been hurt by 13% to 25% declines in the value of the local currencies relative to the dollar. As prices of imported goods in those countries rise, that infects the economy with inflation".
Normally rising rates aren’t an issue for stocks until the 10-year yield gets above 5%, which tends to coincide with a pickup in inflation.“But the pace at which yields head higher matters at any level,” Mr. Kleintop Chief market strategist at LPL Financial said in a note to clients earlier this week.
The good news: Mr. Kleintop forecasts the recent pickup in rates could be due for a pause, especially as Treasury yields shift to levels that typically coincide with the state of the economy.
For instance, third-quarter GDP is tracking in the range of 1.5% to 2.0%, while inflation is running between 1% and 1.5%. Combine both metrics and the recent rise in yields “places it right in the middle of the range of the ‘normal’ level for the 10-year Treasury, despite the effects of the Federal Reserve’s soon to be wound down bond-buying program,” Mr. Kleintop said. As long as interest rates don’t spike significantly from current levels, there’s little reason to think the good times in the stock market won’t continue.
After years of efforts to keep interest rates near zero to help the struggling economy, Federal Reserve Chairman Ben Bernanke in May telegraphed that the days of cheap and easy long-term credit were potentially numbered. As a result, yields on 10-year Treasury bonds—a benchmark used to set other interest rates—have shot up to 2.92% from 1.63% in four months.
A lot of companies have jumped at the chance to refinance high-interest bonds and other types of loans while the going is still good. So far this year, 54% of leveraged loans made to companies have been used to refinance debt, according to S&P Capital IQ's Leveraged Commentary & Data unit. That's up from 47% in the year-ago period.Even companies that haven't waded into debt markets in years are jumping in now. Last week, Starbucks Corp. sold $750 million of bonds, its first bond sale in six years. The 10-year bonds carried interest of 3.85%, much lower than the 6.25% the coffee retailer paid on similar bonds it sold in 2007.
At the same time, however, higher rates are also affecting foreign-currency exchange rates in several countries, including India and Brazil. As investors shift their bond holdings to safer and higher-yielding U.S. government debt, the value of the dollar is strengthening against trading partners.
U.S. companies exporting to Brazil and Japan and India have been hurt by 13% to 25% declines in the value of the local currencies relative to the dollar. As prices of imported goods in those countries rise, that infects the economy with inflation".
Government Bonds Yields
Government Bonds
Price Yield
Change %
Price Yield
Change %
| U.S. 2 Year | -1/32 | 0.463 | ||
| U.S. 5 Year | -3/32 | 1.741 | ||
| U.S. 10 Year | -7/32 | 2.938 | ||
| U.S. 30 Year | -9/32 | 3.869 | ||
| Germany 2 Year | 0/32 | 0.231 | ||
| Germany 10 Year | 0/32 | 1.953 | ||
| Italy 2 Year | 0/32 | 2.104 | ||
| Italy 10 Year | 0/32 | 4.526 | ||
| Japan 2 Year | 0/32 | 0.118 | ||
| Japan 10 Year | -1/32 | 0.731 | ||
| Spain 2 Year | 0/32 | 1.724 | ||
| Spain 10 Year | 0/32 | 4.460 | ||
| U.K. 2 Year | 0/32 | 0.448 | ||
| U.K. 10 Year | 0/32 | 2.770 |
Alibaba’s Running Out of Time for 2013 Hong Kong IPO
Alibaba Group Holding Ltd. is running out of time if it wants to list in Hong Kong this year.
Hong Kong’s amended listing rules, which take effect Oct. 1, stipulate that IPO candidates must appoint sponsor banks at least two months before submitting listing applications to the bourse operator. Alibaba said it hasn’t appointed a sponsor bank.
Source: WSJ
Hong Kong’s amended listing rules, which take effect Oct. 1, stipulate that IPO candidates must appoint sponsor banks at least two months before submitting listing applications to the bourse operator. Alibaba said it hasn’t appointed a sponsor bank.
Source: WSJ
Alibaba Braces for Mobile Devices
In an article published in the Wall Street Journal Alibaba braces for mobile devices ,
the Chinese e-commerce giant faces a major challenge: how to cash in on the mobile Internet.
Alibaba's two online marketplaces, Taobao and Tmall, together handle more total dollar transactions than any e-commerce platform including Amazon and eBay.
But more than 90% of those transactions come from PCs. As Chinese consumers increasingly use mobile devices for all kinds of online activities, Alibaba is trying to figure out how to defend its No. 1 position in China's rapidly growing e-commerce market.
Chinese Internet giants Tencent Holdings Inc. and Baidu Inc. are muscling in to strengthen their own e-commerce and mobile capabilities. These companies all realize that they can no longer specialize in one area, such as e-commerce, social networking or search, as they compete for the limited time and attention of smartphone users.
"In the future, there will be more competition from all areas of the Internet," said Alibaba Chief Executive Jonathan Lu.
the Chinese e-commerce giant faces a major challenge: how to cash in on the mobile Internet.
Alibaba's two online marketplaces, Taobao and Tmall, together handle more total dollar transactions than any e-commerce platform including Amazon and eBay.
But more than 90% of those transactions come from PCs. As Chinese consumers increasingly use mobile devices for all kinds of online activities, Alibaba is trying to figure out how to defend its No. 1 position in China's rapidly growing e-commerce market.
Chinese Internet giants Tencent Holdings Inc. and Baidu Inc. are muscling in to strengthen their own e-commerce and mobile capabilities. These companies all realize that they can no longer specialize in one area, such as e-commerce, social networking or search, as they compete for the limited time and attention of smartphone users.
"In the future, there will be more competition from all areas of the Internet," said Alibaba Chief Executive Jonathan Lu.
Unlike Amazon, Alibaba doesn't sell products but makes money through advertising and other services it offers to millions of merchants using its marketplaces.
To better prepare for the rise of the mobile Internet, Alibaba has been trying to gain control over key mobile services and technologies—be it mapping, social media or operating systems—to lure smartphone users to its marketplaces. It has spent about $1 billion in the past several months to buy stakes in an array of services".
How quickly Alibaba adapts to the shift will be crucial in the next phase of its growth. The company is preparing for an IPO that could happen as early as this year and value the company at $70 billion or more.
Syria applies to join global poison gas ban
Syria applied on Thursday to sign up to the global ban on chemical weapons, as U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov discussed a Russian plan under which Damascus would give up its arsenal of poison gas.
The United Nations said it had received Syria's application to join the Chemical Weapons Convention, shortly after President Bashar al-Assad promised to deliver it within days. Washington immediately warned Syria against stalling tactics to avoid military strikes.
The United Nations said it had received Syria's application to join the Chemical Weapons Convention, shortly after President Bashar al-Assad promised to deliver it within days. Washington immediately warned Syria against stalling tactics to avoid military strikes.
As he began talks in Geneva with Lavrov, Kerry said force might still be needed against Syria if diplomacy over Assad's chemical weapons stockpile fails.
"President Obama has made clear that should diplomacy fail force might be necessary to deter and degrade Assad's capacity to deliver these weapons," Kerry said.
"Expectations are high. They are high for the United States perhaps even more sides for Russia to deliver on the promise of this moment. This is not a game and I said that to my friend Sergei when we talked about it initially," Kerry said.
Source: Reuters
Apple Gets iPhone License for China Mobile Network
In an article published today in the Wall Street Journal writing about the introduction in China, of its new products iPhone 5S and iPhone 5C, it says:
"Apple Inc on Wednesday hosted its first-ever iPhone product introduction in Beijing and gained approval to offer the device with China's largest carrier, indications of how important the world's largest smartphone market has become for the Cupertino, Calif., company.
But critics were disappointed by the minimal difference in price for the iPhone 5C—the less expensive of the two phones Apple unveiled—signaling that Apple will continue to target the top end of the Chinese market. While that means Apple likely will retain its profit margins here, analysts worried it would come at the expense of gaining ground in a huge market that is shifting toward less-expensive phones.
Priced at 4,488 yuan (US$733) in China for the unsubsidized, 16-gigabyte version, the iPhone 5C is unlikely to attract customers beyond the affluent in China's largest cities. Apple has maintained a strong share of the market for high-end smartphones in China, but its portion of the broader market has dropped as consumers have bought less-expensive devices from Chinese companies and South Korea's Samsung Electronics Co..
China Mobile has more than 700 million users, but its proprietary Chinese standard has prevented the company from offering the iPhone".
"Apple Inc on Wednesday hosted its first-ever iPhone product introduction in Beijing and gained approval to offer the device with China's largest carrier, indications of how important the world's largest smartphone market has become for the Cupertino, Calif., company.
But critics were disappointed by the minimal difference in price for the iPhone 5C—the less expensive of the two phones Apple unveiled—signaling that Apple will continue to target the top end of the Chinese market. While that means Apple likely will retain its profit margins here, analysts worried it would come at the expense of gaining ground in a huge market that is shifting toward less-expensive phones.
Priced at 4,488 yuan (US$733) in China for the unsubsidized, 16-gigabyte version, the iPhone 5C is unlikely to attract customers beyond the affluent in China's largest cities. Apple has maintained a strong share of the market for high-end smartphones in China, but its portion of the broader market has dropped as consumers have bought less-expensive devices from Chinese companies and South Korea's Samsung Electronics Co..
China Mobile has more than 700 million users, but its proprietary Chinese standard has prevented the company from offering the iPhone".
Adair Turner:The Failure of Free-Market Finance Part II
"Deleveraging of the private households explains the long way to recovery of the 2008-9 economic recession,accumulated debts have a powerful depressive effect, because over-leveraged businesses and consumers cut investment and consumption in an attempt to pay down their debts. Japan’s lost decades after 1990 were the direct and inevitable consequence of the excessive leverage built up in the 1980’s.
Faced with depressed private investment and consumption, rising fiscal deficits can play a useful role, offsetting the deflationary effects. But that simply shifts leverage to the public sector, with any reduction in the ratio of private debt to GDP more than matched by an increase in the public-debt ratio
Private leverage levels, as much as the public-debt burden, must therefore be treated as crucial economic variables. Ignoring them before the crisis was a profound failure of economic science and policy, one for which many countries’ citizens have suffered dearly.
Two questions follow. The first is how to navigate out of the current overhang of both private and public debt. There are no easy options. Paying down private and public debt simultaneously depresses growth. Rapid fiscal consolidation thus can be self-defeating. But offsetting fiscal austerity with ultra-easy monetary policies risks
fueling a resurgence of private leverage in advanced economies and already has produced the dangerous spillover of rising leverage in emerging economies.
Both realism and imaginative policy are required. It is obvious that Greece cannot pay back all of its debt. But it should also be obvious that Japan will never be able to generate a primary fiscal surplus large enough to repay its government debt in the normal sense of the word “repay.” Some combination of debt restructuring and permanent debt monetization.
The second question is how to constrain leveraged growth in the future. Fixing the “too big to fail” problem is certainly important, but the direct taxpayer costs of bank rescues were small change compared to the damage wreaked by the financial crisis. And a banking system that never received a taxpayer subsidy could still support excessive private-sector leverage.
What is required is a wide-ranging policy response that combines more powerful countercyclical capital tools than currently planned under Basel 3, the restoration of quantitative reserve requirements to advanced-country central banks’ policy toolkits, and direct borrower constraints, such as maximum loan-to-income or loan-to-value limits, in residential and commercial real-estate lending".
Source:Adair Turner
Faced with depressed private investment and consumption, rising fiscal deficits can play a useful role, offsetting the deflationary effects. But that simply shifts leverage to the public sector, with any reduction in the ratio of private debt to GDP more than matched by an increase in the public-debt ratio
Private leverage levels, as much as the public-debt burden, must therefore be treated as crucial economic variables. Ignoring them before the crisis was a profound failure of economic science and policy, one for which many countries’ citizens have suffered dearly.
Two questions follow. The first is how to navigate out of the current overhang of both private and public debt. There are no easy options. Paying down private and public debt simultaneously depresses growth. Rapid fiscal consolidation thus can be self-defeating. But offsetting fiscal austerity with ultra-easy monetary policies risks
fueling a resurgence of private leverage in advanced economies and already has produced the dangerous spillover of rising leverage in emerging economies.
Both realism and imaginative policy are required. It is obvious that Greece cannot pay back all of its debt. But it should also be obvious that Japan will never be able to generate a primary fiscal surplus large enough to repay its government debt in the normal sense of the word “repay.” Some combination of debt restructuring and permanent debt monetization.
The second question is how to constrain leveraged growth in the future. Fixing the “too big to fail” problem is certainly important, but the direct taxpayer costs of bank rescues were small change compared to the damage wreaked by the financial crisis. And a banking system that never received a taxpayer subsidy could still support excessive private-sector leverage.
What is required is a wide-ranging policy response that combines more powerful countercyclical capital tools than currently planned under Basel 3, the restoration of quantitative reserve requirements to advanced-country central banks’ policy toolkits, and direct borrower constraints, such as maximum loan-to-income or loan-to-value limits, in residential and commercial real-estate lending".
Source:Adair Turner
Environmental Protection Agency Plan to Curb New Coal-Fired Power Plants
According to an article published today in the Wall Street Journal:
"The Obama administration plans to block the construction of new coal-fired power plants unless they are built with novel and expensive technology to capture greenhouse-gas emissions, according to people familiar with a draft proposal.
The administration's rule on emissions from new power plants, a long-awaited measure that is one of the capstones of the administration's climate-change agenda, is set to be formally proposed by the end of next week. While the new rule isn't final yet and is likely to face a legal challenge, it would be another blow to a coal industry already buffeted by a bonanza of cheap natural gas and increasing regulation.
The Environmental Protection Agency first proposed a stringent standard for coal-fired plants last year, prompting an election-year debate about whether President Barack Obama was waging what Republicans called a "war on coal." Mr. Obama has said he supports clean-coal technology but also sees an urgent need to tackle the release of greenhouse gases blamed for climate change. Power-plant emissions account for about a third of U.S. greenhouse-gas emissions".
The Failure of Free-Market Finance Part 1
Five years after the collapse of the US investment bank Lehman Brothers, the world has still not addressed the fundamental cause of the subsequent financial crisis – an excess of debt. And that is why economic recovery has progressed much more slowly than anyone expected (in some countries, it has not come at all).
Most economists, central bankers, and regulators not only failed to foresee the crisis, but also believed that financial stability was assured so long as inflation was low and stable. And, once the immediate crisis had been contained, we failed to foresee how painful its consequences would be.
Official forecasts in the spring of 2009 anticipated neither a slow recovery nor that the initial crisis, which was essentially confined to the United States and the United Kingdom, would soon fuel a knock-on crisis in the eurozone. And market forces did not come close to predicting near-zero interest rates for five years (and countin
One reason for this lack of foresight was uncritical admiration of financial innovation(derivatives of mortgage loans); another was the inherently flawed structure of the eurozone. But the fundamental reason was the failure to understand that high debt burdens, relentlessly rising for several decades – in the private sector even more than in the public sector – were a major threat to economic stability.
In 1960, UK household debt amounted to less than 15% of GDP; by 2008, the ratio was over 90%. In the US, total private credit grew from around 70% of GDP in 1945 to well over 200% in 2008. As long as the debt was in the private sector, most policymakers assumed that its impact was either neutral or benign.
Debt contracts have important implications for economic stability. They are often created in excess, because in the upswing of economic cycles, risky loans look risk-free. And, once created, they introduce the rigidities of default and bankruptcy processes, with their potential for fire sales and business disruptions.
Moreover, debt can drive cycles of over-investment, as described by Friedrich von Hayek. The Irish and Spanish property booms are prime examples of this
When times are good, rising leverage can make underlying problems seem to disappear.
But in the post-crisis downswing, accumulated debts have a powerful depressive effect, because over-leveraged businesses and consumers cut investment and consumption in an attempt to pay down their debts. Japan’s lost decades after 1990 were the direct and inevitable consequence of the excessive leverage built up in the 1980’s.
Source: Adair Turner
Former Chairman of U.K.'s Financial Services Authority
Project Syndicate
Most economists, central bankers, and regulators not only failed to foresee the crisis, but also believed that financial stability was assured so long as inflation was low and stable. And, once the immediate crisis had been contained, we failed to foresee how painful its consequences would be.
Official forecasts in the spring of 2009 anticipated neither a slow recovery nor that the initial crisis, which was essentially confined to the United States and the United Kingdom, would soon fuel a knock-on crisis in the eurozone. And market forces did not come close to predicting near-zero interest rates for five years (and countin
One reason for this lack of foresight was uncritical admiration of financial innovation(derivatives of mortgage loans); another was the inherently flawed structure of the eurozone. But the fundamental reason was the failure to understand that high debt burdens, relentlessly rising for several decades – in the private sector even more than in the public sector – were a major threat to economic stability.
In 1960, UK household debt amounted to less than 15% of GDP; by 2008, the ratio was over 90%. In the US, total private credit grew from around 70% of GDP in 1945 to well over 200% in 2008. As long as the debt was in the private sector, most policymakers assumed that its impact was either neutral or benign.
Debt contracts have important implications for economic stability. They are often created in excess, because in the upswing of economic cycles, risky loans look risk-free. And, once created, they introduce the rigidities of default and bankruptcy processes, with their potential for fire sales and business disruptions.
Moreover, debt can drive cycles of over-investment, as described by Friedrich von Hayek. The Irish and Spanish property booms are prime examples of this
When times are good, rising leverage can make underlying problems seem to disappear.
But in the post-crisis downswing, accumulated debts have a powerful depressive effect, because over-leveraged businesses and consumers cut investment and consumption in an attempt to pay down their debts. Japan’s lost decades after 1990 were the direct and inevitable consequence of the excessive leverage built up in the 1980’s.
Source: Adair Turner
Former Chairman of U.K.'s Financial Services Authority
Project Syndicate
Les eurodéputés votent en faveur d'une meilleure supervision des banques
Pour se prémunir d'une éventuelle crise bancaire semblable à celle qui a frappé l'Europe en 2008, le Parlement européen a donné son feu vert, jeudi 12 septembre, à la création d'un mécanisme européen de surveillance des banques. Sa supervision sera dévolue à la Banque centrale européenne (BCE) afin de mieux prévenir les risques et défaillances des banques, en amont des pouvoirs nationaux.
En juin, les eurodéputés s'étaient déjà prononcés pour ce "mécanisme de supervision unique" (MSU), subordonnant leur vote final à un accord avec la BCE. La décision du Parlement de Bruxelles confirme donc le compromis trouvé entre les deux institutions, et la BCE devrait être en mesure d'exercer sa mission àcompter de septembre 2014.
Poutine met en garde Obama avant la rencontre américano-russe à Genève
Les négociations entre Russes et Américains sur le dossier syrien ne passent pas que par la voie diplomatique. Moscou veut aussi en appeler à l'opinion publique. Dans une tribune publiée jeudi 12 septembre dans le New York Times, le président russe, Vladimir Poutine, expose sa vision du conflit syrien : contrairement à ses homologues américains et français, il tient les rebelles pour responsables de l*attaque chimique du 21 aout.
Intitulé "La Russie plaide pour la prudence", ce plaidoyer intervient quelques heures avant une rencontre cruciale entre les ministres des affaires étrangèresrusse et américain à Genève autour du plan russe de démantèlement de l'arsenal chimique syrien.
Bce: «In Italia rischi crescenti per l’obiettivo disavanzo al 2,9% del Pil»
Il forte aumento del fabbisogno finanziario italiano, salito a 51 miliardi a luglio 2013 dai quasi 28 del luglio 2012, «mette in risalto i rischi crescenti per il conseguimento dell’obiettivo di disavanzo delle amministrazioni pubbliche nel 2013 (2,9% del Pil)». È quanto scrive la Banca centrale europea nel suo bollettino mensile, sottolineando che «il peggioramento è dovuto soprattutto all’erogazione di sostegno al settore finanziario e al rimborso di arretrati».
«Al fine di ridurre ulteriormente gli squilibri e di promuovere la competitività, la crescita e la creazione di posti di lavoro — ha scritto la Banca centrale diretta da Mario Draghi — è necessario che i paesi dell’area dell’euro continuino a portare avanti il proprio programma di riforme. I governi non dovrebbero vanificare gli sforzi già compiuti allo scopo di ridurre il disavanzo pubblico e riportare il rapporto debito/pil su un percorso discendente».
Via libera insomma al risanamento, ma conciliando austerità e crescita. Registrati segnali di miglioramento economico dell’area euro che secondo la Bce va verso «una graduale ripresa dell’economia». Ma Mario Draghi ha avvertito: «I germogli della ripresa sono ancora molto, molto verdi». Per i restanti mesi del 2013 e il prossimo anno ha sottolineato la Banca centrale nel bollettino di settembre «ci si attende, in linea con lo scenario di base, un lento recupero del prodotto, soprattutto sulla scorta di un progressivo miglioramento della domanda interna sostenuta.
«Al fine di ridurre ulteriormente gli squilibri e di promuovere la competitività, la crescita e la creazione di posti di lavoro — ha scritto la Banca centrale diretta da Mario Draghi — è necessario che i paesi dell’area dell’euro continuino a portare avanti il proprio programma di riforme. I governi non dovrebbero vanificare gli sforzi già compiuti allo scopo di ridurre il disavanzo pubblico e riportare il rapporto debito/pil su un percorso discendente».
Via libera insomma al risanamento, ma conciliando austerità e crescita. Registrati segnali di miglioramento economico dell’area euro che secondo la Bce va verso «una graduale ripresa dell’economia». Ma Mario Draghi ha avvertito: «I germogli della ripresa sono ancora molto, molto verdi». Per i restanti mesi del 2013 e il prossimo anno ha sottolineato la Banca centrale nel bollettino di settembre «ci si attende, in linea con lo scenario di base, un lento recupero del prodotto, soprattutto sulla scorta di un progressivo miglioramento della domanda interna sostenuta.
GDP GROWTH ACCELERATES IN G20, BUT ITALY AND MEXICO LAG BEHIND
Economic output in the world's 20 largest economies (G20), as measured by gross domestic product (GDP) grew by 0.9 per cent in the three months ended June, compared with 0.6 per cent in the previous quarter, according to preliminary estimates from the Organisation of Economic Co-operation and Development [OECD].
GDP growth accelerated in most of the world's largest economies but slowed marginally in Canada (to 0.4% compared with 0.5%) and Japan (to 0.9%, compared with 1.0% in the previous quarter) and significantly in Mexico, where it contracted by 0.7%.
Turkey recorded the strongest growth at 2.1%, compared with 1.5% in the previous quarter followed by Korea with a GDP growth of 1.1%, compared with 0.8% in the previous quarter.
In the UK and the US, GDP growth accelerated to 0.7% and 0.6% respectively, compared with 0.3% in the previous quarter.
In Germany, GDP increased by 0.7%, compared with the zero growth rate registered in the previous quarter. In France, GDP grew by 0.5%, rebounding from a contraction of 0.2% in the previous quarter.
Growth accelerated in Brazil (from 0.6% to 1.5%), South Africa (from 0.2% to 0.8%), India (from 0.4% to 0.6%) and China (from 1.6% to 1.7%). Growth remained stable in Indonesia (1.4%).
Compared with the same quarter of 2012, GDP for the G20 area expanded by 2.6% in the second quarter of 2013, up from 2.2% in the previous quarter. Among G20 economies, China recorded the highest growth rate (7.5%) and Italy the largest contraction (minus 2.1%).
Source: LiveCharts
GDP growth accelerated in most of the world's largest economies but slowed marginally in Canada (to 0.4% compared with 0.5%) and Japan (to 0.9%, compared with 1.0% in the previous quarter) and significantly in Mexico, where it contracted by 0.7%.
Turkey recorded the strongest growth at 2.1%, compared with 1.5% in the previous quarter followed by Korea with a GDP growth of 1.1%, compared with 0.8% in the previous quarter.
In the UK and the US, GDP growth accelerated to 0.7% and 0.6% respectively, compared with 0.3% in the previous quarter.
In Germany, GDP increased by 0.7%, compared with the zero growth rate registered in the previous quarter. In France, GDP grew by 0.5%, rebounding from a contraction of 0.2% in the previous quarter.
Growth accelerated in Brazil (from 0.6% to 1.5%), South Africa (from 0.2% to 0.8%), India (from 0.4% to 0.6%) and China (from 1.6% to 1.7%). Growth remained stable in Indonesia (1.4%).
Compared with the same quarter of 2012, GDP for the G20 area expanded by 2.6% in the second quarter of 2013, up from 2.2% in the previous quarter. Among G20 economies, China recorded the highest growth rate (7.5%) and Italy the largest contraction (minus 2.1%).
Source: LiveCharts
EUROZONE INDUSTRIAL PRODUCTION FALLS MORE THAN FORECAST
Eurozone industrial production fell more than expected in July on the back of weak domestic demand, Eurostat revealed on Thursday.
Output in the 17-nation region dropped 1.5% month-on-month compared to June's 0.3% increase, missing the consensus estimate for a 0.2% decline.
Production was down 2.1% compared with July 2012.
In Germany, Europe's largest economy, industrial production was down 2.3% in July from June.
France, Italy, Ireland, Portugal and the Netherlands also experienced poor performance while Finland and Spain rose.
The report may fuel fears that Eurozone growth will wane during the latest three-month period, after having emerged from an 18-month downturn in the second quarter of the year.
Source: LiveCharts
Output in the 17-nation region dropped 1.5% month-on-month compared to June's 0.3% increase, missing the consensus estimate for a 0.2% decline.
Production was down 2.1% compared with July 2012.
In Germany, Europe's largest economy, industrial production was down 2.3% in July from June.
France, Italy, Ireland, Portugal and the Netherlands also experienced poor performance while Finland and Spain rose.
The report may fuel fears that Eurozone growth will wane during the latest three-month period, after having emerged from an 18-month downturn in the second quarter of the year.
Source: LiveCharts
Precious Metals Prices 8.11 a.m. Eastern Time
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U.S. jobless claims fall; reading clouded by problems processing in two States
The number of new U.S. jobless claims fell sharply last week but much of the decline appeared due to technical problems in claims processing, clouding the last major reading of labor market health before a Federal Reserve meeting.
Initial claims for state unemployment benefits slipped 31,000 to a seasonally adjusted 292,000, the Labor Department said on Thursday.
That was the lowest level of claims since 2006, confounding analysts' expectations for a mild increase.
But a department analyst said the majority of the decline appeared to be because two states were upgrading their computer systems and did not process all the claims they received during the week. One of the states was large and the other small, the analyst said.
While the drop in claims should be taken with a grain of salt, it doesn't change the view that employers appear to have ended a long cycle of elevated layoffs that began around the 2007-09 recession.
The four-week moving average for new claims, which smoothes out volatility,fell by 7,500 to 321,250.
Source: Reuters
Source: Reuters
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