Stephen Roach: How Big Is The Wealth Effect from Easy Money?

  "The Federal Reserve continues to cling to a destabilizing and ineffective strategy. By maintaining its policy of quantitative easing (QE) – which entails monthly purchases of long-term assets worth $85 billion – the Fed is courting an increasingly treacherous endgame at home and abroad.                                                                    By now, the global repercussions are clear,developing economies with large current-account deficits,namely
Brazil,India,Indonesia, Turkey and South Africa, which benefited the most from QE-induced capital inflows, and they were the first to come under pressure when it looked like the spigot was about to be turned off. 
  When the Fed stepped back in its announced tappering of its buying program of long term securities,they enjoyed a sigh-of-relief rally in their currencies and equity markets.

 But there is an even more insidious problem brewing on the home front. 

 It has shifted its focus from the price of credit to influencing the credit cycle’s quantity dimension through the liquidity injections that quantitative easing requires. In doing so, the Fed is relying on the “wealth effect” – brought about largely by increasing equity and home prices – as its principal transmission mechanism for stabilization policy.

There are serious problems with this approach. First, wealth effects are statistically small; most studies show that only about 3-5 cents of every dollar of asset appreciation eventually feeds through to higher personal consumption. As a result, outsize gains in asset markets – and the related risks of new bubbles – are needed to make a meaningful difference for the real economy.

   Second, wealth effects are maximized when debt service is minimized – that is, when interest expenses do not swallow the capital gains of asset appreciation. That provides the rationale for the Fed’s zero-interest-rate policy – but at the obvious cost of discriminating against savers, who lose any semblance of interest income.

   Third, and most important, wealth effects are for the wealthy. The Fed should know that better than anyone. After all, it conducts a comprehensive triennial Surveyof Consumer Finances(SCF), which provides a detailed assessment of the role that wealth and balance sheets play in shaping the behavior of a broad cross-section of American consumers.

In 2010, the last year for which SCF data are available, the top 10% of the US income distribution had median holdings of some $267,500 in their equity portfolios, nearly 16 times the median holdings of $17,000 for the other
 90%. Fully 90.6% of US families in the highest decile of the income distribution owned stocks – double the 45% ownership share of the other 90%
 The problem continues to be the crisis-battered American consumer. In the 22 quarters since early 2008, real personal  consumer expenditure, which accounts for about 70% of US GDP, has grown at an average annual rate of just 1.1%, easily the weakest period of consumer demand in the post-World War II era.
Trapped in the aftermath of a wrenching balance-sheet recession, US families remain fixated on deleveraging – paying down debt and rebuilding their income-based saving balances. Progress has been slow and limited on both counts.

QE benefits the few who need it the least. That is not exactly a recipe for a broad-based and socially optimal economic recovery".

Stephen Roach

Project-Syndicate

Precious Metals Prices 11.17 p.m. Eastern Time

Gold Price Futures     3  months       US$  1,313.26

Silver Price Futures    3 months        US$       21.72

Japan:Neuroscientists say they have succeeded in planting false memories in mice.

Neuroscientists say they have succeeded in planting false memories in mice.

Researchers include Japanese Nobel laureate Professor Susumu Tonegawa at the Massachusetts Institute of Technology and others from the RIKEN research center.

They say they have found a way to stimulate rodents' brain cells with light in order to reactivate prior memories.

The researchers put the mice in a chamber to form a memory of the place.

The mice were then introduced to a different chamber where they received a mild electric shock. At the same time, the researchers used light to activate the cells containing the memory of the previous chamber.

When the mice were placed back into the first chamber they froze in fear even though they had never received a shock there.

TPP ministers agree on tariff elimination rule on final day

Ministers of the 12 countries in the Trans-Pacific Partnership free trade negotiations agreed Sunday to uphold a basic rule of total tariff eliminations in wrapping up their three-day meeting on the Indonesian island of Bali toward the goal of reaching a deal by the year-end.

During their effort to compile work plans for advancing talks on contentious areas, the ministers discussed market access that covers tariff elimination rules and intellectual property rights among others, despite each country having its own sensitivities.On Japan's sensitive items, a ruling party lawmaker in charge told reporters after the meeting that Prime Minister Shinzo Abe's Liberal Democratic Party now plans to study the possibility of eliminating tariffs on the items that have been considered untouchable, including rice.
"We need to consider whether we can take them out or not" from the exceptional items in Japan's negotiation policy -- adopted in line with the party's proposal -- said Koya Nishikawa, head of the LDP's TPP committee, although adding it does not necessarily mean the party has removal in mind.
"If it doesn't hurt (Japan's agriculture), it would be up to the government to negotiate" and decide policies, Nishikawa said.

Source: NewsOnJapan

China, Thailand vow to advance bilateral, China-ASEAN ties

hinese President Xi Jinping and Thai Prime Minister Yingluck Shinawatra met here Sunday, pledging to further bilateral ties and China's relations with the Association of Southeast Asian Nations(ASEAN).

China-Thailand ties enjoy a solid foundation, huge development potential and a good prospect, Xi said during talks with Yingluck ahead of the 21st informal economic leaders' meeting of the Asia-Pacific Economic Cooperation(APEC) in the Indonesian resort island of Bali, slated for Monday and Tuesday.

China highly values its friendly relations with Thailand, and considers Thailand a significant cooperative partner in the region, Xi said.

Following the comprehensive strategic cooperative partnership forged last year, China-Thailand ties enter a new development stage, said Xi.

The two sides should maintain close exchanges, plan cooperation according to their own development needs, tap new growth points and push forward bilateral relations to a higher level, he said.

Construction of high-speed railway and water conservancy infrastructure are key projects concerning regional connectivity, Thailand's economy and the well-being of the Thai people, and thus should be highlighted among the priorities of cooperation projects, Xi said.

These projects can become symbols of China-Thailand friendship, he noted.

China-Thailand ties have been taking the lead among China's relations with ASEAN nations, setting an example for the region, said Xi.

China expects Thailand to fully play its role as coordinator of China-ASEAN relations, and actively promote mutual trust and cooperation between China and ASEAN, and jointly safeguard prosperity and stability in the region, said the Chinese president.

China supports Thailand's proposal to host the international meeting on the sustainable development in the Lancang-Mekong subregion, Xi said.

Yingluck, for her part, said Thailand hopes to strengthen exchanges with China, expand cooperation in such fields as trade and economy, investment and infrastructure construction, and effectively carry out the high-speed railway and water conservancy projects.

Thailand appreciates China's efforts to maintain reform and opening up and advance toward the great rejuvenation of the Chinese nation, she said.

China's economic development is very significant to Thailand and ASEAN, said Yingluck.

Thailand agrees with China on its principled proposals on China-ASEAN relations, and stands ready to join hands with China to boost ASEAN-China friendly cooperation and development, and safeguard regional peace and stability, she said.

Thailand supports China's proposal on the creation of an Asia infrastructure investment bank, and is ready to coordinate with China in this regard, said Yingluck.

Source: Xinhua

Chinese FM spokesman refutes Japanese concerns over maritime security

- A Chinese Foreign Ministry spokesman on Sunday rejected concerns raised by the Japanese side on the so-called maritime security and China's maritime activities.

Qin Gang made the remarks when asked by press ahead of the 21st informal economic leaders' meeting of the Asia-Pacific Economic Cooperation (APEC) in the Indonesian resort island of Bali, slated for Monday and Tuesday.

During an informal breakfast meeting of foreign ministers from APEC's sovereign members on Saturday, Japan's Foreign Minister Fumio Kishida reportedly raised concerns over maritime security and China's maritime activities.

Qin said China's Vice Foreign Minister Li Baodong responded at the scene that the APEC is an economic and trade cooperation forum, holding the tradition for many years of not introducing issues concerning political security and sensitive disputes.

An individual country made the hype solely for its own political objectives, which cannot be accepted by others and is doomed to fail, Qin quoted Li as saying.

Qin said there has been no problem with the freedom of navigation and maritime security in the region. The Chinese government always adheres to the position that the maritime security of all the countries should be safeguarded. China has vigorously participated in maritime security cooperation in the region, which is clear for all to see, he said.

The hype of the so-called maritime security issue is not conducive to the true efforts of safeguarding navigational freedom and security, Qin said.

Chinese, Australian leaders pledge to boost ties

Chinese President Xi Jinping and Australian Prime Minister Tony Abbott agreed here on Sunday to push forward bilateral ties and speed up free trade negotiation.

China and Australia are both major countries in the Asia-Pacific region, said Xi in a meeting with Abbott. "Their close cooperation would not only serve the fundamental interests of both countries, but also contribute to regional and world peace and development," he said.

China and Australia should consolidate "four bonds" in bilateral ties, said Xi.

The first bond is mutual trust. Both sides should respect each other's core interests and major concerns, objectively and rationally view each other's strategic intentions, achieve common progress amid inclusiveness and mutual learning, and seek win-win results through deepening cooperation, said Xi.

The second bond is economy and trade. Both countries should make efforts to achieve early and substantive progress of bilateral free trade agreement (FTA) talks, said Xi, adding that they can also expand cooperation in traditional areas such as energy and resources while exploring new cooperation areas such as infrastructure, information technology, energy conservation and environmental protection.

The third bond is people-to-people exchanges. China and Australia should strengthen exchanges in education, culture and between the two countries' youth, so as to deepen mutual understanding and friendship, said Xi.

The fourth bond is security. The two countries should continue to enhance military exchanges through their strategic defense consultation and navy visits, he added.

On regional cooperation, Xi said the Asia-Pacific region has maintained overall political stability, economic vitality and vibrant regional cooperation.

Countries in the region should focus on development and economic growth, said the Chinese president.

China and Australia may strengthen communication, coordination and cooperation through diplomatic and strategic dialogue mechanisms, said Xi, adding that his country stands ready to work with Australia to play a constructive role in ensuring that the upcoming APEC meeting would achieve its goals.

Abbott, for his part, said China's rise is a blessing to the world, not a challenge.

Australia's prosperity has benefited from cooperation with China, said Abbott, pledging to stay committed to boosting the "four bonds" of mutual trust, economy and trade, people-to-people exchanges and security, in order to develop even more robust bilateral relations and be a good friend of China.

Australia is ready to speed up the FTA negotiations with China, and welcomes Chinese enterprises to invest in Australia, Abbott said.

Australia wishes to enhance cooperation with China within the frameworks of the Group of Twenty and APEC, he added.

Japan casinos would get Vegas-style regulator

Japan would establish an independent gaming regulator modelled on the authorities that police casinos in Las Vegas and Singapore under a draft plan to legalise gambling in a market seen as potentially the second-largest in the world.

The policy outline, which was prepared by Japanese lawmakers who favour casinos and reviewed by Reuters, outlines broad standards for licensing and regulating casino operators and their partners.

After more than a decade of lobbying by lawmakers, a bill to legalise casino gambling is seen as having a good chance of passing in the coming months with the business-friendly Liberal Democratic Party in power and after Tokyo -- a likely casino host -- won the bid to host the Summer Olympics in 2020.

MGM Resorts International, Las Vegas Sands Corp , Melco Crown Entertainment and Wynn Resorts Ltd are among the global operators that have shown interest in developing a casino resort in Japan.

Among the concerns lawmakers who favour legalising casinos believe need to be addressed is what measures will be taken to keep out organised crime, known in Japan as the "yakuza." To address those concerns, the draft plan calls for the creation of an agency that would have control over the issuing of licences and the policing of gaming operations.

"The hurdles to enter the business should be set high. It should not be easy for anyone to get a licence and participate in the industry," the policy plan says. "With proper regulation and enforcement of the law, there is absolutely no reason for casinos to become hotbeds of criminal activity."

Details of the draft plan have not previously been reported.

Source: NewsOnJapan

Abe to seek to improve ties with China, S. Korea at regional summits

Prime Minister Shinzo Abe showed his intention Sunday to seek to improve Japan's soured relations with China and South Korea as he began a trip to Southeast Asia, where he will attend a series of meetings of Asia-Pacific leaders.

Abe also told reporters before his departure that he will encourage other leaders to make final efforts toward concluding within the year a trans-Pacific free trade agreement, despite the absence of U.S. President Barack Obama, who had canceled the trip because of the government shutdown in Washington."I want to exchange views" with South Korean President Park Geun Hye and Chinese President Xi Jinping "if circumstances permit," Abe said at Kansai International Airport before leaving for Bali, Indonesia, where the summit of the Asia-Pacific Economic Cooperation forum is scheduled on Monday and Tuesday.
He also said, "If Japan maintains stable friendly ties with China and South Korea, then it will benefit the region as a whole very much," and that he will keep sending a message to the neighbors that "doors for dialogue are open."
There is no publicized schedule, though, for Abe to meet with the Chinese and South Korean presidents in Bali and also in Brunei, which Abe will later visit for other meetings. Some Japanese officials say Japan's efforts to that end have so far failed to bear fruit.

Source: NewsOnJapan

Israel's Tech Start-Ups and Venture Finance Part II

"IBM has spent nearly $1bn (£640m) on four Israeli companies that all developed big data storage solutions: Storwize, XIV, Diligent and FileX. Earlier this year, Google acquired the mapping app Waze for more than $1 bn".

"The founders of Waze received their technical training in Israeli military intelligence. The giant Israeli tech firms Nice,Comverse,  and Check Point were all created by Unit 8200 alumni or based on technology originally developed by the unit".

Across the boulevard, Yaron Tal is Chief Technical Officer of 6Scan, a website security start-up he founded with ex-army buddies. A white-hat hacker (one that works for non-malicious motives), since the age of 12, he was running his own web security consultancy by the age of 17, before being head-hunted for Matzov, the army’s cyber-security unit.

“Entrepreneurs in Israel are unique,” he says. “Their approach to problems is different to others because the army is a huge incubator for innovation and entrepreneurship. The army gave us a few million dollars at the age of 18 and asked us to build technology and systems that address problems that only people 10 or 20 years older are dealing with in other parts of the world".

Another important driver of the tech scene is the fact that Israeli university students pay only about $3,100 (£2,000) a year in tuition fees. They emerge from military service and three years of studying with zero debt, eager to take a year off to pursue their dreams.

Recruiting to 6Scan became easy after they opened an office on the boulevard, according to Tal. “The street is full of start-ups. We talk together, help each other. There are no big companies here, which is great. We live very near the office. We love the vibe, the place, the other start-ups, the restaurants. It’s easier to bring developers to the company when you say it’s in Rothschild even though we don’t have much money to offer. We offer them equity and a good place to spend each day.”

Source: BBC

IMF: Christine Legard The Aftermath of the Great Recession 2008-9 Part II

Emerging markets and developing countries

  For de past five years they drove  the recovery and kept the global economy afloat—accounting for three-quarters of total growth.

  They are now in much better shape, with the exception of India and Malaysia, than in the crisis of the 80's and 90's, they have flexible exchange rates,higher International Reserves, and lower debts with respect of their GDP's.

  Over the past five years, capital flooded into emerging markets—partly due to loose monetary policy in the advanced economies. Bond inflows alone rose by over $1 trillion—more than 2 percentage points of GDP a year for the recipient countries. Now, with markets getting jittery over the perceived end of easy money, this financial tide is starting to recede.

   These countries are in another transition:

By IMF estimates, the turbulence in train since last May could reduce GDP by ½ to 1 percent in major emerging markets. Of course, some countries are more vulnerable than others.

  As it happens with advanced economies, different groups of emerging economies, face different

problems.

 For some,the priority is to ride out the turbulence as smoothly as possible. Currencies should be allowed to depreciate. Liquidity provision can help deal with dysfunctional market behavior.

 There is less room to maneuver,in countries with inflation pressures—such as Brazil, India, Indonesia, and Russia. Likewise, there is not much space left across many emerging markets for using fiscal policy, given high debt and deficits.

Some countries also need to knock down lingering barriers to long-term growth—pushing ahead with infrastructure investment in places like India and Brazil, deepening financial markets, and opening up local markets,ending non-tariffs proteccionist measures.

China needs to keep moving to a growth path based less on credit—which hit 180 percent of GDP this year—and more on higher productivity, higher incomes, and higher consumption. This means liberalizing interest rates, ramping up financial sector oversight, opening up protected sectors to private initiative, and further strengthening the social safety net.

This emerging market transition will not be fast or easy. These countries will likely spend the rest of the decade adjusting to the new reality.

Again, international collaboration is the only way forward.

Low income countries

These too are in the process of profound transition. In many cases, the developing countries of yesterday are poised to become to the frontier economies of tomorrow.

Sub-Saharan Africa is now the second most dynamic region in the world after developing Asia, and is getting ever closer to the beating heart of the global economy. Growth rates over the past several years have been around 5 percent.

So these countries need to take action, by having enough foreign and fiscal reserves to deploy when necessary, including by mobilizing more revenue. Beyond that, they need to make growth more inclusive—including by boosting public investment and making sure that all have access to decent healthcare, education, and finance.

Transition in the Financial Sector

There is a second fundamental transition taking place in the global financial sector, in parallel with the economic.

Under the old model, the financial sector took on outsized risk in pursuit of outsized rewards, causing outsized ruin—and precipitating the crisis we have been experiencing for the last five years.

How is this transition doing? In the IMF’s assessment, it remains a case of “mission not yet accomplished”.

  Yes, we have seen progress. The tougher capital standards, agreed under Basel III, are being implemented. We have agreement on new liquidity standards, and plans for a leverage ratio to keep excess risk in check.

   There is also an issue for the reform in the deratives market.At the end of last year, total outstanding derivatives amounted to $633 trillion, of which only $24 trillion were traded on organized exchanges. Adequate supervision of the remaining part requires countries and markets to speedily implement the agreed derivatives reforms.

   Another danger zone is shadow banking, which is attracting a lot of riskier activity. In the United States, the nonbanking sector is now twice the size of the banking sector. In China too, about half of the new credit extended so far this year has come through the shadow banking system.

Putting this all together in a globalized world is a headache. And yet, it must be done—nothing less than global financial stability depends on it.

Building a new financial sector is not the job of policymakers alone. It is also the responsibility of the financial industry.

Managing the New Transitions in the Global Economy

an Address by Christine Lagarde
Managing Director, International Monetary Fund

Martin Feldstein: The Taper Chase

"Global financial markets were stunned when the US Federal Reserve announced on September 18,  that it was not ready to begin the widely anticipated reduction in the pace of its “quantitative easing” (QE) program.
After Bernanke announced in May that the Fed intended to “taper” QE, investors began to expect that some reduction in the pace of asset purchases might begin in the early fall. As a result, the interest rate on ten year Treasury bonds increased by nearly 50 basis points, from 1.66% on May 1 to 2.13% on at the beginning of June. Bernanke's press conference after the next meeting of the Federal Open Market Committee (FOMC) on June 19 caused a further rise in the ten-year rate, to 2.5% on July 1 and then to 2.92% just before the Fed’s September meeting.

The market was clearly expecting that the tapering would begin in September and that the asset-buying would end in mid-2014. There are at least three possible reasons why the Fed shifted its actions and policy guidance so dramatically.
One possibility is that Bernanke and the other FOMC leaders – especially Vice Chair Janet Yellen and New York Fed President Bill Dudley – never intended to start tapering. Their earlier statements sought merely to reassure FOMC members who wanted to end QE that the leadership was listening to their arguments and taking them seriously. Doing that prevented QE’s opponents from voting against the majority FOMC position, something that would suggest policy disarray at the Fed and a lack of respect for Bernanke. If this hypothesis is correct,the Fed can be expected to continue with an undiminished program of buying long-term securities.
A second possible explanation is that Bernanke and other Fed leaders were indeed anticipating that they would begin tapering QE in September but were startled at how rapidly long-term rates had risen in response to their earlier statements. Bernanke spoke about his surprise in this regard at his June press conference, when rates were up only about 50 basis points. By September, they were up 125 basis points, to nearly 3%. The market was not convinced that the end of QE ment still easy-money policy.
In this way, the Fed had already achieved a significant rise in rates without having to taper QE. Even if the economy were robust, this increase would dampen housing and other activities that are sensitive to long-term rates.
The third scenario is that economic activity was clearly slowing, with the future pace of activity therefore vulnerable to even higher interest rates. The annualized GDP growth rate in the first half of 2013 was just 1.8%, and final sales were up by only 1.2%. Although there are no official GDP estimates for the third quarter, private-sector assessments anticipate no acceleration in growth, putting the economy on a path that will keep this year’s output gain at well under 2%. In addition, the CPI, excluding food and energy, was running for several months at a rate just of 1.2%,well under Fed's target inflation of 2%,increasing the possibility of a slide into deflation.

And yet, while all of this points to continued asset purchases at the current pace into 2014 (and perhaps beyond), there is one reason why some small tapering might occur in December: Bernanke is scheduled to retire in January. Since he introduced the “unconventional monetary policies” of QE and forward guidance, he might want to show before he steps down that he has put the Fed back on a path to conventional policies. But a single step in that direction would not have a significant impact on the level of interest rates and the pace of economic growth.

I continue to believe that the benefits of QE are no longer significant and that the low level of interest rates is driving investors and banks to take undesirable risks. In these circumstances, the Fed should move swiftly to end its long-term asset-purchase program".

Source:  Martin Feldstein
              Project-Syndicate

Israel's Tech Start-Ups and Venture Finance Part I

Of Israel’s 5,000 tech companies, city planners have counted 600 start-ups in the single square mile around Rothschild Boulevard one of the grandest streets in Tel Aviv. Israel has more companies on Nasdaq than any country beside the US and China, and it attracts more venture funding per capita than anywhere in the world. Its tech sector employs 230,000 people in a population of eight million, earning more than a quarter of the country’s total exports.
  On the seventh floor of the Shalom Meir Tower  there was a municipal library, it was refurbished as a shared workspace for start-ups. The fourth group of 13 companies has just finished their four-month session, which includes meetings with potential partners, lectures by business experts, networking.
 There are similar tech hubs in many cities throughout the world, but Avner Warner, Director of International Economic Development at theTel Aviv Globa lCity Administration , says Tel Aviv stands apart because of a single overriding influence on early-stage Israeli companies: the Israeli armed forces.
 “The military gives them their technological experience, managerial experience and networks,” says Warner. “For the average person, the greatest barrier to being an entrepreneur is 'Where the hell do I start? What do I do first?' Most people just get confused at this point and go get a normal job. That’s the experience the army gives them. It’s understanding how you actually build a product, which is the same as managing a project in the army.”
Inside the HQ of the Mamram, the Israel Defence Forces (IDF) technical support unit in nearby Ramat Gan, computer training course commander Capt. H (her full name is classified) says new recruits on a six-month intensive programming course study from dawn till night and are taught programming skills, teamwork, project management and – most importantly how to be creative. It’s like a school for start-ups.
“When you do a degree in computer science you study the technical things," she says. "You study how to write a code, mathematics. We don’t focus on that. We focus on how to work in a team. How to understand what your client needs and make software that fits his demands. How to write good code that you will be able to de-bug and maintain."
Tal Marian, founder of the TechLoft,says the results of the military training are obvious. “Some of the military units work like a civilian organisation. They encourage entrepreneurship, the feeling that if you come up with a good idea that answers a real need of that unit’s mission, you will get the funding and manpower and the time you need."
 The miniaturised camera and power pack in the Given Imaging camera  pill is based on equipment in the nose of a military drone, for example. Israel raced a decade ahead in the management and use of large data sets – or big data – that drive many consumer apps because of expertise developed by Unit 8200, the intelligence-gathering arm that is now the largest unit in the IDF.

Jim Rogers: When the easy money disappears the catastrophe will be worse

"This is the first time in recorded history that we have every major central bank in the world printing money, so the world is floating on an artificial sea of liquidity. Well, the artificial sea is going to disappear someday, and when it does, the catastrophe will be even worse. Yes, it's coming." - in CNBC

Australia: Gold Producers against hike of Royalty in Western Australia

  According to an article published today in the Wall Street Journal:

"Gold producers in Australia's most resource-rich state have banded together to resist any increase in royalties on sales of the precious metal, fearing a further blow to an industry already battered by falling prices and rising costs.

The Western Australian government is reviewing royalty payments on a range of minerals produced in the state as it seeks to boost revenue in the face of weaker commodity prices, and to tackle ballooning debt that has knocked down its credit rating.

Gold miners have been concerned ever since the premier of the state, Colin Barnett, told the state legislature last week that the current royalty on sales of the metal—currently 2.5%—was "a little light" compared with those for other minerals.

Western Australia's Gold Royalties Response Group, which successfully lobbied against a previously mooted royalty increase three years ago, Friday said it had reformed.

The biggest 10 strong-group producers which include Gold Fields,Barrick, and Doray Minerals are also involved.

The group said it was preparing a submission to the government's review before the end of the month and would then seek meetings with Mr. Barnett, as well as the state's mines and petroleum minister".

"Anything that adds to the cost base has the potential to make some of these mines marginal," 

IMF Christine Legarde the Aftermath of the Great Recession 2008-9 (Will continue)

Five years ago, the global economy avoided a second Great Depression. Five years on, the journey is not yet complete, but the fog of crisis is lifting—and we can see that its aftermath leaves us with multiple new transitions.

After five years of the Great Recession of 2008-2009, we are still in the aftermath,and has left us with multiple transitions.

Two in particular stand out: a transition in the patterns of economic growth, and a transition toward a different kind of financial sector. 

The IMF will release its latest economic forecasts. Overall, the global outlook remains subdued. In many of the advanced economies, however, we are finally seeing signs of hope. Growth is looking up, financial stability is returning, and fiscal accounts are looking healthier.

Advanced Economies
The Euro Area too is going through a major transition,now, after six quarters of recession, the region came up for air last spring, and growth should be back in positive territory next year—almost 1 percent.

Yet unemployment—at 12 percent—is still far too high. In some countries, one in four people cannot find work, and one in two young people.

We are witnessing an ever-closer European fiscal and financial integration—even if we recognize that much more still needs to be done.

Japan too is going through transition—as it seeks to overcome longstanding deflation and stagnation. The government’s aggressive stimulus policy seems to be working—boosting GDP by about 1 percent. Deflation is coming to an end and a newfound optimism is in the air. Yet this Japanese effort is not complete either.

Chinese Art Market and the rise of Poly Auction

  According to an article published today in the Wall Street Journal:
"In less than seven years, Mr. Zhao and Poly Auction have risen to become unlikely major players in the art world. Controlled by Chinese state-owned conglomerate China Poly Group—which began as a unit of the People's Liberation Army—Poly Auction is China's largest art auction house and the world's third-largest peddler of valuable collectibles, after Christie's and Sotheby's.

Last year, Poly sold $1.9 billion in Chinese antiques, paintings, jewelry, coins, rare books and vintage baijiu (a Chinese sorghum-based liquor) among other items. While far from first-place Christie's—with its $5.4 billion in 2011 sales—Poly Auction has rocketed to third place since it was founded in 2005. (Christie's was founded in 1766.)

Dealers in Chinese art say that Poly, which sells primarily to Chinese buyers, is partially responsible for making China an increasingly important art hub. Last year, Chinese buyers spent $18.1 billion on art, overtaking the U.S. for the first time to become the world's largest art market, according to the European Fine Art Foundation. China now makes up 30% of the world's art transactions by value.

"The best works used to all go to Hong Kong. Now, they're coming to Beijing, and Poly has a lot to do with that," says Meg Maggio, owner of Pékin Fine Arts gallery.

Still, Poly and other mainland Chinese auction houses are dogged by accusations of fraud, market manipulation and the proliferation of fakes. Many Hong Kong galleries and western collectors accuse Poly of guaranteeing prices for sellers, allowing sellers to bid on their own works and selling fakes.

Poly officials admit the Chinese auction industry overall is rife with problems but they insist Poly's practice is up to standard.

Jiang Yingchun, general manager at Poly Auction's parent, Poly Culture, says he has heard of third parties bidding up prices at auction. "From an auction house perspective, we don't know if this is happening," Mr. Jiang said. "For us, if it's consigned and bid clearly and paid for, it follows the rules. It's difficult to prove this conspiracy."

As for fakes, Mr. Jiang said Poly tries to verify everything it sells. "But no auction house—even the Western ones—can guarantee that every piece is authentic," he said".

China's Second-Generation Entrepreneurs a Different Breed

  According to an article published today in the Wall Street Journal:

"A big part of China's private economy will change hands in the next decade, from first-generation entrepreneurs to their children, many of whom are foreign-educated and have a very different view about running a business than their parents do.

Kelly Zong, who has been groomed to take over her father's Hangzhou Wahaha Group, is outspoken in saying she doesn't favor her father's hands-on management style. Nor is she a big fan of the way government and business interact in China.

"I believe the government needs to face our generation," the daughter of China's second-richest man was quoted as saying in Guangzhou's Time Weekly. "Our generation can never be like my father's generation." Ms. Zong, who attended high school and college in California, declined to comment directly but acknowledged she made the comments to the Time Weekly.

Ms. Zong may be particularly outspoken, but the children of China's most successful entrepreneurs in general have little patience for the endless wining and dining of government officials that is necessary to do business in China. And they are not the nuts-and-bolts, get-their-hands-dirty managers that their parents are.

But many are shifting their parents' businesses into service industries in sectors such as health care and finance that are important areas in China's economic overhaul. Others are following their parent's entrepreneurial spirit. Either way, the government faces the question of how to embrace this homegrown resource even if this generation doesn't follow standard Chinese business practices''.

Source: WSJ

Giunta Senato, sì alla decadenza di Berlusconi

"La Giunta per le elezioni del Senato ha votato a maggioranza la decadenza di Silvio Berlusconi da senatore, a seguito della condanna definitiva per frode fiscale. L’annuncio è stato dato dal presidente Dario Stefàno attorno alle 16,30, dopo una camera di consiglio di oltre cinque ore. La parola passa ora all’Aula di Palazzo Madama che dovrà ratificare la proposta. La seduta pubblica, prima della camera di consiglio, era durata meno di un’ora . Le forze politiche si erano presentate all’appuntamento fortemente divise: il Pdl facendo quadrato attorno al proprio leader e sostenendo la non applicabilità della legge Severino sulla non eleggibilità dei condannati,perché al momento in cu i fu commesso il reato quelle norme non erano ancora in vigore; il centrosinistra, Scelta Civica , Sel e il Movimento 5 Stelle orientati invece per un voto favorevole alla decadenza".

Corriere della Sera

Boehner asks Obama to negotiate

House Speaker JohnBoehner on Friday called on PresidentBarackObamaand other Democrats to negotiate, as the shutdown of the federal government entered its fourth day.

Boehner’s comments at a press conference reflect the lack of action on either ending the shutdown or raising the debt ceiling, which may be hit by Oct. 17 if Treasury Department estimates prove correct.

“I was at the White House the other night and listened to the president some 20 times explain to me why he wasn’t going to negotiate. I sat there and listened to the majority leader in the United States Senate describe to me that he’s not going to talk until we surrender,” the Ohio Republican said.

“And then this morning, I get The Wall Street Journal out and it says, well, we don’t care how long this lasts, because we’re winning. This isn’t some damn game. The American people don’t want their government shut down and neither do I,” he said.

Source: Marketwatch

While the US does shutdowns, China does business.

   U.S. President cancelled  yesterday its visits to Malaysia and the Phillipines. And later it also announced it was 
cancelling  Asia-Pacific Economic Co-operation (APEC) summit in Bali on Tuesday and the ASEAN (Association of
Southeast Asian Nations) and East Asia summit next Thursday in Brunei. 

That leaves Chinese President Xi Jinping to bask, unrivalled, in center stage glow. As if any extra Stateside "help" was needed, and as if Xi was not already on a roll. 

On Thursday, Xi became the first foreign leader ever to address the Indonesian parliament in Jakarta. He stressed that Beijing wanted by all means to boost trade with ASEAN to a whopping US$1 trillion by 2020 - and establish a regional infrastructure bank. 

   After upstaging Obama in Indonesia (hefty tomes could be penned about that), and signing the requisite $30 billion-plus deals (mostly in mining), Xi was off to Malaysia. 
And in Malaysia, Obama would have pushed harder for the already infamous Trans-Pacific Partnership (TPP) - essentially a corporate racket that is a great deal for US multinationals but not exactly for Asian interests. TPP is the American answer to China boosting its already massive business ties all over Asia. 


Compare Xi's Indonesian triumph - complete with his glamorous wife Peng Liyuan wearing batik - to a recent visit by Japanese Prime Minister Shinzo Abe, who, for all practical purposes, wanted to convince the Indonesians to essentially encircle China. Elaborately polite as usual, the Indonesians brushed Abe aside. China is Indonesia's biggest trading partner after Japan, and it's bound to overtake Tokyo soon.

Beijing has already agreed to discuss a legally binding Code of Conduct in the South China Sea with ASEAN. A working group met last month in Suzhou.

Former Malaysian prime minister Mahathir Mohammad has seen TPP - which excludes China - for what it is, and he's absolutely not convinced TPP will allow Malaysia easier access to the American market.

The top cheerleader of the US pivoting is Japan - and Japan is widely regarded, in different shades of gray all across Southeast Asia, as a US puppet. What is certain is that the Obama no-show only reinforces the predominant perception that current US foreign policy is an absolute mess. And that while the US does shutdowns, China does business.

Source: atimes

FTSE MINERS TRACK METALS LOWER ON US BUDGET IMPASSE

Continuing uncertainty surrounding US politics and falling metal prices weighed heavily on mining stocks on Thursday as investors shrugged off some improving economic data from China.

The partial shutdown of the US government extended into its third straight day today as politicians continue to fail to come up with a solution to the budget. 

Markets are hoping that Congress will agree to raise the $16.7tn debt limit by the October 17th deadline to prevent the US government defaulting on its obligations, something that the Treasury Department said could have a "catastrophic effect" on all aspects of the US economy. The Treasury said in a report today that a default could lead to "events of the magnitude of late 2008 or worse".

"Not only might the economic consequences of default be profound, those consequences, including high interest rates, reduced investment, higher debt payments, and slow economic growth, could last for more than a generation," the Treasury said in the report.

Copper, silver and gold prices were on the decline today, weighing on the outlook for demand for resource stocks. According to Alex Young, Senior Sales Trader at CMC Markets, "global analysts are expecting further potential drops should uncertainty in the States continue".

Fresnillo, Vedanta and Anglo American were among the worst performing stocks on the FTSE 100 by the close of trade.

Glencore Xstrata, Randgold and BHP Billiton were also in the red.

Source: LiveCharts

IMF Christine Legard warns about failure to raise Debt Ceiling and Government Shutdown

As International Monetary Fund (IMF) Managing Director Christine Lagarde called on nations to embark on transitions for a new global agenda, she made special mention of the need for the US to raise its debt ceiling to avoid damage to the global economy.

In a speech given on Thursday ahead of the 2013 World Bank-IMF Annual Meetings, Lagarde warned that the problem with the US debt ceiling is even more crucial than the current government shutdown. "The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the US economy, but the entire global economy," she said. "So it is 'mission-critical' that this be resolved as soon as possible," the IMF chief insisted.

The partial US government shutdown entered its fourth day on Friday with approximately 800,000 civil servants affected and the publication of data, such as the monthly Employment Report that was supposed to be released on Friday, delayed.

Yet, a more pressing issue is Congress' dispute over raising the $16.7trn debt ceiling. The current deadline is October 17th and if no agreement is reached, the Congressional Budget Office (CBO) said the government would be unable to pay its bills sometime between October 22nd and October 31st. 

The US Treasury warned on Thursday that a federal default would lead to recession that may be even worse than the one caused by the 2008 financial crisis. 

Source: Reuters

Dallas Fed President Fisher Decision not to begin tapering bond buying was Sharply Split

Policymakers at the Federal Reserve were sharply split last month over whether to trim the U.S. central bank's massive bond-buying stimulus, although they ultimately chose not to, a top Fed official said on Friday.

The decision, by 17 top Fed officials after two days of discussion led by Fed Chairman Ben Bernanke, was a "close call," Dallas Fed President Richard Fisher told a group of business leaders at the Clinton Presidential Center in Little Rock, Arkansas.

Fisher's remarks are unusual because Fed policymakers typically avoid characterizing the overall tone of discussion at the policy-making table, sticking more to their personal views.

Fisher himself argued for reducing the Fed's $85-billion-a-month bond-buying program.

Source: Reuters

U.S:Cheap Home refueling units for gas cars is the missing link to greater market for gas vehicles

"Affordable home refueling is the missing link to public adoption of natural gas vehicles in far greater numbers," said Curtis Martin, program director of the government-funded Clean Cities Coalition in Antelope Valley, California.

That may soon change. As the U.S. natural as drilling boom pushes output to record highs and promises sustained lower prices,General Electric Co,Whirlpool Corp,Eaton Corp and others are developing more affordable home refueling systems. For about a tenth of the price of current models, plus installation, they aim to sell the new units to the millions of homes across America already hooked up to natural gas supplies.

At the same time, energy providers in Georgia, California and Utah are in talks about distributing new refueling units when they become available in the next two years, according to interviews with industry executives, aiming to stimulate natural gas demand. Honda Motor Co Ltd, which makes one of the only natural gas passenger cars sold in the United States, has also expressed interest .

Still home filling units are to expensive,held back by the upfront expense of buying and installing new units, and a lack of natural gas cars. The cars themselves generally cost about $10,000 more than comparable conventional vehicles.

"Affordable home refueling is the missing link to public adoption of natural gas vehicles in far greater numbers," said Curtis Martin, program director of the government-funded Clean Cities Coalition in Antelope Valley, California.

That may soon change. As the U.S. natural gas drilling boom pushes output to record highs and promises sustained lower prices, General Electric Corp,Whirlpool Corp., Eaton Corp and others are developing more affordable home refueling systems. For about a tenth of the price of current models, plus installation, they aim to sell the new units to the millions of homes across America already hooked up to natural gas supplies.

Source: Reuters