Countries & Regions Archives - Page 224 of 383

April 2, 2013

North Korea tests the limits of a MAD world | Business Spectator

Gideon Rachman points out in Financial Times that the doctrine of mutually assured destruction (MAD), employed by the West in nuclear confrontations, assumes a rational adversary:

In many respects, North Korea has replicated some of the very worst features of Maoist China: the isolation from the outside world, the labour camps, the cult of personality and the willingness to tolerate mass starvation at home. The latter is particularly chilling, when one remembers that nuclear deterrence is meant to rely on an unwillingness to accept the death of millions of your compatriots.

April 2, 2013

Mitch McConnell Prepares To Give Barack Obama The Political Shellacking Of A Lifetime – Forbes

Ralph Benko shares an insight on US healthcare from columnist Warren Brookes on Forbes:

Brookes shared an indelible insight. He observed that it was possible to provide good health care at an affordable cost through the free market, rationing it by price. And it was possible to provide good health care at an affordable cost by the government through state agencies, rationing it by thoughtful policy. And that America had managed to create a monstrous hybrid of the two, the worst possible system: lousy care at unaffordable prices.

April 1, 2013

Has Australia hit the floor with interest rates?

Izabella Kaminska made a strong argument on FT Alphaville last year for the RBA to lower interest rates and weaken the Australian Dollar to protect manufacturing and export industries:

Australia’s current account deficit coupled with a deeply negative net external debt position both provide strong fundamental impetus for currency weakening. Should the RBA want to engineer currency depreciation, lower interest rates are likely to be more than enough. Indeed, even if interest rates decline only gradually to reflect a structurally slowing economy there are plenty of fundamental reasons for the Australian dollar to weaken.

The case for lower interest rates still holds true but the RBA is obviously concerned by signs of recovery in housing prices that could exacerbate the existing property bubble. Robert Gottliebsen at Business Spectator reports:

In less than three months the market price of a bottom of the range Meriton inner-Sydney apartment has risen 6 per cent from about $500,000 to around $530,000……According to Meriton’s Harry Triguboff, local buyers have jumped from 15 to 40 per cent of the market.

There is a solution. The RBA can lower interest rates provided it simultaneously introduces macroprudential steps similar to those being considered by the RBNZ: increase the amount of capital banks must set aside to cover potential losses from high loan to valuation ratio (LVR) home loans. That would make high LVR loans more expensive and discourage property speculation, taking some of the heat out of the housing market.

March 31, 2013

Mongolia needs better roads, schools and hospitals: so why all this talk about saving for the future? | Making development work for all

Australia could also learn from the Chilean experience of resources boom-bust cycles and adopt similar policies to those being considered by Mongolia. Gregory Smith explains:

Eric Parrado, former head of the Chilean ‘Economic and Social Stabilization Fund’, tells us that “if natural resource booms are well managed they can be a blessing” and that “an important general lesson is that governments should avoid temptation to spend significant temporary surpluses”.

March 30, 2013

When You Weren’t Looking, Democrat Bank Stooges Launch Bills to Permit Bailouts, Deregulate Derivatives « naked capitalism

Yves Smith reports on attempts to undermine the Volcker Rule and why the rule is so important:

In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have turned a blind eye as banks use their depositaries to fund derivatives exposures. And as bad as that is, the depositors, unlike their Cypriot confreres, aren’t even senior creditors. Remember Lehman? When the investment bank failed, unsecured creditors (and remember, depositors are unsecured creditors) got eight cents on the dollar. One big reason was that derivatives counterparties require collateral for any exposures, meaning they are secured creditors. The 2005 bankruptcy reforms made derivatives counterparties senior to unsecured lenders.

March 30, 2013

‘Most of the banks are zombie banks’ | Het Financieele Dagblad

Translation from an interview by Marcel de Boer & Martin Visser with Willem Buiter, chief economist at Citgroup:

Is Europe creating zombie banks?

These already exist. Most of the banks are zombie banks. There is little new lending to businesses and households. Zombie banks will not offer credit even on good projects — that is already evident on a large scale.

Full article (in Dutch) at ‘De meeste banken zijn zombiebanken’ | Het Financieele Dagblad.

March 28, 2013

Forex: Euro correction while Aussie retraces

The euro is headed for a test of primary support at $1.26 on the monthly chart. Respect would confirm the primary up-trend, while failure would signal a down-swing to $1.20.
Aussie Dollar/USD

* Target calculation: 1.35 + ( 1.35 – 1.20 ) = 1.50

Pound sterling is testing the new medium-term resistance level at $1.53 against the dollar. Respect would confirm the primary down-trend, with a target of $1.43*. Declining 63-day Twiggs Momentum, below its 2011 lows, strengthens the signal.
Aussie Dollar/USD

* Target calculation: 1.53 – ( 1.63 – 1.53 ) = 1.43

The Aussie Dollar retraced this week to test short-term support at $1.04, but the up-trend is intact and we should expect a test of resistance at $1.06. Failure of support at $1.03 is unlikely, but would warn that primary support at $1.015 is again under threat. Narrow fluctuation of 63-day Twiggs Momentum around zero suggests a ranging market.

Aussie Dollar/USD

Canada’s Loonie rallied off medium-term support at $0.97 against the greenback. Expect some resistance at $0.99, but the CAD is just as likely to test the descending trendline at parity. The primary trend remains down and a test of primary support at $0.96 remains on the cards in the next quarter.
Aussie Dollar/USD

The US dollar is encountering increased resistance as it approaches ¥100 against the Japanese Yen. The 30-year down-trend is over. The advance is extended and a correction likely, but breakout above ¥100 would test the 2007 high above ¥120*.
Aussie Dollar/USD

* Target calculation: 100 – ( 100 – 80 ) = 120

March 28, 2013

S&P 500: Any gas left in the tank?

The S&P 500 managed to close at a new high, with most fund managers reporting good results for the quarter, but does this signal a new bull market or a last-gasp effort to lock in performance bonuses before the market subsides into a correction?

While markets may be rising, there is strong risk aversion.

“@bespokeinvest: Utilities P/E now up to 16.75, higher than the P/Es of Tech, Financials, Industrials, Health Care, Energy and Materials.”

— Downtown Josh Brown (@ReformedBroker) March 28, 2013

This is definitely not a classic bull market.

One also needs to be wary of September and March quarter-ends. They often represent significant turning points, with new highs (red arrows) and new lows (green arrows) frequently proving unsustainable.

S&P 500 Index

* Target calculation: 1530 + ( 1530 – 1485 ) = 1575

While there is no sign of divergence on 13-week Twiggs Money Flow, which would indicate unusual selling pressure, it is important to remain vigilant over the next quarter rather than blindly follow the herd. Bearish (TMF) divergence or reversal of the S&P 500 below 1500 would warn of a correction.

March 28, 2013

Will the Chinese Be Supreme? | Ian Johnson | The New York Review of Books

Ian Johnson highlights how China’s strategic blunders have painted it into a corner:

Just as [Pre WW I] Wilhelminian Germany should surely have seen that building a blue-water navy would cause Britain to form alliances against it, so too should China understand that demanding control over islands far from its shores but close to its neighbors’ would cause a backlash. (Here one thinks not so much of the Senkaku/Diaoyus but of the shoals, reefs, and islets in the South China Sea.) Even the battle for the Senkaku/Diaoyus seems to have no satisfactory endgame for China except a permanent state of tension with its most important neighbor.

……..today the country’s tactics have left it surrounded by suspicious and increasingly hostile countries; indeed, it’s probably no exaggeration to say that China has no real allies.

March 28, 2013

China’s Glass Ceiling | Geoff Dyer | Foreign Policy

Geoff Dyer points out why China’s Remnibi cannot compete on the international stage with the dollar, even if China’s economy grows larger than the US:

For the renminbi to assume a central role, China would also have to make massive reforms to its own economy. The key to Chinese state capitalism is control over a relatively closed financial system, which allows the Communist Party to funnel huge volumes of cheap credit to select projects, industries, and companies. But to have a truly international currency, one that the world’s central banks want to hold, China would have to let investors from around the world buy and sell large volumes of Chinese financial assets. As a result, Beijing would have to dismantle that system of controls. It would need to permit capital to flow freely in and out of the country, let the market set interest rates and allow the currency to float. An independent legal system and transparent economic policy-making would also be useful. China has a choice. It can have an international currency that might challenge the U.S. dollar or it can keep its brand of state capitalism that has driven the economy and kept the Communist Party in power. But it cannot have both.