Economy Archives - Page 121 of 132 - the patient investor

February 28, 2012

China outlines plan to loosen capital controls – FT.com

China’s capital controls have served it well. It was little harmed by the Asian financial crisis of 1997-98 and has been largely insulated from the global tumult of the past four years. That resilience in the face of external trouble has emboldened conservatives in Beijing who support the status quo.

But there are also problems in maintaining such rigid capital controls. Chinese savers have few investment outlets for their money and plough it into the property market instead. Perhaps most important from a political standpoint, plans to transform the renminbi into a rival to the dollar have run into difficulty – foreign companies do not want a currency that cannot be invested in its country of origin.

“Internationalisation of the renminbi is now a clear mandate, so resistance for capital account liberalisation has been diminishing,” said Liu Li-gang, an economist with ANZ. “The wind has shifted.”

China’s top leaders have given a series of signals in recent months that they want capital account reforms to get into gear.

via China outlines plan to loosen capital controls – FT.com.

February 28, 2012

The World from Berlin: ‘Europe is Pouring Money Into a Bottomless Barrel’ – SPIEGEL ONLINE – News – International

In an interview with SPIEGEL published on Monday, [Interior Minister Hans-Peter Friedrich] said: “Greece’s chances to regenerate itself and become competitive are surely greater outside the monetary union than if it remains in the euro area.” He added that he did not support a forced exit. “I’m not talking about throwing Greece out, but rather about creating incentives for an exit that they can’t pass up.” It was the first time a member of the German government called on Greece to leave the currency.

via The World from Berlin: ‘Europe is Pouring Money Into a Bottomless Barrel’ – SPIEGEL ONLINE – News – International.

February 27, 2012

China Bystander: World Bank report | 中國外人

The World Bank report offers [China’s reformers] a strategic description of the way forward rather than policy prescription. Its six strategic directions for China’s future are:

Completing the transition to a market economy;
Accelerating the pace of open innovation;
Going “green” to transform environmental stresses into green growth as a driver for development;
Expanding opportunities and services such as health, education and access to jobs for all people;
Modernizing and strengthening its domestic fiscal system;
Seeking mutually beneficial relations with the world by connecting China’s structural reforms to the changing international economy.

via China Bystander | 中國外人.

February 24, 2012

Treating China as an enemy – Telegraph Blogs

Ambrose Evans-Pritchard: China remains poor, with a per capita income of just $7,000. It faces the classic “middle income trap” in a few years time when the low-hanging fruit of catch-up growth is exhausted. The country will soon have to make the switch from copying technology to cutting-edge invention, the challenge that has defeated so many economies over the years and made a mockery of so many extrapolation curves.

As the World Bank warns in its latest report (out Monday), China risks coming down to earth with a thud unless it breaks the state stranglehold on investment.

My own guess is that China will go through a nasty little hangover as it purges toxins from the great credit boom of the last five years, before settling down to more pedestrian growth rates. It will be a big economic power, but not so vast it upturns the whole global system. It risks becoming old before it is rich.

via Treating China as an enemy – Telegraph Blogs.

Comment:~ The main threat from China is not military but economic. It has the potential to destabilize the global economy through its aggressive currency/trade policies. If the major players are able to resolve this, we are likely to see a scale-back of current tensions.

February 23, 2012

Canada’s Household Debt Is Rising – WSJ.com

OTTAWA—Increased household debt in Canada, underpinned by rising house prices and low interest rates, poses a key domestic risk to financial stability, the Bank of Canada said on Thursday.

The finding, contained in the central bank’s quarterly economic review, was the latest in a series of warnings from economists and Canadian officials that high consumer borrowing has emerged as one of the economy’s biggest risks. Household debt stood at over 150% of personal disposable income as of the third quarter of last year, the report noted.

via Canada’s Household Debt Is Rising – WSJ.com.

February 23, 2012

New Push for Reform in China – WSJ.com

An exclusive preview of an economic report on China, prepared by the World Bank and government insiders considered to have the ear of the nation’s leaders, offers a surprising prescription: China could face an economic crisis unless it implements deep reforms, including scaling back its vast state-owned enterprises and making them operate more like commercial firms.

……The report warns that China’s growth is in danger of decelerating rapidly and without much warning. That is what has occurred with other highflying developing countries, such as Brazil and Mexico, once they reached a certain income level, a phenomenon that economists call the “middle-income trap.” A sharp slowdown could deepen problems in the Chinese banking sector and elsewhere, the report warns, and could prompt a crisis, according to those involved with the project.

via New Push for Reform in China – WSJ.com.

February 21, 2012

Europe Reaches a Greek Deal – WSJ.com

Greece ended months of uncertainty as it secured a new bailout and debt-restructuring agreement during a marathon negotiating session of euro-zone finance ministers, but the deal leaves unanswered questions about whether Greece will be able to meet the terms of the accord……

Officials said the meeting, which lasted nearly 13 hours, produced a plan that would reduce Greece’s debt to just over 120% of gross domestic product by 2020.

via Europe Reaches a Greek Deal – WSJ.com.

February 20, 2012

Charles Munger: A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business | The Big Picture

In a bureaucracy, you think the work is done when it goes out of your in-basket into somebody else’s in-basket. But, of course, it isn’t. It’s not done until AT&T delivers what it’s supposed to deliver. So you get big, fat, dumb, unmotivated bureaucracies.

They also tend to become somewhat corrupt. In other words, if I’ve got a department and you’ve got a department and we kind of share power running this thing, there’s sort of an unwritten rule: “If you won’t bother me, I won’t bother you and we’re both happy.” So you get layers of management and associated costs that nobody needs. Then, while people are justifying all these layers, it takes forever to get anything done. They’re too slow to make decisions and nimbler people run circles around them.

The constant curse of scale is that it leads to big, dumb bureaucracy—which, of course, reaches its highest and worst form in government where the incentives are really awful. That doesn’t mean we don’t need governments—because we do. But it’s a terrible problem to get big bureaucracies to behave.

via Charles Munger: A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business | The Big Picture.

February 15, 2012

Default Therapy

Why not let an insolvent debtor default and invite capitalism to do its work?

That’s the process an Austro-Hungarian economist by the name of Joseph Schumpeter used to call “creative destruction”…and it has worked pretty well over the years, believe it or not…….

Consider the divergent fates of two countries that came face-to-face with a financial crisis in 1990. One of these countries is still merely muddling along…20 years later! The other country is flourishing.

That’s because one of these countries, Japan, responded to its crisis by coddling its crippled corporations and by throwing monumental sums of taxpayer dollars at failing financial institutions. The other country, Brazil, responded to its crisis with relatively savage measures. It defaulted on its debts, devalued its currency (more than once) and did not stand in the way of corporate failure. Brazil’s responses were far from perfect, but they were much less imperfect than were Japan’s……

Too bad for Japan. Its economy has muddled along for two decades, while its stock market has produced a loss of 2% per year across that entire 20-year timeframe. By contrast, the Brazilian economy and stock market have both boomed during the last two decades, despite some very serious bumps along the way.

via Default Therapy.

February 15, 2012

Greek death spiral accelerates – Telegraph Blogs

Ambrose Evans-Pritchard: This is what a death spiral looks like. It is what can happen if you join a fixed exchange system, then take out very large debts in what amounts to a foreign currency, and then have simultaneous monetary and fiscal contraction imposed upon you.

Germany discovered this on the Gold Standard when it racked up external debt from 1925 to 1929 (owed to American bankers) in much the same way as Greece has done.

When the music stopped – ie. when the Fed raised rates from 1928 onwards – Germany blew apart in much the same way as Greece is blowing apart. This is not a cultural or anthropological issue. It is the mechanical consequence of capital flows into a country that cannot handle it, as Germany could not handle it in the late 1920s.

via Greek death spiral accelerates – Telegraph Blogs.