China is now heading toward Japan-style economic paralysis if it doesnt change course | Quartz

Jack Rodman, president of Global Distressed Solutions LLC, spent 1999 to 2011 living in Japan and China, packaging and disposing of nonperforming loans and distressed assets. He writes on the problems facing China:

At the end of 1989, Japan’s bubble economy burst and its economic miracle came to an abrupt end. The Nikkei exchange fell from nearly 40,000 to its current 10,000 range. Over the course of 20 years, what appeared to be “unstoppable” economic growth proved to be anything but.

Today, China, in some ways, appears to be closer to following Japan than to sustaining its own economic miracle. China’s Shanghai Index (stocks) has fallen from a high of 7,000 in 2007 to a low of 2,000 for the past few years, and Chinese domestic investors have little confidence in their domestic stock market. The Japanese bubble, and its aftermath, was the result of a series of domestic financial and economic imbalances, many of which China faces today—to varying if not greater degrees….

Read more at China is now heading toward Japan-style economic paralysis if it doesnt change course – Quartz.

The Anatomy of Global Economic Uncertainty – Mohamed A. El-Erian – Project Syndicate

Mohamed A. El-Erian, CEO of PIMCO, describes four key dynamics that will shape the future of the global economy:

  1. Many economies have built up excessive debt that is now causing market instability. They have three options for de-leveraging: default, like Greece; austerity, like the UK; or “financial repression” like the US — where “interest rates are forced down so that creditors, including those on modest fixed incomes, subsidize debtors”.
  2. Economic growth would reduce the ratio of debt to incomes: “Many countries, including Italy and Spain, must overcome structural barriers to competitiveness, growth, and job creation through multi-year reforms of labor markets, pensions, housing, and economic governance. Some, like the US, can combine structural reforms with short-term demand stimulus. A few, led by Germany, are reaping the benefits of years of steadfast (and underappreciated) reforms.”
  3. It is also important that the benefits of economic growth be shared across the entire community,  reducing income inequality and related social instability.
  4. Political systems in Western democracies, designed to support the status quo, are ill-equipped to deal with these “structural and secular changes”. Failure to adjust is the greatest risk.

“Those on the receiving end of these four dynamics – the vast majority of us – need not be paralyzed by uncertainty and anxiety. Instead, we can use this simple framework to monitor developments, learn from them, and adapt. Yes, there will still be volatility, unusual strains, and historically odd outcomes. But, remember, a global paradigm shift implies a significant change in opportunities, and not just risks.”

via The Anatomy of Global Economic Uncertainty – Mohamed A. El-Erian – Project Syndicate.

Fed Expresses Modest Optimism –

Federal Reserve officials Wednesday refrained from taking new steps to charge up the economy as they expressed some modest optimism about the recovery while they continue to debate ways to bring unemployment down without stoking inflation.Meanwhile, Fed Chairman Ben Bernanke, in a news conference Wednesday after the Fed announcement, offered little hope for a pickup in U.S. growth after years of economic weakness, saying the pace of progress is “likely to be frustratingly slow.”

via Fed Expresses Modest Optimism –

China will not ease up on realty –

Although there has been some noise about easing real estate curbs amid recent aggressive price cutting and subsequent protests, Li Daokui’s [academic advisor and member of the monetary policy committee of the People’s Bank of China] view is consistent with Premier Wen Jiabao’s view that curbs will be remain in place. He believes that economic growth will slow, and the growth model which relies on real estate development will end.

He added that inflation in China will probably fall from about 5.5% for this year to just 2.8% next year…..

via China will not ease up on realty – |