News links for 17 Feb 2014
“From SocGen’s Wei Yao: Don’t mind bank lending, credit growth is still slowing in China. From UBS’s Wang Tao: Don’t worry about aggressive credit tightening. From BoFAML’s Lu Ting: Now you know the People’s Bank of China is not really tightening”
“A number of economists including Robert Shiller, the Nobel-prize winning Yale University professor, have warned that a bubble may be building in Latin America’s largest economy, where house prices have tripled since 2008, rising even faster than the cost of rents. “Things have not changed so suddenly for Brazil that it would justify prices rising this much,” said Mr Shiller, adding that during a trip to Brazil last year he felt like he was in the US in 2005. “Interest groups develop that want to cheerlead the housing boom . . . it sounds like something I’ve seen before.””
There is bad blood between Argentina and Brazil over a proposed free trade agreement with the EU. Brazil is reputed to have claimed Argentina was holding the deal up.
Argentina released new inflation numbers under pressure from the IMF. These numbers show month-to-month inflation of 3.7% in January.
“Turkey’s parliament has voted to increase government control over judges and prosecutors, in a move Ankara says is a justified response to a conspiracy against the government but which critics depict as an authoritarian step that undermines the rule of law.”
“When examining the Scottish economic statistics one thing immediately jumps out: namely, the dependence of just about every key macroeconomic variable on oil exports”
“Scotland’s independence campaign was dealt a blow when José Manuel Barroso, European Commission president, said it would be “difficult, if not impossible” for an independent Scotland to join the EU.”
Spanish prices declned at the fastest month-on-month rate in at least 50 years in January, with a decline of 1.3%. The textile sector was a large part of the fall.
“In total, the slide in house prices throughout 2013 came to 10.3 percent, against an 11.7 percent annual drop in 2012. From the start of the crisis in the third quarter of 2008 up to the end of 2013 the total decline reached 38.2 percent.”
I also said this on twitter. It would make sense to move from the unemployment rate to wage growth as a forward guidance target. https://twitter.com/edwardnh/status/434068789655646208
“”The reason why you’re seeing this pivot of the Fed, the costs and risks are starting to outweigh the benefit,” he said. “It has certainly bought the system time, but it hasn’t done so in a costless manner.” “It can buy the system time to heal, but it alone cannot carry the burden… We should realize the Fed cannot deliver great outcomes for the economy without help. Either they’re going to get help from other agencies in DC that are currently paralyzed or our future is going to be less bright.””
“The government of Indonesia had retained the law firm for help in trade talks, according to the February 2013 document. It reports that the N.S.A.’s Australian counterpart, the Australian Signals Directorate, notified the agency that it was conducting surveillance of the talks, including communications between Indonesian officials and the American law firm, and offered to share the information. “
“The head of Japan’s Government Pension Investment Fund has hit out at pressure to rebalance its bond-heavy portfolio, arguing that his Y124tn ($1.2tn)-in-assets institution should not be used as a tool to push up stock prices.”
I agree that gold is a safe haven at that would benefit from a crisis.
“At 5pm in Tokyo the Mt Gox Bitcoin price was $310, down from $470 on Friday and a long way adrift from the $611 rate quoted by Coindesk, which averages prices across leading global exchanges excluding Mt Gox. The freeze on Bitcoin withdrawals is adding to fears that the rapid rise of interest in trading Bitcoin and other virtual currencies is not being matched by systems to support it. “
“it’s China that’s rigging the market, mainly by trapping, and thus cornering, much of the world’s copper supply in long-term collateral deals on home turf. What’s more, that rigging is being motivated by the very same capitalistic interest-rate incentives that conventionally encourage banks in the west to “rig markets” as well. In other words, it’s all the result of China becoming more (not less) capitalistic.”
“During the economic boom and credit expansion that followed the Seven Years’ War (1756-63), Berlin was the equivalent of an emerging market, Amsterdam’s merchant bankers were the primary sources of credit, and the Hamburg banking houses served as intermediaries between the two. But some Amsterdam merchant bankers were leveraged far beyond their capacity. When a speculative grain deal went bad, the banks discovered that there were limits to how much risk could be effectively hedged. In this issue of Crisis Chronicles, we review how “fire sales” drove systemic risk in funding markets some 250 years ago and explain why this could still happen in today’s tri-party repo market.”