News links for 24 Feb 2014
Always be sceptical of statements like this: “China cannot have a Lehman moment. Its financial system does not work the way America’s (or Japan’s or Italy’s) does. In fact, it is not clear how China can suffer any sort of acute financial crisis. And it is extremely unlikely that, if such a crisis did occur, it would do lasting harm to the global financial system.”
” What is going on in Turkey is also playing out in South Africa, Brazil and, to a lesser extent, Mexico. If the global financial system is to become an instrument of geo-political stability, it will have to be reformed so that what is happening in Turkey (and elsewhere) doesn’t become the norm. We are seeing a market-made financial crisis and yet again, the agents of disruption – the financial markets – are passing the buck. Without some form of global capital controls which prevent money flowing in and out of a country at breakneck speed, the world will lurch from one financial crisis to the next driven by greed, fear and fashion.”
In 2013, Argentina’s trade surplus was down 27% to $9 billion compared with 2012. The problem was a rising bill ($11 billion) for importing energy. Argentina’s major trading partners are in Mercosur at 28% of trade and China and southeast Asia at 19% of exports and 23% of imports.
In January, Argentina’s trade surplus was $35 million, 88% lower than at the same time in 2012. This highlights the continuing problem Argentina is having in accumulating foreign reserves.
“If presidential elections are held in the next three months, they will probably result in a victory for either Yulia Tymoshenko, the western-leaning former prime minister, or Vitali Klitschko, the former boxing champion. Ms Tymoshenko has a poor record in power, and it was an ominous sign that the crowds in Kiev’s Independence Square whom she addressed on Saturday did not receive her with unqualified enthusiasm. Mr Klitschko is wholly inexperienced in government and is regarded with suspicion by the radical nationalists who have played an increasingly important role in the revolution.”
Germany is receiving its largest wave of immigrants since the 1960s with 26,00 Spaniards coming since 2009. This is not a really big number in an economy of 80 million. Moreover, there are almost 39,000 Spaniards in Germany who have been resident for 40 years or more. The toal Spanish population is 120,000, a small sliver of the Turkish population.
This may explain the differential in market appreciation: “Profits at Europe’s listed companies are recovering from the recession at a slower pace than during any business cycle since 1970. Not only is the recovery in earnings unusually lengthy, but the gap between Europe and the US coming out of recession is over three times bigger than it has averaged at this stage in previous cycles. US earnings are now 20 per cent above their peak in 2007, while European earnings are 26 per cent below.
“Overall, this seems to be a “more of the same” package, rather than anything more dramatic. It stems from the IMF’s belief that, while a shortage of demand in the developed economies is still the main constraint on growth, supply potential has also been substantially damaged by the weakness of investment and the labour force. This increased IMF concern about permanent erosion of potential output mirrors the recent shift towards supply side pessimism by the central banks. Hence the caution about the speed of the recovery.”
” About three-fourths of U.S. states and many cities have outspent their maintenance budgets dealing with the extreme weather, said Greta Smith, an associate program director with the American Association of State Highway and Transportation Officials in Washington. She said this pothole season is “one of the worst in memory.” The potholes are emblematic of a deeper chasm. The gap between the cost of improvements to U.S. transportation infrastructure and available revenue from both state and federal sources was as much as $147 billion, according to a 2009 National Transportation Infrastructure Financing Commission report.”
“Detroit is putting pension funds ahead of bondholders in a proposed restructuring plan as it seeks to pay $18bn in debts and emerge from the largest municipal bankruptcy in US history.”
“The interconnection agreement Comcast and Netflix signed isn’t a violation of network neutrality, but it continues a troubling precedent for the internet and has anti-competitive overtones.”