James Alexander via Historinhas | We often hear from both the right and the left that the relative lack of growth in the US is mostly due to supply issues, in particular changing demographics. Those baby-boomers retiring have created a new stagnation. The US Bureau for Labor Statistics (BLS) has consistently encouraged this view. There’s really nothing that can be done about it.
World stock markets’ current weakness reflects concerns about a serious downturn in China’s economy. The fall in global oil prices is the result of the decline in Chinese demand. The doubt is whether this fall will be a soft one or whether the government will lose control and will be unable to avoid a severe financial crisis
BARCLAYS | When President Maduro announced the members of his new cabinet on January 6, he seemed to signal his intention to maintain a hard-line stance; there was no suggestion of any willingness to make the adjustments to correct the large distortions and imbalances hampering Venezuela’s economy.
It’s like a curse. Every time a central bank raises interest rates, it has to retract. Sometimes it’s because the move has been precipitative. Three weeks after the Fed decided to raise rates, oil prices and the Chinese stock market tumbled in unison and Wall Street started a correction. So had the Fed been too hasty?
Marc Chandler via Caixin | Lenin and Kautsky once debated the future of imperialism. Kautsky saw a trend toward a global ruling class. Lenin argued that despite such tendencies, inter-imperialist rivalries would prevent the emergence of global ruling class. The so-called West was never as homogenous as the cold warriors pretended. There were asymmetrical perceptions of the threat posed by the Soviet Union until its dying days. Only now do the United States and Europe contemplate a free-trade pact.
UBS | 2015 saw China’s growth slowing further but the government’s intensified policy support helped to prevent a hard landing. The equity market was very volatile and the world was surprised by China’s modest but perhaps ill – timed currency move. For 2016, we expect growth to grind lower with further policy easing, corporate restructuring to accelerate, and RMB to depreciate by another 5%. However, there could be some big surprises too on property destocking, SOE reform, RMB exchange rate and financial markets.
They are right. That´s the way the Fed thinks. But it is dangerous and wrong! Insisting on the mistake will likely lead to another recession. Larry Kudlow (HT Lars Christensen) also rants on the Fed´s mistaken view.
Wang Liwei and Huo Kan via Caixin | Advocates of financial reform consider the International Monetary Fund’s plan to add the yuan to its special drawing rights (SDR) currency basket as momentous as the World Trade Organization’s welcome in 2001.
Caixin | As we start 2016 hoping for a better economic outlook, regulators must address certain financial problems, particularly risks associated with wealth management products that led to many defaults last year. China weathered several major financial storms over the past decade because of a towering pile of savings that provide banks with ample liquidity to prop up the market during times of trouble. But now depositors are using their money to snap up financial products offered by trust companies promising high returns.
Hopes for a soft landing in the Chinese economy are fading away. Focus sharpens on renminbi as it dips to increasingly low levels, challenging Central Bank’s massive interventions. China still commands sweeping foreign reserves but, over the latest months, they have shrunk by nearly one trillion dollars. Markets fear they could meltdown forcing a massive depreciation.