Economics

[nanningbob]

Wonder if this is related to earlier: Fears of bank run on HSBC

http://www.zerohedge.com/news/2014-01-2 ... ithdrawals

Have been searching around, but cant find anything substantial to prove that this is true.

Cheers

I dont know zero hedge enough to believe or not believe their stories. I generally dont trust articles unless I also find alternate articles based on other sources of fact. Too much doom and gloom conspiracy stuff out there. However, I do know HSBC is under China's control and China is concerned about capital flight. I know several Chinese persons wanting to buy assets outside of China. Whether they have tightened things down that much I dont think they have at this point. I will find out this afternoon when I make a withdrawal for USD to use to go back to the USA. I probably wont have any problems because I am not Chinese.

The problem, as I see it and I dont see the whole picture, 2/3 of assets are owned by the top 5%. Many of that 5% are in power and they would have to tax themselves to pay the bills. I dont see that happening. Do you?? So ...........

If you remember last years big story of Bo Xilai, he was a top leader who was suppose to get one of the top posts here in China. He and his wife had made a deal with a British business man to move millions of dollars outside of China. When the British guy changed the deal so he would get more money, the wife poisoned him to death and a big scandal broke out here in China. He is now disgraced and his wife is in jail. So even the big boys are trying to get their money out. I have read stories of Chinese buying big tracts of real estate in the USA (especially the West coast) and Australia. They are looking for assets to protect their money. Paintings, jewelry, etc. are all on their list. They purchase over 60% of the world's luxury goods, especially those that have a chance of holding value or appreciating.

I just read an article that said HSBC has ended this policy so it was short lived.

[nanningbob]

Another note on China. The holidays make for huge cash withdrawals in China. So the BOC has again plugged money into their accounts. Everyone fills little red envelopes and gives money to relatives. After the holidays money is then deposited back into accounts as people deposit what they received over the holiday. Did you get more than you gave?? Anyway dont put too much into the last cash infusion of BOC that happens this time of year. What will be more important is if the money is put back in after the holidays.

https://mninews.marketnews.com/content/ ... approaches

If after the holidays BOC has to do a cash infusion then that is trouble with a Capital 'T'.

[SpiderX]

Hi Bob,

Wonder if there are firecrackers going off in Nanning now.
Hope you enjoy the lunar new year holidays and
Gong Xi Fa Cai !!!


Cheers

[Jollyroger]

If there are any of Bob's readers who have not subscribed to John Mauldin's free newsletter this might be a very good time to do so. The current issue is fascinating reading and should interest all who are investing in currency fluctuation. I am in no way connected with this publication other than to be a subscriber myself and thought I would pass along the info.
http://www.mauldineconomics.com/subscribe
Roger

[rosst]

If there are any of Bob's readers who have not subscribed to John Mauldin's free newsletter this might be a very good time to do so. The current issue is fascinating reading and should interest all who are investing in currency fluctuation. I am in no way connected with this publication other than to be a subscriber myself and thought I would pass along the info.
http://www.mauldineconomics.com/subscribe
Roger

These guys talk about currencies a lot and are buddies with Mauldin too...
http://www.dailypfennig.com/

[Layzars]

Maudin is overrated: http://mikenormaneconomics.blogspot.ca/ ... on-on.html

Just one example of him getting it totally wrong. That said, he has no formal economics credentials whatsoever (Bachelors of Arts, Bachelor of 'Divinities'); he's more of a self-promotor than a legitimately skilled investor not unlike Peter Schiff; a notorious gold shill who has lost the majority of his clients vast sums of money.


I also am leery of just about anything coming from ZeroHedge; their articles and findings _definitely_ need to be cross-sectioned/correlated with more neutral sources. With all due respect, the majority of its community and bloggers strike me as being Austrian school zealots and gold bugs more concerned with validating their politics than being objective or profitable. After all, these are the same people that have celebrated gold salesmen as legitimate economic commentators rather than shills pushing a product.


I think debt worrying vis a vis the US and other economies is also vastly overstated, particularly with the US becoming a net energy producer (it's thought to become a major energy exporter in just over 10 years or fewer) and its trade deficit on the decline:

http://www.iea.org/newsroomandevents/pr ... 15,en.html

http://www.aljazeera.com/indepth/featur ... 13250.html

http://america.aljazeera.com/articles/2 ... ports.html

http://www.washingtontimes.com/news/201 ... /?page=all

http://www.valuewalk.com/2013/07/us-cur ... appearing/

Trillion dollar deficits cannot be sustained forever of course, but there's no evidence that these are going to persist until the States runs itself into the ground; in fact the US budget deficit is declining. Further, as the US's trade balance and domestic energy production continue to improve, the deficit will likewise further shrink alongside. Thus far it seems that stimulus and Keynesian interventions have been fruitful if not outright successful. Furthermore, when you frame the US debt and deficit in a historical context, it is utterly unremarkable relative to WW2 levels, while the US featured a surplus as recently as the late 90s under Clinton. Meanwhile Japan is staging a thus far largely successful stimulus program via Abenomics with a debt that's about twice that of America's relative to the size of its economy.

By contrast, austerity, particularly severe austerity, has largely been a disaster in Europe where tried, resulting in Debt to GDP ratios that are not only increasing but _accelerating_ due to affected economies shrinking rapidly under the strain such policy imposes; in otherwords, their economies are shrinking faster than their debts, causing the latter to grow in real terms! Indeed, it seems that the Eurozone may be set to imitate the infamous 'lost decades' of Japan attributable to inadequate public spending/stimulus as the private sector deleveraged in the aftermath of an unwinding asset bubble.

Now lest anyone get the wrong impression, I'm not saying that government money should be recklessly spent, but when it is intelligently invested via stimulus that averts crisis and primes the pump of demand and thus economic activity, deficit spending can certainly be for the best.

[nanningbob]

Maudin is overrated: http://mikenormaneconomics.blogspot.ca/ ... on-on.html

Just one example of him getting it totally wrong. That said, he has no formal economics credentials whatsoever (Bachelors of Arts, Bachelor of 'Divinities'); he's more of a self-promotor than a legitimately skilled investor not unlike Peter Schiff; a notorious gold shill who has lost the majority of his clients vast sums of money.


I also am leery of just about anything coming from ZeroHedge; their articles and findings _definitely_ need to be cross-sectioned/correlated with more neutral sources. With all due respect, the majority of its community and bloggers strike me as being Austrian school zealots and gold bugs more concerned with validating their politics than being objective or profitable. After all, these are the same people that have celebrated gold salesmen as legitimate economic commentators rather than shills pushing a product.


I think debt worrying vis a vis the US and other economies is also vastly overstated, particularly with the US becoming a net energy producer (it's thought to become a major energy exporter in just over 10 years or fewer) and its trade deficit on the decline:

http://www.iea.org/newsroomandevents/pr ... 15,en.html

http://www.aljazeera.com/indepth/featur ... 13250.html

http://america.aljazeera.com/articles/2 ... ports.html

http://www.washingtontimes.com/news/201 ... /?page=all

http://www.valuewalk.com/2013/07/us-cur ... appearing/

Trillion dollar deficits cannot be sustained forever of course, but there's no evidence that these are going to persist until the States runs itself into the ground; in fact the US budget deficit is declining. Further, as the US's trade balance and domestic energy production continue to improve, the deficit will likewise further shrink alongside. Thus far it seems that stimulus and Keynesian interventions have been fruitful if not outright successful. Furthermore, when you frame the US debt and deficit in a historical context, it is utterly unremarkable relative to WW2 levels, while the US featured a surplus as recently as the late 90s under Clinton. Meanwhile Japan is staging a thus far largely successful stimulus program via Abenomics with a debt that's about twice that of America's relative to the size of its economy.

By contrast, austerity, particularly severe austerity, has largely been a disaster in Europe where tried, resulting in Debt to GDP ratios that are not only increasing but _accelerating_ due to affected economies shrinking rapidly under the strain such policy imposes; in otherwords, their economies are shrinking faster than their debts, causing the latter to grow in real terms! Indeed, it seems that the Eurozone may be set to imitate the infamous 'lost decades' of Japan attributable to inadequate public spending/stimulus as the private sector deleveraged in the aftermath of an unwinding asset bubble.

Now lest anyone get the wrong impression, I'm not saying that government money should be recklessly spent, but when it is intelligently invested via stimulus that averts crisis and primes the pump of demand and thus economic activity, deficit spending can certainly be for the best.

First thank you for posting. I was beginning to think I was going to be talking to myself here. I have a suggestion, when you make multiple points and have a change of subject matter that each main thought has its own post. That way if there is a discussion the subject matter is kept in context of what was posted. So good job. I will make comments on some of what you said but to me it is a breath of fresh air seeing someone else take on the misconceptions of the gold crowd. They get a lot of play but few solid rebuttals so feel free to keep on that subject.

[nanningbob]

I agree with you on the govt. debt issue. Too much focus is made on the amount of debt versus a comparison between the debt to GDP ratio. 100% debt ratio, though disturbing, is not a doomsday scenario. We can recover from it and be a healthy economy again but we will need some solid leadership to do so. I also agree that the USA becoming an energy exporter, they already have been for awhile, can be used to bring down the deficits and have a solid growing economy in the future.

You are correct that austerity alone will not solve the problem, in fact wrongly applied it can exasperate the problem even further as you noted. There must be a balance between raising govt. revenues (by economic growth and tax reform) and a decrease in govt. spending or better yet a control mechanism of govt. spending. Congress has for far too long not done its job in passing realistic budgets from year to year. Too many people blame the FED for our problems when they are not the one who make the budget from year to year. If we didnt rack up huge deficits we wouldnt need them to be printing money, selling bonds, etc. to finance govt.

[nanningbob]

In defense of John Maudin, obviously no economic writer is ever going to get it all correct. If he did or anyone else did we would all be quadrillionaires. I also think you can become self educated in a field and be knowledgeable without getting a degree. As an administrator of a school I prefer teachers with bachelors degrees and classroom experience over the gobbledy gook of the Master's and Doctor's degrees. Give me someone who can teach and control a classroom any day over intellectual knowledge.

Be that as it may John nailed this recession right out of the box stating it would be a dragged out slow recovery lasting 7-10 years. He pointed to the USA energy buildup as the place where good economic growth would return. Until that comes fully into play his prediction of a sputtering economy was well predicted back in 2008. He also has been very helpful in the currency area with knowing the troubles of the Euro both the Greek mess, Crete/Cyprus mess, and onto Spain, and Italy, even though those two ended up not being as severe as predicted at the time. I am also looking forward to his prediction that at some point France is going to hit the news and make the Euro dive. I have made good money on each one so far.

Of course I cant leave out his prediction of the JPY moves last fall that played out this spring. He has taken out a mortgage to sell the JPY and is sitting on it so he put his money where his mouth was. Following his advice I did a 60% increase of my account last spring so he does get some things right. Anyway I have found him good when it comes to currency trading even though he may not get all the economics right in other areas. In fact I wish I could get it all right, I would be retired by now.

[Layzars]

So far as fiscal reform goes, US military spending definitely needs to take a hit, and it absolutely needs to implement sweeping tax and subsidy reforms (i.e. increase taxes, improve tax enforcement, eliminate loopholes, decrease overtly broad corporate subsidies). Unfortunately the US federal government is far too beholden at the moment to rich and corporate donors to enact decisive change on these issues; money in politics and its increasingly corrupting influence is easily the single greatest problem facing the States at the moment. That said, most of the hope for deficit and fiscal stability in the States must come from growth as a practical matter until there is constitutional reform to rein in the blight of growing plutocracy afflicting it.


As for John Mauldin, I'm not going to pretend that he's never made a successful call in his life, but he has made a lot of bad ones, and his incomplete understanding of the economy shows:

http://investingcaffeine.com/2010/04/14 ... ries-wolf/

The latest call cited in that article, April 2010 was disastrously wrong as the S&P 500 skyrocketed and never looked back save for a brief period in mid-late 2011.

The overall profile I get of the man is a sensationalist, permabull doomsayer (not unlike many Austrians/gold stackers/debt worriers) that benefits from being a 'broken clock' and stumbles upon a correct and seemingly impressive prediction every now and then. In otherwords, I think his best calls have stemmed not from a solid understanding of economics but by making the same ones until he's eventually right, thereby enacting a sort of credibility martingale if you will. To be fair, I don't devoutly follow the man based upon this perception and the call outs I've seen that inform it, but I definitely would be hesitant to look to him for insight without taking it with a mountain of salt.