Macquarie China Lunch Meeting - Interesting

Macquarie China Lunch Meeting - Interesting

China growth will slow to target of 8% in 2011.
Population demographics a big long term issue, will grow old before it gets rich.
Investment still high at 45% of growth, but dropping as a percent of growth from here on.
Consumption = 45% of growth,  and will have effect of slowing growth going forward.
Real estate: high end bad, will add lots more low ends.
Urbanization: 350mm to move to cities in next 10 yrs!!!
Current PROJECTS of govt spending = 75% of GDP (not all spent in one year of course).
China captures little of value added of its exports.
"Branded China" is a big focus of govt.
SOEs will increasingly internationalize.
China will not crash, lending is being slowed (9tn to 7tn) but SPENDING isn't.
Environment: Conflict btwn Nat'l mandates and local govt realities.
Local Environmental police love polluters, fines a big source of income, ergo they don't close them.
Cars: emission standards now higher than USA.
China started rapid growth at a much lower GDP/capita ($700) vs. Taiwan and Japan and Korea ($1.75k).
When the rapid growth phases ended for the above countries GDP/Capita was $13,000

The Keynesians have learnt nothing - Niall Ferguson

Click HERE for full article

Excerpt:

When Franklin Roosevelt became president in 1933, the deficit was already running at 4.7 per cent of GDP. It rose to a peak of 5.6 per cent in 1934. The federal debt burden rose only slightly – from 40 to 45 per cent of GDP – prior to the outbreak of the second world war. It was the war that saw the US (and all the other combatants) embark on fiscal expansions of the sort we have seen since 2007. So what we are witnessing today has less to do with the 1930s than with the 1940s: it is world war finance without the war.

But the differences are immense. First, the US financed its huge wartime deficits from domestic savings, via the sale of war bonds. Second, wartime economies were essentially closed, so there was no leakage of fiscal stimulus. Third, war economies worked at maximum capacity; all kinds of controls had to be imposed on the private sector to prevent inflation.

Fed Kills the Dollar?

Fed's volte face sends the dollar tumbling

Rarely before have a few coded words in the minutes of the US Federal Reserve caused such an upheaval in the global currency system, or such a sudden flight from the dollar.

Click HERE for link to full article

de Gaulle had it right

"Betting against gold is the same as betting on governments. He who bets on governments and government money, bets against 6,000 years of recorded human history." Charles de Gaulle

UK budget "oops"

FOMC MINUTES ARE OUT

Surprise... surprise… the FOMC downgraded its “outlook” and the economy for the first time in about a year. Additionally, “A few participants cited some risk of deflation,” and the FOMC acknowledged that more “stimulus” (i.e. – money printing) may be needed:

 

“However, members noted that in addition to continuing to develop and test instruments to exit from the period of unusually accommodative monetary policy, the Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably.”

 

Economic Snapshot

Debt Daze

Comparing Changes In Quarterly US Debt And Deficits

by T. Durden

Now that America is on record spending autopilot and nobody cares or knows just what the 2010 deficit pattern of the government will look like, and, more importantly, the debt issuance, we have compiled historical quarterly data comparing the change in US deficit and debt data. As the chart below demonstrates, over the past 10 quarters, on average the US had added $400 billion in debt each quarter, while increasing its deficit by about $275 billion, with debt issuance surpassing any given period's deficit by almost 50%. To be sure, the data in the debt change is skewed by the outliers of Q3 and Q4, which were not so much an increase in term debt, but a massive issuance in short-term debt holdings, as the entire world scrambled to place their money into ultra-secure 30 Day and other Bill securities. As a result of these two debt outlier points, the US is now stuck with rolling over half a trillion in short-term debt on a monthly basis. Either way, it is obvious that it will likely be impossible for the US to trim it quarterly debt issuance materially below $400 billion per quarter, and will likely see this number increasing as tax receipts continue declining. Additionally as quarterly deficits are unable to drop below $300 billion (note the Q2 '10 data excludes June deficit data), once interest rates start climbing, look for these numbers to surge once ever greater portions of the US deficit go to simply pay the interest on the federal debt. Bottom line, with the US expected to generate a deficit of about $1.5 trillion in the next fiscal year, the napkin estimate says that the US will likely incur between $2 and $2.5 trillion in debt over the next year. And now you know even better why the administration is now spending money with no blueprint whatsoever.

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Fed Needs Another Money Blitz - Daily Telegraph

Fed Money Blitz: Click HERE

Excerpt:

Fed watchers say Mr Bernanke and his close allies at the Board in Washington are worried by signs that the US recovery is running out of steam. The ECRI leading indicator published by the Economic Cycle Research Institute has collapsed to a 45-week low of -5.7 in the most precipitous slide for half a century. Such a reading typically portends contraction within three months or so.

Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed's balance sheet from $2.4 trillion (£1.6 trillion) to uncharted levels of $5 trillion. But they are certain to face intense scepticism from regional hardliners. The dispute has echoes of the early 1930s when the Chicago Fed stymied rescue efforts.