Posts Tagged ‘G-20’

Rogoff: Beware of Wounded Lions

Rogoff: Beware of Wounded Lions

Courtesy of Mark Thoma, Economist’s View

Kenneth Rogoff says the rest of the world should not ignore the recent threats of protectionist measures coming from the US:

Beware of Wounded Lions, by Kenneth Rogoff, Commentary, Project Syndicate:  G-20 leaders who scoff at the United States’ proposal for numerical trade-balance limits should know that they are playing with fire. … 

According to a recent … report…, fully 25% of the rise in unemployment since 2007, totaling 30 million people worldwide, has occurred in the US. If this situation persists, as I have long warned it might, it will lay the foundations for huge global trade frictions. The voter anger expressed in the US mid-term elections could prove to be only the tip of the iceberg…, the ground for populist economics is becoming more fertile by the day. …

True, today’s trade imbalances are partly a manifestation of broader long-term economic trends, such as Germany’s aging population, China’s weak social safety net, and legitimate concerns in the Middle East over eventual loss of oil revenues. And, to be sure, it would very difficult for countries to cap their trade surpluses in practice: there are simply too many macroeconomic and measurement uncertainties.

Moreover, it is hard to see how anyone – even the IMF, as the US proposal envisions – could enforce caps on trade surpluses. The Fund has little leverage over the big countries that are at the heart of the problem.

Still,… world leaders … must recognize the pain that the US is suffering in the name of free trade. Somehow, they must find ways to help the US expand its exports. Fortunately, emerging markets have a great deal of scope for action.

India, Brazil, and China, for example, continue to exploit World Trade Organization rules that allow long phase-in periods for fully opening up their domestic markets to developed-country imports… A determined effort by emerging-market countries that have external surpluses to expand imports from the US (and Europe) would do far more to address the global trade imbalances … than changes to their exchange rates or fiscal policies. …

American hegemony over the global economy is perhaps in its final decades. China, India, Brazil, and other emerging markets are in ascendancy. Will the transition will go smoothly and lead to a global economy that is both fairer and more prosperous?

However much we


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The G20’s China Bet

The G20’s China Bet

People walk in front of a construction site at Beijing's Xidan shopping district June 18, 2010. China's economy will keep up its robust pace of growth despite the euro zone debt crisis and may exceed the United States to become the world's largest economy in 2020, an academic adviser to the central bank said in remarks published on Friday. REUTERS/Bobby Yip  (CHINA - Tags: BUSINESS CONSTRUCTION SOCIETY)

Courtesy of Simon Johnson at Baseline Scenario

The G20 communiqué, released after the Toronto summit on Sunday, made it quite clear that most industrialized countries now have budget deficit reduction fever (see this version, with line-by-line comments by me, Marc Chandler and Arvind Subramanian).  The US resisted the pressure to cut government spending and/or raise taxes in a precipitate manner, but the sense of the meeting was clear – cut now to some extent and cut more tomorrow.

This makes some sense if you think that the global economy is in robust health and likely to grow at a rapid clip – say close to 5 percent per annum – for the foreseeable future.  With high global growth, it will matter less that governments are cutting back and unemployment will come down regardless.  Taking this into account, the IMF is actually predicting (as cited prominently by the G20) that budget “consolidation” actually raise growth over a five-year horizon.

There is no question that some weaker European countries, such as Greece, Portugal, and Ireland, had budget deficits that were out of control.  Particularly if they are to pay back all their foreign borrowing – a controversial idea that remains the conventional wisdom – these countries need some austerity.  But what about those larger countries, which remain creditworthy, such as Germany, France, the UK, and the US?  If these economies all decide to reduce their budget deficits, what will drive global growth?The answer in Toronto was obvious: China.  China is only about 6 percent of the world economy, measured using prevailing exchange rates, but it has a disproportionate influence on other emerging markets due to its seemingly insatiable demand for commodities.  It also has a relatively healthy fiscal balance – and its fiscal stimulus, working mostly through infrastructure investment, did a great job in terms of buffering the real economy in the face of declining world trade in 2008-09.

Now, however, the Chinese government is trying to slow the economy down – there is fear of “overheating”, which could mean inflation or rising real wages (depending on who you talk to).  Chinese economic statistics are notoriously unreliable, so reading the tea leaves is harder than for some other economies, but most of the leading indicators suggest that some sort of slowdown is now underway. 

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Paul Krugman’s Magic Keynesian Mirror

Paul Krugman’s Magic Keynesian Mirror

Courtesy of Mish

Paul Krugman is quite upset with the deficit hawks at the G-20, so much so that he says Lost Decade, Here We Come

The deficit hawks have taken over the G20.

It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US.

The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered — specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound.

Utter folly posing as wisdom. Incredible.

G-20 an Amazing Success

Female devil holding whip, flames in background

In sharp contrast, I called the G-20 an Amazing Success

With all the heated debate and every country doing what they want, inquiring minds just may be asking "How the heck can you call this a success?"

That’s a good question so let’s highlight the positives.

Defining G-20 Success

  • Merkel and Trichet politely told Geithner to go to hell. Given that Geithner needs to be fired, this is a positive event.
  • Europe is more concerned about sovereign debt issues than stimulating growth. Only fools like Geither and the IMF would argue against that.
  • No one paid any attention to Geithner or the Keynesian clowns at the IMF, most notably, IMF Managing Director Dominique Strauss-Kahn.
  • There was no agreement on a universal bank levy. A universal tax is the wrong approach to risk management and it punishes banks with good lending practices.
  • Geithner made a complete fool out of himself.
  • A dozen cheers for German Chancellor Angela Merkel who said “We can only spend what we receive in income.” Finally someone gets it.

 What more could you possibly ask for?

Predictable Reaction 

Without mentioning Krugman specifically, I am not surprised by his reaction. Indeed, I predicted it on Saturday in G20 Heated Debates; Europe Politely Tells Geithner Where To Go.

Kiss the Illusion Goodbye

With global stimulus efforts playing second fiddle to default concerns, a double-dip recession is just around the corner. Please see Hungary Tries To Calm Markets; Europe Headed Back in Recession, US Will Not Decouple for further


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Prepare NOW: They “Get It”

Prepare NOW: They "Get It"

Courtesy of Karl Denninger at The Market Ticker 

Anyone who doesn’t believe that "they" (the powers that be) "get it" at this point needs to remove their head from their ass:

G-20 central bankers and finance ministers agreed in a joint statement today that “within their capacity, countries will expand domestic sources of growth.” At the same time, European Central Bank President Jean-Claude Trichet told reporters that Europe’s best contribution to the global rebound is to achieve fiscal sustainability.

Those two are polar opposites.  You just heard Trichet admit that what everyone wants they cannot have.

Look folks, if you currently spend 11% of GDP by borrowing money and blowing into the economy to prop it up and you achieve "fiscal sustainability" (defined as not doing that any more) GDP will inevitably contract by the amount of stimulative borrowing you withdraw.

Geithner said at a press briefing today that “credible commitments to fiscal sustainability over the medium term” are needed to generate a durable recovery. Spain’s Finance Minister Elena Salgado said at a separate European press briefing that deficit reduction should come “no later than 2011.”

Game’s up folks – that’s six months out.

Let’s be straight with everyone here.  These are the current deficit additions for the first five months of 2010 (click for a larger copy):

That’s nearly $700 billion in five months.  Annualized it’s $1.68 trillion.  Last year’s total was $1.647 trillion.

Ignore the CBO and other government claims.  That which is borrowed is that which is owed, and the increase in that which is owed over a year’s time is the true deficit in the budget, irrespective of all claims otherwise.

This comes out to roughly 12% of GDP.  If we contract that deficit spending in 2011 to the European standard of no more than 3% of GDP then either GDP contracts by the difference (8-9%) or the government extracts that from you in the form of taxes.

Either way you don’t have it – it is either not produced and thus not paid or it is produced and stolen.  Irrespective of how it is achieved you are going to see roughly 10% of your
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G-20 an Amazing Success; Another Look at the Impossible

G-20 an Amazing Success; Another Look at the Impossible

Courtesy of Mish 

In relative terms, as economic summits go, the recent G-20 meeting was a spectacular success.

Unfortunately, one might not get that impression from the Bloomberg headline G-20 Coordination Fails as Governments Clash on Recovery Recipe.

Global policy makers are starting to clash over their individual prescriptions for recovery as Europe demands lower budget deficits while the U.S. warns against pushing exports instead of domestic demand.

At a meeting of Group of 20 finance chiefs in Busan, South Korea, June 4-5, Treasury Secretary Timothy F. Geithner said the world cannot again bank on the cash-strapped U.S. consumer to drive growth and urged other nations to stimulate their own demand.

Global policy makers are starting to clash over their individual prescriptions for recovery as Europe demands lower budget deficits while the U.S. warns against pushing exports instead of domestic demand.

At a meeting of Group of 20 finance chiefs in Busan, South Korea, June 4-5, Treasury Secretary Timothy F. Geithner said the world cannot again bank on the cash-strapped U.S. consumer to drive growth and urged other nations to stimulate their own demand.

The conundrum is that governments are all trying to harness a rebound in trade, which the Netherlands Bureau for Economic Analysis last week estimated grew 3.5 percent in March, more than double February’s pace.

Companies from French beverage maker Pernod Ricard SA to Japan’s Toshiba Corp. and Nissan Motor Co. are counting on foreign demand to stoke earnings.

In the U.S., President Barack Obama aims to double exports over five years, while China is refusing to bow to international pressure to allow an appreciation in the yuan, which it has held at 6.83 per dollar for almost two years to help its exporters.

Japan’s new prime minister, Naoto Kan, enters office with a reputation for favoring a weak yen after saying as finance minister that he wanted the currency to fall “a bit more.” French Prime Minister Francois Fillon said June 4 the euro’s drop below $1.20 is “good news” after a gain that was “penalizing our exports.” Britain’s Osborne said last week in Beijing he is “keen” to make the U.K. more trade-driven.

‘Who Will’ Buy?

“If everyone’s expecting to export their way out of trouble, who will be buying?” said Alvin Liew, a Singapore- based economist for Standard Chartered Plc. “Countries may


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Phil's Favorites

Pop Culture as an edge in business

 

Pop Culture as an edge in business

Courtesy of 

 

 

Josh here – once upon a time it was totally normal to be sitting face to face with a friend and talking across a table, and then they locked down New York City and you know what happened from there. Anyway, my friend Brooke Hammerling was the last person I met with before the shutdown and we taped this conversation about the importance being up on Pop Culture. Lots of business leaders struggle to understand what’s going on from day to day because they’re busy! Brooke’s new newsletter, Pop Culture Mondays, fi...



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Biotech/COVID-19

Trump Vaccine Czar Still Stands to Profit

 

Will there really be several hundred million doses of a COVID-19 vaccine by the end of 2020, which would be record fast vaccine develop, or is this just wishful thinking? Moncef Slaoui, former executive at GlaxoSmithKline and board member of Moderna (till recently) and newly appointed Trump official, says the vaccine will be ready. Either way, Moderna (MRNA) has received nearly half a billion dollars from the government, and its stock price has soared. Amee Vanderpool tells more of the story: 

 

Trump Vaccine Czar Still Stands to Profit

Courtesy of Amee Vanderpool, SHERO 

The Trump administration has announced an ambitious plan to develop and produce millions of doses of a new COVID-19 vaccine by t...



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ValueWalk

New home sales smashed expectations during economic crisis

By Gorilla Trades. Originally published at ValueWalk.

The major indices are all sporting considerable gains at midday, with the S&P 500, the Dow, and the Nasdaq all hitting new multi-month highs in early trading. The continued COVID-related optimism remains the main catalyst behind the rally in stocks and global risk assets and investors shrugged off the diplomatic standoff between the U.S. and China despite the protests in Hong Kong over the weekend. On another note, small-caps have been leading the way higher this morning, together with the key cyclical sectors and that bodes well for the rest of the week, especially as the main overseas indices have also been pushing higher this week.

[reit]

...

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Zero Hedge

"This Ship Is Sinking" - The Economy Is Holed Below The Waterline

Courtesy of ZeroHedge View original post here.

Authored by Bill Blain via MorningPorridge.com,

“Until then men felt they had found the answer to a steady, orderly, civilized life. For 100 years the Western world had been at peace. For 100 years technology had steadily improved. For 100 years the benefits of peace and industry seemed to be filtering satisfactorily through society. Life was all right. The Titanic woke them up.”

...



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Kimble Charting Solutions

King Dollar Could Double Topping; Commodities Would Benefit If It Does!

Courtesy of Chris Kimble

The U.S. Dollar has been a pillar of strength for the past 12-years, at it created higher lows starting in 2008, near the 70 level. Since these lows, it has rallied nearly 50%.

The 102 level was resistance for nearly 13-years (1987 to 2000) until an upside breakout took place.

The rally over the past 12-years took it up to test the 61% retracement level of its 2001 highs and 2008 lows and the 102 level again at (1), where it created back to back monthly bearish reversal patterns in 2017.

The rally over the past 2-years has King$ testing its 61% retracement...



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The Technical Traders

Chuck Jaffe Talks Technical Analysis on Money Life - Indexes & Metals

Courtesy of Technical Traders

Chuck Jaffe, the host of Money Life, is a veteran financial journalist and nationally syndicated financial columnist whose work appears in newspapers from coast to coast. Today he talks with Chris Vermeulen.

Chuck has been named to MutualFundWire’s list of the 40 Most Influential People in Fund Distribution and was the first journalist to make the list. Over the course of his career, he has won numerous awards for business and personal finance journalism.

...

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Lee's Free Thinking

US Southern States COVID19 Cases - Let's Give Credit Where Due

 

US Southern States COVID19 Cases – Let’s Give Credit Where Due

Courtesy of  

The number of new COVID 19 cases has been falling in the Northeast, but the South is not having the same experience. The number of new cases per day in each Southern state has been rangebound for the past month.

And that’s assuming that the numbers haven’t been manipulated. We know that in Georgia’s case at least, they have been. And there are suspicions about Florida as well, as the State now engages in a smear campaign against the fired employee who built its much praised COVID19 database and dashboar...



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Chart School

Is this your local response to COVID 19

Courtesy of Read the Ticker

This is off topic, but a bit of fun!


This is the standard reaction from the control freaks.








This is the song for post lock down!







What should be made mandatory? Vaccines, hell NO! This should be mandatory: Every one taking their tops off in the sun, they do in Africa!

Guess which family gets more Vitamin D and eats less sugary carbs, TV Show



...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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