Central Perk: 6 sept. 2014

sâmbătă, 6 septembrie 2014

Mish's Global Economic Trend Analysis

China Banking Crisis "Almost" Certain Says Senior International Economist; Global Banking Crisis "Is" Certain Says Mish

Posted: 06 Sep 2014 10:16 AM PDT

The Sydney Morning Herald warns about a 'clear and present danger': Australia to be Hit as Chinese Economy Unravels

Speaking at a conference on Thursday, the federal government's former top resources forecaster Quentin Grafton said the iron ore price was unlikely to recover quickly, leading to a painful downturn in the Australian economy in 2015.

"This isn't about doom and gloom, it's about looking at the risk and numbers. It's a clear and present danger," Mr Grafton said.

He said the Reserve Bank of Australia should prepare for a difficult ride as the overpriced property market and high dollar created a challenging economic environment as coal and iron ore prices dropped.

Mr Grafton's comments join an increasingly vociferous choir of concern about the Chinese economy, with investor fears stoked by a Chinese residential property market that is experiencing its worst slump on record.

The average price of new homes has been falling in China for months, with the rate of decline accelerating from June (0.5 per cent) to July (0.8 per cent), sending tremors through the economy. It dropped another 0.6 per cent in August, bringing the average to $US1737 per square metre.

Property market issues are of critical concern for the Chinese economy and global investment community, as the property sector is a key economic driver that contributed 15 per cent of China's 2013 gross domestic product.

China's property market woes are directly linked to the Australian economy as Chinese residential property construction is a leading consumer of iron ore, which accounts for $1 of every $5 of Australian exports.

The dropping demand and oversupply issues have caused the iron ore price to drop to a five year low. It is currently hovering around $US84.38 a tonne.

The next historic low would take a significant slide to $76 a tonne, a rate not seen since September 2009.

Commodity Producer Countries Will Be Hit Hard

I have been discussing the same setup for quite some time. One of the first on this train has been Michael Pettis at China Financial Markets.

China is going to slow, without a doubt, and commodity producer countries such as Australia and Canada will take a hit.

China Banking Crisis 'Almost Certain'

Here's an article that caught my eye, not for what it said, but rather for what it dis not say.

Please consider China banking crisis 'almost certain', warns economist Gabriel Stein.

China's financial system is "almost certain" to face a full blown banking crisis according to a senior international economist.

Gabriel Stein, of economic consulting firm Oxford Economics, told a Sydney audience on Tuesday that Chinese authorities were understating the extent of bad loans on their banks' books and faced tough choices in dealing with the potential bank failure.

"We don't know when there will be a China banking crisis and how it will play out but it is almost certain there will be one," said Mr Stein, a professor at the University of London who served as chief economist at consulting firm Lombard Street from 1991 to 2012.

"We do think the financial risks are high. Bad loans are understated.

"If you compare to 20 years ago, credit growth had been the same and the Chinese authorities owned up to about 30 per cent of non-performing loans in the banking system. They currently claim its one per cent"

Global Banking Crisis is Certain

Gabriel Stein is an optimist.

Remove the word "almost" in the above paragraphs and and replace it with nothing. Next, remove the word "China" and replace it with the word "global" and you have the true state of affairs.

Here Goes ...

"The global financial system is certain to face a full blown banking crisis. We don't know when there will be a global banking crisis and how it will play out, but it is certain there will be one."

With the Fed, ECB, Bank of Japan, Bank of China, Bank of England, and virtually every central bank on the planet all engaged in emergency tactics of some sort, with loans made that cannot possibly be paid back, with Japan off the deep-end in Abenomics, with covenant-lite junk bonds again on the rampage in the US and starting to gear up in Europe, with derivatives and unfunded liabilities in the trillions of dollars, and with the ECB recklessly pursuing ways to stimulate lending amidst major structural flaws with the euro, how the hell can there not be a global financial crisis of some sort?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Time to Give the Middle Class a Chance

Featured

Weekly Address: Time to Give the Middle Class a Chance

In this week's address, the Vice President discusses our continued economic recovery, with 10 million private-sector jobs created over the past 54 months. Yet even with this good news, too many Americans are still not seeing the effects of our recovery.

As the Vice President explains, there's more that can be done to continue to bolster our economy and ensure that middle-class families benefit from the growth they helped create, including closing tax loopholes, expanding education opportunities, and raising the minimum wage.

Click here to watch this week's Weekly Address.

Seth's Blog : Crucial elements for the placebo effect

Crucial elements for the placebo effect

Placebos, used ethically, are powerful tools. They can cure diseases, make food taste better and dramatically increase the perceived quality of art. They can improve the way teachers teach, students learn and we judge our own safety.

Not all placebos work, and they don't function in all fields. Here are some things that successful placebos have in common:

They do best when they improve something that is difficult to measure objectively.

Does this stereo sound better than that one? Is your headache better today than it was yesterday? How annoying was it to wait for the bus in this new bus shelter?

Sometimes the outcome is difficult to measure objectively because it's abstract, but sometimes it's because it's personal.

If you claim that a new driver makes a golf ball go further, a simple double-blind test is enough for me to know if your claim is legitimate, and if it's not proven, it's significantly harder for me to buy in, which of course is the key to the placebo effect working.

If I tell a teacher something about his students, and that knowledge causes the teacher to take a more confident approach, test scores will go up. But what the placebo did was change the teacher (hard to measure), which, by extension, changed the test scores.

Straining credulity is a real danger, one that denudes the effect of placebos.

In 1796, when homeopathy was first developed, we knew very little about atoms, molecules and the scientific method. As a result, the idea behind these potions was sufficiently sciencey that it permitted many people to convince themselves to become better. Today, informed patients find it can't possibly work, so it doesn't. The same thing is true for astrology, which was 'invented' before Copernicus.

Twenty years ago, audiophiles actually paid $495 for a digital alarm clock that made their stereos sound better. It faded fast, mostly because it was embarassing to admit you'd bought ridiculous magic beans like these. But today, $100 usb cables continue to be sold, because, maybe, just maybe, something is going on here. We're not sure we actually know enough about dielectrics and the skin effect to be sure.

Argue all you want about whether or not you want to be buying or selling placebos, but it's quite likely that the right placebo with the right story can dramatically increase certain outcomes.

If you want to improve performance, the right placebo is often the safest and cheapest way to do so. The opportunity is to find one that's likely to work, and to market it in a way that's ethical and effective.