Archive for March, 2013

China’s growth could slow sharply by 2030 – Fed

Reading the below article and there’s one point that stuck with me , GDP is man made ! After living in Shanghai for a period I saw that a “great deal” of things are fake and it’s a given that the population is not correct as funding was based on population .I believe that 10/15% variable is conservative overstated .

But at the current rate China generates GDP growth in a week equivalent to Cyprus yearly GDP & 12.5 weeks GPP growth of Greece !!

China might be slowing but it’s still growing !

China's growth could slow sharply by 2030 – Fed.

China’s growth could slow sharply by 2030 – Fed

The US Federal Reserve believes that global economic trends might shift sharply by 2030, as China faces mounting headwinds – potentially forcing it to fade dramatically in the years ahead.

Declining productivity and an aging population could shrink the trend growth in China to around 6.5% by 2030, according to a new study. Moreover, if the current forces that are undermining economic activity combine in a worst-case scenario, the pace could fall to under 1%.

Notably, one of the Fed’s Senior Adviser wrote that GDP growth rate is the sum of the growth in employment and the growth in output per employee, and China faces challenges in both of these categories. Meanwhile, a US diplomatic cable recently released by Wikileaks has shown that Li Keqiang, China’s new premier, called the GDP figures ‘man-made’ and therefore unreliable as they underestimate inflation.

Chinese economic data is often questioned by sceptics who believe that government statisticians refine the numbers to make the Communist Party look like it’s bringing prosperity to its citizens.

Nonetheless, in the midst of the financial crisis, buoyant Chinese growth helped to support the global economy after recessions in the United States and Europe.

Economists commented that most investors would agree that the Chinese economy cannot maintain the extremely rapid growth rates it has seen over the past decades. The question is thus not whether the Chinese economy will slow but by when and by how much.

If you are looking for impartial and up-to-date professioanl financial advice about international investment funds, speak to a deVere Financial Adviser for a whole-of-market approach.

There is no Currency War – Goldman Sachs

This did make me laugh ! There’s no currency war as Japan has already won !!

There is no Currency War – Goldman Sachs.

There is no Currency War – Goldman Sachs

Whilst prominent leaders of BRICS countries unite in South Africa to tackle currency volatility and discuss plans to set up institutions that re-establish the roles of the World Bank and International Monetary Fund, Goldman Sachs believes that there is no so-called Currency War going on.

Yesterday, Ford CEO Alan Mulally complained that the weakness in the Japanese yen is giving an advantage to competitors who can sell for less.

However, experts from the investment bank Goldman Sachs believe that instead, we are just seeing ‘prudent monetary easing’ and thus it was the decline of real rates in some countries that has resulted in weaker currencies.

The prime examples are Japan, which has seen its currency fall due to rising inflation expectations and a decline in real rates; and the UK, which has engaged in outright monetary easing from the Bank of England.
Therefore, Goldman believes that such moves are for the benefit of the global economy as a whole, rather than a Currency War. The bottom line is that what we are seeing is simply classical monetary policy to boost domestic demand.

Meanwhile, at the BRICS summit in Durban, Brazil policy makers warned again of a global currency dispute as nations take reciprocal action to weaken their currencies and protect export industries. Brazil’s real has gained 2% to the dollar since the beginning of the year, while the South African rand has dropped 8.8%.

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Re blogging “Mr Yen cautions on Japan’s ‘unsafe’ debt trajectory”

A great article in the Telegraph on the Yen , Abenomics and debt ,
Looking at Japan is self financing its debt bit for how long ? Abenomics makes JGB looks very interactive , negative yield 1%!

2008 financial crash made many people remember that borrowed money has to be paid ,

In my opinion they will tax , tax , tax ! Which history shows us it never never works , I believe increase the consumption TAX to 10% is a much better option , and then invest in projects to keep Japan in Competitive position .
Japan should stick to its strengths and invest in R&D and engineering .

As always the markets will decide .

Tony Evans

Mr Yen cautions on Japan’s ‘unsafe’ debt trajectory

By Ambrose Evans-Pritchard, in Tokyo4:04PM GMT 26 Mar 2013

“A debt ratio of 245pc of GDP is not really safe, and it is not happening because we are investing,” said Takehiko Nakao, Japan’s ‘Mr Yen’ or vice finance minister in charge of the exchange rate.
Mr Nakao said the scope for further fiscal stimulus is running out and the country must restore public finances to a sustainable path by the middle of the decade. “We can’t continue to expect people to lend money to us,” he told The Daily Telegraph.

The comments touch on an acutely sensitive topic. A number of global hedge funds and banks have begun “shorting” Japan’s debt, the world’s biggest at $23 trillion.
They are mostly taking positions through the credit default swap (CDS) market, betting that Japan will be the next big crisis theme after the US subprime crash and the eurozone debt debacle. The radical new government of premier Shinzo Premier is determined to prove them wrong.

Mr Nakao brushed aside criticism that Japan is engaged in currency war or trying to push down the yen, but acknowledged that there are limits to what the Bank of Japan (BoJ) can do under the rules of global finance.

“We didn’t blame other countries after the Lehman crisis when they had large falls in their currencies. We are using monetary policy to tackle persistent deflation in Japan, and avoid a deflationary spiral,” he said.

Mr Nakao said there is a “shared view” among the developed countries that central banks can legitimately buy any form of domestic asset – as the Bank of England and the US Federal Reserve have been doing – but overseas bonds are another matter.
“We cannot buy foreign assets at our leisure. That would be the equivalent of currency intervention by the Bank of Japan,” he said.

The world turned a blind eye to Japan’s purchases of US Treasuries in 2011 after the Fukushima disaster, when the yen surged to a record Y76 against the dollar. But those were unique circumstances.
The yen has since weakened dramatically to around Y95 under Mr Abe, whose “Abenomics” stimulus policies include a shake-up at the BoJ and a new team of governors committed to reflation.

Veteran Japan-watchers say there is a graveyard full of foreign funds that bet against Japanese debt over the last two decades, only to learn the hard way that the country is sui generis, with vast overseas assets and a captive pool of domestic savings.

The great unknown is whether this is now changing as Japan’s trade surplus evaporates. The International Monetary Fund says gross public debt will reach 245pc of GDP this year. Net debt – stripping out the BoJ’s liquid assets – is much lower but it too is now rising fast.

The IMF says net debt will reach 145pc in 2013, well above the usual safety threshold. Figure has jumped by 50 percentage points since 2008, roughly the same as the jump in Spain and Portugal over the same period.
Japan is the only major nation that has not begun to tighten fiscal policy. The IMF says the primary budget deficit was 9pc of GDP last year, yet the Abe government is launching a fresh $200bn blast of stimulus worth 2pc of GDP to kick-start recovery.

Mr Nakao plan is to withdraw the stimulus gradually once recovery gains traction, with a rise in VAT from 5pc to 8pc next year, and then to 15pc. Mr Abe has vowed to cut the primary deficit to 3pc by 2015. “We think that is unrealistic,” said Junko Nishioka from RBS.
Chisato Haguma, chief equity strategist at Mitsubishi UFJ, said the government must curb “exploding social security outlays” as Japan’s ageing crisis hits.
However, he said the high debt level is overstated since the vast assets of the state – including land – dwarf liabilities, and could be sold off if needed. “They have more options than assumed. There is not going to be a fiscal crisis in the next two to three years, but there could be one later,” he said.

Foreign hedge funds have made much of recent moves by the state pension fund GPIF to start selling off part of its vast holding of government bonds (JGBs).
Mr Nakao said the selling is a temporary blip caused by bulge of retiring baby-boomers. The GPIF will soon be a net buyer again and will continue to accumulate for another thirty years.
The IMF has warned repeatedly that Japan is pushing its luck. The Fund has advised fiscal tightening of 10pc of GDP by 2020 just to stabilise the debt level.

It said there is plenty of “low-hanging fruit”, advising Tokyo to raise the retirement age from 65 to 67, and remove the tax subsidy for dependent spouses to make it worthwhile for women to continue working.
Yet the Fund said Japan is uncomfortably close to a debt compound trap, and could face trouble if borrowing costs ratchet up. “Even a moderate rise in yields would leave the fiscal position extremely vulnerable,” it said, warning that this would have implications for the entire world.
“Even a relatively small increase in the sovereign risk premium would make fiscal consolidation more difficult, pose challenges to financial institutions, harm growth prospects in Japan, and could spill over to global risk premia and growth. In this regard, Europe’s recent experience offers a cautionary tale. Once market confidence is lost, regaining it becomes very difficult.”

“Winning is habit. Unfortunately, so is losing”

A cracking quote by the legend Vince Lombardi.Read this today and went , here here

Winning is habit. Unfortunately, so is losing.

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Global stocks remain flat on euro zone crisis

Global stocks remain flat on euro zone crisis.

Today European shares and the euro remained flat, losing early gains as investors fretted that Cyprus’s raid on bank deposits could become the template for future euro zone bailouts.

Banks in Cyprus remain closed following the country’s bailout agreement at the weekend, but comments from Jeroen Dijsselbloem, the new head of the Eurogroup of euro zone finance ministers, have stripped investors of the appetite for the kind of rebound that has followed other rescue deals.

The FTSE All-World is up 0.2% at 236.0, not far from the four-and-a-half-year high of 238.6 hit a couple of weeks ago.

Wall Street’s S&P 500 index is up 7 points to 1,559 at the opening bell, supported by data showing US house prices in January saw their biggest annual increase in six-and-a-half years.

On Monday the S&P traded just 1 point shy of the 1,565 level that was the previous closing high in 2007, before Jeroen Dijsselbloem triggered widespread “risk asset” selling by saying that the Cypriot rescue marked a watershed in how the region deals with failing banks.

But markets have now stabilised as traders absorb Mr Dijsselbloem’s attempts to clarify his initial comments, saying Cyprus was indeed a “specific case”, with “exceptional challenges”.

People often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily.”

“People often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily.”

Zig Ziglar

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Cyprus Bailout confirmed ! €10 billion 60% of GDP .

Eurozone ministers have agreed a deal on a €10bn bailout,

What i have seen and heard suggest the deal will include a levy on deposits of more than €100,000 in Cyprus’s two biggest banks.

Levi could be up to 40% !!!! For one of the banks, and also they could be split into a good and bad bank

What’s been said is that accounts under €100,000 will have no levi on them , but any above could have a Levi over up to 40% , this looks like a huge bitter pill for those account holders.

Also Cyprus has now have capital restrictions, so we have 2 systems in the Eurozones at the moment !!

One key element of the deposit tax, demanded by the IMF, is that it not require a parliamentary vote.

This is a $22billion economy Cyprus according to the United Nations they are the96th largest economy in the world and third smallest economy in the EU .

Jim O’Neill Chairman,Goldman Sachs Asset Management is fond saying :

China (at least in 2011) was creating the equivalent of another Greece every 12½ weeks. China creates another Cyprus every week.

So since the Banks in Cyprus has been closed China has created the equivalent of the GDP in growth!!

Tony Evans

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