With all the focus on LIBOR and imploding Europe, investors have almost “forgotten” about China. How is the Chinese monetary policy run and much more, courtesy Also Sprach Analyst.
Just how different China’s monetary policy is run compared to the West? Perhaps not much. They cut and raise interest rates just as everyone else does.
China is not different from the rest of the world in a sense that Newton’s three laws of motion and law of universal gravitation work in China just as everywhere else and basic principles of economics hold in China just as in everywhere else. Chinese central bank, just as every other central bank around the world, would like to see better growth in credit when they want to stimulate growth, and tighten monetary policy when they need to fight inflation. In that sense, they are the same. The difference is just how monetary policy is run.
Guest post by Lance Roberts.
“Chance has put in our way a most singular and whimsical problem, and its solution is its own reward.” – Sherlock Holmes
Very much like Sherlock Holmes, analysts everywhere are analyzing each and every data point relating to housing hoping that it is “the” conclusive bit of evidence that proves the long awaited housing recovery has arrived. The recent spate of housing numbers, while improved over recent months, have bolstered those calls that the bottom is “in” and a“recovery” has begun. The mystery of the “elusive recovery” continues.
We have been very vocal that while we may have indeed seen the “bottom” the ensuing “recovery”may be a far more elusive. (See here, here and here) However, there are three major clues that housing will continue to elude recovery for quite some time – global drag, employment and the velocity of money.
Clue 1: Global Drag
It is entirely understandable why everyone wants housing to recover. From a homeowners standpoint, particularly the 1/3 of Americans who are underwater in their mortgage, a recovery in housing gives them not only a psychological boost but also the options of selling, which offers mobility, or simply refinancing to lower monthly payments. Economists and other financial analysts believe that a recovery in housing is needed to boost economic growth from the large multiplier effect of each dollar invested in the overall economy. However, residential investment today, as a percentage of GDP, is far less impactful than it has been in the past. Currently residential investment is near the lowest levels on record as a percentage of economic growth.
Guest post by Azizonomics.
Most of us are at least passingly familiar with the theory: the completion of a new tallest skyscraper presages a market crash. Over-exuberant construction reflects over-exuberant markets, and over-confidence often spills over as the hyper-bullish slowly (and then quickly) realise that the good times are over
Here’s the story so far:
Headline in the FT “Spain to force banks to set aside €30bn.” This is a bad joke. One which ordinary Spanish people are going to pay for in blood.
First, €30bn is a joke because it is not enough and the Spanish central bank and the government know it.
Second, 30bn of what? The Spanish banks don’t have 30bn of anything worth setting aside.
According to a Bank of Spain presentation quoted in an article by Bloomberg, the bad debt provisions of Spanish banks so far
would cover losses of between 53 percent and 80 percent on loans for land, housing under construction and finished developments.
The additional €30B announced today
would increase coverage to 56 percent of such loans,..
The property bubble has much more to go before we start approaching realistic property values, and reach an equilibrium.
Massive property supply is hitting the market. Meanwhile, ask yourselves where the banks have marked their property holdings.
The Trader has been covering the Spanish economy over the past year. Our readers know we have been extremely bearish on the outlook for the Spanish economy and the stock market. We won’t go on about the state of the Spanish economy here, but we would like to provide objectivity on majority of the topics covered on our site. Therefore, we provide you Banco de Espana’s latest presentation on the Spanish economy, banking sector and much more. Don’t forget it is the “Banco de Espana”…
Full amusing reading here.