1% Growth! Please to Obey Abenomics Rule!

[inflames]

Without serious policy reforms that would do things to increase the growth rate, Japan is destined to have low growth, if any. Part of this is simply a reflection that GDP is actually a pretty terrible indicator at times, especially in Japan's case. This is something economists have known since the package was announced - simply flooding banks with money won't do anything.

About Wells Fargo - they were actually forced to take money (all of the big banks in the US were actually forced to in order to avoid obvious distinctions between weak and strong big banks). The issues with subprime debt is that the valuations were far worse than what anyone expected. If, for example, debt is priced at 5% (at par value) and people think they should get 7.5% for it to compensate for increased risk, the price of the debt actually falls to 66.66 - it has lost one third of its value. Some banks had a lot of these securities (or even loans) - this made them lose their capital and then, if you lose one third of your capital, people get very, very nervous and stop lending you money (as they know you already lost 1/3rd and can just as easily lose the other 2/3rds and they don't want to be left with a loan to you).

[dimwit]

Yep. People still believe it is a safe haven. That's the last thing Japan wants and bless them they have done everything in their power to try and disabuse the notion but still they flee to Yen.

It's now as if the negative interest rate thing never happened.

The yen is a safe haven compared to bank stocks which are leading the rout.

[FG Lurker]

This is starting to get ugly, and it seems likely to get worse. HK markets opened again today and wasted no time before tanking, sending both the JPY and gold up. Oil has dropped again.

Perhaps most concerning of all though is that the Baltic Dry Index has fallen to below where it was during the worst times post-2008.

I would absolutely love to be wrong, but this does not look good.

[Wage Slave]

Not so sure about the Baltic Dry Index. It's a price and prices reflect demand and supply rather than just demand. The supply of shipping has expanded faster than demand and the price of a critical input to supply (fuel) has fallen very sharply. So the price of shipping stuff has fallen sharply.

This guy says it better than me.

Yes, the Baltic Dry Index has collapsed: but that’s a collapse in the price of shipping, not in the volume of shipping nor of global trade. Far from this being a bad sign for the global economy, it contains within it the seeds of good news. If shipping is becoming cheaper therefore it will be cheaper to trade and there will be more of it. Which is good news, because more trade makes us all richer.

And we need to recall this basic point when we think about either economics or public policy. Yes, price changes are indeed telling us something about the economy around us. But we do have to be careful that we pick up the right message. A falling price can be a symptom of increased supply just as much as it can be of reduced demand.

http://www.forbes.com/sites/timworstall/2016/02/09/whatever-the-baltic-dry-index-says-global-trade-is-not-collapsing/#39eab1037cd2

[FG Lurker]

Large shipping companies use advance contracts to purchase fuel, the same way that airlines and cruise ship operators do. This reduces their exposure to sudden spikes in fuel costs but also means they don't benefit immediately when prices fall. Considering this I don't think the recent Baltic Dry Index drops are due to suddenly reduced operating costs but rather due to a dramatic drop in demand.

Cheap shipping is of course a bonus for anyone who wishes to ship things right now, the problem is that comparatively speaking not many people seem to want to do this...

[inflames]

All depends on the kind of contracts they have - some companies use collar contracts (where they buy one contract to put a ceiling on their prices and sell another to recoup some of the cost) that mean there is a level where they have to start paying when the price goes beneath the floor. Big thing to note is that basically anyone buying futures also tries to sell their products for the future (airlines selling seats 330 days out or shippers offering stuff in advance).

The issue with markets such as this is there are times when, instead of being able to simply put idle ships aside, owners are highly leveraged and basically have to have ships running in order to simply cover interest payments. A drop in demand of 5% or so can send prices plunging, and the drop in demand from China has had an effect.

[FG Lurker]

The drop in demand from China has happened due to a global consumer slowdown. People aren't buying crap made in China so China isn't shipping as much crap all over the world. While one could certainly argue that less crap made in China is a good thing, it's still a slowdown.

As I mentioned previously I would absolutely love to be wrong about this. The problem is that it feels a lot like it did in 2009. My business sells B2B & B2C. We saw a dramatic slowdown in demand post-Lehman and we are seeing the same thing happen again. It doesn't mean the result will be the same but it's enough to cause me concern.

[inflames]

There are several issues with China but fundamentally China has been, along with the US, one of the growth engines for the world for the past 15 years or so. Now that China is slowing, everyone else is wondering what will happen as China was buying a ton of commodities from all over the world. China has actually become somewhat expensive to produce in - the US, for example, isn't much more expensive

Countries that were selling heavily to China, such as Australia, are screwed in the short-term.

[Takechanpoo]

why nobody refer to germany? for the present, most dangerous one is germany rather than china.
"great" deutsch bank is on the verge of death......
death of deutsch bank >>>> death of VW >>>> ?

where did you "down-to-earth" germany go?

[legion]

Capitalism eats itself

we over produce and our only answer is to consume
we want a surplus of consumers to match our surplus of production
but we want to produce more for less
which reduces the purchasing power of the population, effectively reducing the number of consumers

[wuchan]

Capitalism eats itself

we over produce and our only answer is to consume
we want a surplus of consumers to match our surplus of production
but we want to produce more for less
which reduces the purchasing power of the population, effectively reducing the number of consumers

Capitalism is a pyramid, it won't work any other way. The problem is everyone wants to be rich with boats and supercars but when someone different shows up everyone complains. The US wants to be at the top and uses "globalization" to push the bottom offshore. Unfortunately, there are more people out there. China has over a billion people, 1% of one billion is 33% of the population of the US. The math the US is using doesn't work.

[legion]

Good point, hadn't thought of it in those terms.

I'm not interested in being "rich" in material terms.

I think the pursuit of material symbols of wealth does not make us happy. It is what we create for ourselves that matters, the acquisition of money as a means to buy other people's creation seems to be an continual fruitless search for self expression and identity.

Would you rather own a Ferrari or be able to play the flute as well as this?

I know which I'd choose

And I think the solution to this continual cycle of crisis is a fundamental reassessment of values.

[wagyl]

the acquisition of money as a means to buy other people's creation seems to be an continual fruitless search for self expression and identity

We have gone beyond such post-modern thinking. I suppose you could say that in this current information age, your self worth is no longer what you can buy, but how many likes and followers you have...



I'm no hippy (I just smell like one), but I agree with your position. I think there is a fundamental problem with how we measure success.

Economics is, at a very basic level, the measurement of consumption.
The aim is to produce increasing values, in other words to use up more and more stuff. Anything else is failure.

I'm not sure that that is the best measure of societal health.

[wuchan]

Good point, hadn't thought of it in those terms.

I'm not interested in being "rich" in material terms.

I think the pursuit of material symbols of wealth does not make us happy. It is what we create for ourselves that matters, the acquisition of money as a means to buy other people's creation seems to be an continual fruitless search for self expression and identity.

Would you rather own a Ferrari or be able to play the flute as well as this?

I know which I'd choose

And I think the solution to this continual cycle of crisis is a fundamental reassessment of values.

I am a certified "car guy". The trendy ones that people want tend to catch fire. I would only buy an Italian sports car as an investment because I know I can take a $50k(USD) car and with $30k have a faster, more reliable car. One could also argue that all one needs to do is buy an Alpina D3 (diesel M3).



Beyond my car fetish, the global economy is not heathy. There is a currency war happening. 2016 will be worse than the Japanese demon "lehman shock". Governments are undercutting each other to remain competitive. Central banks are slashing rates to prevent their currieries from becoming irreverent. Oil is going to hit $17 a barrel before it stabilizes (I guarantee a $4 window).

[legion]

the acquisition of money as a means to buy other people's creation seems to be an continual fruitless search for self expression and identity

We have gone beyond such post-modern thinking. I suppose you could say that in this current information age, your self worth is no longer what you can buy, but how many likes and followers you have...

ouch

I think the SNS thing is really creepy, how would you feel if you got a snail mail letter with letters cut from magazines that said "I like you, I want to follow you"?

[Wage Slave]

Unfortunately, there are more people out there. China has over a billion people, 1% of one billion is 33% of the population of the US. The math the US is using doesn't work.

Population of China = 1.375 billion

x 1% = 13.75 million

Population of The US = 316.5 million

13.75 million is 4.3% of 316.5 million. Not 33%.

[wuchan]

Unfortunately, there are more people out there. China has over a billion people, 1% of one billion is 33% of the population of the US. The math the US is using doesn't work.

Population of China = 1.375 billion

x 1% = 13.75 million

Population of The US = 316.5 million

13.75 million is 4.3% of 316.5 million. Not 33%.

sorry, drunk posting.....

There are way more rich chinese than rich 'mericans.

[Wage Slave]

Economics is, at a very basic level, the measurement of consumption.

I agree pretty fundamentally with the thrust of your argument - bit of an old hippie myself at times. If I may quibble a bit with this statement though. At root, economics is about how resources are allocated within a collection of people. Measurement of consumption is vital tool for thinking about that. Still, you are right that economics doesn't do well with consumption (or supply) of anything that can't be measured and valued in monetary units and that means it's woefully limited as a primary guide to policy making.

Oscar said it well:

“Cecil Graham: What is a cynic?
Lord Darlington: A man who knows the price of everything, and the value of nothing.
Cecil Graham: And a sentimentalist, my dear Darlington, is a man who sees an absurd value in everything and doesn’t know the market price of any single thing.”

[Samurai_Jerk]

Japan’s economy contracts in latest setback for Abe policies

Japan’s economy contracted at a worse than expected 1.4 percent annual pace last quarter as Prime Minister Shinzo Abe’s lavish stimulus policies failed to counter anemic consumer demand and sluggish exports.

The preliminary data released Friday, which may be revised, shows the world’s third-largest economy stumbling again after a 1.3 percent expansion in the July-September quarter. The economy shrank 0.4 percent in the October-December quarter from the previous quarter.

Despite the lackluster report, Tokyo’s main share index, the Nikkei 225, vaulted 7.1 percent to 16,017.94 helped by a weakening in the Japanese yen, hopes of more stimulus and Friday’s rally on Wall Street.

The latest contraction, the second in 2015, adds to worries that Abe’s strategy for reviving the economy through inflation fueled by massive monetary easing is failing. The slowdown in China, one of Japan’s biggest export markets, has been a further hindrance.

[Wage Slave]

Time for my Genki Denki stimulus plan. Down with all the power poles and up with the voltage! A 3Kw electric kettle in every kitchen just like in advanced countries! 7Kw electric cookers if people want them! Power to the people delivered invisibly! New household appliances for old! And it's Eco as well! The new appliances will all be more efficient! C'mon Abe. You know the banks are not really your friends any more - time to take bold and decisive action to get Japan moving again. Dig up those roads, get the factories running full pelt, Let's see KS Denki and Yamada bustling again. Imagine the welter of new products and colour options that will appear - Just like the golden days of Showa all over again. Japan will be back!

[Grumpy Gramps]

Yes, 240/400 volt lines sound just about good,,, if it can be done without nukes. And he could also subsidise gasoline and oil in order to make people use more and the oil reserves of the world be gone sooner for a greener future and Dieselgate would be solved, too

Apart from that, it's probably about time for nomics-Abe to walk the plank; politically that is.

[wagyl]

Apart from that, it's probably about time for nomics-Abe to walk the plank; politically that is.

Serious question: who is willing and able to take the vacancy after the plank has been walked?

[canman]

Serious question: who is willing and able to take the vacancy after the plank has been walked?
And there in lies the problem. There is no one with any better ideas. And if there were they would not stick their neck out over this. As much as I despise Abe, Aso, Kuroda and that group, I don't see anybody on the Minshuto side who could do anything better. I would like to hope they would think about the average Taro a little more than the LDP does, I don't think they would make a difference.

[Takechanpoo]

just abolish consumption tax and government tax revenue will increase in the long term. they are just doing the tax increase by the order from ministry of finance. j-politicians cant disobey the bureaucrats of the ministry of finance. or whatever you do is throwing water on a heated stone until baby boomer generations jijis and babas die out.

[matsuki]

The consumption tax increase is really a step backwards...and I've heard quite few jiji's thinking the cuntry is using it to get furrin tourists tax money....not realizing the tourists can actually make the large purchases tax-free.

[Grumpy Gramps]

I can't think of a father/mother-figure that I would happy with as prime minister, either. But maybe a derukugi like this is a little un-Japanese anyway. IMO the function could as well be served by a "prime-ministeial committee" in future. This might slow down some processes a little, but then this is politics, there is no rush (we have seen that in Fukushima) and it would help watering down pesonal accountability a little in the rare case of any failure (not that I think Fukushima was a failure, of course not)..

[matsuki]

I can't think of a father/mother-figure that I would happy with as prime minister, either. But maybe a derukugi like this is a little un-Japanese anyway. IMO the function could as well be served by a "prime-ministeial committee" in future. This might slow down some processes a little, but then this is politics, there is no rush (we have seen that in Fukushima) and it would help watering down pesonal accountability a little in the rare case of any failure (not that I think Fukushima was a failure, of course not)..

Isn’t it pretty much committee anyway? Just with a figurehead they can blame if shit hits the fan? (though I do agree with what you're saying...)

[inflames]

We need to import another American to run the country - instead of MacArthur, I think Trump would at least kill sacred cows in 10 minutes and actually result in changes. Hashimoto would try to suck his dick then as well.

[kurogane]

Because they've done so well running their own country (into the ground)?

[Grumpy Gramps]

The idea ist not so bad. As the country is run by the bureaucrats anyway, to have a gaijin as PM to blame anything and everything on, then deport and replace with another one would be helpful for the moral health of the country.