Economic growth was weaker than expected in the third quarter, the government said Tuesday, held back by soft business construction and dwindling inventories. While the results tempered some of the expectations about the pace of a recovery, analysts still foresee steady, and stronger, growth in the fourth quarter. [...] Gross domestic product in the third quarter -- the total value of goods and services in the economy -- was 2.2 percent from July through September, revised down from 2.8 percent last month and 3.5 percent in October.
While the results tempered some of the expectations about the pace of a recovery, analysts still foresee steady, and stronger, growth in the fourth quarter.
[...]
Gross domestic product in the third quarter -- the total value of goods and services in the economy -- was 2.2 percent from July through September, revised down from 2.8 percent last month and 3.5 percent in October.
Gordon Brown received a twin blow today when a leading ratings agency warned Britain to get a tighter grip on its record budget deficit and figures revealed that the slump of the past 18 months was now officially the deepest since the second world war. Fitch said that the UK - along with France and Spain - needed to "articulate more credible and stronger fiscal consolidation during the course of 2010 to underpin confidence in the sustainability of public finances". Failure to do so, the ratings agency added, would greatly increase the chances of a debt downgrade, which would increase the cost of servicing the national debt. The warning came within hours of data from the Office for National Statistics showing that Labour's attempts to boost growth took the edge off the recession in the third quarter but were not enough to prevent the slump extending into a record-breaking sixth quarter.
Fitch said that the UK - along with France and Spain - needed to "articulate more credible and stronger fiscal consolidation during the course of 2010 to underpin confidence in the sustainability of public finances".
Failure to do so, the ratings agency added, would greatly increase the chances of a debt downgrade, which would increase the cost of servicing the national debt.
The warning came within hours of data from the Office for National Statistics showing that Labour's attempts to boost growth took the edge off the recession in the third quarter but were not enough to prevent the slump extending into a record-breaking sixth quarter.
Train C2019 covers the 120 kilometers between Beijing and Tianjin in 30 minutes, passing peasants in fields burning corn stalks and warrens of shacks occupied by people who aren't sharing in China's economic boom. The line is part of China's 2 trillion yuan ($292.9 billion) investment in a nationwide high-speed passenger-rail network that may be too much train, too fast. The time savings that the new system delivers may not justify the cost, creating a potential drag on long-term growth, said Michael Pettis, former head of emerging markets at Bear Stearns Cos. The losers are Chinese consumers, who will have to wait for new health-care and old-age benefits while the government focuses on public-works spending, he said. While the expanded service will be a "trophy" for China, the country "already has probably the best infrastructure in the world for its level of development," said Pettis, now a finance professor at Peking University.
The line is part of China's 2 trillion yuan ($292.9 billion) investment in a nationwide high-speed passenger-rail network that may be too much train, too fast.
The time savings that the new system delivers may not justify the cost, creating a potential drag on long-term growth, said Michael Pettis, former head of emerging markets at Bear Stearns Cos. The losers are Chinese consumers, who will have to wait for new health-care and old-age benefits while the government focuses on public-works spending, he said.
While the expanded service will be a "trophy" for China, the country "already has probably the best infrastructure in the world for its level of development," said Pettis, now a finance professor at Peking University.
Rail deflects from road/air, both of which are heavy liquid fuel users. Are Bear exposed to an underperforming oil market ? keep to the Fen Causeway
Bear Stearns doesn't exist any more and the guy is not working for Bear Stearns, he's formerly at Bear Stearns and currently a professor in China according to the article. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Got BS confused with GS.
Even so, I still think there's something in that analysis that, if not directly self-interested, derives from a starkly neoconservative view that infrastructure is for wimps. It's not hi-speed rail he hates, it's anything govt initiated and aponsored. keep to the Fen Causeway
Buying medical electronics from the USA would at least give them something of value for their US dollars. Or they could just wait and watch the dollars evaporate along with their export market. At least the Saudis understood the importance of recycling foreign currency. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
His response was that that the Chinese government was (1) not sure exactly how to make such social infrastructure investments and tied along with that, were doubtful of the effectiveness of those investments, especially in light of the still significant amount of corruption that exists in China; (2) doubtful even if such social infrastructure investments actually succeeded in their primary objectives (i.e. improved healthcare, social security for the elderly, better education, childcare to let more mothers work, etc.), whether if such successes would necessarily lead to more domestic consumption; and (3) if they did result in more domestic consumption, they might not be able to control the rate of that domestic consumption and thus the inflation that it would engender.
Despite these possible explanations, it remains unclear to me why there is such reluctance to invest in social infrastructure by the Chinese central government when (a) they have so much money, and (2) everyone else seems to agree that it would be good for domestic consumption, which in turn would be good for the Chinese economy in the long-term. La Chine dorme. Laisse la dormir. Quand la Chine s'éveillera, le monde tremblera.
I suspect this is elementary economics, but could you unpack that relationship for me? You're saying companies will have to pay higher wages if workers have state-supported health insurance/services and/or a social retirement program? La Chine dorme. Laisse la dormir. Quand la Chine s'éveillera, le monde tremblera.
Governments are not Santa and social benefits aren't made by elves. We need to understand that these things cost money and have to be sustained through taxes and/or user premiums. Chinese goods are so cheap partly because workers get no benefits--no retirement, no health care and often rather shoddy schools, as recent earthquakes show. Lots of what is spent is wasted on graft to local party elites. There is little reason to expect that a scaled up health care industry would be built more efficiently. One would hope that it might be run more efficiently, but possibly in vain.
But the ongoing costs of health care and retirement will eventually increase the cost of exports. The US and Europe have been uncompetitive wrt manufacture of consumer goods in no small part because of the total absence of any benefits to Chinese labor. China has a vast pool of potential industrial labor still in the countryside, so, in effect, Malthus rules and wages tend to subsistence. China has begun to see that the lack of any rules on environmental pollution has to be dealt with and are likely focused there and do not want to be distracted by other expensive programs.
From the point of view of the elites, workers are a disposable, renewable commodity, little different from pigs and chickens raised for market. They would object to the characterization, but the fact is western elites envy them their lack of restraints. The attitudes of some "overseas" Chinese of the business class that I knew or knew of in LA were completely compatible with that characterization. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
Have the neolibs got to the chinese ? keep to the Fen Causeway
That is a very large part of the whole point of globalization. The fact of a low cost producer puts pressure on higher cost producers. The public and the vast majority of economists have been taught that this is just how economics work and that bringing politics into the equation is WRONG. Of course this is absurd and the existing arrangements are the RESULT of politics that favor elites and that then disguise the fact that politics are even a part of the equation.
It is a measure of the task ahead that enough of the public must be re-educated to support sensible, available solutions, such as Hudson, Stiglitz and others have suggested, or see themselves in the same condition as the Chinese worker today faces. The next generations really can all live in shipping crates sitting in open sewers unless we awaken. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
What happens if the Chinese suddenly all start consuming a lot more? Seems to me they'll buy themselves some cars and airplane tickets. More infrastructure spending would be necessitated. You don't hear anyone (anyone that matters, like, economists) nag about the airports and highways China is building. No doubt that slice of infrastructure spending amounts to something when you sum it up.
So, that's why I thought the piece was a rather amazing display of economic stupidity.
It is going to be sufficiently challenging to simply provide the basics that a modernizing peasantry in India and China will want without compounding the problem by allowing deliberately shoddy merchandise that is junk in half or less of its reasonable lifetime. But that implies that criteria other than next month's and years corporate statements are to be seriously considered. Flopenhagen showed how far we have to go yet. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
I understand the worries about corruption regarding public subsidies (unemployment, pensions) but free provision of basic services like health care and education doesn't lend itself to so much corruption.
The control-freakery of the Chinese government does shine through. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Ministers from the European Union's member states today backed a proposal by the European Commission to extend existing EU import duties on certain types of footwear produced in China and Vietnam. The extension by 15 months, starting in January, was possible after Austria, Germany and Malta dropped their opposition. In November, EU trade diplomats rejected the Commission's proposal.
The extension by 15 months, starting in January, was possible after Austria, Germany and Malta dropped their opposition. In November, EU trade diplomats rejected the Commission's proposal.
Senator David Vitter submitted one of my questions to Federal Reserve Chairman Ben Bernanke, as part of his reconfirmation hearings, and received the following reply in writing (as already published in the WSJ on-line). Q. Simon Johnson, Massachusetts Institute of Technology and blogger: Andrew Haldane, head of financial stability at the Bank of England, argues that the relationship between the banking system and the government (in the U.K. and the U.S.) creates a "doom loop" in which there are repeated boom-bust-bailout cycles that tend to get cost the taxpayer more and pose greater threat to the macro economy over time. What can be done to break this loop? A. The "doom loop" that Andrew Haldane describes is a consequence of the problem of moral hazard in which the existence of explicit government backstops (such as deposit insurance or liquidity facilities) or of presumed government support leads firms to take on more risk or rely on less robust funding than they would otherwise. A new regulatory structure should address this problem. A. (continued) In particular, a stronger financial regulatory structure would include: a consolidated supervisory framework for all financial institutions that may pose significant risk to the financial system; consideration in this framework of the risks that an entity may pose, either through its own actions or through interactions with other firms or markets, to the broader financial system; a systemic risk oversight council to identify, and coordinate responses to, emerging risks to financial stability; and a new special resolution process that would allow the government to wind down in an orderly way a failing systemically important nonbank financial institution (the disorderly failure of which would otherwise threaten the entire financial system), while also imposing losses on the firm's shareholders and creditors. The imposition of losses would reduce the costs to taxpayers should a failure occur. This answer misses the central issue. Haldane's argument (and our point) includes "time inconsistency" - i.e., you promise no bailouts today but, when faced by an awful crash, you provide a massive set of bailouts. There is nothing in Mr. Bernanke's statements, here or elsewhere, that addresses this concern. His hope is that current proposed changes in regulation will make a crash less likely. This is a strange assertion, given current market conditions: e.g., the Credit Default Swap (CDS) spread for Bank of America now hovers just 100 basis points above that of the US government, despite BoA having a very risky balance sheet. Creditors apparently believe they will not face losses - and the same is true for people lending to all our big banks. This is exactly the kind of thinking that produces reckless lending (and borrowing). Will Bernanke really disappoint them in our next crash? Until markets price "small enough to fail" risk into our biggest banks, the time inconsistency problem is alive and well - and threatening. The Fed's continuing refusal to confront this point directly - even as other major central banks shift their public positions (and more are moving in private) - is alarming and disconcerting. The Fed is falling far behind. This will have much broader consequences for its credibility and independence down the road.
Q. Simon Johnson, Massachusetts Institute of Technology and blogger: Andrew Haldane, head of financial stability at the Bank of England, argues that the relationship between the banking system and the government (in the U.K. and the U.S.) creates a "doom loop" in which there are repeated boom-bust-bailout cycles that tend to get cost the taxpayer more and pose greater threat to the macro economy over time. What can be done to break this loop? A. The "doom loop" that Andrew Haldane describes is a consequence of the problem of moral hazard in which the existence of explicit government backstops (such as deposit insurance or liquidity facilities) or of presumed government support leads firms to take on more risk or rely on less robust funding than they would otherwise. A new regulatory structure should address this problem. A. (continued) In particular, a stronger financial regulatory structure would include: a consolidated supervisory framework for all financial institutions that may pose significant risk to the financial system; consideration in this framework of the risks that an entity may pose, either through its own actions or through interactions with other firms or markets, to the broader financial system; a systemic risk oversight council to identify, and coordinate responses to, emerging risks to financial stability; and a new special resolution process that would allow the government to wind down in an orderly way a failing systemically important nonbank financial institution (the disorderly failure of which would otherwise threaten the entire financial system), while also imposing losses on the firm's shareholders and creditors. The imposition of losses would reduce the costs to taxpayers should a failure occur.
A. The "doom loop" that Andrew Haldane describes is a consequence of the problem of moral hazard in which the existence of explicit government backstops (such as deposit insurance or liquidity facilities) or of presumed government support leads firms to take on more risk or rely on less robust funding than they would otherwise. A new regulatory structure should address this problem. A. (continued) In particular, a stronger financial regulatory structure would include: a consolidated supervisory framework for all financial institutions that may pose significant risk to the financial system; consideration in this framework of the risks that an entity may pose, either through its own actions or through interactions with other firms or markets, to the broader financial system; a systemic risk oversight council to identify, and coordinate responses to, emerging risks to financial stability; and a new special resolution process that would allow the government to wind down in an orderly way a failing systemically important nonbank financial institution (the disorderly failure of which would otherwise threaten the entire financial system), while also imposing losses on the firm's shareholders and creditors. The imposition of losses would reduce the costs to taxpayers should a failure occur.
This answer misses the central issue. Haldane's argument (and our point) includes "time inconsistency" - i.e., you promise no bailouts today but, when faced by an awful crash, you provide a massive set of bailouts. There is nothing in Mr. Bernanke's statements, here or elsewhere, that addresses this concern.
His hope is that current proposed changes in regulation will make a crash less likely. This is a strange assertion, given current market conditions: e.g., the Credit Default Swap (CDS) spread for Bank of America now hovers just 100 basis points above that of the US government, despite BoA having a very risky balance sheet. Creditors apparently believe they will not face losses - and the same is true for people lending to all our big banks. This is exactly the kind of thinking that produces reckless lending (and borrowing). Will Bernanke really disappoint them in our next crash?
Until markets price "small enough to fail" risk into our biggest banks, the time inconsistency problem is alive and well - and threatening.
The Fed's continuing refusal to confront this point directly - even as other major central banks shift their public positions (and more are moving in private) - is alarming and disconcerting. The Fed is falling far behind. This will have much broader consequences for its credibility and independence down the road.
by Kipper Williams at the Guardian
Much is being made of Bernanke's program of quantitative easing, which is nothing more than an extreme form of artificially low rates of interest in the aftermath of a financial crisis. The current program of quantitative easing is not only no miracle cure, it will not work at all, will not 'fix' the problems that are plaguing the American economy in any substantial manner. Quantitative easing would only be a cure if the crisis had been caused by an exogenous credit shock, a sudden withdrawal of liquidity due to an event unrelated to the workings of the domestic economy like a war or an act of nature. But this is clearly not the case. For the cause of the financial crisis was in fact a lengthy period of artificially low interest rates under the chairmanship of Alan Greenspan, which allowed all manner of financial excess and malinvestment and even fraud to fester in the real economy for a protracted period of time until it became embedded, and one might even say a dominant force, in the economy. Applying quantitative easing may relieve the symptoms of the credit crisis but is merely a palliative, not a cure. It is similar to the case of a debilitated addict who being denied his marcotics goes into shock and suffers a heart attack. Yes, a resumptio of the drug will relieve the short term symptoms perhaps but will do nothing for the underlying deterioration which will continue to worsen. The very low rates of interest have 'cured' the short term credit seizing in the financial markets, thereby providing time and opportunity to engage in real systemic reform and rebalancing to fix what caused the crisis in the first place: an outsized and corrupt financial sector, and a system of global trade that is freakishly imbalanced and manipulated by command economies and multinational corporations. Until those reforms are made, the US economy will experience a series of bubbles and crisis that through the US dollar reserve currency system will shake the governments of the world to their foundations.
But this is clearly not the case. For the cause of the financial crisis was in fact a lengthy period of artificially low interest rates under the chairmanship of Alan Greenspan, which allowed all manner of financial excess and malinvestment and even fraud to fester in the real economy for a protracted period of time until it became embedded, and one might even say a dominant force, in the economy.
Applying quantitative easing may relieve the symptoms of the credit crisis but is merely a palliative, not a cure. It is similar to the case of a debilitated addict who being denied his marcotics goes into shock and suffers a heart attack. Yes, a resumptio of the drug will relieve the short term symptoms perhaps but will do nothing for the underlying deterioration which will continue to worsen.
The very low rates of interest have 'cured' the short term credit seizing in the financial markets, thereby providing time and opportunity to engage in real systemic reform and rebalancing to fix what caused the crisis in the first place: an outsized and corrupt financial sector, and a system of global trade that is freakishly imbalanced and manipulated by command economies and multinational corporations.
Until those reforms are made, the US economy will experience a series of bubbles and crisis that through the US dollar reserve currency system will shake the governments of the world to their foundations.
In the 19th and 20th centuries we made stuff: corn and steel and trucks. Now, we make protocols: sets of instructions. A software program is a protocol for organizing information. A new drug is a protocol for organizing chemicals. Wal-Mart produces protocols for moving and marketing consumer goods. Even when you are buying a car, you are mostly paying for the knowledge embedded in its design, not the metal and glass.
Yup. Everything's a protocol.
IMHO we are about to see the viral spread of interactive, consensual protocols which will make existing one way protocols redundant.
Probably worth a Diary. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Even when you are buying a car, you are mostly paying for the knowledge embedded in its design, not the metal and glass.
