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Debt ‘Round the World

On January 20, 2012, in Asia, Debt, Europe, by Tim

Today’s Daily Chart from the The Economist is chock-full of fun and interesting data on public and private sector debt around the world and, based on the graphic below, us Anglo-Saxons are clearly outpacing the rest of the world when it comes to household debt.

Of course, Japan is the unquestioned leader in government debt – about double that of second place Italy – but, flipping through the tabs of this interactive graphic reveals that, overall, the U.K. is the worst of the lot … it’s a good thing they can print their own money.

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Growth Slows in China – to 9.2 Percent

On January 17, 2012, in Asia, Europe, by Tim

Along with another European credit downgrade by Standard & Poor’s and Greece once again edging closer to default (they’ve been edging closer to default for years now), slower growth in China is making headlines this morning, though, most nations would give their eye-teeth for an economy that is still expanding at a nine percent clip.

Retail sales were up 17 percent from year ago levels while year-over-year growth rates slowed during all four quarters of 2011 as the government tightened lending and found other ways to rein in soaring home prices and cool inflation.

So far, it looks like they’re succeeding. Hopefully, they won’t be too successful.

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Look at What Central Banks Have Done

On January 10, 2012, in Asia, Banks, Europe, by Tim

I’ve been meaning to dig through the European Central Bank’s balance sheet data in order to better understand how it has grown so fast in recent months (as indicated in red below) and why the Germans aren’t up in arms about it.

Someday I surely will, though there doesn’t seem to be any real urgency since the recent spurt of money printing is not likely to end anytime soon. Between now and then, this graphic from The Economist’s Central banks: Crazy aunt on the loose will have to do.

It is fairly remarkable to stop and think how far we’ve come since the world’s central bankers saved us (and, of course, the biggest and most dangerous banks) from sure annihilation three years ago. Who would have ever imagined back in 2005 or 2006 that nearly the entire globe would have “turned Japanese” by now.

Who imagines today that the chart above left might not change for another 10 or 20 years?

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Iran, Russia to use Rial, Ruble, not U.S. Dollars

On January 9, 2012, in Asia, Currencies, by Tim

Though not quite at the same level of hysteria that was generated a few years ago when it was announced that Iran was in the process of setting up its own oil bourse and, as a result, severely impacting (or much worse) the reserve currency status of the U.S. dollar, word over the weekend that Iran’s trade with Russian will now be conducted using rubles rather than dollars, according to this story at Fars News Agency, is nonetheless interesting.

Iran and Russia have replaced US Dollar with their own currencies in their trade ties, a senior Iranian diplomat announced on Saturday.

Speaking to FNA, Tehran’s Ambassador to Moscow Seyed Reza Sajjadi said that the proposal for replacing US Dollar with Ruble and Rial was raised by Russian President Dmitry Medvedev in a meeting with his Iranian counterpart Mahmoud Ahmadinejad in Astana on the sidelines of the Shanghai Cooperation Organization (SCO) meeting.

“Since then, we have acted on this basis and a part of our interactions is done in Ruble now,” Sajjadi stated, adding that many Iranian traders are using Ruble for their trade deals.

“There is a similar interest in the Russian side,” the envoy stated, adding that that Moscow is against unilateral sanctions on Iran outside the UN Security Council, specially the recent sanctions against Iran’s Central Bank (CBI).

This follows a number of similar moves by Iran in recent months with other trading partners and China’s ongoing efforts to establish currency agreements with many other nations, most recently Japan, a reminder that currencies such as the U.S. dollar loser their “reserve” status very slowly, but, in this case, apparently very surely.

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The Slowdown in China

On December 5, 2011, in Asia, Housing, by Tim

Worrisome signs have been emerging from China in recent weeks that all is not well. Home prices have been notching modest declines of a fraction of a percent over each of the last three months (though this may be one case where the government’s data is manipulated even more than usual) and the manufacturing sector saw a modest contraction in November for the first time since 2009.

Today, the Chinese services sector notched its weakest growth in three months and, after the central bank loosened bank reserve requirements last week after two years of tightening, policymakers fret that slowing growth could lead to social unrest. Amid daily calls by pundits for a “hard landing”, the LA Times reports that the planned economy is in trouble.

According to an official New China News Agency report published Saturday, China’s top security chief warned provincial officials to brace for unrest if financial conditions continue to deteriorate.

Zhou Yongkang, a member of China’s nine-person Politburo Standing Committee, said the country should focus on developing better social management -– a euphemism for control aimed at stamping out opposition and unrest.

“The Party and the government have always paid a lot of attention to social management … but it still cannot keep up with the changes in economic and social development,” Zhou reportedly said, using typically dense party jargon.

“Faced with the negative impact of the market economy, we still have not established a complete social-management system,” Zhou continued. “How to establish a social management with Chinese characteristics to suit the socialistic market economic system in China is the most pressing task we face today.”

With the labor market now showing some distress as the number of strikes and other protests escalates, income inequality is an increasingly important issue to workers with increasingly idle hands and this is not good news for the government.

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Obama and China, Good Cops and Bad Cops

On November 14, 2011, in Asia, Currencies, by Tim

You’d think that there’s at least a little bit of a “Good Cop, Bad Cop” dynamic going on right now when President Obama talks to the Chinese about letting their currency strengthen at a faster pace. Of course, Obama is the good cop here with just about every GOP presidential hopeful playing the alternate role and one can easily imagine Chinese President Hu Jintao being told over the weekend, “Hey, I’m about the best friend you’re ever going to have in Washington. How about a little appreciation, currency-wise?”

As Hu made clear yesterday, from the perspective of the Chinese, they had no part in making any of the rules in the current global monetary system and feel little compulsion to play by them. Mindful of the Japan experience in the late-1980s when strong currency appreciation led to massive asset bubbles and two lost decades, they’re not likely to simply comply with the wishes of the West when it comes to their currency.

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