Yves here. Only with the fullness of time will we know whether Ilargi’s “the end is nigh” headline will have coincided with the crack that signaled the sell-by date of the officialdom-induced post crisis rally. But Ilargi makes more interesting points than simply, as many done, point out that the bubble party has to end and the unwind is not likely to be pretty.
Read more...As the heir-in-waiting to the title of world’s largest economy, China finds itself in a strange position in terms of its oil consumption.
In September 2013, China became the biggest net importer of crude, beating out the U.S. for the first time. This came as no surprise, given how rapidly China’s thirst for oil has grown, although landing in top place happened a little ahead of U.S. Energy Information Agency (EIA) predictions that it would take place in 2014. However, where the U.S. has been shoring up its own internal production, China has lagged behind. Between 2011 and 2014, U.S. oil production rose by 31 percent, as opposed to China, which saw its own production increase by a little more than 5 percent over that time. This leaves China utterly dependent on oil imports, a vulnerable position to be in at a time when its economy is beginning to wobble.
Read more...Yves here. I’ve refrained from saying much about the announcement of the plan to establish a $100 billion development bank by the BRICs nations (Brazil, Russia, India, and China) because the hype is ahead of the reality. Yes, it is true that the US has been abusing its role as steward of the reserve currency. QE has been a huge bone of contention in all emerging markets, since hot money has flooded in, while the Fed has, in an insult to the collective intelligence of the leaders of these countries, tried claiming that it has nothing to do with the influx. And they are bracing themselves for the tidal retreat when the Fed starts tightening. The US’ efforts to use sanctions to punish Russia have also focused the minds of these countries.
However, the formation of a development banks falls vastly short of the infrastructure needed for any country’s currency (or a basket of currencies) to displace the dollar.
Read more...One the markets that has been least easy to predict this year has been US bonds. The long term US bond bears, that are often monetarists at heart and believe QE will bring inflation, have been queuing up to short. Likewise, post-Keynesian’s have pointed at Japan and laughed about secular deleveraging and widow-maker trades.
The fact is, the bears have been wrong all year, and even with recent inflationary rumblings are still wrong.
Read more...Yves here. China is cracking down on flight capital, starting with Australian banks. As the most casual readers of the business press know, the international wealthy, particularly Russians and Chinese, have been using residential real estate in “world cities” as their favorite lockbox. As we’ve written, it’s stunning to see how much real estate has been hoarded in London. Mayfair was depopulated during the petrodollar recycling of the 1970s; now much of Belgravia, Chelsea near Sloan Square, and Kensington are visibly underpopulated. Vancouver has been bid to the sky by Chinese flight capital. New York is a big destination for Russian and Chinese investors, and Chinese money has been pouring into Australian real estate.
The Chinese move may be an admission of stress on the financial system.
Read more...France appears to have taken its public relations strategy for dealing with $8.9 billion fine against BNP Paribas from an old saying among lawyers: “If you have the facts on your side, pound the facts. If you have the law on your side, pound the law. If you have neither on your side, pound the table.” Here’s the guts of the French compliant, which is that the US is abusing the power of dollar dominance:
Read more...How major energy companies are selling their former first world product, fossil fuels, to the third world, replaying Big Tobacco’s ploy.
Read more...Russia and China, along with other developing economies, are exploring ways to create an Eurasian alliance to go toe-to-toe with the US economic hegemony.
Read more...Why the much-envied position of being a chronic exporter isn’t quite a bed of roses.
Read more...On the danger that China’s overgrown shadow banking system poses to the economy, and the practical and political obstacles to curbing it.
Read more...China’s increasing debt level has goosed the economy. What form might the hangover take?
Read more...As readers may know, the mislabeled trade deal known as the TransPacific Partnership hasn’t looked like it has great odds of being consummated. But the Administration has been browbeating Japan, and has also been talking of breakthroughs in negotiations. Has the dynamic changed?
Read more...40 central banks have invested in yuan. Should the US be worried?
Read more...Bitcoin is getting hammered today.
Read more...You know it’s bad when parties who aren’t at the negotiating table can tell a deal is going pear-shaped.
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