According to Gabriel Wildau writing for the FT, one Chinese debt analyst believes China's debt could be much higher than the government is reporting. Charlene Chu tells Wildau that the amount of bad debt in China could be $6.8 trillion more than the official figures. Wildau writes: “Everyone knows there’s a credit problem in China, but I find that people often forget about the scale. It’s important in global terms,” Ms Chu said in an interview by phone from New York. Ms Chu left Fitch in 2014 to help launch the Asia operation for Autonomous Research, which specialises in analysis of … [Read more...]
Despite Retailer Slaughter, Sales Strong
Despite a year or retailers suffering or going bankrupt, consumers came out strong in July. Retail sales increased by 0.6% in the month. The takeaway is that Americans are feeling better about spending, but they're choosier about where they do it. At the Wall Street Journal, Josh Mitchell and Sarah Chaney write that internet sales drove the increase. Sales over the internet drove last month’s increase, with spending at nonstore retailers growing 1.3%, the most since December. One big factor: Amazon’s Prime Day, a popular day of discounts at the site. Other retailers also posted strong … [Read more...]
How Will the World Handle Such Unprecedented Central Bank Balance Sheets?
Central banks around the world have employed untested emergency bond buying operations in an attempt to stabilize their markets or to encourage growth. Now those chickens are coming home to roost. The FT reports that leading central banks own a full fifth of their governments' debt. The six most active central banks, the Fed, the BOJ, the ECB, the BOE and the Swiss and Swedish central banks collectively own over $15 trillion in assets. Kate Allen and Keith Fray report: Of this, more than $9tn is government bonds — one dollar in every five of the $46tn total outstanding debt owed by their … [Read more...]
China’s Most Serious Bubble
Yet another bubble has caught up to China's over-regulated economy, this time it's growing in the domestic asset-management industry. The problem for China's closed economy is that with no way for money to escape, any time the authorities manage to pop a bubble in one area of the economy, another grows somewhere else. Anjani Trivedi writes: Chinese regulators are targeting the latest bubble in their financial system: the domestic asset-management industry. Unfortunately, it is a moving target. The gargantuan industry—a byproduct of China’s trapped and churning capital—has more than doubled … [Read more...]
The Odd Outcomes of Monetary Manipulation
After a years long campaign of managing the value of the franc, Swiss national bankers are wondering what to do with the hoard of assets they have accumulated in their efforts to keep the currency's value low. Today the Swiss National Bank holds over $750 billion in assets, and the Swiss are beginning to ask how this money could be used, and by whom. Monetary policy around the world is in uncharted territory, and sorting out the details will take time. Brian Blackstone writes: Thanks to its efforts to weaken the franc, the Swiss central bank has amassed $750 billion in stocks, bonds … [Read more...]
CAT Optimistic About Global Economy
Caterpillar and other major corporations are getting optimistic about the global economy. Increasing demand for things like steel and construction equipment may be indicating increased economic activity. Cat is taking a cautious view of the future though, perhaps not ready to go all in on an economic boom. Andrew Tangel and Josh Zumbrun write for the WSJ: Caterpillar Inc. CAT 5.88% signaled cautious optimism about global growth, offering fresh evidence that many markets are in rebound mode after a years long slump. The world’s largest heavy-machinery maker, an economic bellwether, in its … [Read more...]
The 2% Inflation Fraud
There is increasing chatter in the financial press that the Fed is becoming concerned about the recent slowing in inflation. By the Fed’s preferred personal consumption expenditures index, inflation is running at 1.4%--down from 1.75% in 2016. I know what you are thinking, oh the horror! The Fed’s focus on hitting an arbitrary 2% inflation target makes little sense to most Americans. Why not target zero? Or if you are going to bother with a target, why not set a range? Does a couple of a tenths of a percentage points in inflation make any difference to anybody outside of … [Read more...]
Is this a Solution to America’s Pension Crisis?
Here the FT reports on the value of land underlying America’s city and town governments as a possible solution to America’s pension crisis. According to one estimate, the value of land owned by local governments, excluding public parks is $25 trillion. That compares to $3.8 trillion in municipal debt and $7.5 trillion in accumulated pension obligations. Matthew Klein writes: Boston’s Logan International Airport was built in the wrong place. Instead of occupying undesirable plots on the outskirts of the city, it sits on almost 1,000 hectares of easily accessible waterfront property close to … [Read more...]
Do Millennials Spend their Money Differently Than You?
It turns out, Millennials have some different shopping habits than GenXers or the Baby Boomers. They're very interested in motorcycles and eating out, but not very interested in clothes or cars. … [Read more...]
Manufacturers are Flocking to this One State: Here’s Why
With the expansion of the Panama Canal, dredging operations in the state's main port, and business friendly rules, the state of South Carolina is attracting manufacturing business from around the world. You've read about Samsung, Boeing, BMW and more on this site, but it's not just these major manufacturers that are finding home in South Carolina. Smaller manufacturers too, are attracted to the Palmetto State, especially its Upstate region. Here the Wall Street Journal's Erica Phillips explains why the Panama Canal expansion is driving new jobs and money into South Carolina's inland Upstate … [Read more...]
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