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beautiful: BERTAHAN tanpa QE (26/10/2016) versus NEXTCRISES (t$unam1 W1LL COM3, be prepAr3d)

November 11, 2016

pembalikan arah dana dari pasar EMERGING balek ke amrik, eurozone dan jepang akan mulai terjadi, begitu menurut Gubernur Bank Sentral amrik Yellen


 … menurut gw: modal asienK keluar masuk pasar modal n pasar uang kite, akh, uda lazim lah, well, biarin aza … karena gw selalu memegang prinsip: berinvestasi itu memang wajib diversifikasi ke beberapa jenis investasi, dari yang berisiko tinggi hingga yang rendah, seperti tabungan, termasuk valas seh … tapi gw juga memegang prinsip bahwa EKUILIBRIUM  itu HUKUM TERKUAT di ekonomi, termasuk ekonomi global … tidak ada satu arah aza tren sebuah gejala ekonomi, pasti terjadi pembalikan arah … itu menunjukkan terjadinya ekuilibrium / keseimbangan baru… dalam hal ini, liat gejala masuknya hot money / uang panas asienK ke pasar keuangan kite pada 2013-2014 ini … ekspektasi 2015 terjadi penguatan suku bunga US Dollar merupakan sebuah pencegahan terhadap kemungkinan terjadinya KRISIS GLOBAL baru, yaitu kondisi kekacauan keuangan global baru yang disebabkan oleh OVERSTIMULI keuangan, yang ditandai oleh RENDAHNYA SUKU BUNGA amrik dan pasar keuangan negara maju (eurozone, jepang) … jadi secara NORMAL kenaekan suku bunga dolar itu akan terjadi 2015 dan sekaligus menjadi bemper bagi KRISIS baru lah 🙂

JOSEPH STIGLITZ: the economic times: 2016

The tumultuous start to 2016 supports the belief that there is no reason to expect the global economy to be any stronger this year than in 2015, said Joseph Stiglitz, Nobel Laureate and professor, Columbia University. In a conference call with analysts organised by UBS, he spoke on a range of issues confronting the world economy and identified lack of demand as the major problem coupled with the slow deceleration in China. Biswajit Baruah reports:

Global Economic Outlook

The global economy is currently not doing very well. 2015 was one of the worst years in the century. The only time the economy was worse was during the previous two recessions — one at the beginning of the 21st century and the other during the global financial crisis. 2016 is likely to be as bad as there is a global slowdown, with countries like Brazil and Russia in recession. Though there are no structural problems, there are problems of global demand. Europe is stagnating, while the US is growing slowly. The deficiency in global demand will inevitable affect China, and due to weak global demand, China’s exports will be affected which will weaken the economy.

China is going through structural transformation and that’s always difficult.

Global Economic Risks

I think between 2016 and 2018, there would be another year of crisis. The Greece issue is still there in euro zone. About 60 per cent of voters from countries such as Greece, Spain and Portugal have voted against the austerity measures, while the euro zone has not changed its policy. I see lot of political and economic turmoil in Europe because they have not fix the economic framework. I don’t think interest rates in US will increase very quickly, but in 2017 or 2018, there would be some pressure. The liquidity during the QE programme created asset price bubbles, now when this liquidity will be withdrawn from markets, one need to see how these asset prices will adjust.

Impact of Chinese Slowdown

The Chinese slowdown is going to adversely impact economies that are closely linked with the country, such as the East Asian countries. I think it’s going to be a difficult year for many of the Asian countries. I am glad that China has moved to market basket for its currency. I have no convincing argument for why the renminbi is being very badly out-of-line as the country still has trade surplus. If one sees the magnitude of capital flight from China, then one has to see how the government is going to respond.

What China Can Do

China has to invest in new enterprises, new industries, innovations, and services. China needs to increase its tax base as this will support the government spending and stimulate the economy. China has moved to green or low carbon economy and one needs to incentivise that, which can be done through a carbon tax which will boost spending in sectors such as health, education, transport, and others. The major problem China is facing today is in spaces such as environment, health, education and financial instability. There are a lot of micro discussions about excess supply in steel and coal industries. I think though these discussions are important, it’s not going to change the growth trajectory of the economy. It’s now important to make the right investments and increase demand in the economy for which the government has to increase spending.

Stock Market Circuit Breakers

Stock markets, whether American or Chinese, are volatile and often are very unstable. There are a lot of people who believe that markets function well, but in reality markets are not only volatile and unstable, they are inefficient too. We need rules and regulations to make stock markets less volatile, less unstable and efficient. I think circuit breakers can provide stability to financial markets provided they are designed correctly, otherwise they can create more instability. The advanced countries have been learning the mechanism of circuit breaker for long time and they have still not got it right, and I think China has to learn and they have to design correctly


An increasingly obvious paradox has emerged in global financial markets this year. Though geopolitical risks – the Russia-Ukraine conflict, the rise of Islamic State and growing turmoil across the Middle East, China’s territorial disputes with its neighbours and now mass protests in Hong Kong and the risk of a crackdown – have multiplied, markets have remained buoyant, if not downright bubbly.Oil prices have been falling, not rising, and global stock markets have, overall, reached new highs. Credit markets show low spreads, while long-term bond yields have fallen in most advanced economies.Yes, financial markets in troubled countries – for example, Russia’s currency, equity and bond markets – have been negatively affected, but the more generalised contagion to global financial markets that geopolitical tensions typically engender has failed to materialise.Why the indifference? Are investors too complacent, or is their apparent lack of concern rational, given that the actual economic and financial impact of current geopolitical risks – at least so far – has been modest?

Global markets have not reacted for several reasons


For starters, central banks in advanced economies – the US, the eurozone, the UK and Japan – are holding policy rates near zero, and long-term interest rates have been kept low. This is boosting the prices of other risky assets such as equities and credit.Second, markets have taken the view that the Russia-Ukraine conflict will remain contained, rather than escalating into a full-scale war. So, though sanctions and counter-sanctions between the west and Russia have increased, they are not causing significant economic and financial damage to the EU or the US.

More important, Russia has not cut off natural gas supplies to western Europe, which would be a major shock for dependent EU economies.

Third, the turmoil in the Middle East has not triggered a significant shock to oil supplies and prices like those that occurred in 1973, 1979 and 1990. On the contrary, there is excess capacity in global oil markets. Iraq may be in trouble, but about 90% of its oil is produced in the south, near Basra, which is fully under Shia control, or in the north, under Kurdish control. Only about 10% is produced near Mosul, now under the control of Islamic State.Finally, the one Middle East conflict that could cause oil prices to spike – a war between Israel and Iran – is a risk that is contained, for now, by ongoing international negotiations with Iran to contain its nuclear programme.So there appear to be good reasons why global markets so far have reacted benignly to today’s geopolitical risks.

What could change that?

Several scenarios come to mind.

First, the Middle East turmoil could affect global markets if one or more terrorist attacks were to occur in Europe or the US – a plausible development, given that several hundred Islamic State jihadis are reported to have European or US passports. Markets tend to disregard the risks of events whose probability is hard to assess, but that have a major impact on confidence when they do occur. Thus, a surprise terrorist attack could unnerve global markets.

Second, markets could be incorrect in their assessment that conflicts such as that between Russia and Ukraine, or Syria’s civil war, will not escalate or spread. The Russian president Vladimir Putin’s foreign policy may become more aggressive in response to challenges to his power at home, while Syria’s ongoing meltdown is destabilising Jordan, Lebanon and Turkey

.Third, geopolitical and political tensions are more likely to trigger global contagion when a systemic factor shaping the global economy comes into play. For example, the mini-perfect storm that roiled emerging markets earlier this year – even spilling over for a while to advanced economies – occurred when political turbulence in Turkey, Thailand, and Argentina met bad news about Chinese growth.

China, with its systemic importance, was the match that ignited a tinderbox of regional and local uncertainty.Today – or soon – the situation in Hong Kong, together with the news of further weakening in the Chinese economy, could trigger global financial havoc.

Or the Federal Reserve could spark financial contagion by exiting zero rates sooner and faster than markets expect.

Or the eurozone could relapse into recession and crisis, reviving the risk of redenomination in the event that the monetary union breaks up. The interaction of any of these global factors with a variety of regional and local sources of geopolitical tension could be dangerously combustible.So, while global markets arguably have been rationally complacent, financial contagion cannot be ruled out.

A century ago, financial markets priced in a very low probability that a major conflict would occur, blissfully ignoring the risks that led to the first world war until late in the summer of 1914. Back then, markets were poor at correctly pricing low-probability, high-impact tail risks. They still are.• Nouriel Roubini is chairman of Roubini Global Economics and a professor at New York University’s Stern business school.


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Kuala Lumpur, Nov 11, 2016 (AFP)
Malaysia’s economy expanded at a better-than-forecast pace in the third quarter, snapping five straight quarters of slowing, the central bank said on Friday.

Bank Negara said gross domestic product grew 4.3 percent in July-September, faster than the 4.0 percent predicted in a Bloomberg News poll as private domestic consumption offset weak government spending.

However, it warned of further economic headwinds ahead.

“Overall, while domestic conditions remain resilient, uncertainties in the external environment may pose downside risks to Malaysia’s growth prospects,” the central bank said.

Energy-exporting Malaysia has the third-largest economy in Southeast Asia, but has been grappling with falling oil prices and weak overseas demand.

Growth in the second quarter of this year was 4.0 percent, the slowest since 2009.

The country has also been rocked by a massive financial scandal centring on allegations that billions of dollars were stolen from a state investment fund overseen by Prime Minister Najib Razak, who denies wrongdoing.

In July, Malaysia unexpectedly cut interest rates for the first time in seven years to help spur growth.

In a 2017 budget unveiled last month, Najib announced new cash assistance for the poor, civil-servant pay rises to help stoke consumption, and plans for more infrastructure projects.

The World Bank has forecast Malaysian full-year growth below five percent this year and next.


WORLD FINANCE: The International Monetary Fund (IMF) encouraged governments to implement measures to reduce global debt to a level that is more in line with global GDP. Following the release of its October 2016 Fiscal Monitor report, the IMF said swift government intervention is necessary to combat the current global debt level of $152trn 225 percent of global GDP. Two thirds of global debt is held in the private sector.

Speaking at a press conference following the release of the report, Vitor Gasper, director of the IMF’s fiscal affairs department, said $152trn is a record amount in global debt. “A crucial message from the fiscal monitor is that when private debt is on an unsustainable path, it is important to intervene early on in the process to make sure financial crises and recessions can be prevented.”

Swift government intervention is necessary to combat the current global debt level of $152trn – 225 percent of global GDP

Overall, debt has not yet fallen from the levels reached during the 2008 global financial crisis. According to the IMF report, slow economic growth since this event has resulted in debt levels not being reigned in.

To combat this spending, the IMF suggested governments lead programmes to restructure debt and tax deals in order to encourage creditors to extended repayment periods. While combating debt levels has traditionally fallen under the responsibility of central banks, the IMF has suggested more active government policies may be more effective in the long term.

“Fiscal policy can do more, as the case may be, to restore nominal growth, facilitate adjustment, and build resilience”, Gaspar said. He also explained that global markets are diverse, and there is not a suitable one-size-fits-all approach. Instead, a comprehensive, consistent and coordinated effort is needed from governments.

Also highlighted in the IMF report was the uneven distribution of debt across the world. High levels of debt were concentrated in advanced economies and some large emerging markets, like China.

The release of the Fiscal Monitor report immediately followed the release of the IMF’sWorld Economic Outlook, in which it predicted global growth would slow to 3.1 percent in 2016.

Escalating global debt threatens a new financial crisis

Death by debt Fig 1

Death by debt Fig 2

Death by debt stats

Death by debt Fig 3

WORLD FINANCE: Global debt is spiralling out of control and the next financial crisis appears to be imminent. With few lessons learned since the 2008 recession, what will become of the world once it has been consumed by its own losses?

Christine Lagarde is attempting to provide a solution for reducing the debt of leading nations, but is the world in too deep?
Author: Aaran Fronda
January 13, 2016

In the aftermath of the 2008 financial crisis, a global economic recession – possibly the deepest, and most definitely the longest that the world has ever seen – took hold. The billions of taxpayer dollars that had been spent on bailing out the banks, combined with huge amounts of quantitative easing and reducing interest rates to rock-bottom levels, resulted in advanced economies holding the highest public debt-to-GDP ratios that had ever been seen.

To make matters worse, that debt, even now, continues to grow. Currently, global debt has risen to more than $57trn and, according to the management consultancy firm McKinsey & Company, this has subsequently increased the ratio of debt-to-GDP globally by more than 17 percentage points. With global debt at these levels, the compound annual growth rate comes in at 5.3 percent; far exceeding the 3.3 percent global growth predicted by the International Monetary Fund (IMF) in 2015 and the 3.8 percent that the organisation expects the world to achieve by the end of 2016. In short, the world is going to struggle to pay off the interest, let alone make any meaningful dent in the debt itself.

This massive accumulation of debt around the world, combined with the fact that very little has been done to deleverage the global economy both in terms of household or public debt, has led many commentators to contend that the seeds for the next economic crisis have already been sown. Some are even predicting that another global meltdown is imminent. If that is the case, it is important to understand how the world has arrived at this position – and, more importantly, to try and ascertain what will happen when the world eventually buckles under its own debt.

Those who control society are living in a bubble where the belief is that the tiny adjustments that have been made since 2008 are adequate

Rapid reduction
In an attempt to balance their books, various countries have implemented austerity measures, with many states cutting back on spending and raising taxes – however, some have found that such moves come with a number of drawbacks: if governments cut back on spending and stop investing in infrastructure and other vital projects, there is less economic output with which to reduce the deficit.

As such, a number of different fiscal policies have been put forward in the place of these austere economic ideologies. One of the more interesting stemmed from a report constructed by three IMF researchers, which asserts that if a ‘green zone’ exists – a state of high debt and full employment simultaneously, such as in the US – then it is in the public’s best interest to take on more debt. The report, When Should Public Debt Be Reduced?, argues that ‘the boom, not the slump, is the right time for austerity at the Treasury’.

Shortly after the report was released, Managing Director of the IMF, Christine Lagarde, told NPR journalist Renée Montagne, “[The US] needs to have a medium-term fiscal policy that is aiming at reducing the long-term debt… In the immediate short-term, there is no great risk of increase of [increasing] that US debt… In the short-term, some measures can be taken in order to sustain growth, in order to encourage growth by way of infrastructural investment, for instance.”

Lagarde’s position attempts to provide a balanced solution for reducing the debt of those advanced economies that exist in the green zone: when economic growth is minimal, focus should be diverted away from debt reduction and instead placed on public capital projects, which will exceed market returns and generate growth for the economy, allowing debt reduction programmes to take place at a later date.


If this solution sounds simple, that’s because it is: as with most theories, the major problem with this scheme is that it sounds great on paper, but the conditions that it requires do not exist in reality. Focusing on debt reduction during boom periods is good advice, but to this day growth remains stagnant, and many countries are struggling to stay out of recession. Lagarde’s theory is also simplistic in its suggestion that governments will make the right choices, and public investment projects will provide rates of return high enough for debt reduction to begin in the first place.


Reliance on debt
Ultimately, so long as the ratio of debt-to-GDP remains high, the debate over what the best method for reducing public debt is, will rage on. However, a great many economists are beginning to question why so little attention is being paid to the extreme levels of private household debt being accrued in many advanced economies (see Fig.1). If left unchecked, this has the potential to hamper economic growth far more than cutting back on public spending could, especially in consumer-based economies, as during levels of extreme debt people have a tendency to tighten their belts. As in these circumstances, the middle and lower classes often use their disposable income to pay down their debt instead of driving economic growth through consumption, Lagarde’s rose-tinted theories of debt reduction have been essentially rendered ineffective.

In the US – as is the case across many developed countries at the moment – the single largest driver behind increasing private debt levels has been the stagnation of real wages. “You have to remember that the US, as a society, one of its uniquenesses – or what it likes to call its ‘exceptional quality’ – was that it did see a rise in real wage for workers pretty much continuously for the 150 years before the 1970s”, according to Professor of Economics Emeritus at the University of Massachusetts and Producer of the Economic Update podcast, Richard D Wolff. “This gave the US not only an extraordinary level of wealth, but it made [the] working class believe that it had arrived in the best possible place on the planet, because [the US] could promise endless waves of immigrants rising wages over time.”

Not only did the US deliver on that promise, providing many of the people that came to its shores a level of prosperity and a standard of living that was not afforded elsewhere, but it also saw the birth of what was known as the ‘American dream’, with workers’ wages rising to reflect the boom in economic activity. However, over the last 35 years, wages for many Americans have failed to grow – which, according to the Economic Policy Institute, is the primary cause of not only a depreciation in family income over the past generation, but also an increase in income inequality across the country.

This stagnation of real wages in the US resulted in the American working class trying to solve its problems with debt. The American people have sustained a rising standard of living in the only way that is available to them when real wages don’t rise: through borrowing. They did so partially by developing the mass credit card, a phenomenon of the 1970s. During the same period, there was an explosion of another relatively new phenomenon – mortgage debt, which took off in a big way.
The Bank for International Settlements (BIS) has seen debt-to-GDP rise to worryingly high levels in a number of countries of late, leading many commentators, including Wolff, to fear that another major banking crisis is on the cards within the next three years. “I certainly think we are heading for one”, said Wolff. “I do not see, in any significant way, that [any] response to date – whether it is the Dodd-Frank bill in the US or the various banking regulations imposed in Europe – are adequate to or proportional to the level of the crisis”.“You have a population that is addicted to debt as a way to sustain the so-called American dream”, Wolff told World Finance. “To give the mass of Americans… at least a sustainable illusion that their promised well-being – the promised progress of each generation living at a higher standard of living than the one that preceded it – [is still intact]… To keep all that going, which is absolutely crucial for the self-image of American society, debt has become the answer.”

Wolff isn’t the only person to think that the US has failed to learn many lessons from the last financial crisis: speaking at the IMFs’ annual meeting in 2015, José Viñals, Director of the Monetary and Capital Markets Department at IMF, said that all advanced economies have yet to address the legacies of the 2008 crash – something that he argued is essential if there is any hope of financial stability and growth returning. Considering how much is at stake, it is baffling to many why policy-makers have not done more to fix the broken financial system that was at the heart of the last economic crisis.


Working the system
As Wolff sees it, there is a fundamental and constantly evolving social split in American society between the ‘haves’ and the ‘have-nots’, where ‘haves’ are able to live comfortably, and ‘have-nots’ find themselves frequently worrying about their livelihoods (see Fig. 2). Once that divide is fully understood, he believes that it becomes clear not only why the US has found itself in this precarious position, but why little – despite Lagarde’s assertions – is being done to fix it. However, while the vast majority of people are still suffering as a result of the financial turmoil of 2008 and the on-going economic crisis, a small percentage of the American income pyramid has done spectacularly well: between the 1970s and the present day, this group of high-earners has seen extraordinary levels of growth in both their absolute and relative wealth.

Wolff noted, “Yes, things went bad in 2008, but [this group] had the power then to direct the government to bailing themselves out. So for them, everything is working out fairly well, and has gone that way for almost half a century. Therefore, they are deeply persuaded that this [way of life] can and will persist, and the notion that the mass of people are falling ever further behind… becomes unimportant. They just think that this is the way things are now, and the mass of the working class will need to accommodate itself to the changed world.”

For Wolff, the folks at the top understand that they have become extremely powerful by virtue of this highly concentrated wealth pyramid, and that this puts them in a vulnerable position in a society that offers universal suffrage. In the US, according to Wolff, the elites have taken very concrete steps to immobilise the political system and create a systematic barrier against anything that will change the favourable situation they find themselves in.

“America is now a place where, to be a credible political candidate, you have to satisfy 500 people who sit at the top of the economic ladder of this society. And if you manage to displease any significant portion of them, your political career is either over or capped at a point of incapacity to do anything, no matter what the mass of opinion is in the country.” The political system, therefore, has either grown insensitive to the economic problems that it faces, or it has become systematically stymied to them. It is for these reasons that the shortcomings of the economic system have been allowed to persist for so long – because there is seemingly little to no resistance to it.


According to Wolff, politically speaking, there are only marginal signs of discontent about the way in which the country is structured, with only a few high-profile figures, including US Senator Bernie Sanders, publicly addressing inequality levels. However, the real danger with setting up a society up in this manner is that political explosion becomes the only feasible method for bringing about meaningful change for those who oppose the system. Wolff said, “If I were the bank of international settlements, I would be far less worried about a financial crisis than I would about the social explosion that is bubbling below the surface.

“If you read the financial press, there are widespread predictions that 2016 and 2017 are lining up to be difficult years, with various kinds of adjustments, downturns etc. If they are bad enough, and they set off the kind of cascades of trouble that [they have the potential to] – [which certainly happened] in 2008 – it could be the catalyst to social, political and economic reforms on a massive scale.”

Catalyst for change
Since 2012, the world has been talking about an economic recovery, despite the fact that many people have yet to feel the effects of one in their daily lives: most people’s wages haven’t recovered, and while unemployment rates appear to be shrinking at long last (see Fig. 3), for those willing to look a little more closely at the labour market, they will notice that almost all of the jobs that have been created in the last four or five years offer much lower pay without any of the benefits that many have come to expect. There is also much lower job security overall.

All of this is being imposed on the working class, while the government endlessly talks about recovery. In effect, what this does is make the majority of people feel as though there has been a recovery that they have somehow missed out on. This in turn forces people to turn inward and blame themselves for something that is a larger social issue – however, there is no saying that this anger will stay internal forever.

Wolff noted, “If the situation does get worse and you allow the left to function in the US, which it is now doing on a scale that I’ve never seen in my lifetime… Combined with the fact… that a phenomenon like Sanders – someone that identifies as a democratic socialist – can even run for office in some significant way… All this acts as a sign that, just below the surface, there is a lot of anger and a lot of bitterness waiting to be unleashed.” What will eventually ignite this process is difficult to predict – however, what is clear is that the US is a tinderbox.
As it stands, the US has neither the leadership at the top or – for the time being, at least – the pertinent formations below that are necessary to bring about change in any meaningful way. It is a difficult time, but Wolff admits that the consciousness of the majority is changing. People are growing more and more discontented and less and less patient with the current state of affairs, and while in the past people would put up with capitalism’s shortcomings because it at least ensured a better standard of living to what was afforded to the generation prior, that is no longer the case.Separated from reality
Those who control society are living in a bubble where the belief is that the crisis is manageable, and the tiny adjustments that have been made since 2008 are adequate, meaning that nothing is likely to change anytime soon. Meanwhile, the general public is both aware and slightly afraid of the social cataclysm that they know is coming.

“The mass awareness of the inequality, and the sense of it being unfair and out of control – I’ve never seen that in the US in all my life”, according to Wolff. “This is socially explosive. I don’t think that it is sustainable long-term. The truth of it is that you now have a system that is desperately trying to figure out how to be successful… for those at the top, without being so disastrous for everyone else that it destroys itself. It gives me a sense that the system is en route to sowing the seeds of its own demise.”

There is a level of instability in the economic system that can be disguised and covered over. We can all become Keynesians who believe that governments’ monetary and fiscal policies can still keep everything going, as Lagarde has assured us – but it’s a concern how much longer this can be sustained before cracks begin to appear, and the debt finally takes its toll.


Post navigation

Geneva, Sept 27, 2016 (AFP)
The World Trade Organization on Tuesday revised down its 2016 global trade forecast by more than a percentage point, warning growth had hit its slowest pace since the global financial crisis.WTO now estimates that global trade will expand by just 1.7 percent in 2016, compared to its April projection of 2.8 percent, and compared to a projection a year ago that trade would swell by 3.9 percent this year.The UN agency also revised down its 2017 forecast, with trade now expected to grow between 1.8-3.1 percent, down from the previously anticipated 3.6 percent.”With expected global GDP (gross domestic product) growth of 2.2 percent in 2016, this year would mark the slowest pace of trade and output growth since the financial crisis of 2009,” WTO said in a statement.

It said the downgrade followed a sharper-than-expected decline in merchandise trade volumes in the first quarter, and a smaller-than-expected rebound in the second quarter.

The contraction, it said, was driven especially by slowing economic and trade growth in developing economies like China and Brazil.

But North America, which had showed the strongest import growth of any region between 2014 and 2015, was also hit by deceleration, WTO said.

“The dramatic slowing of trade growth is serious and should serve as a wake-up call,” WTO director general Robert Azevedo warned in the statement.

He voiced particular concern over the slowdown in the context of growing anti-globalisation sentiment.”

“We need to make sure that this does not translate into misguided policies that could make the situation much worse, not only from the perspective of trade but also for job creation and economic growth and development which are so closely linked to an open trading system,” he said.

Azevedo cautioned against the negative impact of inequality.

“While the benefits of trade are clear, it is also clear that they need to be shared more widely,” he insisted.

“We should seek to build a more inclusive trading system that goes further to support poorer countries to take part and benefit, as well as entrepreneurs, small companies, and marginalised groups in all economies,” he said.

“This is a moment to heed the lessons of history and re-commit to openness in trade, which can help to spur economic growth,” Azevedo said.

SEP 12, 2016 1:00 AM EST


Stock markets were beset by interest-rate jitters on Friday, making it the worst day for the major U.S. averages since late June.

Every one of the 10 Standard & Poor’s sectors ended in the red, and bonds and commodities also had a bad day. The backdrop to the selloff was recent developments indicating that consensus market expectations have attached too low a probability to a Federal Reserveinterest-rate hike this year, as I have argued.

The Fed Lifts Off, Barely

The generalized move down in stocks is sparking an interesting discussion about how investors should respond. After all, we have experienced such sudden air pockets in the last year. These events have been rather infrequent given the context of unusually low market volatility, and all have proved both temporary and quickly reversible.

Whether this equity market selloff will follow the same course is, of course, open to debate. Already, some are urging investors to “buy the dip,” hoping to repeat a strategy that has proved profitable in the past. Other commentators are more cautious, and some have suggested that investors should sell before prices fall even further.

Where you end up on this issue has less to do with your assessment of corporate and economic fundamentals than with how you see the prospects for a continuation of the recent exceptional period of both public and private liquidity support for financial markets. Specifically:

  1. It is unlikely that fundamentals will improve significantly any time soon.
    International Monetary Fund Director Managing Director Christine Lagarde signaled last week that the IMF is again likely to revise downward its forecasts for global growth, a confirmation that the world economy remains fragile and uneven. The sputtering of structural and cyclical expansion engines is being accompanied by highly unbalanced macroeconomic policy responses, including the prolonged excessive reliance on central banks, weak global policy coordination and an inability to translate good policy intentions into effective improvements.
  2. Politics and geopolitics aren’t helping.
    The political context in many Western countries is far from conducive to good and calm economic policy: The U.S. is in the final stretch of a contentious presidential election; in the U.K., the consequences of the Brexit vote in June have yet to become clear in terms of policy and institutional changes; Italy is facing its own defining referendum; Spain is struggling to form a government, and in Germany, the governing party of Chancellor Angela Merkel suffered a humiliating local election defeat to the anti-establishment AfD party. Geopolitics also add uncertainty, including a defiant North Korea, continuing turmoil in the Middle East, as well as the threat from non-state actors, lone wolf attackers or terror groups, which amplify a sense of new unpredictability.
  3. The usual antidotes to such market episodes are no longer as much of a certainty.
    These economic, political and geopolitical factors are not new. Indeed, until now, the winning trade has been to shrug them off, including by assuming that the occasional selloff will be both temporary and reversible.
    The main reason is not that stock valuations have been ultra-cheap. They have not. It is that downward trends have been more than offset by liquidity injections, particularly those from share repurchases by corporations, including those with large amounts of cash on their balance sheets, and unconventional central bank policies that have involved sizable asset-purchase programs.
    Such liquidity injections, and the incremental market demand that comes with them, have delivered to investors a lot more than a boost in asset prices. They have consistently repressed volatility, encouraging many to take on more market exposure for each unit of allowable risk. And they have reduced the drag to risk-mitigating portfolio diversification. That’s because both stocks and bonds have benefited from these purchases, thereby helping simultaneous price increases for both risk assets (such as stocks and high-yield bonds) and “risk-free” ones (such as U.S. and German government bonds).
    Those, like me, who worry about an excessive decoupling of stock prices from fundamentals also feel that the dominating impact of liquidity may be changing and potentially waning. This is particularly the case for central banks, whose market intervention is evolving because of a change in what former Fed Chairman Ben Bernanke described as a “benefit, cost and risk” equation.
    The shift is not just a matter of the declining benefits of protracted unconventional monetary measures — characterized by less central bank policy economic effectiveness overall, as well as the Bank of Japan’s experiment with negative rates, which has been not just ineffective but also possibly counter-productive. This evolution is also the result of (justified) mounting concerns about collateral damage and unintended consequences, especially when it comes to the detrimental effects of ultra-low and negative nominal interest rates, distortions to the healthy functioning of markets, mounting threats of future financial instability and central bank vulnerability to political interference.
    Such considerations have underpinned signals from central bank that they are becoming more reluctant to do more absent a notable deterioration in economic activity. This became more evident last week when the European Central Bank refrained from specifying additional policy actions. It may also have influenced the remarks by Boston Fed President Eric Rosengren on Friday that highlighted the markets’ excessive discounting of the possibility of rate hikes.
  4. The private antidote may also be less notable from now on.
    Stocks have benefited from enormous corporate cash injections, including $1.7 trillion in U.S. stock repurchases from 2012 through 2015, according to Goldman Sachs data cited in a recent Financial Times article. The windfall for investors has been amplified by consistently higher dividend payments.
    Now, however, there are partial indications that slowing growth in both buybacks and dividends may become less of a potent force.
    According to Bloomberg data, average corporate cash cushions have shrunk to their lowest in three years as earning growth slows. The appetite of companies for financial engineering, including issuing bond to fund buybacks, may also be restrained by rising yields and uncertainty about future prospects.

All of this means that markets will again try to force central banks into a round of supportive liquidity injections and an even more protracted period of ultra-low interest rates. And there is no definitive reason to expect that they won’t succeed. But the longer-term prospects of such a strategy are becoming weaker by the day; and the more companies realize this, the lower the prospects for higher corporate buybacks and dividend payouts.

Without a significant improvement in fundamentals, investors would be well-advised to remember that there is an impending limit to how much liquidity injections can protect markets from the underlying economic reality.

 new chin year dragon 01

MAPI: In May, I examined the reasons for optimism in the five-year global outlook, drawing on my recent webinar for senior executives at Pentair.

Today, I turn to the major factors that are holding back growth. Unfortunately, there are more restraints than momentum.

  1. I predict no growth in U.S. manufacturing industrial production in the first half of this year and little growth for the year as a whole.
  2. Several key global economies are in recession, including Brazil, Russia, and Norway.
  3. Asia (particularly China) will be less of a growth driver than in the past; the growth slowdown on the continent is part cyclical and part structural.
  4. Europe is struggling with 10%+ unemployment, the emerging economy slowdown, the refugee crisis, and anxiety over Greece and a possible Brexit.
  5. Advanced economies have limited policy options in a new recession. Fiscal policy is constrained by high debt and monetary authorities are already at zero or negative interest rates.
  6. The refugee crisis is putting pressure on government budgets and resulting in political backlash.
  7. Foreign trade is depressing U.S. economic growth and the trade position is deteriorating in most manufacturing industries. Of the 17 industries I looked at, electric lighting and household appliances had the most adverse trade ratios in 2015.
  8. Within consumer-related manufacturing, logging, HVAC equipment, and apparel should all post production declines this year.
  9. Within investment-related manufacturing, I predict 2016 production declines in many industries, with drilling equipment, agricultural equipment, and engines and turbines suffering the most. Many of these industries are negatively affected by the sector’s rising trade deficit.
  10. Investors have turned risk-averse and are drawing money out of emerging economies and back to safe havens such as the United States.
  11. World steel production will decline this year. China is responsible for half of world production.
  12. Emerging economies are in the late stages of the credit cycle, making them vulnerable to slower growth as they deleverage after excessive debt growth.
  13. Low commodity prices have led to protracted recessions in emerging economies.
  14. Brazil’s recession should last through 2016. The nation is beset with multiple troubles, including a crisis of confidence in political leaders, declining real wages, soaring unemployment, and a contraction in bank lending.


contra corner: It Was All A Dream—–Japan’s Monetary Fiasco Removes All Doubt

Last Friday the Statistics Bureau of the Japanese Ministry of Internal Affairs and Communication reported some more bad news for Prime Minister Abe and really Bank of Japan chief Kuroda. Month-over-month, the consumer price index was down again, leaving it 0.48% less in June 2016 than June 2015. This was the third consecutive month of increasingly negative year-over-year CPI estimates.

When QQE was first implement back in April 2013, its staff economists guessed that it would take two years to get Japan back to 2% inflation; the standard target for almost all the central banks in the “developed” world. The point of QQE as apart from all prior QE’s, and there had been nine or ten before it depending on your definitions, was that it would be so big, powerful, and sustained that the “deflationary mindset” that had, according to orthodox economists, gripped Japan for decades would be forced to surrender to this new monetary regime. Two years was their conservative forecast.

The Bank of Japan did achieve the first part; the central bank has, as of the latest balance sheet figures for June 2016, quadrupled the level of bank reserves in Japan. The end of month balance in March 2013 was ¥52.6 trillion, a number that at the outset of prior QE’s was already supposed to be impressive, further meaning that it wasn’t as if BoJ was starting from nothing. More than three years and an acceleration of QQE later, there are now ¥272.6 trillion of bank reserves in Japan, an increase of 418.2%.

These are numbers that should conjure images of Weimar Germany, but instead they bear absolutely no relation to either the narrow view of the CPI or, more importantly, the wider view of Japan’s economy. Nothing.

ABOOK August 2016 BoJ CPI Reserves

And so it would be entirely natural for anyone to begin to ask whether bank reserves actually count for anything other than myth and legend. QQE was supposed to be a massive “money printing” operation, so terrible that it was the final culmination of Paul Krugman’s late 1990’s criticism in actual economic “forward guidance” – to credibly promise to be irresponsible. The quite appropriate fear of money printing in traditional terms (of actual currency) is that once it gets out into public hands it is impossible to stop.

That isn’t entirely accurate, however, as the real trigger to uncontrolled inflation and even hyperinflation really doesn’t have much to do with quantity theory at all; it is entirely driven by psychology, more so in relation to public faith in those tasked with actually knowing what they are doing. In 1921 and then 1922 in Germany, the breaking point was truly when it became very clear that authorities had not only created a bad situation but far more importantly were in denial about it.

In other words, German monetary officials, particularly Reichsbank head Rudolf von Havenstein and Minister of Finance Karl Helfferich, denied that Germany had an inflation problem at all – right up until the end. Minister Helfferich declared that Germany had better gold coverage after the war than before it, despite that more than quadrupling of currency volume. One economics professor, Julius Wolf, wrote in 1922 that, “in proportion to the need, less money circulates in Germany now than before the war.” As much as the easy-to-see Versailles excuse played a part, there can be no doubt that beyond 1921 the German people themselves began to recognize that authorities had no idea what they were doing; worse, they came to see that even though policymakers were inept and incompetent, officials themselves would never admit as much and thus nothing would prevent Germany from its fate. That awakening meant an increase in danger that French occupation could never have unleashed on its own.

The Japanese people are not faced with actual money printing but rather the revelation of pseudo-money printing as a matter of economic and financial reverberation. So much has been made of QQE as that all-powerful engine of raw monetary fury that it is difficult if not impossible to predict how it would unwind after being so thoroughly discredited.

From this perspective, you can understand the sense of urgency at BoJ at least to start 2016. After ¥200+ trillion and nothing to show for it, what is at stake is much more than 2% inflation. The behavior of the Japanese yen since November is the best, most dangerous example of that possibility yet. It was amplified that much more by NIRP, especially in that the introduction of a negative rate policy, another supposedly powerful tactic, elicited at most a few days of conforming echo before the yen resumed its increasingly open defiance of BoJ policy as if NIRP never happened.

With the exchange rate threatening 100 to the dollar in the first week of July, someone had to do something to restore even the possibility of regaining just the semblance of orthodox order. And so it was “leaked” that BoJ was considering an even larger measure of “credibly promise to be irresponsible” that may have included the mythical Friedman “helicopter.” The rekindled “awe” lasted about a week, and brought JPY back down only to just shy of 107.

The love affair with imprudent statism was mainly a manifestation of the media (and stocks, redundant in some ways). Reaction was initially sharp in all markets, but overall quite tame and muted. Maybe that played a part in the eventual reluctance of BoJ to do much of anything at the end of July, greatly disappointing to the narrative that had been building all month. Could the BoJ finally be sensing that having shown themselves impotent there is no longer any benefit to definitively proving it?

Both Abraham Lincoln and Mark Twain have been attributed with an appropriate quotation for this possibility; “better to remain silent and be thought a fool than to speak and remove all doubt.”

On July 24, the Wall Street Journal published what was an open comment on dissent against further “easing” (another mainstream monetary term that so deserves the quotation marks) in Japan. Recognizing some urgency but really downplaying it overall, these now more reluctant policymakers appear to have won the argument, for the time being.

But other BOJ officials are signaling a reluctance to act, underscoring questions about whether the central bank has reached the limits of its powers to revive Japan’s economy. They note that monetary policy is already extremely accommodative, with bond yields and interest rates at or near record lows, and express doubts that additional easing would make fiscal stimulus much more effective, according to people familiar with the central bank’s thinking…


The BOJ may turn to new, “more targeted” approaches, one of the people said. “I’m not saying that we wouldn’t like to ease further, but it isn’t as simple as ‘the more, the better; the sooner, the better.’”

Indeed, what might have happened had JPY reacted to the “helicopter” with the same disdain shown NIRP? It could have been catastrophic, a risk that I doubt BoJ was prepared to take at this juncture without immediacy to necessitate drastic action right now (essentially paraphrasing the quote above). They can afford to wait since the most pressing issue is JPY in further “harmful” appreciation, which spells out a more negative but still uncertainfuture. The risks of monetary policy have been turned totally upside down.

In short, the month of July, the sudden rekindling of mainstream love for central bank “stimulus”, was all a dream. For even the BoJ to acknowledge reality is a drastic change, one forced upon them by circumstances they never anticipated – that they are, overall, quite powerless in the modern, wholesale format. QQE was essentially the Japanese central bank daring anyone in the world to bet against them, and for more than two years nobody did. Now almost everyone is and quite close to home, and their main reply is to punt where once it supposedly counted most?

ABOOK August 2016 BoJ JPY

JPY is back to within 100 again today, completing a full round trip. The CPI was published last week at -0.50% and still falling.

Central banks around the world were given mythical status a few decades ago based on what they didn’t do. At the time they were building those legends the Bank of Japan was already at work disproving them contemporarily. The data and ineffectiveness was, however, almost entirely dismissed as if it were a quirk of Japan or even the Bank of Japan fumbling the execution of otherwise brilliant construction and resolve. That excuse has been exposed by uniformity of result wherever QE is tried. The legend now seriously (mortally?) wounded, even the Bank of Japan hesitates.

The trap is sprung; JPY continues to mutiny not as an isolated case related to only Japan but as universal recognition of what might be to come. Central banks have essentially a rump choice; to let the economy continue to worsen under the “dollar’s” tightening noose, or continue on and risk being caught in “denial” too close to that which shoved Weimar Germany into lasting history. For now, Japan’s policymakers vote for the noose but only because the threat of slow death is in 2016 apparently the most palatable or least risky. There is no money in monetary policy, a statement that bears grave consequences in either direction as the world realizes it.

ABOOK July 2016 FOMC PCE Deflator Fed BSABOOK July 2016 FOMC ECB HICP Liquidity Needs

Jakarta detik -Perkembangan sektor keuangan pada periode sekarang bergerak sangat dinamis. Dalam hitungan bulan, bahkan mingguan, seringkali isu ancaman krisis muncul ke permukaan.

“Dulu jarang dengar ancaman krisis, sekarang bisa datang setiap bulan atau mingguan hanya berasal dari gosip regulasi yang beredar,” ujar Menteri Keuangan Bambang Brodjonegoro dalam sambutannya saat membuka acara Milad ke 12 Ikatan Ahli Ekonomi Islam (IAEI) di Gedung Dhanapala, kantor Kemenkeu, Jakarta, Kamis (3/3/2016)

Menurut Bambang, hal ini merupakan tantangan yang harus dihadapi pelaku di sektor keuangan syariah, maupun konvensional. Sehingga sikap kewaspadaan mesti ditingkatkan dibandingkan sebelumnya.

“Ini tantangan terbesar baik konvensional atau syariah,” imbuhnya.

Bambang menginginkan agar sektor ini memberikan konstribusi besar untuk perekonomian nasional, baik perbankan maupun industri keuangan non bank (IKNB).

“Industri perbankan dan IKNB tetap penting. Tapi jangan sampai terjebak asyik membahas bagaimana perkembangan industrinya tanpa melihat kontribusi pada perekonomian nasional. Kita asyik pada profesi sendiri dan lupa kewajiban kita sebagai masyarakat, untuk bagaimana ilmu kita berkontribusi pasa perekonomian nasional,” papar Bambang.


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ikon analisis gw

BI TELMI …  melulu … gw dah mulai meragukan ekonomi global (yang menjadi andalan ekonomi makro kita saat ini) sejak, setidaknya, April 2015, bahkan sejak 2014 dah mulai … 🙂

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The Rise and Fall of American Growth: The US Standard of Living since the Civil War. By Robert Gordon. Princeton University Press; 762 pages; $39.95 and £27.95.

ON JANUARY 20th those who see themselves as the global elite will gather in the Alpine resort town of Davos to contemplate the “fourth industrial revolution”, the theme chosen by Klaus Schwab, the ringmaster of the circus known as the World Economic Forum. This revolution will be bigger than anything the world has seen before, he says. It will be a tsunami compared with previous squalls. It will be more disruptive. It will be more interconnected; indeed, the revolution will take place “inside a complex ecosystem”. Not only will it change what people do, it will change who they are.

Anybody who is tempted by this argument should read Robert Gordon’s magnificent new book. An American economist who teaches at Northwestern University, Mr Gordon has long been famous in academic circles for advancing three iconoclastic arguments. The first is that the internet revolution is hyped. The second is that the best way to appreciate the extent of the hype is to look at the decades after the civil war, when America was transformed by inventions such as the motor car and electricity. The third is that the golden age of American growth may be over.

In “The Rise and Fall of American Growth” Mr Gordon presents his case for a general audience—and he does so with great style and panache, supporting his argument with vivid examples as well as econometric data, while keeping a watchful eye on what economic change means for ordinary Americans. Even if history changes direction, and Mr Gordon’s rise-and-fall thesis proves to be wrong, this book will survive as a superb reconstruction of material life in America in the heyday of industrial capitalism.

The technological revolutions of the late 19th century transformed the world. The life that Americans led before that is unrecognisable. Their idea of speed was defined by horses. The rhythm of their days was dictated by the rise and fall of the sun. The most basic daily tasks—getting water for a bath or washing clothes—were back-breaking chores. As Mr Gordon shows, a succession of revolutions transformed every aspect of life. The invention of electricity brought light in the evenings. The invention of the telephone killed distance. The invention of what General Electric called “electric servants” liberated women from domestic slavery. The speed of change was also remarkable. In the 30 years from 1870 to 1900 railway companies added 20 miles of track each day. By the turn of the century, Sears Roebuck, a mail-order company that was founded in 1893, was fulfilling 100,000 orders a day from a catalogue of 1,162 pages. The price of cars plummeted by 63% between 1912 and 1930, while the proportion of American households that had access to a car increased from just over 2% to 89.8%.

America quickly pulled ahead of the rest of the world in almost every new technology—a locomotive to Europe’s snail, as Andrew Carnegie put it. In 1900 Americans had four times as many telephones per person as the British, six times as many as the Germans and 20 times as many as the French. Almost one-sixth of the world’s railway traffic passed through a single American city, Chicago. Thirty years later Americans owned more than 78% of the world’s motor cars. It took the French until 1948 to have the same access to cars and electricity that America had in 1912.

The Great Depression did a little to slow America’s momentum. But the private sector continued to innovate. By some measures, the 1930s were the most productive decade in terms of the numbers of inventions and patents granted relative to the size of the economy. Franklin Roosevelt’s government invested in productive capacity with the Tennessee Valley Authority and the Hoover Dam.

The second world war demonstrated the astonishing power of America’s production machine. After 1945 America consolidated its global pre-eminence by constructing a new global order, with the Marshall Plan and the Bretton Woods institutions, and by pouring money into higher education. The 1950s and 1960s were a golden age of prosperity in which even people with no more than a high-school education could enjoy a steady job, a house in the suburbs and a safe retirement.

But Mr Gordon’s tone grows gloomy when he turns to the 1970s. Economic turbulence increased as well-known American companies were shaken by foreign competition, particularly from Japan, and as fuel prices surged thanks to the OPEC oil-price rise. Economic inequality surged as the rich pulled ahead of the rest. Productivity growth fell: having reached an average of 2.82% a year between 1920 and 1970, output per hour between 1970 and 2014 grew by an annual rate of no more than 1.62%. America today faces powerful headwinds: an ageing population, rising health-care and education costs, soaring inequality and festering social ills.

What chance does the country have of restoring its lost dynamism? Mr Gordon has no time for the techno-Utopians who think that the information revolution will rescue America from such “secular stagnation”. His attitude to the IT revolution is much the same as that of Peter Thiel, a venture capitalist, who famously said: “We wanted flying cars but instead we got 140 characters.” America has already harvested the fruits of the IT revolution. The growth rate increased each year in the decade after 1994, but the spurt did not last and it has since fallen back since.

Now Mr Gordon thinks that Moore’s law is beginning to fade and the new economy is turning into a mirage. He can be forgiven for giving such short shrift to Davos types who have no sense of history: driverless cars will change the world less than the invention of cars in the first place. He is also surely right that America faces unusually heavy challenges in future.

But he goes too far in downplaying the current IT revolution. Where the first half of the book is brilliant, the second can be frustrating. Mr Gordon understates how IT has transformed people’s lives and he has little to say about the extent to which artificial intelligence will intensify this. He also fails to come to terms with the extent to which, thanks to 3D printing and the internet of things, the information revolution is spreading from the virtual world to the physical world. Mr Gordon may be right that the IT revolution will not restore economic growth rates to the level America once enjoyed. Only time will tell. But he is definitely wrong to underplay the extent to which the revolution is changing every aspect of our daily lives.

JAKARTA – Pelambatan pertumbuhan ekonomi pada 2015 bukanlah terjadi tiba-tiba.Pelambatan ekonomi diyakini buah dari kebijakan-kebijakan di masa lalu.

Deputi Gubernur Senior Bank Indonesia (DGS-BI) Mirza Adityaswara menjelaskan, apa yang terjadi pada 2015, pasti ada kaitannya dengan data-data ekonomi yang terjadi pada 2014-2013. Bahkan, perekonomian saat ini merupakan imbas dari data-data ekonomi beberapa tahun belakang terakhir.

“Untuk perekonomian 2016, kita lihat faktor-faktor apa di 2015 yang terjadi untuk 2016. Mau enggak mau, kita harus lihat ke belakang,” kata Mirza dalam seminar di Kalibata, Jakarta, Kamis (26/11/2015).

Mirza mencontohkan, pada 2008-2009 terjadi global financial crisis di Amerika Serikat (AS), dan merembet dampaknya ke negara-negara maju maupun berkembang. Krisis yang terjadi pada 2008, tidak terlepas dari kebijakan di AS pada 2001.

“Itu kejadian yang masih ada sebab akibat. Karena dunia, ekonomi maupun aktivitas ekonomi itu tentu berawal dari suatu ide, motivasi itu pasti. Ide atau motivasi dari kegiatan, pasti butuh dana dan modal. Sekarang kita bicara sumber dana dan modal tersebut,” paparnya.

Mirza menambahkan, jika sumber dana dan modal tersebut terjadi gejolak, maka akan mempengaruhi aktivitas maupun ekspansi ekonomi. Untuk itu, penting memahami sumber dana tersebut dan situasinya.



JAKARTA Presiden Jokowi mengatakan ada banyak tantangan dalam reformasi yang dihadapi bangsa Indonesia, salah satunya adalah infrastruktur yang tertinggal. Hal ini diungkapkannya saat menjadi pembicara dalam acara Policy Speech di Brookings Institution.

“Saya sudah berbicara berulang kali mengenai ambisi pembangunan infrastruktur kita. Tidak perlu saya ulangi lagi di sini: pelabuhan, waduk, tol. Saya bisa sampaikan bahwa perkembangan pembangunan infrastruktur di Indonesia sangat progresif,” papar Jokowi seperti dilansir dari Setkab, Rabu (28/10/2015).

Dia mengemukakan, banyak orang bertanya kepadanya bagaimana Indonesia bisa menghadapi persoalan ekonomi? Bagaimana Indonesia menghadapi krisis ekonomi yang juga menghantam Indonesia.

“Saya menyesal Indonesia tidak mengantisipasi perubahan fundamental di sekitar kita. Tapi, saya melihat perlambatan itu sebagai suatu peluang. Peluang untuk melakukan reformasi,” kata Jokowi,

Dia melanjutkan, seiring dengan pembangunan infrastruktur, pemerintah juga memberikan perhatian pada reformasi. Hal ini dilakukan untuk membebaskan sektor privat baik domestik maupun luar kebijakan yang tidak berpihak.

“Perizinan yang berbelit-belit dan misguided protectionism yang membuat banyak perusahaan dan industri menderita sekian lama,” tuturnya.



business insider: China got ugly in 2015.After a year-plus long rally of over 150%, the country’s stock markets crashed twice — once in June and again in August — giving up all their gains for the year.

Indices for key drivers of the country’s economy, like real estate, manufacturing, and exports, started flashing red. September’s purchasing managers index hit its worst read since 2009, the depths of the financial crisis.

Last month, the country devalued its currency.

In all this chaos, a key question has been: why is this happening now?

At a debate at New York City’s China Institute on Tuesday, short-seller Jim Chanos of Kynikos Associates — a well-known China bear — explained why.

“What made 2015 a little more important,” Chanos said, “was

the impact of the Fed [US Federal Reserve] interest rate decision…

The possibility of a RMB policy decision in August…

and the government’s missteps in handling the stock market run up and drop.”

Together, he continued, those issues created a “heady witches’ brew of changing perceptions on China.”

Now let’s break that down.
Right up until just a few weeks before the Federal Reserve’s September decision, the entire world of finance and money thought that the central bank might end its financial crisis-era 0% interest rate policy, and raise rates 0.25%.

Markets were bracing themselves. A rate hike would have been a statement of confidence in the US economy. The US dollar strengthened, in part in expectation of a rate hike, while money started flowing out of China at the fastest rate in around a decade.

The yuan is pegged to the dollar, and as the dollar strengthened, so did the yuan. That made Chinese exports more expensive. In August, the government found out that July exports cratered, falling 9% from the same time a year before.

Despite its recognition that the New Normal would cause the economy to slow down, it was not ready for a loss of that magnitude. The government decided to devalue the yuan. It has since fallen 4% since then.

The government doesn’t want it to fall anymore, though, so it has been using its reserves to prop up the currency. Analysts estimate that it may have burned between $94 and $110 billion on this defense in August alone.
Then there is the stock market disaster. The Chinese government decided to encourage citizens to get into the market because it wanted to deploy their savings to capitalize debt laden companies, especially state-owned enterprises (SOEs), as they were being restructured in accordance with the ‘New Normal’ plan.

The Chinese people obliged their government and then some. Mainland indices in Shanghai and Shenzen rallied over 150%.

That was until June 12, when both of them started cratering. The government threw hundreds of millions of dollars at the problem to make it go away. It canceled IPOs and new share issues. It went after “malicious” short sellers in the market.

But then the indices cratered again in August.

The whole process highlighted the Chinese government’s inexperience in handling capital markets. Even Goldman Sachs CEO Lloyd Blankfein, a long-term China bull, said the government’s reaction was “ham fisted.”

Of course, none of this means China is collapsing tomorrow. Not even Chanos believes that. But it helps explain why 2015 has been such a critical year for China.

“This is going to be a slow motion unwind,” Chanos said on Tuesday. “This is not going to be smoking ruins tomorrow.”


bloomberg: Asian policy makers welcomed the Federal Reserve’s decision to raise interest rates for the first time in almost a decade, seeing it as an endorsement of better U.S. economic growth, while some emerging markets sounded caution about possible capital outflows.On balance, the rate increase should be constructive for emerging market economies, Bangko Sentral ng Pilipinas Governor Amando Tetangco told reporters Thursday ahead of a rate decision at home. The region’s currencies may continue to fall against the U.S. dollar and money may flow out of developing countries, although not in the “significant magnitudes” seen in the past, he said.The Philippines, Indonesia and Taiwan will be the first Asian central banks to react to the Fed’s move, with economists expecting the Southeast Asian nations to remain on hold while about half the analysts surveyed by Bloomberg predict a cut in Taiwan. Increasing U.S. borrowing costs may be closing the window for Asian central banks to shore up their economies with rate cuts, which could spur capital flight from emerging markets.

“The Fed’s statement should anchor confidence on the path of growth and inflation in the U.S.,” said Tetangco. “We may see the U.S. yield curve flatten, which would be positive for emerging market economies that have exposures in the long end of the curve or are planning to tap this sector for funding.”

Investors React

Asian markets cheered the Fed’s decision, as Japanese shares jumped, Chinese stocks advanced and gauges of regional equity volatility declined after the well-telegraphed decision. The reaction in financial markets reflected a growing conviction among investors that the U.S. economy is strong enough to withstand a higher cost of borrowing, even amid lackluster inflation.

In a news conference yesterday, Yellen repeatedly stressed her confidence in the health of the U.S. economy and played down concerns that it would be knocked off course by weakness overseas or by the recent tumult in the high-yield bond market. Since the recovery began in June 2009, gross domestic product has grown at a steady annualized pace of 2.2 percent per quarter on average.

“This is an appropriate decision, in keeping with a U.S. economy that is improving,” Japanese Finance Minister Taro Aso told reporters in Tokyo when asked about the Fed’s decision. The move is “not necessarily bad” for Japan’s economy and policy makers will continue to monitor U.S. monetary policy and global reaction to the Fed move, said Chief Cabinet Secretary Yoshihide Suga.

The “U.S. Fed rate hike and reference to gradualism are on expected lines,” India’s Economic Affairs Secretary Shaktikanta Das said in a Twitter post. India is well prepared and the Fed’s confidence about the economy’s recovery “is good news for our exports,” he said, adding that the “end of uncertainty and accommodative outlook for future will help.”

’Downward Pressure’

The Fed’s decision means that emerging-market economies will continue to experience capital outflows and downward pressure on their exchange rates, economic growth and asset markets, Hong Kong Monetary Authority Chief Executive Norman Chan told reporters Thursday. The speed of outflows from Hong Kong will depend on the pace of future U.S. interest rate increases, Chan said.

Yellen said that the central bank had put itself in a position to nurture the 6 1/2-year-old expansion by raising rates a bit now to avoid having to increase them a lot later. That will enable the Fed to tighten policy gradually, moving rates up in fits and starts to keep the economy on track.

The HKMA raised its base rate for the first time in nine years following the Fed’s move. Because Hong Kong’s currency is pegged to the U.S. dollar, the city’s monetary policy typically moves in line with the Fed.

The Fed’s rate increase was expected and unlikely to affect South Korea’s economy, Vice Finance Minister Joo Hyung Hwan said in a meeting in Seoul. South Korea will closely monitor financial markets and swiftly react to take necessary steps according to contingency plans if needed, Joo said.

Provides Certainty

The Fed’s decision provides certainty, Indonesia President Joko Widodo told reporters. The effect on the market has been positive with the nation’s stock index rising and the rupiah strengthening, he said.

The rise “is good news for our economy just because it’s a sign of U.S. strength,” New Zealand Finance Minister Bill English said in a Bloomberg Television interview. English said he expects an “exchange rate realignment” as the Fed raises rates over the next 12 to 18 months, weakening the Kiwi dollar.

The “sweet spot for us is the kiwi dollar a bit weaker against the U.S. and a recovering U.S. economy as a locomotive pulling the region along, and that’s possible over the next year or two,” said English.

Frankfurt, Dec 4, 2015 (AFP)
German industrial orders, a key measure of demand for goods in Europe’s top economy, rose in October, driven by robust demand from the euro area, the economy ministry said on Friday.Provisional official data showed an increase in orders of 1.8 percent month-on-month in October, following declines of 0.7 percent in September and 2.1 percent in August.Analysts polled by financial services firm FactSet had pencilled in an increase of 1.0 percent for October.The rise was attributable to stronger demand both at home and abroad for German-made goods. Export orders rose by 1.8 percent and domestic orders were up by 1.7 percent, the ministry calculated.Orders from the eurozone increased by 2.4 percent and orders from outside the single currency area increased by 1.4 percent.


Opinion: A crash everyone should have expected

Stock exchanges around the world have been going down the tubes for days. Is a new crisis imminent, spurred by the chaos in China? There’s much evidence to the contrary, writes DW’s Henrik Böhme.

Technically, nothing has really happened yet. It’s still just the “markets” that are being shaken up, albeit rather violently. Granted, for every minute of trading at the moment, billions of dollars evaporate. But if you really think about it, and manage to ignore the dizzying sums being wiped from balance sheets, this most recent crash isn’t all that surprising.

Yes, I realize there has been a lot of bad news going around that the overheated financial markets had to cope with in the past few weeks, most notably from China. When the second-largest economy in the world experiences such a dizzy spell, it can make investors nervous. But it’s not the only cause of the current turbulence.

There are a handful of other countries once touted as up-and-coming emerging nations that have people worried. Take Russia, for instance: It has recently been weakened by Western sanctions and its own homemade problems. Or Brazil, which like Russia mainly relies on its commodity exports to keep the economy going. But now, hampered by falling demand for those commodities and thus falling revenues, it has slipped into recession.

How to spend all that money?

It would of course be only too easy to lay the blame at emerging markets’ doors. That’s because the current stock market boom, which has been holding now for seven years, is basically being subsidized by the central banks of the world.


Since the Lehman Brothers crash, the US Federal Reserve and the European Central Bank have been pumping billions of dollars and euros into the markets while keeping interest rates near zero. But where should all that money go? It has to be profitably invested somewhere, especially when pension funds and insurance companies want to keep their promises of returns.

So what happened? It was invested in all kinds of equities. And if one thing is for sure about stocks, it’s that they are vulnerable to market fluctuations. And sometimes those fluctuations can totally wipe out a stock’s value. That’s just the way it goes. Another product of these wild years has been the tendency for companies to use their considerable profits only secondarily for new investments. They much prefer to reward their shareholders with plump yields.

No questions asked when things are rosy

But it’s also not like this was the first crash of the last few years. The markets – according to many experts’ predictions in light of the cheap money bubble – would become extremely volatile and prone to fluctuation. Remember last autumn, when the German DAX suddenly began skidding and didn’t stop until it hit 8,400 points? The reason at the time was economic concerns.

Those concerns turned out to be unfounded. After that it recovered rapidly, jumping 4,000 points within half a year. The rally didn’t end until the DAX hit a record 12,390 points. Isn’t it funny that no one seems to care what the reasons are for such dramatic market gains? Only when things go south do people begin asking questions.

In such cases, it helps to take a look at the raw numbers. Germany, the global export champion, mostly delivers its products to Europe. Only 7 percent go to China. Beijing’s problems may indeed be the cause of many sleepless nights for German business leaders, particularly in the auto industry. But there are plenty of others who don’t share their concerns. Another reassuring fact is the state of the US economy, which is currently in a position to grow. On top of that, prices for raw materials like oil and copper are low. That may be lamentable for some countries, but for others it’s a welcome stimulus.

Much is now in the hands of the head of the US Federal Reserve, Janet Yellen. The mere suggestion of a shift in monetary policy there that would see the Fed raise interest rates is enough to instill great fear in emerging economies, where investors have been withdrawing massive amounts of money because they expect higher rates of return in the US. It’s a vicious cycle. But at some point the anti-crisis measures of cheap money and low interest rates have to end. The only problem is that if China’s crisis expands and drags the world economy down with it, the West will be out of instruments to counter it. The residual effects of the Lehman crash can still be felt today.
US stocks tumbled in opening trade on Monday, with the Dow plummeting more than 1,000 points or some 6 percent within minutes after trading started. But shares recovered considerably later in the day. The initial steep fall built on the huge sell-off of stocks that had taken hold across Asia and later Europe.

DW: European stock markets slumped drastically on the same day, with London’s benchmark FTSE 100 index of top blue-chip companies diving more than 4.67 percent, while Frankfurt’s DAX 30 sank 4.7 percent. France’s CAC 40 plunged 5.35 percent.

The sell-off in Europe came after Chinese shares saw all of their gains this year wiped out following a massive rout on the Shanghai Stock Exchange. On Monday, the Shanghai Composite index closed 8.49 percent down at 3,209 points.

Panic selling ripped virtually across the whole of Asia, with shares in Hong Kong closing 4.77 percent lower and in Tokyo 4.61 percent down, while Seoul dropped 2.47 percent and Sydney lost 4.09 percent.

Asia’s ‘Black Monday’

Evan Lucas, an analyst with IG markets, described Monday as “one of the worst trading days of the past five years.”

“The reaction from Asia today will be symptomatic of the current investor sentiment and belief that a hard landing (of China’s economy) is inevitable,” he told the news agency Reuters.

Global equities have lost more than $5 trillion (4.3 trillion euros) in value since China’s shock currency devaluation on Aug. 11 sparked fears its economy is slowing more than thought.
Economic slowdown in China

Data on Friday showing Chinese manufacturing activity plumbing a 77-month low added to the gloom, signaling that even a campaign by Beijing to stimulate growth by cutting interest rates and boosting lending is not working.

China worries mounting

As a result, Chinese stocks’ year-long rally that saw shares soar 150 percent came to a sudden end in June. Chinese authorities have since launched unprecedented measures to support shares.

On Sunday state media said the huge national pension fund would now be allowed to buy equities in a fresh bid to prop up the market. The fund, which had some 3.5 trillion yuan ($550 billion) in net assets at the end of 2014, will be able to invest up to 30 percent of that in equities.

Apparently though, investors fear even Beijing’s huge firepower will not be enough to stop the rout in Chinese shares, particularly after Shanghai shares fell through the key 3,500 point mark.

“This is a real disaster and it seems nothing can stop it,” Chen Gang, a Shanghai-based chief investment officer at Heqitongyi Asset Management, told Bloomberg News.

Drag on oil and currencies

Fears of weaker growth in the world’s second largest economy has further dragged down oil prices, which on Friday broke below $40 a barrel for the first time in six years. The slump was compounded by a worsening glut after data last week had shown the number of US drilling rigs rising, despite the slump in prices.

US benchmark West Texas Intermediate (WTI) for October delivery fell $1.28 to $39.58 while Brent crude for October eased $1.45 to $44.65.

Jitters Monday over China and the global economy also led to a drop in the value of the US dollar, sparking a move into the Japanese yen. The greenback fell to 121.23 yen in Asia, down from 122.06 yen in New York on Friday. The euro was at $1.1425 and 138.51 yen, from $1.1386 and 138.97 yen.

The crisis in China is also affecting more and more emerging economies in Asia. With the Asian economic powerhouse faltering, countries like Malaysia, Thailand and South Korea – who dragged their currencies down to fresh multi-year lows on Monday – are bound to suffer.

New York, Aug 21, 2015 (AFP)
World stock markets were hammered with heavy losses on Friday, as China’s economic woes triggered European and Wall Street equity sell-offs and stirred up fears for global growth.Losses of more than 3.0 percent on Wall Street capped the day of market carnage, which began with a 4.27 percent drop in Shanghai after another unnerving sign of slowdown in China’s manufacturing sector.It capped the Shanghai exchange’s worst week since 2011, losing 11.5 percent.Among leading indices, Tokyo shares lost 2.98 percent; Hong Kong 1.53 percent; London’s benchmark FTSE 100 2.83 percent; the CAC 40 in Paris 3.19 percent; and Frankfurt’s DAX 30 2.95 percent.The three key US indices were, after two days of heavy selling, all below where they started 2015, after repeatedly punching through record highs during the past eight months.The blue-chip Dow Jones Industrial Average gave up 3.12 percent for the day and was down 5.82 percent for the week.The S&P 500 shed 3.19 percent in the session and 5.77 percent for the week– a loss representing some $1.14 trillion in share value. The tech-heavy Nasdaq fared worse, losing 3.52 percent and 6.78 percent in the week.Among other key markets, Singapore and Sydney dropped 1.3 percent; Johannesburg 1.47 percent, and Brazil’s Ibovespa 1.99 percent.The spark to the selloff was weak Chinese manufacturing data: Caixin’s purchasing managers’ index came in at 47.1 this month — below 50 means contraction — falling from 47.8 in July and the worst reading in over six years.But behind that were the signs that Beijing is struggling to prevent a stall in the world’s second-largest economy, and that its actions — like the devaluation of the yuan last week — was having a negative impact throughout emerging markets and would drag in developed economies as well.”China’s currency devaluation is at the heart of the rout in global markets,” said Jasper Lawler, market analyst at CMC Markets UK.The effect of the downturn in China could be seen in the hit on specific US blue-chip stocks with large China business: Apple lost 6.12 percent on Friday; General Motors slid 4.0 percent; and Boeing lost 3.88 percent.Meanwhile oil prices slid to six-year lows during trade Friday in part on big importer China’s weakness, the impact spilling over to the shares of oil industry businesses.”We have a challenging economic situation in China, which has now taken the extreme step of devaluing its currency to support its economy. That weakness is ricocheting through emerging markets and the global industrial sector,” said Lisa Emsbo-Mattingly, director of asset allocation at Fidelity, in a client note.- ‘Catching falling knives’ -“With more Chinese-led carnage on the markets today, only the very brave are venturing into equities as buying stocks is currently like catching falling knives,” said Mike McCudden, head of derivatives at stockbroker Interactive Investor.In New York, some analysts called the fall a long-needed correction in shares whose valuations — especially for tech companies — were pushed too far helped by the continued supply of cheap money from the leading central banks in Tokyo, Beijing, Frankfurt and Washington.Patrick O’Hare of said that underpinning the selloff is investors losing faith in the ability of central bankers to use monetary policy to stimulate growth.But he also pointed to pricey valuations recently, given modest growth prospects in the US economy.”A market trading at roughly 17.5 times forward 12-month earnings is priced for much better things economically speaking that have yet to avail themselves as the Federal Reserve had hoped they would.”burs-pmh/vs
TOKYO KOHEI TAKEDA, NQN staff writer — Speculation is rife that Prime Minister Shinzo Abe and Bank of Japan Gov. Haruhiko Kuroda will confer sometime soon. And that has market players growing anxious.Since Abe took office in December 2012, he and the BOJ chief have held six so-called “Abe-Kuro meetings” at the prime minister’s official residence. They have taken place unannounced, and their hush-hush nature has had market players guessing.During the meetings, the two men have reportedly exchanged assessments on the Japanese economy and discussed related matters. Many of the meetings have come just before or after a Group of Seven summit or a meeting of the Group of 20 finance ministers and central bank chiefs.The G-7 is made up of industrial nations; the larger group includes emerging-market countries.The past two Abe-Kuro meetings were held on March 23 and June 2. Given that a two-day G-20 meeting will begin Sept. 4 in Turkey, there is market speculation that Abe and Kuroda will likely meet later this month.

The one-on-ones also have come during Tokyo Stock Exchange trading hours — another factor that keeps market players on their toes. According to The Nikkei’s daily report on the prime minister’s schedule, the six meetings began sometime between 11:48 a.m. and 12:29 p.m. Let’s call it lunchtime. After some of these meetings, the yen’s exchange rate has reacted to news that a meeting had taken place as well as to Kuroda’s post-luncheon market-roiling remarks.

Consider the meeting from last Sept. 11. Abe met with Kuroda ahead of an important decision about whether to go ahead with a planned second consumption tax increase, to 10%, scheduled for this coming October.

After their talk, Kuroda told reporters, “If we face a situation that will make it difficult to achieve our goal, we will do the necessary adjustment without any hesitation, be it additional easing or another measure.” This fueled market speculation that the BOJ, already flooding the financial system with massive amounts of yen, would become even more aggressive with its policy, called quantitative and qualitative easing.

On the Tokyo foreign exchange market that day, the Japanese currency fell to its lowest level against the dollar in about six years, and the Nikkei Stock Average hit an eight-month closing high.

Then, in October, with crude oil prices falling, the central bank struck and announced it would print even more yen. The move surprised market players.


     Some 10 months on and Japan’s economy is still hurting. Preliminary gross domestic product numbers for the April-June quarter came out Monday. They were not pretty, showing an annualized 1.6% real contraction. It was the first decline in three quarters.

Last September, the Abe-Kuro meeting came three days after revised GDP figures for the first quarter of fiscal 2014 were announced. That was the quarter when the initial consumption tax hike, from 5% to 8%, took effect. The figures showed that the economy had shrank 7.1% on an annualized basis from the previous quarter, as opposed to the 6.8% decline that the preliminary data had shown.

Now the market is mumbling about another Abe-Kuroda luncheon and what it might serve up to investors. “Every time the Abe-Kuro meeting is held,” said Satoshi Osanai, an economist at Daiwa Institute of Research, “it helps raise market speculation about additional easing.”

With crude oil prices again heading south, the consumer price index, excluding perishables, is now on the verge of slipping into negative territory. And the BOJ’s stated motive in printing all that yen has been to get prices increasing at a 2% clip.

Other governments are also feeling economic pressure. China’s central bank recently allowed the yuan to float more freely, a move that essentially devalued the currency. The yuan fell against the dollar for three consecutive days lat week.

When asked about when and what the BOJ might do with its monetary policy, about 30% of economists surveyed said the BOJ would implement additional easing around October 2015, according to the ESP Forecast for August by the Japan Center for Economic Research. This was the second-most common answer. The top reply was that the BOJ would tighten its monetary policy sometime after July 2016.

Since October, when Kuroda pulled even harder on his quantitative and qualitative easing lever, Japanese stock prices have been on the upswing and the yen has been further weakening.

Now analysts fear that if Kuroda were to give his favorite lever one more pull, the yen would weaken to such a point that imports would become prohibitively expensive and harm certain businesses and local economies.

Still, with the Abe administration becoming increasingly anxious to deliver economic growth, analysts see more circumstantial evidence for additional easing after Abe next lunches with Kuroda.

Abe himself is in desperate circumstances. His approval ratings are taking a big hit now that his government is seen ramming defense-related bills through parliament. His evaporating popularity is giving rise to market speculation that he will get Kuroda to print even more yen when the two next meet.

It is not easy to predict when the two will actually get together, given the Japanese parliament’s schedule. For now, market players will have to hold their breath.

BANGKOK — China’s successive devaluation of its currency is shaking up companies in Southeast Asia, spurring concern that an influx of cheap imports may pick up pace.Chinese goods make up 30% of Vietnam’s imports, the largest share. The economic standstill in China has led to lower demand for steel products in that country, and the steel is instead being exported to Vietnam and other places at low prices, said Tran Dinh Long, chairman of steelmaker Hoa Phat Group.That Vietnam’s steel imports gr
ew 15% from a year earlier in the January-July period seems to support his statement. Now the country is scrambling to find ways to deal with Chinese products, which are becoming more competitive as the yuan weakens.Work is underway in Vietnam to build its first integrated steelworks that includes a hot rolling mill, blast furnaces and other facilities. The project is led by Taiwan’s Formosa Plastics, with Japan’s JFE Steel also taking part.Indonesia’s state-run Krakatau Steel is also wary of a flood of cheap Chinese imports. The company was in the red for three straight years through 2014. The government may move to strengthen import controls.

Shrinking exports to China

The Chinese economy is decelerating at a faster pace than Beijing expected, a factor that led to the yuan devaluation.

Southeast Asian companies are concerned that exports to China will decline further as the weaker yuan reduces China’s purchasing power. Vietnam increased exports to China by 22.4% year on year in the January-July period, but Indonesia’s figure plunged 27.1% and Thailand, Malaysia and the Philippines recorded declines of 3.5% to 3.7% over the same term.

One company whose exports might be affected is Malaysia’s Sime Darby, owner of palm oil plantations covering nearly 6,000 sq. kilometers. The company’s earnings are susceptible to fluctuations in palm oil prices and foreign exchange rates. Sime Darby is also facing unfavorable headwinds in its business selling luxury cars in China.

At Banpu, Thailand’s largest coal company, roughly 20% of sales are tied to China. The depreciation of the yuan will be a disadvantage in the short term, CEO Somruedee Chaimongkol said Friday. But if the Chinese economy improves, then demand will rise, she added.

Fear of a stronger dollar

Companies holding greenback-denominated debt worry that the yuan devaluation will lead to depreciation of other Asian currencies and further strengthen the dollar, which makes debt payments a bigger challenge.

Indonesian telecommunications company XL Axiata announced Friday that it will refinance part of its interest-bearing liabilities, which reached $1.55 billion at the end of June, into rupiah-denominated debt. The risk posed by currency exchange will be significantly lowered over the next three to six months, said Chief Financial Officer Mohamed Adlan bin Ahmad Tajudin. The company is busy trying to turning its earnings around after sinking into the red for the January-June half.

Many airlines in the region are saddled with dollar-denominated debt. Thai Airways International had to report a foreign exchange loss of 3.67 billion baht ($104 million) in its April-June earnings statement.

Philippine conglomerate San Miguel posted an 8% year-on-year fall in net profit to 16.9 billion pesos ($366 million) in the January-June half, weighed down by a foreign exchange loss of 1.1 billion pesos following the recent depreciation of the country’s currency.

Governments forced to move

Company executives are watchful about which directions local currencies will go and how they will affect their earnings. Speculation abounds that the yuan will grow weaker and the dollar stronger, giving rise to selling pressure on Asian currencies. Financial authorities in the region now find themselves facing difficult decisions.

The first one to make a move was Vietnam. On Wednesday, the country’s central bank widened the dong’s trading band to about 2% from around 1%, representing an effective devaluation of 1%.

The Indonesian rupiah has accelerated its descent since Tuesday and is hovering at its lowest level in 17 years. The rupiah is undervalued, said Agus Martowardojo, governor of the country’s central bank. He expressed a willingness to continue the bank’s intervention in the forex market.


Tokyo, May 20, 2015 (AFP)
Japan’s economy grew a better-than-expected 0.6 percent in the first quarter, official data showed Wednesday, after limping out of recession in the previous three months.The latest growth is bigger than a revised 0.3 percent expansion in the final quarter of 2014 and beat the market median forecast of a 0.4 percent on-quarter increase.

Tax-free debt

The great distortion

Subsidies that make borrowing irresistible need to be phased out

THE way that black holes bend light’s path through space cannot be smoothed out by human ingenuity. By contrast, a vast distortion in the world economy is wholly man-made. It is the subsidy that governments give to debt. Half the rich world’s governments allow their citizens to deduct the interest payments on mortgages from their taxable income; almost all countries allow firms to write off payments on their borrowing against taxable earnings. It sounds prosaic, but the cost—and the harm—is immense.

In 2007, before the financial crisis led to the slashing of interest rates, the annual value of the forgone tax revenues in Europe was around 3% of GDP—or $510 billion—and in America almost 5% of GDP—or $725 billion (see Briefing). That means governments on both sides of the Atlantic were spending more on cheapening the cost of debt than on defence. Even today, with interest rates close to zero, America’s debt subsidies cost the federal government over 2% of GDP—as much as it spends on all its policies to help the poor.

This hardly begins to capture the full damage, which is aggravated by the behaviour the tax breaks encourage. People borrow more to buy property than they otherwise would, raising house prices and encouraging over-investment in real estate instead of in assets that create wealth. The tax benefits are largely reaped by the rich, worsening inequality. Corporate financial decisions are motivated by maximising the tax relief on debt instead of the needs of the underlying business.

Debt has many wonderful qualities—allowing firms to invest and individuals to benefit today from tomorrow’s income. But the tax subsidies have tilted the economy in a woeful direction. They have created a financial system that is prone to crises and biased against productive investment; they have reduced economic growth and worsened inequality. They are a man-made distortion and they need to be fixed.

Debt and taxes, life’s certainties

Start with the fragility. Economies biased towards debt are more prone to crises, because debt imposes a rigid obligation to repay on vulnerable borrowers, whereas equity is expressly designed to spread losses onto investors. Firms without significant equity buffers are more likely to go broke, banks more likely to topple (see Free Exchange). The dotcom crash in 2000-02 caused losses to shareholdersworth $4 trillion and a mild recession. Leveraged global banks notched up losses of $2 trillion in 2007-10 and the world economy imploded. Financial regulators have already gone some way to redressing the balance from debt by forcing the banks to fund themselves with more equity. But the bias remains—in large part because of the subsidy for debt. Under a more neutral tax system, firms would sell more equity and carry less debt. Investors would have to get used to greater volatility; but as equity buffers got thicker, shareholders would be taking less risk.

A neutral tax system would also lead to more efficient choices by savers and lenders. Today 60% of bank lending in rich countries is for mortgages. Without a tax break, people would borrow less to buy houses and banks would lend less against property. Investment in new ideas and businesses that enhance productivity would become relatively more attractive, in turn boosting economic growth.

Removing the advantages that debt enjoys would also lead to a fairer system. Relief on mortgage payments is a subsidy that flows to people who need it least: studies show that the richest 20% of American households by income gain the most. Mortgages would become costlier. But new instruments would emerge to allow individuals to bridge the gap between current savings and future income that debt alone now closes—for example, shared-equity mortgages that divide the gains and losses from house-price movements between banks and homeowners.

Lenders and borrowers

If the arguments for getting rid of the debt distortion are overwhelming, the path to its elimination could hardly be more rocky. Politicians do not much like changes that will lower house prices. There is a big co-ordination problem: tax is a matter for national governments, and few countries will be prepared unilaterally to withdraw subsidies that might make them less appealing to footloose companies. In addition, vested interests will bleat loudly. Businesses that depend heavily on debt—banks, private-equity firms and the like—will be ready to spend some of the billions they gain from the tax subsidy on lobbying to defend it.

This argues for a staged approach. The place to start is the subsidies on residential mortgages. Not only do these subsidies increase financial fragility, they fail to achieve their purported goal of promoting home-ownership. The shares of people owning their own homes in America and Switzerland, two countries with vast subsidies, are 65% and 44% respectively—no more than in other advanced economies like Britain and Canada that offer no tax break. The wisest step would be to phase out tax relief gradually, as Britain did in the 1990s.

Getting rid of the tax breaks for corporate debt will be harder. The few countries that have tried to level the playing field have done so by giving an equivalent handout to equity. Belgium and Italy, for instance, give dividend payments and profits flowing to equity holders some of the same perks enjoyed by interest payments. But such systems are fiddly and lower a country’s tax base at a time when governments need money.

The best approach is gradually to phase out tax breaks for debt at the same time as lowering the corporate-tax rate. That would make the policy revenue-neutral, and would also defuse the risk to governments who want to push ahead but fear losing a war waged on tax competition.

Acting in concert or alone, countries should act soon. When interest rates are low, as now, the sweeteners for debt are smaller and thus easier to remove. When rates rise—as, inevitably, they will—the subsidy will become more valuable. This is the moment to tackle the great debt distortion. There may never be a better chance.

NEW YORK – Negara BRICS, yakni Brasil, Rusia, India, China dan Afrika Selatan berencana melahirkan reserve fund dengan modal USD100 miliar.Tak hanya itu, China sendiri sudah meluncurkan bank investasinya sendiri, Asian Infrastructure Investment Bank (AIIB), di mana Amerika Serikat (AS) tidak mendukung finansial lembaga ini.Presiden Amerika Serikat (AS) Barack Obama menyatakan siap mendukung Investment bank besutan China tersebut, tapi dia mau memastikan lembaga ini berjalan dengan baik sebelum AS bergabung.Kedua lembaga keuangan global baru ini akan menjadi kompetitor International Monetary Fund (IMF). Juga akan mengurangi porsi Barat dalam investasi. Demikian dilansir dari CNN.Managing Director IMF Christine Lagarde pada Oktober lalu menyatakan, reserve fund BRICS akan menjadi pelengkap IMF, bukan rival. Total reserves IMF sendiri mencapai USD1 triliun.”Saya tidak melihat itu (menjadi rival), seperti yang banyak orang bilang. Itu malah melengkapi IMF. Kami akan bekerja bersama dan menjadi partner,” tukas Lagarde.(rzy)
NEW YORK – Presiden Rusia Vladimir Putin menyetujui pembentukan reserve fund dengan modal awal USD100 miliar oleh negara BRICS, yakni Brasil, Rusia, India, China dan Afrika Selatan.Dengan ini, maka negara BRICS memiliki alternatif pendanaan sehingga mereka tidak perlu meminjam kepada Amerika Serikat (AS) maupun International Monetary Fund (IMF) untuk bantuan keuangan.Para pemimpin negara BRICS telah menyetujui pembentukan lembaga tersebut, juga sebagai upaya menghimpun kekuatan melawan dominasi negara barat.Negara BRICS mewakili 40 persen populasi dunia, dan 20 persen dari aktivitas ekonomi global. Demikian dilansir dari CNN.Reserve fund akan membantu negara BRICS yang mengalami masalah keuangan. Dalam lembaga itu, China akan berkontribusi sebesar USD41 miliar, lalu Rusia, India dan Brasil masing-masing USD18 miliar. Selanjutnya Afrika Selatan harus menyisihkan USD5 miliar.Waktu atas lahirnya reserve bank ini sangat tepat, di tengah banyak negara-negara berkembang dan korporasi berjuang membayar utangnya yang jatuh tempo untuk beragam alasan.
bloomberg 30 April 2015: Federal Reserve policy makers said they expect the economy to pick up after growth ground to a virtual halt in the first quarter, suggesting they are still open to an interest-rate increase later in the year.The Federal Open Market Committee “continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace,” the panel said in a statement Wednesday in Washington. The slowdown partly reflected “transitory factors,” it said.By repeating its view that growth will rebound up to a “moderate pace,” the committee put financial markets on notice that the first rate increase since 2006 is still in play.

“They made it pretty clear that they expect things will pick up, and that the labor market will tighten,” said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh. “If things turn out like we are expecting and like they are expecting, then I think September makes sense” for an increase.

The Fed repeated it will raise rates when it sees further labor-market improvement and is “reasonably confident” inflation will move back to its 2 percent goal over time.

The benchmark federal funds rate has been kept near zero since December 2008 as the Fed battled the worst recession since the Great Depression and then sought to keep the expansion going.

Stocks and Treasuries remained lower after the statement. The Standard & Poor’s 500 Index was down 0.3 percent to 2,107.75 as of 3:26 p.m. Ten-year Treasury notes yielded 2.05 percent, up five basis points from Tuesday.

Growth Slump

The economy grew at a 0.2 percent annual rate last quarter after advancing 2.2 percent in the prior three months, Commerce Department data showed earlier Wednesday, choked by a slump in U.S. business investment and exports. Economists surveyed by Bloomberg forecast a 1 percent gain.

Even before the release of the first quarter GDP report, economists had pushed back their forecasts for liftoff after a run of disappointing economic data.

In a Bloomberg survey conducted last week, 73 percent of respondents predicted the central bank will wait until September. In a March poll, a majority predicted the first rate increase in June or July.

Employers added 126,000 workers to payrolls in March, the weakest month since December 2013. Reports on manufacturing and retail sales have also trailed behind economists’ expectations.

“The pace of job gains moderated,” the Fed said, and “underutilization of labor resources was little changed.”

Unemployment Forecast

While unemployment has fallen to 5.5 percent from a post-recession peak of 10 percent, Fed officials have reduced their estimate of the long-run jobless rate to 5 percent to 5.2 percent, suggesting they have room to keep borrowing costs low to put more Americans back to work.

The Fed also said that while inflation is likely “to remain near its recent low level in the near term,” policy makers expect it “to rise gradually toward 2 percent over the medium term.”

Inflation has lingered below the Fed’s goal for 34 straight months. The Fed’s preferred gauge of prices rose just 0.3 percent in February from a year earlier.

Lower oil prices have helped keep a lid on inflation while also sapping energy-related investment, and a stronger dollar has curbed exports and made imports cheaper.

Pfizer Inc., the biggest U.S. drugmaker by sales, cut its 2015 earnings forecast because of the impact of the dollar on overseas sales.


Wellington, April 20, 2015 (AFP)
New Zealand’s annual inflation rate eased to 0.1 percent in the 12 months to March, the lowest in 15 years, official data showed Monday.

The cost of living actually fell for the second consecutive quarter, off 0.3 percent in the January-March period largely due to declining petrol prices, Statistics New Zealand said.

“The fall in the March quarter CPI (inflation), which last happened in 2001, was caused by an 11 percent fall in petrol prices,” SNZ prices manager Chris Pike said.

“Without petrol, the CPI rose 0.3 percent.”

Pike said the 0.1 percent annual figure was the lowest rise in inflation since the September 1999 quarter.

The data is likely to see the Reserve Bank of New Zealand leave interest rates unchanged on 3.5 percent at its monetary policy meeting next week.

The central bank, which has an inflation target of 1.0-3.0 percent, has kept rates on hold since July last year.

GUARDIAN: Greek ministers are spending this weekend, almost five grinding years since Athens was first bailed out, wrangling over the details of the spending cuts and economic reforms they have drawn up to appease their creditors.

As the recriminations fly between Europe’s capitals, campaigners are warning that the global community has failed to learn the lessons of the Greek debt crisis – or even of Argentina’s default in 2001, the consequences of which are still being contested furiously in courts on both sides of the Atlantic.

As Janet Yellen’s Federal Reserve prepares to raise interest rates, boosting the value of the dollar, while the plunging price of crude puts intense pressure on the finances of oil-exporting countries, there are growing fears of a new debt crisis in the making.

Ann Pettifor of Prime Economics, who foreshadowed the credit crunch in her 2003 book The Coming First World Debt Crisis, says: “We’re going to have another financial crisis. Brazil’s already in great trouble with the strength of the dollar; I dread to think what’s happening in South Africa; then there’s Malaysia. We’re back to where we were, and that for me is really frightening.”

Since the aftershocks of the global financial crisis of 2008 died away, the world’s policymakers have spent countless hours rewriting the banking rulebook and rethinking monetary policy. But next to nothing has been done about the question of what to do about countries that can’t repay their debts, or how to stop them getting into trouble in the first place.

Brazil’s already in great trouble with the strength of the dollar; I dread to think what’s happening in South Africa

Developing countries are using the UN to demand a change in the way sovereign defaults are dealt with. Led by Bolivian ambassador to the UN Sacha Sergio Llorenti, they are calling for a bankruptcy process akin to the Chapter 11 procedure for companies to be applied to governments.

Unctad, the UN’s Geneva-based trade and investment arm, has been working for several years to draw up a “roadmap” for sovereign debt resolution. It recommends a series of principles, including a moratorium on repayments while a solution is negotiated; the imposition of currency controls to prevent capital fleeing the troubled country; and continued lending by the IMF to prevent the kind of existential financial threat that roils world markets and causes severe economic hardship.

If a new set of rules could be established, Unctad believes, “they should help prevent financial meltdown in countries facing difficulties servicing their external obligations, which often results in a loss of market confidence, currency collapse and drastic interest rates hikes, inflicting serious damage on public and private balance sheets and leading to large losses in output and employment and a sharp increase in poverty”.

It calls for a once-and-for-all write-off, instead of the piecemeal Greek-style approach involving harsh terms and conditions that knock the economy off course and can ultimately make the debt even harder to repay. The threat of a genuine default of this kind could also help to constrain reckless lending by the private sector in the first place.

However, when these proposals were put to the UN general assembly last September, a number of developed countries, including the UK and the US, voted against it, claiming the UN was the wrong forum to discuss the proposal, which is anathema to powerful financial institutions.

Pettifor shares some of the UK and US’s scepticism. “The problem for me is that the UN has no leverage here,” she says. “It can make these moralistic pronouncements but ultimately it’s the IMF and the governments that make the decisions.”

Nevertheless, Llorenti has been touring the world’s capitals making the case for change, and hopes to bring the issue back for fresh discussions next month.

And while the debate rages, developing countries have been taking advantage of rock-bottom interest rates and the cheap money created by quantitative easing to stack up billions in new debt.

Using recently released World Bank data, the Jubilee Debt Campaign calculates that in 2013 alone – the latest period for which figures are available – borrowing by developing countries was up 40% to $17.3bn.

Brazil’s economy is likely to be seriously tested as the greenback rises; Turkey, Malaysia and Chile have large dollar-denominated debts and sliding currencies; and a string of African countries face sharp rises in debt repayments. Ghana and Zambia have already had to turn to the IMF to ask for help. It’s as if, as Pettifor warns, “absolutely nothing has changed since the crisis”.

Tokyo, March 26, 2015 (AFP)
Japanese inflation returned to zero for the first time in nearly two years in February as it slowed for a seventh straight month on lower oil prices and lacklustre consumer spending, data showed Friday.Core consumer inflation, excluding volatile fresh food prices, rose 2.0 percent year-on-year in February due largely to a sales tax hike in April 2014, the internal affairs ministry said.Adjusted for the tax increase, the nationwide core consumer-price index was flat from a year earlier, falling to zero growth for the first time since May 2013.The reading is far short of the Bank of Japan’s goal of 2.0 percent inflation.Inflation is a key measure for Tokyo’s bid to end years of stagnant or falling prices that have been blamed for holding back growth and denting firms’ expansion plans.Prices had been on the rise, largely due to Japan’s heavy post-Fukushima energy bills, but oil prices have tumbled since mid-2014 and consumers snapped their wallets shut after the government raised sales taxes to 8.0 percent from 5.0 percent last year.Separate data from the ministry showed the nation’s jobless rate edged down to 3.5 percent in February from 3.6 percent in January.

HONG KONG, TIONGKOK – Wilayah Asia yang sedang berkembang masih menjadi kawasan dengan pertumbuhan tercepat di dunia, meskipun pertumbuhan di negara-negara industri utama lebih rendah daripada yang diharapkan seiring berlanjutnya reformasi struktural di sejumlah perekonomian penting di kawasan ini, demikian menurut laporan baru dari Asian Development Bank (ADB).

Dalam edisi pembaruan publikasi ekonomi tahunan Asian Development Outlook 2014 (ADO 2014), yang dirilis hari ini, ADB mempertahankan prakiraan pertumbuhan produk domestik bruto (PDB) di kawasan ini sebesar 6,2% pada 2014 dan 6,4% pada 2015. Asia tumbuh 6,1% pada 2013. Wilayah Asia yang sedang berkembang mencakup 45 negara berkembang anggota ADB.

“Menurunnya permintaan eksternal berdampak buruk bagi sejumlah perekonomian di kawasan ini, tetapi secara keseluruhan, Asia dan Pasifik masih akan mencatat pertumbuhan kuat pada 2014 dan 2015,” ujar Chief Economist ADB, Shang-Jin Wei, saat peluncuran laporan. “Untuk ke depannya, proses reformasi struktural di [Republik Rakyat] Tiongkok/RRT, India, dan Indonesia—tiga perekonomian terbesar di kawasan ini—akan sangat mempengaruhi proyeksi pertumbuhan Asia.”

Setelah terjadinya musim dingin yang parah di Amerika Serikat pada kuartal pertama, kenaikan pajak pertambahan nilai di Jepang pada kuartal kedua, dan masih berlanjutnya perlemahan ekonomi Eropa, perekonomian industri utama di dunia nyaris tidak mencatat pertumbuhan pada semester pertama 2014. Prakiraannya saat ini adalah ekspansi perekonomian industri utama sebesar 1,5% pada 2014, turun 0,4 persen dari prakiraan ADO 2014 yang dirilis bulan April lalu, lalu akan membaik hingga 2,1% pada 2015.

Langkah-langkah yang ditargetkan secara khusus untuk menstabilkan investasi telah membantu Tiongkok mempertahankan pertumbuhannya. Setelah mencatat pertumbuhan 7,4% pada kuartal pertama, nilai konsumsi yang bertahan sama dan meningkatnya permintaan eksternal membawa pertumbuhan kuartal kedua naik tipis ke 7,5%. Pemerintah menerapkan pelonggaran kebijakan moneter dengans sasaran khusus, dan sedikit stimulus fiskal untuk menjaga agar pertumbuhan tidak menurun lebih jauh dari angka 7,7% yang dibukukan pada 2013, sambil terus membatasi pertumbuhan utang. Tiongkok diprediksi akan berhasil mencapai prakiraan pertumbuhan ADO 2014 sebesar 7,5% pada 2014 dan 7,4% pada 2015.

India memperlihatkan harapan baru untuk perubahan ke arah yang lebih baik. Setelah meraih kemenangan meyakinkan dalam pemilu, pemerintah baru siap menjalankan reformasi demi mewujudkan potensi perekonomian India. Reformasi untuk mendorong investasi, pemberian izin lingkungan yang tepat waktu, dan pengendalian inflasi, diharapkan dapat semakin meningkatkan ekspor demi mendongkrak pertumbuhan ekonomi. Pembaruan ini mempertahankan prakiraan pertumbuhan India sebesar 5,5% pada 2014, tetapi meningkatkan prakiraan untuk 2015 sebesar 0,3 persen ke 6,3%, saat reformasi sudah mulai menunjukkan hasilnya.

Di balik pertumbuhan yang stabil secara keseluruhan, telah terjadi perubahan keadaan yang terjadi di sejumlah sub-kawasan:

  • Asia Tenggara akan tumbuh lebih baik tahun depan setelah mengalami pertumbuhan yang tidak sesuai perkiraan di 2014. Pertumbuhan tahun ini diproyeksikan hanya mencapai 4,6%, lebih rendah daripada prakiraan 5,0% di ADO 2014 dan pertumbuhan sesungguhnya sebesar 5,0% pada 2013. Beberapa perekonomian yang cukup besar mengalami penurunan permintaan domestik, sehingga prakiraan PDB dipangkas untuk Indonesia, Filipina, Singapura, Thailand, dan Viet Nam. Sebaliknya, ekspor Malaysia yang naik lagi setelah sebelumnya turun ternyata turut mendorong pertumbuhan ekonomi yang lebih kuat di negara itu. Tahun depan, kinerja perekonomian industri utama yang lebih baik dan pemulihan Thailand dari kemerosotan ekonominya akan mendorong pertumbuhan di Asia Tenggara ke 5,3%.
  • Pertumbuhan PDB di Asia Timur masih tetap sebesar 6,7% pada 2014 dan 2015 karena penurunan pertumbuhan di RRT dan Hong Kong—serta perlambatan di Mongolia—tertutupi oleh peningkatan yang didorong ekspor di Republik Korea dan Taipei,RRT. Pertumbuhan PDB di Mongolia akan turun jauh di bawah prakiraan ADO 2014 untuk tahun 2014 dan 2015 akibat anjloknya investasi asing and tertundanya sejumlah proyek pertambangan. Inflasi di Asia Timur akan tetap terkendali sebesar 2,4% pada 2014, tetapi kemungkinan akan merayap naik ke 2,9% pada 2015, yang terutama mencerminkan situasi di RRT.
  • Asia Selatan menunjukkan kinerja lebih baik daripada yang diperkirakan. Prakiraan pertumbuhan di sub-kawasan tersebut untuk 2014 naik tipis ke 5,4%, yang mencerminkan penguatan di Bangladesh dan Pakistan berkat ekspor dan remitansi. Pertumbuhan di Asia Selatan akan naik ke 6,1% pada 2015, lebih tinggi 0,3 persen daripada prakiraan sebelumnya. Selain revisi ke atas untuk India, prakiraan pertumbuhan Pakistan dan Bangladesh juga naik tipis pada 2015, tetapi upaya perbaikan iklim investasi swasta akan sangat menentukan dalam kedua kasus tersebut. Prakiraan untuk inflasi sub-kawasan dipotong tipis sekitar 0,3 persen menjadi 6,1% pada 2014 dan 5,9% pada 2015.
  • Pertumbuhan di Asia Tengah terkendala akibat perlambatan di Federasi Rusia. Lebih rendah daripada proyeksi ADO 2014 sebelumnya, pertumbuhan di sub-kawasan ini kini diproyeksikan menurun ke 5,6% pada 2014 akibat perlambatan aktivitas di Armenia, Kazakhstan, Kirgistan, Turkmenistan, dan Uzbekistan. Prakiraan untuk 2015 diturunkan ke 5,9% menyusul revisi terhadap pertumbuhan Armenia, Georgia, Kazakhstan, Kirgistan, dan Uzbekistan. Proyek pertumbuhan yang lebih rendah ini mencerminkan kondisi yang stagnan di Federasi Rusia dan perlambatan industri secara tajam di Kazakhstan.
  • Prospek di Pasifik meredup akibat kerusakan dari hujan yang sangat deras di Kepulauan Solomon pada awal 2014, aktivitas usaha yang tidak sesuai perkiraan di Timor-Leste, dan kemerosotan bidang konstruksi dan pariwisata di Palau.

Menurunnya harga pangan dan stabilnya harga minyak menjadikan inflasi masih tetap terjaga. Harga konsumen di kawasan ini diperkirakan akan naik 3,4% pada 2014, sama seperti pada 2013, tetapi akan meningkat tipis ke 3,7% pada 2015. Sebagian besar pemerintah mempertahankan kebijakan tingkat suku bunganya sesuai dengan keadaan inflasi rendah.

ADB, yang berkedudukan di Manila, didedikasikan untuk mengurangi kemiskinan di kawasan Asia dan Pasifik melalui pertumbuhan ekonomi yang inklusif dengan lingkungan yang berkelanjutan, dan integrasi kawasan. ADB didirikan pada tahun 1966 dan dimiliki oleh 67 anggota – 48 diantaranya berasal dari kawasan Asia dan Pasifik, termasuk Indonesia. Pada tahun 2013, bantuan ADB berjumlah sebesar $210 milyar, termasuk pembiayaan bersama (cofinancing) sebesar $6,6 milyar.

Seoul, March 18, 2015 (AFP)
South Korea’s jobless rate rose to a five-year high in February as more college graduates and cash-strapped retirees flooded the increasingly tight job market, state data showed Wednesday.The jobless rate of 4.6 percent in February — up from 3.8 percent in January and 4.5 percent a year ago — was the highest since February 2010, according to the state-run Statistics Korea.The seasonally adjusted jobless rate also rose on month from 3.4 percent in January to 3.9 percent in February, when most college students graduate.The seasonally adjusted jobless rate remained the same from a year ago.”More and more youngsters and those in their 50s sought jobs in February, pushing the jobless rate higher,” Statistics Korea said in a statement.The jobless rate among those aged 25 to 29 stood at 9.1 percent in February, down from 9.2 percent in January but far higher than the overall unemployment rate of 4.6 percent.The jobless rate for the wider group of those aged 15 to 29 stood at 11.1 percent — the highest since the government began tallying the youth jobless rate in 1999.South Korean baby boomers forced to retire in recent years are reportedly flooding the job market, seeking part-time jobs once held mostly by young people.
New Delhi, March 16, 2015 (AFP)
International Monetary Fund chief Christine Lagarde hailed India as the bright spot of the global economy on Monday ahead of talks in New Delhi with Prime Minister Narendra Modi.While Lagarde urged Modi to do more to open up the economy, she said India had the “opportunity to become one of the world’s most dynamic economies” with growth running at above seven percent.”Among the emerging markets, and compared to advanced economies, India is the bright spot,” the former French finance minister told The Times of India newspaper.Since Modi came to power last May, inflation has fallen to around five percent while revised gross domestic product (GDP) data has put growth for the current financial year at 7.4 percent, meaning Asia’s third largest economy is now outpacing China.A fall in global crude prices has also been a major boon to a country that is one of the world’s biggest oil importers.Lagarde welcomed the government’s first full budget last month for striking “a good growth-equity balance” and praised Modi’s drive to make India a major manufacturing hub and an easier place to do business.But she also outlined a series of areas where the government needed to do more to encourage investment.”The economy should be opened more fully to the world, and there’s a good case for removing domestic constraints on growth, especially in energy, mining and power,” she said.”Further reforms of India’s complex labour laws to encourage young job-seekers and boost female labour participation, as well as easing of land acquisition and other clearances, will help revive the investment cycle and achieve faster growth.”Lagarde is paying a two-day visit to India, her first since the right-wing Modi replaced the centre-left Congress party in government.As well as her talks with top officials, she is also due to deliver a keynote speech in New Delhi before travelling to the financial capital Mumbai for meetings on Tuesday.
Ekonomi Jepang berhasil mentas dari resesi di kuartal terakhir 2014. Pertumbuhan ekonomi
periode Oktober-Desember mencapai 0,6% ketimbang periode tiga bulan sebelumnya.
Angka ini lebih rendah ketimbang prediksi sebesar 0,9%.
Ekonomi Jepang tumbuh setelah berkontraksi selama dua kuartal berturut-turut sebelumnya.
Pertumbuhan ekonomi Jepang pada kuartal terakhir 2014 mencapai 2,2% ketimbang periode
yang sama tahun sebelumnya.(kontan/az)

INILAHCOM, Jakarta – Perekonomian Thailand melambat tajam pada 2014 menjadi tumbuh pada kecepatan paling lambat dalam tiga tahun terakhir. Itu karena gejolak politik melanda kerajaan itu diperparah penurunan harga pertanian dan melemahnya ekspor.

Produk Domestik Bruto (PDB) meningkat 0,7 persen pada tahun lalu, juga turun dari 2,9 persen yang tercatat pada 2013, Badan Pembangunan Ekonomi dan Sosial Nasional (NESDB) mengatakan dalam sebuah pernyataannya, Senin (16/02/2015).

Angka tersebut paling lemah sejak tumbuh 0,1 persen pada 2011, ketika negara itu hancur dilanda banjir. Pertumbuhan secara luas diperkirakan terpukul akibat kerusuhan politik berbulan-bulan yang menghambat kedatangan wisatawan, memperlambat investasi asing dan melumpuhkan pengeluaran pemerintah sebelum tentara merebut kekuasaan Mei yang berjanji akan memulihkan perdamaian dan perekonomian.

Namun, ada beberapa tanda-tanda baik karena pertumbuhan kuartal keempat datang di 2,3 persen secara tahun-ke-tahun, dan 0,6 persen pada kuartal sebelumnya. Demikian menurut dewan. “Pertumbuhan PDB pada kuartal ini disebabkan oleh kemajuan dalam sektor non-pertanian, kenaikan permintaan domestik dan eksternal serta investasi yang lebih besar,” terang dia.

Selama tahun ini, sektor pertanian utama Thailand, termasuk beras dan karet, kesulitan akibat penurunan harga global, membatasi jumlah tanaman yang diproduksi dan mengambil uang keluar dari kantong warga Thailand. Pemerintahan junta militer telah berjanji untuk memompa miliaran dolar ke dalam perekonomian, terutama melalui skema infrastruktur yang telah lama direncanakan.

Namun angka terbaru akan menimbun tekanan pada para pemimpin, yang telah berjanji akan mengekang subsidi untuk pertanian dan meminta warga Thailand untuk menghentikan diri dari kredit. Thailand adalah salah satu kerajaan yang paling banyak memiliki utang di Asia Tenggara. Kesulitan ekonomi meningkat ketika saingan regionalnya Indonesia dan Filipina maju.

“Ekonomi Thailand harus mendapatkan landasan yang kuat dalam kuartal mendatang, namun pertumbuhannya masih cenderung mengecewakan berdasarkan standar masa lalu,” kata Capital Economics dalam sebuah catatan singkat. [tar] – See more at:

Tokyo, Feb 16, 2015 (AFP)
The Japanese economy limped out of recession in the final three months of last year, official data showed Monday, but growth was flat for 2014 and the weaker-than-expected figures were likely to boost calls for more central bank stimulus.

The tepid results come after the world’s number-three economy contracted between July and September — the second consecutive quarterly decline — as consumer spending dropped sharply following an April sales tax rise aimed at shrinking Japan’s massive national debt.

But the country has since been seeing signs of a modest recovery — including an uptick in factory output and a tight labour market. Economists had widely expected a 0.9 percent expansion between October and December.

The government figures on Monday showed a weaker-than-expected 0.6 percent growth rate in the three months to December, or 2.2 percent on an annualised basis.

Over the full year, the preliminary data showed a flat 0.0 percent growth rate for 2014, after a 1.6 percent expansion in 2013. Revised figures will be released in the following weeks.

By contrast, the US economy grew at its fastest pace in four years in 2014, expanding at an annualised rate of 2.4 percent.

“While Japan’s economy has finally left the tax-related weakness behind, the increase in Q4 GDP fell short of expectations and supports our view that the Bank of Japan will announce more stimulus in April,” Marcel Thieliant from Capital Economics said a note after the figures were released.

“Today’s result indicates that the Bank of Japan’s view on growth is too optimistic, and we still believe that the Bank will announce more easing at the late-April meeting.”

– Uncertain future –

Last month, Japan’s central bank slashed its inflation outlook as plunging oil prices dent efforts to slay years of deflation. But policymakers still boosted their growth forecasts, saying the economy would expand by 2.1 percent in the fiscal year to March 2016, up from an earlier 1.5 percent forecast.

Prices were on the rise, largely due to Japan’s heavy post-Fukushima energy bills, but oil rates have tumbled by about half since the summer.

The BoJ’s inflation target is a cornerstone of Tokyo’s wider bid to turn around years of tepid growth by generating price rises and prompting firms to boost their hiring and expansion plans.

But the sales tax rise — Japan’s first in 17 years — slammed the brakes on consumer spending, plunging the economy into recession and throwing the success of Prime Minister Shinzo Abe’s growth plan, dubbed Abenomics, into question.

Abe’s pro-spending policy blitz — which also calls for major reforms to the highly regulated economy — boosted stock prices and pushed the yen down, a plus for Japanese exporters.

The levy hike to 8.0 percent from 5.0 percent threw the plan off kilter.

The tax rises are aimed at paying down Japan’s enormous national debt, one of the heaviest burdens among wealthy nations, but they have put Abe in a tricky position as he tries to balance them with his growth plan.

Faced with souring economic data, Abe delayed a second tax hike planned for this year to 2017.

He also dissolved the lower chamber of parliament for snap elections in December, two years ahead of schedule, which he and his Liberal Democratic Party ultimately won.


<org idsrc=”isin” value=”FR0004037125″>April</org>

Tokyo, Feb 16, 2015 (AFP)
Japan’s economy grew 0.6 percent in the three months to December, as the world’s third largest economy crawled out of recession, the government said Monday, while the data showed flat growth for the full year.

The quarterly reading came in below the median forecast of 0.9 percent growth in a survey by the Nikkei economic daily.

On an annualised rate, the economy expanded 2.2 percent in the fourth quarter, the Cabinet Office said.

Over the full year, the data showed a flat 0.0 percent growth rate for 2014, after a 1.6 percent expansion in 2013. Finalised figures will be released in the following weeks.

Japan’s economy contracted for the second straight quarter between July and September as consumer spending dropped sharply following an April sales tax rise aimed at shrinking the country’s massive national debt.

But Japan has been seeing signs of a recovery — including an uptick in factory output and a tight labour market.

The fall into recession dented Prime Minister Shinzo Abe’s pro-spending growth bid, dubbed “Abenomics”, which boosted stock prices and pushed the yen down, a plus for Japanese exporters.

But the levy hike to 8.0 percent from 5.0 percent — Japan’s first sales tax rise in 17 years — slammed the brakes on consumer spending, plunging the economy into recession and throwing the success of Abenomics into question.

The tax rises are aimed at paying down Japan’s enormous national debt, but they have put Abe in a tricky position as he tries to balance them with his growth plan.


Hong Kong, Jan 21, 2015 (AFP)
Tokyo shares fell on Wednesday, countering a broad rally in Asian markets, after the Bank of Japan slashed its inflation forecast and held off fresh easing measures after a two-day meeting.

The yen rose against both the dollar and the euro on the news, however, as traders took solace in the BoJ’s announcement that it was also raising Japan’s growth outlook on signs the economy was rebounding.

Shares in Tokyo’s benchmark Nikkei index fell 0.65 percent in afternoon trade, while Seoul stocks dropped 0.11 percent.

Hong Kong, however, saw stocks rise 1.30 percent while Shanghai added 2.23 percent and Sydney rose 1.45 percent.

“(BoJ Governor Haruhiko) Kuroda will be under pressure to increase stimulus,” Masamichi Adachi, an economist at JPMorgan Chase &amp; Co., told Bloomberg News.

“It must be getting harder for him to communicate with market participants, with the economy expected to recover while inflation is slowing due to oil (prices falling).”

The BoJ said inflation for the year starting in April would come in at 1.0 percent, well down from an earlier 1.7 percent forecast, while the economy would expand by 2.1 percent, up from its previous expectation of 1.5 percent.

The price downgrade underscores how the bank’s bid to reach a 2.0 percent inflation target by early next year looks increasingly unlikely, and it will fuel speculation that the BoJ will be forced to unleash further stimulus to kickstart the world’s number three economy.

Japan’s monetary policy announcement comes ahead of another much-anticipated meeting of the European Central Bank (ECB) on Thursday.

Experts broadly expect the ECB to announce a bond-buying scheme aimed at kickstarting lending in the struggling eurozone.

The improved growth outlook pushed the yen higher, to 117.85 against the dollar, compared with 118.82 a day earlier. It was also worth 136.34 versus the euro, compared to 137.24.

The euro, meanwhile, fetched $1.1569 compared with $1.1550 in London.

Oil prices moved higher. The US benchmark, West Texas Intermediate for March delivery, climbed 47 cents to $46.94 while Brent crude for March rose 45 cents to $48.44.

Gold fetched $1,295.65 an ounce, against $1,291.31 late Tuesday.

PARIS &ndash; Komitmen World Economic Forum (WEF) untuk memajukan kondisi dunia akan diuji lagi tahun ini, lantaran perekonomian dunia melambat dan dua lembaga keuangan terkemuka global memangkas proyeksi pertumbuhannya tahun ini dan tahun depan. Pertemuan Davos yang dijadwalkan berlangsung pada 21-24 Januari 2015 di resor ski Davos, Swiss ini tidak komplet tanpa adanya analisis menyeluruh mengenai kondisi perekonomian dunia terkini dan apa yang akan terjadi ke depan.


Dana Moneter Internasional (IMF) pada Selasa (20/1) memangkas tajam proyeksi pertumbuhan ekonomi dunia 2015-2016 dari posisi enam bulan lalu. IMF menyatakan, harga minyak mentah lebih rendah tidak bisa menutupi pelemahan yang sudah menjalar ke seluruh dunia.


Kreditor internasional berbasis di Washington, Amerika Serikat (AS) itu menyatakan, prospek lebih buruk di Tiongkok, Rusia, zona euro, dan Jepang akan menghambat pertumbuhan produk domestik bruto (PDB) dunia menjadi 3,5% tahun ini dan 3,7% pada 2016. Proyeksi itu lebih rendah dibandingkan 3,8% dan 4% untuk 2015 dan 2016, dalam laporan Prospek Ekonomi Dunia pada Oktober 2014.


Pemangkasan tersebut menegaskan satu hal, yakni gambaran perekonomian di banyak negara memburuk, yang disebabkan lesunya investasi, melambatnya perdagangan, dan jatuhnya harga komoditas. Menurut IMF, kendati AS akan tetap menjadi titik cerah di antara negara perekonomian besar, Eropa akan terus dilanda kesulitan dengan deflasinya.


Pada saat yang sama, pertumbuhan ekonomi Tiongkok &ndash; yang melambat dari 7,7% pada 2013 menjadi 7,4% pada 2014 atau terendah dalam 24 tahun &ndash; diperkirakan terus turun. Perlambatan ekonomi Tiongkok ini, kata IMF, disebabkan buruknya pertumbuhan ekspor dan kemerosotan pasar properti.

Washington, Jan 20, 2015 (AFP)
The International Monetary Fund on Tuesday lowered its growth forecast for the global economy to 3.5 percent this year and 3.7 percent in 2016.

Here are its newest growth predictions for selected regions and countries, with the change in percentage points from the IMF’s October outlook in parentheses.

<pre> 2015 2016
<pre> 3.5 (-0.3) 3.7 (-0.3)
Advanced economies 2.4 (0.1) 2.4 (0.0)

United States 3.6 (0.5) 3.3 (0.3)

<pre> 1.2 (-0.2) 1.4 (-0.3)
<pre> 1.3 (-0.2) 1.5 (-0.3)
<pre> 0.9 (-0.1) 1.3 (-0.2)
<pre> 0.4 (-0.5) 0.8 (-0.5)
<pre> 2.0 (0.3) 1.8 (0.0)
<pre> 0.6 (-0.2) 0.8 (-0.1)
<pre> 2.7 (0.0) 2.4 (-0.1)
<pre> 2.3 (-0.1) 2.1 (-0.3)
Emerging &amp; developing economies 4.3 (-0.6) 4.7 (-0.5)

Central &amp; Eastern Europe -2.4 (-1.6) 4.4 (-0.2)

<pre> -3.0 (-3.5) -1.0 (-2.5)
Emerging &amp; developing Asia 6.4 (-0.2) 6.2 (-0.3)

<pre> 6.8 (-0.3) 6.3 (-0.5)
<pre> 6.3 (-0.1) 6.5 (0.0)
Latin America &amp; Caribbean 1.3 (-0.9) 2.3 (-0.5)

<pre> 0.3 (-1.1) 1.5 (-0.7)
<pre> 3.2 (-0.3) 3.5 (-0.3)
Middle East, North Africa,

Afghanistan, Pakistan 3.3 (-0.6) 3.9 (-0.5)

Sub-Saharan Africa 4.9 (-0.9) 5.2 (-0.8)

South Africa
<pre> 2.1 (-0.2) 2.5 (-0.3)

OPEC’s Future Seen in Mining Slump as Oil Price Pummeled

Oil producers reluctant to curb output even as prices tumble to five-and-a-half year lows don’t need to guess what the future holds. They can ask a miner.

In coal to iron ore markets, suppliers have raised volumes even as prices slumped, boosting global gluts and jeopardizing profits as the most dominant players seek to maintain revenue and squeeze out higher cost rivals.

Prices of thermal coal, used to generate electricity, and metallurgical coal, a key ingredient in steel, have tumbled more than half since 2011 on supply additions and slowing demand in China, the biggest commodities consumer. With OPEC insistent that it won’t curb crude output, and U.S. production rising to its fastest weekly pace in more than 30 years, oil markets may be in line for similar prolonged pain.

“If OPEC every now and again looks over their shoulder at what is happening in other commodities you’d think it would be a warning,” said David Lennox, a Sydney-based resource analyst at Fat Prophets.

The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, agreed to maintain its production target at 30 million barrels a day at a Nov. 27 meeting in Vienna. The group is wagering that U.S. shale drillers will be first to curb output as prices drop, echoing a strategy played out by the largest miners.

“The current prices are not sustainable,” Suhail Al Mazrouei, energy minister of OPEC member the United Arab Emirates said Jan. 14 in Abu Dhabi. “Not for us but for the others.”

Iron Ore Pain

Iron ore producers who predicted a swift exit by higher cost suppliers as their commodity entered a bear market last March were caught out as curbs to global output proved slower than anticipated, Nev Power, the chief executive officer of Australian iron ore producer Fortescue Metals Group Ltd. said in October.

Coal exporters, too, have kept increasing supply as prices slid. Global output rose about 3 percent between 2011 and 2013 as prices declined, according to World Coal Association data. In Australia, the biggest exporter of metallurgical coal, production is forecast to rise again in the year to July, according to the nation’s government.

“Oil will have more similarities to both thermal and metallurgical coal,” Melbourne-based Morgan Stanley analyst Joel Crane said by phone. “Those prices have been weakening for more than three years now, yet we’ve seen very little in terms of shutdowns.”

Worse to Come

Slow implementation of cuts to production mean coal prices probably won’t recover until 2016, according to Moody’s Investors Service. The price of iron ore, down 47 percent last year, will remain low through 2016 amid supply additions from Australia and Brazil. UBS AG expects the global iron ore surplus to jump about sixfold to more than 200 million tons by 2018.

For the oil sector, “the lesson is that there’s more oversupply to come,” said Crane. “People are going to crank out more to sell for a lower price and keep that revenue up.”

U.S. crude output surged to 9.19 million barrels a day in the week to Jan. 9, the fastest pace in weekly records dating back to January 1983. That’s amid a global supply surplus estimated by the United Arab Emirates and Qatar at 2 million barrels a day.

Output from OPEC’s 12 members increased by 140,000 barrels a day in December, led by a jump of 285,100 a day in Iraq, which plans to double exports within weeks from its northern Kirkuk oil fields. In the U.S., an oil boom has been prompted by the implementation of horizontal drilling and hydraulic fracturing that’s unlocked shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota.

Absolute Drop

The surge in supply of oil to iron ore comes as China’s transition toward consumer-led growth brings to a close a period of booming demand for metals to energy. The result may be an absolute drop in commodities demand, not simply slower growth, according to Credit Suisse Group AG.

“We’re now close to the end of this big oil cycle and entering the next 10 to 15 years cycle of a more balanced and stable market,” Oslo-based Nordea Markets analyst Thina Saltvedt said by phone.

Expectations that U.S. shale drillers will be most exposed to tumbling prices as demand falls may prove incorrect, according to Fat Prophets’s Lennox. Onshore operations are trimming capital spending and able to cut jobs, while the importance of oil revenue to national budgets of some OPEC member nations may make those suppliers less able to adapt, he said.

Country Risk

“We’ll see the structure of shale costs coming down, whereas it’s probably more difficult for Saudi Arabia to restructure their political spending, for example,” Lennox said. “There are greater consequence for the leaders of that country say, than for the managing director of a small company in Texas.”

To be sure, the process of shale oil production means drillers can respond quickly to declining prices and also are better positioned to react than counterparts in the mining sector, according to Sydney-based Justin Smirk, a senior economist at Westpac Banking Corp.

“It’s very, very expensive to shut a mine because of the costs of getting it up and running again,” Smirk said by phone. “With fracked oil, you stop drilling and you stop spending and the supply dries up quite quickly.”

A “war” for market share is poised to weigh further on oil prices, Australia & New Zealand Banking Group said Jan. 15 as it forecast Brent crude will average $50 a barrel this year, 27 percent lower than a previous estimate.

Yet just as in the iron and coal sectors, oil producers may be ready to endure weak prices for the next two to three years in the belief it will force competitors to shutter and eventually spur gains, according to Lennox.

“The big guys who are still getting a margin will say you want to punish the little guys,” said Morgan Stanley’s Crane.


China Dream Ends for Handan as Steel Slump Spurs Property Losses

Five months ago, Hao Liwei was living the good life, funded by a 36 percent annual return on a property investment. Then her nightmare began.

Interest payments ceased in August and attempts to recover her money failed. Her home town, the steel-production city of Handan, 450 kilometers (280 miles) southwest of Beijing in Hebei province, was grappling with plunging demand for steel and plummeting prices. Economic growth slumped to 5.5 percent in the first nine months of last year, from 10.5 percent in 2012.

“The sky collapsed and I thought of killing myself,” said Hao, 40, now a taxi driver. “It was just like a dream: I had everything but when I woke up it was all gone.”

Hao is among the collateral damage as China reins in years of debt-fueled investment-led growth that’s evoked comparisons to the period preceding Japan’s lost decades. As policy shifts China toward greater consumption and innovation-led growth, Handan’s reliance on the steel industry for expansion has left it among cities feeling the brunt of adjustment pain.

“Steel towns have been decimated many times before, in Pittsburgh, in the U.K., in France, in Belgium,” said Junheng Li, founder of researcher JL Warren Capital LLC in New York. “Handan has a choice: cling to steel and suffer an inexorable decline or invest in the future, wherever it may be.”

Illegal Fundraising

Handan’s woes deepened in September, when local authorities sent work teams into 13 property developers to contain risks after a failure to repay funds raised illegally from the public sparked panic, Xinhua News Agency reported. Thirty-two homebuilders had raised a combined 9.3 billion yuan ($1.5 billion) in illegal fundraising or high-return deposits, causing police to detain 94 people, Xinhua reported.

In freezing, pollution-darkened air that exceeded the World Health Organization’s safety limit by more than 14 times, Wu Ren waited last week outside a property development in downtown Handan in hope of recovering funds he invested in a developer named Century in Gold. Wu, in his mid-40s, said he invested 500,000 yuan for a return exceeding 18 percent a year. The developer’s boss disappeared in August, he said.

“I thought it’s a harmonious society,” said Wu, referring to a phrase used to describe part of former President Hu Jintao’s ideological vision for China. “I didn’t expect this, to be cheated.”

Phone calls by Bloomberg News to Century in Gold’s sales office hot line last week went unanswered.

China’s shift away from investment-led growth has led to bear markets in everything from iron ore to coal. Contracts for steel rebar, or reinforcing steel used in construction, on the Shanghai Futures Exchange have fallen more than 25 percent in the past year.

Cyclical Downturn

Goldman Sachs Group Inc. last year joined other banks in calling an end to the commodities supercycle after a decade of price gains fueled by Chinese demand. The biggest consumer of industrial metals and iron ore and the largest oil user after the U.S. posted the slowest full-year expansion since 1990, according to economists projections of gross domestic product data for 2014 that’s due to be released on Tuesday.

In another abandoned property project named Century Garden, also developed by Century in Gold, the sales office was locked last week. A notice from police and the local court stuck on its windows asks those involved in “illegal deposit taking” to turn themselves in while another policy notice warns against “illegal petitioning practices” such as blocking government office gates and public roads.

Behind the office, there’s no sign of activity on unfinished apartment blocks. A huge advertisement hanging on one building promoted the project as “the choice of the wise.”

Overcapacity Story

“This is a classic showcase of China’s overcapacity story,” said Dong Tao, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. “Industrial overcapacity to start with, followed by property overcapacity and then government-driven infrastructure overcapacity.”

In another corner of the street, Zhao Kejin sat on the concrete stairways of the closed Sunshine Shore property project office. Hand-written white banners hung across its front say, “Give me my blood-sweat money.”

The 55-year-old cement engineering contractor said he had worked on the project for a year and is owed 10 million yuan.

“I need the money to pay my fellow workers,” he said, burning wood in a metal bucket to keep warm. “But no progress yet.”

Evidence from places as far afield as Scotland suggests it will be difficult for towns and cities built off one industry to transition to new growth drivers.

“New industries that will develop if China is successful in moving toward consumer-led growth will require different skills and those can often be found in places that are very far removed from the old growth centers,” said Freya Beamish, a Hong Kong-based economist at Lombard Street Research Ltd. “There are still towns in Scotland where there are simply no jobs.”

JAKARTA – Nilai tukar Rupiah terhadap dolar Amerika Serikat (AS) dibuka menguat tipis. Rupiah berhasil bergerak di bawah Rp12.589 per USD.Melansir Bloomberg Dollar Index, Rabu (14/1/2015), Rupiah pada perdagangan non-delivery forward (NDF) menguat 11 poin atau 0,1 persen ke Rp12.589 per USD. Pagi ini, Rupiah bergerak di kisaran Rp12.574-Rp12.592 per USD.

Laju dolar AS mengalami pelemahan setelah World Bank memangkas proyeksi pertumbuhan global tahun ini. Pasalnya, perbaikan ekonomi Amerika dan penurunan harga bahan bakar tidak dapat mengimbangi data yang mengecewakan dari Eropa dan China.

World Bank memperkirakan ekonomi dunia akan tumbuh 3 persen pada 2015, turun dari proyeksi Juni 3,4 persen sebesar. Laporan ini memperkuat tanda-tanda perbedaan pertumbuhan antara Amerika dan negara besar lainnya meskipun ada optimisme bahwa harga minyak yang lemah akan meningkatkan output.

Namun, Bank Dunia juga meng-upgrade proyeksi pertumbuhan AS menjadi 3,2 persen tahun ini dari perkiraan 3 persen pada Juni. Proyeksi pelemahan di euro dan Jepang karena efek dari krisis keuangan. Selain itu, proyeksi China, ekonomi dunia terbesar kedua, juga mengalami perlambatan ekonomi yang disengaja.

Jepang mencatat surplus transaksi berjalan untuk bulan kelima berturut-turut pada November.
Data resmi Jepang menunjukkan, pelemahan yen membantu meningkatkan hasil investasi di luar
negeri yang dipulangkan.

Kementerian Keuangan Jepang mencatat surplus 433,0 miliar yen (USD3,7 miliar) dalam transaksi
berjalan, membalikkan defisit 596,9 miliar yen setahun sebelumnya. (metrotv/dk)

Fed fund rate: Jefferies Chief Financial Economist interpreted the time frame for fed fund rate hike is between June-December 2015 and he still think that December is the most likely timing. Meanwhile, Jefferies&rsquo; strategist believes that the time frame will be a 3 month &ldquo;patience&rdquo; period inferring April is in play. (Jefferies)

Comment: The statement from FOMC yesterday still emphasized the data-dependent action for the first rate hike, however the new term of &ldquo;patience&rdquo; could be interpreted in various ways. We still believe the time will be sometime in mid 2015 which falling in the range of first interpretation. The new word of patience may indicate faster period but it may take a while before Fed&rsquo;s dual mandate to be achieved. ipot

(Reuters) – President Vladimir Putin assured Russians on Thursday that the economy would rebound after the ruble’s dramatic slide this year but offered no remedy for a deepening financial crisis.

Defiant and confident at a three-hour news conference, Putin blamed the economic problems on external factors and said the crisis over Ukraine was caused by the West, which he accused of building a “virtual” Berlin Wall to contain Russia.

At times sneering, at others cracking jokes, he ignored pressure to say how he will fix an economy facing what his economy minister calls a “perfect storm” of low oil prices, Western sanctions overUkraine and global financial problems.

The rouble has fallen about 45 percent against the dollar this year, and suffered particularly steep falls on Monday and Tuesday, but Putin refused to call it a crisis and said it would eventually rise again.

“If the situation develops unfavorably, we will have to amend our plans. Beyond doubt, we will have to cut some (spending). But a positive turn and emergence from the current situation are inevitable,” Putin said in comments to a packed conference center that were broadcast live to the nation.

Although he said the recovery might take two years, much will depend on how long the West maintains sanctions on Russia over its role in the Ukraine crisis.

European Union diplomats said the 28-nation bloc would ban investment in Crimea from Saturday over Russia’s annexation of the Black Sea peninsula and President Barack Obama is set to sign legislation authorizing new U.S. sanctions.

But Putin showed no sign of heeding a call by EU foreign policy chief Federica Mogherini for “a radical change in attitude toward the rest of the world and to switch to a cooperative mode”.

Sitting at a big desk in front of two large screens showing close-ups of his face, a white mug with a presidential crest on beside him, Putin appeared mainly intent on showing Russians he is in command and will not kow-tow to the West.


The former KGB spy said Russia must diversify its economy to reduce dependence on oil, its major export and a key source of state income, but he gave no details and has said many times during 15 years in power that he will do this.

The rouble slipped as he spoke, and was about 2 percent weaker against the dollar on the day. The central bank increased its key lending rate by 6.5 percentage points to 17 percent on Tuesday, and has spent more than $80 billion trying to shore up the rouble this year, but to little avail.

Although Putin said the central bank and government had acted “adequately”, he chided the bank for not halting foreign exchange interventions sooner, suggesting more decisive action might have made this week’s big rate rise unnecessary.

“All this implies pretty big divisions within the administration as to how to react to the crisis and pressure on the rouble,” said Timothy Ash, head of emerging market research at Standard Bank in London, adding that heads could roll.

Neil Shearing, chief emerging markets economist at Capital Economics in London, said Putin signaled no change of policy and capital controls remained “a measure of last resort”.

“Whatever happens, a deep recession now looms,” he said.

Putin’s popularity has soared over the annexation of Crimea but the ruble’s decline could erode faith in his ability to provide financial stability, an important source of his support.

An opponent, former Prime Minister Mikhail Kasyanov, said problems would mount as prices are expected to surge next year and Putin would need “an exit strategy” to leave power.

But Putin said he felt the “support of the Russian people”, though he had not decided yet whether to seek a new six-year term in an election due in 2018.

Asked about Ukraine, where Russia has irked the West by backing pro-Russian separatists fighting in two eastern regions, Putin said Moscow wanted a political resolution to a conflict that has killed 4,700 people.

He also called for “political unity”, suggesting he does not intend to annex the regions that have rebelled, and avoided calling them “New Russia”, a phrase he has used in the past.

But he blamed NATO for the worst relations between Moscow and the West in decades.

“Didn’t they tell us after the collapse of the Berlin Wall that NATO would not expand eastwards? But it happened immediately. Two waves of expansion. Is that not a wall? … It’s a virtual wall,” he said.

(Additional reporting by Moscow newsroom; Editing by Giles Elgood)

TOKYO, Dec 17, 2014 (AFP)
The embattled ruble recouped some losses in Asian trade on Wednesday after crashing to unprecedented lows, but market players were not convinced of authorities’ ability to reverse the downward trend.

The Russian currency dived to 80 rubles against the dollar and 100 on the euro Tuesday, testing President Vladimir Putin’s ability to ride out both the country’s economic storm and his clash with the West.

To make matters worse, the White House announced that US President Barack Obama plans to approve tightening sanctions against Moscow over its Ukraine incursion.

In Asian afternoon trade, the dollar bought 69.07 rubles while the euro fetched 84.96 rubles.

The Russian central bank boosted its key interest rate to 17.0 percent from 10.5 percent but the move “has failed to stabilise the ruble,” said Sebastien Barbe, head of emerging market research and strategy at Credit Agricole.

The rate hike and plunging oil prices suggest “a meaningful recession next year,” he said in a note.

“Further depreciation pressure suggests that rate hikes and FX intervention may not be enough. At the current juncture, the odds of targeted capital controls are increasing significantly.”

The almost halving of crude oil prices in the past six months has been devastating for Russia’s economy, which is heavily dependent on exports of natural resources.

The euro was mixed after data surprises Tuesday depicted a eurozone economy holding up better than feared, as the 18-nation bloc reported a record trade surplus and the ZEW index for German investment sentiment improved.

The common European currency bought $1.2495, against $1.2511 in New York, while it edged up to 146.07 yen against 145.86 yen.

The Japanese currency was firm on safe-haven buying, with the dollar at 116.89 yen, up from 116.59 yen in US trade but still down from 117.39 yen in Tokyo earlier Tuesday.

Investors are awaiting the outcome of the Federal Reserve’s monetary policy meeting later Wednesday. The Fed is expected to adjust its forecasting language to allow a better understanding of its interest-rate hike plans.

TEMPO.CO , Jakarta – Melemahnya kurs rupiah terhadap dolar dalam beberapa waktu terakhir diyakini sebagai akibat dari spekulasi rencana kenaikan suku bunga The Fed Rate di Amerika Serikat. Namun Menteri Keuangan Bambang Brodjonegoro punya analisis lain mengenai penyebab jebloknya rupiah beberapa waktu ke depan. (Baca: Menkeu: Dolar ‘Mudik’, Rupiah Menukik.)

Menurut Bambang selain Amerika ada negara lain yang bisa mempengaruhi kurs rupiah yakni Rusia. Kebijakan pemerintah Rusia untuk menaikkan suku bunga acuan, kata Bambang, kemungkinan bisa membuat rupiah semakin terpuruk. “Kenaikan suku bunga Rusia akan menyebabkan perubahan yang signifikan di pasar, terutama terhadap permintaan surat berharga dalam nilai rupiah,” kata Bambang.

Tingginya suku bunga Rusia ada kemungkinan merangsang pelarian dana dari negara berkembang lainnya. Bambang mengatakan bulan ini adalah keenam kalinya Rusia menaikkan suku bunga demi mendorong kurs rubel yang jeblok dihantam dolar. (Baca: Lawan Dolar, Indonesia Unggul Ketimbang Malaysia.)

Sebelumnya Reuters mengabarkan Bank Sentral Rusia mengumumkan kenaikan suku bunga acuan dari 10,5 persen menjadi 17 persen. Keputusan ini berlaku sejak Selasa, 16 Desember 2014. “Keputusan ini bertujuan untuk membatasi risiko meningkatnya depresiasi rubel dan risiko inflasi,” demikian pernyataan Bank Sentral Rusia.

Nilai tukar rubel terhadap dolar Amerika merosot 10 persen pada Senin, 15 Desember 2014. Ini adalah penurunan rubel terendah sejak 1998. Pelemahan nilai tukar Rubel menyusul jatuhnya harga minyak dan sanksi ekonomi negara-negara Barat kepada Rusia. Sejak awal 2014, kurs rubel telah melemah lebih dari 45 persen. Bank Sentral Rusia pun menggelontorkan dana US$ 70 miliar untuk menahan nilai tukar rubel. (Baca: Pelemahan Rupiah Lebih Parah dari 2008 .)

Setelah pengumuman kenaikan suku bunga, rubel menguat dari 67 per dolar menjadi 60 per dolar Amerika. Bank sentral Rusia juga meningkatkan volume maksimum valuta asing yang disediakan untuk bank lewat lelang foreign-exchange repurchase agreement (Repo valas) selama 28 hari. Volume valuta asing ditingkatkan dari US$ 1,5 miliar menjadi US$ 5 miliar.

Investor menilai kenaikan suku bunga ini sebagai langkah positif dan menunjukkan pertahanan bank sentral yang cukup gigih. “Ini jelas merupakan langkah menuju arah yang benar. Tingkat bunga riil positif, 7 sampai 8 persen,” kata Kepala Investasi UBS Wealth Management New York, Jorge Mariscal.


MOSCOW, Dec 16, 2014 (AFP)
The Russian ruble resumed its dramatic slide on Tuesday after bouncing back briefly following an emergency move by Russia’s central bank to raise interest rates to 17 percent.

The currency weakened to a new record of nearly 65 rubles against the dollar after bouncing briefly to 61 rubles earlier Tuesday following the central bank’s midnight move to hike interest rates to 17 percent from 10.5 percent to halt the collapse of the ruble.

The Russian currency hit a low of 64.4 rubles on Monday night, sliding 9.5 percent in a single day, its largest one-day fall since the 1998 crisis.


TOKYO, Dec 05, 2014 (AFP)
Tokyo stocks gained 0.19 percent to close at a new seven-year high Friday, extending their winning streak to the sixth straight day as the dollar topped 120 yen again.

The Nikkei 225 index at the Tokyo Stock Exchange gained 33.24 points to 17,920.45, the best finish since late July 2007, while the Topix index of all first-section issues was up 0.35 percent, or 5.07 points, to 1,445.67.

The Nikkei opened lower in the morning on profit-taking, but soon rebounded to continue its bull run, thanks to a weakening yen, a Wall Street rally and hopes for a decisive win for Prime Minister Shinzo Abe in elections this month.

A weaker yen has been fuelling the optimistic outlook for Japanese corporate earnings, with falling oil prices also cheering investor spirit.

“The yen and oil prices have been dropping quite quickly. It is highly possible that corporate profits will perform better than expected,” said Makoto Morita, a senior strategist at Daiwa Securities.

The European Central Bank also disappointed markets by refusing to unveil any fresh easing measures at its final policy meeting of the year despite the eurozone’s tepid growth and anaemic inflation.

Stimulus efforts by major central banks tend to support asset prices globally.

The dollar fetched 120.09 yen in afternoon trade on Friday, moving narrowly after rising past 120 yen on Thursday to hit a fresh seven-year high.

Shares in troubled airbag maker Takata sank 0.53 percent to 1,324.0 yen, while Toyota rose 0.16 percent at 7,742.0 yen and Honda added 0.35 percent to 3,738.0 yen.

But casual fashion operator Fast Retailing fell 1.56 percent to 43,240. SoftBank fell 0.23 percent to 7.785.

— Dow Jones Newswires contributed to this article —


MUMBAI, Dec 01, 2014 (AFP)
Indian factory output rose at its fastest rate in nearly two years in November, with consumer goods leading the way, a key HSBC survey showed Monday.

The British banking giant said its purchasing managers index (PMI) rose to 53.3 points from 51.6 in the previous month, the highest figure recorded since February 2013.

In the survey, which is seen as a harbinger of industrial expansion and economic health, a reading of more than 50 points suggests expansion while anything below indicates contraction.

“Manufacturing operating conditions in India improved for the thirteenth month in a row in November, supported by stronger growth of output and new work intakes,” said HSBC in a report.

However, the bank cautioned that inflationary pressures had intensified in November after three months of easing.

The latest data comes a day before India’s central bank meets for its regular monetary policy review.

The Reserve Bank of India (RBI) is under pressure to cut its benchmark lending rate, held at a steep eight percent since last January, to help revive the country’s flagging economy.

But any sign of a rebound in inflation will make that more difficult.

JAKARTA&mdash; Bursa Asia melemah untuk pertama kalinya dalam 7 hari setelah ekonomi Jepang secara tak terduga berkontraksi dan investor menanti dimulainya perdagangan saham antara Hong Kong dan Shanghai.

Indeks MSCI Asia Pacific turun 0,4% ke level 141,15 pada perdagangan Senin (17/11/2014) pukul 09:02 waktu Tokyo atau pukul 07:02 WIB.

PDB Jepang secara tahunan turun 1,6% pada kuartal III setelah turun 7,1% pada 3 bulan sebelumnya.

&ldquo;Ini cukup mengecewakan,&rdquo; ujar Ryan Huang, Strategist IG Ltd, seperti dikutip Bloomberg.

Indeks Jepang Topix turun 0,5%, indeks Selandia Baru NZX 50 turun 0,1%, indeks Australia S&P/ASX 200 turun 0,2%, indeks Korea Selatan Kospi turun 0,5%.


JAKARTA&mdash; Indeks Nikkei 225 terus menguat. Data Bloomberg pada pk. 09:19, Jumat (31/10/2014) menguat 1,71% ke 15.926,53.

HP Analytics mengemukakan indeks Nikkei di bursa Jepang menguat menyusul Government Pension Investment Fund (GPIF) Jepang yang merupakan dana pensiun terbesar di dunia akan meningkatkan target alokasinya di saham dan mengurangi porsi obligasi.

&ldquo;Hari ini BoJ (bank sentral Jepang) akan merilis pernyataan kebijakan moneter  mereka,&rdquo; tulis HP Analytics dalam risetnya yang diterima hari ini, Jumat (31/10/2014).

SEOUL, Oct 24, 2014 (AFP)
South Korea’s economic growth picked up in the third quarter on revived consumer spending and a government stimulus package, the Bank of Korea said Friday.

Gross domestic product rose a seasonally adjusted 0.9 percent from the April June-period, which had recorded growth of 0.5 percent from the first quarter.

The central bank data showed a rebound in consumer spending, which had stalled in the second quarter as the entire country was plunged into mourning over the April 16 Sewol ferry disaster.

Year-on-year, the economy grew 3.2 percent in the third quarter, slower than the previous quarter’s 3.5 percent.

The government unveiled a $40 billion stimulus package in July as Finance Minister Choi Kyong-Hwan warned of the risk of recession.

The package worth around 41 trillion won was made up of 11.7 trillion won in expanded spending and 29 trillion won in extra financing support.

The lion’s share will be spent this year, with 3.0 trillion won earmarked for the beginning of 2015.

The central bank played its part by cutting its key interest rate by 25 basis points in August and then again by the same amount in October.

The benchmark rate now stands at 2.0 percent, matching a record low last seen from February 2009 through June 2010, when Asia’s fourth-largest economy was seeking to recover from the global financial crisis.

Earlier this month, the Bank of Korea revised its economic growth estimate for 2014 from 3.8 percent to 3.5 percent, and trimmed the 2015 outlook from 4.0 percent to 3.9 percent.

WELLINGTON, Oct 22, 2014 (AFP)
New Zealand’s annual inflation rate fell to 1.0 percent in the 12 months to September, official data showed Thursday, dampening expectations of interest rate hikes for the rest of 2014.

Statistics New Zealand said the cost of living rose just 0.3 percent in the July-September quarter, well below market forecasts of 0.5 percent, as transport costs fell and food prices remained flat.

That put annual inflation at 1.0 percent, the bottom end of the Reserve Bank of New Zealand’s 1.0-3.0 percent target range, giving the central bank leeway to keep rates on hold in the short to medium term.

The bank has already flagged a pause in monetary policy tightening as it takes stock after lifting its base rate from 2.5 percent to 3.5 percent between March and July this year.

The bank is set to review its policy next week but analysts do not expect any further rise in interest rates until March next year at the earliest.

BEIJING, Oct 22, 2014 (AFP)
The global economic recovery is beset by “downside risks”, China’s vice-premier told Asia-Pacific finance ministers Wednesday, a day after growth in the world’s second-largest economy hit a five-year low.

The meeting in Beijing of ministers from the Asia-Pacific Economic Cooperation (APEC) forum precedes the group’s annual summit next month, when Chinese President Xi Jinping is expected to host counterparts including US President Barack Obama, Russian President Vladimir Putin and Japanese Prime Minister Shinzo Abe.

“Now global economic recovery remains difficult, with downside risks still existing,” China’s Vice-Premier Zhang Gaoli said in a speech formally starting the finance meeting.

The Asia-Pacific region faced challenges including what he described as “policy adjustment of major developed economies”, apparently a reference to the US Federal Reserve’s winding down of the vast bond purchase programme it put in place to fight the global financial crisis.

His comments came a day after China, a major driver of global growth, announced that gross domestic product expanded 7.3 percent in the third quarter, its slowest pace since the depths of the crisis.

APEC, established in 1989, groups 21 economies spanning Asia, Oceania and North and South America and includes giants the United States, China, Japan and Russia, emerging economies such as Mexico and Indonesia and small nations such as Brunei and Papua New Guinea.

“The Asia-Pacific region is the main driving force and engine for global economic growth,” Zhang said, stressing that the 21 APEC economies account for 40 percent of the world’s population, 70 percent of the global economy and 46 percent of world trade.

Zhang said ministers would be discussing, among other issues, the global and regional economy, infrastructure investment and financing cooperation and fiscal and taxation policy.

The gathering was attended by Chinese finance minister Lou Jiwei, Japan’s Taro Aso and others, though US Treasury Secretary Jacob Lew skipped the event, instead sending Deputy Secretary Sarah Bloom Raskin.

Sri Mulyani Indrawati, managing director and chief operating officer at the World Bank, told the meeting that developing economies in the region would remain a mainstay of global expansion.

But she warned of wider global risks, including weakening commodity prices, the Ebola outbreak in west Africa and political instability characterised by the rise of the Islamic State group and the conflict in Ukraine.

“The picture has changed, and 2014 could turn out to be a disappointing year for the global economy,” she said.

“Global growth has been revised downwards and is now expected at 2.6 percent this year, only marginally up from 2.4 percent in 2013,” she added, highlighting “a systematic underestimation of global headwinds and inadequacies of policy responses”.

– Free trade –

Over its quarter-century history APEC, which is a consensus-based grouping, has made the pursuit of free trade among member economies a persistent goal.

Nowadays it says its main objective “is to support sustainable economic growth and prosperity in the Asia-Pacific region”.

Economically, rival free trade groupings championed by the US and China have split APEC members.

Politically, tensions within the organisation include maritime territorial disputes between China, the Philippines and Vietnam as well as between China and Japan.

APEC includes Hong Kong, a semi-autonomous region of China, and self-governing Taiwan, which is claimed by Beijing.

The finance meeting was originally slated to be held last month in Hong Kong but the venue was switched early this year, reportedly over Chinese concerns about pro-democracy demonstrations in the former British colony.

Since late last month Hong Kong has been the scene of major street protests by groups demanding fully democratic elections for the city’s chief executive in 2017.

Angela Merkel was right in the end, wasn’t she?

By Sebastian Dullien – 16 May 14

When travelling across Europe these days, I have noticed how once again the economic policy debate in Germany has completely decoupled from that in the rest of Europe. While the euro periphery is still licking its wounds from the euro crisis, in Germany a new narrative of the crisis management of the past years is taking hold: self-congratulation for a supposedly great policy response to the crisis.

Source: IMF/author's calculationSource: IMF/author’s calculation

In short, the new German view runs as follows: The euro crisis is over. The euro is saved. All this shows how successful the German-dominated crisis management has been – with its strong focus on austerity, balanced budgets, and strict “nein” to Eurobonds. And who has to be thanked for that, if not Angela Merkel? Wasn’t it her who pushed tirelessly for this policy stance across Europe and helped teach the EU partners the virtues of fiscal and macroeconomic thriftiness?

In Germany, this narrative has taken hold far beyond the usual supporters of austerity. Last week, Mark Schieritz, one of the leading (and most intelligent and informed) German financial journalists and a long-time critic of Merkel’s austerity path asked pointedly in the weekly Die Zeit: “Do I now have to apologize to Angela Merkel?”, implying that he might have been too harsh in chastening the popular chancellor.

Having read this far, most readers from West of the Rhine or South of the Alps are probably now gasping in horror. “Certainly this cannot be the general mood in Germany?”, I was asked last week by a flabbergasted French journalist after I had tried to explain the German debate to her. I’ve gotten similar reactions in Portugal and Greece.

Of course, whether you judge Merkel’s policies a success depends on how you define the baseline.

Let us take an analogy from medicine: Imagine you prepare dinner on a Sunday night and cut your hand badly with a sharp knife. The bleeding does not stop and you are taken to an emergency room. The doctor comes in and explains that he has decided not to use a standard thread and needle to stitch up the cut, but thinks that a new, experimental treatment should be applied. As your hand hurts badly and you do not see an immediate alternative to this hospital, you agree and are administered a new drug. Soon after, you fall into a coma. Over the following several months, the doctors battle for your survival as complication follows complication. After six months or so, you regain consciousness again and four weeks later you take your first post-coma steps. At some point, you are transferred into a rehabilitation centre and your are told that there is a good chance you will be able to work and live normally with full use of your hand five to ten years down the road.

Of course, the hospital’s doctors in this case deserve thanks that they have saved your life. But would you call the treatment “a success”? I doubt it.

Now back to the euro crisis: Of course, worse policy outcomes are imaginable. The eurozone could have broken apart, dragging the European and global banking system with it in an amplified Lehman moment, leading to a global recession. Compared to this outcome, indeed, European crisis fighting has been a success. But is this the right benchmark?

Going back to the medical analogy: How do you know whether a treatment has been a success? A good comparison is if you look at other patients and see whether they have recovered more quickly, and with less serious complications.

For the euro area, a sensible comparison here would be the United States. At the onset of the euro crisis in 2010, both regions were just moving out of the Great Recession caused by the US subprime mortgage crisis and the Lehman Brothers’ shock. Both economies had seen similar drops in GDP during the crisis, in both regions, banks had experienced similar losses. In a number of ways, the eurozone economy at this point was even in better shape than the United States: gross government debt-to-GDP ratio in the US stood at around 95 percent in 2010, compared to 86 percent in the eurozone. And let’s not forget that the subprime mess had originated in the US, not in the euro area.

Then the euro crisis struck and the two regions diverged in their policy reactions. President Obama’s administration decided to only reduce budget deficits gradually, while in the eurozone, a cold turkey approach of budget cuts was administered. The Federal Reserve embarked on quantitative easing. At the same time, in the eurozone, the European Central Bank was slow to support governments with liquidity problems. Not soon after, a fear of a euro-break up emerged and risk premiums in many euro countries shot up. Banks on this side of the Atlantic stopped lending and the region slipped into a deep recession. In contrast, the US economy continued its (albeit at first shaky) recovery.

While of course a recession is something no one hopes for, how bad has the recent European recession really been in monetary terms? One – very straightforward – way to answer this question would be to calculate how much output has been lost relative to a scenario in which the eurozone economy had grown with the same pace as the post-subprime-crisis-US economy (see graph). If anything, this approach should underestimate the costs of the eurozone recession as the euro crisis has also created uncertainty in the US and hence dragged growth down there as well. Without the euro crisis, both the US and the eurozone could have grown more strongly than the US economy has.

If we now cumulate the deviation of the eurozone’s output path from that of the US from 2010 (the onset of the euro crisis) to the end of 2013, we find out that lost output in the eurozone for this time alone adds up to roughly 10 percent of annual GDP, or €950 billion in total, the equivalent of almost €3000 per capita.

And this is not the end of it: As annual output in the eurozone relative to 2010 levels now runs about 8 percent lower than the expected outcome from following the US path, every year, we lose another €750 billion of output. Of course, once the eurozone is growing faster then the US economy, this gap will start to close. But even with optimistic estimates it will be decade before the gap is closed (if ever). Accumulated losses in the end could then easily be several times the €950 billion we’ve seen in initial losses so far.

Purely rated according to economic performance, it is hence very difficult to construct a “success” out of the eurozone crisis management.

Defenders of the German government’s policy stance would now argue: This might be true, but economic growth is not everything. The US policy of persistently high deficits is irresponsible. At least, Europe has reigned in debt excesses.

Unfortunately, a look at the data is sobering, even when it comes to debt. According to the IMF’s latest “World Economic Outlook”, gross government debt as a percentage of GDP (the most widely used measure) in the US increased between 2010 and 2013 from 94.8 to 104.5 percent, roughly by the same number of percentage points as in the eurozone (where the government debt level rose from 85.7 to 95.2 percent).

One might now wonder: How is this possible that the profligate United States and the much more responsible eurozone under German guidance saw similar debt level increases? The answer is that debt sustainability is not just a function of deficits, but also of economic growth. And the euro crisis management did one thing clearly: It slowed growth. And as we now see in the figures, it curtailed growth so starkly, that not much was won with respect to debt sustainability.

So, if the poor economic balance of the crisis-fighting measures is so obvious, why does the German public not see through it?

One reason might be tunnel vision. The economic climate in Germany is not bad. Unemployment is at a record low and the German economy is benefiting from record-low interest rates, caused both by the ECB’s lose monetary policy and capital inflows from the periphery into the German government bond and covered bond markets. Young Germans only encounter double-digit unemployment rates in news reports.

The other reason might be German elite’s and media’s adherence to ordoliberalism – an economic policy concept has always had an anti-empirical approach. Ordoliberals rely on principles to determine what is right and wrong, and do not rely on data from messy reality to draw conclusions. So who needs to look at GDP or unemployment data to evaluate whether a policy was good or bad? After all, Germans know, without a doubt, that they have been right about austerity. Isn’t it obvious that thrift is better than profligacy?

European Stocks Fall as Growth Concerns Resurface

Turbulent Week Ends With Further Falls as Concerns Grow Over State of Global Economy

Updated Oct. 10, 2014 12:26 p.m. ET

European equities tumbled Friday, capping a turbulent week dominated by ballooning concerns over the health of the global economy.

The Stoxx Europe 600 ended the session down 1.5%, taking its weekly loss to 4% and monthly loss to over 7%, tracking a fall on Wall Street during the previous session.

Global stocks and bonds had enjoyed a brief lift after cautious minutes from the U.S. Federal Reserve on Wednesday pushed expectations for the central bank’s first rate rise further into the future. That move, however, proved to be short-lived, with investors quick to take profits, particularly in light of poor underlying data—especially out of the eurozone—and the International Monetary Fund’s dismal growth prospects.

“Bad news is bad news, after all,” economists at Barclays wrote in a note, adding that while a delayed rate increase in the U.S. may have benefited markets in the short run, investors are fundamentally still spooked by the fragile state of the recovery.

“Memories from January are still fresh, when Treasury yields dropped during what later proved to be a significant slowdown in U.S. and Chinese growth,” said Gustavo Reis, an economist at Bank of America Merrill Lynch, adding that the current growth risks are likewise material.

Philip Lawlor, a partner at London-based Smith & Williamson Investment Management LLP, which manages about £15 billion ($24 billion), described it as a “cathartic correction.”

“The eurozone is evidently confronting a deflationary vortex and there are certainty fears now that the European Central Bank will dither and delay, and then do too little too late to stimulate a recovery,” he said.

The gloom spread into the U.S. on Friday too, where the S&P 500 failed to clamber to intermittent gains, and was down 0.4% at the European close. The Dow Jones Industrial Average, which on Thursday recorded its largest loss of the year, fell 0.2%.

One important source of jitters was data earlier in the week showing that in August, factory output in Germany slumped 4% on the month and manufacturing orders slid 5.7%, both well below expectations. On Thursday the country recorded its biggest drop in exports for August since January 2009, further unsettling investors leading Mizuho International on Friday to trim its growth forecast for the country to 0.1% from 0.2% for the third quarter.

“The downturn in emerging economies and the trade sanctions vis-à-vis Russia have caused a sharp slowdown in German export growth, depriving the eurozone of its only remaining growth driver,” the Japanese bank’s chief European economist Riccardo Barbieri said.

Germany’s DAX 30, packed full of cyclical industrial stocks which are particularly sensitive to growth expectations both domestically and abroad, was the biggest loser of all main European indexes on Friday, falling 2.4% to a one-year low.

It has lost 4.4% this week and 9.4% since the start of the year. The index has also dropped over 12% since its all-time high in early June, putting it firmly into correction territory—a phrase used to describe a fall of between 10% and 20% from the previous peak.

According to data from Lipper, a unit of Thomson Reuters, U.S. investors poured a net €4.12 billion ($5.24 billion) into Europe-focused equity funds from the start of the year until the end of August. But more than €800 million flowed out of funds which concentrate on Germany.

“The selling is pretty indiscriminate, and today it looks like there is no place to hide,” said Neil Wilkinson, who manages a European equity fund at Royal London Asset Management, which oversees £77 billion of assets. He added that he has steered clear of cyclical stocks in recent months.

The euro fell by almost half a percent against the dollar to $1.2633 and the yield on the 10-year bund, which is valued as a low-risk investment during times of volatility, was at 0.88%, around 0.02% lower on the day. Yields rise as bond prices fall.

In neighboring France on Friday, data showed that industrial production stagnated in August, sending the CAC 40 down 1.6%, or 4.9% on the week. The U.K’s FTSE 100 also hit a 12-month low, taking its month-to-date decline to 7.2%.

The U.K.’s main trading partner is the eurozone, and the dismal picture in the region this week led some strategist to push back their rate hike expectations for the Bank of England.

“The continuing dampening of Bank of England rate-hike expectations is likely to keep the pound on the defensive in the near term,” said Lee Hardman, a currency strategist at Bank of Tokyo Mitsubishi UFJ.

The pound has now wiped out all the gains it made in the aftermath of Scotland’s voting to remain part of the U.K. last month, also spurred by nerves fraying ahead of a looming general election scheduled for May next year.

On Thursday, the U.K. Independence Party, which wants Britain to withdraw from the European Union, won its first elected seat in Parliament.

“The victory is a reminder that the general election is upon us and that uncertainty surrounding that is huge and it could be very messy,” said Kit Juckes, a macro strategist at Société Générale in London.

In Russia, meanwhile, the ruble hit yet another all-time low at Friday’s opening, battered by its own problems, despite the central bank’s continued interventions. It was down around 0.3% at the European market close against the buck at 40.35, taking the year-to-date drop to over 20%. The central bank said early Friday it sold $1.5 billion to prop up the ruble on Oct. 8.

Brent crude ended the week around 0.4% lower on the day at $89.95 a barrel, while gold slipped 0.2% to $1,222.10 a troy ounce.

—Tommy Stubbington contributed to this article.

Five charts that show Germany is heading into recession

Europe’s largest economy is on the verge of recession following contraction in the second quarter and weak data for the third

Germany is on the brink of recession. Recovery in Europe’s powerhouse went into reverse in the second quarter when the economy shrank by 0.2%.

All the evidence suggests the weakness persisted in the third quarter amid tensions between Russia and the West over Ukraine and a flagging recovery in the eurozone economy.

Here are five charts underpinning expectations of a fresh German recession.

Germany’s trade position is deteriorating

German exports fell by 5.8% in August. It was the biggest drop since the early stage of the financial crisis in January 2009. Imports also shrank, by 1.3%. It was worse than the 4% fall in exports and 1% rise in imports forecast by economists.

Given Germany’s reputation as a manufacturing and exporting powerhouse, it does not bode well for Europe’s largest economy. The drop in exports narrowed Germany’s trade surplus to €17.5bn (£13.8bn) from €22.2bn (on a seasonally-adjusted basis).

Carsten Brzeski, economist at ING, described the figures as a “horror story”.

German exports
German exports fell by 5.8% in August Photograph: German Federal Statistical Office (Destatis)

German investors are feeling pessimistic

The ZEW indicator of German economic confidence is followed closely around the world. The measure of investor confidence is considered to be a useful signal of turning points in the economic cycle.

In September, the index fell for a ninth consecutive month to 6.9 points, as investor nerves persisted amid heightened uncertainty about the prospects for the German and eurozone economies in the coming months.

German ZEW
The German ZEW measure of investor confidence is falling Photograph: ZEW

German production has been shockingly poor

Industrial production slumped 4% in August according to Germany’s statistics office. It was an unwelcome surprise for investors and economists, following market predictions of a much smaller 1.5% contraction.

Economists said that some of the fall could be explained by temporary factors such as the holiday season. But the scale of the drop could not be explained by one-off factors alone, suggesting genuine weakness in German industry.

German production
Industrial production fell by 4% in August. Photograph: German Federal Statistical Office (Destatis)

German inflation is low

German inflation was unchanged at 0.8% on the main consumer prices measure in August. Low inflation is undoubtedly welcomed by Germany’s consumers, but lack of price pressure in the economy is reflective of a negative trend in the wider eurozone.

In the single currency bloc as a whole, annual inflation is running at just 0.3% – sharply lower than the European Central Bank’s official target of close to but below 2%. Lack of inflationary pressure echoes the lack of growth in the troubled region. The fear is that it will lead to a dangerous spiral of outright deflation, where businesses and consumers delay spending because they expect prices to fall further. The International Monetary Fund has put the risk of eurozone deflation at 30%.

German inflation
German inflation was 0.8% in August Photograph: German Federal Statistical Office (Destatis)

German GDP is one quarter away from recession

Finally, this chart shows how close to recession Germany is. The economy contracted by 0.2% in the second quarter of 2014. A further fall in gross domestic product in the third quarter would tip Europe’s largest economy back into technical recession.

German GDP
The German economy shrank by 0.2% in the second quarter Photograph: German Federal Statistical Office (Destatis)



TEMPO.CO, Jakarta – Dana Moneter Internasional (IMF) memangkas proyeksi pertumbuhan ekonomi global untuk ketiga kalinya pada 2014. IMF juga mengingatkan soal perlambatan pertumbuhan di negara-negara zona euro, Jepang, dan negara-negara berkembang besar, seperti Brasil. (Baca juga: ASEAN Paling Siap dalam Liberalisasi Ekonomi )

Dalam laporan bertajuk “World Economic Outlook”, lembaga donor yang berkantor di Washington ini memangkas proyeksi pertumbuhan global menjadi 3,3 persen pada 2014 dan 3,8 persen pada 2015. Dalam laporan yang dirilis pada Juli 2014, IMF memproyeksikan pertumbuhan ekonomi global 3,4 persen tahun ini dan 4 persen tahun depan.

IMF tercatat telah sembilan kali memangkas proyeksi pertumbuhan global dalam tiga tahun terakhir. Proyeksi ini, menurut Kepala Ekonom IMF Olivier Blanchard, didasarkan pada seberapa cepat negara-negara kaya akan mampu melepaskan diri dari jerat utang dan tingkat pengangguran yang tinggi selama krisis finansial global pada 2007-2009. (Baca: IMF Ingatkan Ancaman Pengetatan Likuiditas )

Untuk menggenjot pertumbuhan, IMF mendorong negara-negara untuk melakukan reformasi struktural, termasuk meningkatkan kebijakan pasar tenaga kerja, memerangi penghindaran pajak, dan meningkatkan anggaran belanja. Hal ini perlu dilakukan guna menghindari risiko stagnasi ekonomi. Proyeksi IMF yang cukup suram membuat para pengambil kebijakan ekonomi negara-negara maju berkumpul di Washington.

Dalam laporannya, IMF juga menurunkan proyeksi pertumbuhan pada tiga negara besar di Uni Eropa, yakni Jerman, Prancis, dan Italia. Ekonomi Jerman tahun depan diproyeksikan menjadi 1,4 persen pada 2014 dan 1,5 persen tahun depan. Begitu pula dengan ekonomi Prancis menjadi 0,4 persen (2014) dan 1 persen (2015). Sedangkan ekonomi Italia diproyeksikan menjadi -0,2 persen (2014) dan 0,8 persen. IMF mengingatkan negara-negara maju untuk mempertahankan stimulus moneter.

IMF juga menurunkan proyeksi pertumbuhan ekonomi untuk Jepang dan Brasil menjadi masing-masing 0,9 persen (2014) dan 0,8 persen (2015). Menurut Blanchard, potensi pertumbuhan ekonomi negara berkembang hanya 1,5 persen lebih rendah daripada prediksinya pada 2011. (Baca: IMF: Perbaikan Iklim Investasi Kunci Pertumbuhan Tahun Depan).

Bonds Advance as Europe Stocks Trim Weekly Loss After U.S

Government bonds rose and European shares erased earlier losses following a plunge in American equities. The dollar strengthened against the yen.

Germany’s 10-year yield fell 2 basis points to a two-week low at 11:11 a.m. in London. The Stoxx Europe 600 Index rose 0.1 percent after sliding as much as 0.5 percent. Standard & Poor’s 500 Index futures (SPX) were little changed after the gauge sank the most in two months yesterday. The dollar rose 0.3 percent against the yen. Copper advanced 0.5 percent.

About $1.42 trillion has been wiped from the value of global shares this month amid concern Chinese economic growth is slowing and speculation about the timing of U.S. interest-rates increases. French consumer confidence was steady, while a German gauge missed estimates before similar data from the U.S., where economic growth figures are also due. Ukrainian officials will hold talks with Russia and the European Union in Berlin today to try to resolve a dispute that led to Russia ending gas sales to its neighbor in June.

“Bonds rallied again as the market is nervous about the global economic outlook, which means the Federal Reserve may have to delay its rate increase,” said Jussi Hiljanen, head of fixed-income research at SEB AB in Stockholm. “Recent messages from Fed policy makers are mixed. The strong dollar may damp U.S. growth and attract more money into U.S. Treasuries, putting further downward pressure on their yields.”

World Bonds

Bonds worldwide advanced this week as a surging dollar sparked warnings from Federal Reserve officials that the stronger currency may hamper growth, and amid bets the European Central Bank will keep down borrowing costs.

Yields on Germany’s 10-year bunds slipped two basis points to 0.96 percent. U.K. 10-year gilts advanced for a sixth straight day, pushing the yield one basis points lower to 2.43 percent. Treasury 10-year yields were little changed today at 2.5 percent, having ended last week at 2.58 percent. Securities in Japan and Australia also rallied this week.

The Stoxx 600 has dropped 1.9 percent this week, the most since August, and closed at an almost one-month low yesterday.

Air France-KLM Group dropped 2.1 percent after Les Echos reported a pilot strike could reduce its operating profit by as much as 250 million euros ($319 million). The company’s board said pilots’ demands for a “single contract” aren’t compatible with the low-cost model it’s seeking.

Record Low

Average yields on euro-denominated investment-grade corporate bonds fell for a second week, dropping to a record 1.24 percent, according to Bank of America Merrill Lynch index data. Yields on financial and covered bonds in the currency also fell to all-time low levels, index data show.

Futures on the S&P 500 expiring in December gained less than 0.1 percent after the index closed at its lowest level since Aug. 15 yesterday. With a 2.2 percent drop, it’s heading for its worst week since August. The MSCI All-Country World Index is down 0.2 percent today, set for a 2.4 percent decline this week, and is heading for its lowest level since Aug. 8.

Nasdaq 100 Index contracts were little changed today after a slump in Apple Inc. pushed the gauge for its biggest loss since April 10.

Even as $320 billion was erased from U.S. equity values yesterday and all but 14 companies in S&P 500 fell, volatility gauges signaled investors have yet to enter panic mode.

VIX Jump

The 18 percent increase in the Chicago Board Options Exchange Volatility Index (VIX) sent the measure to 15.64 yesterday, below its peak level during every major drop since 2012, data compiled by Bloomberg show. The VIX, derived from the price of options used to hedge against losses, is hovering around its average level from the past three years, the data show.

“This week’s consolidation in U.S. stocks is not surprising,” Francois Savary, chief investment officer of Reyl & Cie., said by phone from Geneva. “The potential for the market is limited for the rest of the year, especially considering that the strength of the dollar might have an impact on company earnings. There’s still uncertainty regarding the timing of interest rate hikes — I think the U.S. economy could surprise on the upside.”

U.S. GDP grew 4.6 percent in the second quarter, compared with a previous estimate of 4.2 percent released in August, according to a Bloomberg News survey of economists before a Commerce Department report today.

Final data will show the Thomson Reuters/University of Michigan consumer-sentiment index rose to 84.8 this month, a separate survey projected. That would be the highest in more than a year. A preliminary figure came at 84.6.

Slow Exports

The dollar rally may slow exports in coming months, Fed Bank of Atlanta President Dennis Lockhart said yesterday. New York Fed President William C. Dudley said this week if the dollar were to strengthen a lot it may hamper the central bank’s efforts to spur growth.

The Bloomberg Dollar Spot Index held a five-day rally that sent it to the highest level since 2010. The U.S. currency climbed 0.3 percent to 109.05 yen as Japan’s government presses ahead with reforms that would allow the nation’s $1.2 trillion pension fund to buy more overseas assets.

The MSCI Emerging Markets Index lost 0.3 percent, set for a 3 percent weekly decline, a third straight drop.

The ruble depreciated 1 percent versus the dollar, poised for a new record low. The easing of tensions in Ukraine will offer little respite to Russia as the lowest oil prices in more than two years threaten to tilt the $2 trillion economy toward recession, according to a Bloomberg survey of analysts.

Natural Gas

Copper climbed to $6,729.50 a metric ton. The U.S. is the biggest user of the metal after China. U.K. natural gas climbed 1.1 percent for a third consecutive gain. Russia supplies about 30 percent of European gas needs and ships half of it via Ukraine, whose imports from its eastern neighbor halted June 16 in a price and debt dispute.

Cotton jumped 2.4 percent, the first gain in three days, after falling to the lowest since 2009 yesterday.

West Texas Intermediate oil rose 0.2 percent to $92.70 a barrel after earlier sliding as much as 0.3 percent. Oil demand is growing at its slowest since 2011, while the U.S. shale boom means production outside OPEC is rising by the most since the 1980s, the Paris-based International Energy Agency said in a monthly report Sept. 11.


WASHINGTON – Bank Sentral AS membentuk Komite Stabilitas Finansial (Committee on Financial Stability/CoFS) yang dipimpin oleh Wakil Kepala Fed Stanley Fischer untuk melakukan pengawasan terhadap penggelembungan nilai aset.

Seperti dirilis oleh Fed, komite ini juga diisi oleh 2 gubernur Fed, yaitu Daniel Tarullo dan Lael Brainard.
Tujuan dibentuknya CoFS, kata pejabat Fed, adalah untuk memastikan enam tahun rendahnya suku bunga acuan tidak membuat korporaasi mengulangi kesalahan sama yang memicu bom pembelian rumah dan krisis finansial 2008.

“Mereka meletakkan orang-orang berkelas dalam komite, namun apakah CoFS bisa menangani masalah ini masih menjadi pertanyaan,” kata Deputi Kepala Ekonom UBS Securities LLC, Sabtu (13/9/2014).

Komite ini ditugaskan untuk mengatasi isu yang meresahkan investor, seperti pengukuran volatilitas saham, surat utang dan mata uang dunia yang anjlok pada tahun ini.

CoFS adalah komite kedua yang dibentuk oleh The Fed. Sebelumnya, jajaran Janet Yellen telah membentuk Kantor Bank Sentral untuk Riset dan Kebijakan Stabilitas Finansial (FOFSPR) yang dipimpin oleh ekonom senior Nellie Liang.

Tugas utama komite adalah memastikan temuan staf yang bekerja menangani stabilitas finansial dapat tersalur kepada level pejabat tinggi bank sentral.

Source : Bloomberg


IN MY OPINION, THE NEXT CRISES SHOULD BE IN A RESEARCH BY AN ECONOMIST… not by any analyst without any broad economics background… the opinions on any crises in 2015, should not be taken so seriously … the world economy is changing but slowly, the leaders are still in prepare for the worst mode in their global and regional economy management, especially in Eurozone, most of Asian countries, and mainly in the USA… well, I wish that the economy might go forward in the steady mode
The future might very soon remind us that, for over a quarter of a century, a major financial and economic crisis has occurred every seven years:• In October 1987, the Dow Jones industrial average lost 22.6% of its value in a single day; this was the first crash of the computer age. The crisis spread rapidly; on 2 November 1987, it graced the cover of Time magazine: “The Crash: After a wild week on Wall Street, the world is different.” The Federal Reserve (Fed) managed to calm the situation.• In December 1994, while a euphoria (“bubble”) of internet-based companies was being pumped up in Silicon Valley, the nearby Orange County turned to derivatives-based speculation, and filed for bankruptcy; a little later, a brutal and brief Asian currency and financial crisis, spread in Russia, Brazil, and then in the United States. Here again, the Fed managed to bring the situation under control.• By April 2001, the dot-com bubble, that was formed over the past five years, burst; in one day, the Dow Jones index fell 7.3%. Once again, the Fed managed to calm the situation by creating a flood of liquidity in the economy, that will become subprime mortgage loans.• In the summer of 2008, the bursting of the housing (mortgage-backed security – MBS) bubble triggered a new crisis, truly global this time. The central banks and other lenders allowed once more, countries and businesses, to get into debt with low interest rates, without providing the necessary guarantees that they invest and undergo reforms.We are nearing the end of a new seven-year period. Bubbles have formed again everywhere. And if growth does not materialize, or if a geopolitical crisis put a halt to it (in Ukraine, China, Brazil or other countries) these bubbles will burst; interest rates will rise; securing debt financing will become very difficult; globalization will do the rest and markets, which no longer say the fair value (Mark-to-market accounting), will panic once again.In all logic, this crisis should be triggered in 2015. If not adequately prepared for such a crisis, it will be worse than the previous ones, particularly in Europe. For two reasons: firstly, because almost all the trump cards have been played now – no one will be able to run up further debts – and the European Central Bank (ECB), even by using all means at its disposal, including the most heterodox ones, will be able to do virtually nothing. And secondly because unlike previous crises, the world is still far from being at peace; wars and threats of wars, within and between nations, are increasing making investors more risk averse.Thus there will be no other solutions but to foot the bill; in plain language, this means repaying accumulated debts or cancelling them. But this will only come if, in particular in Europe, that includes the participation of the final holders of the debt, that is to say savers, who will watch their savings being plundered, not by inflation, but by a drain on their bank accounts, as was the case in Cyprus (which the recent agreements on the Banking Union explicitly allow, and known as “bail-ins,” though few people know about it).There is still time to become aware of the situation. And take action. In particular, in Europe, by recreating the means to achieve a resumption of strong and sustainable growth; there are only four ways in which to ensure this, which must be used urgently and at the same time:1. Taking action to lower significantly the euro exchange rate with respect to the US dollar, which assumes that finally the euro area Finance Ministers ask so explicitly to the European Central Bank (ECB).2. Boosting investment, which can become a reality only through large-scale public projects, in particular with energy and telecommunications networks, financed by eurobonds, or by the EIB (European Investment Bank), or by the various Caisses des Dépôts Nationales. These institutions would simply need to stop hanging on to their sacrosanct Triple-A rating that paralyzes them.3. Speeding-up of structural reforms in southern Europe, especially in France, releasing creative powers, as has been done, in different ways, and this has proved successful, by the Germans, British, Swedes and Canadians.4. An attitude of heart that cares for the pursuit of peace, in particular, between Europeans and their Eastern and Southern neighbors.If all this is not undertaken very quickly, in a courageous and tenacious manner, particularly by the countries of Europe finally united, many thunderstorms will break out. Within the next 18 months.No one among us can claim any longer that he did not know.Follow Jacques Attali on Twitter: a combination of tough regulation, a relatively conservative banking system and a dose of good luck, Australia avoided a direct hit from the global financial crisis. But will it fare so well in the crisis of 2015? This is a question regulators and even some bankers are mulling over as the clouds from the 2008 financial disaster slowly lift.The lessons from the past few years have been learnt. More needed to be done to make the financial system safer. New global bank and insurance regulatory regimes have been introduced to avoid a repeat of what started out as a North American subprime mortgage crisis. Banks today face tougher control over capital, liquidity and leverage.But could efforts to cut back on risk be planting the seeds for failure down the track?Barrie Wilkinson, who works with financial services consultancy Oliver Wyman, is paid to think about these things and has tried to pin down the unintended consequences of rising regulation. His findings, in a paper titled The Financial Crisis of 2015: An Avoidable History, sound a cautionary tale.The 24-page study outlines how banks, unwilling to accept the lower returns on equity that result from requirements to carry higher levels of capital, could inadvertently be fuelling a new asset bubble by chasing high returns in commodities or emerging markets – mostly through Asia.Regulators, by focusing on curbing the risky behaviour of banks, may be driving risk-taking into unregulated funds that pose a danger to the system, the study finds.The shadow banking system has been singled out as providing the conditions that inflated the US housing bubble. This quickly evolved into a global crisis.Banks found they could write more loans by packaging their existing loans into securities and derivatives. Big non-bank lenders in the US, such as Fannie Mae and Freddie Mac, were almost wholly reliant on securitisation. This took place without the probing eye of regulators.The Oliver Wyman report tells bank executives and shareholders to accept that returns of the past are unsustainable and that they need to do a better job of monitoring risk, especially in areas that produce unusually high profits.As if to illustrate what the report was warning of, Commonwealth Bank in February reported a thumping rate of return on equity of nearly 20 per cent when it handed down its interim results. This makes CBA one of the world’s more profitable banks, based on a measure of shareholder returns.Asia-focused ANZ has also flagged its intention to hit the 20 per cent mark. To put these numbers in context, at the peak of the credit boom, CBA’s return on equity was a little more than 22 per cent.Over 30 years, the big banks’ average return on equity has been 16 per cent. This suggests there is still a debate to be had over what is an excessive return.While Australia missed the worst of the banking crisis, Wilkinson’s scenario suggests our banking system is in line for a direct hit.While the growth story for Asia markets is widely acknowledged, much of the economic activity in these markets is still being fuelled by cheap money from Western central banks.Soaring commodity prices are soaking up the excess global money supply, helping commodity-rich emerging economies such as Brazil and Russia, with Australia also clearly benefiting.Wilkinson’s 2015 scenario points to high commodity prices as creating strong incentives for commodity-rich emerging economies to launch expensive development projects to dig more out of the ground – creating a massive supply of commodities relative to the demand coming from the real economy. Not only is the strength of the Chinese and other Asian economies important for Australia’s terms of trade and the resource sector, it is now powering global growth.Any hint of a slowing Chinese economy sends tremors through global markets. And, with China throwing everything at tackling inflation, a slowdown is a possibility.Wilkinson also warns that Western banks are building up large and concentrated loan exposures in Asia and across the resources sector. It was a mortgage bubble that sideswiped the US economy; Australia’s undoing could be a resources bubble.The story driving the global commodities bubble assumes a continued increase in demand from China, which has become the world’s largest commodities importer. Materials such as gold, copper, coal and iron ore are changing hands at or near record prices.As with previous asset bubbles, consider that much of the debt financing for resource projects often comes from banks.And much of this is likely to be supplied by Western banks – including Australian banks – that will be eager to preserve their diminishing return on equity and seek lucrative lending opportunities to cover their increasing cost of funds.The regulatory trend of coming down hard on the banks will increase risk-taking in the shadow banking sector, Wilkinson concludes, with a real chance the fundamental imbalances that are driving up levels of risk in the financial system will not be acknowledged by the new regulations. The only question is where these risks will go.Eric Johnston is financial services editor.
Read more:, Aug 27, 2014 (AFP)
Unemployment in crisis-hit France struck a new high in July, official statistics published Wednesday
The next financial crisis keeps loomingNo doubt: Globalisation offers many new opportunities such as new emerging markets as well as fresh competition. Get it right and we all could be winners and prosper. Get it wrong and the global financial crisis of 2008 threatens to be the first of many to approach.Both nationalism and inaction pose serious threats to jobs, growth, climate change, social justice and global poverty reduction. At its most fundamental level, this crisis was caused by the rapid growth of the so-called shadow banking system over the past few decades and its remarkable collapse over the past two yearsWe also need to make sure that financial firms are not too big or too interconnected to fail. All financial transactions should either pass through organized exchanges, or be subject to some sort of strict reporting requirements to regulators.We were told the world economy was back on track, but festering problems threaten to hit developing countries hard food prices.So currency wars have already started, but in a subtle, shadow-boxing way. Speculation driven rises in oil and food prices will be transmitted through the developing world causing the poor to be battered by oil and food prices.This is the next financial crisis. Unlike the last one, it’s not going to blow up all at once. It will be slow torture.The bubble will appear in developing marketsAccording to some creative analysts at the management consulting firm Oliver Wyman, that date is April 26, 2015. The next time, the authors say, the fat-cat financiers will be in Singapore or Hong Kong, chased away from New York and London by stricter reserve requirements and emboldened regulators. The bubble will appear in developing markets, with easy developed-world money and the promise of ever-spiraling commodity prices funding unnecessary building and silly investments. So there you have it—again: a big pool of money chasing market-beating returns and ultimately inflating asset-price bubbles that burst with awful consequences, from bank failures to sovereign-debt crises.All of these narratives of the next big crisis share one very scary assumption: that whatever the United States and its European peers do to try to prevent the next crisis might not be enough. Some wise men suggested strong leverage caps, or size or activity restrictions to stop financial companies from getting too risky. Others suggested just taxing the whole sector. High interest rates will first increase profitability, then kill it. High interest rates, however, have a substantial downside. At some point, the interest rates become too high for many banking customers to pay. And when that happens, default rates start to rise and the banks’ earnings start to plummet as they set aside more and more of their revenues to cover the losses from loans gone bad.Maybe it’s something to do with its being summer time, with much of the world’s top brass away, but it’s becoming a month notorious for market turmoil. Four years ago last week the jaws of the credit crunch snapped shut. The start was marked by investment bank BNP Paribas closing two of its funds exposed to the US sub-prime crisis on 9 August 2007. Within just a few weeks, the queues of worried customers were forming outside the Northern Rock.Four years on, and numerous bailouts later, the world economy seems once again to be standing on the precipice, with stock markets around the world losing billions of dollars in one of the bloodiest meltdowns since the 2008 crash. Share prices fell in Brazil, Tokyo, New York, London, Mexico and across Europe.More than 10 per cent was wiped off the FTSE 100 index in London – equivalent to £270 bn – on the week and £144bn was lost on Friday alone. It closed 600 points down on the week to 5240, about the same level as it started the year. In New York the Dow Jones plunged by 5.3 per cent on the week.Europe playing with fireThere are no magic wands. Time may heal wounds, but certainly does not extinguish fires. Without debt restructuring and financial regulation, the collapse of Europe is just around the corner and will quash the uneven and incipient global economy recovery. Europe is not playing with time, it is playing with fire..We’ve been saying for years that we believe the period of 2016-2018 is the start of an overwhelming financial crisis, possibly much worse than the 2000/2001 stock market collapse, and the 2008/2009 credit crisis. 2016 appears to be the peak of the financial markets and economic escalation, with the giant reverse beginning as early as 2016 and as late as 2018, but more likely as late as 2017.Although many financial experts are now saying the Greek Tragedy has been averted with a financial rescue plan by the International Monetary Fund and the European Union, Simon Black, Senior Editor of the website SovereignMan, says, “…anyone with two brain cells to rub together recognizes that Europe’s economic woes cannot be contained with more paper money… and now the problem just became $1 trillion worse. Battling back from an economic crisis requires hard work, savings, and minimal disruption from the government. There’s no magic pill, entitlement program, or paper money bomb that will suddenly make things better. Instead, governments should be curtailing social benefits that encourage people to be lazy, while simultaneously stripping taxes to the bare bones in order to give entrepreneurs and investors the proper motivation to work hard, take risks, and hire employees.”Even though the European debt crisis may appear to be under control by the end of 2010, it’s to be expected that Europe, including Greece, America, and Japan are heading for a financial brick wall with government spending and regulations out of control and funny-money solutions. The causes of previous financial crises mirror how politicians are handling the problems now, which will only serve to create the next crisis.Can small business avoid a credit crunch?The perennial issue of small firm financing is once again to the fore as small and medium sized firms (SMEs) are experiencing a challenging financing environment in the aftermath of the global economic and financial crisis. A combination of factors has contributed to a credit crunch for small firms. Businesses struggling with negative effects of the recession are experiencing liquidity problems because of increased bad debts and slower payments by debtors.The provision of credit to SMEs by the banking sector worldwide has decreased due to a number of reasons. Firstly, demand for loans by small firms has fallen as business activity has dropped, and firms seek to deleverage. Secondly, bank lending to the sector has declined because of the poorer financial condition of firms during the economic downturn. Thirdly, restricted liquidity in the interbank markets means that financial institutions must curtail their lending to the sector. Banks seek to accumulate capital reserves rather than advance them to SMEs. Additionally, banks seek to protect their limited capital reserves by investing in securities perceived as less risky, including sovereign and corporate paper.Firms should become less dependent on bank financing, an issue stressed by Uriel Lynn at the ISBE conference in November. This can be achieved by retaining greater reserves within the firm, and by seeking sources of external private equity rather than debt finance.Although not all equity investors may be interested in some sections of the SME sector, other equity providers, such as business angels, may willingly provide funding. Small firm owners should be encouraged to seek out investment from the plethora of Business Angel networks In a recent study, firm owners stated that the greatest constraint to growth and development is a lack of adequate financial management skills. Finally, it is imperative that banks significantly alter their lending practices. For many years, debt finance has been advanced on provision of collateral. New lending models need to be based on profitability and projected cash flow, rather than on property and personal guarantees.Indeed, normally the main cause of disagreement between a bank and a customer when an application is rejected is because the bank cannot see sufficient source of income to fund repayments. It is rarely the lack of collateral (that may come later when we begin to consider price).The only aspect of this article that I would specifically wish to draw attention to is the alternatives to raising finance beyond the banks and Angel investor networks that can allow small businesses to avoid a credit crunch. And to return to my earlier reference to the rise of social media – such technologies have also created a range of new financing programmes, including “Funding Circle”It may be difficult to avoid increases in the costs of financing, now is a good time for small business owners and managers to hone their skills in financial management and identify new opportunities in both financing and business development.Author: Norbert Knoll von Dornhoff. Date of birth: 27th March 1941, originating from the South Tyrolian family, The Barons Knoll von Dornhoff. Austrian nationality. Married, three children. Studied jurisprudence and national economics at the Universities in Vienna, Austria and St. Gallen, Switzerland. Graduated Dr.jur. (LL.D)and Dr. phil. and Mag.rer.soc.oec (MBA). Professor (adj. associate) of Economic and Fiscal Policy of the International University for Entreprenology, Hawaii, USA. Languages: German, English, French, Hu…


The future might very soon remind us that, for over a quarter of a century, a major financial and economic crisis has occurred every seven years:

• In October 1987, the Dow Jones industrial average lost 22.6% of its value in a single day; this was the first crash of the computer age. The crisis spread rapidly; on 2 November 1987, it graced the cover of Time magazine: “The Crash: After a wild week on Wall Street, the world is different.” The Federal Reserve (Fed) managed to calm the situation.

• In December 1994, while a euphoria (“bubble”) of internet-based companies was being pumped up in Silicon Valley, the nearby Orange County turned to derivatives-based speculation, and filed for bankruptcy; a little later, a brutal and brief Asian currency and financial crisis, spread in Russia, Brazil, and then in the United States. Here again, the Fed managed to bring the situation under control.

• By April 2001, the dot-com bubble, that was formed over the past five years, burst; in one day, the Dow Jones index fell 7.3%. Once again, the Fed managed to calm the situation by creating a flood of liquidity in the economy, that will become subprime mortgage loans.

• In the summer of 2008, the bursting of the housing (mortgage-backed security – MBS) bubble triggered a new crisis, truly global this time. The central banks and other lenders allowed once more, countries and businesses, to get into debt with low interest rates, without providing the necessary guarantees that they invest and undergo reforms.

We are nearing the end of a new seven-year period. Bubbles have formed again everywhere. And if growth does not materialize, or if a geopolitical crisis put a halt to it (in Ukraine, China, Brazil or other countries) these bubbles will burst; interest rates will rise; securing debt financing will become very difficult; globalization will do the rest and markets, which no longer say the fair value (Mark-to-market accounting), will panic once again.

In all logic, this crisis should be triggered in 2015. If not adequately prepared for such a crisis, it will be worse than the previous ones, particularly in Europe. For two reasons: firstly, because almost all the trump cards have been played now – no one will be able to run up further debts – and the European Central Bank (ECB), even by using all means at its disposal, including the most heterodox ones, will be able to do virtually nothing. And secondly because unlike previous crises, the world is still far from being at peace; wars and threats of wars, within and between nations, are increasing making investors more risk averse.

Thus there will be no other solutions but to foot the bill; in plain language, this means repaying accumulated debts or cancelling them. But this will only come if, in particular in Europe, that includes the participation of the final holders of the debt, that is to say savers, who will watch their savings being plundered, not by inflation, but by a drain on their bank accounts, as was the case in Cyprus (which the recent agreements on the Banking Union explicitly allow, and known as “bail-ins,” though few people know about it).

There is still time to become aware of the situation. And take action. In particular, in Europe, by recreating the means to achieve a resumption of strong and sustainable growth; there are only four ways in which to ensure this, which must be used urgently and at the same time:

1. Taking action to lower significantly the euro exchange rate with respect to the US dollar, which assumes that finally the euro area Finance Ministers ask so explicitly to the European Central Bank (ECB).

2. Boosting investment, which can become a reality only through large-scale public projects, in particular with energy and telecommunications networks, financed by eurobonds, or by the EIB (European Investment Bank), or by the various Caisses des Dépôts Nationales. These institutions would simply need to stop hanging on to their sacrosanct Triple-A rating that paralyzes them.

3. Speeding-up of structural reforms in southern Europe, especially in France, releasing creative powers, as has been done, in different ways, and this has proved successful, by the Germans, British, Swedes and Canadians.

4. An attitude of heart that cares for the pursuit of peace, in particular, between Europeans and their Eastern and Southern neighbors.

If all this is not undertaken very quickly, in a courageous and tenacious manner, particularly by the countries of Europe finally united, many thunderstorms will break out. Within the next 18 months.

No one among us can claim any longer that he did not know.


CAIRNS, Australia, Sept 19, 2014 (AFP)
US Treasury Secretary Jack Lew on Friday urged greater efforts to spur global growth as the head of the World Bank bemoaned a disappointing year and warned of downside risks ahead.

Lew called for more focus on investment and infrastructure to help create jobs in comments ahead of this weekend’s meeting of G20 finance ministers and central bankers in the northern Australian city of Cairns.

“The US continues to be a source of strength in the global economy,” he said, pointing to the US unemployment rate at a six-year low with 10 million jobs created by the private sector over the past 54 months.

“Overall, the global economy continues to under-perform. This is particularly true in the euro area and Japan, while a number of emerging market economies are also slowing.

“More work is needed to achieve faster and more balanced growth, to boost demand, especially in surplus countries and to promote employment,” he added.

“Part of this growth agenda is a focus on investment and infrastructure. We see investment, both public and private, as a key to boosting growth.”

A focus for the Cairns meeting will be tangible progress on an ambitious goal to raise the total GDP of the grouping’s countries by two percent over the next five years — a target they set in Sydney earlier this year.

To meet the goal they pledged to work on reforms to accelerate infrastructure investment, lift employment and enhance trade, but a sickly eurozone recovery and weakening emerging economies threaten to hamper their efforts.

Tensions in Ukraine and the Middle East have spooked European economies, while stagnation and deflation risks in Europe and Japan and the US moving to normalise its monetary policy have added to concerns.

Despite this, Australian Treasurer Joe Hockey, who will chair the Cairns meeting, said more than 900 submissions had been made by participating countries to meet the growth target.

“I think it is hugely important the contribution that countries have made, and infrastructure is a key part of that agenda,” Hockey said.

“Greater involvement of the private sector in delivering infrastructure is a hugely significant issue for G20 countries.”

– Downside risks –

World Bank President Jim Yong Kim welcomed the G20’s focus on driving growth but warned of risks ahead.

“It’s another disappointing year. At one point our growth projections were as high as 3.2 percent globally and now they are around 2.7 percent,” he told a forum in Sydney.

“And in that context we are very grateful to the Australian leaders for bringing the focus to growth.”

Kim cautioned that while there were encouraging signs from some parts of the world economy, plenty of concerns remained.

“The biggest risk to economic growth, there are several, there are lots of downside risks,” he told reporters.

“Especially developing countries are very concerned about the removal of the unconventional monetary policy of the United States. And that looks like that is going to start happening in the middle of next year.

“What we are saying is that, especially for developing countries, if they continue with structural reform they will be able to prepare themselves for the eventual unwinding of the unconventional monetary policies.”

As well as infrastructure investment, the Cairns meeting will also look at ways to bolster reforms in competition and deregulation in a bid to create jobs.

A key outcome from the summit should be progress on a common reporting standard to stop multinational companies from shifting profits to avoid tax, with the OECD putting forward proposals this week.

Movement is also expected on financial regulation and rules to reduce the problem of “too-big-to-fail” banks.

investor daily Selama lima tahun lebih, sejak krisis keuangan 2008, rata-rata harga saham di Amerika Serikat telah naik lebih dari tiga kali lipat. Indeks harga saham, seperti DJIA, Nasdaq dan S&P 500, mencatat rekor demi rekor. S&P 500, yang pada awal 2009 masih mengambang di sekitar angka 600, Selasa 26 Agustus 2014 lalu, untuk pertama kali menembus angka 2000.

Rally panjang sebenarnya merupakan gejala biasa di bursa efek. Hal yang istimewa dengan tren panjang kali ini, yaitu karena ia terjadi di tengah pertumbuhan ekonomi yang subpar. Di dalam negeri, peningkatan harga saham selama kurun waktu yang sama, juga sama fantastis. Kalau kita ambil angka indeks terendah pada krisis 2008 yaitu sekitar 2000, sampai rekor tertinggi 5.224 beberapa hari lalu, indeks harga saham gabungan (IHSG) sudah naik lebih dari 250%. Harga beberapa saham bahkan meningkat beberapa puluh kali lipat.

Saya mengenal beberapa investor yang beruntung melakukan investasi pada pertengahan 2008 sampai awal 2009, dan mempertahankan portfolionya hingga kini. Para investor itu sudah bertransformasi dari jutawan menjadi multi-miliarder, bahkan triliuner.

Namun, seperti jargon Wall Street, no tree grows to the sky, dalam keadaan seperti ini, pertanyaan yang paling menggoda bagi investor, terutama yang telah mencatat keuntungan besar dalam portfolionya, adalah: haruskah saya melakukan profit taking dan merencanakan alokasi aset yang baru sama sekali, atau tetap tinggal dan memperbesar kue portfolio saya, karena keyakinan bahwa harga saham akan terus menanjak. Terbang migrasi atau memperbesar sarang di pohon yang sama?

Baca selengkapnya di Investor Daily versi cetak di


JAKARTA – Menghadapi prospek tahun fiskal pertama tanpa pertumbuhan sejak resesi global pada 2009, para pembuat kebijakan Jepang terus meyakini bahwa nilai tukar yang rendah akan membantu pertumbuhan ekonomi terbesar ketiga dunia itu.

Pada saat pelemahan yen hingga 26% terhadap dolar AS dalam dua tahun terakhir belum memacu tingkat produksi dan ekspor, para pejabat ekonomi dan bank sentral Jepang pekan lalu mengisyaratkan pelemahan lanjutan atas nilai tukar itu.

Koichi Hamada, penasihat Perdana Menteri Shinzo Abe, mengatakan dalam satu wawancara bahwa pelemahan yen akan positif bagi ekonomi Jepang.

Isyarat tersebut menegaskan peluang depresiasi yang kian dalam setelah bank sentral AS menarik stimulus, sedangkan Jepang mempertahankannya.

Dinamika itu menunjukkan bank sentral Jepang akan mendapat bantuan tambahan dalam mengelola inflasi dengan mempertaruhkan penurunan lebih tajam atas daya beli konsumen yang didera tingginya pajak penjualan.

&ldquo;Mereka jelas menyambut baik pelemahan yen lebih dalam lagi,&rdquo; ujar  Hideo Kumano, chief economist pada Dai-ichi Life Research Institute sebagaimana dikutip Bloomberg, Rabu (10/9/2014).


Source : Bloomberg


TOKYO. Dollar Amerika Serikat (AS) menekan yen ke level terlemah dalam 6 tahun terakhir. Bursa AS dalam tren menguat di tengah perbaikan ekonomi dan rencana Federal Reserve menaikkan bunga acuan tahun depan.

Dollar AS menguat sebelum mengumumkan data klaim pengangguran dan potensi kenaikan penjualan ritel. The Fed juga akan menggelar pertemuan pada 16-17 September.

Kurs dollar AS menguat 0,2% ke ¥ 106,21 pada pukul 11.57 di Tokyo. Greenback pernah menekan yen sampai level 106,28 pada Oktober 2008.

Sedangkan terhadap euro, dollar menguat 0,1% ke US$ 1,288 per euro. Bloomberg Dollar Spot Index yang menyusur kekuatan dollar terhadap 10 mata uang utama, naik 0,2% ke 1.047,11.


FRANKFURT, Sept 08, 2014 (AFP)
The outlook for the German economy, Europe’s biggest, brightened on Monday when data showed the country’s trade surplus hit a new record in July on the back of booming exports.

After allowance for seasonal blips, Germany exported goods worth a total of 98.2 billion euros ($127 billion) in July, 4.7 percent more than in June, the federal statistics office Destatis said in a statement.

Imports, on the other hand, shrank by 1.8 percent to 76.1 billion euros.

That meant the seasonally adjusted trade surplus — the balance between imports and exports — increased to 22.2 billion euros in July from 16.4 billion euros in June.

In unadjusted terms, the trade surplus jumped to a record 23.4 billion euros in July, Destatis said.

A trade surplus is one of the factors of growth and wealth creation for an economy.

Exports to the European Union were up 9.6 percent and exports to the 18-member eurozone climbed by 6.2 percent, while exports to countries outside Europe soared by 15.9 percent, the data showed.

Following better-than-expected industrial output and orders data last week, analysts said the trade figures augured well for the German economy in the third quarter.

“All in all, data in July indicate that the German economy had a very positive start into the third quarter,” said Natixis economist Johannes Gareis.

“Thus, although it is early days, the data suggest that Germany will refire its engine in the third quarter and avert a technical recession,” he said.

In the second quarter, German gross domestic product (GDP) had contracted by 0.2 percent.

BayernLB economist Johannes Mayr said that any weakness in exports to Russia and Ukraine had been more than offset by exports to other countries.

“The pick-up in the US economy will have also played a role,” Mayr said.


smh THROUGH a combination of tough regulation, a relatively conservative banking system and a dose of good luck, Australia avoided a direct hit from the global financial crisis. But will it fare so well in the crisis of 2015? This is a question regulators and even some bankers are mulling over as the clouds from the 2008 financial disaster slowly lift.

The lessons from the past few years have been learnt. More needed to be done to make the financial system safer. New global bank and insurance regulatory regimes have been introduced to avoid a repeat of what started out as a North American subprime mortgage crisis. Banks today face tougher control over capital, liquidity and leverage.

But could efforts to cut back on risk be planting the seeds for failure down the track?

Barrie Wilkinson, who works with financial services consultancy Oliver Wyman, is paid to think about these things and has tried to pin down the unintended consequences of rising regulation. His findings, in a paper titled The Financial Crisis of 2015: An Avoidable History, sound a cautionary tale.

The 24-page study outlines how banks, unwilling to accept the lower returns on equity that result from requirements to carry higher levels of capital, could inadvertently be fuelling a new asset bubble by chasing high returns in commodities or emerging markets – mostly through Asia.

Regulators, by focusing on curbing the risky behaviour of banks, may be driving risk-taking into unregulated funds that pose a danger to the system, the study finds.

The shadow banking system has been singled out as providing the conditions that inflated the US housing bubble. This quickly evolved into a global crisis.

Banks found they could write more loans by packaging their existing loans into securities and derivatives. Big non-bank lenders in the US, such as Fannie Mae and Freddie Mac, were almost wholly reliant on securitisation. This took place without the probing eye of regulators.

The Oliver Wyman report tells bank executives and shareholders to accept that returns of the past are unsustainable and that they need to do a better job of monitoring risk, especially in areas that produce unusually high profits.

As if to illustrate what the report was warning of, Commonwealth Bank in February reported a thumping rate of return on equity of nearly 20 per cent when it handed down its interim results. This makes CBA one of the world’s more profitable banks, based on a measure of shareholder returns.

Asia-focused ANZ has also flagged its intention to hit the 20 per cent mark. To put these numbers in context, at the peak of the credit boom, CBA’s return on equity was a little more than 22 per cent.

Over 30 years, the big banks’ average return on equity has been 16 per cent. This suggests there is still a debate to be had over what is an excessive return.

While Australia missed the worst of the banking crisis, Wilkinson’s scenario suggests our banking system is in line for a direct hit.

While the growth story for Asia markets is widely acknowledged, much of the economic activity in these markets is still being fuelled by cheap money from Western central banks.

Soaring commodity prices are soaking up the excess global money supply, helping commodity-rich emerging economies such as Brazil and Russia, with Australia also clearly benefiting.

Wilkinson’s 2015 scenario points to high commodity prices as creating strong incentives for commodity-rich emerging economies to launch expensive development projects to dig more out of the ground – creating a massive supply of commodities relative to the demand coming from the real economy. Not only is the strength of the Chinese and other Asian economies important for Australia’s terms of trade and the resource sector, it is now powering global growth.

Any hint of a slowing Chinese economy sends tremors through global markets. And, with China throwing everything at tackling inflation, a slowdown is a possibility.

Wilkinson also warns that Western banks are building up large and concentrated loan exposures in Asia and across the resources sector. It was a mortgage bubble that sideswiped the US economy; Australia’s undoing could be a resources bubble.

The story driving the global commodities bubble assumes a continued increase in demand from China, which has become the world’s largest commodities importer. Materials such as gold, copper, coal and iron ore are changing hands at or near record prices.

As with previous asset bubbles, consider that much of the debt financing for resource projects often comes from banks.

And much of this is likely to be supplied by Western banks – including Australian banks – that will be eager to preserve their diminishing return on equity and seek lucrative lending opportunities to cover their increasing cost of funds.

The regulatory trend of coming down hard on the banks will increase risk-taking in the shadow banking sector, Wilkinson concludes, with a real chance the fundamental imbalances that are driving up levels of risk in the financial system will not be acknowledged by the new regulations. The only question is where these risks will go.

Eric Johnston is financial services editor.


PARIS, Aug 27, 2014 (AFP)
Unemployment in crisis-hit France struck a new high in July, official statistics published Wednesday


The next financial crisis keeps looming

No doubt: Globalisation offers many new opportunities such as new emerging markets as well as fresh competition. Get it right and we all could be winners and prosper. Get it wrong and the global financial crisis of 2008 threatens to be the first of many to approach.

Both nationalism and inaction pose serious threats to jobs, growth, climate change, social justice and global poverty reduction. At its most fundamental level, this crisis was caused by the rapid growth of the so-called shadow banking system over the past few decades and its remarkable collapse over the past two years

We also need to make sure that financial firms are not too big or too interconnected to fail. All financial transactions should either pass through organized exchanges, or be subject to some sort of strict reporting requirements to regulators.We were told the world economy was back on track, but festering problems threaten to hit developing countries hard food prices.

So currency wars have already started, but in a subtle, shadow-boxing way. Speculation driven rises in oil and food prices will be transmitted through the developing world causing the poor to be battered by oil and food prices.

This is the next financial crisis. Unlike the last one, it’s not going to blow up all at once. It will be slow torture.

The bubble will appear in developing markets

According to some creative analysts at the management consulting firm Oliver Wyman, that date is April 26, 2015. The next time, the authors say, the fat-cat financiers will be in Singapore or Hong Kong, chased away from New York and London by stricter reserve requirements and emboldened regulators. The bubble will appear in developing markets, with easy developed-world money and the promise of ever-spiraling commodity prices funding unnecessary building and silly investments. So there you have it—again: a big pool of money chasing market-beating returns and ultimately inflating asset-price bubbles that burst with awful consequences, from bank failures to sovereign-debt crises.

All of these narratives of the next big crisis share one very scary assumption: that whatever the United States and its European peers do to try to prevent the next crisis might not be enough. Some wise men suggested strong leverage caps, or size or activity restrictions to stop financial companies from getting too risky. Others suggested just taxing the whole sector. High interest rates will first increase profitability, then kill it. High interest rates, however, have a substantial downside. At some point, the interest rates become too high for many banking customers to pay. And when that happens, default rates start to rise and the banks’ earnings start to plummet as they set aside more and more of their revenues to cover the losses from loans gone bad.

Maybe it’s something to do with its being summer time, with much of the world’s top brass away, but it’s becoming a month notorious for market turmoil. Four years ago last week the jaws of the credit crunch snapped shut. The start was marked by investment bank BNP Paribas closing two of its funds exposed to the US sub-prime crisis on 9 August 2007. Within just a few weeks, the queues of worried customers were forming outside the Northern Rock.

Four years on, and numerous bailouts later, the world economy seems once again to be standing on the precipice, with stock markets around the world losing billions of dollars in one of the bloodiest meltdowns since the 2008 crash. Share prices fell in Brazil, Tokyo, New York, London, Mexico and across Europe.

More than 10 per cent was wiped off the FTSE 100 index in London – equivalent to £270 bn – on the week and £144bn was lost on Friday alone. It closed 600 points down on the week to 5240, about the same level as it started the year. In New York the Dow Jones plunged by 5.3 per cent on the week.

Europe playing with fire

There are no magic wands. Time may heal wounds, but certainly does not extinguish fires. Without debt restructuring and financial regulation, the collapse of Europe is just around the corner and will quash the uneven and incipient global economy recovery. Europe is not playing with time, it is playing with fire..

We’ve been saying for years that we believe the period of 2016-2018 is the start of an overwhelming financial crisis, possibly much worse than the 2000/2001 stock market collapse, and the 2008/2009 credit crisis. 2016 appears to be the peak of the financial markets and economic escalation, with the giant reverse beginning as early as 2016 and as late as 2018, but more likely as late as 2017.

Although many financial experts are now saying the Greek Tragedy has been averted with a financial rescue plan by the International Monetary Fund and the European Union, Simon Black, Senior Editor of the website SovereignMan, says, “…anyone with two brain cells to rub together recognizes that Europe’s economic woes cannot be contained with more paper money… and now the problem just became $1 trillion worse. Battling back from an economic crisis requires hard work, savings, and minimal disruption from the government. There’s no magic pill, entitlement program, or paper money bomb that will suddenly make things better. Instead, governments should be curtailing social benefits that encourage people to be lazy, while simultaneously stripping taxes to the bare bones in order to give entrepreneurs and investors the proper motivation to work hard, take risks, and hire employees.”

Even though the European debt crisis may appear to be under control by the end of 2010, it’s to be expected that Europe, including Greece, America, and Japan are heading for a financial brick wall with government spending and regulations out of control and funny-money solutions. The causes of previous financial crises mirror how politicians are handling the problems now, which will only serve to create the next crisis.

Can small business avoid a credit crunch?

The perennial issue of small firm financing is once again to the fore as small and medium sized firms (SMEs) are experiencing a challenging financing environment in the aftermath of the global economic and financial crisis. A combination of factors has contributed to a credit crunch for small firms. Businesses struggling with negative effects of the recession are experiencing liquidity problems because of increased bad debts and slower payments by debtors.

The provision of credit to SMEs by the banking sector worldwide has decreased due to a number of reasons. Firstly, demand for loans by small firms has fallen as business activity has dropped, and firms seek to deleverage. Secondly, bank lending to the sector has declined because of the poorer financial condition of firms during the economic downturn. Thirdly, restricted liquidity in the interbank markets means that financial institutions must curtail their lending to the sector. Banks seek to accumulate capital reserves rather than advance them to SMEs. Additionally, banks seek to protect their limited capital reserves by investing in securities perceived as less risky, including sovereign and corporate paper.

Firms should become less dependent on bank financing, an issue stressed by Uriel Lynn at the ISBE conference in November. This can be achieved by retaining greater reserves within the firm, and by seeking sources of external private equity rather than debt finance.

Although not all equity investors may be interested in some sections of the SME sector, other equity providers, such as business angels, may willingly provide funding. Small firm owners should be encouraged to seek out investment from the plethora of Business Angel networks In a recent study, firm owners stated that the greatest constraint to growth and development is a lack of adequate financial management skills. Finally, it is imperative that banks significantly alter their lending practices. For many years, debt finance has been advanced on provision of collateral. New lending models need to be based on profitability and projected cash flow, rather than on property and personal guarantees.

Indeed, normally the main cause of disagreement between a bank and a customer when an application is rejected is because the bank cannot see sufficient source of income to fund repayments. It is rarely the lack of collateral (that may come later when we begin to consider price).

The only aspect of this article that I would specifically wish to draw attention to is the alternatives to raising finance beyond the banks and Angel investor networks that can allow small businesses to avoid a credit crunch. And to return to my earlier reference to the rise of social media – such technologies have also created a range of new financing programmes, including “Funding Circle”

It may be difficult to avoid increases in the costs of financing, now is a good time for small business owners and managers to hone their skills in financial management and identify new opportunities in both financing and business development.


Author:. Date of birth: 27th March 1941, originating from the South Tyrolian family, The Barons Knoll von Dornhoff. Austrian nationality. Married, three children. Studied jurisprudence and national economics at the Universities in Vienna, Austria and St. Gallen, Switzerland. Graduated Dr.jur. (LL.D)and Dr. phil. and Mag.rer.soc.oec (MBA). Professor (adj. associate) of Economic and Fiscal Policy of the International University for Entreprenology, Hawaii, USA. Languages: German, English, French, Hu…Go Deeper | Website

showed, in another blow for the deeply unpopular President Francois Hollande.

The labour ministry said there were now 3.424 million people out of work, a rise of around 26,000. The 0.8-percent rise compared to the previous month was the ninth consecutive gain in the monthly unemployment figures.

“This rise reflects zero growth in the eurozone and in France,” Labour Minister Francois Rebsamen said in a statement.

According to the latest quarterly figures published by national statistics office INSEE, the rate in the first quarter in France was 10.1 percent. Figures for the second quarter are due to be released on September 4.

France, Europe’s second biggest economy, is battling a political and economic crisis seen as the worst since Hollande took power more than two years ago.

Growth has ground to a halt in the first six months of the year and Hollande has been unable to live up to his promise to bring down unemployment.

His strategy for pulling France out of the mire is the much-vaunted Responsibility Pact, which will cut social charges for businesses by 40 billion euros ($53 billion) in exchange for them creating 500,000 jobs by 2017.

Given the parlous state of France’s deficit and debt, this will be financed by 50 billion euros in public spending cuts, but the plans sparked a rebellion on the left flank of Hollande’s ruling Socialist Party.

Former economy minister Arnaud Montebourg launched a broadside at the austerity policies of his own administration, prompting the prime minister to tender the government’s resignation and enact an urgent reshuffle.


PARIS, Aug 23, 2014 (AFP)
French Economy Minister Arnaud Montebourg on Saturday criticised German austerity measures and warned France would no longer “be pushed around” by the EU’s economic powerhouse.

“You have to raise your voice. Germany is trapped in an austerity policy that it imposed across Europe,” the socialist minister said in an interview with Le Monde newspaper.

Montebourg’s comments follow Germany’s snubbing of a request from French President Francois Hollande earlier this month for an EU-wide shift of economic policy in order to encourage growth.

They put Montebourg at loggerheads with Hollande, who said this week he did not want to see France go “head to head” with Berlin.

Since the start of the eurozone debt crisis in 2010, Germany has faced accusations that by failing to use its standing as Europe’s biggest economy to do more to kickstart growth, it is leaving struggling partners in the lurch.

France is mired in a stubbornly slow economic recovery and the central bank warned this month that Hollande had no hope of reaching his target of 1.0-percent growth for 2014.

Montebourg also criticised — without mentioning Germany by name — its role in helping the European Central Bank to determine eurozone monetary policy.

“Today, unfortunately, the hawks… fight inflation when it disappears while forgetting to fight the essential problems such as widespread unemployment,” he said.


TOKYO – Dolar Amerika Serikat mendekati angka tertinggi terhadap Euro karena spekulasi Federal Reserve (The Fed) akan menaikan suku bunga lebih cepat.

Goldman Sachs Group Inc mengatakan mereka mengharapkan keuntungan lebih lanjut uang outflow dari Eropa.

Dolar selama dua minggu juga tinggi terhadap sekeranjang mata uang utama lainnya.

“Pasar mata uang mungkin pricing in karena kenaikan suku bunga lebih awal dari yang diperkirakan oleh Fed menjelang rapat minutes,” kata kepala valuta asing dan perdagangan uang di New York pada Sumitomo Mitsui Banking Corp Masato Yanagiya mengutip Bloomberg, Tokyo, Rabu (20/8/2014).

Dolar AS sedikit menaik di USD1,3321 per euro. Ketika naik 0,3 persen dan menyentuh USD1,3313, terkuat sejak 7 November.

The Bloomberg Dollar Spot Index, yang melacak greenback terhadap 10 mata uang utama, berada di 1,023.43 dari 1,023.51 di New York, di mana ia naik 0,3 persen. Itu menyentuh 1.023.69 kemarin, tertinggi sejak 6 Agustus. (rzy)

BANGKOK — Gubernur Bank of Japan, Haruhiko Kuroda, mengatakan kinerja perekonomian Asia berjalan baik meski ancaman terhadap keamanan dunia kian meningkat.

Dalam pidato di Forum Kebijakan Bank of Thailand di Bangkok, Kuroda mengindikasikan bahwa berlanjutnya gejolak di Irak dan Ukraina  adalah contoh potensi ancaman atas perekonomian dunia. Kuroda tidak menyinggung perihal sengketa wilayah Cina dengan beberapa negara tetangganya, yang salah satunya adalah Jepang.

“Kami di bank sentral terus memantau perkembangan ekonomi dunia dengan saksama, termasuk pula memantau pelbagai risiko geopolitis yang dapat mempengaruhi perekonomian global maupun domestik,” ujar Kuroda, sosok yang pernah memimpin Bank Pembangunan Asia. “Sejauh ini, perekonomian Asia cukup berhasil di tengah berbagai masalah politik dan keamanan.”

Menurut Kuroda, bahkan jika kondisi ekonomi terlihat membaik, bank sentral masih harus berhati-hati.

Para perencana kebijakan Bank of Japan selama ini menyuarakan kekhawatiran atas letupan risiko geopolitik dalam beberapa pekan belakangan. Bank sentral Jepang pun memangkas proyeksi pertumbuhan ekonomi pada tahun fiskal 2014 dari 1,1% menjadi 1,0%.

Wakil Gubernur Bank of Japan, Hiroshi Nakaso, mengatakan pada Rabu bahwa masalah-masalah geopolitik seperti kekerasan di Irak dan ketegangan antara Rusia dan Ukraina, adalah “faktor risiko” perekonomian global. Namun, belum terlihat tanda-tanda bahwa para pengambil kebijakan bersiap melangkah untuk menambah stimulus dana. Menurut Nakaso, target inflasi 2% yang diramalkan BOJ sepertinya akan menjadi kenyataan.

Dalam pidato di Bangkok, Kuroda pun menengarai persetujuannya atas rencana negara-negara BRICS (Brasil, Rusia, India, Cina, Afrika Selatan) untuk mendirikan bank pembangunan baru di Shanghai pada 2016 sebagai alternatif dari Dana Moneter Internasional.

“Jaring pengaman keuangan untuk negara-negara BRICS berpotensi membantu negara berkembang dalam menghindari krisis keuangan,” ujar Kuroda. “Pertumbuhan dan stabilitas keuangan mereka dapat menyumbang besar bagi perekonomian dan stabilitas keuangan global.”

Negara-negara BRICS kali pertama memutuskan untuk menciptakan bank baru pada 2013 setelah para investor asing menarik dana dari negara berkembang.

Kuroda menekankan bahwa IMF tetap akan menjadi lembaga keuangan internasional yang menyediakan dukungan keuangan dan menjaga sistem moneter dunia sambil membantu sejumlah anggotanya dalam pelbagai urusan teknis.

—Dengan kontribusi dari Takashi Nakamichi di Tokyo


WASHINGTON, July 17, 2014 (AFP)
President Barack Obama has a simple message for critics who charge that cascading global crises have left his foreign policy flatfooted and US power enfeebled.

Keep calm — I can handle this.

Obama, who won re-election posing as a war-ending, Osama bin Laden-dispatching statesman, is facing increasingly caustic reviews of his leadership as the Middle East unravels in fire and blood and rising powers challenge US resolve across the globe.

“I’ll point out the obvious. We live in a complex world and at a challenging time,” Obama said, after appearing in the White House Briefing Room on Wednesday to discuss Iran, Ukraine, Afghanistan and the Middle East.

“None of these challenges lend themselves to quick or easy solutions, but all of them require American leadership,” Obama said.

“As Commander-in-Chief, I’m confident that if we stay patient and determined, that we will, in fact, meet these challenges.”

US presidents often look abroad in their second terms when their domestic power erodes and the lure of legacy polishing achievements tempts.

But when Obama casts his eye across the globe, he sees only trouble — and few opportunities to festoon a shrinking foreign policy resume.

His simple message — that he ended the Iraq and Afghan wars and put Al-Qaeda on the run, has been trumped by instability and geopolitical blazes which threaten to tear nations apart and swamp long-established national borders.

The US leader has been pummelled by critics who say he abandoned Baghdad then stood by and watched as murderous Islamic State rebels chewed off chunks of Iraq and Syria to establish a caliphate, which some fear could turn into a terror haven to threaten the United States.

As it agonizes over how to shape Syria’s civil war and worries about Libya’s splintering, the administration also faces a long term challenge from an increasingly assertive China and the march of radical Al-Qaeda inspired radicals across Africa and the Middle East.

But on Wednesday, the president offered a breezy summary of the current crises stacked up in his in-tray, apparently bent on quelling Washington chatter about his leadership.

He unveiled the most punishing US sanctions yet against Russia over Ukraine, hinted he would give more time to a deal making with Iran over its nuclear program after a Sunday deadline and promised to redouble efforts to end the battle in Gaza between Israel and Hamas.

The plan seemed to be to project resolve and resourcefulness — and Obama did not take questions that might have drawn answers that diluted the simplicity of his message.

It was not the first time in recent months that Obama felt the need to defend his foreign policy.

In Manila in April, he argued the key to US leadership was avoiding big mistakes, like the Iraq war. That message was distilled into a formal foreign policy address in May when he warned “tough talk often draws healdines, but war rarely conforms to slogans.”

This time the White House seems to have concluded that it was time to counteract an emerging trope that Obama was being outpaced by global events.

Respected foreign policy columnist David Ignatius warned Wednesday that Obama had slumped into foreign policy inertia, characterised by a lack of urgency and missing follow through on vital US initiatives.

“There is no prize for good intentions here, performance is what matters,” Ignatius wrote in the Washington Post.

“The White House must break through whatever resistance or inertia it encounters. The rest is excuses.”

While foreign policy is a intricate business, politics is the stuff of simple narratives that stick.

Obama can ill afford an impression — long fanned by Republican critics — that he is an indecisive leader more prone to contemplation than action, hardening into accepted media conventional wisdom.

Just this week, the Wall Street Journal, in a widely noticed front page article, wrote that an “arc of instability” challenging Obama’s foreign policy and “reflecting a world in which US global power seems increasingly tenuous.”

Obama has in the past vehemently rejected claims he has presided over an era of American decline — and says the one commonality between each global crisis is that it can’t be solved without active US engagement.

Obama’s Republican critics were quick to react to his announcement of new sanctions on Russia, which ratcheted up the worst East-West crisis since the end of the Cold war.

Mixing faint praise with criticism, Bob Corker, the top Republican on the Senate Foreign Relations Committee said the new measures were useful but overdue.

“While the delay in imposing real costs on Russia has been damaging to US credibility, (the) announcement by the administration is definitely a step in the right direction,” said Corker.

Marco Rubio, a potential Republican presidential candidate took a sharper tack, reflecting the fact that Obama’s foreign policy struggles are already grist for the 2016 campaign trail.

“The sanctions announced … by President Obama are inadequate,” said Rubio.

“Limited actions … make US threats look hollow.”

NEW YORK, July 11, 2014 (AFP)
The dollar and euro moved only slightly in foreign-exchange trading Friday as fears about a large Portuguese bank eased, with the market looking ahead to next week’s packed economic calendar.

“Currency and financial markets stabilized as worries about new debt problems in Europe abated,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.

Portuguese authorities managed Friday to ease wider market fears over the health of the country’s biggest listed bank Banco Espirito Santo, which is being hammered by its parent group’s debt woes.

“There is no reason to doubt the security of the funds entrusted to the BES, and its savers have no need to be worried,” Portugal’s central bank said in a statement.

Concerns that the bank’s troubles could have a wider impact on Portugal — which only two months ago exited a three-year, 77-billion-euro ($106 billion) international bailout — had rocked global markets Thursday as questions resurfaced over eurozone debt.

“The euro potentially has a lot to lose should the recent troubles with one of Portugal’s biggest banks develop into a full-blown crisis. For now though a tentative calm has washed over markets, allowing the euro to catch its breath,” Manimbo said.

Kathy Lien of BK Asset Management said that next week’s charged calendar could spark bigger moves in currencies.

Topping her list was Federal Reserve Chair Janet Yellen’s semi-annual testimony to Congress on the US economy and monetary policy, on Tuesday and Wednesday.

“Everyone wants to know when the Fed will start raising interest rates so rest assured, members of Congress will pepper her with questions about tightening,” Lien said.

Other potential forex movers she cited included earnings reports from JPMorgan Chase, Goldman Sachs and General Electric; Chinese second-quarter economic growth numbers, and US retail sales.

   2100 GMT       Friday      Thursday
   EUR/USD        1.3604        1.3609
   EUR/JPY        137.78        137.88
   EUR/CHF        1.2133        1.2143
   EUR/GBP        0.7954        0.7942 
   USD/JPY        101.23        101.32
   USD/CHF        0.8920        0.8922
   GBP/USD        1.7101        1.7133

LISBON, Portugal (AP) — The specter of Europe’s financial crisis is back to haunt investors.

Worries over the health of Portugal’s biggest bank on Thursday raised fears that the country might run into financial trouble again — just weeks after emerging from a bailout — and trigger a flare-up in the market crisis Europe thought it had quelled.

Stocks and bonds fell in Europe and the U.S. while the price of gold rallied as traders sought it out as a safe investment.

The tensions center on Espirito Santo International, a holding company that is the largest shareholder in a group of Espirito Santo family companies, including the parent of Portugal’s largest bank, Banco Espirito Santo. Espirito Santo International reportedly missed a debt payment this week and was cited for accounting irregularities — the sort of shenanigans that helped cause Europe’s debt crisis four years ago.

Portugal is one of the smaller eurozone economies and, like Greece and Ireland, needed an international rescue in 2011 during the continent’s debt crisis. A three-year economic recovery program was supposed to straighten out its finances. Difficulties at Banco Espirito Santo have triggered fears there may still be some unexploded bombs.

The International Monetary Fund, which provided funds for the Portuguese bailout, acknowledged in a statement that “pockets of vulnerability remain” in Portugal but declined to comment specifically on the case.

Trading in Banco Espirito Santo stock was suspended after a fall of more than 17 percent, which dragged the Lisbon stock market down by 4.2 percent. The yield on Portugal’s benchmark 10-year bonds rose by 0.21 percentage points to 3.97 percent. The Dow Jones Industrial average slid 0.4 percent while Germany’s DAX fell 1.5 percent. Italy and Spain saw sharper drops of 2 percent.

Part of what is spooking investors is that the size of the problem remains unclear and there is potential for the trouble to spread to other companies.

An audit in May found “serious” accounting irregularities at Espirito Santo International, which this week reportedly delayed a short-term debt payment to clients. Because Espirito Santo International has important stakes in a network of the group’s companies, its financial trouble could weigh on the others.

One of the subsidiaries, Espirito Santo Financial Group S.A., is the major shareholder in Banco Espirito Santo and was downgraded Wednesday by Moody’s by three notches. The ratings agency expressed concern about “the lack of transparency” and the extent of links between the group’s companies.

The Portuguese government insists Banco Espirito Santo is solid and the drop in its stock prices merely reflects trouble at the parent company.

But investors have heard such reassurances in Europe before, only for banks to go bust and require the sort of huge rescue loans that can bankrupt small countries like Portugal.

Analysts say that without more information about the size of the financial problem in the Espirito Santo group, investors became cautious.

That was reflected in early trading in the U.S., where the Dow dropped as much as 180 points 20 minutes after the opening bell. The blue-chip index went on the recover most of that loss and ended the day down 70.54 points, or 0.4 percent, at 16,915.07. But buyers focused on stocks that are considered safer, such as utilities and telecoms.

The Standard & Poor’s 500 index finished lower by 8.15 points, or 0.4 percent, at 1,964.88 and the Nasdaq composite fell 22.83 points, or 0.5 percent, to 4,396.20.

The sharp reaction in markets is also partly due to the fact that many stock indexes have hit records recently, leaving investors fearful of a big retreat. The prospect of a flare-up in Europe’s financial troubles seemed enough to set off those fears.

“With Portugal looking to be in trouble once again, prudent analysis has been thrown out of the window in preference to a knee-jerk reaction,” said Chris Beauchamp, market analyst at IG.

Portugal became the third eurozone country after Greece and Ireland to require a financial rescue when it got a 78 billion-euro ($106 billion) bailout in 2011. In return, the government has enacted tough austerity measures, such as cutting spending and reforming the economy.

Europe’s debt crisis contributed to the U.S. stock market’s last correction — a decline of 10 percent or more — in 2011. Concerns that the crisis was spreading helped push the S&P 500 index down 19.4 percent between April 29 and Oct. 3 of that year. Stocks also fell after the U.S. credit rating was cut.

Portugal’s efforts in recent years to get its public finances in shape have helped it regain the trust of investors. That was apparent in the fall in interest rates the country pays on its borrowings. As a result, Portugal concluded its three-year international bailout program in May, and the government has since been able to raise money in the markets.

Thursday’s rise in the country’s bond yields is still small compared with the increases it saw during the crisis. In fact, its borrowing rates are near record lows, having dropped for months as Europe’s financial crisis eased.

How markets react in coming days as more information about the Portuguese firm’s problems is unveiled will be watched closely.

Shareholders in Banco Espirito Santo include France’s Credit Agricole, Brazil’s Banco Bradesco and Portugal Telecom. The Espirito Santo family owns 25 percent through Espirito Santo Financial Group.

The group of companies grew out of a banking dynasty dating back to the 19th century. It also owns Portuguese and international interests in industries such as tourism and private health care.

Portuguese banks recorded heavy losses during Portugal’s bailout but passed the so-called European “stress tests” meant to assess whether they were sound.

TOKYO, June 19, 2014 (AFP)
Tokyo shares opened 0.16 percent higher Thursday following rallies overnight on Wall Street, after the Federal Reserve kept its ultra-low interest rate policy.

The Nikkei index at the Tokyo Stock Exchange opened up 24.55 points at 15,140.35.

The Tokyo bourse was trailing New York, where the S&P 500 jumped to another record close, surging 14.99 points (0.77 percent) to 1,956.98.

The Fed, as expected, reiterated its policy of tapering stimulus while keeping monetary policy “highly accommodative”.

FRB Chair Janet Yellen downplayed recent data that shows accelerating, but still tame, inflation, and characterised unemployment as still too high.

Masayuki Doshida, senior market analyst at Rakuten Securities, said the comment came within the market’s expectations.

“The Fed’s comments were not out of line with market sentiment, especially as reflected in the longer term interest rate picture,” he told Dow Jones Newswires.

Doshida added that the Tokyo bourse was likely to remain in a narrow range as the dollar eased against the yen following the FRB decision.

The greenback Wednesday weakened against other major currencies after the US central bank did not accelerate the time-frame for raising interest rates.

The dollar stood at 101.90 yen, nearly flat from 101.91 in New York Wednesday but lower from 102.17 yen in Tokyo Wednesday morning.

The euro was $1.3594 and 138.50 yen, nearly flat from $1.3593 and 138.52 yen in New York.

WE Online, Siprus – Pemerintah Siprus pada Jumat (30/5) mengumumkan pencabutan semua sisa pembatasan transaksi perbankan di dalam negeri.

Pembatasan yang paling penting adalah larangan pembukaan rekening baru bank.

Transfer bank internasional masih diberlakukan setelah sistem perbankan Siprus direkapitalisasi menggunakan uang deposan pada Maret 2013, sebagai bagian dari dana talangan sebesar 10 miliar euro (13,7 miliar dolar AS).

Semua itu diperkirakan dicabut paling lambat akhir tahun ini, demikian laporan Xinhua, Sabtu pagi.

Kementerian Keuangan Siprus mengatakan pencabutan pembatasan itu bisa dilakukan setelah empat survei positif oleh pemberi pinjaman internasional dan peningkatan peringkat Siprus oleh lembaga rating internasional. (Ant), HONG KONG – Saham Asia naik untuk minggu kedua berturut-turut, ditutup pada level

tertinggi sejak Januari

, menyusul AS dan Cina manufaktur mengalahkan estimasi dan pelemahan yen mendorong ekuitas Jepang.

China Gas Holdings Ltd melonjak 9,1% di Hong Kong setelah Rusia mencapai kesepakatan US$400 miliar untuk memasok gas ke China. Honda Motor Co, yang mendapat sekitar setengah penjualan dari Amerika Utara, naik 4,3% di Tokyo.

Produsen tembaga Sesa Sterlite Ltd naik ke level tertinggi dalam hampir 3 tahun, karena saham India itu melonjak setelah pemilihan Narendra Modi . Saham jatuh di Thailand, setelah tentara melakukan kudeta.

MSCI Asia Pacific Index naik 0,9% minggu ini ke 140,92, membawa gain 2 minggu menjadi 2,2%. Indek pembelian manajer manufaktur China oleh HSBC Holdings Plc dan Markit Economics disampaikan pembacaan sementara dari 49,7 untuk Mei, naik dari 48,1 pada April dan mengalahkan perkiraan. Indeks manufaktur AS juga melampaui proyeksi.

“Sentimen pasar stabil, tetapi kita perlu indikator makro yang lebih kuat bahwa ekonomi global masih dalam kekuatan yang berkelanjutan,” kata Linus Yip, ahli strategi di First Shanghai Securities Ltd di Hong Kong .

Menurutnya, PMI China adalah sinyal yang baik, “Tapi kami masih harus melihat apakah tingkat pertumbuhan stabil . Investor yakin akan ada beberapa kebijakan yang keluar dari bank sentral untuk membantu pasar.”

Source : Bloomberg

Editor : Fatkhul Maskur
JAKARTA— Bursa negara berkembang menguat seiring bursa India mencetak reli terbesar di dunia dipicu spekulasi partai oposisi akan memenangkan pemilu.

Indeks MSCI Emerging Markets naik 0,9% ke level 1.015,82, level tertinggi sejak 10 April 2014.

“Ada harapan besar jika Modi menjadi perdana menteri selanjutnya, dia akan berinisiatif untuk melakukan reformasi baru untuk mengakselerasikan pertumbuhan,” papar Hertta Alava, Head of Emerging Markets FIM Asset Management Ltd, seperti dikutip Bloomberg, Selasa (13/5/2014).

Indeks Brazil Ibovespa menguat setelah ekonom memangkas proyeksi inflasi di Brazil. Indeks India S&P BSE Sensex melonjak sejak 13 September. Saham Samsung Electronics Co naik paling tajam sejak Agustus, Bank of New York Mellon India ADR naik ke level tertingginya dalam 3 tahun.



Source : Bloomberg


Ekonomi AS Terus Membaik, Simak Rincian Datanya
Amanda Kusumawardhani – Jum’at, 18 April 2014, 21:04 WIB, WASHINGTON— Klaim pengangguran menyusut pada pekan lalu, menembus level terendah selama hampir 7 tahun terakhir.

Tidak hanya itu, kepercayaan konsumen juga mengalami peningkatan sehingga mempertegas indikasi pemulihan ekonomi di Amerika Serikat.

Departemen Ketenagakerjaan Amerika Serikat melaporkan jumlah klaim pengangguran naik tipis yaitu 2.000 menjadi 304.000 dari 302.000 pekan sebelumnya. Survei Bloomberg sendiri memperkirakan angka klaim pengangguran pada pekan lalu naik menjadi 315.000.

Indeks Kepercayaan Konsumen Bloomberg juga tumbuh dari level terendah selama 9 minggu. Peningkatan kepercayaan konsumen tersebut bisa mencerminkan optimisme masyarakat negeri Paman Sam ini terhadap ekonomi, keuangan, dan iklim daya beli.

Laporan pemerintah juga menunjukkan penurunan angka pemecatan, mulai pulih dari periode resesi yang ditandai dengan maraknya pemotongan hubungan kerja. Belum lagi, kenaikan penjualan dan pemulihan sektor manufaktur memacu penguatan ekonomi Amerika Serikat, setelah digempur oleh cuaca ekstrim.

“Kondisi pasar tenaga kerja mulai membaik. Anda akan melihat perbaikannya lebih lanjut pada tahun ini,” kata Brian Jones, ekonom senior Societe Generale di New York, Kamis (17/4/2014).

Laporan lainnya, the Fed Philadelphia menyebutkan indeks aktivitas bisnis meningkat menjadi 16,6 pada April tahun ini dari 9,0 pada bulan sebelumnya. Indeks awal tersebut merupakan angka tertinggi sejak 7 bulan, melampaui estimasi ekonom yaitu naik menjadi 10,0.

Indeks yang mencatatkan angka di bawah 10 menandakan ekspansi manufaktur di wilayah yang terdiri dari bagian timur Pennsylvania, New Jersey bagian selatan, dan Delaware. Penaikan tesrebut disebabkan oleh bertambahnya pesanan baru dan pengiriman.

Sebelumnya, musim dingin yang ekstrim diiringi dengan lemahnya ekspor dan akumulasi saham diperkirakan mampu memangkas pertumbuhan produk domestik bruto (PDB) menjadi 1,5% pada kuartal I/2014. Padahal, laju pertumbuhan PDB pada kuartal IV/2013 mencapai 2,6%.

Source : Bloomberg/Reuters
Editor : Linda Teti Silitonga

Up, up and away

Higher inflation may be needed to leave extra-low interest rates behind

AT FIRST glance, rich-world central banks are going their separate ways. Cheered by sturdy growth figures, the Bank of England and the Federal Reserve are shuffling toward an exit from easy monetary policy; markets found Janet Yellen’s first Fed statement unexpectedly hawkish. The European Central Bank, in contrast, is tacking looser. On March 25th Jens Weidmann, president of the Bundesbank, suggested that the ECB might need to be more forceful in order to keep the euro-area economy out of the grips of deflation.

Look again, however, and the path forward appears similar across the rich world: low interest rates stretch off into the visible distance. The outlook is clearest in Europe, where the ECB may toy with negative rates as a means to fend off deflation. But even in America and Britain “normal” rates are a distant prospect. In February Mark Carney, the Bank of England’s governor, promised that eventual rate rises would happen gradually, and would level off below the pre-crisis norm. On March 19th Ms Yellen offered similar guidance. Markets project that short-term rates in both economies will still be just 2% in early 2017 (see chart 1), a level the euro zone will not hit until 2020.

As normalisation recedes toward the horizon, central bankers moan publicly about the costs of low rates. In February Daniel Tarullo, a Fed governor, said that they might encourage investors to take dangerous risks as they “reach for yield”. Even more worrying, low rates leave little cushion against future shocks. The Fed’s main policy rate was just 2% when Lehman Brothers failed in 2008, compared with 5% at the start of the 2001 recession and 8% when the downturn of 1990 began.

Yet rates are low for good reason: economies cannot withstand dearer credit. Central banks are battling against two sources of downward pressure on their main policy rates. One is the rock-bottom level of the real (ie, inflation-adjusted) interest rate needed to keep economies running at full tilt. This “natural” rate has been dragged down by long-term structural trends. A global savings glut is partly to blame: export powerhouses like the OPEC countries and China buy vast quantities of rich-world debt, depressing borrowing costs in the process. Rising inequality also adds to the pool of underused savings, since the rich save more of their income. Leaden real rates were reinforced by the financial crisis. Tumbling asset prices forced households to repay debts rapidly. As they struggled to deleverage, their interest in new borrowing and spending evaporated.


Central banks bear more responsibility for the second complication: low inflation. Since besting the double-digit price rises of the 1970s, most central banks have set inflation targets of around 2% per year. But though stable prices are a true central-bank achievement, they have not been won without cost: headline interest rates fell alongside inflation, as borrowers required less compensation for erosion of the value of their principal by rising prices (see chart 2). That raised the odds of a bump against near-zero rates—a collision that has forced central banks to use unfamiliar and untrusted tools to combat slow growth.

Though central banks are in a tight spot, stuck between the economy’s need for cheap credit and the mounting costs of low rates, they are not without options. Some of the pressure could be eased by higher inflation. This would let central banks cut effective borrowing costs despite the zero bound on interest rates, since inflation reduces the burden of repaying a given loan. Just as important, higher inflation would speed up interest-rate normalisation.

Last November Fed economists published a paper arguing that lifting the inflation target to 3% would rapidly lower unemployment while allowing the Fed’s policy rate to rise higher, faster. The argument does not seem to have swayed the Fed’s monetary-policymaking committee, which continues to project inflation of at most 2% until the end of 2016. Markets reckon prices will rise even more slowly.

A rise in the inflation target would not be an easy step to take. The ECB would need permission from its political masters. The Fed only established an official target of 2% in January 2012; its officials would no doubt worry that so great a change after so little time would undermine its credibility.

But it is still hard to explain central banks’ nonchalance in the face of below-target inflation. Since declaring its 2% target the Fed has undershot almost 90% of the time; American inflation is now just 1.2%. Elsewhere low inflation is becoming more entrenched. Euro-area inflation is 0.7% and falling. In Britain, where above-target inflation was the norm for much of the recovery, consumer prices rose at just 1.7% in the year to February.

Central banks could do a world of good simply by promising not to tighten until inflation is back on target. Seizing on better economic conditions to begin preparing for rate rises may seem like good sense. But tightening policy while inflation is no threat will make fighting the next recession much more difficult.

Developing Asia Can Sustain Growth Pace, Manage Risks, ADB Says
By Rosemarie Francisco on 09:04 am Apr 01, 2014
Category Business, Economy
Tags: adb, economy
Manila. Developing Asia is poised to sustain its current growth momentum and is well positioned to manage risks coming from a slightly slower Chinese economy and possible uneven demand from major industrialized nations, the Asian Development Bank said.

Asian nations can undertake preemptive measures to protect the region’s growing economy from unpredictable capital inflows, said the Manila-based lender as it unveiled its forecasts for the region for 2014 and 2015.

The bank said it expects the region, grouping 45 counties in Asia-Pacific, to grow 6.2 percent this year, slightly faster than its most recent estimate of 6.0 percent in December, before accelerating further to 6.4 percent in 2015.

“Most regional economies have strengthened their economic fundamentals. Looking ahead, strengthening macroprudential measures before the boom can help avert sudden capital reversals that accompany the bust,” the ADB said in its Asian Development Outlook 2014.

While risks to the region’s growth outlook have eased, further shock to global financial markets from the U.S. tapering of stimulus and expected policy tightening, an uneven recovery in developed economies, and the possibility of slower growth in China as it aims to curb credit expansion would weigh on the region’s economic uptrend, the bank said.

Growth in China is expected to be 7.5 percent this year, the ADB said, slower than its December forecast of 7.7 percent, and will likely lose momentum further to 7.4 percent in 2015 as the country pursues policies aimed at more equitable, balanced and sustainable growth.

India is forecast to accelerate to 5.5 percent this year, much faster than the 4.7 percent forecast in December, although the South Asian nation was still operating below potential which can be solved by clearing investment bottlenecks, the bank said.

Improving global trade conditions will help lift Southeast Asia’s growth to 5.0 percent this year, slightly higher than a previous estimate of 4.8 percent, with Malaysia, Singapore and Vietnam leading the way. Political unrest will continue to restrain growth in Thailand, with the economy picking up speed only in 2015, the ADB said.

The bank also said inflation in Asia is expected to be largely steady with global commodity prices remaining soft. Possible upside risks are likely from adjustments in subsidized fuel and power rates in some countries, with regional inflation seen at 3.6 percent, steady from previous forecasts but higher than an actual 3.4 percent last year.

The ADB noted that despite developing Asia’s rapid growth, it continues to lag other regions in public spending on education and healthcare. The bank urged countries to expand revenue-raising measures to fund targeted poverty-reduction projects and narrow income gaps.

Putin Calls Obama to Discuss Resolving Ukraine Crisis
By Mike Dorning – Mar 28, 2014
Russian President Vladimir Putin and President Barack Obama dispatched their top diplomats for more discussions to resolve the Ukraine conflict after the leaders held an hour-long telephone conversation on the crisis.

Obama asked for a written response from the Russian leader to the plan that Secretary of State John Kerry presented to Russian Foreign Minister Sergei Lavrov in the Hague earlier this week, according to a statement from the White House.

Obama told Putin that a diplomatic solution “remains possible only if Russia pulls back its troops and does not take any steps to further violate Ukraine’s territorial integrity and sovereignty,” the White House said yesterday.

For his part, Putin highlighted a “rampage of extremists” intimidating officials and residents “in various regions,” according to a statement from his office. The Russian president also brought up the situation in Transnistria, a self-proclaimed republic wedged between Moldova and Ukraine with a Russian military presence that followed Crimea’s annexation by asking to join Russia.

Putin’s statement indicated he’s willing to examine “steps the global community can take” to stabilize Ukraine.

Hour-Long Call

The call between the two leaders lasted about an hour and they spoke while Obama was in Saudi Arabia, the final stop on a six-day trip that has been dominated by the situation in Ukraine. The U.S. and European Union have imposed two rounds of asset freezes and travel bans on Russian and Ukrainian officials and associates of Putin, with the threat of economic sanctions if the confrontation escalates.

The White House statement didn’t detail what plan Kerry and Lavrov discussed. In previous meetings, Kerry called for talks between Russia and the Ukrainian government with international participation, and sending monitors into Ukraine, including Crimea. Russia would be able to keep its bases on the Black Sea peninsula as long as Ukraine’s sovereignty was respected.

No date for a meeting between Kerry and Lavrov was given.

Over three days in Europe, Obama sharpened the U.S. response to Russia’s incursions into Ukraine. At a summit originally intended to discuss nuclear security and through an emergency meeting of the Group of Seven nations, the U.S. and its allies presented unified opposition to Russia’s actions.

Troop Buildup

U.S. officials have warned that the presence of Russian forces on Ukraine’s eastern border suggests that Putin may seek to carve off more of Ukraine’s east and south. Obama urged Putin to pull Russia’s military back from Ukraine’s frontier.

While U.S. intelligence officials continue to monitor what they say is a significant buildup of Russian troops near eastern Ukraine, some expressed concern that Putin’s sudden mention of Transnistria may be a prelude to a different move.

Speaking on the condition of anonymity to discuss intelligence assessments, two officials said that the visible military movements in the east may be “maskirovka” — a Russian term for deception — to distract attention from preparations to move into the small separatist Transnistria region through the Ukrainian Black Sea port of Odessa. Russian forces held what was called an anti-terrorism drill in the region this week.

Another possibility, U.S. Air Force General Philip Breedlove, NATO’s supreme commander in Europe, said March 23 in Brussels, is a Russian move all the way from Ukraine’s eastern border past Crimea to Odessa and Transnistria — a move that would leave Ukraine landlocked. The region, he said, may be “the next place where Russian-speaking people may need to be incorporated.”

McCain’s Assessment

U.S. Senator John McCain, an Arizona Republican, echoed that concern.

Because Moldova is not a NATO country, a U.S.-led NATO force response there would be “very questionable,” McCain said in an interview for Bloomberg Television’s “Political Capital with Al Hunt” airing this weekend.

The annexation of Crimea was met by sanctions from the U.S. and the European Union against Russian and Ukrainian officials and businessmen with ties to the Kremlin.

Obama vowed this week that further land grabs in Ukraine would trigger sanctions that target more vital sectors of the Russian economy. Any military response would be reserved for Russian action against a North Atlantic Treaty Organization ally, such as Poland or one of the Baltic republics.

Russian Economy

Concern that Russia’s economy would suffer from an extended confrontation over Ukraine has helped push the benchmark Micex Index (OPNMICX) down 10.6 percent this year. With emerging-market stocks rallying amid confidence in the global economy, though, the index rose 0.9 percent yesterday to 1,344.12.

Russia’s Baa1 government bond rating may be cut by Moody’s Corp., the ratings company said yesterday in a statement after the close of U.S. markets. The move was triggered by a weakening of Russia’s economy and uncertainty created by the Ukraine conflict, Moody’s said in a statement.

European and Asian allies have rallied around the U.S. position, suspending Russia from the Group of Eight major industrial powers and jointly laying down a threat of “sectoral” sanctions should Russia invade other parts of Ukraine. Even so, the stance skirted tough questions on what those sanctions might be.

U.S.-based companies are the largest source of foreign investment in Russia, primarily in technology and financial services, according to a 2013 report by Ernst & Young. They include General Electric Co. (GE), Boeing Co. (BA), and Caterpillar Inc. (CAT)

Exxon Mobil Corp. (XOM) and OAO Rosneft (ROSN) had been set to start their first Arctic well this year, targeting a deposit that may hold more oil than Norway’s North Sea.

Economic Pressure

To maintain pressure on Putin, McCain said he U.S. should consider forcing U.S. companies such as GE and Exxon Mobil to suspend business in or pull out of Russia if it attempts to take more territory from Ukraine or other neighboring nations.

As part of U.S. efforts, the Congress is poised to pass legislation that includes about $1 billion in loan guarantees and authorizes $150 million in direct assistance to Ukraine.

The U.S. Senate approved a plan this week, and the House of Representatives is scheduled to vote on it April 1. The aid was also linked to Ukraine reaching a deal with the International Monetary Fund. The IMF has unveiled a preliminary accord with Ukraine for a two-year loan of $14 billion to $18 billion designed to help the country avert default.

Ukraine’s government is grappling with dwindling reserves, a weakening currency, and an economy threatening to slide into a third recession in six years.

Growing and spreading

The results from our latest poll of forecasters

EACH month we ask a group of economists to give us their predictions for GDP growth, inflation and the current account (basically, a measure of foreign trade) across 14 economies. Economists seldom agree on much, and the latest forecasts for 2015 are no exception. Sweden and Britain show the biggest discrepancies, with growth forecasts ranging from 2.1% to 3.5%, and 1.8% to 3.2%, respectively. Although the range of expectations for Japan’s economy was the narrowest among the countries in our poll, there was still of a spread of 0.8 percentage points. Overall, the economists felt that next year will be better than this year. Only the economies of Britain and Japan are expected to expand at slower rates in 2015. But for those European countries that have suffered deep recessions, notably Italy and Spain, growth is likely to remain sluggish over the two year period. Even economists, those dismal scientists, can agree on that.


Stocks vulnerable to Asia shock as profit growth declines: SocGen

March 25, 2014, 4:41 PM

Datastream, Societe Generale

Profit growth is declining, and given that stocks are trading near record levels, any currency shock out of Asia makes the market particularly vulnerable and could send the U.S. into recession as job growth and investment vanish. That’s the take from Societe Generale uber-bearish strategist Albert Edwards on Tuesday.

Edwards looks at profit growth based on MSCI’s trailing earnings metric and notes that the dip in the profit-growth cycle puts stocks and GDP growth on particularly shaky ground because sluggish growth will discourage business investment, which is already conservative as it is.

“The bulls will point out, quite correctly, that on many key measures the profits situation in the US looks quite healthy. But experience shows us that it is not the level of profits, nor the rate of profitability (ROE), nor the level of margins that drives the investment cycle. Instead it is the rate of growth of profits that should be monitored.”

Among Asian currencies, the Chinese yuan hit its lowest point in more than one yearagainst the U.S. dollar after the central bank widened its trading band and appeared to push it lower. And Edwards has previously fretted that a weakening yen could“destabilize already weak balance-of-payments situations in the rest of Asia.”

In his latest report, Edwards writes:

“While profits growth is so anemic, any adverse shock such as an Asian currency devaluation that we have discussed previously (including both Japan and China) will be enough to deepen that profits recession and send US investment expenditure into decline. While most equity investors appear to believe that the US economy has reached escape velocity, a recession carries a far higher risk than the market supposes.”

Even without using MSCI metrics, first-quarter earnings are now expected to be flat, according to FactSet, compared with expectations back at the beginning of the year that they would expand 4.4%.

For the rest of the year, analysts are forecasting earnings growth rates are 7.7% for the second quarter, 11% for the third quarter, and 11% for the fourth quarter, according to FactSet. But those, of course, are subject to change  and historically have tended to be revised lower as the end of the quarter nears.

Corporate investment, or a lack of it, is posed as a risk to the economic recovery by Lindsey Piegza,  chief economist at Sterne Agee, in a note Tuesday. Citing the rise in consumer confidence, Piegza notes the confidence survey doesn’t really outline a catalyst for businesses to ramp up hiring and investment, which is necessary to make good on the improved outlook.

Piegza wrote:

“Businesses remain hesitant to invest hindering employment and longer term income growth. No matter how optimistic consumers may be, unless the credit cycle takes hold, prompting investment, it’s unlikely the economic picture improves markedly over the next 6-12 months.”

–Wallace Witkowski

ADB Minta Asia Antisipasi Krisis

Oleh: Wahid Ma’ruf
pasarmodal – Jumat, 21 Februari 2014 | 11:47 WIB

INILAH.COM, Hong Kong – Asia Development Bank (ADB) negara di Asia meningkatkan kesiapannya menghadapi krisis ekonomi seperti krisis tahun 1990 an.

Hal tersebut dikatakan Presiden ADB, Takehiko Nakao seperti mengutip, Jumat (21/2/2014). “Kesiapsiagaan dapat mendukung stabilitas,” katanya.

Ekonomi negara berkembang, katanya, mungkin berpotensi terkena krisis. Namun seharusnya mengambil persiapan karena sudah pernah mengalami krisis sebelumnya seperti tahun 1997.

Pasar saham, pasar obligasi dan mata uang di negara berkembang pada sebulan terakhir mengalami turbulensi. Kondisi tersebut bahkan sejak awal tahun sudah terjadi.

Aksi jual di pasar negara berkemang merupakan kombinasi dari beberapa faktor. Beberapa diantaranya seperti tertundanya pemangkasan stimulus moneter dari US$85 miliar per bulan. Meskipun saat ini sudah terpangkas menjadi US$65 miliar per bulan.

Padahal kebijakan Fed tersebut telah membuat likuiditas keuangan di pasar global stabil. Selain itu dengan tren melemahnya data ekonomi China.

Bahkan kondisi terakhir negara yang disebut The Fragile Five seperti India, Indoneisa, Brasil, Turki dan Afrika Selatan mengalami turbulensi ekonomi terparah. Hal ini menjadi dampak pelarian modal ke AS. Kelima negara ini terguncang karena mengalami defisit fiskal dan defisit
PDB Zona Euro Menguat
Amanda Kusumawardhani – Senin, 17 Februari 2014, 02:01 WIB, BRUSSELS — Perekonomian zona Eropa tumbuh melampaui estimasi pada kuartal terakhir tahun lalu sehingga mengurangi tekanan European Central Bank (ECB) untuk mengambil tindakan pada pertemuan bulan depan.

Pertumbuhan ekonomi zona Eropa kali ini dipimpin oleh Jerman dan Perancis dan mampu memacu pertumbuhan pada level yang lebih tinggi sebagai indikasi pulihnya perekonomian kawasan yang sempat dilanda resesi berkepanjangan.

Badan Pusat Statistik (BPS) Zona Euro mencatat produk domestik bruto (PDB) Uni Eropa meningkat 0,3% setelah hanya menguat 0,1 % pada kuartal III/2013. Penguatan PDB tersebut mengalahkan estimasi ekonom yang disurvei Bloomberg yaitu 0,2%. Secara keseluruhan, PDB Zona Euro justru menurun 0,4% pada tahun lalu.

“Laporan tersebut sekaligus mengindikasikan berkurangnya tekanan sehingga stimulus masih bisa dilanjutkan,”kata Howard Archer, Ketua Ekonom IHS Global Insight London akhir pekan lalu.

Dirinya mengharapkan laju inflasi tetap rendah dan kebijakan kredit yang ketat sehingga memicu kebijakan lebih lanjut dari ECB.

Mata uang Euro menguat setelah laporan PDB dikeluarkan yaitu diperdagangkan pada US$1,37 pada 12.12 p.m di Brussels, Jumat (14/2).

Sebelumnya, Gubernur ECB Mario Draghi menjelaskan bahwa ECB tetap meneruskan stimulus ekonomi hingga menemukan informasi yang menyeluruh mengenai pemulihan ekonomi Uni Eropa.

“Kami bersedia dan siap untuk melakukan tindakan apapun,”tekannya setelah menahan tetap suku bunga rendah yaitu 0,25%.

ECB sendiri akan mempublikasikan proyeksi makro ekonomi triwulan pada bulan depan, termasuk prediksi inflasi pada 2016 sebagai acuan untuk melanjutkan stimulus ekonomi.

Meskipun begitu, tidak semua indikasi tersebut mengarah pada penguatan ekonomi. Laporan terpisah yang dirilis Eurostat menyebutkan surplus perdagangan zona Euro non-musiman menyempit menjadi 13,9 miliar Euro pada Desember tahun lalu dari 17 miliar Euro pada November 2014.

Ekonomi Jerman

Jerman, ekonomi terkuat di Eropa memimpin ekspansi dengan kenaikan 0,4% pada kuartal IV/2013, sedangkan PDB Perancis meningkat 0,3%. Penguatan kedua negara tersebut melampaui estimasi para ekonom.

“Jerman secara konsisten masih memimpin perekonomian Zona Euro. Seharusnya, ekonomi Jerman mampu mencapai momentumnya pada masa yang akan datang,”ungkap Carsten Brzeski, ekonom ING Group NV yang berbasis di Brussels.

Italia menguat 0.1% setelah sempat stagnan pada kuartal ketiga tahun lalu. Meskipun begitu, pemulihan ekonomi Italia masih dikategorikan lemah dan tidak tertebak.

Berita positif juga datang dari Spanyol dan Portugal yang mampu menguat masing-masing 0,3% dan 0,5%. Berbeda dengan mayoritas negara di Zona Euro, ekonomi Cyprus justru merosot 1% dan Yunani melambat menjadi 2,6% tahunan pada kuartal terakhir tahun lalu.

Walaupun ekonomi Yunani melambat pada kuartal terakhir tahun lalu, anggaran fiskal Yunani mencatatkan surplus sebesar US$2,1 miliar. Surplusnya anggaran fiskal tersebut memungkinkan pemerintah Yunani untuk meningkatkan alokasi belanja sosial.

“Pencapaian surplus anggaran kali ini bahkan tiga kali lebih besar dari estimasi pemerintah,”tekan Perdana Menteri Yunani Antonis Samaras.

Surplus anggaran Yunani merupakan kunci utama yang disyaratkan oleh kreditur agar Yunani mendapatkan dana talangan 240 miliar Euro. Yunani memang dijadwalkan untuk mencapai surplus anggaran pada tahun ini sebagai bagian dari persyaratan peminjaman.

Source : Bloomberg/Reuters
Editor : Martin Sihombing
PARIS, Feb 14, 2014 (AFP)
The French economy turned in slightly firmer growth than expected last year, expanding by 0.3 percent, but undershot in the final quarter in a mixed message for the beleaguered government.

This was a stride ahead of the government’s own estimate that the economy would limp into growth of just 0.1 percent in 2013.

It came as a small relief in the run-up to municipal elections.

President Francois Hollande welcomed “the new-found confidence of people in the economy” in France, government spokeswoman Najat Vallaud-Belkacem reported after a cabinet meeting.

“It is a good sign for the coming year,” she quoted him as saying. “It is the right time to accelerate our public policies to support growth.”

Finance Minister Pierre Moscovici said in remarks on France 2 television that the latest official figures, although better than expected, meant that “more has to be done” to “get unemployment down”.

The latest official figure for the year was just ahead of the national statistic institute’s forecast in December of 0.2-percent growth.

But since then the INSEE institute had already slightly upgraded its estimates for growth in the first and third quarters, from shrinkage of 0.1 percent to zero.

However, in the last three months of the year, the economy showed growth of 0.3 percent, INSEE said in its first estimates.

That fell short of its forecast in December for expansion of 0.4 percent.

The government, faced with weak and unsteady recovery from recession, will be thankful for every extra drop of growth, as it struggles to engineer a change of policy to cut charges on businesses and to make deep cuts in public spending.

– Investment picks up-

Growth raises the prospects of job creation, although these figures are far too low to begin to dent record unemployment in the country, one reason why Francois Hollande, a Socialist, is suffering from the lowest approval ratings on recent record for a French president.

Growth also raises revenue from taxes which the Socialist-Green government urgently needs to help meet European Union rules for reducing the public deficit, along with fraught negotiations under way to cut deeply into public spending.

France has the eurozone’s second-biggest economy.

The state of its finances is closely watched by its partners, in particular economic powerhouse Germany which reported growth of 0.4 percent for the last quarter on Friday, after 0.3 percent in the previous quarter.

Hollande has turned his sights on the economy in the hope of avoiding a heavy defeat in local elections next month.

A critical factor in French growth is household consumption, and this rose by 0.4 percent last year having fallen by the same amount in 2012.

However, a vital factor in recovery is investment, and in the fourth quarter this showed signs of getting going, rising by 0.6 percent after seven quarters of retreat.

In remarks to AFP, INSEE explained: “There is really a coincidence of three factors: investment has risen after two years of falls, consumption was robust at the end of the year, and exports rose in the fourth quarter.”

Moscovici said: “I am not satisfied, and I say ‘let’s do more’.”

ATHENS, Feb 14, 2014 (AFP)
Crisis-hit Greece took a step closer to recovery on Friday with official data showing that the six-year recession choking the country was easing faster than expected.

Overall, the figures indicate that Greece has now managed to cut the recession by almost half in the space of one year.

The state statistics agency said in a flash estimate that the Greek economy had contracted by 2.6-percent on an annual comparison.

Based on this data, the economy on average contracted by 3.7 percent in 2013, better than a previous forecast of 4.0 percent, according to AFP calculations.

However, the agency noted that a clearer picture would be available on March 11 with the announcement of provisional results.

In 2012, the economy shrank by 6.4 percent.

This year it is expected to register growth of 0.6 percent for the first time since 2008, according to the finance ministry.

“The Greek economy exits out gradually of the recession. Nevertheless we do not expect this to happen definitively until the second half of 2014,” Jesus Castillo of French investment bank Natixis said in a note.

The latest figures constitute a welcome boost to the embattled coalition government of Prime Minister Antonis Samaras, who is at pains to show that four years of gruelling austerity are now bearing fruit.

Also on Friday, the statistics agency announced an inflation drop of 1.5 percent in January, compared to a 1.7-percent fall in December.

Prices in Greece have officially been in decline since March, but most Greek households struggling under an ongoing tax barrage have yet to feel the benefit, consumer groups and unions note.

The government faces a tough local elections challenge in May, with anti-austerity parties poised to gain heavily from widespread anger over the six-year recession and soaring unemployment gripping the country.
Asia shares find solace in Wall Street, yen eases

By Wayne Cole
SYDNEY (Reuters) – Asian markets were set for guarded gains on Monday encouraged that Wall Street was able to weather a seemingly disappointing U.S. jobs report, though there is more than enough event risk ahead to keep investors on their toes.
Crucially, the new head of the Federal Reserve, Janet Yellen, delivers her first testimony to the House on Tuesday and the senate on Thursday, and markets will be hoping for reassurance that policy will stay loose for a long time to come.
Early Monday, MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.16 percent, while Australia’s market added 0.6 percent. Nikkei futures pointed to a moderate gain at the open.
Markets took their cue from Wall Street where the Dow gained 1.06 percent and the S&P 500 1.33 percent. The pan-European FTSEurofirst 300 rose 0.75 percent and MSCI’s all-country stock index 1.2 percent.
Japanese shares should also find comfort in a softening yen with the dollar pushing up to 102.58 and probing resistance around 102.60. The dollar was also a shade firmer on the euro at $1.3620, against $1.3635 late Friday.
Both stocks and the dollar had initially retreated when the U.S. payrolls report showed a rise of only 113,000 in January, well short of forecasts.
However, the damage was limited by a very strong household survey where a sharp jump in employed nudging the jobless rate down to 6.6 percent.
The mixed bag left Treasuries little changed with yields on 10-year notes a shade lower at 2.69 percent.
In commodities, oil prices extended their recent gains as persistently cold weather across the U.S. continued to eat into heating fuel stocks.
U.S. crude rose 35 cents to its highest in five weeks at $100.29 a barrel, while Brent crude oil futures were steady at $109.54 a barrel.
Spot gold was also firm at $1,269.25 an ounce, but faces stiff resistance from $1,273 to $1,278.
Fed Chair Yellen will be able to offer her own read of the jobs report before lawmakers this week.
Analysts generally assume she will stick to the script of recent policy meetings, reiterating that further gradual decline in asset buying is likely as long as the economy continues to improve as assumed.

“We expect her to state that tapering is not on a preset course and the committee will adjust course as needed, particularly if the expected firming in growth and gains in payrolls do not persist,”

wrote analysts at Barclays in a note.
Yellen is also likely to repeat the standard forward guidance that the funds rate will remain near zero until the unemployment rate falls well below 6.5 percent, so long as inflation is subdued.
Major U.S. data includes retail sales on Thursday where a flat result is forecasts due partly to bad weather and a rise in petrol prices.
In Asia, China releases trade numbers on Wednesday and consumer prices on Friday. Analysts at Commonwealth Bank of Australia predict exports will have shrunk in January but mainly because of significant base effects as January last year saw an outsized 25 percent increase.
Trade flows can be very volatile in January and February due to the timing of the Lunar New Year holiday.
The euro zone releases its first estimate of economic growth on Friday and forecasts favor a slim 0.2 percent increase in the fourth quarter, which would keep pressure on for more action from the European Central Bank.
ECB President Mario Draghi gives a speech on “Progress Through Crisis?” on Wednesday and markets will be sensitive to any hint of further accommodation to come.
Across the Channel, the Bank of England issues its February Inflation Report on Wednesday which will likely show muted prices pressures and so support the outlook for low rates.
(Editing by Shri Navaratnam)
China and Emerging Markets: Riding Wild Horses

Submitted by Otaviano Canuto On Mon, 02/03/2014
One month ago, I discussed some major risks [1] to a slight upturn in the global economic scenario for 2014. Among those risks, concerns with the growth slowdown and challenges with shadow banking in China have already come to the fore as the Chinese Year of the Horse [2] approached its inauguration last Friday.

Higher perceived risks about China have added another potential vulnerability, as witnessed by a new round of capital flows out from emerging markets in the last few weeks, resembling the one of last summer [3]. While US 10-year Treasury yields have descended a bit since December, despite the beginning of the actual Fed tapering, news on China’s industrial production softness have sped up the on-going steady course of reduction of exposure of global portfolios to emerging markets in general, in favor of advanced economies. Idiosyncratic political and/or economic events also mattered in particular cases (Turkey, Ukraine, South Africa, and Argentina) but the fact that countries with liquid markets and less fluid conditions – like Mexico, Poland, and Malaysia – also suffered some asset sell-off indicates a much broader scope is at play.

How significant are the potential global spillovers from China’s economic growth slowdown? Why has the latest news particularly affected emerging markets? Last Friday, JPMorgan’s “Global Data Watch” offered some clues. Their research estimates that a 1 percentage point fall in Chinese GDP growth rates tends to have something like a total 0.46 p.p. negative impact on global growth, over four quarters, with effects through oil prices embedded. However, while this reflects a 0.21 p.p. drop in the GDP growth of advanced economies, the corresponding figure for the other emerging markets as a whole is 0.73 p.p. Commodity-dependent countries would be especially hard-hit, as the others may count on some revival of imports from advanced economies.

The world has kept close watch on the ongoing downward adjustment of China’s shadow banking system – credit intermediation involving entities and activities outside the regular banking system [4] – with the near-default of a large trust product during the last few weeks being part of the worrisome news coming from the country. Not because of financial linkages with the rest of the world, as foreign ownership of entities is low and domestic sources and destinations of flows are overwhelmingly predominant, but for the risks that a disorderly unwinding might deepen the already expected growth slowdown [5].

The Chinese shadow banking system did not look very large compared to other countries (including other emerging markets) in the recent past – see Ghosh et al (2012) [6]. However, not only has the expansion of the shadow banking system been extraordinary over the last three years, but also the private non-financial sector debt as a percentage of GDP, which has risen dramatically since 2009. China’s economic policy reaction to the post-2008 fears of a global crash led to some laxity with respect to the rapid expansion of shadow-banking channels of finance of investments and real-estate spending through special purpose vehicles, including those owned by subnational governments. As it often happens with sudden and intense spurts of credit ease, part of the pyramid of newly created assets and liabilities has “pyramids” or “white elephants” as their real-side counterpart.

Chinese authorities must therefore tread cautiously. While maintaining the pressure to correct balance sheets, by taking a hard stance on the side of official refinance backstops, they shall try to avoid panicky effects of occasional bankruptcies by ring-fencing some systemically relevant financial entities. How well this is done will bear consequences on Chinese current GDP growth rates, their impact on emerging markets in general and, therefore, on the risk that a panicky unwinding of exposure to emerging markets might provoke a strong deceleration of the latter, engendering in turn a negative feedback loop to advanced economies. The 2014 baseline for the global economy still appears to be trending upwards, but the Year of the Horse may be jumpy.

Plus Minus Kebijakan The Tapering
Senin, 3 Februari 2014 | 15:06
investor daily
JAKARTA- Komisaris Independen Bank Permata Tony Prasetiantono mengatakan, the tapering (pengurangan stimulus) yang dilakukan Bank Sentral bertujuan untuk memulihkan kondisi perekonomian Amerika Serikat (AS) dari krisis, dengan adanya the tapering tingkat pengangguran di Amerika turun menjadi 6,7% pada tahun 2014.

Menurut dia, penurunan angka pengangguran merupakan bonus bagi perekonomian AS dimana perekonomiannya semakin membaik namun di satu sisi kebijakan the tapering berisiko menurunkan pertumbuhan ekonomi negara berkembang termasuk Indonesia, karena ada risiko capital outflow.

Tony mengatakan berdasarkan proyeksi IMF, perekonomian global tumbuh pada level 3,2% pada 2014 dari 3% pada 2013. “The tapering baik bagi perekonomian Amerika, bagi negara berkembang membaiknya perekonomian amerika merupakan kesempatan emas untuk meningkatkan kinerja ekspor” ujar dia dalam acara ” Beritasatumedia Holding OJK Dialogue Strengthening Indonesia Financial System” di Hotel Four Season, Jakarta, Senin (3/2).

Tony mengatakan, ada plus minus di balik kebijakan the tapering AS namun agar perekonomian Indonesia bisa tetap terjaga maka pemerintah harus menjaga fundamental dalam negeri dengan cara meningkatkan daya saing dan mengurangi defisit transaksi berjalan.

Dia mengatakan, salah satu cara yang bisa digunakan untuk mengurangi defisit adalah dengan menurunkan laju impor, impor bisa diturunkan dengan menaikkan suku bunga acuan atau BI rate.

Menurut Tony, negara yang mempunyai defisit transaksi berjalan yang cukup tinggi sudah menaikkan suku bunga acuan hingga beberapa kali seperti India dan Turki, sekarang tinggal kebijakan Bank Indonesia apakah masih mempertahankan BI rate pada level 7,5%. “Jika fundamental sudah kuat, kebijakan the tapering tidak akan menjadi momok lagi,” ungkap dia

Tony menuturkan, nilai tukar rupiah terhadap dolar diperkirakan juga akan menguat apabila fundamental perekonomian dalam negeri sudah kokoh, ia memproyeksikan jika defisit transaksi berjalan mengecil dan berada pada kisaran di bawah 3% terhadap GDP maka nilai tukar rupiah bisa menembus level Rp 11.500- Rp 12.00. (dho)
29. January 2014, 11:29:02 SGT
Negara Berkembang Kuasai Investasi Asing 2013

Kenaikan investasi asing langsung (FDI) di negara berkembang merupakan cerminan laju pertumbuhan mereka yang pesat usai krisis finansial global 2008. Namun, motor pertumbuhan ekonomi global tampaknya kembali condong ke negara maju. Pemodal asing pun kini beralih ke sana. Terdapat sinyal, investor asing tahun ini kian cemas akan masalah politik dan ekonomi yang dihadapi beberapa negara berkembang besar.

Meski demikian, direktur investasi dan usaha UNCTAD, James Zhan, memperkirakan aliran FDI ke negara berkembang tahun ini tidak berkurang. Bagaimanapun, laju pertumbuhannya bisa saja melamban, ujarnya. Kepada The Wall Street Journal, Zhan memprediksi negara berkembang masih akan mendominasi aliran FDI tahun ini.

“Melambannya pertumbuhan adalah risiko yang paling besar, sementara aliran FDI ke negara maju akan pulih dengan perlahan,” kata Zhan.

Berubahnya aliran modal asing dari negara maju ke negara berkembang sejak krisis finansial 2008 memang drastis. Pangsa FDI global ke negara berkembang besar seperti Brasil, Rusia, India, Cina, dan Afrika Selatan naik hampir dua kali lipat sejak 2008. Sementara itu aliran modal ke negara maju pada 2013 tercatat kurang dari setengah total FDI mereka pada 2007.

Pada 2013, FDI korporasi naik 11% menjadi total $1,5 triliun, masih lebih rendah dari FDI tertinggi pra-krisis yang sebesar sekitar $2 triliun pada 2007. Investasi asing di negara maju naik 12% menjadi $576 miliar atau 39% dari total FDI global. Sementara itu, modal asing di negara berkembang naik 6,2% ke rekor tertingginya yakni $759 miliar atau 52% dari total FDI. Sisa investasi asing mengalir ke “negara transisi” seperti Rusia dan negara Eropa timur lainnya, demikian jelas UNCTAD.

UNCTAD memperkirakan aliran FDI global naik ke $1,6 triliun pada 2014 dan $1,8 triliun pada 2015. Jika dibandingkan tahun-tahun sebelumnya, kali ini ketidakpastian soal aliran FDI akan berpusar di negara berkembang. Afrika Selatan, Turki, Brasil, dan India akan menggelar pemilu tahun ini, sumber kecemasan bagi perusahaan asing menyangkut investasi mereka.

The party is over

Latin America’s weakest economies are reaching breaking-point

WHEN the euro crisis was at its height it became commonplace for struggling European economies to insist that they were not outliers like Greece. Whatever their woes, they declared, Greece’s were in a class of their own. In Latin America, by contrast, the unwanted title of outlier has two contenders: Argentina and Venezuela.

Both have been living high on the hog for years, blithely dishing out the proceeds of an unrepeatable commodities boom (oil in Venezuela; soya in Argentina). Both have been using a mix of central-bank interventions and administrative controls to keep overvalued exchange rates from falling and inflation from rising. Both now face a come-uppance.

High inflation is a shared problem. Argentina’s rate, propelled higher by loose monetary and fiscal policies, is unofficially put at 28%. Argentina’s official exchange rate is overvalued as a result, fetching 70% more dollars per peso than the informal “blue” rate in mid-January. Venezuela’s prices are rising faster still. Last year, during an awkward political transition after the death of Hugo Chávez to the presidency of Nicolás Maduro (pictured with Cristina Fernández de Kirchner, the Argentine president), the Central Bank stepped up money-printing to finance public spending, pushing inflation to 56.2%. A dollar fetches 75-80 bolívares on the black market, up to seven times the official rate.

Both countries have dwindling arsenals with which to defend their overvalued currencies. Venezuela’s reserves of gold and foreign currency, which stood at nearly $30 billion at the end of 2012, were down to just over $21 billion by last week. Only about $2 billion of that is in liquid assets. Ecoanalítica, a research firm, estimates that the government can also dip into around $13 billion of opaque, off-budget funds. Argentina’s reserves have also been tumbling (see chart).

Something had to give, and late last month it did. Argentina first allowed the peso to plunge, by more than 15% in the week starting January 20th, and then announced a relaxation of the government’s ban on buying foreign currency for saving purposes. Argentines making over 7,200 pesos ($900) monthly are now able to change 20% of their salary into dollars at the official exchange rate so long as they get approval from AFIP, Argentina’s tax agency. The dollars are transferred to their bank accounts, not released in cash, and hit by a 20% fee if withdrawn before a year. If that sounds complicated, it is still cheaper than buying dollars in the illegal market.

The government’s objective seems to be to close the gap between the official and blue exchange rates, alleviating the need to spend more of those precious reserves to prop up the official rate. Although the gap has closed a little, fear that devaluation will lead only to yet higher inflation explains continued high demand for dollars, even at the less favourable exchange rate. So too does the fact that only a third of Argentine workers meet the declared-income threshold for buying dollars, according to analysis by IARAF, a think-tank.

Guido Sandleris of the University Torcuato di Tella says the plan is doomed to failure unless the government becomes more open about its intentions and adopts a genuinely restrictive set of policies to battle inflation. Although the Central Bank this week raised one of its interest rates by a full six percentage points, rates remain below inflation, giving Argentines little reason to hold pesos.

On the fiscal front the government needs to reduce subsidies and remain unyielding in the face of workers’ demands for pay rises. Miguel Kiguel of EconViews, a consultancy, says wage increases to be negotiated in March and April must remain under 30% if they are to serve as an anti-inflationary anchor. That will be hard given lavish pay awards handed out to striking policemen last year.

Whether the government is willing to put prudence before politics is not clear. On the day that her government let the peso’s slide turn into a slump, Ms Fernández announced a plan to fund education for unemployed 18- to 24-year-olds that could cost 11 billion pesos. Her only reference to the currency’s fall was a tweet accusing banks of helping favoured investors to speculate on the peso. There are some people, she wrote, who “want to make us eat soup again, but this time with a fork.”

At least Argentina’s partial liberalisation of currency controls is a halting step towards normality. Venezuela, where the situation is even more perilous, is heading in the other direction. On January 22nd the government unveiled new rules under which a higher rate for non-essential transactions is set weekly (it stood at 11.36 bolívares to the dollar this week). The old rate of 6.3 still applies for government imports and basic items such as food and medicine, so reserves will keep falling as the government defends the currency.

Venezuela is running out of dollars to pay its bills. Although payments to its financial creditors of around $5 billion this year do not appear to be at risk, the country’s arrears on non-financial debt are put at over ten times that sum. These include more than $3 billion owed to foreign airlines for tickets sold in bolívares, and around $9 billion in private-sector imports that have not been paid for because of the dollar shortage. “Under the current economic model, and with this economic policy,” says Asdrúbal Oliveros of Ecoanalítica, “this [debt] looks unpayable.”

The effects are already apparent. Foreign airlines have placed tight restrictions on ticket sales; some have suspended them altogether. Many drugs and spare parts for medical equipment are unavailable. Car parts, including batteries, are increasingly hard to find; newspapers are closing for lack of paper. The country’s largest private firm, Empresas Polar, which makes many basic foodstuffs, is struggling to make some products. In a statement Polar said the government owed it $463m and that production was “at risk” because foreign suppliers of raw materials and packaging were threatening to halt shipments.

The government blames the crisis on private businesses and “irresponsible” use of hard currency by ordinary Venezuelans. It has ordered drastic cuts in dollar allowances for travellers, especially to popular destinations like Miami. Remittances to relatives abroad have also been slashed. In a bid to curb runaway inflation, it has introduced a new law restricting companies’ profits to 30% of costs. Long jail sentences await transgressors.

Without a big injection of dollars from the state oil company, Petróleos de Venezuela, which brings in 96% of foreign earnings, the crunch will continue. Better terms for foreign investors in the oil industry would bring in much-needed cash and boost stagnant production. But unless the government abandons its antipathy to private capital, the prospect of new investment is dim. Shortages of goods are only likely to worsen. If Argentina is an outlier, Venezuela risks straying into a different category entirely.

From the print edition: The Americas

Emerging Stocks Post Worst Selloff Since 2009 on Economy
By Elena Popina and Zahra Hankir – Jan 31, 2014
Emerging-market stocks declined this week, capping the worst start to a year since 2009, as signs of a Chinese slowdown and worse-than-estimated Russian economic data bolstered concern the global recovery will falter.

The MSCI Emerging Markets Index was little changed at 936.53 today, falling 1.4 percent for the week and 6.6 percent in January. OAO Gazprom drove declines in Russia’s Micex Index, while the ruble approached a five-year low. The Borsa Istanbul 100 Index slid 1.3 percent as Turkey’s trade deficit increased more than expected. Brazil’s Ibovespa (IBOV) erased earlier losses as Itau Unibanco Holding SA led financial companies higher.

Equities joined a global selloff this month after China’s manufacturing contracted, the Federal Reserve pressed on with economic stimulus cuts amid a rout in emerging-market currencies and political unrest in Ukraine escalated. Russia’s economy grew at less than half the previous year’s pace in 2013, missing forecasts as investment declined, data today showed.

“Investors around the world are closely watching the emerging markets right now,” Timothy Ghriskey, who oversees $1.5 billion as the chief investment officer at Solari Group LLC, said by phone from New York. “China is investors’ biggest concern simply because its slowing growth has ripple effects through many emerging markets. Investors are also scared of the slowing level in Russia’s economic growth.”

Biggest Losses

The iShares MSCI Emerging Markets Index exchange-traded fund added 0.2 percent to $38.19 today. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, advanced 1.8 percent to 28.90.

Brazil’s Ibovespa advanced, paring its monthly decline to 7.5 percent as Itau surged 2.6 percent. Power utility EDP-Energias do Brasil SA gained as energy prices soared because the nation’s dry weather is depleting reservoirs used for hydropower.

Russian shares fell, extending the worst start to a year since 2008, as Gazprom, the nation’s biggest company, sank 1.5 percent. OAO, Russia’s biggest electronics retailer, had the biggest decline on the Micex Index this month. The ruble capped its worst month since May 2012 against Bank Rossii’s target dollar-euro basket.

Political Crisis

Ukraine’s hyrvnia slumped, extending its biggest monthly decline in more than four years, and bond yields surged on speculation the nation’s political crisis will worsen. The Borsa Istanbul 100 Index extended this year’s slide to 8.8 percent as Turkiye Garanti Bankasi AS (GARAN) sank.

Chinese markets are closed for the Lunar New Year holiday. The Shanghai Composite Index completed the worst start to a year since 2010 yesterday after the nation’s manufacturing contracted for the first time in six months.

“The consensus is overwhelmingly negative,” John-Paul Smith, a global emerging-market equity strategist at Deutsche Bank AG, said by phone today. “The key is the uncertainty of what’s going to happen in China. We stick to our forecast of a 10 percent drop in EM equities this year, for the time being.’

Indian stocks rose, led by property developers and banks, as the benchmark index ended five days of losses before the release of economic data and earnings reports. Oberoi Realty Ltd. (OBER) had the biggest weekly gain after the Supreme Court overruled a Bombay High Court order that plots of land owned by the company in Mumbai were a ‘‘private forest.” ICICI Bank Ltd. climbed 1.4 percent.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose six basis points, or 0.06 percentage point, to 358 basis points, according to JPMorgan Chase & Co.
It’s like 1997 all over again
Jan 27th 2014, 9:21 by P.F. | MUMBAI

“THE peso has gone to hell,” worried the Nobel-Prize winning writer V.S. Naipaul in an essay from the 1990s about Argentina. He also touched on Eva Perón’s sexual technique, beefsteak, class tensions in Buenos Aires and Jorge Luis Borges. Its limp currency is an elemental part of that South American country. And yet the news last week—that the partially pegged peso had dropped by 15%—has scared global investors.

At Davos, a gabfest for the world’s biggest egos, the talk turned from Jamie Dimon’s enormous pay packet to worries about an emerging-markets crisis. Currencies in the developing world fell to their lowest level since 2009. Along with Argentina, so Turkey, South Africa and Russia have been hit hard. There is violence on the streets of Kiev and Bangkok. The scare dragged down the S&P500 by 2% on Friday, January 24th. Then Monday morning the Asian bourses fell.

Emerging countries have already had a recent walk on the wild side: from May to August 2013, after the Federal Reserve made its first, botched, attempt to start winding down its bond purchases. At the prospect of an end to free money, funds were pulled from emerging countries that have benefited from a decade of easy inflows, and currencies and stockmarkets tanked. During the last few months of the year however things seemed to have stabilised.

Crises have a habit of coming in fits and starts, though, rather than in one big bang. For instance Thailand ran into trouble in July 1997. Four months later South Korea’s president warned his countrymen of the “bone-carving” pain to follow an IMF bail-out. It took over a year for Russia to blow up; its default didn’t happen until August 1998. The last mini-crisis took time to come to a head, too. After Argentina devalued and defaulted in 2001, many argued it was a cranky special case. But by mid-2002 the contagion had taken Brazil to the brink.

Since the sell-off of 2013, doom-mongers may argue, two things have got worse. First it has become even clearer that the rich world’s central bankers do not have much of a clue how to tame the beast they have created in the form of ultra-loose monetary policy. Ben Bernanke, the outgoing Fed chief, chairs his last policy meeting on January 28th and 29th. The Fed is expected to trim its bond purchases by a further $10 billion, to $65 billion a month. No doubt this will be accompanied by a torrent of elegant verbiage to show that the Fed is in command. But sceptics should look at Britain, where the newish central bank boss, Mark Carney, has abandoned the framework he put in place only half a year ago. It was supposed to govern the pace at which monetary policy would return to an even keel. The process of normalising central banks’ balance-sheets is going to be mighty unpredictable and disruptive.

The second change for the worse is that the emerging world’s recovery in exports looks tepid. The hope had been that as the Western world grew faster it would suck in more goods from emerging economies, helping them to improve their current-account balances and making them less dependent on foreign capital inflows.

But the latest data are mixed on this front. In both Brazil and Turkey current-account deficits have widened since the summer. China’s exports grew 4% year-on-year in December, which was slower than expected. At every sign that China is in trouble investors run from emerging economies—it is one national economy that serves as both a proxy for Western appetite for exports and as a source of demand in its own right, particularly for commodities.

To my mind the doom-mongers are too pessimistic. Something other than a generalised rout is taking place. As we have argued before, most emerging economies have more flexible exchange rate policies now than they did in the 1990s—falling currencies can be a healthy sign of adjustment, provided the decline is orderly. And this sell-off has been discriminating. India, which was clobbered last summer, has done all right. It has a new central-bank boss in place and has narrowed its current-account deficit, largely by banning gold imports. Mexico and South Korea are perceived to have reforming governments and they too continue to command investors’ confidence. The Philippines, long dismissed by investors as a land of eternal promise and guaranteed disappointment, managed to issue ten-year sovereign bonds with an interest rate of just 4% earlier this month—again, its government is judged to have a reformist bent.

This latest panic is partly about politics. Look at the list of worst-hit countries. Turkey’s currency has collapsed due to a corruption scandal that has engulfed its prime minister. Venezuela, which also devalued last week, is a wreck. South Africa is facing a wave of industrial unrest. Ukraine is being racked by huge protests. The Thai baht has so far held up surprisingly well—but our correspondent believes the country’s very unity is now at stake.

What might cause the panic to spread from these troubled spots to all the emerging economies? Perhaps if more countries faced either social instability or a sense of political impasse, making tough reforms harder. This is not impossible—India and Indonesia face elections this year which could rouse passions or result in weak governments. Brazil faced widespread unrest last year.

A second trigger might be a sense that the emerging economies are fibbing about the state of their financial systems. The 1997 crisis spiralled when it emerged that many private banks were in dreadful shape and that some monetary authorities had become captives of the private sector. The central banks of Thailand and South Korea misled the outside world, respectively, about their reserves position and their country’s dollar liabilities.

One common characteristic of all emerging countries today is that they have all shared in the colossal credit boom. Loans have been growing by double-digit rates for many years. Vietnam has already blown up—it has set up a “bad bank” to try and clean up its lenders. Perhaps more countries are yet to own up to big, bad debt problems of their own. If you want to give yourself a fright on this front consider the share price of Standard Chartered, a Western bank largely exposed to the emerging world. It has collapsed.

So there are two things to watch for signs that the present panic might morph into something much nastier.

First the streets—for more social unrest and political gridlock. And then the banks—for any sign that their books are rotten.

Global shares, dollar rise on signs of global recovery

11:22am EST
By Herbert Lash
NEW YORK (Reuters) – Global equity markets and the dollar edged higher on Wednesday as a pick-up in private sector jobs in the United States and solid German economic data provided further evidence of an increase in worldwide growth.
U.S. private employers added a bigger-than-expected 238,000 jobs in December, the strongest increase in 13 months, a report by payrolls processor ADP showed.
In Germany, exports rose for the fourth consecutive month in November and industrial orders surged more than expected – mostly based on overseas demand – in a sign that Europe’s largest economy is benefiting from a nascent global upturn.
An MSCI world equity index .MIWD00000PUS that tracks shares in 45 countries rose 0.16 percent to a five-and-a-half year high before backing off that peak. Overnight in Japan, the Nikkei .N225 jumped 1.9 percent to approach a six-year peak.
ADP’s National Employment Report also revised November’s job gains higher, coming two days before the government’s nonfarm payroll report. That report is more comprehensive as it includes both public and private sector employment.
“ADP’s number is consistent with other labor numbers we have gotten,” said Guy Berger, U.S. economist at RBS Securities in Stamford, Connecticut.
“It is conceivable that by the end of year, we could see the unemployment rate fall below 6.5 percent,” he said. “That would be consistent with the (Federal Reserve’s) projected pace of tapering this year.”
The Dow Jones industrial average .DJI fell 85.77 points, or 0.52 percent, at 16,445.17. The Standard & Poor’s 500 Index .SPX was down 1.71 points, or 0.09 percent, at 1,836.17. The Nasdaq Composite Index .IXIC was up 10.17 points, or 0.24 percent, at 4,163.35.
The pan-European FTSEurofirst 300 index .FTEU3 of leading European shares was flat in a see-saw session.
The dollar gained against the yen, euro and a basket of currencies.
The dollar rose 0.26 percent to 104.87 yen and firmed against the euro, with the single currency last trading 0.1 percent lower at $1.3502.
Against a basket of six major currencies, the dollar .DXY reached a six-week high of 81.048 and was last up 0.21 percent on the day at 81.007.
Crude oil prices were down slightly.
Brent crude for delivery in February edged down 5 cents to $107.30 a barrel, after settling up 62 cents on Tuesday.
U.S. crude fell 73 cents at $92.94 a barrel.
U.S. Treasuries prices fell on the ADP report. The U.S. Treasury 10-year note fell 17/32 in price to yield 3.0006 percent.
Signs of a U.S. recovery have reassured some investors that the world’s biggest economy can withstand the Federal Reserve’s decision to scale down its bond-buying program. The program drove many investors into equities by curtailing returns on cash and bonds, helping fuel much of last year’s stock market rally.
Minutes of the Fed’s December meeting are due later on Wednesday, and markets are hoping for a clear commitment to keeping rates low for a long time.
The European Central Bank meets on Thursday. Analysts and investors doubt it will do more than flag its readiness to act in the future, despite another surprising fall in euro zone inflation.
(Additional reporting by Sudip Kar-Gupta in London; Editing by Dan Grebler)
7 January 2014 Last updated at 20:48 GMT BBC
The International Monetary Fund will raise its forecast for global growth according to its managing director, Christine Lagarde.

She said the revision would come in the next three weeks but did not elaborate, saying that it would be premature to say any more.

In October the IMF lowered its growth forecasts, saying the global economy “remains in low gear”.

It cut its growth forecast for 2014 by 0.2 of a percentage point to 3.6%.

It also reduced the estimate for 2013 growth by 0.3 of a point to 2.9%.

Back then it warned that a slower pace of expansion in emerging economies such as Brazil, China and India, was holding back global expansion.

Many economists have been surprised at the strength of the rebound in developed economies, particularly the United States and the UK.

‘Breakthrough year’
Last month the US Commerce department revised US growth upwards to its fastest pace since late 2011.

It said GDP grew at an annualised rate of 4.1% between July and September, up from an earlier 3.6% estimate.

Citing those stronger growth figures, US President Barack Obama has said 2014 will be a “breakthrough year” for the US economy.

Also last month, growth estimates for the UK economy in 2013 were upgraded.

The Office for National Statistics (ONS) raised its forecast for annual growth to 1.9% from 1.5%.

Ms Lagarde made the comments during a press conference in Nairobi.

The IMF has lent $750m to Kenya to support reform and the government’s financial position.
Lagarde: IMF akan revisi naik proyeksi pertumbuhan global
Rabu, 8 Januari 2014 03:06 WIB | 1691 Views

Nairobi (ANTARA News) – Dana Moneter Internasional akan merevisi naik proyeksi pertumbuhan global dalam waktu sekitar tiga minggu, Direktur Pelaksana Christine Lagarde mengatakan Selasa di Nairobi.

“Kami akan merevisi naik perkiraan pertumbuhan ekonomi global,” dia mengatakan dalam konferensi pers di ibukota Kenya, menambahkan bahwa akan menjadi terlalu dini untuk mengatakan lebih banyak lagi.

Lagarde, yang mengakhiri kunjungan dua harinya ke Kenya, tidak memberikan alasan untuk revisi tersebut.

Ketika mengeluarkan laporan terbaru “World Economic Outlook” pada Oktober, IMF menurunkan proyeksinya, mengatakan bahwa pertumbuhan global “masih di gigi rendah”.

Dikatakan, pihaknya memperkirakan ekonomi global akan tumbuh 2,9 persen tahun-ke-tahun pada 2013 dan 3,6 persen pada 2014. Itu mencerminkan sebuah revisi turun masing-masing 0,3 dan 0,2 persentase poin, dari perkiraannya pada Juli.

Negara-negara berkembang, meskipun masih memberikan kontribusi terbesar terhadap pertumbuhan global, kehilangan lebih banyak momentum dari yang diperkirakan sebelumnya, IMF mengatakan pada November, meskipun negara maju, khususnya Amerika Serikat, menunjukkan tanda-tanda meningkat.

Fakta bahwa Federal Reserve AS telah mulai mengubah kebijakan uang longgarnya, itu telah berdampak memperlambat aliran modal ke negara-negara berkembang karena imbal hasil jangka panjang di Amerika Serikat dan banyak negara lainnya telah meningkat, Lagarde mengatakan Selasa.

Ketua IMF makan malam dengan Presiden Kenya Uhuru Kenyatta pada Senin malam di kota pesisir Mombasa.

Kunjungannya dilakukan sebulan setelah pencairan terakhir dari pinjaman 750 juta dolar AS selama tiga tahun untuk Kenya guna mendukung restrukturisasi besar kebijakan ekonomi dan penguatan posisi keuangan pemerintah.

Penerjemah: Apep Suhendar
Editor: B Kunto Wibisono
Kabar baik dari IMF bikin bursa Asia bergairah
Rabu, 08 Januari 2014 | 09:27 WIB

TOKYO. Saham-saham di Asia menguat dan indeks acuan naik untuk pertama kalinya dalam lima hari. Kenaikan ekuitas Asia itu terjadi setelah dana moneter international (IMF) berencana untuk menaikkan proyeksi pertumbuhan ekonomi global.
Selain itu, penguatan ekuitas Asia menyusul menyusutnya defisit perdagangan di Amerika Serikat (AS). Indeks MSCI Asia Pacific naik 0,6% menjadi 139,28 pada pukul 10:47 waktu Tokyo (8/1). Kenaikan indeks ini terjadi setelah kemarin (7/1) indeks berada di level terendah sejak 19 Desember.
Saham yang naik antara lain; Seven & I Holdings Co melonjak 4,5% persen di Tokyo, kemudian saham China Oilfield Services Ltd naik 1,3% di Hong Kong. Kemudian saham Nintendo Co melonjak 7% di Tokyo.
Angka-angka perdagangan AS dan rencana IMF menaikkan perkiraan pertumbuhan ekonomi global menunjukkan ekonomi dunia ada di jalur pemulihan,” Hiroichi Nishi, manajer ekuitas SMBC Nikko Securities di tokyo.
Sementara itu kinerja bursa Asia juga menguat, untuk indeks Topix Jepang naik 1%, indeks Kospi Korea Selatan dan indeks S & P/ASX 200 Australia juga naik tipis. Begitu pula dengan kondisi indeks NZX 50 Selandia Baru yang juga naik 0,4%.
Sementara itu, indeks Hang Seng Hong Kong naik 0,6% dan Hang Seng China Enterprises Index naik 0,2%. Begitu juga dengan China Shanghai Composite Index yang juga menguat 0,3%.
Editor: Asnil Bambani Amri
Global Economy: On a firmer footing awaiting the Fed

3:09pm EDT
By Alan Wheatley, Global Economics Correspondent
LONDON (Reuters) – More bricks in the global recovery wall are likely to slot into place in a week that could also yield more clues as to when the Federal Reserve will start unwinding its exceptional monetary stimulus.
Updated gross domestic product figures are usually brushed aside as backward-looking.
But with the timetable for Fed ‘tapering’ dependent on the flow of data, any upward revision to U.S. second-quarter GDP growth can only strengthen the hand of those who expect the central bank to move as early as its September 17/18 policy meeting.
Economists polled by Reuters reckon GDP expanded at a 2.2 percent clip between April and June, up from an initial estimate of 1.7 percent thanks to a bigger contribution from net exports.
The U.S. economy is far from firing on all cylinders. But last week home sales for July jumped to a three-year high and the four-week moving average for new jobless claims fell to the lowest level in nearly six years.
Sam Bullard, an economist with Wells Fargo in Charlotte, North Carolina, said he still thought, after the minutes of July’s policy-making Federal Open Market Committee (FOMC), that Fed Chairman Ben Bernanke would start to ease off next month.
“At least on the economic data front, the numbers are gradually improving and the plan that Bernanke laid out at the June FOMC meeting for potential tapering in the second half of this year still looks as though it’s on pace. We’re still in that September camp,” Bullard said.
To be sure, the Fed has to take account of plenty of headwinds.
Bullard cited the risk of a U.S. government shutdown due to wrangling over next year’s budget. Congress also needs to raise the federal debt ceiling by November, raising the specter of a repeat of the brinkmanship that rocked markets two years ago.
“If the Fed goes for September, they have to have some faith that there’ll be some resolution to these federal fiscal issues and that they won’t throw their economic growth projections off course,” Bullard said. “It’s not a slam dunk.”
Figures this week are also likely to show U.S. inflation according to the Fed’s preferred measure, the core deflator for personal consumption expenditure, remained stuck last month near June’s uncomfortably low annual rate of 1.2 percent.
And financial conditions have tightened since the Fed met in July, with mortgage rates yanked higher by rising bond yields.
But Jerry Webman, chief economist with OppenheimerFunds, said the Fed had talked itself into a position where it would arouse suspicions if it did not start buying fewer bonds in September, say $75 billion a month instead of $85 billion.
“At the moment, expect tapering to begin in the middle of September; don’t expect it to be terribly disruptive to financial markets,” New York-based Webman said.
Statistics this week from developed economies should partly allay another concern voiced in the Fed minutes – that America’s export markets were sluggish.
Japan, responding to aggressive monetary stimulus and a weaker yen, is forecast to report a rebound in industrial output and household spending alongside an acceleration in consumer price inflation – just as the Bank of Japan wishes.
In Germany, economists are penciling in a rise in the IFO business climate index for August to 107.0 from 106.2 as well as a solid rise in retail sales and a dip in the number of jobless.
After data on Friday showed Germany’s 0.7 percent rise in second-quarter GDP was driven by domestic demand, including a rebound in business spending, Thomas Harjes with Barclays in Frankfurt said he expected Europe’s largest economy to maintain its underlying 2 percent annualized growth rate through 2014.
“Corporate capital investment should continue a moderate recovery unless the euro area crisis intensifies again, or global demand, especially from China, is significantly weaker than expected,” Harjes said in a note.
The data flow from China has in fact improved lately, and economists expect a modest rise in the official manufacturing purchasing managers’ index, due on September 1, to 50.5 from 50.3.
That would be welcome news to China’s emerging-market trading partners. The currencies of India, Brazil and Indonesia among others have tumbled due to growth worries and a looming end to ever more cheap dollars printed by the Fed – opening up a negative feedback loop for Bernanke to bear in mind.
Derry Pickford, a macro analyst with Ashburton in London, said investors might be underestimating the potential impact of emerging-market woes on U.S. and European profitability.
“The fact that country-specific emerging market shocks have coincided with tapering talk has created a bit of a perfect storm for emerging markets,” he said.
(Editing by Hugh Lawson)
Mata Uangnya Rontok, Bank Sentral Brasil Kucurkan Stimulus US$ 60 Miliar
Wahyu Daniel – detikfinance
Jumat, 23/08/2013 19:39 WIB

Jakarta – Kondisi pelemahan mata uang tak hanya terjadi di Indonesia, Brasil juga menghadapi kondisi yang sama. Bank sentral Brasil langsung mengumumkan program stimulus US$ 60 miliar untuk menyelamatkannya dari krisis.

Program ini berupa swap mata uang dan pinjaman senilai US$ 3 miliar per pekan. Lewat program ini, bank sentral Brasil ingin menyelamatkan kejatuhan nilai tukarnya.

Dikutip dari CNN, Jumat (23/8/2013), langkah bank sentral Brasil ini dilakukan karena situasi ekonomi di AS membuat investor asing menarik dananya dari negara-negara berkembang, dan kembali ke AS.

Seperti diketahui, bank sentral AS yaitu The Fed berencana untuk menghentikan program stiumulusnya karena ekonomi AS membaik. Kondisi ini membuat dana-dana investor kembali ke AS.

Karena situasi ini, mata uang di dunia seperti India dan Indonesia mengalami tekanan cukup dalam. Demikian juga dengan nilai mata uang Brasil yang tertekan.

Tekanan terhadap mata uang ini akan menimbulkan inflasi. Selain itu, bursa saham juga jatuh, dan sejumlah pengusaha mengalami kerugian cukup besar.


  • August 22, 2013, 3:48 AM ET

Asia 1997 vs. Asia 2013

ByAlex Frangos

It seems all too familiar. Currencies are plunging. Current account deficits are widening. Central bankers are tripping over themselves to settle markets.

So is this the 1997-98 Asian Financial Crisis redux?

For one economist who lived through the crisis, history isn’t repeating itself just yet.

“If the Asian financial crisis was a 10. I’d still be on a 3. My instinct is this is a short term portfolio adjustment that will pass,” says Stephen Schwartz, chief Asia economist for BBVA. He saw the Asian financial crisis up close as an International Monetary Fund staffer covering the region, and later lived in Indonesia working for the IMF as Asia licked its wounds during the 2000s.

“These episodes are comparable only in the sense that it was a period of big capital inflows and then outflows. But the underlying conditions are very different from 1997,” he says. To be sure, having lived through 1997, he’s reluctant to sound an all clear: “I don’t want to minimize the difficulties.” Policy missteps, like those seen in India the past week, have a way of letting matters spin out of control.

Recent turmoil in some Asian emerging economies is certainly troubling and one lesson from every crisis is to expect the unexpected. Foreign investors, who flooded into the region the past five years, are turning tail from places like Indonesia, Malaysia and Thailand.

India’s currency has plunged 15% against the dollar since May, when the U.S. Federal Reserve signaled it might cut back its bond-buying stimulus program. That’s tightening credit and raising worries that an economic slowdown already underway will get worse in the countries affected.

Here are several ways 2013 is different from 1997:

1. Floating exchange rates. Unlike 1997, economies in Asia for the most part don’t maintain currency pegs, which are hard to defend against speculators. So when the rupee or baht or rupiah drops 10%, it might hurts investors and unnerve businesses in the short term. But in the medium term, it can be a relief valve for the economy, making goods more competitive on the world market and encouraging local consumers to import less. It also lets central banks preserve their foreign exchange reserves to pay for imports and foreign debt.

2. Foreign reserves. The war chests central banks hold are substantially larger than 1997. While India’s central bank has taken criticism for not building up its reserves even higher, at $254 billion, they are hardly negligible. Thailand, epicenter of the 1997 crisis, has $170 billion today, compared to essentially zero when it was bailed out by the IMF.

3. Transparency. Back in 1997, Thai authorities didn’t disclose $30 billion in bets the country had made in currency forward markets. “It came as a shock even to the IMF team that the Bank of Thailand had effectively run out of reserves,” says Mr. Schwartz. “Today all these countries provide detailed data on reserves, on nonperforming loans in the banking system. That allows markets to react much earlier and adjustments are less abrupt.”

4. Current account balances. The current account measures whether a country needs to attract foreign capital to keep its financial system afloat. Things have deteriorated in this regard for India and Indonesia, and to a lesser extent Thailand and Malaysia. But compared to 1997, the problem is far less wide spread. In the three years before the crisis, Hong Kong, India, Indonesia, South Korea, Philippines, and Thailand all ran substantial deficits, some in double digits. Today, Hong Kong, Philippines and South Korea are in surplus and Taiwan’s surplus has grown even larger than 1997.

5. Foreign debt. This was the killer in the Asian crisis. Companies, banks and governments had borrowed vast sums in dollars, but their revenue was in local currencies. When currencies devalued, companies and banks were unable to pay back the debt. While debt levels have risen the past few years, most of it has been in local currency. So if you’re a Thai consumer who borrowed 1 million baht to buy a house, baht weakness against the dollar is unlikely to affect your ability to repay the loan. That doesn’t mean the dollar outflows won’t cause some casualties, but the pervasiveness of the damage is likely to be less.

South Korea especially has greatly reduced the liabilities its banking system has to short-term foreign currency debt. That could explain why the nation has actually seen capital inflows the past few weeks even as Southeast Asia suffers.

6. Banking reform. In the 1990s, banking supervision was primitive by today’s standards, with money being thrown around at dubious ventures. “The quality of the usage of the funds was weaker than now. There were currency mismatches, duration mismatches and investments in the wrong sectors,” says Mr. Schwartz. In Indonesia and South Korea, coziness between banks and companies led to bad lending decisions. While there’s still bad lending decisions everywhere, the oversight is much tighter. For evidence, look no further than the curbs authorities have placed on lending in speculative areas, such as auto sales in Indonesia, consumer loans in Malaysia, and property loans in Singapore and Hong Kong.

  • 12. August 2013, 9:31:24 SGT

Momentum Pertumbuhan Dunia Bergeser

oleh Alex Frangos di Hong Kong, Sudeep Reddy di Washington, dan John Lyons di São Paulo

Momentum ekonomi dunia kini berbalik ke negara maju setelah pada masa krisis keuangan negara-negara berkembang menjadi pemimpin pertumbuhan.

Untuk kali pertama sejak pertengahan tahun 2007, sejumlah negara maju seperti Jepang, Amerika Serikat dan Eropa bersama-sama menyumbang sebesar $74 triliun bagi perekonomian dunia melampaui kontribusi dari negara-negara berkembang seperti Cina, India dan Brazil. Informasi itu disampaikan oleh Bridgewater Associates LP.

Situasi tersebut dapat kembali membentuk arus modal dan merobohkan ramalan mengenai harapan korporasi yang besar pada pasar negara berkembang.

Jepang adalah salah satu kekuatan yang mendorong adanya perubahan. Setelah mengalami pelemahan selama beberapa tahun terakhir, tingkat perekonomian negara tersebut akhirnya naik sebesar 2,6% per tahun pada kuartal kedua. Laporan pemerintah pada Senin menunjukkan persentase tersebut lebih kecil daripada catatan pada triwulan pertama yang mencapai 3,8%. Namun, setelah bertahun-tahun mengalami kemandekan ekonomi, hasil itu cukup berarti.

Untuk perbesar gambar, klik di sini.

Pulihnya perekonomian AS telah menghasilkan pertumbuhan yang stabil, meski di tingkat moderat. Perekonomian Eropa ditaksir mengalami kenaikan tipis pada kuartal lalu pascaresesi panjang, demikian prediksi laporan pekan ini.

Pada saat bersamaan, jagoan negara berkembang seperti Brazil, Rusia, India dan Cina mengalami penurunan kinerja ekonomi. Dana Moneter Internasional (IMF) memproyeksikan bahwa perekonomian dunia menanjak sebesar 3,3% tahun ini dibandingkan dengan persentase pada 2012, yakni 3,2% dan 2011, yakni 4%.

Pergeseran itu dapat menciptakan tantangan baru bagi perusahaan dengan operasi berskala global.

Pertumbuhan ekonomi dunia mulai mencari kembali titik keseimbangannya, walaupun situasi itu masih bisa berbalik jika negara-negara berkembang bisa memulihkan diri lagi.

Banyak negara berkembang yang masih membukukan tingkat pertumbuhan tercepat di dunia walaupun tidak sepesat sebelumnya. Target pertumbuhan resmi Cina yang dipatok Beijing sebesar 7,5% akan menjadikan tahun ini sebagai masa pertumbuhan terlamban sejak 1990, meski masih melewati percepatan pertumbuhan AS sebesar kira-kira2%. Para ekonom memprediksi Cina akan tumbuh lebih lambat dari target pemerintah. Para ekonom mengharapkan banyak negara berkembang dari Asia Tenggara hingga Amerika Selatan dengan skala ekonomi lebih kecil dapat mencapai tingkat pertumbuhan cukup kuat meskipun lebih lemah dari tahun-tahun sebelumnya.

Untuk perbesar gambar, klik di sini.

Satu hal yang menandai negara-negara berkembang tidak langsung bisa menikmati pertumbuhan di pasar-pasar lebih matang: Indeks manajer pembelian di pasar negara berkembang meraih titik terendah sejak awal 2009, demikian survei dari firma konsultasi ekonomi, Capital Economics. Ukuran yang ditujukan untuk AS, Eropa dan Jepang mengalami kenaikan.

Pemulihan tentatif yang dicatatkan oleh Eropa belum terealisasikan dalam tingkat perdagangan yang dapat turut membantu negara berkembang. Kebangkitan Jepang belum bisa dinikmati negara-negara tetangganya. Pemulihan Jepang dibarengi dengan penurunan tajam nilai yen, pemicu impor lebih mahal. Artinya, Jepang lebih condong membeli produk dalam negeri.

Penilaian yang dibuat oleh Bridgewater menunjukkan bahwa AS, Jepang dan pasar negara maju lainnya berkontribusi sebesar 60% dari aktivitas ekonomi tambahan dunia sebesar $2,4 triliun yang diproyeksikan oleh para ekonom tahun ini.

—Dengan kontribusi dari Warangkana Chomchuen, Tom Orlik dan Xiaoqing Pi.

15. August 2013, 13:09:48 SGT
Eropa Mulai Pulih dari Krisis
oleh Marcus Walker di Berlin dan Charles Forelle di London

Resesi zona euro tampaknya segera berakhir dipacu oleh data ekonomi terbaru dari Jerman dan Perancis. Namun, pemulihan ekonomi yang sifatnya moderat takkan terlalu berpengaruh dalam menambal masalah yang lebih serius yang dialami negara-negara pada zona tersebut. Selain itu, sejumlah pemerintahan di Eropa dikhawatirkan menjadi terlalu berpuas diri dengan keadaan saat ini.

Data ekonomi baru dari Jerman dan Perancis meruapkan otimisme di zona euro.
Mata uang zona euro kembali melambat—dipastikan melalui data yang terbit Rabu yang menunjukkan tingkat perekonomian hanya bertumbuh sebesar 1,1% per tahun pada triwulan kedua—yang akan mendorong para politisi Eropa untuk melontarkan klaim mengenai meredanya krisis utang kawasan. Upaya membabi-buta yang dulu pernah diluncurkan guna memulihkan zona euro mulai menunjukkan tanda-tanda mereda.

Banyak ekonom menyatakan pemulihan ekonomi berjalan terlalu lamban untuk bisa menangani sejumlah masalah zona euro seperti utang yang masih menggelembung, tingkat pengangguran tinggi, perbankan yang limbung serta instabilitas politik.

“Tanda positif selalu bagus, tapi belum tentu membantu pemulihan,” ujar Adam Posen, presiden Peterson Institute for International Economics di Washington, Amerika Serikat. “Masalah utamanya terletak pada legitimasi pemerintah yang telah rusak, serta pada kapasitas produksi Eropa yang tak lagi mendapatkan investasi, dan pada masalah tenaga kerja, yang diwarnai pengangguran berkepanjangan termasuk di kalangan muda.”

Produk domestik bruto 17 negara zona euro meningkat 0,3% pada triwulan kedua dibandingkan dengan kuartal pertama. Situasi tersebut mengakhiri enam triwulan masa kontraksi. Kemajuan itu ditandai dengan pertumbuhan tiga bulanan sebesar 0,7% di Jerman dan 0,5% di Perancis.

Jerman kembali mencatatkan kenaikan signifikan selepas musim dingin. Sektor konsumen dan pemerintah di Perancis melakukan belanja dengan lebih bebas pada kuartal yang berakhir Juni. Para analis memprediksi adanya kenaikan pertumbuhan di masa mendatang meskipun masih lamban.

Perekonomian Spanyol, Italia, dan Yunani yang telah terpuruk kembali mengalami kontraksi, walaupun lebih lemah dari sebelumnya. Portugal—salah satu negara zona euro yang menjalani program dana talangan—tumbuh secara mengejutkan pada level 1,1% kuartal lalu.

Setelah Bank Sentral Eropa mengakhiri kepanikan di pasar obligasi negara zona euro setahun lalu dengan menjanjikan pembelian surat utang berskala besar, fokus krisis Eropa bergeser efek samping perekonomian seperti tingkat pengangguran yang meninggi, kurangnya kepercayaan di ranah usaha, dan terkikisnya bangunan sosial. Euro punya peluang besar untuk bertahan, dengan tingkat kemakmuran Eropa sebagai pertaruhannya.

Pertumbuhan sebesar 0,3% per kuartal takkan mengubah kondisi bahkan meski keadaan itu bisa dipertahankan.

“Jika pertumbuhan per tahun selama empat tahun mencapai 2%-3%, mungkin kita bisa selamat, karena tingginya tingkat pertumbuhan bisa menghapuskan noda masa lalu,” ujar Charles Wyplosz, profesor ekonomi Graduate Institute, Jenewa. “Namun, saya tidak mengetahui dari mana pertumbuhan semacam itu akan tercipta.”
U.S. Economy Grew at 1.7% Rate in 2nd Quarter, Faster Than Expected
Published: July 31, 2013
The United States economy performed a bit better than expected in the second quarter, shrugging off some of the impact from higher taxes and lower federal spending in the spring, the government reported Wednesday.
The gross domestic product grew at an annual rate of 1.7 percent, hardly indicative of an economic boom, let alone enough to bring down elevated levels of unemployment soon. It is also the third quarter in a row in which growth failed to top 2 percent, the average since the recession ended in 2009.

Still, the increase was an acceleration from growth in the first quarter of 2013, which was revised downward to 1.1 percent from an earlier estimate of 1.8 percent by the Bureau of Economic Analysis.

“It was a reasonable performance,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “In the long run, it’s not enough but I’ll take growth wherever I can get it.”

The economy’s trajectory is being closely watched by the Federal Reserve as it determines whether to ease its huge stimulus efforts. Fed policy makers will conclude a two-day meeting Wednesday and issue their latest statement on the economy early Wednesday afternoon.

On Wall Street, stocks rose modestly as traders readied for the Fed announcement, watching closely for any change in the language of the statement that might indicate the central bank’s course.

Many economists had anticipated growth of below 1 percent in the second quarter, as automatic spending cuts imposed by Congress and higher taxes that went into effect this year began to bite.

Federal spending did decline by 1.5 percent in the second quarter, but the drop was not as severe as the falloff in government spending in earlier quarters. Meanwhile, exports rose 5.4 percent, reversing a decline in the first quarter.

Most experts predict growth will pick up in the second half of 2013 as the drag from the federal spending cuts and higher taxes begins to fade


“On balance it was a positive report showing a healthier economy than previously believed,” said Michelle Meyer, senior United States economist at Bank of America Merrill Lynch. “But growth has slowed in the past few quarters, reflecting fiscal tightening in Washington.”

The chairman of the Federal Reserve, Ben S. Bernanke, has hinted the Fed will soon begin tapering, or winding down part of its extensive bond purchases aimed at stimulating the economy, but the timing is uncertain.

On Wall Street, analysts and traders are speculating the Fed could start tapering as early as September if the economy enjoys healthier growth and the job situation improves, or it could be delayed to December or beyond on evidence of weakness.

While the Federal Reserve is not expected to announce a change in policy later in the day Wednesday, the economic data in the second quarter paints a more vigorous picture than anticipated and may increase the odds that the Fed will taper sooner rather than later.

Indeed, there were pockets of strength in Wednesday’s data from the Bureau of Economic Analysis. For example, residential fixed investment increased by 13.4 percent, a sign the housing sector continues to recover. Personal consumption rose 1.8 percent, as consumers showed some resiliency, especially given the increase in payroll taxes at the beginning of 2013.

Higher inventories, always a volatile component of economic reports, added 0.41 percentage point to overall growth. But analysts cautioned that inventory estimates were often adjusted as more data comes in, raising the possibility that second quarter growth could be revised downward in the future.

More clues about the economy’s performance will come Friday when the Labor Department reports on monthly job creation and the unemployment rate. Economists estimate the economy created 185,000 jobs in July, according to a Bloomberg survey, a bit below the 195,000 level in June, with the unemployment rate falling to 7.5 percent, from 7.6 percent.

The latest data come as the government performed its first comprehensive revision in how the economy is measured since July 2009.

As a result, the estimated growth in 2012 was actually healthier than originally thought. Last year’s annual rate of growth in economic output was revised upward to 2.8 percent, from 2.2 percent. The government also slightly adjusted the estimate of the severity of the recession from 2007-9, saying that the economy contracted at annual rate of 2.9 percent, instead of 3.2 percent.
July 18, 2013, 9:09 a.m. EDT
Time to be brave about emerging markets

By Audrey Kaplan
Naysayers continue to sound warnings over slowdowns in China, Brazil and other developing economies. Given the relative underperformance in those countries’ equity markets, we think it’s precisely the time for longer-term investors to be brave and take advantage of the opportunities to get in at potentially rewarding levels.

Despite all the near-term angst, the emerging-market story remains a compelling one. A majority of developing countries have sounder fiscal balance sheets, stronger internal-growth prospects, and lower price-earnings multiples than their developed-country counterparts.

Indeed, any emerging-country fiscal deterioration is likely due to higher public spending in support of domestic needs and infrastructure — spending that is helping make internal demand a more significant driver of their economy relative to exports and related manufacturing.

Isn’t it good in the long-run if emerging economies spend more on education, health-care, financial service and other products to improve their standing? At the least, it makes them less dependent on a developed world confronting demographic and fiscal headwinds.

Yields on longer-term emerging-market debt suffered with the recent U.S. Treasury re-pricing, which arguably represents a start to a gradual return to normal after years of artificially low rates. But we think much of the Fed’s potential tapering of longer-term bond purchases has been priced into the market.

Moreover, the global rise in yields has been balanced against a benign inflation backdrop and subdued commodity prices, both of which provide a positive environment for emerging-market equities.

Finally, because of the rise of the importance of institutional investors over the past decade, we think capital flows to the emerging markets are less sensitive to short-term U.S. real rates than they used to be.

Now let’s look at valuations. Currently, global equities as measured by MSCI All-Country World Index are attractive, trading at forward P/E of 12.8 times earnings vs. their long-run average of 15.8 times, according to Citigroup.

Emerging-market equities are the most attractive, with several country equity indices trading at 10-year discounts — the P/E on MSCI China Index is eight times earnings, while South Korea’s KOSPI is 8.1 times. Many companies in these economies are priced at substantial discounts to their fair value, despite long-term growth rates in line with those of U.S. corporations. In fact, we’re forecasting long-term earnings-per-share growth for the S&P 500, MSCI China’s Index and South Korea’s KOSPI at 11.2%, 12.4% and 10.2%, respectively.

Why, then, are equities in these economies trading at substantial discounts? Slower GDP growth may be a reason, but that’s a questionable explanation. After all, the consensus is still calling for emerging-market GDP growth to easily outpace that of its developed counterparts by a factor of three to four times.

While China is decelerating, it still grew a healthy 7.5% in the second quarter — a sizable gap relative to the developing world. Brazil also is projected to experience substantially stronger growth the next two years.

And a pickup in U.S. growth, which Federated and others are projecting for this year’s second half and 2014, should be good for the emerging markets. Even as they work to build internal demand, China, South Korea, Mexico and other developing countries remain major exporters to the U.S.

So what we have is a re-rating of equities in emerging markets that has been fueled by price declines and currency depreciation, not by earnings-growth slowdowns; better long-term growth prospects supported by both structural demand and strong demographics (provided credit conditions do not deteriorate meaningfully, which we do not expect); and equities trading at discounts to developed-world markets. As investors look to the next three to five years, they should consider — and act — on these long-term opportunities.
Wall Street sumringah usai Bern Bernanke berpidato
Oleh Asnil Bambani Amri – Rabu, 17 Juli 2013 | 21:21 WIB


NEW YORK. Bursa Amerika Serikat (AS) cerah saat pembukaan perdagangan hari ini, Rabu (17/7). Kondisi bursa yang berada di zona hijau itu terjadi setelah Ben Bernanke, Gubernur Bank Sentral Amerika Serikat (AS) atau the Federal Reserve (Fed) melontarkan rencana membeli obligasi tahun ini.
Indeks Dow Jones Industrial Average menguat 31,34 poin, atau 0,20% menjadi 15.483,19. Sedangkan Indeks Standard & Poor 500 naik 5,85 poin, atau menguat 0,35% menjadi 1.682,11. Sementara Nasdaq Composite Index naik 12,13 poin, atau menguat 0,34% menjadi 3.610,63.
Sebelumnya, Ben Bernanke melaporkan kebijakan moneter tengah tahunan ke anggota senat AS. Ia mengatakan, program pembelian obligasi The Fed akan berhenti pada pertengahan 2014, walaupun rencana itu bisa saja berubah.
Sementara itu, pasar keuangan sangat sensitif terhadap kebijakan Fed, terutama dalam program pembelian obligasi. Pada akhir Mei lalu, Bernanke berkomentar menghentikan pembelian obligasu yang membuat bursa AS terbakar dan turun 6%.
“Ini merupakan penilaian yang adil dalam situasi saat ini, dan ini mungkin yang diharapkan oleh rata-rata investor,” kata Jack Ablin, kepala investasi di BMO Private Bank di Chicago menyambut baik keputusan The Fed tersebut.
Saham keuangan mencatat kenaikan, seperti Bank of America Corp yang naik 1,6% menjadi US$ 14,14, dan BNY Mellon Corp naik 3,9% menjadi US$ 31,54. Namun, PNC Financial turun 2,4% menjadi US$ 72,70.
What’s Good for U.S.-China-Japan Hurts Emerging Markets
By Simon Kennedy – Jul 9, 2013 9:43 PM GMT+0700

Signs that the Federal Reserve is preparing to curtail its stimulus are boosting interest rates abroad as well as in the U.S. The strictest credit squeeze in China in at least a decade threatens to erode a pillar of international growth. Japan’s reflation push is lifting the exchange rates of trade rivals and luring capital.
While the transitions could mean slower growth in the U.S. and China, they ultimately prime the three biggest economies for less volatile and longer-lasting expansions. Losers for now include the emerging markets and commodity producers previously buoyed by easy U.S. monetary policy and Chinese demand. Economies that still need cheap cash or weaker currencies, including the euro area, also could suffer. Policy makers already are responding.
“Pieces of the world are moving, and when that happens you have frictions,” said Stephen Jen, co-founder of hedge fund SLJ Macro Partners LLP in London. “There’s more divergence, and financial markets will see more volatility.”
Lowered Forecast
The shifts are reflected in today’s new International Monetary Fund forecasts, which show the gap between developed-and emerging-market growth rates will remain close to the narrowest in a decade, at 3.8 percentage points in 2013. Further undermining the trend set in the wake of the 2008 global financial crisis, the Washington-based lender cited a slowdown for emerging markets in cutting its prediction for worldwide expansion this year to 3.1 percent from 3.3 percent in April.
The new environment is leaving some emerging countries — especially Brazil, Mexico, South Africa, Turkey and Ukraine — vulnerable to a sudden stop in which capital flows are thrown into reverse, say economists at Morgan Stanley, who used 12 metrics including debt issuance and current accounts to measure the risk.
For all the shake-up, international policy makers have long sought such changes because of concerns about easy U.S. money, China’s outsized demand and Japan’s malaise. Group of 20 finance ministers and central bankers will assess the outlook when they gather next week for talks in Moscow.
Significant Progress

“We are seeing significant progress in the global economy now, so people shouldn’t be worrying,”

said Holger Schmieding, chief economist at Berenberg Bank in London. “The gradual return to a more balanced pattern of global growth should be good rather than bad for almost everyone in the medium term.”
The biggest source of market turmoil was the June 19 announcement by Chairman Ben S. Bernanke of a possible time frame for the Fed to begin paring its $85 billion in monthly asset purchases, starting as soon as later this year.
Since Bernanke first raised the possibility of 2013 tapering in May 22 congressional testimony, the yield on 10-year Treasury notes has risen to 2.62 percent at 10:30 a.m. in New York today from 2.04 percent, according to Bloomberg Bond Trader prices. Treasuries lost the most since 2009 in the first half of the year and posted their longest run of quarterly declines since 1999.
Jim Paulsen, chief investment strategist at Wells Capital Management, calls the gains in long-term borrowing costs a “good yield rise” because they reflect mounting confidence at the Fed and among investors in the U.S. economy. He finds that since 1967, whenever the 10-year bond yield has been below 6 percent, any increase typically has been associated with improving sentiment.
Rising Payrolls
U.S. payrolls rose by 195,000 workers in June, beating analysts’ forecasts, and revisions added 70,000 jobs to the employment counts for April and May, according to Labor Department data released July 5. The jobless rate remained at 7.6 percent, near a four-year low.
If the faith continues to solidify, “higher interest rates should not materially impact economic activity, and the stock market may continue to provide favorable results,” said Paulsen, who helps manage more than $340 billion in Minneapolis. The Standard & Poor’s 500 Index has risen 15 percent this year.

Tapering “is actually healthy,”

given that an expansion in the Fed’s balance sheet beyond $3 trillion has failed to spur much growth in credit or the economy, according to a June 27 report by BlackRock Inc., the world’s largest asset manager. Gross domestic product grew at a 1.8 percent annualized rate in the first quarter, revised from a previous estimate of 2.4 percent, according to Commerce Department data.
Tighter Credit
There is less room for celebration elsewhere as investors push yields up even in economies less able than the U.S. to cope with tighter credit. The decoupling is reflected in the 0.6 percent decline since May 22 in the S&P 500 Index (SPX) compared with a 3.7 percent fall in the MSCI World Index.
Countries that may suffer from unwanted yield increases include the U.K., Russia and those in the euro area’s crisis-hit periphery, said Stephen King, chief global economist at HSBC Holdings Plc in London.
The yield on Spain’s 10-year note has risen to 4.71 percent from 4.18 percent on May 22, even with the economy contracting for seven straight quarters. Portugal’s yield last week jumped above 8 percent for the first time since November as the government struggled to address crisis-fighting austerity fatigue. Ten-year U.K. government bond yields climbed to 2.59 percent on June 24, the highest since 2011.
Such gains will make it costlier for governments to finance their debt and for consumers and companies to access credit, extending the countries’ woes.
‘Incipient Recovery’
“Rather than being a sign of incipient recovery, a sudden spike in bond yields might be enough to send some economies off the rails altogether,” said King, adding that the U.S. may suffer a backlash if trade dries up as a result.
Policy makers are pushing back in the hope of persuading markets to refocus on the weakness of their economies. Mark Carney, who became governor of the Bank of England on July 1, and European Central Bank President Mario Draghi both signaled last week that they will keep interest rates low for longer than investors anticipated.
The prospect of less U.S.-led stimulus also is rocking emerging markets. Particularly prone are economies that took advantage of easy money to run up current-account deficits and borrowing imbalances, according to Michael Saunders, a Citigroup Inc. economist in London. Outside of China and the Middle East, emerging economies have aggregate current-account shortfalls of about 2 percent of GDP, the highest since the late 1990s.
Disappearing Surpluses
Thailand (EHCATH) and China (EHCACNY) are among nations whose surpluses have shrunk, while Indonesia (EHCAIDY) and India (EHCAIN) face mounting deficit challenges. Gaps in Chile (EHCACLY) and Brazil (EHCABRY) also have grown. Meantime, average private-sector debt in South Korea, Thailand, Singapore and Indonesia has risen by 25 percentage points of GDP in the last four years, according to Citigroup.
China, Hong Kong (EHCAHK) and India are in a “high-risk danger zone” if a pullback by the Fed prompts investors to punish Asian countries that have weak economic fundamentals and are too slow to reform, according to a June 28 report from Nomura Holdings Inc.
In Europe, Hungary and Poland are at risk because foreign investors have large holdings of local-currency debt, according to Oxford Analytica, based in Oxford, England. Turkey is especially vulnerable because of its reliance on foreign cash to finance its large current-account gap at a time when political tensions are rising, the consulting company said in a report last week.
Worsening Fundamentals

“Many emerging-market countries now face the long-absent challenge of rising capital needs with worsening fundamentals at a time when global-liquidity conditions may not be easing further,”

said Citigroup’s Saunders.
That already is forcing a response as authorities from Brazil and Thailand to India and Indonesia raise interest rates, intervene in currency markets or unwind capital controls to stanch the exit of cash or limit its fallout. In doing so, they’re reversing some of the measures introduced to cope with the hot money sent their way by the loose monetary policies of recent years.
China is also in transition as its policy makers seek to rein in financial speculation and real-estate prices, signaling tolerance of a weaker expansion. Interbank borrowing costs reached records on June 20 before easing.
First Miss
HSBC and Goldman Sachs Group Inc. are among those now predicting expansion of 7.4 percent this year in the world’s second-largest economy, compared with Premier Li Keqiang’s 7.5 percent forecast. This would be the first miss for a government growth prediction in 15 years. Manufacturing expanded at the slowest pace in four months in June, and the economy probably eased for a second straight quarter, according to the median estimate in a Bloomberg News survey.
Chinese authorities may be trying to make economic performance more consistent after a credit surge helped propel expansion above 9 percent in recent years, said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd. By addressing the imbalances, China also may avoid the mistake the U.S. and Europe made in not tackling excesses before they sparked crises.
“The new leadership quite clearly seems to be taking a much longer-term view on China and are prepared to take some risks that growth in the short term will disappoint in order to encourage a more balanced and sustainable economy,” he said.
Likely Losers
Again there are likely losers, among them Australia, South Korea and Taiwan, each of which dispatches more than a quarter of its exports to China. New Australian Prime Minister Kevin Rudd is warning that the end of a China-led mining boom possibly portends recession, noting trade with China represents 10 percent of GDP.
China accounts for one-sixth of global output, estimates Julian Callow, chief international economist at Barclays Plc in London.
“But the consequences of a domestically driven Chinese slowdown would be much more significant than this implies, given China’s role as a major importer of commodities and capital goods, and in particular its role in supporting business confidence across Asia,” said Callow, who calculates China accounted for 43 percent of worldwide growth from 2007 to 2012.
Close Connection
While he said cheaper commodity prices would be good for advanced nations, they would hurt producers. Deutsche Bank AG analysts estimate the Chinese have accounted for about a quarter of worldwide demand for major raw materials in recent years. Chinese purchases of copper, coal, iron ore and oil are all “closely connected” to loan-growth conditions and so are at risk if the credit crunch continues, according to Bank of America Merrill Lynch analysts.
Companies and countries that produce materials for transportation, power and property development will be particularly hit, said Larry Hatheway, chief economist at UBS AG in London. More than 80 percent of the exports to China from Russia, Brazil, Australia, Canada and Indonesia are for domestic use, UBS calculates.
“If China slows, this will have a disproportionate impact on commodity producers and chunks of emerging markets,” said Hatheway. “

Property and infrastructure are big uses of nickel and copper

, etc, so a slowdown in China will obviously mean a pretty generalized effect on the commodity universe.”
Deflation Fight
Japan, the world’s third-largest economy, is trying to end 15 years of deflation-fighting by easing monetary and fiscal policies and pursuing deregulation. The effort overseen by Prime Minister Shinzo Abe is starting to pay off. Factory output rose the most in May since December 2011, retail sales climbed and consumer prices ended a six-month slide.
“Abenomics is aimed at ending deflation and rebuilding the nation’s fiscal health by spurring longer-term growth,” said Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo. “It’s essential and seems to be on the right track.”
A byproduct is nevertheless a falling yen. The currency weakened the most in the first half of this year versus the dollar since 1982. It also dropped 12 percent against the euro and about 7 percent versus the sterling, threatening to undercut European trade.
“Japan is exporting deflation risk to Europe, increasing competitive pressures when much of Europe is suffering chronic growth deficiency,” said Lena Komileva, managing director at G+ Economics Ltd. in London.
Emerging markets again may suffer, BlackRock’s Peter Fisher said June 27 on Bloomberg Television’s “Surveillance.” While hurting exports, the weaker yen is drawing investment away from these countries and toward Japanese equities — the Nikkei 225 (NKY) Stock Average has gained 39 percent so far this year.
“That’s a whole lot of pressure” on these nations, said Fisher, a former U.S. Treasury and Fed official.
BRUSSELS, July 08, 2013 (AFP)
Eurozone finance ministers agreed Monday to unlock billions of euros in fresh aid for Greece on condition it press ahead with urgently needed reforms.

The Eurogroup ministers, holding their last meeting before the summer break which was also attended by IMF chief Christine Lagarde, agreed to pay out 6.8 billion euros in fresh aid to Athens.

However, the funds would not be handed over in one lump sum, but in different instalments subject to certain conditions being met.

“The Eurogroup commends the authorities for their continued commitment to implement the required reforms that have already led to a significant improvement of cost competitiveness, an impressive strengthening of the fiscal position and a more resilient banking sector,” the group said in a statement read out by its chief, Dutch Finance Minister Jeroen Dijsselbloem, at a news conference.

“The Eurogroup therefore expresses its appreciation for the efforts made by the Greek citizens.

“At the same time, significant further work is needed over the next weeks to fully implement all prior actions required for the next disbursement,” Dijsselbloem added.

In particular, the required reforms of the public administration — Athens has pledged to axe 4,000 state jobs by the end of the year, as well as redeploy 25,000 civil servants across its vast bureaucracy — needed to be carried out.

And further efforts were needed to improve tax revenue collection.

“It is time to step up momentum of reform in Greece,” said EU economic and monetary affairs commissioner Olli Rehn.

Under the terms of the deal, some 4.0 billion euros would be paid out “in the coming weeks,” and a further 1.0 billion euros in October, both sums shared by the eurozone rescue fund EFSF and European central banks.

And the International Monetary Fund would stump up 1.8 billion euros.

IMF chief Lagarde said the board of her institution would review the report of Greece’s “Troika” of creditors — the IMF, the European Central Bank and the EU — at the end of July.

And it would “review the various prior actions agreed with Greek authorities.

And there was “every reason to expect” that the funds would be disbursed, “given the work done by the Troika and the staff agreement reached yesterday,” Lagarde said.

The Troika had concluded a technical audit of reforms in Greece earlier.

— Crisis in Portugal also discussed —

Eurogroup ministers also discussed the situation in another bailed-out country — Portugal, which sunk into a political crisis over the shock resignations of two key ministers this month.

European leaders have asked Lisbon to clarify the political situation quickly, fearing that uncertainty could throw the country off its course to exit the troika’s rescue programme by 2014.

Dijsselbloem said he was reluctant to “go into national politics too much. But political stability was needed to push forward the programme.”

German finance minister Wolfgang Schaeuble had conceded that “there are occasionally government crises” in EU member states.

But Portugal appeared to have overcome its crisis already, Schaueble said.

“In recent years, Portugal has shown itself to have very stable conditions.

“There is every indication that they’ve overcome” the crisis. And on the matter of the reforms, “Portugal is on a very successful path,” the German minister said.

“I feel fairly relaxed that Portugal will continue along its successful path.”

Portugal’s doggedness in implementing required reforms has won praise from the international creditors but the painful austerity measures have been immensely unpopular at home.

Disagreements over the reforms sparked the latest crisis, with foreign minister Paulo Portas resigning because he disagreed with Prime Minister Pedro Passos Coelho’s decision to hold fast to the path of austerity.

After a series of negotiations with Portas, Passos Coelho announced a deal this weekend to keep the shaky coalition together.

Under the accord, Portas would remain with a bigger role as deputy prime minister, tasked in particular with coordinating the country’s economic policies as well as relations with the country’s international creditors.

On Tuesday, the finance ministers from all 28 European Union countries are expected to give the final green light to Latvia to join the eurozone.

They would also have to set an exchange rate between the Latvian lats and the euro.

EU pledges €6bn to tackle youth unemployment
Leaders at summit in Brussels determine to bring down youth unemployment rates which are as high as 50% in some areas

Ian Traynor in Brussels
The Guardian, Thursday 27 June 2013 19.32 BST

European leaders pledged last night to launch a battery of new measures to combat the scourge of youth unemployment, following three years of austerity policies and spending cuts that have contributed to soaring jobless rates.

But the EU summit in Brussels did not raise new funds to help combat the problem in countries such as Greece, Spain or Portugal; instead, it ordered a rediversion of money from within the EU budget. After months of wrangling, the various warring EU institutions also agreed a new seven-year €960bn (£820bn) budget. The summit decided to devote €6bn of that to fighting unemployment, prioritising the resources on regions where youth unemployment is higher than 25%.

In addition, the European Investment Bank is to borrow on the markets to increase lending to small businesses in an attempt to bypass the credit crunch and encourage the hiring of school-leavers.

The €6bn is expected to have limited impact in countries like Spain or Greece where official figures show youth unemployment exceeding 50% following years of austerity policies.

Angela Merkel, the German chancellor fighting for a third term in September, also wants to counter youth unemployment. She has convened another European summit in Berlin next week devoted to the issue.

Senior European officials conceded that the two-day summit opening on Thursday evening was an exercise in treading water, with all decisions of substance in the EU being put off until after Germany’s general election on 22 September. The next summit is scheduled for October.
German Unemployment Unexpectedly Drops in Recovery Sign
By Jeff Black – Jun 27, 2013
German unemployment unexpectedly fell in June amid signs a recovery in Europe’s biggest economy is on track even as the euro area struggles to emerge from its longest ever recession.

The number of people out of work dropped by a seasonally adjusted 12,000 to 2.94 million, after a revised gain of 17,000 in May, the Nuremberg-based Federal Labor Agency said today. Economists predicted a June increase of 8,000, according to the median of 35 estimates in a Bloomberg News survey. The adjusted jobless rate was at 6.8 percent, matching the two-decade low registered for most of last year. May’s rate was revised to 6.8 percent from 6.9 percent.

“The jump in May was something of a distortion, so there should be a correction” said Ulrike Rondorf, an economist at Commerzbank AG in Frankfurt before the data was published. “The labor market as a whole is doing well, considering the significant economic slowdown over the winter.”

The Ifo institute’s measure of German business confidence rose for a second month in June, while the ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased.

Debt Crisis

German industrial output jumped 1.8 percent in April from March as construction activity rebounded following winter temperatures that lasted longer than usual and postponed work.

The economy expanded just 0.1 percent in the first quarter of 2013 as the 17-nation euro area, Germany’s biggest trading partner, remained mired in recession. The currency bloc’s gross domestic product has contracted for the past six quarters.

The Bundesbank on June 7 cut its projections for Germany. The Frankfurt-based central bank expects gross domestic product to expand 0.3 percent in 2013 and 1.5 percent next year, down from earlier forecasts of 0.4 percent and 1.9 percent. Signs of a slowdown in the summer months are emerging, the central bank said June 17 in its monthly report.

“The economy is overall leaving the effects of the sovereign debt crisis behind, even if at a slower pace due to weather effects,” said David Milleker, chief economist at Union Investment GmbH in Frankfurt. “The German economy is on track and the labor market numbers are very solid.”
BRUSSELS, June 25, 2013 (AFP)
EU leaders meet this week knowing they have to deliver growth and jobs, especially for the young, as years of debt crisis austerity and soaring dole queues test faith in the European project.

The debt crisis may have eased, allowing governments some leeway on austerity in favour of growth, but the question is how far they can go without compromising hard won gains.

Germany, the bloc’s biggest economy and paymaster, insists that strained public finances still have to be put right first if the EU is to get back on track, while France under Socialist President Francois Hollande says growth is the priority.

The summit on Thursday and Friday comes against a distinctly mixed backdrop — the European economic outlook is for further recession and the global picture is uncertain as China slows sharply.

At the same time, borrowing costs kept low by central bank intervention are beginning to rise and are expected to go much higher, clouding the outlook for both business and states whose debt burden will now only weigh heavier.

A plan to produce jobs must be approved “otherwise Europe will be seen by everyone as useless, negative and bureaucratic,” Italian Prime Minister Enrico Letta said Sunday.

“Employment for young people in Europe has collapsed,” Letta told RAI public television. “I hope we will be able to come out and tell people that we have done something concrete and which can be implemented immediately.”

The numbers speak for themselves.

In April, the last month for which figures are available, unemployment in the 17-nation eurozone hit a 24th consecutive monthly high at 12.2 percent or 19.3 million people, while the 27-member EU had an 11-percent jobless rate or more than 26 million out of work.

In the 16-25 age bracket, the situation was much worse — the eurozone had an average unemployment rate of 24.4 percent or 3.6 million, and the EU 23.5 percent or 5.6 million.

Even worse, however, was the situation in bailed-out Greece, with a youth jobless rate of more than 60 percent, followed by Spain on 50 percent and Italy and Portugal at 40 percent — levels so high that people are talking of a “lost generation” which may never find work.

EU President Herman Van Rompuy describes the problem as “one of the most pressing issues in most, if not all, of our member states” which leaders simply must tackle if the union is to prove its worth.

“We want to avoid another summit with a lot of declarations and little action,” a diplomat in Brussels told AFP.

Growing frustration with the EU’s role is clearly evident.

At the weekend, the pro-EU Dutch government said the time of “an ever closer union” in Europe was over, setting out a raft of policy areas that should be left to member states rather than Brussels.

“This is an issue which strikes a chord with many people across Europe,” it said, adding that its aim was to create “a European Union that is a more modest, more sober and at the same time more effective.”

Conservative British Prime Minister David Cameron has called for powers to be taken back from Brussels and for Britain’s refashioned membership to be put to an ‘in-out’ referendum.

Another key issue for growth and credibility are stalled efforts to put in place a “banking union,” the new regulatory system meant to prevent failing lenders from damaging the wider economy, as they have done repeatedly during the debt crisis.

Lengthy talks last week produced no accord on how a failed bank should be wound up, mainly due to differences over who should foot the bill. EU finance ministers will meet again Wednesday, right ahead of the summit.

“An agreement on banking union is fundamental for us,” Letta said.

“We will not accept any compromise on this because banking union means protecting savers from possible crashes … making the European financial system more solid and getting loans at lower rates,” he said.

“I am not definitively confident,” he said, adding: “There will be a tough battle.”

On the diplomatic front, the summit is also set to give the go-ahead for Croatia to become an EU member on July 1 — the first enlargement since Bulgaria and Romania joined in 2007.

EU leaders could also give an official start date for membership negotiations with Serbia — after the former pariah state normalised relations with Kosovo earlier this year.
‘No systemic risk’ from ongoing liquidity crunchUpdated: 2013-06-25 03:11 By WANG XIAOTIAN ( China Daily)
China’s liquidity crunch won’t pose systemic risks to the world’s second-largest economy, but the central bank needs to rethink its policy, said analysts.

Willem Buiter, Citigroup Inc’s chief economist, said recent cash tension is a “warning shot” from the People’s Bank of China that it means to curb shadow banking activities instead of those of ordinary banks, which pose no systemic risk.

“But if you rely on a crunch (to target shadow banking), you’ll succeed but with an economic recession,” said Buiter.

Apart from an increase in funding costs, the government should introduce a policy mix involving increased market orientation for the banking sector and treat banks and shadow banking the same, Buiter said.

Shen Minggao, head of China research at Citigroup, said tight liquidity cannot be sustainable and the central bank should inject funds into the market before long. “A cut in the reserve requirement ratio cannot be ruled out.”

The PBOC “should also work on improving its policy transparency, to better communicate with the market and guide investor expectations, otherwise it will lead to ‘artificial’ panic”.

Analysts have said that the central bank’s “punishment” of banks that fund investments in securities with funding from the interbank market will result in more prudent lending and liquidity management, which will hurt economic growth.

Citigroup has cut its forecast for China’s GDP growth this year to 7.6 percent from the previous 7.8 percent. The rate will further ease to 7.3 percent in 2014, it said.

It is becoming clear that China’s new economic leadership team is willing to accept some short-term pain for long-term gains, and the recent crunch in the interbank market is the most obvious evidence of the new stance, said Stephen Green, chief China economist at Standard Chartered Bank.

“China’s current high interbank rates are the intended result of a PBOC campaign to force banks to better manage liquidity and deleverage from certain sectors.

“Comparisons with the Lehman-related freezing of interbank liquidity in the United States in 2008 are unhelpful. This is not a run on liquidity caused by a credit event. Instead, we believe it is a deliberate policy meant to de-risk the interbank system,” he said.
June 22, 2013
Emerging Markets, Hitting a Wall
A GROWTH slowdown in the so-called BRICS nations — Brazil, Russia, India, China and South Africa — could be impeding the expansion of the global economy. That’s serious enough, and indeed we are seeing unrest in Brazil over stagnant living standards. Yet a graver problem may be lurking behind the headlines — namely, that sustained, meteoric growth in emerging economies may no longer be possible.

The disconcerting truth is that the great “age of industrialization” may be behind us, a possibility that has been outlined most forcefully by the economist Dani Rodrik, who is leaving Harvard for Princeton next month. And evidence for this view is coming from at least four directions:

THE RISE OF AUTOMATION First, machines can perform more and more functions in manufacturing, and sometimes even in services. That makes it harder to compete via low wages.

Say you run a company in a developed nation and have been automating many of its processes. Because your total bill for employee wages would be low, why not choose the proximity and familiarity of investing in labor in or near your home country? This change would help the jobs picture in the United States and probably countries like Mexico, but could hurt many other lower-wage nations.

GLOBAL SUPPLY SOURCES Supply chains are now scattered across many countries. Think of the old development model as a nation, such as South Korea, trying to build a nearly complete domestic supply chain for its automobile and other industries. The newer model is more distributed, as reflected by the iPhone, with the bounty from the investment spread across many locations, including the Philippines, Taiwan and mainland China. As for cars, Thailand has courted automobile factories with success, but the parts usually come from outside the country and the benefits for the Thai economy are limited.

Richard Baldwin, professor of international economics at the Graduate Institute in Geneva, refers to the internationalization of the supply chain as “globalization’s second unbundling.” He sees the new world as one of “development enclaves,” in which parts of countries will stand out as advanced or wealthy, without fundamentally transforming the entire economy.

WIDER ECONOMIC GAPS Another barrier is the difficulty of sustaining a cultural vision for catching up economically. South Korea was a poor nation in the 1960s, and its economic rise required sacrifices from millions of people in work hours, savings and investment in education. But within 20 years or so, one could see that South Korea would most likely join the ranks of economically developed nations. Indeed it has, so these sacrifices yielded satisfaction within a reasonable time. Many of today’s poorer nations seem to be more than 20 years away from competing with the global leaders, which are now themselves more advanced, and that slower and longer path to the top may discourage some countries from even trying.

AGING POPULATIONS Finally, many lower-income countries will be old before they are rich. China’s population, for example, is aging rapidly, given the government’s one-child policy and the decline in birthrates that accompanies rising income. It is less well known that fertility rates in much of the Middle East and North Africa are also falling rapidly. In Iran, for example, it is now estimated at 1.86 per woman, which over time would mean that families are not replenishing themselves. And shrinking and older populations, of course, limit future economic growth.

BY no means do these arguments mean that the living standards of poorer nations must stagnate. A country can improve the lot of at least some of its citizens by selling services, as seen in the relative prosperity of Bangalore, India, which, among other activities, runs call centers and sells many programming services online. Many African nations are marketing their resource wealth, and may also improve productivity in local agriculture. Virtually all poor nations eventually benefit from the innovations of wealthy nations, which they often receive at much lower prices, as seen with cellphones and medications, for example.

So the chances for progress remain, but those poorer nations might never “become like us.” There was something special about the 20th-century mix of widespread, well-paying manufacturing jobs, which enabled the rise of a middle class that would take significant control of government, through its roles as voters and taxpayers. Those manufacturing jobs also created strong incentives for many people to pursue traditional education, whether in Toronto or Tokyo.

The best guess is that the idea of economic catch-up has changed, which means that politics in developing nations could change, too. Just as inequality in income and wealth has been rising in the United States, newly growing nations find themselves in a more stratified world, without developing their own strong egalitarian histories to undergird political institutions or economic expectations. Many of the wealthy may produce their public goods — like secure streets and clean, beautiful parks — in gated communities.

In some countries, there may be a de facto “rule by consent” from abroad — if, for instance, you are an African working in a Chinese-owned mine and living in a company town, while receiving your vaccines from a Western nonprofit organization. Those phenomena might not fit our current notions of national pride very well — and might mean further splits within developing nations.

Indeed, the future path of developing countries could be much different from that of recent, high-growth success stories. The next set of emerging-market winners, for example, may retain very large pockets of poverty. And as the expectation of a single, common path for economic development fades, governments may need to rethink what they can accomplish — and how.

In any case, we should be prepared for the possibility that, while Seoul now looks a fair amount like Los Angeles, perhaps La Paz, Accra and Dhaka will never look much like Seoul.

Tyler Cowen is a professor of economics at George Mason University.
German Ifo Sentiment Rises for Second Month on Recovery
By Stefan Riecher – Jun 24, 2013 3:02 PM GMT+0700

German business confidence increased in June for a second month amid speculation that a recovery in Europe’s largest economy is gathering pace.
The Ifo institute’s business climate index, based on a survey of 7,000 executives, rose to 105.9 from 105.7 in May, in line with economists’ estimates in a Bloomberg News survey.
The German economy expanded 0.1 percent in the first quarter of this year after shrinking 0.7 percent in the final three months of 2012. Investor confidence gained this month and industrial production jumped the most in more than a year in April. The Bundesbank last week said economic growth will show a significant acceleration in the second quarter, while warning of signs of a slowdown later in the year.
“Germany’s economy clearly is recovering from the slump at the end of 2012,” said David Milleker, chief economist at Union Investment GmbH in Frankfurt. “But the pace of expansion will partly depend on the rest of the world. There are some worrisome developments in emerging markets like China.”
Cash Crunch
Manufacturing in China is shrinking at a faster pace this month, a preliminary reading of the Chinese Purchasing Manager’s Index showed last week. At the same time, the nation’s money market has suffered a two-week cash squeeze that will test the management skills of new Communist Party leaders saddled with risks from a record credit expansion under their predecessors.
German exports rose 1.9 percent April from March, beating economists estimates in a Bloomberg survey, data from the Federal Statistics Office in Wiesbaden showed this month. European Central Bank President Mario Draghi said on June 6 in Frankfurt that exports are a primary driver of growth for the 17-nation euro-area.
Beiersdorf AG (BEI), the German maker of Nivea skin cream, on May 2 reported first-quarter profit that exceeded estimates as higher emerging-market sales countered a drop in western Europe.
The euro area is struggling to emerge from six quarters of contraction, its longest-ever recession. The ECB expects the 17-nation currency bloc to shrink 0.6 percent this year before expanding 1.1 percent in 2014. Recent economic-survey data are showing “some improvement, but from low levels,” Draghi said on June 18 in Jerusalem.
Growth Forecast
The Bundesbank on June 7 cut its projections for Germany, predicting that Europe’s largest economy will expand 0.3 percent in 2013 and 1.5 percent next year, down from earlier forecasts of 0.4 percent and 1.9 percent. Signs of a slowdown in the summer months are emerging, the central bank said June 17 in its monthly report.
Puma SE (PUM), Europe’s second-largest maker of sporting goods, cut its revenue and profit forecasts for this year on May 14 after reporting first-quarter earnings that trailed analysts’ estimates, citing a “challenging” business environment in Europe and disappointing sales in China.
German new car sales resumed a decline in May, after increasing in April for the first time this year, the German Federal Motor Vehicle Office, or KBA, said on June 4. Registrations fell 9.9 percent from a year earlier to 261,316 vehicles.
Still, Daimler AG (DAI) Chief Executive Officer Dieter Zetsche said on June 12 that earnings have improved in the second quarter as new models win buyers and the Mercedes-Benz car unit reduces costs faster than anticipated.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to 38.5 from 36.4 in May. German consumer confidence will jump to the highest level in more than 5 1/2 years this month, GfK AG said May 24, citing the market research company’s sentiment survey of about 2,000 people.
“Germany’s economy is performing pretty well considering the headwinds it’s facing,” said Ulrike Kastens, senior economist at Sal. Oppenheim Group in Cologne.
When the Ben and Beijing party comes to an end
Reuters – 33 minutes ago

By Jonathan Spicer
(Reuters) – Through the dark days of the financial crisis, and the grey days of the halting recovery that have followed, investors have always been able to count on backing from two sources – Ben Bernanke and Beijing.
They have provided stimulus, mainly by pumping funds into the U.S. and Chinese economies in various ways, when other pillars of support had become unreliable.
That helps to explain why global financial markets took such a beating last week when both signaled that they are getting tired of being leant on so heavily.
Bernanke, the chairman of the U.S. Federal Reserve, set a timetable at last week’s Fed meeting for the central bank to reduce the size of its bond buying program with a view to ending it by the middle of next year.
Meanwhile, his counterparts at the People’s Bank of China (PBOC) engineered a cash crunch as a warning to overextended banks – and this from a central bank that has previously always provided liquidity when cash conditions tightened.
A lot will now depend on whether this kind of behavior from either hurts the global economy enough to seriously damage the confidence of businesses and consumers, with the resulting fallout for spending, corporate profits, and hiring.
“A trading environment once predicated on free money forever is now being reassessed,” said Eric Green, TD Securities’ global head of rates research, in a note to clients. The prospects of the Fed stopping its easy money policies “leaves few willing buyers to step in” as prices drop, he said.
In China, a sudden leap in rates for short-term borrowing to record highs should help rein in so-called shadow banking, the lending being done by non-bank institutions, but there is the risk of a miscalculation that could set off a full-blown banking crisis even as the economy is showing fresh signs of slowing.
“It does create a lot of repayment risk within the system between financial institutions and there is potential for unintended consequences,” said Charlene Chu, senior director at Fitch Ratings.
A possible miscalculation is also the concern of St. Louis Federal Reserve President James Bullard, who complained that Bernanke spoke too soon about reducing stimulus last week.
Neither the central bank’s own economic growth forecasts nor its expectations for continued weak inflation supported a decision just yet to dial back on the $85 billion a month it has been pumping into the financial system, the St. Louis Fed said in explaining Bullard’s thinking.
Bullard, who dissented against the decision, wanted “a more prudent approach,” that would have meant waiting for clearer signs that weak inflation would rebound.
While Bernanke made it clear that the Fed’s actions would depend on whether the economy continues to improve, he based his forecast on expectations that growth will be buoyant enough to bring the U.S. jobless rate down to near 7 percent in a year’s time from its current rate of 7.6 percent.
Investors had known the central bank was starting to consider less accommodation, but the level of detail surprised them. So did the return of the Fed to calendar-based guidance on what it intended to do, after months of attempts by Bernanke and other top officials to tie the bond buying, known as quantitative easing, to the economy’s performance.
“The average investor is just so dependent on quantitative easing to act as that safety net that, even though it was forewarned, it still came as a shock,” said Bruce Bittles, chief investment strategist for brokerage Robert W. Baird & Co.
The big problem is that there isn’t much precedent for normalizing an economy that has been artificially supported for so long with low interest rates and a massive injection of funds through bond buying. To say the punch bowl is being removed may be an understatement.
The risk is that there are more major disruptions in financial markets in the next few months as investors pull back for fear of the unknown – and that rising interest rates and a decline in the value of stocks and bonds starts to feed into the real economy as consumers and companies cut back spending.
That could stall the housing market recovery and reduce expectations for retail sales and capital investment, which would quickly feed into lower corporate earnings growth and weaker job creation.
To be sure, on housing and the economy, Bernanke was hopeful last week – saying that people “expect house prices to continue to rise” – and stressing that when interest rates rise for the right reasons, including optimism about the economy, it is “a good thing.”
And his credibility remains intact with many.
Bernanke “did a very good job of structuring the runway, saying this is how it’s likely to unfold,” said William Larkin, fixed income portfolio manager at Salem, Massachusetts-based Cabot Money Management, which has $500 million in assets.
Investors are almost evenly split on whether the Fed will be able to manage the transition to higher rates without doing serious harm to the economy, according to the Wells Fargo/Gallup Investor and Retirement Optimism Index, released on Thursday. Forty-six percent of those surveyed said the Fed will be successful, while 43 percent said the economy will suffer great harm when policy changes.
JPMorgan chief U.S. economist Michael Feroli said he mostly expects economic data to play out as the Fed predicts.
“Were the economy to stumble, however, history may look back on this meeting as one where the Fed once again jumped the gun in embracing better data,” he said.
Given such uncertainty for global markets, the last thing that was needed last week was concern about stability in the Chinese banking system.
The PBOC let short-term interest rates spike to extraordinary levels – the cost of borrowing overnight funds surged to as high as 25 percent for some institutions at one stage – as it refused to inject funds into money markets.
The jitters spread more broadly late last week, amid rumors – passed on by Chinese media outlets – that two major banks had received emergency funds from the PBOC circulated in financial markets in London and New York on Thursday. The lenders denied the rumors, after which money markets calmed somewhat on Friday.
But the episode has added to some wider concerns among investors that the Chinese economy is over-extended, with overall financing rising 52 percent in the first five months of this year compared with the same period in 2012. Of particular concern are big sales of wealth management products that promise investors high returns.
The negative sentiment was reflected in a front-page article in the U.S. financial weekly Barron’s this weekend. The headline screamed “China’s Looming Credit Crisis” as it spotlighted what it said was reckless borrowing by Chinese companies and local governments.
Given the growing importance in recent years of an earnings stream from China for many large American and European companies any stumble by China could have wider ramifications.
For the current quarter, earnings for companies in the Standard & Poor’s 500 index are expected to rise by just 3.2 percent, though they are seen rebounding back above 13 percent for the fourth quarter despite forecasts for negligible sales growth.
However, there are plenty of warning signs. In the run up to the quarterly reporting period, which starts next month, the number of firms in the index lowering their earnings forecasts is outnumbering those raising them by 6.5 to 1 – the weakest outlook ratio since 2001, according to Thomson Reuters data.
On Friday, for example, one of the country’s biggest restaurant operators, Darden Restaurants Inc, said higher payroll taxes and gasoline prices were cutting into traffic at its eateries, which include two destinations for the middle class, the Olive Garden and Red Lobster chains.
And while FedEx Corp reported a higher-than-expected quarterly profit on Wednesday, it did so by cutting costs. The company, considered an economic bellwether because of the massive volume of goods it moves around the world, is cutting costs and jobs to adjust to higher demand for less expensive international shipping.
Many companies are finding it difficult to raise prices in the current environment, which can hurt their margins, and reflecting Bullard’s concerns about the inflation rate being too low.
And even those who are relatively bullish in one market or another are keeping their expectations very much in check.
“‘Down a little’ is the new ‘up,’ for now anyway,” said Doubleline Capital’s CEO Jeffrey Gundlach, who is bullish on Treasuries despite last week’s worst sell-off in the benchmark 10-year market in more than a decade.
(Additional reporting by Ann Saphir and Dan Burns; Editing by Martin Howell & Kim Coghill)
Fed Seen by Economists Tapering QE at September Meeting
By Joshua Zumbrun and Catarina Saraiva – Jun 20, 2013
Federal Reserve Chairman Ben S. Bernanke will cut the Fed’s $85 billion in monthly bond purchases by $20 billion at the Sept. 17-18 policy meeting, according to 44 percent of economists in a Bloomberg survey.

The survey of 54 economists followed Bernanke’s press conference yesterday, in which he mapped out a timetable for an end to one of the most aggressive easing strategies in Fed history. His remarks prompted economists to predict a faster reduction in purchases: in a June 4-5 survey, only 27 percent of economists forecast tapering would start in September.

Bernanke, speaking after a two-day meeting by the Federal Open Market Committee, said the Fed may begin dialing down its unprecedented bond-buying this year and end it in mid-2014 if the economy achieves the Fed’s objectives. Policy makers are forecasting growth of as much as 2.6 percent this year and 3.5 percent in 2014.

“The committee, and even Bernanke’s remarks, showed a surprising degree of confidence in the outlook,” said Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. in New York and a former Fed economist. “I’m a little more surprised that they were willing to signal they’re on the path of moving out of this set of Fed policies.”

Fed Taper

Fifteen percent of economists in the survey said the Fed will taper in October and 28 percent said policy makers will wait until December. The remaining 13 percent said the Fed won’t begin reducing its pace of purchases until at least next year.

The central bank’s forecasts for growth are more optimistic than Wall Street’s. The median estimate of private forecasters in a Bloomberg survey calls for an expansion of 1.9 percent this year and 2.7 percent next year.

The amount of initial tapering predicted by economists in the most recent survey was unchanged from the prior one. The central bank will halt bond buying entirely in June 2014, according to 44 percent of the economists in the latest survey.

If economic data are consistent with the Fed’s forecasts, “the committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year,” Bernanke said at the press conference. “We will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year.”

Stocks and gold fell and Treasury yields rose for a second day as investors face the prospect of a wind-down in the Fed’s asset purchases. The Standard & Poor’s 500 Index dropped 2.1 percent to 1,594.32 at 2:48 p.m. in New York, after falling 1.4 percent yesterday. Treasury yields rose to 2.43 percent from 2.35 percent yesterday and 2.19 percent on June 18. Gold fell below $1,300 an ounce to the lowest since September 2010.

Financial Assets

The impact of tapering is largely reflected in prices of financial assets, said Jonathan Wright, an economics professor at Johns Hopkins University in Baltimore who worked at the Fed’s division of monetary affairs from 2004 until 2008.

“Saying that the Fed will taper later this year tightens financial conditions right now — a risky strategy when the economy is only just gaining a bit of momentum.”

The U.S. central bank began its third round of large-scale asset purchases in September by buying $40 billion a month of mortgage-backed securities. The Fed added $45 billion of Treasury purchases in December. The FOMC has said since September that it will buy bonds until seeing signs of substantial labor-market improvement.

Winding Down

Reducing stimulus and winding down the balance sheet without roiling markets is one of the biggest challenges Bernanke’s successor would face, should the chairman not serve a third, four-year term. President Barack Obama said this week that Bernanke has stayed in his post “longer than he wanted,” one of his clearest signals yet the Fed chief will leave.

Fed Vice Chairman Janet Yellen is the likeliest candidate to replace Bernanke when his term ends in January of 2014, according to economists in the survey. The economists assigned Yellen a 65 percent chance of ascending to the top job at the central bank.

Former Treasury Secretary Timothy F. Geithner was assigned a 10 percent chance of becoming the next chairman and former Obama adviser Lawrence Summers, Treasury secretary under President Bill Clinton, was given 9 percent odds.
BURSA AS: Proyeksi Pertumbuhan Bank Dunia Dipangkas, Saham Berjatuhan
Sepudin Zuhri – Kamis, 13 Juni 2013, 21:03 WIB

BISNIS.COM, JAKARTA–Saham AS jatuh, menyusul penurunan selama tiga hari Index Standard & Poor 500, sebagai pemotongan perkiraan pertumbuhan global Bank Dunia mengimbangi kenaikan penjualan ritel dan penurunan klaim pengangguran.

The S & P 500 turun 0,2% menjadi 1.609,80 pada pukul 09:35 di New York atau 20.35 WIB.

“Ini disangkal bahwa serangkaian data yang semakin baik,” kata Chris Bertelsen, Kepala Investasi di Global Financial Private Capital, sebuah perusahaan kekayaan pribadi dengan aset US$2 miliar, dalam sebuah wawancara telepon seperti dikutip Bloomberg, Kamis (13/6/2013).

“Satu-satunya masalah bagi pasar adalah kita berada dalam bulan yang vakum. Dengan kata lain, tidak ada penghasilan dan orang-orang khawatir tentang The Fed.”

Penjualan ritel di AS naik 0,6% pada bulan lalu, kenaikan terbesar dalam tiga bulan, seperti data dari Departemen Perdagangan AS.

Editor : Sepudin Zuhri
WALL STREET: Sentimen Negatif Laju Ekonomi Turunkan Indeks S & P dan Dow Jones 0,8%
Rustam Agus – Kamis, 13 Juni 2013, 06:12 WIB

BISNIS.COM, NEW YORK–Indeks Dow Jones kembali anjlok dalam 3 hari terakhir dipicu sentimen negatif pertimbangan investor atas pertumbuhan ekonomi dan langkah stimulus bank sentral AS.

Seluruh saham di 10 industri utama kelompok S & P 500 juga melemah.

Saham utilitas turun 1,1% memperpanjang penurunan 6 minggu hingga total 11%. Biogen Idec Inc juga tergelincir 7,4% setelah Citigroup Inc memangkas rekomendasinya terhadap saham.

Adapun Cooper Tire & Rubber Co melonjak 41% usai setuju untuk diakuisisi oleh Apollo Tyres Ltdsenilai US$2,6 miliar

Indeks The Standard & Poor 500 (SPX) turun 0,8% menjadi 1,612.52 pada pukul 4 PM setelah hingga mencatat penurunan terbesar 3 hari sejak 17 April.

Indeks Dow kehilangan 126,79 poin atau 0,8% ke 14,995.23 dan telah turun 1,7% dalam 3 hari terakhir, pelemahan terpanjang sejak 28 Desember.

“Pasar memiliki waktu yang sulit memegang keuntungan apapun,” kata Peter Kenny, kepala strategi pasar di Knight Capital Group Inc (KCG) di Jersey City, New Jersey, seperti dikurip Bloomberg.

Sebelumnya stimulus dari Federal Reserve dan pendapatan yang lebih baik dari perkiraan telah mendorong kenaikan pasar saham AS dan mendorong indeks S & P 500 naik 138% dari level terendah 12 tahun pada 2009.

Indeks telah jatuh 3,4% dari rekor tinggi pada 21 Mei, sehari sebelum Ketua Fed Ben S. Bernanke menyarankan bank sentral bisa mengurangi pembelian obligasi, yang dikenal sebagai pelonggaran kuantitatif jika ekonomi membaik dalam cara yang nyata dan berkelanjutan. (ra)

Source : Newswire
Editor : Rustam Agus
9. June 2013, 18:30:46 SGT
Pertumbuhan Ekspor Cina Melemah
oleh William Kazer

BEIJING – Pertumbuhan ekspor Cina pada Mei secara tak terduga melemah setelah selama berbulan-bulan menunjukkan peningkatan. Ini menimbulkan pertanyaan seputar akurasi data tersebut, dan menimbulkan keraguan akan kemampuan sektor eksportir dalam membantu pertumbuhan ekonomi Cina yang terus melambat.

Surplus perdagangan Cina melebar pada Mei, namun gambaran perdagangan secara keseluruhan justru lemah. Impor berkurang, yang menunjukkan turunnya permintaan baik di dalam maupun di luar negeri.

Hasil yang buruk ini mensinyalir perdagangan tidak akan banyak menyokong pertumbuhan negara berekonomi terbesar kedua di dunia itu dalam beberapa bulan ke depan. Ini juga memperdalam kekhawatiran akan lesunya pemulihan ekonomi global.

“Untuk ke depannya, pertumbuhan ekspor [Cina] hanya akan sebesar satu digit,” ujar Li Wei, ekonom di Standard Chartered.

Ekspor Cina hanya tumbuh 1% pada Mei jika dibandingkan setahun sebelumnya, sementara impor turun 0,3%. Surplus melebar menjadi $20,4 miliar– naik dari $18,16 miliar pada April, demikian menurut data pemerintah.

Pertumbuhan ekspor ini di bawah proyeksi sebesar 5,6% oleh beberapa ekonom yang disurvei The Wall Street Journal. Angka ini juga jauh dari pertumbuhan year-on-year sebesar 14,7% pada April. Data April diyakini direkayasa oleh eksportir yang menaikkan perolehan mereka guna menghindari restriksi modal. Para eksportir juga ingin memindahkan modal mereka ke Cina untuk memanfaatkan penguatan yuan, mata uang Cina.

Pengawas pertukaran valuta asing Cina sejak saat itu mulai memburu eksportir yang menyediakan invoice palsu, serta mengingatkan pedagang akan hukuman yang lebih berat bagi mereka yang terbukti menyediakan invoice palsu. Kantor bea cukai mengatakan upaya pencegahan invoice palsu ini menjadi salah satu faktor melemahnya hasil perdagangan Mei, serta menurunnya permintaan dalam negeri dan lesunya pemulihan ekonomi global.

“Data April sudah pasti dilebih-lebihkan,” ujar Li dari Standard Chartered.

Beberapa ekonom lain sepakat data Mei lebih sesuai kenyataan, dan bahwa upaya pencegahan invoice palsu pemerintah berpengaruh atas data ekspor yang menurun.

“Regulasi atas aliran uang yang abnormal jelas berdampak,” ujar ekonom Nomura, Zhang Ziwei.
Soros Kembali Beli Saham Jepang
oleh Kana Inagaki dan Gregory Zuckerman

Berbagai kalangan investor mulai menjual saham Jepang. Mereka cemas, pemulihan ekonomi Jepang tak akan berjalan mudah bagi pemerintah dan investor.

Namun, George Soros memilih jalan berbeda. Lewat perusahaannya, Soros Fund Management, miliarder itu justru kembali membeli saham perusahaan Negeri Sakura.

Soros mencetak keuntungan lebih dari $1 miliar dari pelemahan yen dan pergerakan saham lokal Jepang. Pekan ini, sahut sumber yang sama, Soros kembali ke pasar sesudah mendapati sinyal stabilitas di pasar obligasi Jepang.

Perusahaan Soros juga menambah pembelian saham perusahaan-perusahaan Jepang, dari kategori blue-chip hingga perusahaan berkembang. Ketika pelemahan saham mengejutkan banyak investor, fenomena ini justru menjadi ihwal yang “sangat menarik” bagi Soros. Ia berharap tingkat perekonomian Jepang menguat, sehingga pendapatan pun bertambah.

Langkah investor asal Amerika Serikat itu muncul saat pasar saham Tokyo semakin lesu. Indeks acuan Nikkei Stock Average pada Jumat melemah 21% dari puncak intraday yang tercatat 23 Mei. Nilai tukar dolar turun tajam hingga 96 yen.
Ini dua faktor penyebab Wall Street tersenyum
Oleh Barratut Taqiyyah – Senin, 10 Juni 2013 | 20:57 WIB


NEW YORK. Mayoritas saham yang diperdagangkan di bursa AS menanjak pada transaksi awal pekan (10/6). Berdasarkan situs Bloomberg, pada pukul 09.35 waktu New York, indeks Standard & Poor’s 500 naik 0,2% menjadi 1.646,37.

Ada beberapa penyebab yang mendorong kenaikan bursa AS. Pertama, data pertumbuhan ekonomi Jepang yang lebih baik ketimbang prediksi pelaku pasar.

Kedua, S&P meningkatkan outlook perekonomian AS. Asal tahu saja, S&P baru saja menaikkan outlook peringkat utang AA+ milik AS dari yang sebelumnya negatif menjadi stabil.

“Adanya kenaikan outlook peringkat utang sangat berarti sekali. Data ekonomi AS sudah membaik secara bertahap dan S&P mencatat hal itu,” jelas Laurence Creatura, fund manager Federated Investors Inc.
June 8, 2013
In China, More Signs of Slowing Growth
HONG KONG — After weathering the global financial crisis better than any other large economy, China is now showing its own signs of slackening growth despite heavy lending from state-owned banks and extensive government investment programs, data released over the weekend showed.

Industrial production fell last month to its lowest growth rate since last September. Imports, mainly materials needed by factories, and fixed-asset investment both fell in May to their weakest growth since last August, when the economy was still mired in a sharp but deep summer slowdown.

Producer prices, typically measured at the factory gate, have declined on a year-on-year basis every month for 15 months in a row and have accelerated downward through March, April and now May. Chronic overcapacity has set off price wars even as blue-collar wages continue to rise.

The May data “have confirmed that the economy is stuck in stagnant growth again after quite a brief rebound” over the winter, said Xianfang Ren, a senior economist in the Beijing office of IHS, a global consulting firm. ‘‘Demand-side indicators are unanimously weak, with extremely weak exports growth and continued slide of fixed-asset investment growth.”

In interviews over the past month, executives in China described being discouraged about overseas demand, although they are not yet nearly as worried as they were at the bottom of the global financial crisis in 2009. Some are also expressing the beginnings of concern about the health of domestic demand.

“Our export business has come down from last year and is not great, though still at acceptable levels,” said Eric Tang, the sales manager for Suqian Green Glove, a manufacturer of vinyl gloves for medical examinations and food processing in Suqian, in east-central China. ‘‘Our domestic business is a small part of our overall activity and is middling along as well.”

A few executives say that they already see considerable distress in their industrial sectors. Zhumadian City Kangmao Arts & Crafts, a 1,500-employee manufacturer of fabric shopping bags and backpacks in central China, has had to cut prices by a fifth in recent months because of lack of demand, particularly from overseas buyers.

“Our business has dropped greatly since the start of this year,” said Wang Xuexin, the vice general manager. ‘‘All expansion plans have been put on hold — in fact, we have actually recently closed down part of one factory building already and have cut back the number of our workers since our orders are down by double digits.”

All the same, there were still signs of strength in the Chinese economy. Retail sales were up 12.9 percent in May, marginally better than an increase of 12.8 percent in April. Government spending on new rail lines and other infrastructure has also been strong, even as companies have cut back on manufacturing and real estate investments.

Some executives say that their companies are fine, even as they acknowledge broader economic troubles. ‘‘While our factory is doing all right, many of our peers in the industry have had to deal with problems related to overcapacity and falling prices,’’ said Sam Xu, a sales manager at the Yongkang Yongxin Industry & Trade, a maker of physical fitness equipment in Yongkang, in southeastern China.

China’s difficulties have global significance because the country has emerged as the world’s largest consumer of many goods, including items like copper, steel, cars and cellphones. Economists from a number of international organizations and banks have been marking down their forecasts for Chinese economic performance this year, predicting growth of about 7.7 percent. That would be a robust pace by most countries’ standards but weak for China, where many businesses and families had become accustomed to double-digit growth over most of the past three decades.

Beijing’s official target is 7.5 percent growth this year, but the country has often beaten targets in the past. At the same time, however, Western economists have long accused China of smoothing its data, understating true growth during boom years but also overstating it during downturns.

In May, industrial production was up 9.2 percent from the same period a year earlier, slowing a little from the 9.3 percent growth in April. Fixed-asset investment growth has dipped slightly, to 20.4 percent for the first five months of this year, particularly weak given that investment was already fairly slow early last year.

Consumer price inflation also faltered in China last month, while producer prices at the factory gate fell sharply, the government announced Sunday morning.

The price statistics released Sunday morning, followed by the industrial production and fixed-asset investment figures Sunday afternoon, came a day after China released export and import statistics for May that were also considerably weaker than most economists had expected.

Exports barely rose in May, up 1 percent from a year earlier. But that anemic result may have reflected a government crackdown on false export reporting by companies that had been seeking to bypass currency controls and move money into the country as a way to place a bet on further appreciation of the renminbi.

The consumer price index showed subdued inflation for the goods and services typically purchased by Chinese households, with prices up 2.1 percent from the same period a year earlier — a slower pace than in April, when prices had risen 2.4 percent, and below the 2.5 percent rate that economists had forecast for May.

Many factories and other producers actually had to cut prices again last month, as producer prices were down 2.9 percent from the same period a year earlier. Those prices had fallen 2.6 percent in April and 1.9 percent in March, and the steeper May decline is a sign that deflation may be gathering momentum.

“In the absence of strong stimulus policy, and in an environment of rising disinflationary pressure, we expect growth momentum to remain flat if not weaker in the coming quarters,” HSBC economists said in a research note Sunday evening.

In many economies, the weak inflation and even deflation now seen in China could be a sign that the central bank should expand the money supply and that the government should spend more, so as to stimulate the economy. But Prime Minister Li Keqiang hinted strongly Saturday that the government was leery of bailing out the economy with either another round of large-scale bank lending or extra government spending.

The state-run Xinhua news agency said that during a meeting near Beijing, Mr. Li had told provincial leaders that macroeconomic policy should be kept stable, government spending should be controlled and policy makers should focus instead on regulatory changes. Such changes may improve the efficiency of the economy.

China’s state-controlled banking system has lent very aggressively for the past four years, helping the Chinese economy avoid the global economic downturn but also producing sharp annual increases in total debt as a share of economic output. That has made Chinese leaders wary of relying on further increases in lending to sustain what had been nearly double-digit economic growth.

Mr. Li and President Xi Jinping this spring have been urging economic overhauls. But they face powerful vested interests opposed to specific policy changes, like a breakup of the monopolies and oligopolies of state-owned enterprises in many sectors of the economy.

Mr. Xi seems to have given few public hints about his economic policy plans after his meeting with President Obama. According to Xinhua, he told Mr. Obama that the 7.7 percent growth in gross domestic product that China achieved in the first quarter of 2013 was a pace that was “beneficial to adjusting the economic structure and to improving the quality of and returns from economic growth.”

“We have full confidence that we can maintain sustained and healthy development of the economy over the long term,” Mr. Xi said, according to Xinhua.

‘”While fully seeing the optimistic prospects for the Chinese economy, we believe that it also faces some risks and challenges. Over all, these risks can be generally held in check. We are taking focused steps to further avert and defuse them.”

It is unusual for China to release a large batch of economic statistics on a Sunday. But Monday, Tuesday and Wednesday are public holidays on the mainland.

Hilda Wang contributed reporting.

Hilda Wang contributed reporting.
Three Reasons to be Optimistic About Europe
the financialist by credit suisse
By most economic measures, Europe is still ailing. The euro zone remains in its longest recession since the introduction of the single currency in 1999, and many EU member nations continue to struggle under the weight of the ongoing sovereign debt crisis. But in an interview with The Financialist, Credit Suisse Chief Economist Neal Soss offers reasons to be optimistic about the continent, including Spain, which suffered a severe economic downturn. In fact, Soss thinks a number of the EU’s peripheral countries could see economic growth resume later this year or next. Among the factors that could help usher in a long-awaited European resurgence: a continuing shift away from fiscal austerity, the European Central Bank’s demonstrated commitment to supporting the euro, and favorable import/export balances in peripheral countries such as Spain.
ECB’s Draghi says euro zone on track for ‘very gradual’ recovery
Reuters, Monday 3 Jun 2013
Economic situation in euro area remains challenging but there are signs of possible stabilisation according to ECB President Mario Draghi

The euro zone economy is on track for a recovery later this year driven by the European Central Bank’s loose monetary policy and demand from abroad, the bank’s President Mario Draghi said.

The ECB cut interest rates to a new record low in May and said it would act again if necessary but its hand may in part be stayed this month and going forward by a rebound in inflation, which rose back to 1.4 percent in May from 1.2 percent in April.

That is still way below the bank’s roughly 2 percent target and unemployment in the euro zone reached a fresh high in April at 12.2 percent, fuelling further calls for policymakers to do more to help the economy.

“The economic situation in the euro area remains challenging but there are a few signs of a possible stabilisation, and our baseline scenario continues to be one of a very gradual recovery starting in the latter part of this year,” Draghi said in the text of a speech prepared for the International Monetary Conference in Shanghai.

After the ECB’s last policy meeting a month ago, the bank said economic activity should stabilise and recover gradually. The bank meets again on rates next Thursday.

Ahead of a court hearing in Germany later this month on complaints about the ECB’s new government bond purchase programme, dubbed Outright Monetary Transactions (OMT), Draghi spent much of the speech defending the initiative.

He said the threat of the ECB buying bonds had played a key role in calming financial markets, from which “virtually all economic agents, including corporations, banks and households” were benefiting.

“Nevertheless, vulnerabilities remain,” Draghi said.

Calmer markets have given governments more breathing space to adjust and last week, the European Commission announced that several countries would have more time to meet deficit targets.

But Draghi urged governments to stick to their reform paths.

“To inspire confidence, policy-makers must follow-through with their fiscal reform agenda,” Draghi said.

“In fact, little would be gained from a loosening of fiscal adjustment today if it creates market expectations that additional tightening will become necessary tomorrow.”

In the medium term, he said, it had to be ensured that the adjustment was based on increasing productivity.

“Only through steadfast pursuit of such structural reforms can the competitiveness of euro area economies in the global marketplace be restored,” Draghi said.

The ECB can only start buying a government’s bonds once the country has signed up to strict reforms under a bailout programme and even then, Draghi said, the OMT was “designed to keep government bond yields just below ‘panic’ levels”.

“Not to bring them down to levels that would somehow help government solvency,” he said. “ECB intervention under OMTs would not address those parts of sovereign bond yield spreads that are fundamentally justified.”

Draghi said it was important to recall that always and especially in the present situation, the need for governments and parliaments to reform did not stem so much from the bond market but from the dramatic conditions in the labour market.
German Bonds Fall for 3rd Week as Draghi Says Economy to Recover
By Anchalee Worrachate & David Goodman – Jun 8, 2013 1:00 PM GMT+0700

German government bonds dropped for a third week as European Central Bank President Mario Draghi said the region’s economy should return to growth later this year, damping demand for fixed-income assets.
Spanish and Italian securities fell for a fifth week as Draghi also said after the ECB’s monthly policy meeting that he saw no reason for any “immediate” additional measures to lower borrowing costs. Portuguese bonds slumped, with 10-year yields rising the most this week since July. U.S. Treasury 10-year yields (USGG10YR) climbed to the highest since April 2012 last month as signs the world’s biggest economy is improving reduced the allure of the safest securities.
“The ECB was much less dovish than what the market was hoping for,” said Luca Cazzulani, a senior fixed-income strategist at UniCredit Global Research in Milan. “Bond yields in the euro region and in the U.S. are rising for the same reason. Investors are contemplating the world where central banks gradually turn off the liquidity tap.”
Germany’s benchmark 10-year yield rose four basis points, or 0.04 percentage point, this week to 1.55 percent after increasing to 1.57 percent on June 3, the highest level since Feb. 25. The 1.5 percent bund maturing in May 2023 fell 0.375, or 3.75 euros per 1,000-euro ($1,322) face amount, to 99.58.
The ECB left its main refinancing rate at a record-low 0.5 percent on June 6 after reducing it by a quarter point last month. The central bank lowered its forecast for the euro area’s economy to show contraction of 0.6 percent this year from an estimate of minus 0.5 percent made in March, while raising their projection for next year to 1.1 percent from 1 percent.
‘Should Stabilize’
“Euro-area economic activity should stabilize and recover in the course of the year, albeit at a subdued pace,” Draghi said at a press conference in Frankfurt after the policy meeting. “We have a range of different instruments,” he said, while adding that economic data since the previous meeting “were not enough to grant immediate action.”
Spain’s 10-year yield climbed 11 basis points this week to 4.55 percent, while Italy’s increased three basis points to 4.19 percent. Portugal’s 10-year rate jumped 53 basis points to 6.14 percent after rising to 6.31 percent yesterday, the highest level since April 15.
U.S. employers added 175,000 workers last month after a revised 149,000 increase in April, the Labor Department said yesterday in Washington. The number keeps alive speculation the Federal Reserve will slow its bond-buying program.
German government bonds handed investors a loss of 0.8 percent this year through June 6, according to Bloomberg World Bond Indexes. Italian bonds returned 2.7 percent and Spanish securities gained 5.3 percent.

Greenspan: Taper Now, Even If Economy Isn’t Ready

Published: Friday, 7 Jun 2013 | 7:35 AM ET

By:  | Producer, CNBC’s “Squawk Box”
Greenspan: Taper Now, Even If Economy Isn’t Ready

Friday, 7 Jun 2013 | 7:33 AM ET

In a wide-ranging interview, Alan Greenspan, former Federal Reserve Board chairman, discusses the stock market’s likely reaction to the Fed’s tapering policies.

Former Federal Reserve Chairman Alan Greenspan told CNBC on Friday that the central bank should taper its $85 billion a month bond buying even if the U.S. economy is not ready for it.

“The sooner we come to grips with this excessive level of assets on the balance sheet of the Federal Reserve—that everybody agrees is excessive—the better,” he said in a “Squawk Box” interview. “There is a general presumption that we can wait indefinitely and make judgments on when we’re going to move. I’m not sure the market will allow us to do that.”

But if the Fed moves too quickly in reining in its accommodative policies, he added, it could shock the market, which is already dealing with a very large element of uncertainty.

Greenspan said he’s not sure the markets will allow an easy exit. “Gradual is adequate, but we’ve got to get moving.”

(Read MoreMarkets May Have Gone Too Far on Taper Talk: Plosser)

“The most important positive force in the economy at the moment is the fact that equity premiums are so high, which means the downside on stock prices is quite limited,” he said. “If we can get stock prices to rise, which they will if this thing stabilizes, then you get a lot of asset-growth effect on the economy.”

“I think the issue is not only a question of when we taper down, but when do we turn,” he explained, meaning actually decreasing the Fed’s balance sheet, which stood at $3.357 trillion on June 5, compared with $3.342 trillion on May 29.

“The markets may not give us all the leeway we might like to do that,” he observed, pointing out that tapering is still increasing the Fed’s balance sheet.

(Read MoreWhat Jobs Data, Greenspan Signal on Fed Tapering: Talking Squawk)

Play Video
Greenspan’s ‘Sure Sign’ of Market Uncertainty
In an exclusive CNBC interview, former Fed Chairman Alan Greenspan, shares this thoughts on what worries him about the bond market, and the necessity for the Fed to have a “Plan B.”

As far as the Fed’s near-zero interest rate policy, he said it’s helped stock prices, but the markets need to be prepared for a faster-than-expected rise in rates.

“Bond prices have got to fall. Long-term rates have got to rise. The problem, which is going to confront us, is we haven’t a clue as to how rapidly that’s going to happen. And we must be prepared for a much more rapid rise than is now contemplated in the general economic outlook.”

(Read MoreNo Swoon: Job Creation Continues, Rate Up to 7.6%)

“We’re still well below the [rate] level we normally ought to be at this stage,” he said. “The consequence of that is that when the bond market begins to move we may not be able to control it as well as we’d like to. And that has a lot of ramifications with respect to all sorts of markets.”

“I don’t say that’s a high probability,” he qualified, “but I think we’re underestimating the probability that that could happen. And not being aware of the fact that there’s got to be some ‘Plan B’ of what one is going to do and I’m certain my former colleagues have been talking about this at great length.”

By CNBC’s Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

Stocks Soar 1%, Dow Spikes 200 on Jobs Data; Vix Slumps 8%
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Published: Friday, 7 Jun 2013 | 12:05 PM ET
By: JeeYeon Park | Writer

Stocks held near session highs Friday as the government’s monthly employment report suggested the economy was tepid enough for the Federal Reserve to maintain its bond-buying program in the next few months.

The Dow Jones Industrial Average shot up more than 150 points, led by Home Depot and American Express.

The S&P 500 and the Nasdaq also advanced. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, slid near 15.

Most key S&P sectors were higher, led by industrials and consumer discretionary.

“I think you want to get more cyclical as the summer progresses [because] the economy actually is starting to get a little bit better,” said John Manley, chief equity strategist at Wells Fargo Funds Management. “The economy is weak and getting better—I want to own the stock market when things are bad and going to good.”
Stocks gyrated in rocky trading Thursday as the U.S. dollar tumbled against the yen and amid ongoing questions over the murky future of the central bank’s stimulus program. Major averages eventually finished at session highs and the Dow regained its footing above the psychologically-important 15,000 level.

“There are things going on in Japan that may come back to haunt us, but buying the dip here is giving us a big rebound here,” said Art Cashin, director of floor operations at UBS Financial Services.
(Read More: Yen Rally Sends Shock and Selling Through Markets)
Nonfarm Payrolls Up 175,000 in May
CNBC’s Hampton Pearson breaks down the latest number on jobs. “It’s a flatline number,” replies CNBC’s Steve Liesman, talking with CNBC’s Rick Santelli about the employment results. With Mark Zandi, Moody’s Analytics; Kevin Hassett, American Enterprise Institute; Austan Goolsbee, Booth School of Business, and Greg Ip, The Economist.
The U.S. added 175,000 jobs in May, according to the Labor Department, indicating the economy was expanding modestly, but not enough to convince the Federal Reserve to pare back its bond-buying program. The unemployment rate edged up to 7.6 percent. Economists surveyed by Reuters expected a gain of 170,000 jobs with the rate holding steady at 7.5 percent.

“I’m disappointed. This number was not that impressive and I don’t see a lift off that we should have seen by now if QE was working—we were barely above the consensus, but for it to be a really good number, it had to be above 200,000,” said Doug Cote, chief market strategist at ING U.S. Investment Management. “And judging by this number, it’s clear that QE3 is not creating sustainable growth.”
Employment is a key indicator for the Federal Reserve, and Chairman Ben Bernanke has indicated the central bank could start tapering off its $85 billion bond purchases if the jobs market shows consistent improvement. Other Fed officials have also fanned expectations they are prepared to consider downsizing the asset purchase program.

Meanwhile, former Federal Reserve Chairman Alan Greenspan told CNBC that the central bank should start to taper its $85 billion a month bond-buying program even if the economy is not ready for it, saying that the near-zero interest rate policy has helped stock prices, but the markets need to be prepared for faster-than-expected rise in rates.

QE is a temporary phenomenon for the market and ultimately, as soon as [the Fed support] ends or tapers off, the market would lose major support,” said Cote.
Cramer’s Stocks to Watch
Don’t start your trading day without finding out what CNBC’s Jim Cramer is watching ahead of the opening bell.
Wal-Mart gained after the big-box retailer authorized a new $15 billion share repurchase program.
Macquarie Research initiated coverage of Citigroup and Morgan Stanley with an “outperform” rating and resumed coverage of Goldman Sachs with a “neutral” rating. Meanwhile, the brokerage initiated coverage of Bank of America with an “underperform” rating and downgraded JPMorgan to “neutral” from “outperform.” Still, all five major financials rallied, along with the broader market.

Intel slipped after Piper Jaffray downgraded its rating on the chipmaker to “underweight” from “neutral,” pointing to the decline in the company’s core PC business.

Late on Thursday, Federal health advisors recommended relaxing restrictions on GlaxoSmithKline’s diabetes drug Avandia, the former blockbuster at the center of one of the biggest drug controversies in recent years. The vote could enlarge the market for Avandia in the U.S. and lay the groundwork for further research into the drug’s health risks.

Also on the economic front, April’s consumer credit numbers from the Fed will be reported at 3pm ET. Economists polled by Reuters forecast a $12.5 billion gain, up on March’s rise of $8.0 billion.
In other news, President Barack Obama will meet Chinese President Xi Jinping in California on Friday. It will be their first meeting since Xi became China’s leader and discussions are expected to focus on strengthening Sino-U.S. cooperation.

—By CNBC’s JeeYeon Park. Follow JeeYeon on Twitter: @JeeYeonParkCNBC


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