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  • The China View From 30,000 Feet  [View article]
    Enjoy your wealth destruction with your breakfast. My suggestion would be to hold off investing there until you know what sector will take the hit for the bad loans in the banking sector. Household, SOE or CPC. My guess is that they will try to re-open the 1990's toolbox and bring back severe household financial repression in order to bail out the banking sector.

    In that event, you can kiss the transition to a consumer led economy goodbye as it will require a massive transfer of wealth from the household sector to the banking sector to keep it afloat.
    Feb 9, 2016. 05:13 PM | 1 Like Like |Link to Comment
  • Bank Supervision To Insure Financial Stability Through Business Cycles  [View article]

    Iceland is a speck. The repercussions from the banking crisis that happened in Iceland had no effect on the global economy because in terms of the size of the icelandic economy. 2008 Iceland GDP was less than $18 billion dollars. Not trillion, billion.

    There are more than a 1000 companies in the US that conduct more business than the entire country of Iceland does.

    Please, think before you post.
    Feb 8, 2016. 11:28 AM | Likes Like |Link to Comment
  • Productivity Is The Missing Ingredient  [View article]
    In the graph on transfer payments as % of total disposable income is the transfer payment # only those that are means tested or does it also include SS/Medicare payments (some of which really are welfare benefits if you live long enough, a different matter altogether)
    Feb 5, 2016. 04:28 PM | Likes Like |Link to Comment
  • U.S. Growth Slows Sharply In 2015's Fourth Quarter  [View article]
    Can someone breakdown the difference between the advance estimate and the atlanta fednow. I am curious if their indicator is really getting better or was this another coincidence
    Jan 29, 2016. 05:52 PM | Likes Like |Link to Comment
  • Half Of U.S. Income Is Over $125,000 Per Year  [View article]
    If you include obamacare subsidies (which i do), approximately 25% of the us population receives means tested benefits.
    Jan 29, 2016. 10:52 AM | 3 Likes Like |Link to Comment
  • China In Transition: Concerns Vastly Overblown  [View article]
    So what if the GDP price deflator was more like 5-6% over the past 7 or 8 years instead of the 1-2% used? And i ask this question because people are starting to realize that how china contructs its price indexes and the price deflator result in things like negative engels curves from 2000 through 2014, which has NEVER happened in history before.
    Jan 28, 2016. 07:47 PM | Likes Like |Link to Comment
  • The China GDP Manipulation Controversy  [View article]
    1) GDP is up significantly until all the bad debt gets realized. Given that i have read accounting policies for some banks in china that require that the Company has ceased operation for 6 months before a loan is moved to NPL status. By western banking rules, bad debts in china would be upwards of 20% more over 50% for SOE's by some estimates i have seen. So while China can produce it cannot do so without continue to fund that production with debt. There are no earnings to back up that debt. That is one of the really big issues. While people say that Debt to GDP is comparable between the US and China, what people forget is that the US productive (by actual cash flows) asset base is so much larger than China. China's debt to GDP of now approaching 300% is really worrying because they do not have the cash flow base to support that level of debty.

    2) Please explain to me how the engel curves have been negative from 2000 to 2012 and say with a straight face that GDP is not made up.
    Jan 25, 2016. 02:04 PM | 1 Like Like |Link to Comment
  • The Odd Thing About China's GDP Growth  [View article]
    Most economists who follow the intricacies between nominal and real GDP think that inflation is between 1 to 2 percent higher and therefore growth should be 1 to 2 percent lower. In the fourth quarter's case, a GDP deflator of plus 1 percent, would mean real growth of only 5 percent (6 percent nominal minus 1 percent inflation). This is a much more realistic representation of Chinese growth.

    Or it could be worse. People are now starting to map engel curves in china (Nakumura & Steinsson) and finding out that china has achieved the impossible - that even though gdp per capita has increased substantially in the past decade, by reviewing consumer price indexes in china they have found that the math says they are now spending more on food as a % of total income then they were when they were substantially poorer. Never happened before, but hey, its CHINA!!!!

    So if instead of 1-2% higher inflation over the last decade or so, the real number is more like 4-5% higher inflation, that still means a much higher GDP deflator and therefore real growth in china is substantially lower than thought.
    Jan 21, 2016. 07:14 AM | Likes Like |Link to Comment
  • Could China's Meltdown Derail The U.S. Economy?  [View article]
    Total US goods trade to China is $100 billion per year - in a $17 trillion dollar economy. If you add in Euro goods trade (thinking that those goods go into products in Europe that are used to make products sold to china) is another $250 billion per year. Add the two together is a total of 2% of US GDP on an annual basis

    The reason that people in china are buying US real estate is its one of the very few ways for them to store value outside of china. Expect that number to balloon in the next couple of years as everyone with even a little common sense in china can see what is coming down the pike. Those old enough to be around from the 90's when the CPOC instituted massive financial repression on the household sector in order to fund the bail out of the banking system know whats coming. There are only three sectors that can absorb the coming banking crisis - CPOC (not going to happen), the SOE's (owned primarily by the heads of the CPOC, so again not gonna happen) and the household sector.
    Jan 21, 2016. 07:03 AM | 1 Like Like |Link to Comment
  • A Quadfecta Of Important Economic News  [View article]
    FedNow from Atlanta i believe is 0.8% for Q4. It will be interest to see how it tracks the updates
    Jan 15, 2016. 04:47 PM | Likes Like |Link to Comment
  • The Problem Of Abundance  [View article]
    The problem with all those things listed is that they are not going to lead to more demand. They are repair and maintenance activities and will therefore only maintain current productive capacity.

    We need not new demand for existing things, we need totally new so that what we have in abundance gets used to make something new that makes the economy more productive.
    Jan 15, 2016. 12:12 PM | 1 Like Like |Link to Comment
  • China Takes The Road To Serfdom  [View article]
    Watch for a repeat of the 1990's banking crisis. CPOC will bring out its toolbox from that time. There are three sectors that can pay for the past excesses. Government (essentially the CPOC), SOE's or the household sector. I don't think you need three guesses who will be forced to take the losses.

    Watch for changes that result in higher financial repression of the household sector.
    Jan 13, 2016. 02:36 PM | Likes Like |Link to Comment
  • U.S. Banks Are Under 7 Times Leverage On Risk Assets  [View article]
    More than likely somewhere between 55 and 65% of the "Other assets" line item above is intangibles and goodwill.
    Jan 5, 2016. 06:06 PM | Likes Like |Link to Comment
  • U.S. Banks Are Under 7 Times Leverage On Risk Assets  [View article]
    Sorry - but the number is much higher than that. Just between BAC and JPM goodwill and other intangibles is on the order of $175 billion
    Jan 5, 2016. 06:05 PM | Likes Like |Link to Comment
  • U.S. Banks Are Under 7 Times Leverage On Risk Assets  [View article]
    Just asking, because I am not sure, but did you adjust the net worth to remove assets like goodwill and certain intangible assets from "other" and such? It will reduce the net worth significantly and thus increase the leverage.
    Jan 5, 2016. 04:45 PM | 1 Like Like |Link to Comment