This continues to offer support for the world’s stock markets.
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Yes, and gasoline consumption went up a bit as well. Down only 4% year over year.
The deficit is also ‘automatically’ getting larger as well.
We could stop declining as fast and just go into ‘muddle through’ mode at higher levels of unemployment.
And this could encourage the mainstream to do what it can to minimize any fiscal response as the await ‘market forces and monetary policy kicking in.’
Obama recently stated we needed a fiscal stimulus to get things going, but then focus on ‘fiscal responsibility’ when the economy is growing again.
And they all say one of the major problems of the US government is the high level of debt.
Obama is also backwards on trade, as he talks about protecting US workers and opening new markets for US exporters.
Still hoping for the best!
Merry Christmas!
>
> On Thu, Dec 25, 2008 at 1:37 PM, mauer195 wrote:
>
> Everybody keeps focusing on the disastrous season that
> retailers are supposed to be having, but then there’s this
> news:
>
Consumers Spend More As Gasoline Prices Fall
By Annys Shin
Consumers increased their spending last month for the first time since spring, as falling gas prices helped boost their purchasing power, new data showed yesterday.
On an inflation-adjusted basis, consumers spent 0.6 percent more in November than they did the month before, the Commerce Department reported, the first increase since May. Disposable income also rose on an inflation-adjusted basis, by 1 percent, compared with an increase of 0.7 percent in October.
But even as consumers returned to stores and shopping malls, analysts cautioned that the data did not signal the start of a turnaround for the economy. Because energy prices are unlikely to sink at the same clip they have over the past few months, Americans won’t be able to pocket much more savings at the pump.
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Highlights
| China eases rules on forex advances |
Domestics somehow caught short USD like the rest of the world?
| More measures to spur consumption and foreign trade(Xinhua) |
Help for both domestic consumption but exports as well- still pushing exports.
| China to Raise Export Rebates, Use Yuan to Settle Some Trade |
Pushing exports.
| China Must Prevent Drastic Decline in Property Prices |
China eases rules on forex advances
Exporters will be able to increase their advances on foreign-currency payments to 25 percent from the current 10 percent, the China Securities Journal reported on Wednesday.
The decision came in a circular issued by the State Administration of Foreign Exchange (SAFE) on Tuesday night.
Importers’ quota for deferred foreign-currency payments also rose to 25 percent from 10 percent.
Analysts said the move would help small and medium-sized enterprises raise funds and improve their cash flow.
A banker who asked to remain unidentified told Xinhua the financial crisis has caused difficulties for many enterprises and this move would give them more operating capital.
The State Council, or China’s cabinet, urged a higher quota of foreign exchange advances to support trade during a standing committee conference on Dec 3.
SAFE official Cai Qiusheng was quoted by Tuesday’s Shanghai Securities News as saying that foreign exchange reserves were below their peak at $1.9 trillion as of the end of September.
According to the paper, enterprises that have good credit and haven’t violated any foreign-exchange regulations can qualify for the new limits.
To prevent “hot money” inflows through trade, SAFE, the Ministry of Commerce and the General Administration of Customs issued a joint circular on July 14 to step up supervision of cross-border capital flows.
The foreign exchange agency told administrative departments at all levels to step up inspection to prevent large-scale cash outflows.
More measures to spur consumption and foreign trade(Xinhua)
Updated: 2008-12-24 20:02BEIJING — More measures will be taken to stimulate consumption and support foreign trade, according to Wednesday’s executive meeting of China’s State Council, or the cabinet.
A document released after the meeting, chaired by Premier Wen Jiabao, said to stimulate domestic consumption, efforts should be made to improve the rural circulation network, increase varieties of commodities available in rural markets, improve urban community service-facilities, promote upgrade of durable goods, support development of circulation companies, stimulate consumption in holidays and through exhibitions, and step up supervision over product quality and safety.
In the fiscal year of 2009, the central government would increase its financial support for development of the rural circulation network and the service industry.
To sustain a stable growth in the country’s foreign trade, the central government would raise export tax rebates of high-tech and high-value-added products, adjust the forbidden and limited commodity catalogue of processing trade, encourage a transfer of processing trade from the eastern to the central and western region.
The government would also urge banks to improve services for foreign traders, increase imports of products needed, direct foreign funds to high-tech, energy-saving and modern service industries, simplify customs procedures and keep a close eye on the quality and safety of both imported and exported products.
China to Raise Export Rebates, Use Yuan to Settle Some Trade
Dec. 24 (Bloomberg) –China will raise export rebates on some machinery and electronics and let some trade with Hong Kong, Macau and Southeast Asia be settled in yuan to help boost faltering overseas sales, the Cabinet said.
China will also expand the use of government money to develop foreign trade, the State Council announced today.
The pilot program for settling trade in yuan will take place in Guangdong province, eastern China’s Yangtze River Delta region, and Guangxi and Yunnan provinces, the statement said.
China Must Prevent Drastic Decline in Property Prices
Dec. 24 (Bloomberg) — China must prevent a drastic decline in property prices, the State Council said in a report to the nation’s parliament today, state-run China National Radio said on its Web site.
The government will increase construction of housing for low-income families and control excessive gains in land prices, the report said.
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Karim writes:
Last data before 12/30
Lower interest rates now starting to help this sector, but at the expense of interest income for others. Much of this is offset by government, however, as the deficit continues to rise counter cyclically (the ugly way- lower revenues and higher transfer payments).
This may get a lot worse after the holidays.
Yes, but not all that big a move for a negative 7% quarter and a 70% drop in crude oil and large declines in other commodities.
Lower interest income biting.
It’s not so much that people are saving as it is they are not borrowing, as total mortgage and other credit measures decline.
Less than expected as lower fuel prices seem to be helping some.
Falling fuel prices and automatic stabilizers increasing the federal deficit are beginning to have an effect, but this is a long, drawn out process that in the past has taken years to restore output and employment.
A full payroll tax holiday and maybe $300 billion in Federal revenue sharing with the states can cut that time frame down to months rather than years.
And, of course, without a plan to cut crude oil product consumption fuel prices can likewise quickly elevate.
The Fed is still obstructing bank functioning by demanding collateral from member banks when it lends. This is redundant and should be addressed at once.
Also, the Fed swap lines to foreign CB’s are again rising and approaching $700 billion. Not sure how this ends. Lines are scheduled to end in April, but hard to see this happening. It could turn out to be the largest international fiscal transfer of all time.
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Several months back, the eurozone national governments fell into ‘Ponzi’ as growth prospects went negative.
They now seem to be in that downward spiral of falling revenues, rising transfer payments, and rising credit default premiums.
Without a fiscal response to restore growth this will only get worse, and the National governements are, by treaty and by market dependence, in no position to enact a meaningful fiscal expansion.
Highlights
| Trichet Says Decline in Oil Prices Is Helping Global Economy |
| ECB’s Trichet Says ‘Fragility’ of Financial System Is Challenge |
| Nowotny Says ECB Is Keeping Some ‘Fire Power’ on Interest Rates |
| ECB’s Hurley Says Euro Economy to Contract Next Year |
| Bini Says ECB’s Rate Decision Data Driven, Ansa Says |
| Italy’s EU20 Billion Bank Plan Wins Approval From EU |
| Germany Scales Down Second Stimulus Package, Sueddeutsche Says |
| Sarkozy Will Announce Measures to Help Auto Industry by Jan. 31 |
| European Bonds Open Little Changed; Two-Year Yield 1.75 Percent |
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IMF warns of ‘disturbing’ UK debt
The level of debt in the UK is “disturbing,” the head of the International Monetary Fund has said.
But Dominique Strauss-Kahn told the BBC that given the severity of the economic downturn, more government borrowing was the lesser of two evils.
No, he’s the greater evil. Another deficit terrorist.
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| Survey | n/a |
| Actual | 48.0% |
| Prior | 2.9% |
| Revised | n/a |
| Survey | n/a |
| Actual | 316.50 |
| Prior | 286.10 |
| Revised | n/a |
Picking up with lower rates.
| Survey | n/a |
| Actual | 6758.60 |
| Prior | 4156.00 |
| Revised | n/a |
Spiking with lower rates.
| Survey | 0.0% |
| Actual | -0.2% |
| Prior | 0.3% |
| Revised | 0.1% |
Lower than expected. Lower interest income continues to bite.
| Survey | n/a |
| Actual | 2.5% |
| Prior | 3.1% |
| Revised | n/a |
Still up but lower interest income biting.
| Survey | -0.7% |
| Actual | -0.6% |
| Prior | -1.0% |
| Revised | n/a |
Not good, but lower fuel prices helping other sales.
| Survey | 1.5% |
| Actual | 1.4% |
| Prior | 3.2% |
| Revised | n/a |
Way down with the big drop in fuel costs.
| Survey | 0.0% |
| Actual | 0.0% |
| Prior | 0.0% |
| Revised | n/a |
| Survey | 2.0% |
| Actual | 1.9% |
| Prior | 2.1% |
| Revised | 2.0% |
Back in the Fed’s comfort zone.
| Survey | -3.0% |
| Actual | -1.0% |
| Prior | -6.2% |
| Revised | -8.4% |
A little better than expected but still in decline.
| Survey | n/a |
| Actual | -17.6% |
| Prior | -12.9% |
| Revised | n/a |
Big drop.
| Survey | n/a |
| Actual | -0.9% |
| Prior | -6.7% |
| Revised | n/a |
| Survey | -3.0% |
| Actual | 1.2% |
| Prior | -4.4% |
| Revised | -6.8% |
Bit of a blip up but nothing serious as prior revised lower.
| Survey | 558K |
| Actual | 586K |
| Prior | 554K |
| Revised | 556K |
May get a lot worse after the holidays.
| Survey | 4410K |
| Actual | 4370K |
| Prior | 4384K |
| Revised | 4387K |
Likely to move up after the holidays.
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(email exchange)
>
> On Tue, Dec 23, 2008 at 2:43 PM, Russell
> wrote:
>
> Warren:
>
> You have known I have been negative on this
> market collapse for a long time.
>
Yes!
I was more hopeful for the right political response after it went bad in July. :(
>
> And what happens on a day to day basis only
> stirs the pot. The reason for trucks not being
> able to lift anything at the ports is that trade
> finance has disappeared and the reason why
> the Baltic Dry Index declined 98% in 90 days.
> The banks are technically bankrupt. I said that
> about Citi way back when.
>
Yes, they weren’t bankrupt back then, and they were open for business. Now that the government has let it go bad after an OK Q2, previously sort of OK/money good assets have further deteriorated and are no longer money good if this is left to its own ways.
A $1 Trillion of the right fiscal response turns it all around.
Idle Cranes From Long Beach To Singapore
Idle shipping cranes at Frozen Ports From Long Beach to Singapore portend a bleak 2009-2010.
Chris Lytle, chief operating officer of the port of Long Beach, California, took in a panorama of the slumping world economy from his rooftop observation deck one day this month. Shipping cranes stood still, truck traffic trickled and a cargo vessel sat idle, moored to a pier.
“You never see that,” Lytle said. “It’s quiet. Too quiet.”
Port traffic has slowed from North America to Europe and Asia as a recession erodes consumer demand and the credit crisis chokes off loans to export-dependent companies. International trade is set to fall by more than 2 percent next year, the most since the World Bank began measuring it in 1971. Idle ports around the globe are showing how quickly a collapse in trade can spread, undermining growth in each country it reaches.
“Everybody expects 2009 to be a bleak year,” said Jim McKenna, chief executive officer of the Pacific Maritime Association, a San Francisco-based group representing dock employers at U.S. West Coast ports. “Now, it looks like 2010 is going to be just as bleak.”
Coal is piling up at the Mozambique port of Maputo. Brazil’s exports of cars, household appliances, machinery and furniture fell in November from a year earlier. The port in Singapore, the world’s busiest for containers, posted its first month-over-month decline in seven years in November, at 1.5 percent.
“You take it for granted until it blows up,” said Bernard Hoekman, trade economist at the World Bank, in an interview. “Now it’s blowing up.”
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(email exchange)
Thanks- good heads up by Matt Franko!
With this clarification the ECB seems to recognize the systemic support these swap lines provide, and will have to find other means of keeping a lid on the euro if that’s what they want to do.
>
> On Tue, Dec 23, 2008 at 9:21 AM, Cesar wrote:
>
> I agree with Franko comments.
>
> See press release from Dec 19th below.
>
> The Governing Council of the ECB has decided, in agreement
> with other central banks including the Federal Reserve, to
> continue conducting US dollar liquidity-providing operations at
> terms of 7, 28 and 84 days. These operations will continue to
> take the form of repurchase operations against ECB-eligible
> collateral and to be carried out as fixed rate tenders with full
> allotment. Given the limited demand, the operations in the
> form of EUR/USD foreign exchange swaps will be discontinued
> at the end of January but could be started again in the
> future, if needed in view of prevailing market circumstances.
>
>
> n Mon, Dec 22, 2008 at 8:05 PM, Warren wrote:
>
> Cesar, please check this out, thanks!
>
> W
>
Matt says:
Mr Mosler,
I think the swap lines between the ECB and the US Fed may not be the same swap operations that last week the ECB talked about terminating at the end of Jan 09.
The ECB currently offers term US$ liquidity (US$ that has been provided from the Fed via a previous swap between central banks) 2 ways. 1 way is via a collateralized operation, and 2 is a swap of euros for dollars.
On 15 October the ECB announced the swap facility:
“Provision of US dollar liquidity through foreign exchange swaps: As from 21 October 2008, and at least until the end of January 2009, in parallel with the existing tenders in which the Eurosystem offers US dollar liquidity against ECB-eligible collateral, the Eurosystem will also offer US dollar liquidity through EUR/USD foreign exchange swaps. The EUR/USD foreign exchange swap tenders will be carried out at a fixed price (i.e. swap point) with full allotment. Further details on the tender procedures for EUR/USD foreign exchange swaps will be released shortly.”
These “swap” type of transactions look like they never caught on (real Euros would have to be provided after all!), as most of the USD provided by the ECB ($100s of billions) have gone the “collateralized” auction route. For instance last week they did a 28-day where the collateralized operation had 47 bidders for $47.5 billion and the swap had one bidder for $70 million. So I think the ECB is just eliminating this liquidity swap vehicle because of “lack of interest”, but plans on providing US$ liquidity via collateralized auctions until at least the April 30 current expiration of the overall ECB to US Fed swap lines.
I could be mis-reading this but I offer my observations.
After the last budget surplus ended in 2001, Bloomberg stated it was the longest period of surplus since 1927 -1930.
Prof. Fred Thayer wrote this before the surpluses of the late 90’s:
http://www.epicoalition.org/docs/thayer.htm
Here’s part of the intro:
From the origins to World War II
In its first 150 years, the government periodically undertook systematic multi-year reductions in the national debt by taking in more revenues than it spent.
Each of six such sustained periods led to one of the six major depressions in our history. The last three of these crashes were the truly significant depressions of the industrial era.
This is the record:
1. 1817-21: In five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.
2. 1823-36: In 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.
3. 1852-57: In six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857..
4. 1867-73: In seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.
5. 1880-93: In 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.
6. 1920-30: In 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.
There have been no such multi-year budget surpluses and debt reductions since World War II and, significantly, no major new depression. The record suggests that reducing the debt never sustained prosperity, even when the debt was virtually wiped out by 1836. The highest deficits were those of World War II, ranging from 20 to 31 percent of Gross National Product. For a few years following the war, the debt was greater than GNP, the only such case in history. The wartime borrowing and spending actually ended the Great Depression.
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