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Couldn’t agree more!

Let them export their brains out, while we sustain domestic demand with lower taxes/higher federal spending.

It’s all to our advantage!

China Central Bank Attacks Paulson’s ‘Gangster Logic’

by Li Yanping

Jan 16 (Bloomberg) — A Chinese central bank official attacked reported comments by U.S. Treasury Secretary Henry
Paulson that China’s high savings rate helped trigger the global credit crisis.

“This view is extremely ridiculous and irresponsible and it’s ‘gangster logic,’” Zhang Jianhua, the bank’s research head,
said. His comments were in an interview with the state-run Xinhua News Agency, posted on a government Web site today.

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They are being felt- the economy is getting worse, until the budget deficit gets large enough.

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The news just keeps getting worse over there.

They are unlikely to make up for lost exports with domestic demand due to structural constraints on proactive fiscal policy.

This put deflationary forces in place that drive relative prices down until exports resume.

And with national government solvency in question, there is no ‘safe haven’ for euro financial assets.

Overly tight fiscal currency keeps it strong, but a reduction in the desire to save in that currency works the other way.

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‘Bond failures’ are not all that uncommon in the eurozone and more of a debt management issue at this point.

However a rising deficit due to falling revenues and rising transfer payments as GDP weakens could cause the ability to fund to deteriorate rapidly.

Bank failures that require national government funding don’t help either, and the eurozone seems long overdue for multiple major bank failures.

German bond sale’s fate signals trouble ahead

by David Oakley

A German sovereign bond auction failed on Wednesday as investors shunned one of the most liquid and safe assets in the world in a warning for governments seeking to raise record amounts of debt to stimulate slowing economies.

The fate of the first eurozone bond auction of 2009 signals trouble ahead as governments around the world hope to issue an estimated $3,000bn in debt this year, three times more than in 2008.

The 10-year bonds failed to attract enough bids to reach the €6bn the German government wanted. Bids of €5.24bn, a cover of only 87 per cent, amounted to the second worst auction on record in terms of demand.

Such developments were rare before the credit crisis. Before the seven German bond auctions that failed last year, the last German bond auction to fail was in July 2000 after the dotcom crash.

Analysts said the vast amount of supply is deterring investors and a growing number of countries, including those with deep and mature bond markets, such as Germany, the UK and Italy, are struggling to attract buyers.

The Netherlands has seen bond auctions fail, the UK and Italy have been forced to offer investors higher yields to meet their auction targets, while Spain and Belgium have cancelled offerings because of a lack of demand.

The German finance agency admitted that investor appetite for government debt had waned, although insisted the auction was “not a disappointment”.

Meyrick Chapman, a UBS fixed-income strategist, said when a German bond auction failed it “does suggest there may be trouble ahead for other governments wanting to raise money in the debt markets. Before the financial crisis, German bond auctions just did not fail.”

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Right, time to wait for a US fiscal response large enough to help the eurozone as well as the US.

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Domestics somehow caught short USD like the rest of the world?

Help for both domestic consumption but exports as well- still pushing exports.

Pushing exports.

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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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.

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Brown has it backwards, as most do. Lack of lending is a ‘good thing.’

It means ‘full employment’ can be sustained with much lower taxes for any desired level of government spending.

Too bad they are all out of paradigm and are letting things deteriorate while they agonize over the size of the deficit.

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With no sign of a meaningful response, and, worse yet, no safe channel to get it done even if they wanted to, systemic risk in the eurozone continues to escalate.

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Very constructive move here- front loading future public sector capital expenditures.

Darling to ‘reprioritise’ spending (FT)

Alistair Darling evoked the spirit of John Maynard Keynes on Sunday as he signalled a “reprioritising” of spending plans towards capital infrastructure, housing and energy. The chancellor of the exchequer will call on departments to bring forward billions of pounds of capital expenditure to invigorate the economy ahead of an expected recession. The government is limited in its ability to step up overall spending for the current three-year period, set at the last comprehensive spending review. But it can bring forward money from planned budgets in 2010-11 – after the next general election. The government has already announced the front-loading of money to build more social housing as part of its autumn relaunch. It has also allowed the Ministry of Defence to sign off its £4bn aircraft carrier contracts by juggling its budget.

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