The house of cards is falling. Will Greece now have to provide aid to Germany?
"Offenbach, a city of about 120,000
people neighboring Germany’s financial capital Frankfurt, is so
mired in debt it had to ask the state of Hesse for a 211
million-euro ($277 million) bailout in June. In so doing, it became one of the largest of 102
municipalities to tap 3.2 billion euros of aid Hesse is making
available as the first of Germany’s 16 federal states to
introduce a formal rescue fund for struggling towns and cities."
For entire article: http://www.businessweek.com/news/2012-09-18/german-city-needing-aid-shows-debt-crisis-tentacles-euro-credit
Showing posts with label global financial crisis. Show all posts
Showing posts with label global financial crisis. Show all posts
Tuesday, September 18, 2012
Thursday, June 21, 2012
China PMI Falls, Points To Need for Stimulus - WSJ.com
HSBC Preliminary China PMI Fell in June - WSJ.com
The HSBC initial, or "flash," measure of manufacturing also foreshadowed weakness in the months ahead as its barometer of new manufacturing orders, particularly export orders, showed further declines amid a lingering global economic slowdown.
![[CECON]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_vDFz6zTTnwhRJTFHCSqWPaAdsjX2pNnHltleNMwrr3pJrTBSdI1ZCSNc5bV7KkBj0I64ytZ6YipJJt1iLFvTyF5XTlQMbT3xOw0t1pkeCHRfw3udC3uJqzoCi-2RaA8hyV8lu5UwdtAOcPrC2wNA1tOQ=s0-d)
China has already turned to an array of measures to boost growth, speeding up approvals on big projects, offering tax breaks and extending subsidies to promote consumer spending. A big unanswered question is whether the plethora of actions in the past month or so will be sufficient to boost growth during the second half of the year. If so, it could help strengthen global demand at a time when Europe is in recession and the U.S. is growing slowly.
Meanwhile, HSBC pointed to less than robust signs on the domestic economic front as well.
It said there was no meaningful improvement in domestic demand in June, with a rise in inventories of finished goods. Prices were also suggesting a potential for deflation, rather than inflation, due to weak demand.
By WILLIAM KAZER
BEIJING—A preliminary gauge of China's manufacturing activity showed more weakness in June, which appeared to strengthen the case for more stimulus measures to spur growth.The HSBC initial, or "flash," measure of manufacturing also foreshadowed weakness in the months ahead as its barometer of new manufacturing orders, particularly export orders, showed further declines amid a lingering global economic slowdown.
Meanwhile, HSBC pointed to less than robust signs on the domestic economic front as well.
It said there was no meaningful improvement in domestic demand in June, with a rise in inventories of finished goods. Prices were also suggesting a potential for deflation, rather than inflation, due to weak demand.
Sunday, June 10, 2012
China's Great Wall is Crumbling Again-- Don't Rely on China to Prop Up the World
China has 60 million empty apartments
By Fred LeebThe world's economic recession has breached the Great Wall of China again. In 2008, China had a $600 billion stimulus program. On June 7, 2012, another domino fell when China had to cut its interest rate by a quarter of a percentage point in an effort to stimulate its growth again.
China
is desperately attempting to shift from an export economy to a
consumer economy due to the world-wide recession; it is now in a
slow-down of its own. The current weakening is likely to worsen. This
means that the teetering economies of the United States and Europe
cannot depend on China to boost them up. In fact, a slowdown in China
could actually accelerate the effects of the recession on the West due
to today's pervasive global economy. Not only does our economy affect
China but China's economy affects ours.
The interest rate cut was the first cut since December 2008. According to Tom Orlik of the Wall Street Journal,
"A move to lower the cost of capital might support short-term growth,
but it comes with a price. Higher lending will push up China's
burgeoning ratio of credit-to-gross-domestic-product, building up
debts that will one day have to be repaid. And higher investment
spending threatens to tip China's economy further off balance, with
attendant problems of waste and overcapacity."
Per Gordon Chang of Forbes, once you add in "hidden liabilities, China's debt-to-GDP ratio at the end of last year increased to somewhere between 90-160%.
By comparison, at the end of last year, the debt-to-GDP ratios for Italy and Greece were 137% and 179%, respectively.
Many areas of the Chinese economy are weak. New bank loans for
2012 are projected to be about 15% less than the government's goal,
according to Bloomberg News.
There reportedly has been a lack of demand due to shaky profits and
excess capacity. In addition, though a real estate bust is not
projected, Chinese real estate prices have been falling in value.
According to China Daily, China's house prices fell to a 16-month low in May, investment growth in property development experienced its eighth year-on-year decrease in April and the real estate confidence index was at its lowest level in nearly three years.
According to Alex Finkelstein of the World Property Channel, property developers
in China are currently selling their inventory at a 40-50% discount and
large residential projects have resulted in an estimated 60 million
unoccupied apartments.
Nick Edwards of Reuters
reported, "China is recognising that they have to keep their economy
stimulated and growing," said Gordon Charlop, a managing director at
Rosenblatt Securities in New York. "They will be proactive to make sure
they don't run into any of the problems we've faced and are facing and
Europe is facing." According to Edwards, "Beijing wants to see growth
solidly underpinned before a once-a-decade leadership change at the top
of the ruling Communist Party, due towards the end of this year. But it
is likely to be wary of setting off a fresh round of price hikes that
could put social stability at risk."
Instead
of being the strong economy holding the global economic system
together, China may be another cause of instability, risk and
uncertainty. Though China is on the other side of the globe, its
economy may have a profound effect on us locally.
Our business projections should recognize the risks inherent from being a part of the global economy and we should be developing contingency plans now to be prepared properly in case of another downturn. Our economy is likely to get even more difficult before getting better.
Our business projections should recognize the risks inherent from being a part of the global economy and we should be developing contingency plans now to be prepared properly in case of another downturn. Our economy is likely to get even more difficult before getting better.
Friday, June 8, 2012
China rate cut raises fears of grim May economic data | Reuters
China rate cut raises fears of grim May economic data | Reuters
China's surprise rate cut unveiled on Thursday has boosted hopes that cheaper credit will help combat its faltering economic growth and has encouraged global share markets in their belief that the major economies are stepping up stimulus.
But the central bank's cut, the first since the global financial crisis in late 2008, has also raised concerns about a deluge of May Chinese data due this weekend.
Reuters polls published earlier in the week suggested the world's second-largest economy probably showed signs of stabilising last month from a surprisingly weak April. Now, some economists worry that those expectations may be misplaced.
"The concern is that with industrial production and CPI data coming out of China at the weekend that it's indicative of them knowing something about weak data going forward," said Adrian Schmidt, currency strategist at Lloyds Bank in London.
The outlook was already looking grim by Chinese standards....
Beijing is still tackling the after-effects of the 4 trillion yuan ($635 billion) stimulus programme unveiled in late 2008 during the global financial crisis.
The programme triggered a frenzy of real estate speculation, saw local governments amass 10.7 trillion yuan of debt and drove inflation to a three-year peak by July 2011.
"China is recognising that they have to keep their economy stimulated and growing," said Gordon Charlop, a managing director at Rosenblatt Securities in New York.
"They will be proactive to make sure they don't run into any of the problems we've faced and are facing and Europe is facing."
...Import growth, forecast by analysts at 5 percent year-on-year in May, would be an improvement on April's 0.3 percent rise, but again well below the 10 percent target and an indication of still fragile demand at home and abroad. [Please click on the hyperlink above to see the entire article.]
China rate cut raises fears of grim May economic data
BEIJING, June 8 |
(Reuters) - Global cheers over China's decision to cut interest rates could fade to stony silence if, as some economists fear, the move signals that some grim economic data are about to be released.China's surprise rate cut unveiled on Thursday has boosted hopes that cheaper credit will help combat its faltering economic growth and has encouraged global share markets in their belief that the major economies are stepping up stimulus.
But the central bank's cut, the first since the global financial crisis in late 2008, has also raised concerns about a deluge of May Chinese data due this weekend.
Reuters polls published earlier in the week suggested the world's second-largest economy probably showed signs of stabilising last month from a surprisingly weak April. Now, some economists worry that those expectations may be misplaced.
"The concern is that with industrial production and CPI data coming out of China at the weekend that it's indicative of them knowing something about weak data going forward," said Adrian Schmidt, currency strategist at Lloyds Bank in London.
The outlook was already looking grim by Chinese standards....
Beijing is still tackling the after-effects of the 4 trillion yuan ($635 billion) stimulus programme unveiled in late 2008 during the global financial crisis.
The programme triggered a frenzy of real estate speculation, saw local governments amass 10.7 trillion yuan of debt and drove inflation to a three-year peak by July 2011.
"China is recognising that they have to keep their economy stimulated and growing," said Gordon Charlop, a managing director at Rosenblatt Securities in New York.
"They will be proactive to make sure they don't run into any of the problems we've faced and are facing and Europe is facing."
...Import growth, forecast by analysts at 5 percent year-on-year in May, would be an improvement on April's 0.3 percent rise, but again well below the 10 percent target and an indication of still fragile demand at home and abroad. [Please click on the hyperlink above to see the entire article.]
Monday, June 4, 2012
All Hail the Generalist - Vikram Mansharamani - Harvard Business Review
All Hail the Generalist - Vikram Mansharamani - Harvard Business Review
We have become a society of specialists. Business thinkers point to "domain expertise" as an enduring source of advantage in today's competitive environment. The logic is straightforward: learn more about your function, acquire "expert" status, and you'll go further in your career.
But what if this approach is no longer valid? Corporations around the world have come to value expertise, and in so doing, have created a collection of individuals studying bark. There are many who have deeply studied its nooks, grooves, coloration, and texture. Few have developed the understanding that the bark is merely the outermost layer of a tree. Fewer still understand the tree is embedded in a forest....
For various reasons, though, the specialist era is waning. The future may belong to the generalist. Why's that? To begin, our highly interconnected and global economy means that seemingly unrelated developments can affect each other. Consider the Miami condo market, which has rebounded quite nicely since 2008 on the back of strong demand from Latin American buyers. But perhaps a slowdown in China, which can take away the "bid" for certain industrial commodities, might adversely affect many of the Latin American extraction-based companies, countries, and economies. How many real estate professionals in Miami are closely watching Chinese economic developments?
All Hail the Generalist
But what if this approach is no longer valid? Corporations around the world have come to value expertise, and in so doing, have created a collection of individuals studying bark. There are many who have deeply studied its nooks, grooves, coloration, and texture. Few have developed the understanding that the bark is merely the outermost layer of a tree. Fewer still understand the tree is embedded in a forest....
For various reasons, though, the specialist era is waning. The future may belong to the generalist. Why's that? To begin, our highly interconnected and global economy means that seemingly unrelated developments can affect each other. Consider the Miami condo market, which has rebounded quite nicely since 2008 on the back of strong demand from Latin American buyers. But perhaps a slowdown in China, which can take away the "bid" for certain industrial commodities, might adversely affect many of the Latin American extraction-based companies, countries, and economies. How many real estate professionals in Miami are closely watching Chinese economic developments?
Wednesday, April 25, 2012
The Reality-averse Illinois Government Is On Route To A Probable Plunge Into Insolvency - Investors.com
The Reality-averse Illinois Government Is On Route To A Probable Plunge Into Insolvency - Investors.com
Illinois was more heavily taxed than its five contiguous states (Indiana, Kentucky, Missouri, Iowa, Wisconsin) even before January 2011, when Quinn got a lame duck Legislature (its successor has fewer Democrats) to raise corporate taxes 30% (from 7.3% to 9.5%), giving Illinois one of the highest state corporate taxes, and the fourth-highest combination of national and local corporate taxation in the industrialized world.
Since 2009, Quinn has spent more than $500 million in corporate welfare to bribe companies not to flee the tax environment he has created.
Quinn raised personal income taxes 67% (from 3% to 5%), adding about $1,040 to the tax burden of a family of four earning $60,000. Illinois' unemployment rate increased faster than any other state's in 2011.
Its pension system is the nation's most underfunded, and the state has floated bond issues to finance pension contributions — borrowing money that someday must be repaid, to replace what should have been pension money it spent on immediate gratifications. [Please click on the link above to see the entire article.]
For Illinois, The Bills Come Due As Reality Closes In
Illinois was more heavily taxed than its five contiguous states (Indiana, Kentucky, Missouri, Iowa, Wisconsin) even before January 2011, when Quinn got a lame duck Legislature (its successor has fewer Democrats) to raise corporate taxes 30% (from 7.3% to 9.5%), giving Illinois one of the highest state corporate taxes, and the fourth-highest combination of national and local corporate taxation in the industrialized world.
Since 2009, Quinn has spent more than $500 million in corporate welfare to bribe companies not to flee the tax environment he has created.
Quinn raised personal income taxes 67% (from 3% to 5%), adding about $1,040 to the tax burden of a family of four earning $60,000. Illinois' unemployment rate increased faster than any other state's in 2011.
Its pension system is the nation's most underfunded, and the state has floated bond issues to finance pension contributions — borrowing money that someday must be repaid, to replace what should have been pension money it spent on immediate gratifications. [Please click on the link above to see the entire article.]
Thursday, April 5, 2012
Fiscal crisis of municipal and provincial gov`ts APRIL 05, 2012 06:55 donga.com[English donga]
The same problems are occurring in the hot economic environment of South Korea. Please see the article below:
donga.com[English donga]
The city of Incheon has paid its civil servants one day late, blaming “a temporary lack of liquidity.” The delay in pay due to a deficit of 2 billion won (1.8 million U.S. dollars) is something not to be ignored given the city`s annual budget of 8 trillion won (7.1 billion dollars). The debt ratio of the Incheon City Hall by year`s end is expected to reach 40 percent. If the figure exceeds 40 percent, this will plunge the city into a debt crisis and prompt an audit by the central government. This is tantamount to a debt workout program for corporations.
Incheon became debt-saddled due to a host of reckless populist projects carried out under former mayor Ahn Sang-soo. Eunha Rail, which cost 85.3 billion won (75.5 million dollars), will be torn down due to poor construction. A free economic zone into which the city injected more than 1 trillion won (885 million dollars) has attracted few investors. The construction of the main stadium for the 2014 Asian Games, a venture needing more than 500 billion won (443 million dollars), has also come under scrutiny. If Incheon`s Munhak Stadium, which hosted games of the 2002 World Cup soccer finals, had been renovated, the city would have needed just 54 billion won (48 million dollars). This is in stark contrast to Daegu, which successfully hosted the IAAF World Championships in 2011 by refurbishing Daegu Stadium.
donga.com[English donga]
The city of Incheon has paid its civil servants one day late, blaming “a temporary lack of liquidity.” The delay in pay due to a deficit of 2 billion won (1.8 million U.S. dollars) is something not to be ignored given the city`s annual budget of 8 trillion won (7.1 billion dollars). The debt ratio of the Incheon City Hall by year`s end is expected to reach 40 percent. If the figure exceeds 40 percent, this will plunge the city into a debt crisis and prompt an audit by the central government. This is tantamount to a debt workout program for corporations.
Incheon became debt-saddled due to a host of reckless populist projects carried out under former mayor Ahn Sang-soo. Eunha Rail, which cost 85.3 billion won (75.5 million dollars), will be torn down due to poor construction. A free economic zone into which the city injected more than 1 trillion won (885 million dollars) has attracted few investors. The construction of the main stadium for the 2014 Asian Games, a venture needing more than 500 billion won (443 million dollars), has also come under scrutiny. If Incheon`s Munhak Stadium, which hosted games of the 2002 World Cup soccer finals, had been renovated, the city would have needed just 54 billion won (48 million dollars). This is in stark contrast to Daegu, which successfully hosted the IAAF World Championships in 2011 by refurbishing Daegu Stadium.
Monday, February 13, 2012
China tells banks to roll over local government loans: FT | Reuters
China tells banks to roll over local government loans: FT | Reuters
"China encouraged banks to lend to local governments for new projects during the financial crisis to buoy the economy, but its provinces and cities now face $1.7 trillion in debts. More than half those loans were scheduled to come due over the next three years, the newspaper said. Banks had started extending maturities for local governments to avoid a wave of defaults, the paper said, citing bankers and analysts familiar with the matter."
Fred Leeb: Is the global house of cards built on a house of cards?
"China encouraged banks to lend to local governments for new projects during the financial crisis to buoy the economy, but its provinces and cities now face $1.7 trillion in debts. More than half those loans were scheduled to come due over the next three years, the newspaper said. Banks had started extending maturities for local governments to avoid a wave of defaults, the paper said, citing bankers and analysts familiar with the matter."
Fred Leeb: Is the global house of cards built on a house of cards?
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