Archives of “gross domestic product” tag

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Christine Lagarde: "China's Slowdown Was Predictable, Predicted"… Yes, By Everyone Except The IMF

  
Analysis, Education
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In what may be the funniest bit of economic humor uttered today, funnier even than the deep pontifications at Jackson Hole (where moments ago Stanley Fischer admitted that “research is needed for a better inflation indicator” which means that just months after double seasonally adjusted GDP, here comes double seasonally adjusted inflation), in an interview with Swiss newspaper Le Temps (in which among other things the fake-bronzed IMF head finally folded and said a mere debt maturity extension for Greece should suffice, ending its calls for a major debt haircut), took some time to discuss China.

This is what she said. 

Turning to China, Lagarde said she expected the country’s economic growth rate to remain close to previous estimates even if some sort of slowdown was inevitable after its rapid expansion.
China devalued its yuan currency this month after exports tumbled in July, spooking global markets worried that a main driver of growth was running out of steam.
“We expect that China will have a growth rate of 6.8 percent. It may be a little less.” The IMF did not believe growth would fall to 4 or 4.5 percent, as some foresaw.

Actually, some – such as Evercore ISI – currently foresee China’s GDP to be negative, at about -1.1%. (more…)

Roubini sounds alarm on bond market 'vigilantes'

  
Analysis, Economy, Education
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The United States may fall victim to bond “vigilantes” targeting indebted nations from the United Kingdom to Japan in a potential second stage of the financial crisis, New York University professor Nouriel Roubini said.

“Bond market vigilantes have already woken up in Greece, in Spain, in Portugal, in Ireland, in Iceland, and soon enough they could wake up in the UK, in Japan, in the United States, if we keep on running very large fiscal deficits,” Roubini said at an event at the London School of Economics. “The chances are, they are going to wake up in the United States in the next three years and say, ‘this is unsustainable.'”

The euro has touched a four-year low against the dollar on concern nations with the largest budget deficits will struggle to meet the European Union’s austerity requirements. Roubini, speaking in a lecture hall packed with students who then queued to meet him at a book-signing, suggested that the public debt burden incurred after the banking panic of 2008 may now cause the financial crisis to metamorphose.

“There is now a massive re-leveraging of the public sector, with budget deficits on the order of 10 percent” of gross domestic product “in a number of countries,” Roubini said. “History would suggest that maybe this crisis is not really over. We just finished the first stage and there’s a risk of ending up in the second stage of this financial crisis.”

The US posted its largest April budget deficit on record as the excess of spending over revenue rose to $82.7 billion. The federal debt is currently projected to reach 90 percent of the economy by 2020.

Roubini, who predicted in 2006 that a financial crisis was imminent, said that the record US budget deficit may persist amid a stalemate in Congress between Republicans blocking tax increases and Democrats who oppose cuts in spending.

“In many advanced economies, the political will to do the right thing is constrained,” he said.

Roubini reiterated that the euro region faces the threat of a breakup after the Greek budget crisis. The European Union said on Tuesday it transferred the first instalment of emergency loans to Greece, one day before 8.5 billion euros ($10.4 billion) of bonds come due.

“Even today there is a risk of a breakup of the monetary union, the euro zone as well,” Roubini said.

“A double dip recession in the euro zone” is “something that’s not unlikely, given what’s happening.”

ECB Purchases Of Sovereign Bonds Surge Tenfold Compared To Prior Week, Hit €1.4 Billion

  
  Education
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After dropping to a modest €134 million last week, ECB purchases of sovereign debt exploded tenfold in the last ended week to €1.384 billion, confirming that the ECB continues to bid up all Portuguese and Irish bonds available for sale, so the market does not crash. As Reuters notes, this is the highest weekly amount purchase since early July. Once again it is up to the European Fed-equivalent to be the buyer of only resort. And Europe’s continued central bank facilitated life support comes on the heels of the latest joke in recession timing: per Dow Jones, the Center for Economic Policy Research Monday said its Euro Area Business Cycle Dating Committee had determined that the currency area’s recession began in January 2008 and ended in April 2009, lasting a total of 15 months and reducing gross domestic product by 5.5%. Some recovery there, when half the PIIGS have no access to capital markets, have their Prime Ministers mocked during conference calls, and are fighting with an exchange rate last seen long before Greece, Portugal, Spain and Ireland had to be rescued. We wonder what the CEPR’s timing on the end of the European depression will end up being?

Why is Jim Rogers Sceptical of India's Future?

  
Analysis, Economy, Education
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Investor and Adventure Capitalist Jim Rogers remains deeply sceptical of India’s future. In an interview with Forbes India, he argues the country is sitting on a fiscal time bomb.
 

The finance minister has changed the direction of India’s budget deficit by reducing the target for 2010-11 to 5.5 percent.
You really believe it will happen? Go back over the years and see their previous claims.

He has got a lot of praise for that in India. Still you are not impressed. Why?
Even if it happens, it is not being done by sound budgeting. It is from selling off the family jewels if it happens.

Don’t you think a high deficit was justified last year when the government had to spend and help the economy revive?
No. They are just trying to push the problems out into the future rather than solving the underlying problems. Do you really think the solution for a problem of too much debt and too much consumption is more debt and more consumption?


Are we not living in extraordinary times when we have to follow such flexible policies?
We are indeed. They are making the problems worse in extraordinary times which require tough measures to correct decades of abuse.

The finance minister rolled back some of the economic stimulus measures he had announced last year. Would you have preferred to see a complete rollback than a partial one?
Yes. And more.

If you were to set an agenda for the government, what would that be?
Cut spending and subsidies dramatically. Many studies have shown that countries start having serious growth problems when debt is 90 percent of GDP (gross domestic product). India is now [at] 80 percent and will be [at] 90 percent soon under this budget. The subsidies distort the economy in less productive areas.

Full Interview: LINK

UBS latest to cut India's FY12 growth forecast to 7.7 pct

  
Analysis, Economy, Education
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(Reuters) – UBS on Wednesday joined the growing list of brokerages lowering India’s 2011/12 economic growth forecast, paring Asia’s third-largest economy’s growth to 7.7 percent from 8 percent, as interest rate rises and higher oil prices start to bite.

Morgan Stanley and Bank of America-Merrill Lynch had last week lowered their growth forecast for the Indian economy in the next fiscal year that begins in April to 7.7 percent and 8.2 percent.

UBS also cut the world’s second-fastest growing major economy’s gross domestic product forecast for the current fiscal year to 8.7 percent from 9 percent on weak December-quarter growth and continuing weakness in the industrial output growth.

“The reason for the slowdown is as before: lagged impact of todays tight money on demand plus effect of higher oil prices,” Philip Wyatt, an economist at UBS wrote in a note, adding he sees the economy recovering to 8.6 percent growth in 2012/13.

India’s economy grew at a slower-than-expected 8.2 percent in the December quarter from a year earlier, after expanding at 8.9 percent in the previous two quarters.

Industrial output in January topped forecasts, but was still weak at 3.7 percent annual rise.

“We expect WPI (wholesale price index) inflation to accelerate from 7 percent in March 2011 to 7.7 percent a year hence,” Wyatt wrote.

India’s headline inflation unexpectedly quickened in February on rising fuel and manufacturing prices, raising expectations for aggressive central bank tightening beginning later this week. (more…)

$60 Trillion Of World Debt In One Visualization

  
Analysis, Economy, Education
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Today’s visualization breaks down $59.7 trillion of world debt by country, as well as highlighting each country’s debt-to-GDP ratio using colour. The data comes from the IMF and only covers external government debt.  

It excludes the debt of country’s citizens and businesses, as well as unfunded liabilities which are not yet technically incurred yet. All figures are based on USD. 

(more…)

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