Tag: news

The IMF’s woeful forecasting record, chronicled extensively before, has just taken yet another hit, following the latest flip flop on emerging markets. Try to spot the common theme of these assessments by the IMF.

IMF Chief economist Olivier Blanchard, April 11, 2011 (source):

“In emerging market economies, by contrast, the crisis left no lasting wounds. Their initial fiscal and financial positions were typically stronger, and the adverse effects of the crisis were more muted. High underlying growth and low interest rates are making fiscal adjustment much easier. Exports have recovered, and whatever shortfall in external demand they experienced has typically been made up through increases in domestic demand. Capital outflows have turned into capital inflows, due to both better growth prospects and higher interest rates than in the advanced economies. The challenge for most emerging market economies is thus quite different from that of the advanced economies—namely, how to avoid overheating in the face of closing output gaps and higher capital flows.”

IMF Chief economist Olivier Blanchard, July 9, 2013 (source):

“If you look country by country it seems to be specific . . . so in China it looks like unproductive investment, in Brazil it looks like low investment and in India it looks like policy and administrative uncertainty. But you wonder whether there is not something behind. I think behind this is a slowdown in underlying growth – not the cyclical component but just the average rate. It’s clear that these countries are not going to grow as fast as they did before the crisis.”

IMF Chief economist Olivier Blanchard, January 23, 2014 (source)

“Finally, we forecast that both emerging market and developing economies will sustain strong growth“

A few days later, EMs around the globe crashed, and central banks virtually everywhere had to step in to bail out their crashing currencies, and hit the tape with even more impressive verbal intervention every several hours.

Finally, today we get IMF economist Alejandro Werner, January 30, 2014 (source)

“Conditions in global financial markets will stay tighter than they were before the U.S. central bank’s “taper talk” in the first half of 2013, translating into higher international borrowing costs, particularly with the recent volatility in emerging markets…. sustained turbulence in emerging markets could tighten global financial conditions further…. Rebuilding fiscal buffers, and using monetary policy and flexible exchange rates to absorb shocks where possible, remains the order of the day.“

In other words, going from a forecast of “high underlying growth”, to “not going to grow as fast as they did”, to “sustain strong growth”, to violent EM crash, to “turbulence”, “volatility”, and urging EMs to “using monetary policy to absorb shocks”, what is clear is that nobody knows what is going on, nobody has any handle on the future of Emerging Markets, but let’s all just pretend that the MIT central-planners in control, are in control, and all shall be well.

via Zero Hedge http://ift.tt/1bCulIn Tyler Durden

The IMF’s woeful forecasting record, chronicled extensively before, has just taken yet another hit, following the latest flip flop on emerging markets. Try to spot the common theme of these assessments by the IMF.

IMF Chief economist Olivier Blanchard, April 11, 2011 (source):

“In emerging market economies, by contrast, the crisis left no lasting wounds. Their initial fiscal and financial positions were typically stronger, and the adverse effects of the crisis were more muted. High underlying growth and low interest rates are making fiscal adjustment much easier. Exports have recovered, and whatever shortfall in external demand they experienced has typically been made up through increases in domestic demand. Capital outflows have turned into capital inflows, due to both better growth prospects and higher interest rates than in the advanced economies. The challenge for most emerging market economies is thus quite different from that of the advanced economies—namely, how to avoid overheating in the face of closing output gaps and higher capital flows.”

IMF Chief economist Olivier Blanchard, July 9, 2013 (source):

“If you look country by country it seems to be specific . . . so in China it looks like unproductive investment, in Brazil it looks like low investment and in India it looks like policy and administrative uncertainty. But you wonder whether there is not something behind. I think behind this is a slowdown in underlying growth – not the cyclical component but just the average rate. It’s clear that these countries are not going to grow as fast as they did before the crisis.”

IMF Chief economist Olivier Blanchard, January 23, 2014 (source)

“Finally, we forecast that both emerging market and developing economies will sustain strong growth“

A few days later, EMs around the globe crashed, and central banks virtually everywhere had to step in to bail out their crashing currencies, and hit the tape with even more impressive verbal intervention every several hours.

Finally, today we get IMF economist Alejandro Werner, January 30, 2014 (source)

“Conditions in global financial markets will stay tighter than they were before the U.S. central bank’s “taper talk” in the first half of 2013, translating into higher international borrowing costs, particularly with the recent volatility in emerging markets…. sustained turbulence in emerging markets could tighten global financial conditions further…. Rebuilding fiscal buffers, and using monetary policy and flexible exchange rates to absorb shocks where possible, remains the order of the day.“

In other words, going from a forecast of “high underlying growth”, to “not going to grow as fast as they did”, to “sustain strong growth”, to violent EM crash, to “turbulence”, “volatility”, and urging EMs to “using monetary policy to absorb shocks”, what is clear is that nobody knows what is going on, nobody has any handle on the future of Emerging Markets, but let’s all just pretend that the MIT central-planners in control, are in control, and all shall be well.

via Zero Hedge http://ift.tt/1bCulIn Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Here's the global financial crisis in a nutshell: access to easy credit can solve a temporary liquidity problem, but it can't increase the value of collateral or generate income.

The Chinese culture has a wonderful vocabulary of colorful analogies and metaphors, and today's title refers to the typhoon of liquidity (freely available credit) that has flooded the global economy for the past five years.

The source of the phrase is Liu Chuanzhi, the Chairman of Lenovo and the iconic figure of Chinese manufacturing. When asked a few years ago why 60% of Lenovo Group’s profit came from asset investment and only 40% came from manufacturing. He said “when the typhoons come, even a pig can fly in the sky. Everybody is profiteering from this. Why can’t we?”

The typhoon in this case is China's credit/liquidity-driven real estate speculative frenzy, in which the only losers are those who don't borrow to the hilt in the shadow banking system and buy, buy, buy empty flats in vacant buildings.

The critical distinction to make about typhoons of credit-driven speculation (in China, Japan, the U.S., Europe, etc.) is between liquidity and valuation.

Let's take a household as an example to explain the difference. Say the household owns a $300,000 house with a $150,000 mortgage. The household has home equity of $150,000.

Let's say one of the household loses their job and the sole remaining income is not enough to pay the monthly bills. This is a liquidity crisis. The household could borrow money based on the collateral of the home equity to tide them over until the second worker finds a new job.

A valuation crisis is different: let's say the household decides to sell the house and discovers the market value is only $150,000–the same as the mortgage. After deducting the real estate transaction costs, the household has negative equity. So instead, the owners claim the house is worth $250,000 and try to get a home equity line of credit to solve their income/liquidity crisis.

Here's the global financial crisis in a nutshell: access to easy credit can solve a temporary liquidity problem, but it can't increase the value of collateral or generate income. The owner can misrepresent the value of the asset to borrow money based on phantom collateral, but that doesn't change the market value of the underlying asset or increase the income needed to make loan payments.

Simply put, credit/liquidity cannot solve valuation/collateral crises. Correspondent J.B. recently addressed this issue:

"RE: accounting and real life. Sometimes they differ but over the long run they always synch up. For instance let's say a bank has a lot of quality assets but a liquidity issue. It will take that good paper to the Fed to get liquidity for the bank to get through the hard time (no write down required and it works out). On the other hand if the bank has a bunch of bad assets, it now has a solvency issue and not a liquidity issue (i.e. not marking to market does not agree with reality). Sure if CRE goes bad it can postpone marking it to market for a while but soon it has no cashflow and accounting does not matter because it cannot pay its bills, payroll or redeem demand deposits. The failure to properly mark assets to market will not save it and ultimately accounting and reality will re-synch."

The world's central banks and governments have tried for the past five years to fix a valuation/collateral/income crisis with liquidity. No wonder they've failed–enabling insolvent owners to borrow more money doesn't make the borrowers any less insolvent.

Once the liquidity typhoon dies down, the insolvent pigs will plummet back to earth. That's what we're seeing in the periphery economies and shadow banking systems around the world.

via Zero Hedge http://ift.tt/1ie2gfu Tyler Durden

Following NY Rep. Michael Grimm’s apology yesterday for threatening to break a reporter in half and throw him off a balcony, none other than former NY Rep. Anthony Weiner had some advice for the cantakerous congressman. Wring in the New York Daily News, Weiner began: “First, if you don’t want to talk about a scandal in which you’re embroiled, whatever that scandal may be, maybe it’s best that you don’t do interviews for a while…” but the snark and irony surges from there.

 

Weiner’s New York Daily News Op-Ed advice begins…

First, if you don’t want to talk about a scandal in which you’re embroiled, whatever that scandal may be, maybe it’s best that you don’t do interviews for a while.

 

For that matter, you may not want to attend community meetings, visit your office or go a sporting event. Fact is, an investigation that’s hanging over your head is the kind of thing people might be curious about. People ask you about embarrassing stuff even when you want to talk about other things. Especially when you want to talk about other things.

But gets a little snarky…

Better yet, if you don’t want to talk about your fund-raising scandal, maybe just maybe don’t have one to begin with. I only know what I read in the papers about all this. (OK, maybe I know a bit more.) But it does seem like a lot of people are being investigated and indicted in connection with Mikey Suits’campaign.

 

I’ll leave it to the authorities who are probing this in New York, Washington, Texas and Israel to work out what happened, but it seems like we may be headed for another of those Nixon/Christie “mistakes were made” moments.

And then, in the irony of the decade (given Weiner’s outrageous outbursts to his voters and reporters alike)…

If you ignore the first two rules, try answering the questions posed to you, calmly.

 

 

I know that “can you tell us about the status of the ethics investigation into you?” sounds like fighting words. But it can actually be an invitation to explain some of the messy doings that have swirled around you since nearly the moment you were elected.

Weiner concludes…

Bottom line, notwithstanding the fact that there are lousy reporters — and that we all pay too much attention to scandals and not enough to all the people in public life who get up every day to do the best they can to do good work — the basic deal of representative government is this: The people who get elected have to be held accountable by the people who pay their salaries.

 

Sometimes that means getting a certificate of appreciation from the local Kiwanis Club, and sometimes it means having a reporter ask a question you don’t like. If you are living right, there are many many more of the former than the latter. But being an elected official is a high honor. You roll with the punches.

 

…

 

I did a terrible job following these rules. I did embarrassing things and made them so much worse by being dishonest about them.

So, people that live in glass houses shouldn’t screw there?

via Zero Hedge http://ift.tt/1iQ4jcq Tyler Durden

Following NY Rep. Michael Grimm’s apology yesterday for threatening to break a reporter in half and throw him off a balcony, none other than former NY Rep. Anthony Weiner had some advice for the cantakerous congressman. Wring in the New York Daily News, Weiner began: “First, if you don’t want to talk about a scandal in which you’re embroiled, whatever that scandal may be, maybe it’s best that you don’t do interviews for a while…” but the snark and irony surges from there.

 

Weiner’s New York Daily News Op-Ed advice begins…

First, if you don’t want to talk about a scandal in which you’re embroiled, whatever that scandal may be, maybe it’s best that you don’t do interviews for a while.

 

For that matter, you may not want to attend community meetings, visit your office or go a sporting event. Fact is, an investigation that’s hanging over your head is the kind of thing people might be curious about. People ask you about embarrassing stuff even when you want to talk about other things. Especially when you want to talk about other things.

But gets a little snarky…

Better yet, if you don’t want to talk about your fund-raising scandal, maybe just maybe don’t have one to begin with. I only know what I read in the papers about all this. (OK, maybe I know a bit more.) But it does seem like a lot of people are being investigated and indicted in connection with Mikey Suits’campaign.

 

I’ll leave it to the authorities who are probing this in New York, Washington, Texas and Israel to work out what happened, but it seems like we may be headed for another of those Nixon/Christie “mistakes were made” moments.

And then, in the irony of the decade (given Weiner’s outrageous outbursts to his voters and reporters alike)…

If you ignore the first two rules, try answering the questions posed to you, calmly.

 

 

I know that “can you tell us about the status of the ethics investigation into you?” sounds like fighting words. But it can actually be an invitation to explain some of the messy doings that have swirled around you since nearly the moment you were elected.

Weiner concludes…

Bottom line, notwithstanding the fact that there are lousy reporters — and that we all pay too much attention to scandals and not enough to all the people in public life who get up every day to do the best they can to do good work — the basic deal of representative government is this: The people who get elected have to be held accountable by the people who pay their salaries.

 

Sometimes that means getting a certificate of appreciation from the local Kiwanis Club, and sometimes it means having a reporter ask a question you don’t like. If you are living right, there are many many more of the former than the latter. But being an elected official is a high honor. You roll with the punches.

 

…

 

I did a terrible job following these rules. I did embarrassing things and made them so much worse by being dishonest about them.

So, people that live in glass houses shouldn’t screw there?

via Zero Hedge http://ift.tt/1iQ4jcq Tyler Durden