Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Global economy loses steam as Chinese, European factories falter (Reuters) World economic growth lost momentum in September, with China's factory output shrinking again, euro zone manufacturing growth slowing, and U.S. activity steady. The latest business surveys across Asia, Europe and the Americas paint a gloomier picture and are likely to prompt more calls for central banks to loosen monetary policy even further.
Plastic oceans: What do we know? (BBC News) Not only is the visible plastic floating in the oceans a crisis but the small plastic particles resulting when bulk material breaks down is also a big problem. According to a researcher quoted in this article, a person "consuming an average amount of seafood would ingest about 11,000 plastic particles a year".
From heroes to bystanders? Central banks' growth challenge (Reuters) Central bankers who led the charge to pull the global economy from a cliff during the financial crisis now risk becoming bit players, ill-equipped to snap the world out of sluggish growth and its addiction to cheap credit. This article suggests fiscal action is required to get the global economy growing again. Econintersect: Explain to us the need for balanced government budgets again?
BREAKING Questions About Leak at Federal Reserve Escalate to Insider-Trading Probe (Economic Policy Journal) A high-profile investigation into a leak of sensitive information from the Federal Reserve in 2012 has escalated to an insider-trading probe led by a key market surveillance agency and federal prosecutors in Manhattan, according to people familiar with the matter. The firm at the center of the probe, Medley Global Advisors put out a report, in advance of a Federal Reserve statement, with such specifics that were included in the statement that a reeks of a tip off from inside the Fed. The author of the report in question met with Janet Yellen before it was published. Yellen says the subject of the meeting was "her perspectives on international developments". She says that she "did not convey any confidential information".
Hurricane Joaquin (NOAA) Katest forecast has the storm, now a category 4 hurricane, brushing the Atlanic coast of the U.S. and Canada, from Cape Hateras, North Carolina to Newfoundland with tropical storm force winds and heavy rain.
E.U. to ease capital rules for banks, insurers to boost economy (Business Insurance) The European Union will ease capital rules it has imposed on banks and insurers since the financial crisis to help markets raise more funds for reviving sluggish economic growth. Econintersect: So the worry is shifting from crisis avoidance to growth stimulus. Here we go again - isn't it likely that looser regulatory requirements will result in increased speculation raher than increased investment?
How Russian President Vladimir Putin Will Bankrupt His Country (The Street) This is repeated from 'What We Read Today' yesterday. A valuable reference was omitted - see next article. Econintersect: Russia may have fiscal and monetary problems but bankruptcy cannot be one of them. Some Russian companies which have foreign currency denominated debt may have problems (and some could go through bankruptcy) but the government debt is largely denominated in rubles. Russia creates rubles and can never run out. They can chose to default on their debt but that is not bankruptcy which would involve involuntary default (inability to pay). There are devaluation and inflation risks, but never bankruptcy.
The Ruble's Collapse and Russian External Debt (Economics Group, Wells Fargo Securities) This was written 9 months ago (11 December 2014). As opposed to the government, Russia's banking and non-financial corporate sectors have about $500 billion external debt (see below) outstanding, according to this article, and the authors point out that this debt "could result in some debt-servicing challenges in the future". The authors clearly describe why Russian government default is highly unlikely, as opposed to the risk for private debt:
Debtors can borrow from domestic creditors and foreign creditors, and they can also issue in domestic currency or in foreign currencies. External debt is the debt that is due to foreign creditors, whether that debt is denominated in the domestic currency or in foreign currencies. If external debt is denominated in the domestic currency, then foreign creditors would bear the foreign exchange risk. That is, a depreciation of the domestic currency means that foreign creditors would receive less foreign currency when the coupons and principal are paid in the domestic currency. Conversely, the domestic borrower bears the foreign exchange risk when the debt is issued in foreign currencies.
Now let us consider the outstanding debt of the Russian government. About two-thirds of its debt is denominated in Russian rubles, with most of the remainder denominated in U.S. dollars.1 Does the sharp rise in long-term ruble-denominated debt yields really represent increased risk of default? After all, the Russian central bank could conceivably create an unlimited supply of rubles to pay off creditors. That is, Russian authorities could eventually roll over maturing debt by selling new bonds to the Russian central bank.
Manufacturing PMI falls to 7-month low in Sept (Business Standard) The PMI (Purchasing Managers' Index) for manufacturing, compiled by Markit Economics, eased to 51.2 points in September as against 52.3 the previous month. However, the September PMI, based on a survey of 300 industrial companies, also marked the 23rd straight month of expansion. A reading over 50 signals growth and one below it a contraction.
Exports slump for 9 months running (MK Business News) September exports stood at $43.5 billion, down 8.3% from a year ago, according to data released by trade authorities on Thursday. It was a slight recovery compared to August exports which were $39.2 billion, down 14.9% from a year ago, but the year-to-year decline continued for the first nine months of this year. Except December exports when a 3.1%t rebound was seen, the country's exports kept falling from November of last year. Exports for the first nine months amounted to $397.1 billion, down 6.6% from the same time a year earlier.
China home sales stall (Macro Business) Centaline says home sales through September 27 were up a very slight 0.43% in its 54-city survey, while CREIS reports home prices increase 0.28% in its 100-city survey. In the 100-city survey, the price rise was down from a 0.95% rise in August. The largest ten cities saw average prices increases of 0.50%. There were more cities with rising prices in September, 59 versus 51 in August. There's optimism for a good "Silver October" thanks to the reduction in first-time home purchase down payments to 25%. Centaline dubs the latest move the "fifth round of housing bailouts in 2015".
Economy continues to struggle: NDC (The Taipei Times) Downside risks intensified in August, with key indicators such as industrial output, nonagricultural employment and stock indices all trending down. A recession could be close at hand.
Australia can't afford to burst housing bubble as wave of Chinese money looms (Sydney Morning Herald) Property rises might be taking a breather after a year of superheated growth, but one investment banker has bad news for most aspiring home owners: Australian house prices will keep getting higher and the government will do nothing to prick the bubble because the country simply can't afford it. And any hint of instability in China could send a wave of new money into the Australian market.
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