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What We Read Today 17 February 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number accepted.

There are eleven more articles discussed 'behind the wall' focused on economic growth issues.

Please help support Global Economic Intersection a one-year subscription to 'Behind the Wall' - only $25 for the entire year!



  • NAFTA's Economic Upsides (Carla A. Hills, Foreign Affairs) The primary argument by Carla Hills centers on the increase of cross-border sourcing of raw materials and sub-assemblies, an increase in cross-border investment and a 400% increase in intraregional trade flows. She does not mention the negative impacts on "Main Streets" in the regions that were discussed in the GEI News post earlier this week.
  • A Most Dangerous Era (John Mauldin, Advisor Perspectives) This article was listed before in a discussion about Obamacare. This time we are focused on the section about under-performing U.S. GDP growth. Mauldin says his calculation shows GDP even farther below trend than does the CBO (Congressional Budget Office).


  • What faster growth? Skeptics donít see it (Jeffrey Bartash, MarketWatch, The Wall Street Journal) The doubters of U.S. economic growth may be getting smaller in numbers but not in the intensity of argument. Among the latest evidence in their case is the decline in retail sales.


  • Chinese credit bounces as inflation abates (Leith van Onselen, Macro Business) "Chinese credit data released today shows that total lending has roared back, with the broadest measure of new loans, total social financing, surging in January." This is happening even as more credit defaults and bailouts are occurring, witnessed by situations in "What We Read Today" in recent weeks. See also the next two articles following this one.


  • Weekly chronicle of the Chinese economy (Phat Dragon, Westpac Institutional Banking Group, Macro Business) New lending was at a reasonable level for a January to start 2014 increasing by just 1.4% per year. Other numbers indicating a move to more conservative funding of the economy:
  • Foreign currency loans down 12%.
  • Trust loans down 49%.
  • Bond raisings down 85%.
  • Deposit growth down to 11.3% per year from December 13.8%.
  • G4 bankers increased transfers to China by $135 billion in the first nine months of 2013 after withdrawing $31 billion in 2012.
  • Bond financing is falling and equity increasing.


  • Get ready: a large portion of Chinaís $1.8 trillion in trust products may be headed for default this year (Gwynn Guilford, Quartz) One of the biggest threats to near-term global growth is a breakdown of the Chinese banking system with failures of significant financial institutions. One area of evident stress has been Investment Trust Products that have garnered almost $2 trillion in assets and have promised unrealistic returns. These are term-instruments and are coming to maturity in large numbers in 2014 and (43%) and 2015 (37%).

The losses associated with products is unknown but some of the few maturing in 2013 have seen significant shortfalls which were made good, apparently by China's government owned banks (but the announcements didn't state that clearly).

These Trusts are issued by shadow banking entities, many of which may be simply providing off-balance sheet fronts for the official banks. Remind anyone of 2008?

And there are reasons to believe that at least some of these Trusts have been making the few maturity payments so far out of the proceeds received for more recent Trust investments. Ponzi anyone?

This is a much smaller problem than the 2008 crisis but could be enough to stall out fragile global growth for 2014 (and 2015?).

An obsession with growth has eclipsed our concern for sustainability, justice and human dignity. But people are not disposable - the value of life lies outside economic development.
  • 5 Things To Ponder: Cash, QE, Investing & 1929 (Lance Roberts, STA Wealth Management) Lance Roberts contributes to Global Economic Intersection. The graph below shows how the balance sheet recession (depression?) has produced a destructive distortion in the historical cyclical pattern between velocity of money and GDP growth.

Click on graph for larger image.

  • A century of decline (The Economist) What better way to conclude a review of economic growth than with the story of Argentina, the anti-growth country.


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