World Economic News and Discussion

Someone once said (forgot who said it though) was that economy/finances is more of a faith/belief system than science. One can adjust such belief till it benefits them. It of course doesn't make it right, but well, it is what we live with.

Colossal Failure

AIIB to Issue Loans in US Dollars

The Asian Infrastructure Investment Bank (AIIB) will credit projects in US dollars while attracting capital in other currencies, AIIB President Jin Liqun said Sunday.

"We lend only in US dollars," Jin said at a press conference, answering question on whether the institution would issue loans in other denominations.
He clarified that other currencies, including the euro and the yuan, could be used to attract capital from the international market.

The bank, seen as a rival to Western-dominated international institutions like the World Bank and the International Monetary Fund, was officially launched on Saturday with $100 billion in capital.
Jin, president-designate as of August, was confirmed AIIB's first president at its inaugural session.


AIIB, with 57 founding countries, is set to begin looking into infrastructure and energy project loans by mid-2016, Russian Economic Development Minister and AIIB Board of Governors member Alexei Ulyukayev said on Saturday.
The Asian Infrastructure Investment Bank (AIIB) will issue its first loans before the end of 2016, bank President Jin Liqun said.


Jin, who was confirmed as the institution’s first leader at its inaugural session after an opening ceremony on Saturday, further declined to enumerate the projects planned to be co-financed with other financial institutions.


AIIB, with 57 founding member countries and $100 in initial capital, is seen as a rival to Western-dominated institutions such as the World Bank and International Monetary Fund.
Russian Economic Development Minister and AIIB Board of Governors member Alexei Ulyukaev said on Saturday the bank was set to begin considering infrastructure and energy project loans by the second quarter of 2016.

This hits closer to home, and KVS should read this, and any other Canadians here:
"Jingle Mail" Makes Comeback In Canada As Underwater Borrowers Mail Keys Back To Banks

Germany Continues Repatriation of Gold Reserves From Abroad

Deutsche Bundesbank has already delivered the precious metal valued at approximately 11.5 billion euros to Frankfurt. The country is planning to bring back half of the country's gold reserves until 2020.

The German central bank accelerated the withdrawal of Germany's gold reserves from overseas repositories, president of the Bundesbank Jens Weidmann said Sunday.

According to Weidmann, the bank is working on a new concept of the gold storage adopted by Germany in 2013, according to which at least half of the total gold reserves of the country should be transferred to Frankfurt until 2020.

Weidmann said that 366 tons of gold at a total value of approximately 11.5 billion euros have been delivered to Frankfurt so far.

"Thus, there are now about 1,400 tons or 41.5% of our gold reserves here. We comply with the schedule," Deutsche Welle quoted the banker as saying.

According to him, the rest of the gold will be stored in New York and London.

Gold is an additional reserve currency for Germany. According to the Bundesbank, the German gold reserve amounts to approximately 3,400 tons and is the second largest in the world after that of the United States.

"There are suggestions Germany wants its gold because it's worried its loans to less fiscally responsible sovereigns won't be repaid. But I believe Germany is preparing in case the euro were to eventually dissolve, so it wants its gold to potentially back a new Deutsche Mark. Perhaps they, too, recognize gold's return to its role as money," Peter Krauth wrote in 2013 for Money Morning.

The gold reserve is to a certain extent a financial regulator for Europe as a whole and ensures Germany a leading role among European countries.

Read more: http://sputniknews.com/business/20160320/1036618662/germany-repatriation-gold.html#ixzz43iE9U3PF

Top Silicon Valley VC Laments: Startups Being Funded Are "Mostly Crap & Largely Worthless"

This is one of the things I was talking about when I debated back with Mike regarding how silicon valley is a dotcom 2.0 burst waiting to happen again.

Excellent analysis by Pepe Escobar on the new Silk Road project.

Was expecting something different when I've read Silk Road

America's "Advanced Stupid" In 2 Stunning Charts

It Took $10 In New Debt To Create $1 Of Growth In The First Quarter

And some on here wants Russia to mimic such economic success.

The yuan is nearing to become a true international currency. In October, the Chinese currency will be added by the International Monetary Fund (IMF) to its list of reserve financial instruments.

Read more: http://sputniknews.com/business/20160903/1044933366/china-russia-yuan.html

George1 wrote:

The yuan is nearing to become a true international currency. In October, the Chinese currency will be added by the International Monetary Fund (IMF) to its list of reserve financial instruments.

Read more: http://sputniknews.com/business/20160903/1044933366/china-russia-yuan.html

If IMF is a US tool, then why would IMF accept yuan as a reserve currency?

Russia climbs two notches in World Economic Forum's Global Competitiveness ranking

More:
http://tass.com/economy/902681?_ga=1.122805067.1337049799.1447427261

China Economy about to Collapse ?

Jim Rickards‏ @JamesGRickards https://twitter.com/JamesGRickards

Gotta love China. They buy WMPs with interbank loans. Make your Ponzi a carry trade! Place is like a frat house on fire, bros keep drinking.



Here's the China WMP graph. Once a Ponzi shrinks in size it collapses quickly. Bernie Madoff can explain where this goes. Game over in China

Didnt knew my country India has Public debt almost 70 % of GDP ( http://www.livemint.com/Politics/pfOStekeAkqH4KnBDUsuDN/What-India-needs-to-do-achieve-a-lower-debt-to-GDP-ratio.html )

a sustainable debt path as the principal macro-economic anchor of India’s fiscal policy and has favoured reducing debt to GDP ratio to 60% by 2023 from 68.5% in 2016.

So the goal is to bring it down to 60 % by 2023

I guess with a growth rate of 6-7 % we can manage such high public debt ?

New 2025 Global Growth Projections Predict China’s Further Slowdown and the Continued Rise of India

http://atlas.cid.harvard.edu/rankings/growth-predictions/

China's economy wont collapse. Instead, it will be sustained as it is (kicking the can) till alternative method is in place. Currently, silk road and other investment projects abroad are a way out for China from current method.

During the entire period of Obama of 8 years the average GDP growth was 1.48% link

EU Growth rate for past 8 years has been the same less than 2 years , both countries have also accumulated huge debt in propotion of their GDP , for US it is ~ 108 % and EU it is ~ 90 % of GDP.

In any case we are told by MSM that these growth rates are anything but fantastic !

India is much poorer than China so not surprising that it's growing faster.

They are too pessimistic on China, IMO (what a surprise...). I predict a growth of 5.5% until 2025, the growth will remain atleast around 6% until 2020. Their growth so far have been exceptional, why would that change? They are investing very heavily in infrastructure, education and technology.

At the same time, they are way too optimistic on Mexico and Turkey, for example. Sure, I think they can achieve good growth rates, but higher than China? LMAO, how!? Both countries actually have higher PPP GDP per capita than China, Turkey especially so, and both countries are far from China's growth rate.

Also, for some reason they forecast good growth rates for Western Europe... almost 3% for the US, etc. Based of what exactly? At the same time, they are quite pessimistic about Eastern Europe. It seems Russia is not ranked at all?

In any case, based of those figures Eastern Europe would stop converging to Western living standards... Poland, the Baltics, Hungary, Romania and so on would barely grow by 3% a year, while Czechia would actually go below that.

On the other hand countries like France and Finland would achieve an average growth of around 3%... Oh yeah, and Saudis too. Umm... I don't think so.

My crystal ball:

India: 7-8%
China 5.5%
Mexico 4%
Turkey 3-4.5%
Russia 3-4%
Eastern Europe (Poland, the Baltics, Romania, Hungary...): 3-4%
UK: 2.5%?
USA: 2-2.5%
France: 2%
Sweden: 2%
Finland 1.5-2%
Germany 1.5%

Question is, are most of the growth healthy?

China and US, along with most of EU rely on debt growth in order to sustain some sort of economic growth - redoing a road 3 times in 1 year isn't real growth. India and Russia sees real growth due to investments and development in real production. Production in US has actually dropped. Same with retail spending. But what grew was debt.

India has higher growth thanks to its massive population. Their taxes per income is also higher. Although their GST tax did lower prices a bit.

We'll see. In any case, one thing to consider is that the Chinese debt is mostly domestic, banks are state-owned, etc. Overall the economy is much more "under control" than in the West.

Chinese human capital is also very high. They "should" be as rich as the Japanese and Koreans (just like Eastern Europe should be atleast as rich as countries like Spain and Italy). They just started their economic reforms later than South Korea. IIRC, pretty much exactly 2 decades later. They are simply doing pretty much the same thing as Korea, but on a much larger-scale.

That's why there is so much hype about the Chinese economy and it's "problems" in the West, because it's a threat for their hegemony. Just wishful thinking, nothing else. (Actually, that hegemony is already over, largely thanks to China.) China is simply just getting started, their average living standards are still quite modest. The urbanisation is still not finished either. That in itself is a major factor in economic growth.

When it comes to the West, I tend to question the "conspiracy theories" about their totally fake growth. Again, wishful thinking by "anti-Westerners". And even if their growth is "real", the West is still in relative decline. The world's average is growth rate is higher regardless, the rest of the world is catching up, so I honestly don't care too much either way. Neither should the others who don't/didn't like Western hegemony.

Of course, I'm not an expert, but isn't debt in many ways basically "investment"? The western countries have so much debt simply because they can. They control the markets (or rather, they used to). Because their financial markets and overall economies are so developed. Not to mention that the amount of debt actually varies a lot from (Western) country to country, no? I'm not saying that it's not a risk or that the Western growth model doesn't have issues and countries like the US are certainly living past their means (foreign policy ambitions), but I feel they're exaggerated in certain circles.

And I'm sure India's debt will grow as the country develops. At this point it's impossible to know how much debt they'll have when they reach China's current level of development (even that will take something like 15-20 years), let alone the West.

What makes the western economy developed over others?

Canada lost its manufacturing, so did Australia, and majority of US economy is either manufacturing of very specific items, some high tech, software bubbles and over inflated products. In all, property management and education is how US is "growing".

A real economy produces real goods. China is one of those nations. So is Russia. India is catching up. In the west, they all produce something specific and sell to each other. US mostly assembles end product which parts come from Mexico or other developing nations.

UK is even worst off than US. Its growth is entirely banking and service sector. Canada is resource base, same for Australia.

Nothing advanced about it or developed. They just know the US can print forever cause who will stop them? Now China, Russia and others are trying to.

This current method can't last forever. That is what Austin has been pointing out. That is also why US and western Europe is lashing out. They target the weaker link which was Russia. Or at least they thought it was the weaker link because of fallacies and they have Retards like Kudrin who thinks the west is Russia's only option and willing to sell out the entire nation. They (west) think such people still has authority but their positions give these people false hope in themselves and end up being useless for the west.

All in due time. For nations like Finland and the rest will end up turning east when they realise the west can't offer them anything anymore.

Of course the west won't just fall. It is just that their economic structure may fail and they won't be nearly as rich or open in their economies in the future. Especially once EU fails.