No Image

Government Knows Best – Junk Food Ban Goes Global

Obesity is a ‘big’ (pardon the pun) problem in the Pacific Islands.  In fact, a recent World Bank study found that over half the adult population in 16 of the 17 Pacific Island countries and territories were obese while over 75% of the population was obese in 11 of those counties.

Pacific Island Obesity

 

So what do you do when you just can’t count on citizens to make sound judgements about their own personal health decisions?  Well, you call in the Nanny State to ban sodas and sugary snacks, of course…which, according to the New York Times, is exactly what the tiny Pacific island nation of Vanuatu is doing.

While many governments struggle to ban soda to curb obesity, the tiny Torba Tourism Council in the remote Pacific island nation of Vanuatu is planning to outlaw all imported food at government functions and tourist establishments across the province’s 13 inhabited islands.

 

Provincial leaders hope to turn them instead into havens of local organic food. The ban, scheduled to take effect in March, comes as many Pacific island nations struggle with an obesity crisis brought on in part by the overconsumption of imported junk food.

 

“We want to ban all other junk food from this province,” Luke Dini, the council’s chairman and a retired Anglican priest, said in a telephone interview from Torba. He said the province had about 9,000 residents and got fewer than 1,000 tourists a year, mostly Europeans.

Nanny State

 

Not surprisingly, so-called “public health experts” have praised Vanuatu’s ban on imported food while blasting international consumer goods companies for “exploiting these nations by providing a food supply that is not, in the long term, better for health” while “decimating” local populations.

Public health experts who study the island nations of the Pacific welcomed the ban, saying that bold measures were necessary for an impoverished and isolated region of 10 million people — one where the cost of sending legions of patients abroad for dialysis treatment or kidney transplants is untenable.

 

“Imagine if 75 million Americans had diabetes — that’s the scale of the epidemic we’re talking about in Vanuatu,” Roger Magnusson, a professor of health law and governance at Sydney Law School in Australia, said in an email.

 

“Can anyone seriously say that Vanuatu doesn’t have the right to exercise its health sovereignty in every way possible to protect its population from an epidemic of that scale?” he added.

 

It is so wrong what is being done to exploit these nations by providing a food supply that is not, in the long term, better for health,” said Elaine Rush, a professor of nutrition at the Auckland University of Technology in New Zealand who has studied health problems in the Pacific islands. She described the effect that the health crisis was having on families there as “decimating.”

Of course, there are just a couple of small problems with the “evil corporation” theory as presented by “public health experts” and the New York Times.  Unfortunately, while the “health experts” would like for you to believe that obesity is a new problem plaguing the people of the Pacific islands, as Wendy Snowden of the World Health Organization points out, in reality obesity rates on these islands were simply “higher to start with.”  Moreover, as Snowden also notes, one other small problem is that no level of “taxes and prohibitions” on sugary food products has “been able to demonstrate reductions in obesity prevalence.”

Still, Dr. Snowdon said, the taxes and prohibitions on drinks in the Pacific islands — along with education, food labeling and school-nutrition programs — have not reduced the region’s overall incidence of obesity or its associated health problems.

 

“No country in the world has been able to demonstrate reductions in its obesity prevalence, so we’re not that different,” she said. “It’s just that our levels are higher to start with.”

But rest assured, dear citizens of the world, that your Nanny State’s aggressive, invasive policies stripping you of your basic personal liberties are intended for your own good and are in no way a meaningless attempt to cram their liberal agendas down your throat at all costs, irrespective of scientific data proving their complete lack of effectiveness in achieving their stated goals.

The post Government Knows Best – Junk Food Ban Goes Global appeared first on crude-oil.news.


No Image

Posts Tagged <b>crude oil</b>

ENDOR study of nitrogen hyperfine and quadrupole tensors in vanadyl porphyrins of heavy crude oil [Cross-Listing]. 0 votes @Harvard ITC (0 votes …The post Posts Tagged <b>crude oil</b> appeared first on crude-oil.news.


No Image

<b>Crude oil</b> issues cause stagnation in gas prices

The automotive group pointed to crude oil as the cause of the cost stagnation. AAA officials said U.S. oil production has stayed at a steady daily rate of …The post <b>Crude oil</b> issues cause stagnation in gas prices appeared firs…


No Image

British Museum trains Iraqi archaeologists to rebuild post-Daesh

Standing in front of two ancient Assyrian statues, eight Iraqi archaeologists discuss not only the homes some have fled, but also how to avoid explosives when they finally go back to work. They’re in London as part of a British Museum scheme aimed at equipping Iraq with the digital and excavation skills necessary to salvage artifacts and rebuild ancient sites Daesh fighters have attempted to destroy. Jonathan Tubb, head of the British Museum’s Iraq Emergency Heritage Management Training Scheme, told the Thomson Reuters Foundation the project began as an attempt to do something positive when nothing was possible on the ground. “We could actually prepare people… for the day when these sites would be released again, liberated, and ensure that […]


No Image

British Museum trains Iraqi archaeologists to rebuild post-Daesh

Standing in front of two ancient Assyrian statues, eight Iraqi archaeologists discuss not only the homes some have fled, but also how to avoid explosives when they finally go back to work. They’re in London as part of a British Museum scheme aimed at equipping Iraq with the digital and excavation skills necessary to salvage artifacts and rebuild ancient sites Daesh fighters have attempted to destroy. Jonathan Tubb, head of the British Museum’s Iraq Emergency Heritage Management Training Scheme, told the Thomson Reuters Foundation the project began as an attempt to do something positive when nothing was possible on the ground. “We could actually prepare people… for the day when these sites would be released again, liberated, and ensure that […]


No Image

The Billionaire-Owned, Corporate Media Is As Worthless As Ever

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

I think the U.S. citizenry is being afflicted by a sort of mass insanity at the moment. There are no good outcomes if this continues. As a result, I feel compelled to provide a voice for those of us lost in the political wilderness. We must persevere and not be manipulated into the obvious and nefarious divide and conquer tactics being aggressively unleashed across the societal spectrum. If we lose our grounding and our fortitude, who will be left to speak for those of us who simply don’t fit into any of the currently ascendant political ideologies?

 

From the post: Lost in the Political Wilderness

Rather than focus its journalistic energy on chronicling the economic insecurity plaguing so many of our fellow Americans, the billionaire-owned corporate media appears entirely obsessed with chattering endlessly about Russia conspiracy theories and domestic coup plots. Instead of looking in the mirror and admitting how its countless errors and propaganda pushing led to multiple humanitarian disasters over the last couple of decades, the oligarch-owned mainstream media insist upon a narrative that Trump the individual is at the root of our problems, as opposed to an entrenched executive branch with excessive power. This is because the mainstream media isn’t actually concerned about our cancerous, systemic metastasizing statism, it merely doesn’t want Trump in charge of it. I, on the other hand, want to dismantle that unconstitutional state entirely and transfer power to the American people where it belongs — self-government. Does anyone actually think for a second the media would be this adversarial if Hillary won?

This weekend’s article by Nicholas Kristof in The New York Times represents a sort of coming out party for the billionaire-owned, corporate media. More than anything else I’ve seen, it perfectly demonstrates how completely disconnected and worthless billionaire-owned media truly is. It’s the height of absurdity that these media organizations, owned by billionaires or giant corporate conglomerates, are playing the victim in all this when they’ve been the world’s primary abuser for the entire 21st century.

You can be a staunch defender of the free press and the 1st Amendment, and at the same time point out that the billionaire-owned media has failed us. This is my position, and Trump’s election hasn’t changed that. The handful of corporations and billionaires who control the mainstream press does not = “the press.” They (and the deep state) are currently trying to convince the public that they’re the only ones standing between you and fascism. This is complete stupidity, and if we fall for it, we will get what we deserve.

The billionaire-owned media is far more complicit in creating the imperial Presidency than Donald Trump, he merely figured out a way to get control of it. Now these same charlatans are pretending to put out a fire they themselves started, and want to be celebrated for being so courageous. This is eerily similar to the scam pulled off by the Federal Reserve during and after the financial crisis.

With that introduction out of the way, let’s take a look at a few excerpts from the mind-bogglingly explicit piece in this past weekend’s New York Times, titled brazenly enough, How Can We Get Rid of Trump?

Maybe things will settle down. But what is striking about Trump is not just the dysfunction of his administration but also the — vigorously denied — allegations that Trump’s team may have cooperated with Vladimir Putin to steal the election. What’s also different is the broad concern that Trump is both: A) unfit for office, and B) dangerously unstable. One pro-American leader in a foreign country called me up the other day and skipped the preliminaries, starting with: “What the [expletive] is wrong with your country?”

 

So let’s investigate: Is there any way out?

 

Trump still has significant political support, so the obstacles are gargantuan. But the cleanest and quickest way to remove a president involves Section 4 of the 25th Amendment and has never been attempted. It provides that the cabinet can, by a simple majority vote, strip the president of his powers and immediately hand power to the vice president. The catch is that the ousted president can object, and in that case Congress must approve the ouster by a two-thirds vote in each chamber, or the president regains office.

It’s never been attempted in the history of the country, but let’s promote it anyway!

The 25th Amendment route is to be used when a president is “unable” to carry out his duties. I asked Laurence Tribe, the Harvard professor of constitutional law, whether that could mean not just physical incapacity, but also mental instability. Or, say, the taint of having secretly colluded with Russia to steal an election?

 

Tribe said that he believed Section 4 could be used in such a situation.

 

“In the unlikely event that Pence and a majority of Trump’s bizarre cabinet were to grow the spine needed to do the right thing with the process set up by that provision, we would surely be in a situation where a very large majority of the public, including a very substantial percentage of Trump’s supporters, would back if not insist upon such a move,” Tribe said. “In that circumstance, I can’t imagine Trump and his lawyers succeeding in getting the federal courts to interfere.”

As a reminder, here’s an example of the intellectual and ethical wasteland known as Laurene Tribe’s mind as of late:

Now back to Kristof.

The better known route is impeachment. But for now it’s hard to imagine a majority of the House voting to impeach, and even less conceivable that two-thirds of the Senate would vote to convict so that Trump would be removed. Moreover, impeachment and trial in the Senate would drag on for months, paralyzing America and leaving Trump in office with his finger on the nuclear trigger.

In Kristof’s mind, a major downside to pursuing impeachment is that it won’t get rid of Trump fast enough. Is this really a paper the public can remotely trust to report on the country’s problems in a fair manner?

Now here’s where it starts to get simply comical. Kristoff writes:

Some people believe that the 2018 midterm elections will be so catastrophic for the G.O.P. that everyone will be ready to get rid of him. I’m skeptical. In the Senate, the map is disastrous for Democrats in 2018: The Republicans will be defending only eight Senate seats, while Democrats will in effect be defending 25.

 

So while Democrats can gnash their teeth, it’ll be up to Republicans to decide whether to force Trump out. And that won’t happen unless they see him as ruining their party as well as the nation.

Perhaps instead of “gnashing their teeth,” Democrats could come up with a coherent platform that doesn’t revolve around worshiping Wall Street.

Finally, here’s how Kristoff ends his pathetic plea for overthrowing Trump.

And what does it say about a presidency that, just one month into it, we’re already discussing whether it can be ended early?

No Nicholas, “we” aren’t already discussing it. You are. You and your media peers. Which brings me to the most infuriating aspect of what is happening in American discourse today. What is someone like me, who dislikes Trump, but dislikes the corporate media even more, supposed to do?

This is the uncomfortable position I find myself in today, and if I’m there, millions of others are there as well. Trump understands this, which is why he continues his unrelenting attacks on elements of the corporate press. Personally, my dislike of Trump would be far more acute if not for my total disdain for the billionaire-owned media. Journalists are supposed to be adversarial toward power generally, not pick and choose which powerful figures to challenge based on political ideology. The corporate media has clearly failed the country, thus Trump is being politically savvy by picking a fight with it. As I noted last week on Twitter:

I’ve said this forever.
If Trump targets elitist institutions, he will win.
If he targets average people, he will lose.
Not complicated.

— Michael Krieger (@LibertyBlitz) February 17, 2017

Once again, the corporate media is proving its worthlessness by making everything about a man, as opposed to the systemic disaster that is the oligarch-controlled society we live in. The current President isn’t charismatic enough, and doesn’t espouse the right platitudes when he bombs Muslim women and children. That’s the media’s red line apparently. If it sounds like I’m against everything, there’s a reason. Our culture is deranged and corporate media deserves a lot of the blame.

Finally, here’s an article published by Forbes last year to get you up to speed on what we’re up against: These 15 Billionaires Own America’s News Media Companies.

Billionaires don’t buy media outlets to make money, they already have that. They buy them to manipulate public opinion.

The post The Billionaire-Owned, Corporate Media Is As Worthless As Ever appeared first on crude-oil.news.


No Image

People Are Suddenly Worried About China (Again)

Considering that in the past 3 months the only daily topic of relevance for the media has been “Donald Trump” both in the US and abroad, one would assume that when it comes to global policy uncertainty the primary source would be, record S&P 500 paradoxically notwithstanding, the United States. One would also be wrong, because while Trump seemingly remains the only topic worthy of discussion blanketing the airwaves, as the following chart from Goldman demonstrates, it has been China where policy uncertainty has stealthily exploded in the past three months according to policyuncertainty.com, while making virtually no new headlines.

But how is it possible that China, which is seemingly far more “concerning” at this moment than it was a year ago when fears about Chinese financial conditions and devaluation led to global market selloff and pushed the S&P into correction, has had virtually no impact on risk assets so far in 2017: clearly either the chart above, or the market, is wrong.

Conveneintly it is the same Goldman which has published an exhaustive report laying out the key risks to China’s growth, many of which have been discounted by the market which erroneously assumes that just because the world went though a China “scare” period one year ago, that the world’s second biggest economy remains contained. Far from it.

For those pressed for time, below is the summary of Goldman’s “Risks To China’s growth In The Year of the rooster” report, from the team of MK Tan:

  • After meeting the 2016 growth target, Chinese policymakers are focused on stability ahead of the upcoming leadership reshuffling. This relative calm–we expect only a modest deceleration in growth in the Year of the Rooster—is coming at the cost of further increases in credit and other imbalances. Meanwhile, markets have tempered their acute bearishness on the Chinese economy and are focused on policy and politics in the US and Europe. Still, with growth arguably above potential and Chinese policy tightening, we think a review of China-related risks is timely. We separate risks into those emanating from the Chinese economy itself, and adverse shocks from abroad.
  • Domestically, our concerns center on the ongoing credit boom and the calibration of policy tightening. A fading “credit impulse” to growth seems likely, with cyclical sectors like housing apt to slow this year—even if low reliance on foreign funding and strong government influence on bank lending and bond purchases reduce the risk of an acute credit crunch. As for policy tightening, policymakers have tried to balance growth targets with financial stability, but inflation could become a new constraint as potential growth declines.
  • The biggest risks for China from abroad are an accelerated pace of Fed tightening and/or US protectionism. As for the former, with two Fed hikes already priced in for 2017, it would probably take a shift into more hawkish territory than our own forecast (three hikes) to cause a major shock. As for the latter, the most disruptive measures would be a large across-the-board tariff on China or the “border-adjusted cash flow tax” under consideration by the House of Representatives. Either could impose a meaningful hit to Chinese exports and growth, as well as exacerbating capital outflow and financial stability risks.
  • If one or more of these risks materializes, a Chinese slowdown would be transmitted to other countries through three main channels: slowing goods imports from the rest of the world, falling commodity prices, and tighter financial conditions (most likely via a stronger USD and weaker equity prices). Open Asian economies, particularly those with commodity exposure and/or dollar indebtedness, remain the most vulnerable to a “hard landing” in China.

* * *

Those interested in the details behind the report are encouraged to read on for the key select excerpts:

Introduction

A year ago, markets were abuzz over the possibility of a financial calamity in China and/or a “big deval” in the currency. Market pricing implied the likelihood of substantial equity price moves and CNY depreciation (Exhibit 1). Fears of a China crisis reverberated through global markets, tightening financial conditions around the world and pushing the US Federal Reserve to postpone its plans for further rate hikes.

Exhbit 1: China’s equity and currency markets were both under stress a year ago

Chinese policymakers wrestled with challenges throughout 2016, but large and sustained policy stimulus eventually fostered recovery. Fiscal and regulatory easing, alongside continued rapid credit growth, underpinned strong growth in infrastructure spending and a rebound in cyclical sectors like property and motor vehicles. Real GDP growth came in on target (6.7% versus a 6.5%-7.0% target range), and alternative measures of activity also improved (Exhibit 2). Our China Current Activity Indicator bottomed out at 4.3% (see dark line in Exhibit 2; this is measured on a three-month, three-month annualized basis) in early 2015, recovered to the mid-5% range last year, and is now running at 6.9%. Heavy industry, as proxied by our physical output measure (gray line in Exhibit 2), has seen an even more pronounced reacceleration.

Exhibit 2: After a tough 2015, our measures of Chinese growth accelerated in 2016

Now, while forecasters still expect a little slowing in growth and some further depreciation in the renminbi, the focus is much more on policy in the US and Europe. In the US, President Trump’s tweets have spawned a cottage industry of interpreters vying to understand where policy may head in the coming year. Across the Atlantic, the road map for “Brexit” as well as continued uncertainty about politics in the rest of the Eurozone occupies many market participants. While we subscribe to the view that Chinese policymakers will manage through the year with reasonably high growth, it is still prudent to review the risks ahead.

After the roller coaster of the past year, most observers expect Chinese policymakers to make significant efforts to keep growth stable this year and try to reduce volatility in financial markets. Indeed, commentary following December’s Central Economic Work Conference suggested that “controlling financial risks” may even take precedence over the growth target—a sensible ordering of priorities, in our view. Still, even if the Communist Party of China (CPC)’s long-term commitment to double income in this decade—as promulgated by the previous administration and reiterated last year by many senior officials—is pushed out by a year or two, it continues to carry some weight. We therefore expect the growth target to be near 6.5% for 2017, and policymakers to accept only limited flexibility around this target (sub-6% GDP growth is unlikely to be acceptable). A special motivation for minimizing market and economic “noise” in 2017 is the upcoming 19th Party Congress and associated leadership reshuffling, which will involve the majority of members in the Politburo and Standing Committee of the CPC. 

Global financial markets seem to have bought into the notion that China-related risks will be managed, shrugging off China’s significant bond and FX market volatility in recent months. Substantial capital outflows and CNY depreciation against the USD continued in late 2016 but have not (yet) resulted in substantial tightening in global financial conditions, unlike last year (Exhibit 3).

Exhibit 3: Less spillover from China to US financial conditions recently

The aforementioned improvement in growth, alongside clearer messages from policymakers (publicly rejecting a large devaluation and holding the trade-weighted renminbi stable since mid-2016) and friendlier global conditions (a more dovish Fed in particular) have all helped.

What could bring China fears to the fore again, and cause the markets to change their assessment?

We explore some possible paths to a “hard landing” in China. (For the purposes of this discussion we define a “hard landing” as a drop of at least 4pp in our China Current Activity Indicator within one year—on this basis we’ve had a few near misses in the last few years, most recently in early 2015, but no hard landing. From the current growth pace, this would imply a drop in CAI to the mid-2% range or below.) We divide our review into external shocks and then domestic vulnerabilities, although clearly the two interact with each other. We emphasize these risks are not part of our baseline scenario for China in 2017, though they are more than mere “tail risks”.

Domestic vulnerabilities—credit and policy miscalibration

We see two principal risks domestically. The first is an abrupt end to China’s credit boom.

A widespread perception of a “policy put”, implicit guarantees to state enterprises and governments at all levels, and generally strong growth have underpinned the stability of the financial system. They have also encouraged rapid growth in leverage, including a reacceleration in 2015-16 (Exhibit 4).[5] China’s post-GFC credit boom has taken debt levels well beyond those of EM peers (Exhibit 5).

Exhibit 4: Credit growth has reaccelerated since 2015 and is well in excess of nominal GDP growth

Exhibit 5: China’s debt level well above EM peers 

Sustained debt booms typically lead to slower growth, greater financial volatility, and heightened risk of a financial crisis. Looking at more than a century of historical data, we found that a “large domestic debt boom” lasting at least 7 years where the debt-to-GDP ratio increases by over 52pp—China’s easily qualifies—is typically followed by a 2pp slowdown in growth and a heightened risk of financial crisis (Exhibits 6 and 7).

Exhibit 6: Real GDP growth decelerates after debt booms: Real GDP growth relative to average during debt boom period

Exhibit 7: Financial crises common but not inevitable in large-country domestic debt booms

Another way to look at the potential growth consequences is to estimate the negative “credit impulse” if credit growth were to slow to half its current pace. Using our past analysis of the relationship between credit and growth, and assuming a deceleration over one year, this would slow growth by 2-3pp or more (a more gradual deceleration would spread this growth hit over a longer period). 

We have seen credit booms end because of intentional tightening (Japan, where policymakers raised interest rates and imposed credit controls), external shocks (capital outflows in the Asia Financial Crisis), or to some extent collapsing under their own weight (the United States, where rising defaults led to a vicious cycle of tighter credit, falling asset prices, and weaker growth). Similarly, a structural break in China’s credit expansion—a sharp tightening in credit availability—could occur because of a deliberate policy shift or because imbalances have simply grown too large to be sustained (more on both below). Regardless of the trigger, a supply-driven tightening in credit would have highly negative consequences for growth.

Chinese policymakers are trying to avoid this sort of sharp pullback. Perhaps with the US experience in mind, they have been particularly attentive to “shadow banking” risks, recently taking steps to regulate off-balance sheet activities such as wealth management products, and to increase the cost of repo financing that is often used to fund shadow banking activity, even at the cost of prompting a significant bond market selloff in late 2016. In this context, our forecast remains for a “bumpy deceleration” in growth rather than a hard landing, though the longer the credit boom continues, the more difficult it will be to guide the economy to a soft landing.

The second domestic risk is a major policy tightening. This could be intentional or unintentional, although we view the latter as much more plausible. 

Chinese policymakers’ growth goals appear increasingly likely to conflict with supply-side constraints. Historically, the growth target was a “policy put” that was out of the money—a reassurance that growth would not be allowed to drop too far. However, in recent years the target appears to have become a binding constraint on policy. Actual growth is near the target instead of well above it (Exhibit 8), and our estimates suggest potential growth is slightly lower (near or below 6%).

To meet the GDP growth targets, credit growth has boomed, as noted in the previous section, and a key driver of demand for that credit has been a large increase in the broadly-defined fiscal deficit (Exhibit 9). Indeed, a portion of the fiscal expansion has been underwritten by the central bank itself in the form of rising credit to the banking sector (e.g., “pledged supplementary lending” to policy banks such as CDB; see Exhibit 10). 

Attempting to boost growth above its potential rate for a sustained period is likely to lead to rising inflation and/or unsustainable asset price appreciation. We have already seen a large run-up in housing prices, substantial capital outflow pressures, and a sharp turnaround in producer prices (although we would attribute the latter primarily to CNY depreciation and upstream supply-side constraints rather than demand stimulus). As yet, CPI inflation is modest (Exhibit 11), but inflation could eventually force more difficult tradeoffs—and possibly a harsh policy tightening–if growth targets are not tempered further.

With growth in the target range for now, policymakers have begun tightening on a number of fronts to address these risks:

  • Housing restrictions in tier 1 and 2 cities, mostly on the demand side, to address surging home prices.
  • Regulation of “shadow banking” activities such as wealth management products to limit liquidity risks and overall credit growth.
  • Higher and more volatile repo rates to limit shadow credit growth (and perhaps also to discourage outflows and support the currency).
  • Stricter enforcement of controls on capital outflows.

The steps thus far look like “targeted tightening” designed to limit risks without too much damage to economic growth. For policymakers to cut their growth aspirations significantly and tighten very aggressively, other economic challenges such as inflation or capital outflows would have to get much worse, in our view.

Exhibit 8: Policymakers have kept real GDP growth on target…

Exhibit 9: …but fiscal support has reached unprecedented levels

Exhibit 10: PBOC and banking sector have helped finance stimulus

Exhibit 11: PPI rebounded sharply, but CPI inflation still modest

Even if policymakers do not intend to slow growth sharply, there is always a risk that they do so accidentally. The past few years have featured numerous occasions where policy tightening generated bigger effects (either in financial conditions or the real economy) than expected. Examples include the mid-2013 spike in repo rates (Exhibit 12), volatility in the equity markets around policy interventions (such as the introduction of the “circuit breaker” in early 2016), and of course the ructions in global currency and equity markets around the small renminbi devaluations in August 2015 and early 2016. Late last year, modest tightening by PBOC contributed to a significant backup in the bond market (Exhibit 13). In the real economy, efforts to reform local government finances slowed investment and heavy industry activity in late 2014 and early 2015, prompting a reversal in the spring of 2015 and substantial easing thereafter.

Exhibit 12: Sharp repo spikes in earlier years; moderate increase in volatility recently

Exhibit 13: Recent bond market backup ended a three-year rally

The biggest vulnerabilities to unintended tightening are probably in the less formal areas of off-balance sheet spending (on the fiscal side) and non-bank credit extension (on the monetary side). On-budget fiscal policy is relatively transparent and controllable, but how local governments will respond to changing incentives—including anticorruption efforts, shifts in performance criteria, and changing availability of credit—is harder to predict. Likewise, policymakers have considerable influence on direct lending by large state banks, but less so on other bond market participants or “shadow banking” entities. This is especially true when multiple regulators/policymakers may be acting in a manner that is not completely coordinated. A particularly big challenge is how to unwind the perception of implicit guarantees on the debt of many SOEs and local governments’ financing vehicles without precipitating a credit crunch.

In summary, we see a policy tightening “accident” as a key domestic risk. Credit expansions can buckle under their own weight as leveraged asset prices rise to unsustainable levels and rising defaults prompt a reversal in credit availability. But with policymakers attempting to manage both housing prices and defaults directly, we think the central issue in the year ahead is policy calibration. Policymakers clearly do not want the economy to slow sharply, particularly ahead of the leadership transition later this year. At the same time, they need to address some of the imbalances in the economy to limit future volatility. Getting the balance right is particularly challenging given the leverage already in the system. Warning signs of overtightening could come from a large pullback in fiscal activity (Exhibit 9), a sharper spike in short-term interest rates (Exhibit 12), a widening in credit spreads (Exhibit 13; this might occur for example because of a reassessment of the value of implicit guarantees), or any sign that polices were causing an abrupt seizure in broad credit availability (Exhibit 4).

* * *

Potential shocks from abroad—export slump or hawkish Fed

We see two main potential shocks from abroad that could conceivably cause a “hard landing” in China:

First is a sharp decline in export demand… Despite the rapid growth of domestic demand and services, exports remain an important pillar of China’s economy. In recent years, 15-20% of Chinese value-added was dependent on demand outside the country. Although this proportion has been declining, China remains sensitive both to global growth shocks and to any lurch towards protectionism in developed markets, particularly the US. 

…either because of global growth… The single most important driver of Chinese exports is the pace of domestic demand growth in its trading partners. Our analysis suggests that Chinese real export growth moves slightly more than one-for-one with foreign demand growth,after accounting for exchange rate moves and commodity prices.[18] With an export-to-GDP ratio of slightly over 20%, it would clearly take a very large shock to directly cause a “hard landing” in China. It took the global financial crisis for an external shock to slow growth by 4pp on its own (Exhibit 14). Of course, weaker external demand could have indirect effects on domestic challenges also (e.g., by increasing non-performing loans and credit stresses, or by leading to greater FX outflows). However, weaker external demand isn’t our base-case scenario; on the contrary, global activity has been accelerating and we expect at least a modest improvement in domestic demand growth in developed markets in 2017.

…or increased trade barriers. In the wake of the US election, the more likely risk to export demand comes from protectionist measures on the part of China’s trading partners. China benefited enormously from the reduction in trade barriers following its entry to the World Trade Organization in 2001 (Exhibit 15), and clearly would be adversely impacted from any backsliding in this area.

Exhibit 14: Export shock would need to be GFC-sized to cause hard landing on its own


Exhibit 15: Chinese export shares have leveled off since the GFC

More substantial US actions would include across-the-board tariffs on Chinese imports (Trump advisor Peter Navarro has proposed 45%) or a “border-adjusted tax,” which would effectively be a tariff on imports from all countries. These could potentially have meaningful growth impacts, particularly when second-round effects of retaliatory tariffs are taken into consideration. Still, while our analysis suggests that tariffs in the single or low double-digits will certainly slow growth, our models do not suggest a magnitude approaching our 4pp “hard landing” threshold in most scenarios that we find plausible. This is particularly true in 2017, since we think the new US administration would be unlikely to apply large tariffs to China or implement a border-adjusted tax before lengthy negotiation and debate.

2. Fed tightening. The pace of Fed hikes in 2017 will be an important determinant of external pressures. More rapid Fed hikes would raise interest differentials and likely result in a stronger USD.[23] Chinese policymakers would then face the choice of seeing their own currency appreciate on a trade-weighted basis (and thereby losing competitiveness), or depreciating against the USD (potentially exacerbating capital outflow pressures). A stronger dollar would also be unhelpful for regional growth.[24] We think Fed and dollar pressures are an important risk in 2017 and beyond, though the gap between market pricing of rate hikes (close to two hikes for the year) and our US team’s view of three rate hikes for the year has closed as markets have priced in better growth and inflation outlook post-election.

However, it is important to note there is an automatic stabilizer of sorts. To the extent outflows or the CNY move are viewed by markets as disorderly, or having the potential to become so, we could revisit the experience of August 2015 and January 2016 where US financial conditions tightened (USD strength/equity weakness), causing the Fed to back off and reducing the pressure that created the concern in the first place. US policymakers certainly have no interest in seeing a “hard landing” in China’s economy, and have been responsive to financial conditions.[25] Clearly, however, this process would be damaging to risk assets initially, as it was in August 2015 and early 2016.

Taken together, while external conditions could prove more difficult in some respects in 2017, we do not think that they will be the fundamental triggers of a “hard landing” in China in 2017. Global growth appears healthy at the moment, with our Global Leading Indicator recently marking an 6-year high.[26] And while we expect the Fed to tighten and trade policy to become less friendly to imports from China, we do not think the magnitude of these changes will do much damage to 2017 growth as a whole.

A more challenging external shock would be a combination of a big protectionist move by the United States and a hawkish shift by the Fed (perhaps reacting to the growth and inflationary consequences of tighter US trade policy). This could result in a substantial blow to Chinese growth, perhaps magnified by interactions with China’s domestic imbalances. Still, as the new administration is still making key personnel appointments in trade-related areas, and we expect the Fed to wait until June for its next hike, this is probably a bigger risk for 2018 (or perhaps late 2017) than for most of this year.

* * *

Policy buffers large but eroding

It’s important to point out that Chinese policymakers still have large—though shrinking—policy buffers relevant to both domestic and external shocks.

External policy buffers include:

  1. A solid current account surplus. The current account surplus was $210bn in 2016, or 1.9% of GDP. Unlike many countries in the runup to the Asian Financial Crisis, China is not borrowing from abroad to fund imports.
  2. A strong net international investment position (15.7% of GDP as of Q3 16). As China has run large surpluses for years, it has accumulated a substantial net long position in foreign assets.
  3. Low external debt as a share of GDP. Looking at the liability side, FX debt is large on an absolute basis at ca $1.5trn, but quite modest relative to the scale of China’s economy ($11trn GDP). From a macro perspective, FX liabilities should not be a major constraint on depreciation, though some sectors that have borrowed significantly in dollars (e.g. property developers) are exposed to this risk.
  4. Still-substantial PBOC reserves. Official reserves stand at just under $3 trillion, within the IMF’s recommended range for a fixed currency regime. Even if one assumes some off-balance-sheet FX selling, the amount is still large and our tally of Chinese holdings of US/German/Japanese fixed income and equity assets (presumably an effective lower bound for liquid reserves, as it excludes holdings via financial centers like the UK, as well as holdings of other countries’ securities) is $1.7 trillion based on data as of mid-2016.

On the domestic side, key resources available to policy makers are:

  1. Fiscal deposits. These currently total 5.4% of GDP, although they have come off their recent peak in early 2015.
  2. More generally, a high credit rating and still-substantial “fiscal space” for the central government. The government has recourse to large assets in the form of the SOEs, although to be sure there are also considerable contingent liabilities throughout the economy—for example the debt of local governments and central SOEs. There appears to be still-considerable scope for government-driven infrastructure investment, even if the ROI of such investment is declining in some areas.[28]
  3. Monetary policy space. Interest rates are still well above zero and there is the potential to loosen constraints on the banking sector (e.g. RRR cuts).

As policymakers spend down this “ammunition”, the market and economic reactions to shocks could become more volatile.

* * *

Conclusion: Key risks and their transmission

In conclusion, we see the biggest risks in China centering on the country’s rising credit imbalances, with mis-calibration of policy or a sharp external shock as possible triggers of a sharp tightening in credit conditions and “hard landing” in growth. To reiterate, this is not our base case for 2017 (and not yet for 2018 either, for that matter). But it deserves close monitoring, and we will be watching the fiscal stance, credit market conditions, and other metrics—as well as comments by policymakers—to update our assessments of these risks.

Should China’s economy slow significantly, it would clearly have effects throughout the region, transmitted via three key channels:

  1. Trade. Just as China would be affected by a drop in export demand, so other countries in Asia would face a growth hit from a slowdown in China. Small open economies would be particularly hard-hit.[30]
  2. Commodities. A slowdown—to the extent it involved goods-producing and construction activities—would have implications for commodity prices, helping the terms of trade in much of the region but hurting it for commodity producers such as Malaysia, Indonesia, and Australia.
  3. Financial conditions. As we observed with renminbi volatility over the past 18 months, financial volatility and growth weakness in China has the potential to tighten global financial conditions, slowing growth and prompting further monetary easing abroad.

Our past work has suggested that the biggest effects of weaker Chinese growth would come in Korea, Taiwan, and Southeast Asia, where most economies would feel the impact through two or all three of these channels.

The post People Are Suddenly Worried About China (Again) appeared first on crude-oil.news.


No Image

Body of drowning victim in Abha found 9 km downstream

Author: Arab NewsTue, 2017-02-21ID: 1487639814125648400
JEDDAH: Civil Defense personnel and volunteers in Abha found the body of a missing person more than a week after he was swept away by flashfloods, the Directorate of Civil Defense in As…



No Image

Fxwirepro: Japanese Yen Marginally Lower Despite Higher Than expected Flash Manufacturing Pmi Data

USD/JPY is currently trading around 113.37 marks.
 
It made intraday high at 113.41 and low at 113.07 levels.
 
Intraday bias remains bullish till the time pair holds key support at 112.79 marks.
 
A daily close above 113.07 will…

The post Fxwirepro: Japanese Yen Marginally Lower Despite Higher Than expected Flash Manufacturing Pmi Data appeared first on forexnewstoday.net.