Protectionism On The Rise....."China Edition"

First the US and now China ( the country with the biggest surplusses ) ...... Just what the doctor ordered...... Now combine this with the following chart ( for more more "depressing" charts see A Tale of Two Depressions & World Trade Shrinks ) and we all can only hope that this kind of "cancer" isn´t spreading.... But i have some serious doubts.....

Nachdem die USA ja bereits trotz einmal mehr großer Worte von Obama die "Buy American" Klausel in Ihrem Konjunkturpaket haben festschreiben lassen kommt jetzt der nächste Tiefschlag...... Wenn die Weltkonjunktur eines nicht gebrauchen kann dann ist es eine Ausuferung des Protektionismus. Der Welthandel ist eh im freien Fall ( siehe klasse Chart via WSJ World Trade Shrinks )..... Das jetzt ausgerechnet China ( das Land mit den größten Handelsüberschüssen ) genau in diese Richtung marschiert ist mehr als bedenklich und läßt einem bei dem nachfolgenden Chart ( mehr depressive Charts via A Tale of Two Depressions ) noch pessimistischer in die Zukunft blicken.......

‘Buy China’ policy set to raise tensions FT

China has introduced an explicit “Buy Chinese” policy as part of its economic stimulus programme in a move that will amplify tensions with trade partners and increase the likelihood of protectionism around the world.

In an edict released jointly by nine government departments, Beijing said government procurement must use only Chinese products or services unless they were not available within the country or could not be bought on reasonable commercial or legal terms.

The government also said it was launching an investigation in response to complaints from domestic industry associations which accuse local governments of favouring foreign suppliers in procurement related to the country’s Rmb4,000bn ($585bn, €421bn, £356bn) economic stimulus package.

Just a few months ago Beijing was raging against a proposed “Buy American” clause included in the US economic rescue package.

“Some countries raised clauses to prioritise the purchase of products of their own countries in their economic stimulus packages,” Yao Jian, a Chinese commerce ministry spokesman, told reporters in February. “We express deep concern about these [measures] ... under the current financial crisis, measures issued by all countries should not cause negative impacts, and especially they should not send out wrong messages.”

Most economists agree China’s economy is starting to recover as a result of its aggressive stimulus package but the country is still struggling with unemployment and fears widespread layoffs could lead to serious social unrest.

The edict was issued jointly by the legislative office of the State Council,China’s cabinet, the national development and reform commission (the country’s powerful state planning agency) and the ministries of industry and information, supervision, housing, transport, railways, water resources and commerce.

The new edict bans local governments and departments from discriminating against domestic suppliers in their procurement. Foreign companies operating in China argue that the opposite is in fact true and that they have been largely cut out of procurement related to the government’s stimulus package.

> More evidence via Michael Pettis that the potential for trade conflicts are rising......

> Hier ein anderes Beispiel das verdeutlich das sich Risiko von Handelskonflikten sich merklich erhöht hat.....

Trade tensions are not improving. Last week I had dinner with a very senior China manager at a large German company and he told me expected anti-dumping suits to surge in the first quarter of next year. As if to beat him to the punch yesterday’s Financial Times came up with this story (“China accused of predatory pricing practices”)

“We are puzzled by this discussion, especially since most European companies operating in China are locally incorporated and have not benefited directly from the government’s stimulus package,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China.

“Requiring government procurement to favour Chinese goods and services certainly won’t help to address China’s trade surplus of €170bn.”

UPDATE: Ambrose Evans-Pritchard

China risks trade suicide Beijing is playing with fire by issuing a `Buy China' edict for its stimulus package.

Beijing risks making the same catastrophic error as the US Congress when it passed the US Smoot-Hawley Tariff Act in 1930. America was then the rising surplus power, like China today. It was the chief beneficiary of an open global system.

By imposing tariffs, Washington triggered massive retaliation. While nobody escaped the Great Depression that ensued, the effects were unequal. The US suffered a far steeper decline in output than the rest of the world. Britain muddled through relatively well in a trade bloc behind Imperial Preference.

China’s action is extremely disturbing. It confirms what we have long feared, that the Chinese government is sufficiently worried about rising unemployment to adopt suicidal measures. Nor does this episode instill confidence in the `China recovery story’.

China kennt die Kraft der Illusion FTD

Das Land will nur noch chinesisch kaufen, frisiert volkswirtschaftliche Statistiken und hängt weiter vom Ausland ab. Ganz schön merikanisch geworden

Die bisher größte Verwunderung löste Peking mit dem für das vierte und das erste Quartal gemeldeten BIP-Wachstum aus - 6,8 und 6,1 Prozent im Jahresvergleich sollen es gewesen sein. Das erstaunt, wo doch die Stromproduktion seit dem vierten Quartal zwischen einem und zehn Prozent im Vergleich zum Vorjahr rückläufig war. In China entfallen 80 Prozent des Stromverbrauchs auf die Industrie.

Havn´t Heard The Word Decoupling For A Long Time......

I think it is safe to say that the downturn isn´t solely the result from the government efforts ( raising price for gasoline, hiking reserve requirements & rates, lending restrictions, yuan appreciation etc ) to slow down the economy.... Just one look at the CIMC Chart ( claimes to make 50 percent of all shipping containers ) is enough to see that the slowdown in the US has spread already to Europe and is now hitting Asia/China. It will be interesting to see if the communist party in China will still be able to keep the people "quiet" & "under control" during a longer lasting downturn......

Denke es ist nicht vermessen zu sagen das sich die nachfolgende Übersicht nicht alleine aus den Versuchen der chinesischen Regierung ( höhere Benzinpreise, Erhöhung der Mindestreservesätze und Zinsen, Verschörfung der Kreditbedingungen, Aufwertung des Yuan´s usw ) geschuldet ist.... Ein weiter Blick auf den CIMC Chart ( stellen nach eigenen Angaben 50% aller Schiffahrtscontainer her ) weist ebenfalls darauf hin das die viel zu oft gehörte These der "Abkopplung" einzelner Regionen nichts weiter als Wunschdenken gewesen ist. Der US Abschwung hat Europa bereits voll erfasst und ist gerade dabei Asien und den Rest der Welt mit voller Wucht zu treffen.

Bin wirklich gespannt ob der Kommunitischen Partei gelingt auch während einer länger anhaltenden wirtschaftlichen Schwächephase die Kontrolle im Land zu behalten. Habe nachdem was ich in letzter Zeit in Sachen Umwelt, Korruption, Unabhängigkeit der Justiz, Presse-und Meinungsfreiheit usw gehört habe ensthafte Zweifel....

Booming China Suddenly Worries That a Slowdown Is Taking Hold NYT



UPDATE:
Brad Setser has a different view

Brad Setser hat eine andere Sicht der Dinge

Danish Central Bank Bails Out Roskilde Bank

When i think of Roskilde the big and very famous Roskilde Festival comes to my mind. I have been there twice in 1999 & 2000. The 2000 festival was overshadowed by an accident during a Pearl Jam concert where several peolple lost their lives. But now back to business.....

I am not really surprised to see that the situation in Denmark is already so bad that banks are failing. Just take alook at this DB Research European Housing Market and the only surprise should be that other countries didn´t have failures yet...... On top of this Denmark is one of the first countries that has officially entered a recession . I expect that there won´t be many countries in Europe without a recession during the next few years.....

Mir fällt beim Wort Roskilde immer sofort das Roskilde Festival ein. Habe das Teil 1999 & 2000 selber besucht. Bis zum Unglück beim Pearl Jam Konzert habe ich damit nur gute Erinnerungen verbunden. Nun aber genug der Sentimentalität......

Ich bin nicht wirklich überrascht das selbst in Dänemark die Situation so ausser Kontrolle geraten ist das die Notenbank einspringen muß. Beim Betrachten dieser Studie DB Research European Housing Market ist es vielmehr verwunderlich das nicht noch mehr Länder bereits Bankenrettungen haben vornhemen müssen. Zudem ist Dänemark offiziell eines der ersten Länder die in die Rezession eingetreten sind. Werden sicher nicht die letzten sein...... Ich persönlich rechne damit das europaweit kein Land ein abtauchen in die Rezession vermeiden kann. Es sei denn wir adaptieren die gleichen "kreativen" & "innovativen" GDP und CPI Berechnungsmethoden wie in den USA..... :-)

July 11 (Bloomberg ) -- Roskilde Bank A/S, whose shares performed the worst last year among the Nordic region's 86 financial companies, became the first Danish lender to be bailed out by the central bank since the subprime crisis started.

The bank found that it needed to make writedowns on a ``significantly larger scale'' than it expected, Roskilde Bank, based in the Danish city of the same name, said in a statement. It will receive ``adequate'' liquidity after the central bank discussed the matter with regulators and the Danish government, the central bank said in a separate statement.

Roskilde Bank is now mulling a sale of its assets and would be the second Danish lender to be acquired amid the turmoil on financial markets in the wake of the U.S. subprime crisis. Sydbank A/S, the third-largest Danish lender, this year acquired BankTrelleborg A/S, which said it had ``significant financial problems.'' Roskilde's trouble stems from its real-estate lending, it said.

``The recent turmoil in the global financial markets and, not least, the crisis in the Danish real-estate market have led to a severe development in a number of larger client relationships,'' Roskilde Bank said in the statement.

Danish house prices will drop as much as 10 percent both this year and next because of rising borrowing costs and excess supply, Svenska Handelsbanken AB's Danish Chief Economist Jes Asmussen said on July 1. Denmark's homeowners finance their purchases through the country's mortgage bond market, which is the third-largest in the world after the U.S. and Germany.

Moody's Investors Service lowered Roskilde's bank financial strength rating to C- from C on July 1, citing the lender's weakening asset quality, large exposure to the Danish real estate industry and intense competition in the banking market.

Profit at Roskilde Bank rose more than fivefold from 2000 to 2006, partly because of increasing lending to the real-estate industry. While those activities have ``contributed significantly'' to the core earnings of the bank in recent years, they have also raised the risk profile of the lender's loan portfolio ``considerably,'' Roskilde Bank said.

Nice Kasriel Rant!

Paul Kasriel is really one of the best! Make sure you read the entire piece and the rant ( it´s a rant by his standards) and click on the Headline.

Der Mann hat es einfach drauf! Kann jedem empfehlen das gesamte Werk zu lesen. Klickt dafür bitte auf die Überschrift.

...It is the combination of the behavior of a yield spread and the CPI-adjusted monetary base. The yield-spread variable is the difference between the yield on the Treasury 10-year security and the federal funds rate. The monetary base consists of the reserves created by the Federal Reserve for the banking system and the currency held by the public.

As the chart below shows, since 1970, whenever the four-quarter moving average of the yield spread has turned negative and, at the same time, the year-over-year change in the quarterly average of the CPI-adjusted monetary base has turned negative, a recession has occurred. Guess what? In each of the first two quarters of 2007, this combination of a negative yield spread and contracting real monetary base has obtained.

> Keep this in mind when everybody on Wall Street is spinning and pulling up several useless indicators that suggest the economy is doing ok........

> Behaltet das im Hinterkopf wenn alle demnächst wieder rosarot sehen und haufenweise Statistiken aus dem Hut zaubern die erklären sollen warum es der Wirtschaft doch gut geht..........

This Rebound Can't Mask the Real Damage / Doug Kass

Looks like some people think that the worst is already over. No wonder that some of them work for CNBC ...... :-) . I´ll go with Kass.

Sieht so aus als als wenn mal wieder einige glauben es ist wieder Zeit die dips zu kaufen. Nicht verwunderlich das einige davon auf CNBC arbeiten...... :-). Ich sehe das ähnlich wie Kass

At about 5 a.m. EDT Wednesday, a well-regarded CNBC commentator suggested that, as in times past, the market has often recovered from abrupt and large down moves like we saw yesterday. (She seemed to be implicitly stating that buying the dip is a good idea.)

> especially when you hear statsictics like this from Rosenberg via Minyanville

> das gilt im besonderen wenn man Zahlen wie diese hört

• As many feared, auto sales were horrible in July, falling 12% in figures that encompass most major auto manufacturers including Toyota (TM), which saw a 7% decline.


• According to Merrill's David Rosenberg, other months where auto sales were down double digits include a 12% year-over-year decline in Dec. 2000; a 10.8% decline in April 1990; a 10.8%decline in July 1981; and an 11.1% decline in Dec, 1979.
• What do all of those months have in common? According to Rosenberg they were three months or less away from the official start of an economic downturn.
  

> The argument from the bulls is standing on a very weak foundation when you look at this chart that shows the pecentage of the financial sector vs. the entire stock market capitalisation.

> Das Argument der Bullen für einen weiteren Anstieg in den USA steht auf extrem schwachen Fundament wenn man sich diesen Chart ansieht......

And, Tuesday, many commentators on RealMoney.com and elsewhere suggested that investors were ignoring the positive news -- citing past earnings growth, past share appreciation, etc. (basically a lot of pasts were used in this analysis) -- and were saying that the market's selloff was unjustified. The short squeeze (which quickly disappeared) in IndyMac Bancorp was even used as an example of overdone negative sentiment that could have broad and positive market implications.

I disagree on all counts.

What is the favorable news? Why should stocks have a Pavlovian move higher and reverse this morning's weakness? And what bearing does one stock (i.e., IMB) have on the whole?

thanks to Cox & Forkum

The reality is that credit markets have (predictably) seized up and the credit cycle is in the process of normalizing. I have been concerned with this since December 2006, when I penned an editorial that described the bubble in credit availability in Barron's.

For a time, there was a disconnect between widening credit spreads and stocks. No more.

Risk is being repriced, the carry trade is being dissolved, illiquid assets are being forced to mark to market, hedge funds have started to be disintermediated and we are witnessing a worldwide margin call. And the folly of partial and conformational analysis of sentiment is being uncovered.

This is all occurring in what I have described as a tightly (and levered) financial system -- and why I thought on July 23 "It´s time to panic."

thanks to the Economist

The past levering up and current panic was importantly abetted by the fund of funds industry, the dominant investor in the dominant investment class (hedge funds), which failed to analyze how and why many hedge funds reported such consistent investment returns -- especially of a collateralized debt obligation and collateralized loan obligation kind.

The greatest risk is in our financial intermediaries that drank the credit Kool-Aid served up by the mortgage brokers, the investment brokers/bankers and the Fed, which kept interest rates too low for too long.

In looking at the dominant financial companies I have often written about and in quoting the lesson taught to me by my friend, bubby and pal, former Institutional Magazine's No. 1-rated bank analyst, Mark Biderman, during adjustments in risk premiums, it is not the "apparent" level of earnings (or net interest spreads) that are important; it is credit quality that is the culprit and, at times, the system's fundamental undoing.

Does this all mean that our investment world is coming to an end?

No, it does not. We could get a rally at any time. But the experience of the last two weeks should be a lesson learned. And that lesson is that a healthy amount of skepticism should provide the backdrop to all of our investment decisions -- in good times and in bad times

Disclosure: Short homebuilder, REITs, Russell 2000, KBW Mortgage Finance Index

The world economy - Test of stamina / ECONOMIST

i think the chances for the worldwide economy to resist a us recession have never been better. but i have the fear that the next us recession good be a big one......

glaube ebenfalls das die chancen der weltwirtschaft eine us rezession einigermaßen zu überstehen noch nie so gut waren. allerdings befürchte ich das die nächste us rezession ne happige wird.....

What, asks the IMF, might a flagging America mean for the rest of the world?

ALTHOUGH the pacemaker is tiring, the other runners are keeping up a good speed. This week the IMF marked down its forecast of American GDP growth, but detected no loss of puff in the rest of the world. In its semi-annual World Economic Outlook, ahead of this weekend's meetings of the fund and the World Bank, the IMF forecasts that world output will grow by 4.9% both this year and next, just as it did last autumn. But it has cut its forecast of American growth in 2007 by 0.7 percentage points, to 2.2%, and in 2008 by 0.4 points, to 2.8%. It has raised its estimates for the euro area and for developing countries in Asia and elsewhere.

This is consistent with the idea that Asia and Europe have become “decoupled” from America, despite the growth of international trade and financial integration. Some (including this newspaper) have seen signs that Asian and European domestic demand will be strong enough to withstand an American slowdown. Others are not so sure: recently the Asian Development Bank said it could find “no evidence” that fast-growing East Asian economies were detaching themselves from America, Europe and Japan.

One chapter in the Outlook, from which economists on both sides have claimed support, weighs up the evidence. The fund notes that America's recent slowdown has so far had little effect beyond Canada and Mexico—but also that it has been largely confined to housing and manufacturing. The risk that it will spill over to consumption and thence, via imports, to other countries, has not passed. Macroeconomic policymakers may have to be prepared to offset any damage.

The fund looks back at the effects of five American recessions and two milder “mid-cycle slowdowns” in the past 30-odd years. On average, growth in other regions fell during the recessions by about half as much as in America. The fall varied across both recessions and regions (see chart). Synchronised declines have tended not to be the result of spillovers from America, but to have global causes. In 2001, for example, many regions were caught by the bursting of the tech bubble, tumbling stockmarkets and declining investment. In 1974-75, the first oil-price shock was a common factor.

America's 1991 recession, in contrast, was a more local affair, after the savings-and-loan crisis. Regional differences also matter. In 1982, for example, Asia and Latin America were hurt more than industrial countries. Latin America suffered especially as rich-world interest rates rose, bringing on the region's debt crisis.

The mid-cycle slowdowns, in 1986 and 1995, were much tamer. American GDP growth fell by only a percentage point on average; the median decline in other industrial countries was only a tenth of that; and growth in other regions rose. So far, notes the IMF, today's American slowdown fits this pattern.

Mild, with local causes: in other words, so far the American slowing is of just the type to leave Asia and Europe undisturbed. Stephen Roach of Morgan Stanley argues that it is premature to say that decoupling has been truly tested. He's right: it hasn't. Over to the American consumer.

residential fixed investment to gdp / mauldin-guerite!

maybe this time its different....../evtl ist dieses mal ja alles anders...........

make sure you read the "whole piece from john mauldin" with more great charts and insights!

ihr solltet auch den rest von john maludin lesen!

Every time the ratio has fallen from its peak by more than 10% we have had a recession, except in 1966, and then we had a mere "slowdown" for one quarter.


größer/bigger http://www.safehaven.com/images/mauldin/6472_b.gif

Goldilocks' Wake-Up Call / hussman

i recommend reading the full piece! / empfehle den ganzen artikel zu lesen!

http://www.hussmanfunds.com/wmc/wmc061204.htm

What is the probability of a recession beginning within the next 6 months?

Well, on the basis of a larger data set that includes interest rate differentials (yield curve, credit spreads), housing starts, and the ISM Purchasing Managers Index, the probability of a recession beginning within 6 months has spiked to about 79%, with the probability of a recession within 12 months now running about 92%. That's not certainty, however, and there have indeed been a few times when risk has shot up without an imminent economic downturn (the spike in 6-month risk to 83% in 1989 was not followed by a recession for a full year, and a couple of lesser spikes in the 1990's were uneventful). Suffice it to say that based on recent data, the odds of an oncoming recession have increased sharply and abruptly.