Japan Post Holdings will buy Nomura Real Estate Holdings to strengthen its presence in the real estate development market, national broadcaster NHK reported on Friday. Japan Post is…
Тема умных городов может получить интересное продолжение в Японии. В 2018 году неподалеку от Йокогамы появится кусочек настоящего «умного» мегаполиса – Цунасима, к строительству которого приступает консорциум из 10 крупных японских компаний при поддержке местных властей.
Panasonic планирует создать в Японии еще один ∎умный город∎, спроектированный с использованием самых современных, экологичных и энергоэффективных технологий. Помимо жилья и коммерческой недвижимости в городе разместится центр исследований и разработок компании Apple.
Форекс: Евро торгуется с понижением Этим утром евро торгуется с понижением относительно большинства своих главных соперников. Между тем, сегодня инвесторы могут ликовать от обилия макрорелизов. Так, инфляция потребительских цен Германии выступит в роли показателя дальнейшей динамики цен. Кроме того, ожидается выход индексов настроения Еврозоны, большая часть которых должна свидетельствоать об улучшении в январе. В США будут опубликованы предварительная оценка ВВП за четвёртый квартал и первичные заявки на пособие по безработице. Учитывая, что вчера Федрезерв пошёл на очередное сокращение своих ежемесячных покупок активов, американские данные будут представлять особую важность для участников рынка. В 6 часов утра по GMT евро потерял 0,2 процента и 0,1 процента против американского доллара и британского фунта, торгуясь по цене 1,3645 доллара и 0,8244 фунта соответственно. Австралийский доллар опустился на 0,1 процента в сравнении с долларом США после того, как производственный индекс активности Китая был пересмотрен в сторону понижения в январе. Европа: Рынок откроется в «минусе» Открытие германского фондового индекса DAX и французского CAC ожидается на 26-28 пунктов и 1-3 пункта ниже соответственно. Индекс Британской фондовой биржи FTSE100 откроется понижением на 19-22 пункта. Публикация индекса уверенности потребителей Еврозоны и Португалии; уровня безработицы и индекса потребительских цен Германии; индикаторов экономических настроений и делового оптимизма в промышленности Еврозоны; индекса ведущих экономических индикаторов Швейцарии от KOF; ВПП Испании; объёма розничных продаж и промышленного производства Португалии; индекса цен производителей Греции; чистого объёма потребительского кредитования, денежного агрегата М4, объёма чистых займов частным лицам, одобренных заявок на ипотечные кредиты и чистого объёма ипотечного кредитования Великобритании запланирована на сегодня. Roche Holding AG (ROG), Novo Nordisk A/S (NOVOB), Banco Santander SA (SAN), Hennes & Mauritz AB (HMB), Moet Hennessy Louis Vuitton SA (MC), Telefonaktiebolaget LM Ericsson (ERICB), Royal Dutch Shell (RDSA), Diageo (DGE), British Sky Broadcasting Group (BSY), Renishaw (RSW), Safestore Holdings (SAFE), CPL Resources (CPL), Angle (AGL) и Haynes Publishing Group (HYNS) отчитаются по результатам своей деятельности. DHL, дочерняя компания Deutsche Post AG (DPW), вступила в спор с UNI Global Union и международной федерацией солидарности транспортников, обвинияющих компанию в нарушении прав работников, – пишет германская газета «Sueddeutsche Zeitung». Как объявил главный исполнительный директор компании Telefonaktiebolaget LM Ericsson (ERICB) Ханс Вестберг (Hans Vestberg), он не планирует уходить в отставку после сообщений о том, что его кандидатура рассматривалась в качестве замены главного исполнительного директора компании Microsoft Стива Балмера (Steve Ballmer), – передаёт Bloomberg. По словам Марко Тронкетти Провера (Marco Tronchetti Provera) – председателя и главного исполнительного директора Pirelli & C. SpA (PC), он не делал и не получал никаких предложений о возможной продаже компании. По сообщениям «The Guardian», бизнес-секретарь Винс Кейбл (Vince Cable) обратился к главному исполнительному директору Lloyds Banking Group (LLOY) Антонио Орта-Осорио (António Horta-Osório) с требованиями провести срочное собрание, после того, как банк сократил число директоров по связям с общественностью для малого бизнеса в рамках оптимизации своей долгосрочной стратегии развития предприятия. В соответствии с Bloomberg, ARM Holdings (ARM) вместе со своими партнёрами разработали новый стандарт для своих серверов, позволяющий разработчикам программного обеспечения создавать продукты на базе ARM, которые будут работать на серверах других производителей. Стратегия по обслуживанию альпийских курортов помогла увеличить число лыжных рейсов easyJet (EZJ) на 20,0 процентов в течение последних пяти лет, – информирует Bloomberg. Азия: Торги в «красном» Этим утром азиатские рынки торгуются в отрицательной зоне после того, как Федеральная резервная система США объявила об очередном этапе сокращения стимулирующих мер на 10 миллиардов американских долларов. В Японии Sumitomo Mitsui Financial Group (8316) отступили на сообщениях компании о сокращении чистой прибыли за первый квартал. Nintendo Company (7974) подешевели после того, как компания решила придерживаться своей основной бизнес-модели с направлением на игровое оборудование и электронные программы, разочаровавших инвесторов. В то же время, компания информировала о планах обратной покупки около 10,0 миллионов акций. Sumitomo Realty & Development (8830), Mitsubishi Estate (8802) и Nomura Real Estate Holdings (3231) пошли вниз вслед за понижениями брокера. В 6 часов утра по GMT индекс Токийской фондовой биржи Nikkei 225 торгуется на 3,2 процента ниже на отметке 14899,0 пунктов. В Китае рынки торгуются с понижением в силу пересмотра производственной деловой активности страны в сторону снижения в январе. Zhongjin Gold Company (600489) потеряли в цене по причине заявления компании о возможном резком падении прибыли за 2013 год. В Гонконге Lenovo Group (992) зафиксировали убытки несмотря на согласие компании приобрести бизнес в сфере производства смартфонов Motorola у корпорации Google ориентировочно за 2,9 миллиарда американских долларов. China Shipping Development (1138) опустились на новостях компании о возможных годовых потерях. Фондовые рынки Южной Кореи сегодня закрыты по случаю праздника. США: Фьючерсы торгуются выше В 6 часов утра по GMT фьючерсы на S&P 500 торгуются на 3,0 пункта выше. Публикация объёма ВВП, числа первичных и повторных заявок на получение пособия по безработице, индекса личного потребления и объёма незавершённых сделок по продаже жилья планируется на сегодня. Exxon Mobil (XOM), Google (GOOG), Amazon.com (AMZN), Visa (V), United Parcel Service (UPS), 3M Company (MMM), ConocoPhillips (COP), Altria Group (MO), Occidental Petroleum (OXY) и Celgene Corporation (CELG) объявят о своих результатах сегодня. В среду в рамках продлённой торговой сессии Google (GOOG) выросли на 2,2 процента на сообщениях о согласии компании продать своё подразделение по производству смартфонов Motorola Mobility фирме Lenovo Group примерно за 2,9 миллиарда долларов. Flextronics International (FLEX) и Facebook (FB) пошли вверх на 12,3 процента и 12,1 процента соответственно благодаря квартальным результатам, оказавшимся выше рыночных ожиданий. Высокая скорректированная прибыль за первый квартал и сильный годовой прогноз по ней обеспечили рост QUALCOMM (QCOM) на 3,1 процента. NeuStar Inc. (NSR), напротив, «рухнули» на 23,5 процента в силу слабого прогноза скорректированной чистой прибыли на 2014 год. KaloBios Pharmaceuticals (KBIO) стремительно упали на 29,3 процента после того, как фаза 2 клинических испытаний препарата KB003, предназначенного для лечения тяжелой бронхиальной астмы, не принесла ожидаемых результатов. Citrix Systems (CTXS) отступили на пять процентов вслед за неудовлетворительными данными по доходу за четвёртый квартал и низкого прогноза на первый квартал и 2014 год. Во время вчерашней регулярной торговой сессии американский фондовый индекс S&P 500 опустился на один процент после того, как Федрезерв США объявил о своём дальнейшем сворачивании стимулирующей программы на 10,0 миллиардов долларов, несмотря на тревожную ситуацию на развивающихся рынках. Yahoo! (YHOO) подешевели на 8,7 процента вследствие более сильного, чем ожидалось, снижения дохода от дисплей-рекламы в четвёртом квартале и мрачного прогноза чистой прибыли на первый квартал. Boeing (BA) уменьшились на 5,3 процента из-за пессимистичного финансового прогноза на полный год. Неблагоприятные итоги по чистому объёму продаж за четвёртый квартал и более низкий, чем ожидалось, годовой финансовый прогноз стали причиной падения McCormick & Company (MKC) на 6,2 процента. Avon Products (AVP) и Colgate-Palmolive (CL) пошли вниз на 5,7 процента и два процента соответственно в связи с негативной оценкой брокера. Dow Chemical Company (DOW) прибавили 3,9 процента ввиду позитивных данных за четвёртый квартал и повышения квартальных выплат дивидендов. Marathon Petroleum (MPC) подорожали на четыре процента вслед за результатами четвёртого квартала, превысившими ожидания рынка. Сводка последних новостей ФРС продолжает сокращать QE и сохраненяет процентную ставку ФРС США оставила базовую процентную ставку без изменений – в диапазоне 0,0-0,25 процента в соответствии с рыночными ожиданиями. В то же время она сократила свою ежемесячную программу покупки облигаций на 10,0 миллиардов американских долларов до 65,0 миллиардов, ссылаясь на экономический рост страны с момента последнего заседания. Рост японских розничных продаж замедляется На годовой основе розничные продажи Японии в декабре 2013 года поднялись на 2,6 процента, меньше рыночных оценок; пересмотренный в сторону повышения рост ноября составил 4,1 процента. Производственный PMI Китая не дотягивает до предварительной оценки Китайский индекс деловой активности PMI в производственном секторе от HSBC/Markit в январе 2014 года показал 49,5, что оказалось ниже предварительной оценки в 49,6; в декабре 2013 года он был равен 50,5. Объём продаж нового жилья в Австралии падает По данным австралийской Ассоциации промышленности жилищного строительства, скорректированный на сезонность объём продаж нового жилья в стране сократился в декабре на 0,4 процента в месячном исчислении, тогда как в предыдущем месяце был отмечен рост в 7,5 процента. РБНЗ удерживает основную процентную ставку на прежнем уровне Резервный банк Новой Зеландии (РБНЗ) сохранил свою ключевую процентную ставку на уровне 2,50 процента, что совпало с ожиданиями рынка. Число выданных разрешений на строительство Новой Зеландии поднялось С учётом корректировки на ежемесячной основе декабрьское число выданных разрешений на строительство в Новой Зеландии неожиданно пошло вверх на 7,6 процента по отношению к пересмотренному в сторону увеличения росту ноября в 12,5 процента. Материал предоставлен Saxo Bank
Here is Nomura's current US outlook: Activity: In the 3 1/2 years since the Great Recession ended, real GDP has grown at a lackluster 2.1% pace and is tracking close to that pace in Q1 2013. Lower-income households are in the process of ratcheting down spending in response to a higher tax burden, but aggregate demand is being held up by higher-income spenders reacting to rising wealth from equities and real estate. Fiscal policy remains a source of uncertainty for the outlook, but risks of a policy misstep have diminished. Our forecast for the US economy assumes that half of the 1 March spending cuts will be implemented this year, but it is looking more likely that the full sequester will remain in place. If so, our assumptions for government spending will need to be revisited. Congress is working to complete a continuing resolution (CR) before the 22 March Easter holiday break. The CR is expected to fund the federal government through the end of this fiscal year (30 September). Providing a buffer against fiscal headwinds, the housing recovery continues to deepen. Home price increases are providing support for household confidence and we expect the wealth effect from real estate to help support aggregate demand.Inflation: Our forecast for consumer price inflation to remain below 2% for the forecast horizon reflects the effects of a substantial output gap that has emerged from three years of sub-par growth in the economy, and limited risks from commodity prices.Policy: We expect the FOMC to maintain its current longer-term asset purchase program through Q3 2013, and then begin to taper purchases as the recovery strengthens and outlook improves convincingly. Upcoming negotiations in Washington over the reprogramming of spending cuts and the budget are likely to prove very contentious.Risks: Fiscal policy missteps and slower global growth remain the dominant risks to the outlook.Nomura is projecting real GDP to increase 1.9% in 2013 (another sluggish year), and for the unemployment rate to fall to 7.5% in Q4. For housing starts, Nomura is forecasting an increase to 1.02 million starts from 780 thousand in 2012 (a 30% increase). Tuesday economic releases: • At 7:30 AM ET, NFIB Small Business Optimism Index for February. The consensus is for an increase to 90.1 from 88.9 in January. • At 10:00 AM, Job Openings and Labor Turnover Survey for January from the BLS. The number of job openings has generally been trending up, but openings were only up 2% year-over-year in December.
Крупнейший в Японии брокер Nomura Holdings планирует продать долю в подразделении Nomura Real Estate Holdings примерно за 53 млрд йен ($572 млн) с целью привлечения дополнительных средств и фокусирования деятельности на банковских операциях на фоне ужесточения требований регуляторов к достаточности капитала и ликвидности. Так, компания намерена понизить свою долю в подразделении с 51% до 36%.
China Overheating? Biggest Weekly Cash Drain in History; Questions Surface Over Chinese Growth Numbers
In December I suggested the modest bounce in China PMI would not last. It didn't. The allegedly sustainable recovery in China is already in question. The HSBC Flash China Manufacturing PMI™ shows manufacturing conditions barely above contraction. Key pointsFlash China Manufacturing PMI™ at 50.4 (52.3 in January). 4-month low. Flash China Manufacturing Output Index at 50.9 (53.1 in January). 4-month low Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said: "The Chinese economy is still on track for a gradual recovery. Despite the moderation of February’s flash PMI, the index recorded the fourth consecutive reading above the 50 critical line. The underlying strength of Chinese growth recovery remains intact, as indicated by the still expanding employment and the recent pick-up of credit growth." Questions Surface Over Chinese Growth Numbers Those expecting China to be in some sort of sustainable recovery with Europe in a major recession and the US in a big slowdown if not outright recession are a bit delusional. Please consider China’s Premature Overheating. China began this year with an off-the-charts explosion in credit issuance. Last week, it broke records again, this time for the amount of cash drained from its banking system. The record credit issuance of 2.5 trillion yuan ($400 billion) in January — comprising both bank lending and non-bank financial institutions’ credit — always looked as if it was verging on the reckless. The surprise perhaps is that this reversal came so early. The central bank withdrew 910 billion yuan from the economy via open-market operations last week, its biggest weekly cash drain ever. This action coincided with warnings from Beijing for local governments to keep a tight reign on property-market speculation, amid fears of bubbles reappearing. On Friday, the government further extended its existing battery of property taxes to try to take the heat out of the market. The new measures target non-residential property and buyers of second homes. In recent weeks, the Chinese capital has literally ground to a halt due to smog worsened by traffic and factories. Nomura says in a new report that pollution has got so bad, it may force policy change on the government, which will inevitably reduce growth in the short term. An unusual appendix in the report was a nationwide map of Particulate Matter (PM) readings. It has always been hard to square away China’s position as a low-cost manufacturing hub, while at the same time having some of the highest-priced real estate in the world. Some economists have an explanation: The numbers are plain wrong. Standard Chartered Bank’s Stephen Green questions if China’s growth in 2012 might have only been 5.5%, even as the official figure was 7.8%. And if China’s inflation has been running at a higher pace than we thought, reining it in could prove more difficult. How soon before investors need to worry again about what landing lies ahead for China’s overheating economy? No one really knows the true state of China's GDP, but many of us do realize it's overstated, perhaps by a large amount. GDP is not a good measure of the true state of the economy anyway, with fiscal stimulus everywhere you look.Realistic OutlookJuly 18, 2012: "China Rebalancing Has Begun"; What are the Global Implications? Michael Pettis on China Rebalancing, Chinese Price Deflation, and Spain Exit from Euro; Target 2 Revisited August 16, 2012: Pettis on Debt, Currency Wars, Commodity Prices and Capital Flight; China FDI Contracts 8.7% YoY, 8th Drop in 9 Months December 27, 2012: Michael Pettis on China Reforms, Ponzi Schemes in Wealth Management Programs, Rebalancing Implications GDP aside, global rebalancing has just begun, and it may take a decade to finish. Expectations that the worst is behind us in China and in Europe is about to be shattered on the hard rocks of reality. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com"Wine Country" Economic Conference Hosted By MishClick on Image to Learn MoreMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
From Wendy Chen at Nomura: After slowing for seven straight quarters, we expect China's GDP growth to rebound to 8% in Q4 2012. We expect real GDP growth to rebound to 8.0% y-o-y in Q4 from a low of 7.4% in Q3, underpinned by accommodative monetary and fiscal policies, inventory destocking coming to an end and a modest improvement in exports. Industrial production growth is likely to rise to 10.6% y-o-y in December from 10.1%, as a return to more normal inventories lifts production. We expect fixed asset investment to rise slightly to 20.8% y-o-y (ytd) in December from 20.7% in November, driven by infrastructure investment and possibly real estate investment. We expect retail sales to grow by 15.6% y-o-y in December from 14.9%, aided by easier financing conditions and rising asset prices. The China data releases are scheduled for next Friday. It appears China's growth is picking up in the short term, but growth will probably slow again. Michael Pettis wrote last month: Three cheers for the new data? I expected that politics would require a jump in growth over the rest of this year and the beginning of the next, this “good growth” tells us nothing about the health of the underlying economy. It only tells us how difficult politically the transition is likely to be. ... Growth rates in China will continue to slow dramatically in the next few years, and if there are temporary lulls, as there must be, these do not represent any sort of “bottoming out” at all. They simply represent the fact that Beijing cannot afford politically to allow the adjustment to taker place too quickly, and from time to time Beijing is are going to step on the investment accelerator to speed things up temporarily.
Official PMI remains above 50,as similar survey by HSBC suggests manufacturing is at its strongest since May 2011China's official manufacturing purchasing managers' index held steady in December at 50.6, matching November's seven-month high, as growth in new orders was unchanged and the pace of output softened marginally.With the main index above 50 for three successive months, the survey indicates that China's vast factory sector is expanding. A PMI reading below 50 suggests growth has slowed; above 50 indicates an acceleration.The official figures were released a day after a similar survey by HSBC suggested manufacturing activity was at its strongest since May 2011. Together the surveys support a growing consensus that economic activity in China revved up during October to December, after GDP growth had slowed for seven consecutive quarters to 7.4% in the third quarter.That provides a welcome sign for a global economy where the euro area and Japan are in recession and the US is struggling for significant growth."Output has stayed above the 50-mark, showing that the manufacturing industry appears to maintain growth expectations, but the rate of growth has weakened," the National Bureau of Statistics, which released the data, said in a note.The official PMI reading was slightly below expectations; a poll of economists by Reuters last week predicted a rise in the PMI to 51.0.The survey showed output in oil processing, quarrying and tobacco industries slipped, while food processing, auto manufacturing, textiles, steel and electronics expanded, the bureau said.A new export orders sub-index fell to 50 from 50.2 in November.HSBC said its China PMI, which gathers more data from smaller, privately held firms with a strong export focus, rose in December to 51.5, its highest since May 2011.Some analysts cautioned that the pick-up in economic activity in recent months may reflect renewed investment spending, rather than the consumer activity that policymakers acknowledge is needed to rebalance the economy."It's pretty clear that it's more driven by infrastructure and increasingly housing, that's driving heavy industry," Zhang Zhiwei, of Nomura International, said.Rising land prices have prompted widespread expectations that the real estate market will be revived by an investment-driven recovery that would offset weak export markets, even though the central government had pledged to maintain investment and purchasing restrictions to try to control prices.Railway spending delayed from earlier in 2012 was being rushed out before the end of the year, and rising prices for land purchased by state-owned developers could point to a relaxation in property market curbs that has yet to be made official, Zhang said.China was expected to achieve economic growth of 7.7% in 2012, forecasts in a benchmark Reuters poll show. That would mark the slowest full-year expansion since 1999. While that is well above the world's other major economies, it is below the roughly 10% annual growth China has experienced for most of the past 30 years.The government has relied on fine-tuning its policy settings to try to combat the worst downturn China has faced since the 2008-09 global financial crisis, studiously avoiding any hint of repeating a 4tn yuan (£395bn) stimulus package it launched back then, which led to a debt-fuelled spending binge by local governments.ChinaAsia PacificManufacturing sectorguardian.co.uk © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds
Obama's Back In: Does He Succumb To Popular (Ignorant?) Opinion Like The Europeans Or Make The Tough Choices
Many have asked me if I believe in austerity measures or the Keynsian approach of spending out of recession. I have stated, time and again, that the question is loaded - hence the answer can never be sufficient. When you are trying to go from your home to the market across town in a crowded urban environment, you cannot make the trip successfully by deciding ahead of time that you are just going to make left turns (austerity? Austrian?) or right turns (stimulus? Keynsian?). You come to an intersection and you make the turn that's necessary to get you where you want to go. It might sound overly simplistic and common, but I'll be damned if common sense is one of the most uncommon things I've come across over the last 7 years or so! On that note, there does appear to be a misunderstanding on how government finances work as compared to finances in the private sector. The government is not a for profit player that competes directly with those in the private sector, but is instead a universal support network that benefits from the success of the private sector. Hence, the government must work in the best interests of the private sector in order to thrive. This sometimes entails taking the other side of the trade to ensure that a trade can take place. One pundit who has done a good job of explaining this through pretty charts that explain the peculiar situation that we are now in (a balance sheet recession), is Dr. Richard Koo of Nomura Securities. See the FT.com article abstract: In 2008, Barack Obama told the US people the nation’s economic crisis would take a long time to overcome. In 2012, many of those voters are losing patience, because they have not been told why this recession has lasted so long or why his policies were the correct response. Here is the missing explanation – based on not only the US experience, but also that of Japan and Europe. Today, the US private sector is saving a staggering 8 per cent of gross domestic product – at zero interest rates, when households and businesses would ordinarily be borrowing and spending money. But the US is not alone: in Ireland and Japan, the private sector is saving 9 per cent of GDP; in Spain it is saving 7 per cent of GDP; and in the UK, 5 per cent. Interest rates are at record lows in all these countries. For those who may not get the gravity of this statement, it makes no sense to save money with a negative risk/reward proposition, unless of course the saver does not see it that way. One must save if savings are in deficit, and the risk to invest funds is considered greater than the benefit of having said funds in the first place. We are still attempting to wade through the bursting of a massive bubble, and we are playing defensive - not offensive. In other words, are Americans seeking return OF capital over return on said capital? We are over-leveraged, and to effectively delever you cannot borrow more money or take the risk of aggressive investments. This is so even if investment capital is being offered at zero interest rates. Mr. Koo illustrates the consequences of such behavior eloquently... However, if someone is saving money or paying down debt, someone else must be borrowing and spending that money to keep the economy going. In a normal world, it is the role of interest rates to ensure all saved funds are borrowed and spent, with interest rates rising when there are too many borrowers and falling when there are too few. But when the private sector as a whole is saving money or paying down debt at zero interest rates, the banks cannot lend the repaid debt or newly deposited savings because interest rates cannot go any lower. This means that, if left unattended, the economy will continuously lose aggregate demand equivalent to the unborrowed savings. In other words, even though repairing balance sheets is the right and responsible thing to do, if everyone tries to do it at the same time a deflationary spiral will result. It was such a deflationary spiral that cost the US 46 per cent of its GDP from 1929 to 1933. Those with a debt overhang will not increase their borrowing at any interest rate; nor will there be many lenders, when the lenders themselves have financial problems. This shift from maximising profit to minimising debt explains why near-zero interest rates in the US and EU since 2008 and in Japan since 1995 have failed to produce the expected recoveries in these economies. For some reason, the Fed doesn't seem to get what Mr. Koo and BoomBustBloggers do! With monetary policy largely ineffective and the private sector forced to repair its balance sheet, the only way to avoid a deflationary spiral is for the government to borrow and spend the unborrowed savings in the private sector. Wait a minute! The EU states are definitely borrowing, but they are not redploying the capital back into the private sector, they are simply bailing out banks! In addition, the banks are not deploying the capital into the private sector, they are simply sitting on it, just as Mr. Koo stated they would in the article excerpt above! So, after trillions of borrowing, there's no surprise why there's just relatively pennies making it into the private sector. What Mr. Koo and many who follow Keynsian economic theories seem to forget to include, is that upon borrowing the money to plunge into the private sector, you have to have a plan for paying said monies back. When you borrow said monies and simply waste them (ex. perpetual dead bank bailouts) you create a truly structural problem. Simply ask Greece, or see How Greece Killed Its Own Banks! and then move on to... As The Year Comes An End The Ability Of Greece To Kick The Can Mirrors The Chances Of A Man With No Feet Despite extensive, self-defeating, harsh and punitive austerity measures that have combined with a lack of true economic stimulus, Greece has (to date) failed to achieve Primary Balance. For the non-economists in the audience, primary balance is the elimination of a primary deficit, yet the absence of a primary surplus, ex. the midpoint between deficit and surplus before taking into consideration interest payments. Greece_Primary_balanceGreece_Primary_balanceGreece_Primary_balance The primary balance looks at the structural issues a country may have. Government expenditures have outstripped revenues ever since 2007 and have gotten worse nearly every year since, despite 3 bailouts a restructuring, austerity and a default! Greece_Primary_deficit_copy On to Mr. Koo's diatribe... Recovery from this type of recession takes time because the flow of current savings must be used to reduce the stock of debt overhang, necessarily a long process when everyone is doing it at the same time. Since one person’s debt is another person’s asset, there is no quick fix: shifting the problem from one part of society to another will solve nothing. The challenge now is to maintain fiscal stimuli until private sector deleveraging is completed. Any premature attempt to withdraw that stimulus will result in a deflationary implosion – as in the US in 1937, Japan in 1997, and Spain and the UK most recently. Japan’s attempt in 1997 to reduce its deficit by 3 per cent of GDP – the same size as the “fiscal cliff” now facing the US – led to a horrendous 3 per cent drop in GDP and a 68 per cent increase in the deficit. At that time, Japan’s private sector was saving 6 per cent of GDP at near zero interest rates, just like the US private sector today. It took Japan 10 years to climb out of the hole. Average citizens find it hard to understand why the government should not balance its budget when households and businesses must all do so. It is risky for politicians to explain but, until they make it clear that the economy will implode if everybody is saving and nobody is borrowing, public support for the necessary fiscal stimulus is likely to weaken, as seen during the past four years of the Obama administration. The US economy is already losing forward momentum as the 2009 fiscal stimulus is allowed to expire. There is no time to waste: the government must take up the private sector’s unborrowed savings, to keep the economy from imploding and to provide income for businesses and households so they can repair their balance sheets. Fiscal consolidation should come only once the private sector has repaired its finances and returned to profit-maximising mode. I have ventured along these lines several times in the past. Here is the subscription research that I feel is best poised to take advantage of the guaranteed mistakes to be made ahead, simply click your industry/sector for the most recent research (note, non-subscribers will only be able to view free reports, you may click here to subscribe)... Consumer Discretionary Banks & Financial Services Insurers, Insurance & Risk Management Real Estate Retail As for whether Mr. Koo is correct in the application of severe austerity when one should be trying to prime the pump.... Greece Is To Pathogen As Cyprus Is To Contagion As Spain Is To Infected... CNBC reports Greece Austerity Strike Will Hurt GDP Further even as Cyprus Expects Bailout as S&P Cuts Ratings to Junk: Cyprus said on Wednesday it expected talks to start with lenders on badly needed aid next week, as ratings agency Standard & Poor's pushed it deeper into junk territory, implying domestic political expediency lay behind a delay in clinching a deal. One of the smallest nations in the euro zone, Cyprus sought European Union (EU) and International Monetary Fund (IMF) aid in June after its two largest banks suffered huge losses due to a write-down of Greek debt. Well, our Contagion Model showed clear paths of the knock on effects of Greek infection, and we haven't even gotten started with the economic pathogen party yet! Although it seems as if Tyler is being a smart ass, he couldn't be farther from the truth. Reference my piece Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse! concerning the accuracy of the IMF's baseline scenarios... image005.pngimage005.png And back to the ZH post: ....Breakdown of IMF deleveraging forecasts for the three scenarios, of which the realistic one is highlighted: Under weak policies, the withdrawal of foreign investors accelerates to twice the pace seen since 2009. Periphery spreads widen by about one standard deviation above the baseline. Follow me:
China May Forgo Easing as Economy Rebounds, Survey Shows (Bloomberg)... or as food and house inflation has never gone away China Edges Out U.S. as Top Foreign-Investment Draw Amid World Decline (WSJ) Fed to keep buying bonds despite firmer U.S. growth (Reuters) Bernanke Seen Attacking Jobless Rate With QE Until His Term Ends (Bloomberg) Mortgage applications plunge 12%, down for third week in a row (Dow Jones) Exchanges Retreat on Trading Tools - Fund Managers, Regulators Say Certain Orders Are Risky, Aid High-Speed Firms (WSJ) Europe Bank Chief to Defend Bond-Buying Plan (WSJ) Japan, China Envoys Met Last Week for Talks on Island Feud (Bloomberg) Goldman’s Pill Says ‘Guerrilla’ ECB to Impose Losses on Skeptics (BBG) Chance rise of an Obama defeat (FT) King Says BOE Is Ready to Add to QE If U.K. Recovery Fades (Bloomberg) Rajoy Sees Case for Slowing Spain’s Austerity as Economy Shrinks (BusinessWeek) Hong Kong Intervenes to Defend Peg as Upper Limit Tested (Bloomberg) Overnight Media Digest WSJ * Apple Inc unveiled a smaller iPad and yet another version of its larger tablet, seeking to blunt an advance by rivals while preserving its premium pricing strategy. * After a slow start, Facebook Inc's effort to squeeze more money from advertisers on mobile devices is starting to pay off. The mobile boost helped revenue rise 32 percent in the quarter that ended on Sept. 30, to $1.26 billion, slightly topping Wall Street's expectations. * British defense giant BAE Systems Plc, recovering from the failure of its proposed merger with Airbus parent EADS NV, now faces the challenge of convincing investors that the plan wasn't an act of desperation. * Zynga Inc is cutting staff for the first time in the social-games maker's brief history, by parting ways with about 5 percent of its workforce. * Nokia Oyj completed a bond offering to raise 750 million euros ($972.30 million), moving to take advantage of favorable lending conditions to help shore up the company's liquidity reserves, an area that came under scrutiny in its earnings report last week. * Netflix Inc reported an 88 percent drop in third-quarter net income and lowered its expectations for subscriber additions, sending shares tumbling. * The British Broadcasting Corp's director general defended the network's much-criticized handling of a scandal over alleged serial sex abuse by its late star Jimmy Savile, even as he said the case shows there was a "problem of culture inside the BBC" in the past. * Barnes & Noble Inc said customers at 63 stores in nine states may have had their credit-card information stolen. FT KING WARNS BANK ACTION REACHING LIMIT The BoE is ready to inject more cash into the fragile British economy if recent positive signs fade, BoE Governor Mervyn King said on Tuesday. TRINITY MIRROR SHAREHOLDERS URGE INQUIRY Some big shareholders in Trinity Mirror are planning to call for an investigation into alleged phone hacking at tabloid titles including the Daily Mirror. US RESULTS RAISE FRESH FEARS FOR ECONOMY U.S. companies have warned of weaker global demand and are cutting jobs, raising fresh fears about the health of the world economy and sending shares tumbling. FRANCE NEARS DEAL TO RESCUE PEUGEOT France is close to agreeing a deal to prop up Peugeot by providing up to 7 billion euros ($9.07 billion) of financial guarantees to the car maker's lending arm. UBS READY TO TAKE AXE TO INVESTMENT BANK UBS is planning further drastic cutbacks in its investment bank that could prompt the loss of several thousand jobs. CHINA WIDENS INSURERS' INVESTMENT OPTIONS China has opened a new area of alternative investments to the country's insurance companies. BRUSSELS DROPS WOMEN BOARD QUOTAS PLAN A controversial plan drawn up in Brussels to force all publicly traded companies to have 40 percent of women on their boards has been scrapped. SAVILE ALLEGATIONS DRAW IN MORE BBC STAFF The head of the BBC denied on Tuesday helping to cover up a sex scandal involving one of its former stars but accepted the British broadcaster had been damaged by a crisis. APPLE PUSHES OUT A FOURTH AND MINI IPAD Apple updated its suite of iPads for the holiday shopping season, including a new, thinner and lighter "Mini" edition. BHP LOOKS TO SELLING ARIZONA COPPER MINE BHP Billiton is working with advisors to consider the sale of its Pinto Valley copper mine in Arizona, which could fetch up to $1 billion. CIC IN TALKS TO BUY DEUTSCHE'S UK HQ A Chinese sovereign wealth fund is set to become a landlord in the UK's most important office market: the City of London. NYT * Apple Inc's iPad Mini, which it unveiled at a press event on Tuesday, weighs about two-thirds of a pound and has a screen that measures 7.9 inches diagonally, making its surface area significantly smaller than that of the 9.7-inch iPad. * Facebook Inc's Chief Executive, Mark Zuckerberg, told Wall Street that his company was on its way to cracking the mobile puzzle. Facebook posted revenue that slightly beat forecasts, and it said 14 percent of its advertising revenue came from ads on mobile devices. * With the sale of its Canadian arm, Ally Financial Inc took its biggest step yet toward slimming down and raising money to repay its $17.2 billion taxpayer-financed bailout. The firm said it would sell its Canadian division to the Royal Bank of Canada for about $4.1 billion. * The Royal Bank of Scotland Group Plc agreed to pay $42.5 million in a settlement with the Nevada attorney general that ends an 18-month investigation into the deep ties between the bank and two mortgage lenders during the housing boom. * Netflix Inc's third-quarter revenue, $905 million, up from $822 million in the same quarter last year, was in line with estimates. But its streaming subscriber total, 25.1 million in the U.S., while up from 21.4 million in the third quarter last year, was weaker than expected. * Restoration Hardware Holdings Inc said in a filing that it planned to sell 5.2 million shares at $22 to $24 a share in an initial public offering. * Hackers have stolen credit card information for customers who shopped as recently as last month at 63 Barnes & Noble Inc stores across the country, including stores in New York City, San Diego, Miami and Chicago, according to people briefed on the investigation. Canada THE GLOBE AND MAIL * The Stephen Harper government is sharpening its policy on takeovers by foreign corporations to single out firms controlled by other governments and set more detailed conditions they must meet before Ottawa would approve a deal, sources say. * Finance Canada is excluding provincial numbers from new reports that will focus on whether government finances are sustainable over the long term. After the release of his latest audit, Auditor General Michael Ferguson called on Finance to produce reports for both federal and provincial finances that would show the state of Canada's public finances as a whole. Reports in the business section: * The Bank of Canada has laid out a clearer path for interest rates, pushing back the timing of an eventual increase, while warning for the first time that it could boost rates to dissuade consumers from taking on more debt. * Royal Bank of Canada has emerged from one of the most hotly contested auctions of domestic banking assets in years to buy the Canadian operations of Ally Financial Inc , which will make it the country's biggest player in auto financing. NATIONAL POST * Canada's intelligence service needs new policies for dealing with minors as its officers are increasingly crossing paths with underage radicals, a federal watchdog agency said in a report released Tuesday. FINANCIAL POST * The Toronto stock market tumbled more than 150 points Tuesday amid sliding commodity prices as U.S. earnings disappointments and a fresh round of worry centred on Europe's debt crisis reminded investors about flagging global growth. China SHANGHAI SECURITIES JOURNAL --The China Banking Regulatory Commission said it is exploring allowing more fundraising channels for banks to replenish their capital base, a move which would reduce financing pressures on the domestic A-share market. CHINA DAILY --Property sector lending by Chinese financial instituitions surged in the third quarter, especially for land development. Data released by the People's Bank of China showed 416.8 billion yuan was lent to the real estate sector from July to September, a rise of 29 percent from the second quarter. PEOPLE'S DAILY --China's grain output this autumn is likely to hit a record high and bring a ninth year of consecutive growth in annual output, the Ministry of Agriculture said. SHANGHAI DAILY --China's COSCO Holdings Co, the nation's largest listed shipping company, said the industry will expand as Chinese economic growth picks up momentum. Chairman and CEO Wei Jiafu said the firm was seeing signs of recovery. --The Chinese semiconductor industry needs industrial restructuring and consolidation to create internationally competitive firms, the Ministry of Industry and Information Technology said. Fly On The Wall 7:00 Market Snapshot ANALYST RESEARCH Upgrades American Campus (ACC) upgraded to Buy from Neutral at UBSBank of America (BAC) upgraded to Overweight from Neutral at Atlantic EquitiesCheck Point (CHKP) upgraded to Buy from Neutral at BofA/MerrillDollar Tree (DLTR) upgraded to Conviction Buy from Neutral at GoldmanEagle Bancorp (EGBN) upgraded to Outperform from Market Perform at FBR CapitalFacebook (FB) upgraded to Buy from Neutral at BofA/MerrillFacebook (FB) upgraded to Buy from Neutral at CitigroupIBERIABANK (IBKC) upgraded to Outperform from Market Perform at Keefe BruyetteMolycorp (MCP) upgraded to Buy from Hold at Dahlman RoseMyriad Genetics (MYGN) upgraded to Buy from Neutral at BofA/MerrillRare Element (REE) upgraded to Hold from Sell at Dahlman RoseSensata (ST) upgraded to Buy from Neutral at Janney CapitalWhirlpool (WHR) upgraded to Buy from Sell at Goldman Downgrades AB InBev (BUD) downgraded to Sell from Neutral at GoldmanAtmel (ATML) downgraded to Neutral from Buy at NomuraCTC Media (CTCM) downgraded to Hold from Buy at Deutsche BankDonaldson (DCI) downgraded to Hold from Buy at JefferiesDuPont (DD) downgraded to Neutral from Overweight at JPMorganNorfolk Southern (NSC) downgraded to Neutral from Buy at CitigroupUnited Therapeutics (UTHR) downgraded to Underweight from Neutral at JPMorganVirgin Media (VMED) downgraded to Neutral from Buy at Citigroup Initiations Black Hill (BKH) initiated with an Outperform at RBC CapitalCalpine (CPN) initiated with a Sector Perform at RBC CapitalInergy Midstream (NRGM) initiated with an Overweight at JPMorganLiberty Ventures (LVNTA) initiated with a Buy at CitigroupOriental Financial (OFG) initiated with a Buy at Sterne AgeeSolar Capital (SLRC) initiated with an Outperform at JMP SecuritiesSolar Senior Capital (SUNS) initiated with an Outperform at JMP SecuritiesTHL Credit (TCRD) initiated with an Outperform at JMP Securities HOT STOCKS European Commission said Microsoft (MSFT) failed to offer browser choicesFacebook (FB) reported monthly active users up 26% to 1.01B at September 30CEO Zuckerberg said “deeply integrating monetization into our product teams”'Dow Chemical (DOW) announced restructuringMonster Beverage said (MNST) stands by the safety of its productsPosco (PKX) downgraded to Baa1 by Moody's; outlook negativeAflac (AFL) raised Japan sales outlook to up 30%-35%Broadcom (BRCM) sees Q4 adjusted product gross margin flat to up slightly sequentially Netflix (NFLX) said growth being driven by TV show viewers Sees greater sub additions in Q4 and Q1 vs. Q2 and Q3 Thermo Fisher (TMO) said it has "solid foundation" going into 2013B.R. Bard (BCR) acquired surgical product company NeomendEssex Property Trust (ESS) acquired apartments in San Jose, CA for $148MYelp (YELP) acquired Qype for about $50MUnited Therapeutics (UTHR) received complete response letter for oral Trepstinil NDAPolycom (PLCM) CEO: Q4 to be important quarter with release of new productsCapital Senior Living (CSU) acquired eight communities for $72.9M EARNINGS Companies that beat consensus earnings expectations last night and today include:Encana (ECA), Thermo Fisher (TMO), W.R. Grace (GRA), Dow Chemical (DOW), Unisys (UIS), Celadon Group (CGI), Fortune Brands (FBHS), Aflac (AFL), Norfolk Southern (NSC), C.R. Bard (BCR), Panera Bread (PNRA), Gilead (GILD), Facebook (FB), Juniper (JNPR), Netflix (NFLX), Amgen (AMGN), Broadcom (BRCM), VMware (VMW) Companies that missed consensus earnings expectations include:NorthWestern (NWE), Elan (ELN), Embraer (ERJ), Newfield Exploration (NFX), STMicroelectronics (STM), C.H. Robinson (CHRW), FMC Technologies (FTI), Buffalo Wild Wings (BWLD), Amgen (AMGN) Companies that matched consensus earnings expectations include:Praxair (PX), Republic First Bancorp (FRBK), CTS Corporation (CTS), Compuware (CPWR), SeaBright (SBX) NEWSPAPERS/WEBSITES The nation's two largest stock exchanges are facing a backlash by mutual funds and securities regulators for offering trading tools that could harm institutional investors.Now, NYSE Euronext (NYX), owner of the New York Stock Exchange, intends to ask regulators to let it alter the order type that critics say could benefit high-speed trading firms, according to exchange officials, the Wall Street Journal reportsMost hedge funds are struggling for a fourth consecutive year, the longest period of underperformance since 1995 to 1998. Hedge funds on average gained 4.7% through September, according to industry tracker HFR, while stock-trading funds were up on average 5.5%, the Wall Street Journal reportsThe Fed appears intent to stick to its bond-buying stimulus, having already indicated it would take more than a modest show of economic strength for policymakers to begin taking their foot off the gas. Analysts now believe the central bank will wait until at least December to make any changes to its current plans to buy $40B of mortgage debt per month, Reuters reportsKKR & Co. (KKR), Apax Partners and Madison Dearborn Partners are bidding for Heartland Dental Care, one of the largest U.S. dental practice management companies, worth about $1.3B, sources say, Reuters reportsMortgage bankers and realtors are warning that it could become even harder for borrowers to qualify for a home loan early next year as the industry faces a number of new rules, Bloomberg reportsOil pared gains in New York after a decline in manufacturing data from Germany signalled the region’s debt woes may be far from over. U.S. crude was 0.2% higher after falling as much as 0.5% when Markit Economics reported that the German purchasing managers’ index for manufacturing showed 45.7 for October, down from 47.4 in September. Business confidence in Germany slumped to a 32-month low, Bloomberg reports SYNDICATE CBL & Associates (CBL) files to sell 2.47M shares for selling stockholdersMillennial Media (MM) 10M share Secondary priced at $14.15Novavax (NVAX) announces $27M equity offeringXOMA (XOMA) files to sell common stock
Nestlé and Nokia among firms to warn of weaker global sales despite Chinese GDP growing by 7.4% in third quarterWestern firms are preparing for slower growth in China after Beijing said it expected growth to stabilise at 7.5% for the next few years.The world's second biggest economy grew 7.4% in the third quarter compared with a year ago, the seventh consecutive quarter of slower growth, prompting warnings from Nestlé and Nokia that their bottom line was being affected.The Swiss maker of KitKat chocolate bars and Nescafé coffee said sales growth in Asia, Oceania and Africa, which account for one fifth of its total sales, fell from 11.6% to 9.4%. Nokia, the Finnish mobile phone firm, also blamed slower growth in China for weaker international sales.China's growth figure was only just below government forecasts, while a recent surge in industrial output, retail sales and business investment has appeared to put its economy on a sounder footing.Premier Wen Jiabao was quoted as saying that the economic situation in the third quarter was relatively good, and that the government was confident of achieving its goals. But Mark Williams, chief Asia economist at Capital Economics, said upbeat comments from China's leaders were misleading.Announcing the numbers, the National Bureau of Statistics said a higher than expected rise in September showed growth was on track to stay above target. "We have 7.7% growth in September, which laid a solid foundation for achieving the full-year growth target. So we are confident that we can achieve 7.5% full-year growth or above," said a NBS spokesman, Sheng Laiyun.Williams said a 9.1% annualised figure for the third quarter failed to tally with other economic data, but nevertheless a 7.4% growth rate based on the last four quarters revealed the economy had stabilised and was stronger than expected."There are also some signs that growth may have started to pick-up towards the end of the third quarter. That said, we think the speed of the turnaround implied by the official figures is implausible and, barring significant further policy moves, expect only a tepid turnaround over coming quarters.Our forecasts remain that the economy will expand around 7.6% this year and only 8% in 2013."Alistair Thornton, senior China economist at IHS Global Insight, said: "Those fearing a hard landing will be able to sleep a little better, but those positioned for a clear recovery might be disappointed. The picture is one of emerging stabilisation, not the return of unbridled optimism."European stock markets reacted positively, as the prospects of a China-induced recession receded before paring back gains in afternoon trading.Several analysts said Beijing was keen to moderate growth to prevent the economy from entering a boom and bust cycle. After the financial crisis, China embarked on a stimulus that maintained consumer demand. But the extra cash spilled over into the property sector and triggered an upsurge in prices.A downturn after the Greek debt debacle was avoided by cuts in interest rates, that many analysts feared would fuel to an even bigger property price bubble. Projections that China has waved goodbye to double-digit growth is expected to cool property prices and prevent any overheating causing panic and a price crash.Watch sales slowThe Chinese love affair with expensive Swiss watches is over. Sales have gone into reverse for the first time in three years after a phenomenal export drive that turned Hong Kong and mainland China into the biggest market for Swiss timepieces.A 27% fall in Swiss watch sales in September was driven largely by an economic slowdown that has also hit German cars and imported mobile phones. Global sales fell 10% by volume and 2.7% by value. The new Bond film, Skyfall, which promotes 007's £3,200 Omega wristwatch, may help with the marketing effort, but according to the Swiss Watch Federation, a fall in sales was to be expected."The Chinese economy is running at a slower tempo," said a spokesman.Omega is owned by Swatch, which is the biggest watchmaker in the world. The James Bond name may also help in Europe, where sales are still rising."It is unusual and unexpected, but we think in Europe we have profited from sales to tourists," , said the federation spokesman.Hong Kong accounts for 21% of all Swiss watch sales, compared with the US's with a 10.3% in the US's share, and mainland China's is close behind with 8.5% in mainland China.According to industry experts most Hong Kong sales are to visiting Chinese who use their visit to the former British colony to stock up on expensively branded goods.One analyst said the Swiss were in danger of seeing its 19bn swiss franc industry suffer from a prolonged slowdown in China. French luxury goods maker LVMH and Richemont are two major firms that could also suffer."Even if Swiss watch exports are very volatile on a monthly basis we can only be negative after this publication with -20% decline in Asia and negative figures in the US," said analysts at Chevreux, part of Credit Agricole.The Chinese post crisis boom allowed the Swiss watch industry to break all records in 2011. Hong Kong overtook the US to be the largest market for Swiss watch exports in 2008 and is constantly growing.A report by Fortune Character magazine revealed that the price of imported high-end watches has increased since 2007 with the average price up by 205% since 2007 to $6,812 in 2011.ChinaGlobal economyEconomicsAsia PacificNestléFood & drink industryNokiaMobile phonesPhillip Inmanguardian.co.uk © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds
While Koo-nesianism is only one ideological branch removed from Keynesianism, Nomura's Richard Koo's diagnosis of the crisis the advanced economies of the world faces has been spot on. We have discussed the concept of the balance sheet recession many times and this three-and-a-half minute clip from Bloomberg TV provides the most succinct explanation of not just how we got here but why the Fed is now impotent (which may come as a surprise to those buying stocks) and why it is the fiscal cliff that everyone should be worried about. As Koo notes, the US "is beginning to look more like Japan... going through the same process that Japan went through 15 years earlier." The Japanese experience made it clear that when the private sector is minimizing debt (or deleveraging) with very low interest rates, there is little that monetary policy can do.The government cannot tell the private sector don't repay your balance sheets because private sector must repair its balance sheets. In Koo's words: "the only thing the government can do is to spend the money that the private sector has saved and put that back into the income stream" - which (rightly or wrongly) places the US economy in the hands of the US Congress (and makes the Fed irrelevant). DEIRDRE BOLTON, BLOOMBERG NEWS ANCHOR: Based on the data points, the economic data points we've got in the past month, how likely is it that the U.S. is heading towards a lost decade? Is it more or less likely than what you told us about four to six months ago? RICHARD KOO, CHIEF ECONOMIST, NOMURA RESEARCH INSTITUTE: Well, it is beginning to look more like Japan. The amount of house price declines, the commercial real estate price declines there, all following the Japanese pattern very precisely and very slow GDP growth, even with all this monetary easing, QE2, possibly QE3. So yes, to me, the United States is going through the same process of what I call balance sheet recession, that Japan went through 15 years earlier. BOLTON: You mentioned the possibility of QE3. What should Ben Bernanke do today in his speech and then what should he do as a follow-up action? KOO: Well, actually, the Japanese experience told us that when private sector is minimizing debt or deleveraging with very low interest rates, there's very little monetary policy can do. In fact, Chairman Bernanke has been saying, since the middle of last year that this is no time to cut budget deficit. The fiscal stimulus should be in place because I think he also understands that under the circumstances, there's so little that monetary policy can do. But there's a lot the fiscal policy can do to keep the U.S. economy from losing its bottom. BOLTON: Richard, how. KOO: And so I think he should continue to push that line. Yes? BOLTON: Continue to push that line and maybe try to subtly encourage Washington to take a little bit more control. Sounds like you think that Congress should do something. KOO: Yes, because when people are deleveraging even with zero interest rates, that means they are very sick. The private sector is very sick and in need of help because their balance sheets are under water. And then that's the case, even if Federal Reserve lowers interest rates, puts liquidity into the market, the private sector cannot really respond because they have balance sheet problems. And the government cannot tell the private sector don't repay your balance sheets because private sector must repair its balance sheets. So the only thing the government can do is to spend the money that private sector has saved and put that back into the income stream. And that, I think is what the U.S. has to do. And that means this is no time to cut budget deficit. You have to maintain the fiscal stimulus until private sector is healthy enough to start borrowing and spending money again. And at that point, Federal Reserve will become all very irrelevant. But at the moment, I think the control of the U.S. economy is really in the hands of Congress.