Schlagwort-Archiv: debt

China wants to install quantitative easing for local governments

27.05.15

There is a whisper in the global economy that China wants to install quantitative easing. That seems unlogical with a GDP growth of 7%, booming financial markets and an inflation of 2%. But the assets are sharply increasing so this culd also be a sign for a slowdown and falling indizes.

The Peoples Bank of China (PBoC) controlls the extension of credit to the communities. The program of the PBoC purpose to give the high debted communities the possibilities to change their debt’s to bonds.

The debts of the Chinese lokal governments rises up sharply in the last years. The local governments have a big share in the national debt of China. Government imposed expenditures in infrastructure and social programs on the local government without increasing their revenue. This deficites the local governments have to finance with credits from the banks. The program should begin soon. But the banks don’t accept the PBoC’s program. The rates of the credits are 6%-7% pa, the rates of the bonds are less than 4%. the banks would lose 2% and the maturity of the bonds is longer than the maturity of the credits. The PBoC will give the banks the security that it accept the bonds as security, so banks could refinance themselves deposing the bonds as security to better conditions than normal. This, so the PboC should be enough incentive for the banks to accept the program. The PboC already has prepared a facility called Pledged Supplementary Lending (PLS). This would have also the effect that the banks could give more credits. The monetary pliciy would be loosen and this would support the growth of economy.

This measure goes parallel with the target of the government that China wants to liberalise it’s monetary policy to support the innovative medium seized companies with fresh money and to make the distribution of capital more efficient.

Donald Trump say he protect the national security. What does he mean?

The beginning of 2018 was a bad luck for the Chinese business. Two deals were blocked by the US government. The first was the aquisition of the Moneygram of the Alibaba-subsidery Ant Financial, the second was the deal of AT&T and Huawei. Later US government announced that the telekommunicationconglomerate should totally stop the communication with the smartphone producer because national security reasons.

CFIUS is a US office that proves any acquisition o fa US company for security risks. Dealogic mentioned that CFIUS blocked nearly 30 Chinese acquisitions of US companies. CFIUS partly forbid the acquisition, partly it protract the process. That is as much as all the other G7 states blocked. But China bought 90 US companies in 2016. This is the fourfold of 2012.

The USA and the EU complain about the situation that China blocked the chinese market for acquisitions and mergings with companies abroad and the lack of protection of intellectual property, while Chinese companies are buaing companies in EU market and USA for acquiring intellectual and technology advantages for their own companies. And the trade deficit didn‘t take some out of the situation.

For the Chinese it will be no problem if the USA blocks some acquisitions, but the duties of Donald Trump force a reaction of the Chinese. There are many products the USA imports to China. So China can put duties on agricultural products or aeroplanes. Also EU is thinking about duties on US agricultural and other products. This could be very negative for US farmers. Duties on aeroplanes will be in the interest of China because Boeing could loose market shares. This would advantage the Chinese aviation industry.

But all this stuff has to pay the customers of the goods. All this duties will increase prices and this will upport inflation. Steel and aluminium prices will increase if the plants will produce steel in the USA and this will endanger the aviation industry and the automobile producer also infrastructure projects and the wall to Mexico.

But is it necessary to produce inflation?

https://www.tipp24.com/powerball?prefilled=true&platform=CARA_WEBSHOP

The US debt clock shows 212,562$ debt per citizen or 832,188$ per family, tendency is increasing steadily. Savings are 4534$ per family, means 1158$ per citizen. This is only state debt. Date is 03rd of march, 2018. As the picture below shows the USA put 78% taxes on price draw lotteries if the price will be paid immediately as one sum. This hint I found at a german powerball web site. Paying the price in 30 year rates the taxes will be 38%.

https://www.newyorkfed.org/microeconomics/hhdc

Picture above shows that the private debt is at record high at the end o fthe 4th quarter of 2017. The Center of Microeconomic Data announced a total private debt of 13,15trio$, 473bio$ higher than the last peak in 2008, tendency is also increasing. The mortgage debt amounts 8,88 trio$ and the balances on home equity of credit ( HELOC ) declined to 444bio$. Home Equity Loan Rates

are starting at 4.5%. A home equity loan is a type of second mortgage that lets you borrow money against the value of your home.

The quarterly report aon household debt and credit shows steadily decreasing numbers of bankrupties and foreclosures, the transition in delinquency of student loans is very high steadily and of credit card debt is increasing sharply since the mid of 2017. Also the delinquency of mortgage is low, the sum o fmortgages and second mortgages could lead to a liquidity crisis like 2007.

  • Balances on home equity lines of credit (HELOC) declined again, by $4 billion and now stand at $444 billion.

If FED is raising the rates and economy is not accelerating the situation could change dramatically. Increasing prices for consumer goods will shrink the living standard of ordinary people while the rates of tjhe credits and mortgages are increasing.

US Inflation decreases dramatically from 2011 to 2015 reaching a low of -0.2% in April 2015. In 2016 and 2017 it was stagnant at 2.1 % with a forecast of 2.2% in 2018.

Current US Inflation Rates: 2008-2018

https://tradingeconomics.com/united-states/gdp-growth

GDP growth rate by Country

Country

Last

Previous Highest Lowest

United States

2.50

Dec/17

3.2

16.9

-10

% Quarterly

India

1.80

Dec/17

1.8

5.4

-1.7

% Quarterly

China

1.60

Dec/17

1.8

2.4

1.3

% Quarterly

Turkey

1.20

Sep/17

2.2

5.6

-5.2

% Quarterly

Mexico

0.80

Dec/17

-0.2

2.9

-5.8

% Quarterly

Netherlands

0.80

Dec/17

0.4

1.7

-3.2

% Quarterly

Spain

0.70

Dec/17

0.7

1.6

-1.6

% Quarterly

Euro Area

0.60

Dec/17

0.7

1.3

-2.9

% Quarterly

France

0.60

Dec/17

0.5

7.7

-5

% Quarterly

Germany

0.60

Dec/17

0.7

4

-4.5

% Quarterly

Switzerland

0.60

Dec/17

0.7

2.3

-1.6

% Quarterly

Australia

0.40

Dec/17

0.7

4.4

-2

% Quarterly

Canada

0.40

Dec/17

0.4

3.33

-2.3

% Quarterly

Japan

0.40

Dec/17

0.6

3.2

-4.9

% Quarterly

United Kingdom

0.40

Dec/17

0.5

5

-2.7

% Quarterly

Italy

0.30

Dec/17

0.4

6

-2.8

% Quarterly

Brazil

0.10

Dec/17

0.2

3.6

-4.1

% Quarterly

Russia

0.10

Sep/17

1

4.1

-5.4

% Quarterly

South Korea

-0.20

Dec/17

1.5

7.8

-7

% Quarterly

Indonesia

-1.70

Dec/17

3.19

4.01

-3.57

% Quarterly

https://tradingeconomics.com/united-states/gdp-growth

Unemployment rate in the USA chart and table

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2008 5.0 4.9 5.1 5.0 5.4 5.6 5.8 6.1 6.1 6.5 6.8 7.3
2009 7.8 8.3 8.7 9.0 9.4 9.5 9.5 9.6 9.8 10.0 9.9 9.9
2010 9.8 9.8 9.9 9.9 9.6 9.4 9.4 9.5 9.5 9.4 9.8 9.3
2011 9.1 9.0 9.0 9.1 9.0 9.1 9.0 9.0 9.0 8.8 8.6 8.5
2012 8.3 8.3 8.2 8.2 8.2 8.2 8.2 8.1 7.8 7.8 7.7 7.9
2013 8.0 7.7 7.5 7.6 7.5 7.5 7.3 7.2 7.2 7.2 6.9 6.7
2014 6.6 6.7 6.7 6.3 6.3 6.1 6.2 6.2 5.9 5.7 5.8 5.6
2015 5.7 5.5 5.5 5.4 5.5 5.3 5.2 5.1 5.0 5.0 5.0 5.0
2016 4.9 4.9 5.0 5.0 4.7 4.9 4.9 4.9 5.0 4.9 4.6 4.7
2017 4.8 4.7 4.5 4.4 4.3 4.3 4.3 4.4 4.2 4.1 4.1 4.1
2018 4.1 4.1

https://data.bls.gov/timeseries/LNS14000000

Unemployment rate was falling since 2010 and is stagnant since October 2017. Payroll employment increases by 313,000 in February; unemployment rate unchanged at 4.1%, so the Bureau of Labour Statistics on 15th of March 2018.

As the table below shows the GDP growth of the major economic countries in the world is slowly. Inflation is very low in the leading economies this could induce stagflation. Raising rates for debt without a secure economic situation could bring about liquidity crisis. Higher Inflation is a weapon against stagflation, if the inflation is based on higher demand of the people means higher wages. Inflation with low wages will bear lower demand because the people can‘t buy the things they used to buy and that means poverty and instability with debt at risk and increasing delinquency.

So, what does Pres. Donald Trump mean when he said, that he secures national security, when he put duties on steel and aluminium. What is the real condition of the economy of the USA, EU and the ehole world? Can USA deal with the private debt and mortgages?

The high tech plants the USA will built will not have this big impact on labour market as the plants had in the past.Robot technology will produce many things without human beings and will increasingly spread in the service sector. What if the labour market will turn into a low wages market while the prices in the stores increase so the people will not have the money to pay their debt?

What countries are the economic locomotives if China will find its continuous economic growth? Economics say India will follow if the production in China will be too expencive. But the production hub of China has floated the world for years and will do this also in the future. What products will be left for India? And what companies will built their plants in the USA? In India there are jobs people work for 0,30 US$ per hour. With that low wages in India the labour market in USA will be under pressure. But domestic market have to spur if the economy shold find traction.

See also:

In Future Robots will fullfill our wildest dreams. Video Show with excerpts of Tokyo Game Show. Post will introduce robot

 

Intesa Sanpaolo merged with Banca Populare di Vicenca and Veneto Banca and 17 mio € state aid

Intesa Sanpaolo is Italy‘s 4th biggest Corporate and second biggest bank. It has with 3,900 branches the largest domestic network, 13% market share and 11.1 million clients. It‘s turnover is 49.9 bio $ with a profit of 4bio$. Intesa say that it has particular strength in the wealthiest areas of Italy: strong retail presence covering more than 70% of Italian household wealth. Intensa has branches and represantative offices on every continent.

This conglomerate merges with Banca Populare di Vicenca and Veneto Banca. It pays 1€ for both banks. And that‘s not all. The Italy Government will pay 5.2bio€ Intesa process the merging with the two banks, which have many bad loans they can‘t write off without bankruptcy, so the ECB. 3900 of the 10100 employees will loose their jobs. The 5.2bio€ contain 1.2bio€ to keep jobs Intesa would also cut. 1600 of the 960 affiliates will be closed. Further the Italy government will pay Intesa 12bio€ to write down the bad loans of the two banks into a bad bank. The loss will be devided into parts for the state, the shareholders and

Intesa was dealing hard with the government of Italy, who has no choice than to underwrite that deal. A bankruptcy would lead to social disorder with many protests the government fear. And the two banks would have needed 6.4bio€ imediately to stay alive. And there were no more investors for one of the two banks. Intesa merges with the profitable part of the banks. Bad loans will be written off to bad banks.

The parlament of the EU permits the government of Italy the excemption to process the resolution of Banca Populare di Vicenca and Veneto Banca with the law of Italy. This is possible because none of the banks was relevant to the economical system of Italy. Now the Italy parlament has 60 days to ratify that agreement.

But with this procedure the tax payer will pay 17bio€ for a bailout of two banks. And this the EU wants to avoid and created the SRB. The SRB was created only for system relevant banks. Other banks should file bankrupty, so the EU parlametarians thought. Italy is the fourth biggest economy in the EU. Many banks in Italy have bad loans, so the financial system is very instable now. Italy could trigger the next financial crisis in Europe and EU. So Germany thinks about to extend the SRB to the smaller Banks. This would prevent that states spare shareholders to pay for the losses.

Now the equity holders and the holders of subordinated bonds are supposed to take the first losses. But many of the subordinated or junior bonds are sold to households and individuals. This will be pollitically very difficult for the government. But to inject state funds to soften the impact on private persons will cost hunge amounts and will be against EU rules on states aid.

The Banca Popolare di Vicenza Group was ranked eleven among the Italian banks based on total assets, Veneto Banca is a local bank. The merging of the two banks without risks brings Intensa Sanpaolo a little closer to the leading Uni Credit Group.

Global crisis? Where to invest in difficult situation

The strong debts in $ are a crucial faktor for the economy of China, Japan, EU and USA. Also for the emerging markets could the strengthening US $ become critical. Japan has a debt of more than 200% of GDP. It has no other possibility as to pay the debt draw upon quantitative easing. German exports will advance with a weaker € and will be competitive with Japan that way. But EU need a common fiscal politik to get rid of the debt crisis of it’s memeber states. But without a debt crisis the parlament will not install an integrative fiscal politic.

Also USA has to decrease the debt. Total average debt per US citizen is at 192,510$, the average personal debt per US citizen is at 52,773$, both at high level. The total debt is nearly the 6-fold of the tax revenue and over 100% of GDP. Prof Larry Kotlikoff estimate the uncovered debt at a value of 220 trio $. The QE in USA helped the banks, but didn’t influence the real economy in self-sutaining way. But the assets are increasing, so the investors could be content. But the US assets are very high valued. Between 2009 and 2014 the S&P 500 increases by 85% while the global equity market increases only by 12%. The stock exchanges of the emerging markets partially decreases.

Globally the debts are increasing from 87trio$ in 2000 to 141trio$ in 2007 and 199 trio$ in the middle of 2014.

From 2008 to 2014 the cash generation in USA increases about 10 trio$, normally a very strong stimuli for the economy. Nonethless the economy slows to recession by stagnant development of prices. Additionally the prices for commodities did fall in the last year. If there would be a strong demand the prices would increase. Falling commodity prices are also a sign for a slowing industry.

Measured on price-earnings ratio the stock exchange was only more high-priced at the end of the 1990th and in the year 1929. Both dates are warning signs for a crash scenario.

Investors have high sentiment, assets are increasing but the transport sector slows. A booming industry needs goods and where goods are needed the goods have to be transported. A slowing transport sector is a sign for slowing economy. And industry is producing for their stocks which increases the offer by slowing demand. The industry prices are falling since 4 months. Further the strong US $ will decrease the export. This could influence the consumer prices. US economy is still stagnant even though the US weapon industry booms. The US stimuli for the economy had no sustainable grip in the economy and the labor market, So FED will not increase the rate and slowing profits were often the reason for crisis. The PMI of USA decreased from 57.9 to 51.5. The profit of the large corporates for 2014 decreases compared yty.

We had in 2014 in USA a very good year for IPO’s. Benessaince Capital declared that 273 companies delivered 84.9 bio$. The best sentiment for IPO’s is always at the end of a boom, because investors have a lot of money to invest. Carry trades, margin debt and lombard credits in February 2015 obtained 465 bio $. A very high level and no problem as long as the stock exchanges are booming. But if the market slows the broker will find no more money and has to close his positions. That could turn into a sharp drop at the indizes.

So there are some reasons not to invest broadly in the US economy. Also the EU and China has to be obeyed carefully to find the right values to invest. Africa, which economies which have high GDP growth, is political very unstable, so the investment in African states have to be very well-considered and China has it’s fight against the housing bubble, slowing economy and the consequential mortgage crisis. Investors should think about conservative investments like pharmacy or foodstoff like Nestle or Fronterra. Another niche could be industry values related to the US arms industry, because the Arabien states and Israel are buying high value of US weapons for their fight against Al Qaeda and other rebels. So Israel bought for 1,87 bio$ weapons

The strong debts in $ are a crucial faktor for the economy of China, Japan, EU and USA. Also for the emerging markets could the strengthening US $ become critical. Japan has a debt of more than 200% of GDP. It has no other possibility as to pay the debt draw upon quantitative easing. German exports will advance with a weaker € and will be competitive with Japan that way. But EU need a common fiscal politik to get rid of the debt crisis of it’s memeber states. But without a debt crisis the parlament will not install an integrative fiscal politic.

Also USA has to decrease the debt. Total average debt per US citizen is at 192,510$, the average personal debt per US citizen is at 52,773$, both at high level. The total debt is nearly the 6-fold of the tax revenue and over 100% of GDP. Prof Larry Kotlikoff estimate the uncovered debt at a value of 220 trio $. The QE in USA helped the banks, but didn’t influence the real economy in self-sutaining way. But the assets are increasing, so the investors could be content. So the US assets are very high valued. Between 2009 and 2014 the S&P 500 increases by 85% while the global equity market increases only by 12%. The stock exchanges of the emerging markets partially decreases.

Globally the debts are increasing from 87trio$ in 2000 to 141trio$ in 2007 and 199 trio$ in the middle of 2014.

From 2008 to 2014 the cash generation in USA increases about 10 trio$, normally a very strong stimuli for the economy. Nonethless the economy slows to recession by stagnant development of prices. Additionally the prices for commodities did fall in the last year. If there would be a strong demand the prices would increase. Falling commodity prices are also a sign for a slowing industry.

Measured on price-earnings ratio the stock exchange was only more high-priced at the end of the 1990th and in the year 1929. Both dates are warning signs for a crash scenario.

Investors have high sentiment, assets are increasing but the transport sector slows. A booming industry needs goods and where goods are needed the goods have to be transported. A slowing transport sector is a sign for slowing economy. And industry is producing for their stocks which increases the offer by slowing demand. The industry prices are falling since 4 months. Further the strong US $ will decrease the export. This could influence the consumer prices. US economy is still stagnant even though the US weapon industry booms. The US stimuli for the economy had no sustainable grip in the economy and the labor market, So FED will not increase the rate and slowing profits were often the reason for crisis. The PMI of USA decreased from 57.9 to 51.5. The profit of the large corporates for 2014 decreases compared yty.

We had in 2014 in USA a very good year for IPO’s. Benessaince Capital declared that 273 companies delivered 84.9 bio$. The best sentiment for IPO’s is always at the end of a boom, because investors have a lot of money to invest. Carry trades, margin debt and lombard credits in February 2015 obtained 465 bio $. A very high level and no problem as long as the stock exchanges are booming. But if the market slows the broker will find no more money and has to close his positions. That could turn into a sharp drop at the indizes.

So there are some reasons not to invest broadly in the US economy. Also the EU and China has to be obeyed carefully to find the right values to invest. Africa, which economies which have high GDP growth, is political very unstable, so the investment in African states have to be very well-considered and China has it’s fight against the housing bubble, slowing economy and the consequential mortgage crisis. Investors should think about conservative investments like pharmacy or foodstoff like Nestle or Fronterra. Another niche could be industry values related to the US arms industry, because the Arabien states and Israel are buying high value of US weapons for their fight against Al Qaeda and other rebels. So Israel bought for 1,87 bio$ weapons from USA incl bunker-buster-bombs and anti-air missiles. Saudi Arabia bought 10 Seahawk helicopters and 100 Hellfire rockets. And Qatar made a 11bio$ weapon deal with the USA. And Russia has it’s fight with the sanctions. But if Russia can handle the sanctions it could be also worht to think about a awell-considered investment,  because the values had a big drop and could turn up.

See also:

http://fritzfische.de/finance/?p=14

Argentina is under US pressure to control patagonian region

A day after the Senate approved the proposed debt exchange as a way to circumvent U.S. court rulings Argentina government diskusses swapping global Argentine bonds for paper governed by local law. After a New York court had ruled that Argentina is prohibited from paying holders of its restructured bonds without also paying the hedge funds $1.3 billion plus interest.

In 2002 bondholders got less than 30 cents on the dollar as Argentina defaulted on about 100 bio $ in bonds, because a small group of hedge funds went to court for full repayment.

Argentina steadfastly refuses to pay the holdouts in full, saying that to do so would open the country to a raft of new lawsuits. Argentina fights against recession and inflation. With the swap Argentina tries to to circumvent the U. S. Court rufling and hold liquidity. „There is obviously willingness among many creditors, or bondholders, to participate in the sovereign debt payment law, in order to get the money that is owed to them,“ cabinet chief Jorge Capitanich told reporters. The debt swap bill, passed by the Senate on Thursday. It will allow holders of 29 bio $ in bonds under foreign law the choice to swap them for papers governed by Argentine or French law.

In need of financing to develop its vast Patagonian shale oil and gas fields, Argentina will be unable to issue fresh international debt until the lawsuits are settled.

With Patagonia shale oil and gas field Argentina is sitting atop of a shale bounty that could transform the outlook for the Western Hemisphere’s supply and secure the South American country’s energy self-sufficiency for decades. And it is in an area where you’ve already got oil industry activity. There are service companies, pipelines and infrastructure, and you have also knowledge of the rocks.

Asked what was the key reason behind the decision of US based Corporation Chevron to increase its investment in Vaca Muerta, Robertson answered: “We like the rock. That’s first and foremost. Drilling costs are coming down and the well results so far were sufficient to warrant additional investment.”

BP, CNOOC, Chevron and Sinopec will start 2017 to drill more than 1500 wells to produce 50,000 barrel/day of crude oil and 3 billion cubicfeet/day of natural, so YPF.

The  Chevron Corporation is operating in Argentina for many years where it produces currently 21,000 barrels of crude oil and 4 million cubic feet of natural gas per day and has signed Heads of Agreement to spent $1.24 billion capital expenditure to explore and develop the shale oil and gas in the Vaca Muerta Basin within the Neuquen Province in Argentina.

This agreement comes at a critical period for Argentina as it should start to import natural gas and refined products although it is recognized to hold ones of the largest reserves in the world for shale oil and gas.

Chevron estimates that 2014 capital and exploratory expenditures will be $39.8 billion, including $4.8 billion of spending by affiliates.

At the same time NML Capital served subpoenas this week to Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC) in an effort to obtain information on $6.8 billion in financing for deals signed by the two countries in July.

„We want to understand the mechanics of these credit facilities to establish whether assets to which Argentina has a legal title could surface in jurisdictions where we would be able to attach them,“ a lawyer advising Elliott told.

The subpoenas are aimed at a facility provided by China Development Bank, ICBC and BOC to finance the onstruction of two hydroelectric dams in Argentina’s southern Patagonia region and a loan from China Development Bank and ICBC to finance the Belgrano Cargas railway project.

Both deals were signed by Argentine President Cristina Fernandez and her Chinese counterpart, Xi Jinping, during an official visit of a Chinese delegation to Buenos Aires.