To the never-ending astonishment of our economists, global growth has been much weaker since the Financial Crisis than before it, despite enormous global stimulus from years of extreme central-bank monetary policies and record amounts of government deficit spending.
This should not have happened, according to our economists. Fiscal stimulus and expansionary monetary policies beget economic growth, which beget even more economic growth. That’s the theory. And that’s precisely what hasn’t happened. All it did was inflate asset prices. But the global economy has been a dud.“
If we calculated global growth with China’s true growth rate and not the official rate, global growth in the second quarter of 2015 would be only 2%,” figured Natixis, the investment bank of France’s second largest megabank, Groupe BPCE.This “sluggish growth, close to a recession, is due to persistent, structural causes; we therefore use the term ‘structural recession’ to show that it does not have a cyclical origin,” the report explained. It’s not caused by normal cyclical fluctuations, but by “persistent structural problems that are specific to each region.”
China loses its cost-competitiveness
The problem dogging China is the soaring cost of labor, in an economy that is still too centered on low-end products and exposed to “a very high level of the price elasticity of exports.” Thus, if Bangladesh or Vietnam can produce it a little more cheaply, China loses those exports. Labor costs have soared in the double digits year after year. Even per-unit labor cost, which compensates for productivity gains, has jumped year over year: in 2015, by 4.5%, which is at the low end; and by over 10% at the high end in 2000-2001 and 2007-2008. Hence a decline in exports of those products, a weakening of investments, and a sharp weakening of what Natixis calls China’s “true growth.”...
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." John Stuart Mill
To the never-ending astonishment of our economists, global growth has been much weaker since the Financial Crisis than before it, despite enormous global stimulus from years of extreme central-bank monetary policies and record amounts of government deficit spending.
This should not have happened, according to our economists. Fiscal stimulus and expansionary monetary policies beget economic growth, which beget even more economic growth. That’s the theory. And that’s precisely what hasn’t happened. All it did was inflate asset prices. But the global economy has been a dud.“
If we calculated global growth with China’s true growth rate and not the official rate, global growth in the second quarter of 2015 would be only 2%,” figured Natixis, the investment bank of France’s second largest megabank, Groupe BPCE.This “sluggish growth, close to a recession, is due to persistent, structural causes; we therefore use the term ‘structural recession’ to show that it does not have a cyclical origin,” the report explained. It’s not caused by normal cyclical fluctuations, but by “persistent structural problems that are specific to each region.”
China loses its cost-competitiveness
The problem dogging China is the soaring cost of labor, in an economy that is still too centered on low-end products and exposed to “a very high level of the price elasticity of exports.” Thus, if Bangladesh or Vietnam can produce it a little more cheaply, China loses those exports. Labor costs have soared in the double digits year after year. Even per-unit labor cost, which compensates for productivity gains, has jumped year over year: in 2015, by 4.5%, which is at the low end; and by over 10% at the high end in 2000-2001 and 2007-2008. Hence a decline in exports of those products, a weakening of investments, and a sharp weakening of what Natixis calls China’s “true growth.”...
Good link and there is much truth to labor cost pressures in China. Japanese and Korean manufacturing is shifting to other countries.
It's difficult to discuss these issues because everything in the financial world has been turned around in the past couple of decades to the point where good is bad and bad is good. From measures of unemployment to the way our governments calculate GDP, everything has been redefined so as to make an economy running on un payable debts look healthy.
It's a big 45 year experiment that is drawing to a close.
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." John Stuart Mill
It's a big 45 year experiment that is drawing to a close.
...and buying bucket loads of shiny gold is not going to hedge you against it.
I would have more respect for what you say if you weren't under such delusions.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
It's a big 45 year experiment that is drawing to a close.
...and buying bucket loads of shiny gold is not going to hedge you against it.
I would have more respect for what you say if you weren't under such delusions.
Why do people insist on assuming that anyone who talks about gold owns no other assets but gold. Gold is a hedge, one of many. Rural land is another, a small profitable business is another. Investments in soft commodities is another.
I tend to find that those with the all or nothing mindset typically have all their eggs in the residential property basket, and by law, the superannuation basket. Is that the case here I wonder?
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." John Stuart Mill
...and buying bucket loads of shiny gold is not going to hedge you against it.
I think you are allowing the rantings of goldbugs to detract you from the true value of gold.
For just about everyone on the planet who uses a currency other than the USD, their spending power has been preserved in the last year if they owned gold instead of their local currency.
This is in the same year that most pundits had written off gold as a crank buy.
The year that gold was supposed to crash and burn.
Gold as a store of value is a pretty absurd concept I admit, but bits of paper or electronic entries on your laptop screen? You work for an hour and all you have to show for it is a grubby bit of paper with a $20 symbol on the front.
A bit of paper that can be printed at will, as fast as a printing press can print.
People who chuck all of their money into Gold are lunatics I admit. But no more insane than someone who leverages into property hoping to rent to the person they priced out and then eventually sell for twice the price to the same person they priced out.
Owning 10% gold is a pretty sane hedge. Owning 100% fiat is a leap of faith, holding the debt for a few million of property whilst the bank holds the deeds, is insanity.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
But no more insane than someone who leverages into property hoping to rent to the person they priced out and then eventually sell for twice the price to the same person they priced out.
That's the madness of the modern property investor summed up in a single sentence. When landlords of old drew from the well to buy a home or 2 it didn't interfere greatly with the market. Today we have a market completely dominated by them, distorted by them, basically destroyed by them. Yet here they are all around us saying everything is normal, that they will see the same financial returns as the old landlords saw.
They have learnt nothing from the experiences of other nations.
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." John Stuart Mill
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