Yesterday, Macro Man called out Prime Minister of China, Wen Jiabao, for having spurred China's M2 growth to 28.5% year over year, asked whether he deserves the moniker "Helicopter Wen" more than Ben does. He asks:
"Unfortunately, in an act reminiscent of Gordon Brown Stalin, the early 90's data has been wiped from the historical record. A cynic might suggest that this is because China's leadership doesn't want to remind people that one upon a time, money growth was this high and it didn't end well. Judge for yourselves."
Today, the National Statistics Bureau published new figures showing that Chinese GDP growth was 7.9% in the second quarter from the year previous, up from the growth of 6.1% in the first quarter, per Terence Poon and Andrew Batson at the Wall Street Journal.
"Also Thursday, the finance and economic committee of the National People's Congress, China's legislature, warned that the government must prevent the "extraordinary growth" of credit that could lead to inflation risks and problems for the financial system. It said China should strengthen credit checks and prevent a rebound in bad loans. The committee includes influential members but doesn't have a role in setting economic policy.The Economist notes:
The People's Bank of China has already started to take some measures to fine-tune the rapid flow of credit. On Thursday, the central bank used its weekly sale of three-month bills to continue to guide money-market interest rates higher for the third straight week."
"In the year to June fixed investment surged by 35%, car sales rose by 48%, and purchases of homes by more than 80%. After falling last year, home prices are now rising briskly in some big cities, and share prices have soared by 80% from their November low. Domestic spending has been spurred partly by the government’s stimulus package, but probably even more important was the scrapping of restrictions on bank lending late last year. In June new lending was more than four times larger than a year earlier."
The Economist notes that the importance of property to domestic demand means it is unlikely that Beijing will clamp down too hard on the lending. In the meantime, Carlos Tejada at the China Journal reports that China is revisiting plans to launch a "Made in China" campaign.
2. WORLD BANK WARNS OF DEFLATION ON EXCESS INDUSTRIAL PRODUCTION
Ambrose Evans-Pritchard at the UK Telegraph reports that the chief economist at the World Bank, Justin Lin, in Cape Town recently warned that excess industrial capacity will cause a deflationary spiral unless it is addressed.
"Mr Lin said capacity use had fallen to 72% in Germany, 69% in the US, 65% in Japan, and as low as 50% in some developing countries, mostly touching lows not seen in modern times."Lin suggests that competitive devaluation will have little productive effect in this environment, saying:
"No country can count on currency depreciation and exports as a way out of recession. Unless we deal with excess capacity, it will wreak havoc on all countries. There is urgent need for global, co-ordinated fiscal stimulus."(h/t Yves Smith at naked capitalism.)
3. UK SETS GOAL OF 40% RENEWABLE SOURCE FOR ELECTRICITY GENERATION BY 2020
Selina Williams at the Wall Street Journal reports that the UK has set as its goal sourcing 40% of its electricity generation from low carbon energy sources by 2020, with fully 30% to come from wind power, wave and tidal energy and other renewables. The other 10% is to be from coal-powered plants with carbon capture technology and nuclear. (As of 2006, per the IEA, nuclear power generation accounted for 18.6% of total electricity supply in the UK. Coal accounted for 37.5%. All renewables accounted for 6.1%.)
"'Renewables, nuclear, clean fossil fuels, as this plan sets out, are the trinity of low carbon and the future of energy in Britain,' [Energy and Climate Change Secretary Ed] Miliband said yesterdat. 'All of them should be part of our future energy mix.'4. TURKEY INCREASES FUEL AND RESTAURANT TAXES, REDUCES BENCHMARK INTEREST RATE TO 8.25%
The government wants the power sector to be almost completely free of carbon emissions by 2050 as it strives to meet a commitment to cut overall emissions by 80% by 2050. The UK has already cut its emissions by 21% since 1990."
Delphine Strauss at the Financial Times reports that Ankara yesterday announced that it would raise taxes on petroleum products and restaurants with immediate effect. The new taxes will add roughly 8% to prices at the pump and between 8 and 18% at high end hotels and restaurants.
"'The government is speeding up its efforts to tighten fiscal policy,' said Yakin Cebeci, economist at JPMorgan, estimating the measures could improve budget performance by 0.8% of GDP within 12 months.Effective tax collection has been a point of dispute at the IMF in terms of approving a new financing package for Ankara. Meanwhile, Steve Bryant at Bloomberg reports that the Turkish central bank today cut its benchmark interest rate by half a point to 8.25%, it's ninth consecutive monthly cut, indicating that further cuts may be in the works.
Stimulus packages and a spending splurge before local elections in the spring have led to a rapidly widening budget deficit. Figures published on Wednesday by the finance ministry showed a deficit of 23.2bn lira ($15.2bn) in the first half of the year, compared with a surplus of 1.9bn lira in the same period of 2008."
"The inflation rate reached a 39-year low of 5.2% in May, before rising to 5.7% last month, a pick-up the central bank says will prove temporary. The bank’s target for this year is 7.5% and its most recent survey of economists and businessmen forecast a year-end rate of 6%.
'Inflation will remain at low levels for a long time,' the bank said in today’s statement."
"Industrial output fell 17.4% in May, extending a decline that drove a record 13.8% contraction in gross domestic product in the first three months of the year."5. PRESIDENT OF ABKHAZIA SPEAKS OF RELATIONSHIP WITH RUSSIAN RAILWAYS JUST AFTER EBRD LOAN
In light of the EBRD's recent decision to make a $500 investment in Russian Railways, the following portion of a Der Spiegel interview of the President of Abkhazia, Sergei Bagapsh, might be of some interest:
"SPIEGEL ONLINE: There are Russian military bases in Abkhazia, Russian troops guard your external borders, and your currency is the ruble. And, then, you want the Russians to manage your railways for 10 years. Is it possible that you're getting just a little too dependent on Russia?6. LOCKHEED MARTIN INDIA CEO STEPS DOWN AMIDST ESPIONAGE SCANDAL, WILL US, AUSTRALIA, INDIA AND JAPAN JOINTLY OPERATE AIR CRAFT CARRIERS IN RESPONSE TO CHINESE CONSTRUCTION OF 6?, INDIA SELECTS 2 SITES FOR US COS TO BUILD NUCLEAR POWER PLANTS
Bagapsch: We are dealing with the Russian railways because we have to modernize our own. We would be equally pleased to deal with the German railways if they were interested. In any case, there are no completely independent nations in this world. Liechtenstein is dependent on Switzerland, Luxembourg on France. We are all dependent on one another. Georgia is dependent on America; we are on Russia."
Ajai Shukla at the Business Standard reported on Monday that
"Ambassador Douglas A Hartwick, Lockheed Martin India’s CEO, who was spearheading the world’s largest defense manufacturer’s campaign to sell India the F-16 IN medium fighter aircraft, was withdrawn from India in an unusual hurry."According to Indian Defense Ministry sources, Hartwick was removed as CEO of Indian operations after the company was discovered to be in possession of classified information regarding defense purchases. Meanwhile, Manu Sood at 8ak recently interviewed US historian Jason Verdugo on the possibility of the Quadrilateral Initiative (or Quad) countries (the US, Australia, India, and Japan) jointly operating the recently decommissioned US aircraft carrier--the USS Kitty Hawk--on the recent news that China has been secretly constructing six aircraft carriers. (I am indebted to Galrahn at Informed Comment for both of these items.) Meanwhile, Amol Sharma at the Wall Street Journal reports that India has selected two sites on which US companies could build nuclear power plants, which will be announced when Secretary Clinton arrives in the country next week.
"The two countries may also use Mrs. Clinton's trip to announce completion of an agreement for the US to track sales of defense equipment and ensure it is used for its stated intent, according to people familiar with the matter. That 'end-use monitoring' agreement will be crucial, experts say, as US companies compete for major contracts such as India's plans to purchase 126 fighter jets at an estimated cost of $11 billion.
A spokesman for India's Ministry of External Affairs said that some agreements will 'naturally' be finalized between the US and India during Mrs. Clinton's trip but declined to elaborate."
7. INDIA AND PAKISTAN AGREE TO INTELLIGENCE SHARING ON BACK OF AL QAEDA CALL FOR GENERAL REVOLT AGAINST ISLAMABAD
Rama Lakshmi at the Washington Post reports that the prime ministers of India and Pakistan met for two hours on the sidelines of a Non-Aligned Movement meeting in Cairo after which released a joint statement in which they agreed to share "real-time, credible and actionable" information on terrorist activities.
"[T]he text of the jointly agreed statement on Thursday said that 'action on terror should not be linked to the composite dialogue process and these should not be bracketed' and that 'terrorism is the main threat to both countries.'"The statement follows the call by Al-Zawahiri, a key figure in al-Qaeda, for cooperation in its attacks on Pakistani interests, suggesting that the current government is actually in the employ of the US Ambassador. Juan Cole at Informed Comment posts the entire text per the Open Source Center's translation--note that it includes the nationalist refrain that "the West" seeks to break the country up:
"In Pakistan in particular, the Crusade aims at eradicating the growing jihadi nucleus in order to break up this nuclear-capable country, and transform it into tiny fragments, loyal to and dependent on the neo-Crusaders."This seems increasingly desperate to me and that this particular band of extremists have worn out their welcome in Pakistan.
8. IRAN'S 12 YR CHIEF OF ATOMIC ENERGY ORGANIZATION--FORMERLY 12 YRS AS OIL MINISTER--LINKED TO MOUSAVI STEPS DOWN
BBC News reports that Gholam Reza Aghazadeh, the head of Iran's Atomic Energy Organization, has resigned.
"Mr Aghazadeh is a veteran official who served in the 1980s as a deputy to Mir Hossein Mousavi--the defeated candidate in Iran's disputed presidential elections last month.9. IRAQ'S OIL EXPORTS UP ON INCREASED NORTHERN PRODUCTION (STILL SIGNIFICANTLY BELOW PRE WAR PRODUCTION)
In 1985 he began a 12-year stint as oil minister, staying in the post during the presidency of Ali Akbar Hashemi Rafsanjani.
He then moved to his job at the head of the atomic agency in 1997 under the reformist former president, Mohammad Khatami.
He continued in the post when Mr Ahmadinejad was first elected in 2005."
Faleh al-Khayat at Platts reports that Iraq's total oil exports rose by 19 kb/d in June to 1.925 mb/d.
"Exports from northern fields rose to 528 kb/d in June, a post-war record and 7 kb/d higher than May exports.
The ministry did not say if the figure for the north included exports from the Tawke and Taq Taq fields in Iraqi Kurdistan, which began exporting crude oil on June 1."
"Production from southern oil fields rose slightly to 1.794 mb/d from 1.759 mb/d in May.10. VIOLENT CLASH BETWEEN STATE GOVT BACKERS AND NATIONAL GUARD IN TOWN EAST OF CARACAS
Although this increase is a continuation of the recent improvement in production from the south, the rate achieved is still 161 kb/d below the 1.955 mb/d produced in July last year.
The steep decline in production from southern fields since last July lies behind recent escalation in criticism of oil minister Hussein al-Shahristani and led to his summons by parliament to answer questions about oil policy."
Christopher Toothaker at the Associated Press reported yesterday that hundreds locals in a small town east of Caracas by the name of Curiepe reacted to the National Guard seizing a police station controlled by an elected figure from the opposition by massing outside it and hurling rocks, bottles and Molotov cocktails at the troops.
"The conflict began shortly before dawn when about 40 soldiers from the National Guard tossed tear gas canisters at the police post, forced officers to leave and took over the building, said Elisio Guzman, director of the Miranda state police. He contended the troops were following orders from the mayor."
"As the conflict wound down later Wednesday, Adriana D'Elia, a Miranda state government representative, said state authorities agreed to move their police to another building after meeting with the municipality's pro-Chávez mayor, Liliana Gonzalez."11. FORECLOSURES UP 15% YOY IN 1H 2009, INITIAL UNEMPLOYMENT INSURANCE CLAIMS AT HALF MILLION
Barry Ritholtz at the Big Picture links to RealtyTrac's country-wide county foreclosure map, noting that
"1,905,723 foreclosure filings were reported on 1,528,364 US properties in the first six months of 2009, a 9% increase in total properties from the previous six months and a nearly 15% increase in total properties from the first six months of 2008."
Meanwhile, Reuters reports that initial jobless claims for state unemployment were a seasonally-adjusted 522,000 in the week ended July 11, 47,000 fewer than what was seen in the previous week, per the Labor Department.
"Continued claims of people still on jobless aid after an initial week of benefits fell to 6.273 million in the week ending July 4, the latest for which data is available.12. US OIL IMPORTS DOWN 7.6% IN 1H 2009 YOY, JET FUEL IMPORTS HALVED
It was the lowest reading since April and the largest one-week decline on record. Analysts had forecast continued claims would decline to 6.85 million."
Robert DiNardo at Platts reports that US imports of crude oil and petroleum products fell in the first half of 2009 by 7.6% from the first half of 2008 to 12.048 mb/d, per the American Petroleum Institute's monthly statistical review.
"Crude oil imports in June were down by 12.2% at 8.754 mb/d from 9.974 mb/d in June 2008. For the January-June period, crude imports were down by 6.2% at 9.191 mb/d versus 9.801 mb/d in the prior period, according to API's estimate.Jet fuel imports collapsed, falling 57% to 39 kb/d in June from 91 kb/d in June 2008.
Product imports in June were also mostly lower. For instance, imports of gasoline fell by 27.5% from a year earlier to 981 kb/d from 1.353 mb/d."