Daily Sources 7/6/10

1. Susan Li and Jacob Greber at Reuters report that Kenneth Rogoff, Harvard University professor and former chief economist of the International Monetary Fund, said that the China property market is beginning a collapse that will hit its banking system. Meanwhile, Michael Shuman at the Curious Capitalist reports that China's June Purchasing Managers Index dropped more than expected, meaning that industrial output is likely to slow in the coming months. He notes that Beijing's efforts to rein in lending is also expected to have a slowing effect on the economy. He also reports that PMIs fell across the board in Asia, leading him to ask how meager the US's economic recovery is going to look. Also, Willem Thorbecke at VOX argues that China's decision to abandon the dollar peg could facilitate considerable appreciation which would help the region redirect production away from the US and EU and towards themselves. Brian Spegele at the China Real Time Report writes that Chinese journals have seized upon the suggestion in a niche arms journal that the US Administration is considering canceling purchases of the F-35 due to unanticipated military advances made by China.

2. Nikki Tait and Mark Mulligan at the FT report that Spain's plan to retain jobs by doubling its subsidies to its coal sector is running into heavy flak in both Spain and now Brussels.

3. Nassir Karimi at the AP writes that Iran has sent letter to the EU establishing its conditions for further talks on the nuclear issue.

"[President Mahmoud Ahmadinejad]also set three conditions for an eventual resumption of talks, saying countries who want to participate should make clear whether they oppose Israel's purported atomic arsenal, whether they support the Nonproliferation Treaty and whether they want to be friends or enemies with Iran. However, he said, participation in the talks was not contingent on the answers."

Meanwhile, the AFP reports that Iran will cease subsidizing gasoline sales in late September.

Iranians are currently allocated 60 litres (13 gallons) of petrol a month at a subsidized rate of 1,000 rials (10 US cents). These sales would be stopped, according to [Mohammad] Royanian, [the head of Iran's fuel transportation organization], who did not reveal the new price.

Any other purchase of petrol over and above the rationed quota is at a price of 4,000 rials (40 US cents).

4. Upstream Online reports that OPEC's annual statistical bulletin released today purported to show a 4% rise in proven reserves, led by an increase in Venezuela.

5. Reuters reports that Thailand extended its state of emergency.

6. Dave Ernsberger at Platt's The Barrel reports that in a recent conference in Thailand it was estimated that the world water market will grow twice as fast as the oil market by 2030. There are some doubts that water will be commercialized in the same way as other commodities. Water is much more critical than energy politically speaking. Either way, the prediction that the water market will grow that quickly is an indication of geopolitical stressors to come.

7. Emmeline Zhao at Real Time Economics reports that the Federal Reserve Bank of Dallas authored a report that showed that the developed countries in the world have responded to increased unemployment by erecting new barriers to immigrant labor. Meanwhile, Meraiah Foley reports that the new Australian Prime Minister, Julia Gillard, has proposed a regional processing center in East Timor for refugees seeking to settle in Australia.

8. Anton Troianovski at Real Time Economics reports that vacant office space continued to accumulate in the second quarter, an indication that companies aren't planning to do any hiring in the near future. Tim Duy at Economist's View asks what's wrong with the American jobs machine. He quotes from a piece by Andy Grove which stipulates that an economy which continues to export jobs while innovating will eventually lose both its manufacturing base and its capacity for innovation. Well worth reading in full.