Measles outbreak

A measles outbreak is in the news.

A good time to refresh your socionomic understanding with Social Mood, Stocks and Epidemics

Euro bulls increase

Speculative euro longs are at their highest point in more than a year. As for silver, the big week wasn't met with an increase in speculative longs. The data is from Tuesday, but the big spike in silver started at the end of the previous week. If there wasn't a large increase in bullish bets at of Tuesday, there likely aren't as of today. The short-term RSI indicator is showing silver near overbought levels, but not at an extreme, which comports with the COTS data.

Here comes the inflation?

Inflation Is Here, and It Is Going to Get Worse

Based on past massive monetary pumping and using the time lag of 36 months, we can suggest that the growth momentum of the full CPI and the CPI less food and energy is likely to visibly strengthen in the months ahead. We forecast that the yearly rate of growth of the CPI could rise to 2.4 percent by September before jumping to 4.4 percent by December. Year on year, the rate of growth of the CPI less food and energy is forecast to climb to 1.5 percent by September before climbing to 2.7 percent in December. The message from our monetary analysis that there is a growing risk of acceleration in price inflation in the months ahead.

U.S. economy is fried according to Goldman

I don't know what other conclusion can be reached if $61 billion in cuts will hammer GDP growth.

Goldman Sees Danger in US Budget Cuts

The Republican plan to slash government spending by $61bn in 2011 could reduce US economic growth by 1.5 to 2 percentage points in the second and third quarters of the year, a Goldman Sachs economist has warned.

Truly global markets: K-Pop edition

This is a great video discussing the rise of Korean pop music. Jump to the 10 minute mark, the part on Korea goes for more than 15 minutes. Some highlights: almost everyone speaks English at the Korean music companies (a complete reversal from the 1990s); music is a means not an end, songs sell for as little as $0.05; there's no Korean radio scene, music jumps straight to a global audience via the Internet; English K-pop websites generate more traffic than Korean websites.

Korea doesn't have good demographics, but consider the youth bulge in Asia versus the flat populations in the West. Also, the shift in economic power from West to East. The segment also discusses the rise of the Korean movie industry, which has been putting out Hollywood quality movies for a decade. That's in terms of technical sophistication, they have also created some unique movies that put Hollywood to shame.

Migrant workers don't return after Spring Fesitval

Migrant Workers Stay Home, Stinging Employers

A longtime attraction for migrants is a relatively high wage level in eastern regions, which can be about 20 percent above those in central and western provinces. But more recently the wage differential has become less attractive, since eastern living costs have risen and are higher than elsewhere.
In addition, workers have become increasingly unwilling to leave hometowns, children and other relatives for dormitories and assembly lines far away.

Chinese Academy of Social Sciences scholar Cai Fang also notes that the nation's labor force is growing more slowly than the demand for goods in rapidly growing China.

Cai said China's working age population is nearing its peak and predicted that it will stop growing after 2015. That's when the nation's so-called demographic dividend will disappear.

Gong Sen, a researcher at the State Council Development Research Center's Social Development Office, agreed the nation's labor supply has turned a corner. What had been a seemingly unlimited supply is now falling, and employers can expect more worker shortages.

But some experts have challenged the forecasts of permanent shortages for the labor pool. Zhang Libin, labor market office director at the Ministry of Human Resources and Social Security, argues that the overall worker supply is still increasing in China, and that current shortages are merely structural, tied to a changing labor force.

Companies in general are contending with a shortage of younger migrant workers, who are more mobile than ever and more likely to shop around for better offers, which leads to high turnover rates, Zhang said. On the other hand, she said, fewer jobs are available for older migrant workers, and university graduates have trouble finding suitable work.

As I showed in the post Labor costs soar in China, the population of entry-level workers is in decline. The total labor force is still growing, but entry-level factory workers are fewer. Mix in all the other factors and it is a powerful force that will push wages higher in the coming years.

Sidewalk rage story has legs

Study: ‘Sidewalk Rage’ Plagues New York City Streets

The sidewalk rage story in the Wall Street Journal isn't a one-off event, New York's CBS affiliate has picked up the story.

Understanding China's market

When a free market takes hold, the market that emerges will be an expression of that native culture and religion. This goes for strange ice cream and potato chip flavors to entire business models. Here are three news stories I read today that illustrate this well.

Microsoft likens China market to 'Wild West

Zhang said many areas of business on the mainland were "unclear" making it hard for overseas companies to adapt to the market. "This lack of clarity exists in many aspects, from the competitive model and capricious customers to China's policies and regulations," he said.

Zhang compared market conditions on the mainland to "the Wild West". He said there were no rules as long as companies achieved the ultimate goal: making a profit.

He said he believed it would take a long time for overseas companies to acclimatise. "Now many companies have noticed the problem but it will take years to conquer the maladjustment," he said.

Despite this, he said China was Microsoft's most important market apart from the US. "China is our significant strategic centre. It is not just a market centre - we are not here just to sell."

Microsoft gets it. Best Buy didn't.

Best Buy to Close China Stores

The Richfield, Minn., retailer announced Monday evening that it was shuttering its nine Best Buy branded locations in China, which have struggled to perform as well as similar big-box stores in the U.S., and was also exiting the Turkey market, where it recently began retail operations.

Instead Best Buy said it would focus on growing in China under another retail format called Five Star that has proven more successful; it disclosed plans to open 40 to 50 additional Five Star stores in 2012.

The imported business model failed, but the organic one survives.

Finally, here's a market in branded eggs.

Egg revolution hatching down on the farm

One Sichuan egg farm claims its hens are raised in bigger cages so that they can get more exercise and produce better quality eggs, while a Shanghai firm says its hens are given only vegetarian food and their eggs can be eaten raw, thanks to certain technology introduced from Japan.

Although the prices of these eggs are usually twice that of ordinary eggs, the sales gimmicks they use are often effective in attracting health-conscious buyers.

"I only buy branded eggs," said Zhang Fengxia, a Beijing mother of a two-year-old girl. She is a loyal customer of "tu eggs" or, literally, "earth eggs", whose producers say their hens are raised cage-free and fed worms.

"I know it's hard to verify whether what the producers say is true or not," Zhang said. "But I generally believe something with a brand rather than those coming from somewhere unknown."

Negative mood manifesting around the globe

The above is from the recent front page of the Drudge Report.

To some extent the headlines and news media are hyping events. The Middle East is truly revolutionary, but events in China and Wisconsin are far more pedestrian. However, it's clear that there's a global phenomena in the manifestation of negative social mood that is self-reinforcing.

In Italy, Prime Minister Silvio Berlusconi is under a cloud of scandal. He is always under a cloud of scandal, but now it is turning serious as he faces charges for abuse of power and paying for sex with an underage hooker. This is in Europe, which mocked America's seriousness during the Clinton scandal, but now they are enraged. In part, this may be politics,since Berlusconi is "right" and Clinton "left," but the fact remains that the public is turning on its leader.

This has implications for the protests in the Muslim world because Italy has close relationships with some North African countries such as Libya. Pressed to engage the Libyan leader, Berlusconi has taken a hands off approach for now.
Berlusconi won't 'disturb' Gaddafi amid bloodshed

In Germany, the public rejected Angela Merkel's ruling coalition, an event that is being widely interpreted as a rejection of EU bailout policies. This is reflected in the results. Merkel's center-right party was defeated by the center-left adopting even more right-wing policies, while a left party underperformed and a right party outperformed.
Merkel’s party trounced in Hamburg poll

Ms Merkel’s liberal Free Democrat coalition partners in Berlin did better than expected in the Hamburg poll. Exit polls showed that they were on course to obtain around 6.5 percent of the vote, a result which would enable to enter the city parliament.

The environmentalist Greens had hoped to secure around 15 percent of the Hamburg vote and share power with the Social Democrats. However exit polls suggested that they would pick up just under 12 percent.

Mr Scholz defeated his unpopular conservative opponent Christoph Ahlhaus by advocating rightwing pro- business policies which some critics argued were “more conservative” than the conservatives. “We have been given the support of a large number of voters and we must ensure that we meet our pledges,” Mr Scholz declared last night.

And of course, in South Korea, the bank runs continue
S.Korea bank runs prompt more suspensions

Workers line up to join Foxconn

So much for worries about stressful work conditions.
Shenzhen Daily: Thousands of job seekers at Foxconn

"I have heard they've raised wages here, you can get up to 3,600 yuan per month, compared to other companies the pay is much higher," a job applicant from Hunan said.

Goldman Sachs derivatives fraud

A big headline in the Chinese news this weekend is Goldman Sachs derivatives fraud causing loses for domestic Chinese state-owned companies. Shenzhen Economic Daily has the story:。 The Google translation is terrible in some places, it cannot even translate 忽悠, which means to dupe or to con.

The translation isn't critical to see that the firm remains a target of populist anger. A popular book in China is the "Goldman Sachs Conspiracy" and rising commodity prices only remind people of the speculators.

高盛涉嫌欺诈国内企业真相 忽悠是企业巨亏主因

Appear in the derivatives market from the first fuel huge losses to the large number of central enterprises, the local state-owned enterprises, private enterprises and individual investors (rich) cheated, many domestic enterprises to the risk of a vivid lesson. Industry experts say, Goldman Sachs and other international financial institutions, the behavior of derivatives fraud never stops, new cases have surfaced recently, the complex financial derivatives approach is still not

Today, this newspaper through the analysis of some domestic enterprises recruit the typical case, let more people know the truth of Chinese enterprises been fooled, so that domestic enterprises so as not to make the same mistake.


　　CIC Securities Zhang Xiaodong, general manager of financial derivatives:

　　Goldman 忽悠 main reason is the huge loss of domestic enterprises

　　Investment securities and financial derivatives in managing director Zhang Xiaodong, when interviewed yesterday, said that in 2008, a large number of central enterprises, the local state-owned enterprises, private enterprises and individual investors (rich) in equities, foreign exchange, commodities have suffered huge losses on . Loss of large and covers the breadth and victims is unprecedented. However, the loss of the causes, processes and issues to deal with the outbreak was dense fog, while the enterprise with Goldman Sachs led to huge losses on the gambling, while the global financial tsunami has caused business losses. What is the truth in the end? Goldman Sachs and other international financial institutions suspected of fraud by selling toxic financial derivatives, is the leading domestic enterprises, the main reason for the huge losses.

　　Zhang Xiaodong long been concerned about the development trend of financial derivatives, Goldman Sachs and other international financial institutions will be the complex derivatives contracts, through careful analysis and classified, using simple, non-professional language vividly demonstrated. He said the trap a lot of financial derivatives, ordinary people and even professionals to understand derivatives contracts, is not a very easy thing.

　　Zhang Xiaodong introduction, Goldman Sachs and other international financial institutions to complex derivatives contracts are a distinctive feature, is to participate in the investment income is limited and unlimited risk, limited exposure to international investment banks for the benefit of very impressive. And through the sweetness of your lost little goers: the first contract is generally still profitable, the second extension of the contract or you become addicted.

　　Zhang Xiaodong said, why do so many businesses and individuals in the move? Large central enterprises in the move, may not be responsible for business leaders, but also as private enterprises and the rich in the move? This shows that this is not a simple question of responsibility. Current financial regulatory system is imperfect, the lack of financial derivatives professionals, enterprises and individuals do not have the ability to Goldman Sachs and other international financial institutions are again succeeded in the important reasons. "Most business-to-price valuation of derivatives contracts, transactions, knowledge is almost zero."

　　Zhang Xiaodong introduced so far, no one stood up prosecution of multinational financial institutions such as Goldman Sachs, for several reasons: lack of professional ability to reason, reason unknown sources of wealth, a slavish comprador mentality reasons.

　　Zhang Xiaodong, that Goldman Sachs and other international financial institutions sell to the domestic enterprises of toxic financial derivatives, in addition to alleged commercial fraud, but behind it is organized and premeditated killing. Speed connection is definitely not as easy to imagine the outside world, while the Goldman Sachs people just clever use of common speed connection mentality, designed for domestic state-owned enterprises actually looks like an agreement on the financial trap of gambling contract. Many enterprises and international financial institutions such as Goldman proud, so that after the move was not easy to quit.

　　Zhang Xiaodong, pointed out that currently, Goldman Sachs involved in any one market, PE (private equity) market, commodities market, the domestic stock market, bond market, almost every shot has a lot of money income, and many dozens of times IPO projects and even profit hundreds of times. For this situation is certainly not normal, this highly respected in China and Goldman Sachs are not unrelated.

　　Zhang Xiaodong, when a large number of Chinese companies under the gun down at Goldman Sachs, when Goldman Sachs, the U.S. Government to prosecute, when subjected to heavy fines, Goldman Sachs fame in China is growing even bigger. Goldman Sachs to see a book on the market, you can find the status of Goldman Sachs in China, how "high", how great the image of Goldman Sachs. Executives from the financial sector to the common shareholders, from government officials to ordinary citizens, all worship at the feet of Goldman Sachs.

　　Zhang Xiaodong said, in November 2008, the SASAC emergency brake on the central rate derivatives trading, derivatives trading was suspended. But this is only an expedient measure. As a large-scale production enterprises, the future could not get involved in hedging and hedge risk.

　　Zhang Xiaodong said that a business can not be unworthy of any, to accelerate the development of Chinese financial institutions to develop derivatives professionals, development of financial derivatives. Those who need to hedge the business, financial institutions may engage consultants to do derivatives, to draw lessons from the failure of derivatives to enhance this area of expertise and professional competence. Goldman Sachs and other international financial institutions expect conscience, not to sell the idea of toxic financial derivatives, may never be wishful fantasy.

　　Zhang Xiaodong said, Goldman Sachs and other international financial institutions, derivatives, fraud never stops, new cases have surfaced recently, is which specific domestic companies cheated now disclosed. He said the complexity of derivatives contracts there are many ways of fraud, and the patterns and techniques are constantly refurbished. How to let more people know the Chinese enterprises by the "fraudulent" the truth, how to avoid making the same mistakes, how to strengthen China's financial institutions and Chinese enterprises in the financial derivatives market on the ability, is indeed an urgent task. Only through improved ability to distinguish in this respect, be possible to avoid the hit.

　　Shenzhen Nanshan Power and Goldman Sachs contract

　　Not for gambling but die

　　December 2008, Shenzhen Nanshan Power with a wholly-owned subsidiary of Goldman Sachs, "Jie run company," derivatives of oil dramatically early termination of the agreement. Although the follow-up may also have a legal dispute, but after being to avoid the loss of millions of dollars per month.

　　March 12, 2008, Shennan electricity and Jie Yun and 165,723,968,102.11 165,723,967,102.11 signed a contract confirmation number.

　　After the scandal, the media and some experts criticized the Shenzhen Nanshan Power hedging transactions are not, but gambling, said the two agreements on the gambling agreement. Investment securities and financial derivatives in the Managing Director Zhang Xiaodong, that power with high Shengjie Run Shennan exchange contracts entered into are not gambling, but to die. Because oil prices, Shenzhen Nanshan nothing; while oil prices fell, Nanshan Power will be huge loss.

　　Zhang Xiaodong, a detailed analysis of these two agreements, to explain why this is not gambling but rather die.

　　Shenzhen Nanshan Power and total signed two agreements with Goldman Sachs. The first agreement is very simple, that is if oil prices above 62 dollars, Nanshan Power profits, on the contrary, Goldman Sachs profit. Of Shenzhen Nanshan Power, the most profitable no more than 300 million dollars; for Goldman, earnings of up to tens of millions of dollars.

　　Second agreement is completely different. The agreement provides Goldman Sachs the right to December 30, 2008 to decide whether activation of the first agreement with an option similar to the other swap. The options exchange swap with the first surface substantially similar options, but in fact completely different, mainly in several ways.

　　First, the option for a first swap agreement, Shenzhen Nanshan is the active participation; while the second agreement that the options exchange, Shenzhen Nanshan Power is passive, no choice. Goldman Sachs according to market price fluctuations, and choose whether to activate the second option in the swap agreement.

　　Second, the first agreement, the Nanshan Power likely to get the maximum profit of $ 3,000,000, while in the second agreement, the Shenzhen Nanshan no profit possible.

　　Third, the first agreement, the maximum loss of electricity Shennan 400 million; while in the second agreement, the price of oil by the end of 33 U.S. dollars in 2008 to design, Shennan loss of power will be up to a month $ 12,000,000, the largest loss of up to $ 260,000,000. Even if oil prices over 66 U.S. dollars, the maximum monthly profit of Shenzhen Nanshan only 34 million, or 18 months, the maximum possible profit of more than 600 million U.S. dollars only.

　　Goldman Sachs, the most from these two contracts, thanks to $ 3,000,000, up to make hundreds of millions of dollars, and has full control of risk; of Shenzhen Nanshan Power, the maximum profit of $ 3,000,000, the largest loss of hundreds of millions of dollars, risk without any controls. Therefore, the Shenzhen Nanshan agreement with Goldman Sachs is not a gamble agreement.

　　Goldman Sachs through the first 300 million dollars contract bait to lure into the Shenzhen Nanshan a big trap.

　　On the surface, the second agreement between the two sides of the gambling December 31, 2008 after the price of oil above or below the $ 64.5, but the point is that the activation of the agreement the right hands at Goldman Sachs, and Goldman Sachs activation The agreement is premised on oil prices in the end of December 2008 is far below the $ 64.5. If then the price of oil much higher than $ 64.5, Goldman does not activate the contract.

　　The second contract is actually an option on the option, known as compound options (Compound Option). This option pricing is usually more complicated, not any one non-financial companies have pricing power for such products, according to Zhang Xiaodong terms, this compound options worth up to tens of millions of dollars. The Shenzhen Nanshan Power was handed over to the options given to Goldman Sachs.

　　Goldman Sachs with the hunting of Shenzhen Nanshan Power CAO robbed and killed in 2005 used very similar way, all through the compound option, the use of the complexity of the product and pricing advantages, access to huge gains.

　　Shenzhen Nanshan Power Deputy General Manager violin yesterday in an interview that the company and a wholly owned subsidiary of Goldman Sachs run company disputes Jie, all the companies subject to periodic reports and company announcements. If new circumstances will be the first time the company disclosed.

　　Journalists access to Shenzhen Nanshan disclosure of relevant content is the latest 2009 annual report, annual disclosure of the contents of the two contracts. Report said that in April 2008 to 10-month period, based on the above two certificates, Jie run companies pay to the company 210 million dollars.

　　Shenzhen Nanshan Power said that although the two sides to terminate the transaction confirmations and different reasons, but confirmation of this fact and transactions have been terminated no differences. Transaction termination, Jie Yun trading company sent a letter to require the Company to terminate compensation for the loss, while a separate letter expressed the hope that a commercial settlement of disputes. Not accept the company write back Jie run company's claim for damages, while a separate letter agreed to peace talks. After several rounds of consultations between the two sides and negotiations, no consensus. November 27, 2009, the Company Security Council received a letter of international law firm, letters to the matters described above, and require the company to compensate the company total $ 79,962,943.00 Jie Yun losses and ended November 27, 2009 $ 3,736,958.66 in interest. Companies in the January 25, 2010 reply letter will not be accepted Jie run company's claim for damages. Management to determine if the negotiation fails, do not rule out the two sides to resolve disputes through judicial means possible.

　　Shenzhen Nanshan Power Board considers that the two certificates and transaction parties to the transaction has been terminated; the progress of this matter, there are many uncertainties at this stage not possible to resolve future methods and the results estimated.

　　How to fall into the CAO

　　Goldman Sachs extension options trap

　　For the Chinese companies involved in financial derivatives market, China Aviation Oil (Singapore) Ltd has the benchmark significance.

　　In 2004, China Aviation Oil (Singapore) in oil derivatives trading losses of about 5.5 billion U.S. dollars.

　　Death in the "extended option"

　　It is reported that China Aviation Oil (Singapore) was started in 2001 trading in oil derivatives, in addition to hedging, the company also launched its own trading activities.

　　And Goldman Sachs in Singapore, Jie Yun trading company, the China Aviation Oil (Singapore) from the beginning doomed to failure.

　　Goldman Sachs and General Aviation Oil (Singapore) derivatives contracts can be summarized as follows: Goldman Sachs to sell at low prices first, China Aviation Oil (Singapore) a product, so that China Aviation Oil (Singapore) must make money, but profits cap. At the same time, Goldman Sachs gave you since China Aviation Oil (Singapore) such a positive opportunity to make money, and that China Aviation Oil (Singapore) also give something back to Goldman Sachs, the China Aviation Oil (Singapore) agreed
(Source: Shenzhen Daily)

Silver bulls, silver bulls...

The data ends on February 15, before the run-up in price on Thursday and Friday.

There goes silver, will gold follow?

Zero Hedge had the chart of silver backwardation up yesterday. It's popping today for reasons specific to the silver market, but this is not as isolated as it seems, since it may have to do with physical supply constraints in the trading market. King World News has been all over this story.

A long-term chart of the gold/silver ratio shows that silver is nearing its high point for the past couple of decades (the gold/silver ratio is near a low point). I have no guess as to whether it will break into a new range or not. However, I expect gold prices will head higher and therefore, silver can still move up even if it loses relative ground to gold.

Japan imploding and no one is watching

Mish has some coverage on Japan today in Japan's Social Security Panel Wants to Double Sales Taxes; Tax Cut Independents Win Local Elections in Landslide; Japan's Debt Trap Has No Escape

He links to an article about election results that speaks to the social mood in Japan.

ANALYSIS: Japan's two-party system is collapsing

Landslide victories for independent candidates in local elections in central Japan earlier this month shocked the nation's two major parties and revived public doubt about the nascent two-party system.

'It is the beginning of the collapse of the two-party system,' Minoru Morita, a veteran political analyst, said.

The independents, Hideaki Omura, and the Nagoya Mayor Takashi Kawamura, who campaigned for tax cuts, defeated candidates endorsed by the big parties in the Aichi gubernatorial election and the mayoral race.

Omura, who was ousted from the opposition Liberal Democratic Party (LDP), and Kawamura, a former Democratic Party of Japan (DPJ) member, took advantage of the public's frustration with the two parties, analysts said.

'Those who support Ichiro Ozawa also voted for Omura and Kawamura as the DPJ has been divided over infighting,' Morita said, referring to the scandal-tainted former DPJ leader, one of Japan's most influential political figures.

'Many Japanese have been repulsed and furious over the DPJ as they voted for the party [in 2009] expecting that it could bring about major changes to the nation's politics,' Morita said.

The LDP pretty much ran Japan as a one-party country for most of the post-war era, until the DPJ knocked them out less than two years ago. However, the nascent two-party system, as the article describes it, is already breaking down into multi-party democracy—at least for now.

I don't know the particulars of the Japanese electoral system, but it appears they have proportional representation, which means the one-party system was cultural. In the U.S., a multi-party election (such as in 1860) results in a minority candidate winning the seat. Therefore, even if multi-party elections took place, the system would collapse back towards two parties. In Japan, cultural inertia could push the country back towards one or two parties, but there is no structural push.

Social mood is going to turn very negative in Japan. They are broke and there are no bailouts coming. Nikkei versus gold hit a new low in November. An interesting factoid I saw recently was that gold has not reached a new nominal high in yen. In 1980, when gold hit $875 an ounce, the exchange rate from $ to ￥ was about 230. Gold was about 200,000 yen per ounce then, today it is 115,000 yen. If gold enters a clear bull market, it will be at highs in every single currency around the world. Japan will get there via rapid devaluation of the yen.

Chinese housing policy gets crazy

The unintended consequences of this policy will be many. Already, one consequence is increased anger expressed on the Internet.
Internet outrage over Beijing property rules

Beijing's new policy requiring non-residents to have paid city taxes for five years before they can buy a home in the capital has sparked angry criticism on the internet.

The rule, announced on Wednesday, comes on the heels of a call by the State Council to cool the overheated property market and is the toughest measure yet.

But it is being criticised on the internet for being unfair, even by those who claim not to be Beijing residents. Non-residents are believed to account for 50 to 60 per cent of the capital's transactions, according to property agents.

"This is city protectionism," a chat-room contributor from Hebei said. "Why should non-Beijing residents be required to pay tax for five years before they can buy a home? Outrage!"

His complaint was supported by a contributor from Tianjin.

Another contributor said: "After five years, home prices will increase to a level that they cannot afford."

One complainant said: "This is not aimed at curbing property [prices]. It is aimed to elbow out non-Beijingers."

There has been a lot of anger about housing lately. This policy comes on the heels of a change to housing statistics, which the public suspects is designed to hide property inflation.

China Scraps Property Data, Clouding View

Yuan reform continues part XVII

China to Launch Yuan Option Trading

It doesn't allow for yuan trading, but it does allow businesses that deal in foreign currency to hedge their risk. It also means the government can allow the yuan to appreciate more quickly, if it wants.

China is also easing back on export rebates.
China Seeks New Normal for Export Tax Rebates

Exports alone were worth US$ 1.57 trillion. And export tax rebates rose to record 732.7 billion yuan – an amount that exceeded the government's nationwide spending on health care or subsidized housing.

Now, as demand for China's exported goods rises again, export tax rebates for at least some products are likely to be reduced by the government. The rollbacks began last year for a few items. And the move would reverse the trend of friendlier rebate policies enacted two years ago to help exporters after the outbreak of the global financial crisis.
Tax rebates were increased for thousands of exported products during the financial crisis.

The groundwork for a new tax policy was laid with recent media reports that said the government has been considering cutting tax rebate rates.

China still provides a lot of aid to exporters, but a falling tax and rising yuan will hurt the sector. This, again, is all with an eye towards supporting the domestic economy.

Austerity is messy

Madison schools, others closed amid call for demonstrations
Wis. lawmakers flee state to block anti-union bill
Wis. Gov. Walker calls Democrat boycott a 'stunt'

Expect more protests such as this, all around the country, in the coming years. The current reforms are nowhere near as drastic as what will follow if the economy doesn't pick up. Declining social mood will also encourage increased confrontation between various groups.

Sidewalk rage

Get Out of My Way, You Jerk!

For the cool-headed, sidewalk rage may seem incomprehensible. After all, it seems simple enough to just go around the slow individual. Why then are some people, even those who greet other obstacles with equanimity, so infuriated by unhurried fellow pedestrians?

How one interprets the situation is key, researchers say. Ragers tend to have a strong sense of how other people should behave. Their code: Slower people keep to the right. Step aside to take a picture. And the left side of an escalator should be, of course, kept free for anyone wanting to walk up.

"A lot of us have 'shoulds' in our head," says Dr. Deffenbacher. Ragers tend to think people should do things their way, and get angry because the slow walkers are breaking the rules of civility. It's unclear exactly why some people harbor such beliefs, Dr. Deffenbacher says. Such ways of thinking are generally learned from family, friends or the media, he adds.

I wonder how an international city such as New York differs in this regard. There are a lot of different ideas about personal space, public space, etc. interacting at once. In China, I don't think anyone gets sidewalk rage. Although there are a lot of slow walkers who will block the entire sidewalk, it's also ok to bump people as you pass. Unless you're moving fast and deliver a healthy blow to a bystander, you won't hear a peep.

Third Great Depression, Japan is sunk

我们离“全球第三次大萧条”还有多么近
The first was in the 1930s, the second just past, and the third is not far off. For Americans, this may actually sound more like a repeat of the first Great Depression. The first part of the Great Depression ended in 1932-33 with a massive dose of inflation following the nationalization of gold and the devaluation of the dollar. However, this inflation was nipped in the bud in 1937, and along with an insane amount of government intervention that put Hoover's tinkering to shame, causes the depression withing the Depression.

A similar scenario is unfolding today. The U.S. central bank floods the world with liquidity, setting off inflation and booms in developing markets. Central banks are already starting to counter the loose policy of 2008-2010, but this time they are pushing against their own policies plus the Federal Reserve and to some extent, the ECB, which is bailing out several countries. As Liu Junluo says in this latest blog, central banks are a flawed system. I would take it a step further and say that if central banks are making policy, they are making policy mistakes. Based on current conditions, the mistakes will be very large this time, at least as large as in 2006-2008.

Monetary policy takes time. Andy Xie is looking for 2012 crisis, maybe he is also early. In the near term, watch Japan. That is the most dangerous country right now due to a deterioration in the savings rate. Goldman Sachs predicts that the savings rate of Japan will turn negative this year. That's important because it means that foreigners will become the marginal buyers of Japanese government bonds. Now, if you are a foreigner, you're first going to look to the U.S. and Europe, where rates are higher and debt levels are lower. Adding to the mix, the emerging markets are hiking rates and tightening monetary policy, reducing the pool of funds available for Japanese government bonds (JGBs). All of which signals higher interest rates.
Higher interest rates are bad news for Japan.

Up until now, Japan’s government has been able to “cover the minimum payment” by borrowing from reserves in its Government Pension Investment Fund and selling its debt to Japan’s life insurance companies. But as seniors, which now number nearly one in four, start drawing down those assets, those avenues will be closed to further purchases of bonds issued by the state. In fact, they will soon become net sellers of their existing holdings in order to support the new pensioners, and then, “who will buy?”

Japan’s government revenues of $1.6 trillion annually fall short of its expenses of $2 trillion, creating an annual deficit of $400 billion. Kyle Bass, who runs Hayman Advisors, estimates that debt service eats up $244 billion every year. He calculates that if investors demand just an additional two percentage points in interest, that would double that debt service. Bass concludes that “the Japanese have created the circumstances for the greatest financial failure in world history.”

Japanese interest rates could easily rise 2%, it would bring their yields to roughly the level of U.S. bonds right now.

Credit markets in the U.S. actually seem to be picking up steam at the moment, which means this all may be a year or two, or more, away. I'm watching Japan for the possible spoiler though.

我们离“全球第三次大萧条”还有多么近

Bear mood cometh?

Here's a comment from the Socionomics Institute website:

“Gender-bending is a classic trend that appears during times of bear markets, and shaving one's eyebrows is a way to blur gender boundaries on the cheap,” says EWI's Brian Whitmer, who writes about the trend in the August issue of The European Financial Forecast.

He points out that a recent cover of Italian Vogue magazine features the shaved head and brow of model Kristen McMenamy, who pioneered the no-brow look two recessions ago in a "grunge" photo shoot for U.S. Vogue in 1992. Whitmer predicts more permanent attempts at androgyny as financial markets continue down to the larger bottom predicted by EWI.

In contrast, EWI says that bull markets emphasize super-feminine and super-masculine roles with heroes and heroines who fit conventional gender roles.

And here's the latest fashion headline:

Feminine twist on classic menswear at Fashion Week

In every fairytale there's a princess and a hero. Unless she comes to her own rescue.

Luxe textures, sheer fabrics and fitted shapes offering feminine twists on traditional men's suiting are all over the runways at New York Fashion Week. It's strength combined with confidence, boy style, by Day 5 of fall previews.
Prabal Gurung has his share of frilly princesses. But, as in the case of his muse for the season, Miss Havisham of Dickens fame, the knights don't always show up.

"Her story is a lot about men," said Gurung from the front row of his mentor Carolina Herrera's show Monday.
Other designers mixed princess beauty and the strength of menswear.

Tommy Hilfiger sent classic tailoring and pinstripes down the catwalk. Donna Karan's DKNY turned traditional men's jackets into capes. Brian Wolk and Claude Morais looked to the history of menswear to please a Ruffian woman's search for "unkempt elegance" via a white silk blouse with black bow tie and tailed jacket.

Lady looks like a dude.