Wednesday, March 11, 2009

Economic news around the world: not good....still

The global central bank easing continues. The Bank of England is very near its lower bound, 0%. From Bloomberg:
The Bank of England opens a new front in its effort to ward off deflation today as it prepares to buy government bonds with newly created money. The central bank said today it will purchase 2 billion pounds ($2.7 billion) of gilts, its first deployment in a three- month plan that may see it spend 75 billion pounds. The results of the operation will be released after 2:45 p.m. in London.

And Trichet leaves room for further cuts on anemic fourth growth numbers after the ECB announcement to cut its refi rate to 1.5%. From Reuters (Trichet comment):
"We did not decide ex ante that we were at the lowest level. If justified by facts, figures...if some of the risk that I am mentioning are materialising, I don't exclude that the policy rate could be changed and could go down."

The retrenchment in global demand is passing through to Malaysia's exports in January:
Malaysia's January exports plunged 27.8 per cent year-on-year, hitting their lowest level since 2001 amid falling demand from key trading partners, according to official data released Friday.

China also showing a sharp decline in exports, with anemic demand for imports. In February, exports fell at a 26% annual rate and imports at a 24% rate. And according to Bloomberg, the Chinese government plans to take action:
The government has halted the yuan’s gains against the dollar and plans to cut export taxes to zero as demand dries up because of the global slump. Premier Wen Jiabao is relying on a 4 trillion yuan ($585 billion) stimulus package to propel economic expansion after the weakest growth in seven years threw millions out of work.

Economists react to the sharp drop in China's February inflation rate. From WSJ's Real Time Economics:
Inflationary pressures have weakened significantly in China during recent months, despite continued government efforts to boost domestic consumption in an attempt to build a more sustainable growth path for the economy. Steps taken thus far have involved direct subsidies for low-income households. For an average middle-class household, the habit of saving still outshines any temptation to spend. The central bank needs to cut interest rates now so that the incentives to save will diminish. — Sherman Chan, Moody’s

And the Bank of Japan is holding on - February money supply is still growing, M2 at a 2.1% rate and M3 at a 1.1% rate. But is this enough to offset the downward price pressures coming from a strong yen, slumping exports, and anemic domestic demand?

Rebecca Wilder

1 comment:

  1. What is wrong with falling prices?

    Who, besides the uncompetitive greedy, fears falling price?

    On Prices

    Prices reflect the clearing of what sellers make available sale and how much buyers want and can buy from how much cash and credit exists in their hands.

    On Bogus Academia Economics vs Authentic Economics

    Bogus Academia economics as preached from Harvard, MIT, Columbia, Princeton and disseminated to lesser universities preach a false doctrine, that falling prices are bad for humans.

    What sick propaganda, a harmful message, a big lie that these courtier liars say to trick everyday good, honest men and women.

    Falling prices harm only effeminate, uncompetitive men who seek ways to protect their inefficiency and unearned profits.

    In authentic economics, falling prices for manufactured things is the natural order, an iron economic law.

    Overtime, men become ever better at combining matter, energy, time and know-how to produce more units, faster, with better workmanship, hence lower costs and prices.

    On Natural Price Rises

    Only the vagaries of weather, geologic events and pests can cause a rise in prices for agricultural products.

    Examples of such events include sustained droughts, tsunamis, mad cow disease, avian flu.

    On Artificial Price Rises

    Rising prices come from excess money credit, an absolute truth.

    When too much money comes into circulation too quickly through debt formation (borrowers renting cash from banks), those who get such money bid up prices for the lagging fixed supply of goods.

    This produces unearned profits for firms in oligopoly industries, which is the structure for the major industries in the U.S.A. today.

    Oligopoly industry design results from a pernicious form of corruption, corruption that hides behind the label of "consolidation for global competitiveness".

    Such uncompetitive industry structures harms consumer Americans while enriching effeminate, uncompetitive men who captain the behemoth corporations of such industries.