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  1. #1
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    [EN] New Economic Order: Plenty of Work, Not Enough Pay

    Even as job markets are tight in many major economies, low unemployment is failing to spur robust increases in wages.

    OCT. 7, 2017

    LILLESTROM, Norway — In the three-plus decades since Ola Karlsson began painting houses and offices for a living, he has seen oil wealth transform the Norwegian economy. He has participated in a construction boom that has refashioned Oslo, the capital. He has watched the rent climb at his apartment in the center of the city.

    What he has not seen in many years is a pay raise, not even as Norway’s unemployment rate has remained below 5 percent, signaling that working hands are in short supply.

    “The salary has been at the same level,” Mr. Karlsson, 49, said as he took a break from painting an office complex in this Oslo suburb. “I haven’t seen my pay go up in five years.”

    His lament resonates far beyond Nordic shores. In many major countries, including the United States, Britain and Japan, labor markets are exceedingly tight, with jobless rates a fraction of what they were during the crisis of recent years. Yet workers are still waiting for a benefit that traditionally accompanies lower unemployment: fatter paychecks.

    Why wages are not rising faster amounts to a central economic puzzle.

    Some economists argue that the world is still grappling with the hangover from the worst downturn since the Great Depression. Once growth gains momentum, employers will be forced to pay more to fill jobs.

    But other economists assert that the weak growth in wages is an indicator of a new economic order in which working people are at the mercy of their employers. Unions have lost clout. Companies are relying on temporary and part-time workers while deploying robots and other forms of automation in ways that allow them to produce more without paying extra to human beings. Globalization has intensified competitive pressures, connecting factories in Asia and Latin America to customers in Europe and North America.

    “Generally, people have very little leverage to get a good deal from their bosses, individually and collectively,” says Lawrence Mishel, president of the Economic Policy Institute, a labor-oriented research organization in Washington. “People who have a decent job are happy just to hold on to what they have.”

    The reasons for the stagnation gripping wages vary from country to country, but the trend is broad.

    In the United States, the jobless rate fell to 4.2 percent in September, less than half the 10 percent seen during the worst of the Great Recession. Still, for the average American worker, wages had risen by only 2.9 percent over the previous year. That was an improvement compared with recent months, but a decade ago, when the unemployment rate was higher, wages were growing at a rate of better than 4 percent a year.

    In Britain, the unemployment rate ticked down to 4.3 percent in August, its lowest level since 1975. Yet wages had grown only 2.1 percent in the past year. That was below the rate of inflation, meaning workers’ costs were rising faster than their pay.

    In Japan, weak wage growth is both a symptom of an economy dogged by worries, and a force that could keep the future lean, depriving workers of spending power.

    In Norway, as in Germany, modest pay raises are a result of coordination between labor unions and employers to keep costs low to bolster industry. That has put pressure on Italy, Spain and other European nations to keep wages low so as not to lose orders.

    But the trend also reflects an influx of dubious companies staffed by immigrants who receive wages well below prevailing rates, undermining union power.

    That this is happening even in Norway — whose famed Nordic model places a premium on social harmony — underscores the global forces that are at work. Jobs that require specialized, advanced skills are growing. So are low-paying, low-skill jobs. Positions in between are under perpetual threat.

    “The crisis accelerated the adjustment, the restructuring away from goods producing jobs and more into the service sector,” says Stefano Scarpetta, director for employment, labor and social affairs at the Organization for Economic Cooperation and Development in Paris. “Many of those who lost jobs and went back to work landed in jobs that pay less.”

    Shift in occupations

    Growing inequality


  2. #2
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
    Union Power Eroded

    In November 2016, a week after Donald J. Trump was elected president on a pledge to bring jobs back to America, the people of Elyria, Ohio — a city of 54,000 people about 30 miles west of Cleveland — learned that another local factory was about to close.

    The plant, operated by 3M, made raw materials for sponges. Conditions there were influenced by an increasingly rare feature of American life: a union that represented the workers.

    The union claimed the closing was a result of production being moved to Mexico. Management said it was merely cutting output as it grappled with a glut coming from Europe. Either way, 150 people would lose their jobs, Larry Noel among them.

    Mr. Noel, 46, had begun working at the plant seven years earlier as a general laborer, earning $18 an hour. He had worked his way up to batch maker, mixing the chemicals that congealed into sponge material, a job that paid $25.47 an hour.

    Now, he would have to start over. The unemployment rate in the Cleveland area was then down to 5.6 percent. Yet most of the jobs that would suit Mr. Noel paid less than $13 dollars an hour.

    “These companies know,” he said. “They know you need a job, and you’ve got to take it.”

    In the end, he found a job that paid only slightly less than his previous position. His new factory was a nonunion shop.

    “A lot of us wish it were union,” he said, “because we’d have better wages.”

    Last year, only 10.7 percent of American workers were represented by a union, down from 20.1 percent in 1983, according to Labor Department data. Many economists see the decline as a key to why employers can pay lower wages.

    In 1972, so-called production and nonsupervisory workers — some 80 percent of the American work force — brought home average wages equivalent to $738.86 a week in today’s dollars, after adjusting for inflation, according to an Economic Policy Institute analysis of federal data. Last year, the average worker brought home $723.67 a week.

    In short, 44 years had passed with the typical American worker absorbing a roughly 2 percent pay cut.

    The streets of Elyria attested to the consequences of this long decline in earning power.

    “There’s some bail bondsmen, some insurance companies and me,” said Don Panik, who opened his gold and silver trading shop in 1982 after he was laid off as an autoworker at a local General Motors plant.

    Down the block, a man with a towel slung over bare shoulders panhandled in front of a strip club, underneath a hand-lettered sign that said “Dancers Wanted.” A tattoo parlor was open for business, near a boarded-up law office.

    One storefront was full of activity — Adecco, the staffing company. A sign beckoned job applicants: “General Laborers. No Experience Necessary. $10/hour.”

    Lyndsey Martin had reached the point where the proposition had appeal.

    Until three years ago, Ms. Martin worked at Janesville Acoustics, a factory midway between Cleveland and Toledo. The plant made insulation and carpets for cars. She put products into boxes, earning $14 an hour.

    That, combined with what her husband, Casey, earned at the plant, was enough to allow them to rent a house in the town of Wakeman, where their front porch looked out on a leafy street.

    Then, in summer 2013, word spread that the plant was shutting down, putting 300 people out of work.

    Ms. Martin took 18 months off to care for her children. In early 2015, she began to look for work, scouring the web for factory jobs. Most required associate’s degrees. The vast majority were temporary.

    She took a job at a gas station, ringing up purchases of fuel, soda and fried chicken for $9 an hour, less than two-thirds of what she had previously earned.

    “It almost feels degrading,” she said.

    Her hours fluctuated. Some weeks she worked 35; most weeks, 24.

    A competitor to Ms. Martin’s former employer has set up a factory directly opposite the plant where she used to work. The company hired 150 people, but not her. She said she had heard the jobs paid three to four dollars less per hour than she used to make.

    Ms. Martin recently took a new job at a beer and wine warehouse. It also paid $9 an hour, but with the potential for a $1 raise in 90 days. In a life of downgraded expectations, that registered as progress.

    Fear Factor

    Conventional economics would suggest that this is an excellent time for Kuniko Sonoyama to command a substantial pay increase.

    For the past 10 years, she has worked in Tokyo, inspecting televisions, cameras and other gear for major electronics companies.

    After decades of decline and stagnation, the Japanese economy has expanded for six straight quarters. Corporate profits are at record highs. And Japan’s population is declining, a result of immigration restrictions and low birthrates. Unemployment is just 2.8 percent, the lowest level in 22 years.

    Yet, Ms. Sonoyama, like growing numbers of Japanese workers, is employed through a temporary staffing agency. She has received only one raise — two years ago, when she took on a difficult assignment.

    “I’m always wondering if it’s O.K. that I never make more money,” Ms. Sonoyama, 36, said. “I’m anxious about the future.”

    That concern runs the risk of becoming self-fulfilling, for Japan as a whole. Average wages in the country rose by only 0.7 percent last year, after adjusting for the costs of living.

    The government has pressed companies to pay higher wages, cognizant that too much economic anxiety translates into a deficit of consumer spending, limiting paychecks for all.

    But companies have mostly sat on their increased profits rather than share them with employees. Many are reluctant to take on extra costs out of a fear that the good times will not last.

    It is a fear born of experience. Ever since Japan’s monumental real estate investment bubble burst in the early 1990s, the country has grappled with a pernicious residue of that era: so-called deflation, or falling prices.

    Declining prices have limited businesses’ incentive to expand and hire. What hiring companies do increasingly involves employment agencies that on average pay two-thirds of equivalent full-time work.

    Today, almost half of Japanese workers under 25 are in part-time or temporary positions, up from 20 percent in 1990. And women, who typically earn 30 percent less than men, have filled a disproportionate number of jobs.

    Years of corporate cost-cutting has weakened Japan’s unions, which tend to prioritize job security over pay.

    The recent uptick in wages, although modest, has raised hopes of increased spending that would embolden businesses to raise pay and to upgrade temporary workers to full-time employees.

    Until that happens, workers will probably remain hunkered down, reluctant to spend.

    “I have enough to live on now,” Ms. Sonoyama said, “but I worry about old age.”

    Oslo, where a construction boom is remaking the city. Fledgling companies have captured slices of the construction industry, employing Eastern Europeans at low wages


  3. #3
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
    Global Threats

    No one is supposed to worry in Norway.

    The Nordic model has been meticulously engineered to provide universal living standards that are bountiful by global norms.

    Workers enjoy five weeks of paid vacation a year. Everyone receives health care under a government-furnished program. Universities are free. When babies arrive, parents divvy up a year of shared maternity and paternity leave.

    All of this is affirmed by a deep social consensus and underwritten by stupendous oil wealth.

    Yet even in Norway, global forces are exposing growing numbers of workers to new forms of competition that limit pay. Immigrants from Eastern Europe are taking jobs. Temporary positions are increasing.

    In theory, Norwegian workers are insulated from such forces. Under Norway’s elaborate system of wage negotiation, unions, which represent more than half of the country’s work force, negotiate with employers’ associations to hash out a general tariff to cover pay across industries. As companies become more productive and profitable, workers capture a proportionate share of the spoils.

    Employers are supposed to pay temporary workers at the same scale as their permanent employees. In reality, fledgling companies have captured slices of the construction industry, employing Eastern Europeans at sharply lower wages. Some firms pay temporary workers standard wages but then have them work overtime without extra compensation. Unions complain that enforcement patchy.

    Peder Hansen, a process operator, at the Nikkelverk refinery in Kristiansand, Norway.
    “If they were to increase our wages too much, the company would lose customers,” he said.

    “Both the Norwegian employer and the Polish worker would rather have low paid jobs,” said Jan-Erik Stostad, general secretary of Samak, an association of national unions and social democratic political parties. “They have a common interest in trying to circumvent the regulations.”

    Union leaders, aware that companies must cut expenses or risk losing work, have reluctantly signed off on employers hiring growing numbers of temporary workers who can be dismissed with little cost or fuss.

    “Shop stewards are hard pressed in the competition, and they say, ‘If we don’t use them then the other companies will win the contracts,” said Peter Vellesen, head of Oslo Bygningsarbeiderforening, a union that represents bricklayers, construction workers and painters. “If the company loses the competition, he will lose his work.”

    Last year, companies from Spain and Italy won many of the contracts to build tunnels south of Oslo, bringing in lower-wage workers from those countries.

    Mr. Vellesen’s union has been organizing immigrants, and Eastern Europeans now comprise one-third of its roughly 1,700 members. But the trends can be seen in paychecks.

    From 2003 to 2012, Norwegian construction workers saw smaller wage increases than the national average in every year except two, according to an analysis of government data by Roger Bjornstad, chief economist at the Norwegian Federation of Trade Unions.

    When Mr. Karlsson, the painter, came to Norway from his native Sweden in the mid-1990s, virtually everyone in the trade was a full-time worker. Recently, while painting the offices of a government ministry, he encountered Albanian workers. He was making about 180 kroner per hour, or about $23, under his union scale. The Albanians told him they were being paid barely a third of that.

    “The boss could call them, and 20 guys would be standing outside ready to work,” Mr. Karlsson said. “They work extra hours without overtime. They work weekends. They have no vacations. It’s hard for a company that’s running a legitimate business to compete.”

    He emphasized that he favored open borders. “I have no problem with Eastern Europeans coming,” he said. “But they should have the same rights as the rest of us, so all of us can compete on equal terms.”

    Even in specialized, higher-paying industries, Norwegian wage increases have slowed, as unions and employers cooperate toward improving the fortunes of their companies.

    That is a pronounced contrast from past decades, when Norway tallied up the profits from oil exports while handing out wage raises that reached 6 percent a year.

    As the global financial crisis unfolded in 2008, sending a potent shock through Europe, Norway’s high wages left businesses in the country facing a competitive disadvantage. That was especially true as mass unemployment tore across Italy, Portugal and Spain, depressing wages across the continent. And especially as German labor unions assented to low pay to maintain the country’s export dominance.

    Starting in mid-2014, a precipitous descent in global oil prices ravaged Norway’s energy industry and the country’s broader manufacturing trades. That year, Norwegian wages increased by only 1 percent after accounting for inflation, and by only a half percent the next year. In 2016, wages declined in real terms by more than 1 percent.

    Peder Hansen did not relish the idea of a smaller pay raise, but neither was he terribly bothered.

    Mr. Hansen works at a nickel refinery in Kristiansand, a city tucked into the nooks and crannies along Norway’s southern coast. His plant is part of Glencore, the mammoth Anglo-Swiss mining firm. He sits at a computer terminal, controlling machinery.

    Much of what the refinery produces is destined for factories in Japan that use the nickel to make cars and electronics. Lately, nickel prices have been weak, limiting revenue. This year, Mr. Hansen’s union accepted an increase of about 2.5 percent — a tad above inflation.

    “If they were to increase our wages too much, the company would lose customers,” Mr. Hansen says. “It’s as simple as that.”

    He exudes faith that his company’s fortunes will be shared with him, because he has lived it. At 24, he earns 630,000 kroner a year, with overtime, or more than $80,000. He owns a two-story house in Kristiansand, and he has two cars, an Audi and an electric Volkswagen. The lives of company executives seem not far removed from his own.

    “The C.E.O. of the plant is a humble person,” he said. “You can say ‘Hi.’”

    But for some workers, the plunge in oil prices has tested faith in the Norwegian bargain.

    In Arendal, a coastal town of wooden houses clustered around a harbor, Bandak, a local employer, succumbed to the crisis. The company made equipment connecting oil pipelines. As orders grew scarce in late 2014, a series of layoffs commenced. Workers ultimately agreed to a 5 percent pay cut to spare their jobs.

    “We wanted to keep all of our employees, so we stuck together,” said Hanne Mogster, the former human resources director. “There was a lot of trust.”

    But the company soon descended into bankruptcy. And that was that for the 75 remaining workers.

    Per Harald Torjussen, who worked on Bandak’s assembly line, managed to find a job at a nearby factory at slightly better pay.

    Still, his confidence has been shaken.

    “It feels a lot less secure,” Mr. Torjussen says. “We may be approaching what it’s like in the U.S. and the U.K.”

    NYT: Global Economy’s Stubborn Reality: Plenty of Work, Not Enough Pay

  4. #4
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    Penniless retirees and teen zombies

    For the first time in human history, a tech revolution is making people worse off. It brings out the worst in human nature and makes unscrupulous people very rich.

    Andy Xie
    20 July, 2017

    While I was giving a talk to a bored and sleepy audience one afternoon last month, they suddenly rose from their lethargy, clapping and cheering ecstatically. It wasn’t me. They were worshipping a gigantic picture projection on the screen behind me. It was the chart of cryptocurrency prices going vertical. The audience looked mostly like retirees from central China. Many of them were probably red guards during the Cultural Revolution and cheered at Chairman Mao with the same enthusiasm. Now cryptocurrencies are their gods.

    Bitcoin has gone crazy. Ethereum has done better. There are over 700 cryptocurrencies. Whenever you see one taking off, you can be sure that a crowd like this, somewhere in China, is cheering like that.

    The middlemen in this market are like the “wolf of Wall Street” on steroids, coming up with more fantastical stories by the day. If the CIA were looking for the perfect weapon to bring down China, this is it. Electronic currencies have put Las Vegas and Macau at the fingertips of all Chinese retirees. Sooner or later, most will lose their pension money. The resulting chaos will pose a critical threat to social stability.

    And, talking about weapons against China, online gaming is even more powerful, being targeted at youth. Electronic currencies promise to make Chinese retirees mad, but online gaming is turning Chinese boys into zombies. A century and a half ago, the Chinese government fought the British to keep opium out. In the 21st century, China is happily doing it to itself. China’s successes have got many countries worried about their future. It seems those worries may be overblown.

    Lately, its official media waded into blaming one game for its negative social impact. But why this one, and why now? Online gaming has been a battle between mothers and sons in China for a decade. Would an occasional media intervention like this make a difference? Remember a similar episode about online searches? In China, the essence of searches is selling fake information. When someone died for believing in fake medical information, there was a media uproar. Has anything meaningful changed?

    In the West, tech isn’t so innocent either. The EU just fined Google billions of dollars for doing a little “evil”. Social media sites like Facebook hire psychologists to design tricks to keep users hooked. E-commerce providers find new ways to make people buy things they don’t need and can’t afford. In China, e-commerce is always about fake goods. The West is catching up.

    Tech dominates media. There are sensational stories on a daily basis about new things to come. Silicon Valley has become more glamorous than either Hollywood or Wall Street. Geeky acronyms and terms like AI, AR, blockchain and big data crawl into daily conversations, like we are supposed to know. Even the Chinese government’s annual work report sounds like a speech by some guru at a venture capital conference. But, why do we still have boring lives? Worse, the global economy has been stagnating through this tech boom.

    In the developed economies, people’s economic well-being is at a decades’ low. The angst has led to populist political upheavals in the US and Europe. Even emerging economies are not seeing significant growth from more tech. After so much attention to – and so much money invested in – the tech boom, where’s the beef?

    The world has experienced tech crazes many times before. Each one was a financial bubble, but also produced a growth boom. Even the last IT bubble in the late 1990s led to prosperity for a few years. And its impact was lasting: multinational companies became truly global with integrated global management systems. This one, so far, feels only like a Hollywood show.

    It’s easy to see why many hot techs have a negative impact on economic activities and the quality of life. When people are constantly checking social media for “likes” on pictures, how can they be productive or happy?

    Then, one may ask why people do things that are not good for them. Well, people gamble, smoke and use drugs. Human weaknesses are always there. When big businesses organise to take advantage of them, the world becomes a worse place.

    There are two kinds of internet businesses that are profitable: arbitraging or connecting people. Sharing economy is about arbitraging. Car-hailing services are really about milking the value of taxi licences. Yes, the taxi business is a monopoly and should be subject to competition. However, the car-hailing business is good at redistributing value, but is not really creating much value for the economy.

    We all applaud a good search business like Google that places the knowledge of the world at our fingertips. But, remember that the millions of people who created that knowledge are the ones who made the real difference. Google is a tool that makes them more accessible, it is just a form of convenience, not a revolution. When the internet makes it easier for people not to pay for content, content makers will produce less. The world is worse off as a result.

    For the first time in human history, a tech revolution is making people worse off. It brings out the worst in human nature and makes unscrupulous people very rich. When the best and the brightest become rich by amplifying the good side of human nature, the world moves forward. When some people get very rich by taking advantage of the worst traits in human nature, a dark age is just around the corner.

    Última edição por 5ms; 08-10-2017 às 23:21.

  5. #5
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    It’s all or nothing for China as trade collision with the US looms

    Andy Xie
    29 December, 2016


    China sits on massive overcapacity. In 2008, China embarked on a massive credit stimulus that has quadrupled the country’s debt. China feels that it has the right to solve its problems with devaluation and exports. That is setting it up for a headlong collision with the Trump administration.

    That collision would reflect historical forces reshaping the global economic pecking order. In 1989, Trump paid nearly US$100,000 to publish an ad on his anti-Japan trade view in three major US newspapers. His views on China are remarkably similar to what he said about Japan then. The year before, a group of US Congressmen, including the 1996 Republican presidential nominee Bob Dole, smashed a Toshiba radio on Capital Hill to show their anger at Toshiba selling technology to the Soviet Union. But, they didn’t mention the Norwegian or French company that participated in the same deal. The US politicians were riding on the blue-collar sentiment against Japan.

    White blue-collar workers have enjoyed high living standards for more than a century because the Chinese system suppressed their productivity at home. When China joined the World Trade Organisation, it signalled the beginning of the end of the white premium in the global economic pecking order.

    I’m not belittling the concerns about China’s trade practices. I would be the first to decry the Chinese system that keeps household disposable income low, sucks it away with bubbles, and holds capital costs artificially low. As the world’s largest exporter, China sets the benchmark for labour compensation. How the Chinese government treats its people is fair game for global discussions. Nonetheless, race will be an important factor in the forthcoming trade friction between China and the US.

    The irony is that China could initiate reform and just leave this mess behind. Its per capita income is only US$7,400, merely a seventh of US workers. Chinese workers are as well-educated and productive as their US counterparts. Moreover, the Chinese work longer hours, and China’s female labour participation rate is at 90 per cent, much higher than that of Western countries. China has better infrastructure and newer factories. Granted, the US has unrivalled high technologies, but that accounts for a small part of its economy.

    China’s domestic woes and international challenges are largely due to its inefficient system. The government is obsessed with concentrating economic resources in its own hands, and asset markets are like casinos, sucking people in and making them lose money. The government uses its vast resources inefficiently. Hence, China’s currency has a tendency to depreciate.

    China’s economic development has been just as fast as the 1952-92 rise of a bombed-out Japan after the second world war. The difference is in how their currencies behaved. The yen tripled against the dollar during the period, while the Chinese currency has been mostly declining. Economic inefficiency and its implications for the exchange rate explain why China’s rapid economic development has not translated into matching gains in per capita income.

    The coming struggle between the US and China will likely end either with an economic collapse in China or its ascendancy to the dominant world economy. There is little middle ground. If China embarks on structural economic reforms by embracing the market and shrinking the government, its GDP will quickly surpass that of the US, probably within 10 years.


    Andy Xie

    Dr Andy Xie is a Shanghai-based independent economist specialising in China and Asia, and writes, speaks and consults on global economics and financial markets. He joined Morgan Stanley in 1997 and was managing director and head of the firm’s Asia-Pacific economics team until 2006. Prior to that he spent two years with Macquarie Bank in Singapore, where he was an associate director in corporate finance. He also spent five years as an economist with the World Bank. He was voted one of the 50 most influential persons in finance by Bloomberg magazine in 2013.

    Xie’s viewpoints have at times attracted unwelcome attention. In 2006, when he was a star Asia economist at Morgan Stanley a leaked email to colleagues in which he said money laundering was bolstering growth in Singapore led to his abrupt departure from the bank.

    In early 2007, he termed China’s surging markets a “bubble” that could lead to a banking crisis,” and in 2009 he likened them to a “Ponzi scheme.”

    His 2007 forecast turned out correct. Soon after his prediction, the Shanghai Composite Index started plunging. After hitting a peak of 6,092 on Oct. 19, 2007, it fell below 2,000 over the next 12 months.

    Xie, who is from China but was educated at — and earned a Ph.D. from — Massachusetts Institute of Technology, has said Chinese authorities have tried to characterize him as an American spy sent to disrupt their markets after his 2007 prediction.

    Xie “is a respected economist,” said Huawei Ling, managing editor of Caixin Weekly and a John S. Knight Journalism Fellow at Stanford University. “I appreciate his consistency and his analysis on China’s economic issues,” she said.
    Última edição por 5ms; 08-10-2017 às 23:50.

  6. #6
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    The world economy is in real trouble

    Don’t listen to the ruling elite: all signs point to a prolonged period of global stagnation and instability

    Andy Xie
    30 May, 2016

    The G20 working group meeting in Shanghai didn’t come up with any constructive proposals for reviving the global economy and, instead, complained that the recent market turmoil didn’t reflect the “underlying fundamentals of the global economy”. The oil price has declined by 70 per cent since June 2014, while the Brazilian real has halved, and the Russian rouble is down by 60 per cent.

    The global economy is on the cusp of another recession, and these important people blamed it all on some sort of psychological problem of the people.

    Over the past two decades, the global economy has been blessed with the entry and participation of 800 million hard-working Chinese, plus the information revolution. The pie should have increased enough in size to make most people happier. Yet, the opposite has happened. The world has gone from one crisis to another. People are complaining everywhere.

    One major complaint that people have is that the system is rigged – that is, the rising income concentration is not due to free market competition, but a rigged system that favours the politically powerful. This is largely true. The new billionaires over the past two decades have come mostly from finance and property.

    The most important factor in the rigged system is monetary policy being used to pump up financial markets in the name of stimulating growth for people’s benefit. This is essentially the trickle-down wealth effect, that is, making some people in the financial food chain rich while the spillover gives people a few crumbs. Yet, instead of crumbs, the wealth effect has pumped up property prices in Manhattan, London and Hong Kong, as well as the price of modern art. Essentially, the wealth effect has stayed within the small circle of the wealthy. And these people show up at Davos to congratulate policymakers on their “successes”.

    Wasting resources is an equally important factor in making the global economy weak and prone to crisis. After the 2008 financial crisis, the US government and Federal Reserve spent trillions of dollars to bail out the people who created the crisis. Instead of facing bankruptcy and jail, these people have become richer than ever. Predictably, they have used their resources to rig the system further.

    After 2008, when Beijing launched a massive investment push, the global ruling elite all praised China for saving the global economy. China has increased credit by over US$20 trillion to finance the construction of factories and homes. However, investment does not guarantee final demand. The process of building up a factory creates demand. But, when it is completed, it needs to sell its goods to someone. What China did was build even more factories to keep this factory occupied. This Ponzi scheme couldn’t last long. We are just seeing the beginning of its devastating consequences.

    China’s overinvestment has pumped up commodity prices, which has led to another Ponzi scheme. As major central banks cut interest rates to zero, credit demand didn’t respond in general, as businesses didn’t see growing demand from people who were suffering income erosion. The commodity boom justified credit demand for the time being. Trillions of dollars were poured into the energy sector, and trillions more into other commodity industries. Businesses in emerging economies that were pumped up by rising commodity prices borrowed US$9 trillion. This mountain of debt is floating on a commodity Ponzi scheme that is floating on China’s investment Ponzi scheme. Its bursting is just the beginning. Its impact on the global financial system could be bigger than the 2008 financial crisis.

    In addition to the bursting of the global commodity bubble, China’s overcapacity bubble will kill global capital expenditure for many years to come. Even though Chinese investment isn’t growing like before, investment at half of gross domestic product is still adding overcapacity by over US$1 trillion per year – the problem is getting bigger.

    All indications are that China wants to export the overcapacity. And why not? China overinvested to bail out the global economy. It shouldn’t pay the whole price for the mistake.

    China’s strategy would lead to de-industrialisation in most of the world, in particular middle-income emerging economies. Weak capital expenditure would lead to weak employment and labour income. The resulting bankruptcies may further weaken the global credit system.

    The global economy is facing years of stagnation, deflation and financial crises. The current economic managers will resort to the same tricks of pumping up the financial markets with liquidity, to no avail. In the meantime, political instability will spread around the world. It will take a long time for the right leaders to emerge.

    Initially, populists will win. Their policies, unfortunately, will focus on protectionism and rolling back the World Trade Organisation system. That will lead to further economic turmoil in the global economy. Protectionism may suddenly jump-start inflation that will quickly become hyperinflation, which would certainly lead to violent revolutions.

    The world is on the cusp of a prolonged period of stagnation and instability. Our ruling elite is blaming it on people seeing things. Their strategy is to change people’s psychology. Unfortunately for them, the world is catching fire and that fire will eventually reach their Davos chalets.


  7. #7
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    Why we should care about Spain’s lurch towards civil war

    ‘So far, political agreement has prevailed, but if this fails we should be under no illusions – civil war would loom as clearly as it does today over the citizens of Barcelona’

    David Dodwell
    08 October, 2017

    For anyone keen to quantify the harm done by the 2008 global financial meltdown, and the decade-long recession that has followed, you need look no further than the catastrophe now unfolding in Catalonia.

    For those who found comfort in the moderation that elected Emmanuel Macron in France, and returned Angela Merkel to power in Germany, the blocked and traumatised streets of Barcelona show clearly that democracies worldwide – and the beliefs that democracies provide the best practical form of governance –face profound challenges.

    Catalonia’s claim to independence to any outsider seems ridiculous. Yes it is true that the Catalans have a long history - Petronilia, Queen of Aragon and Ramon Berenguer IV, Count of Barcelona married in 1150 and formed a dynasty that lasted for nearly 600 years. Even today, more than 90 per cent of the population speak Catalan rather than Spanish.

    But for three centuries, since the War of the Spanish Succession in 1714, Catalonia has been woven into the heart of modern-day Spain. Today it accounts for 16 per cent of Spain’s population, and 19 per cent of its GDP. Some would argue that with Barcelona at its centre, it provides the beating heart of Spanish culture. It’s food isn’t at all bad either.

    For Europe, Catalonia’s preposterous quest for independence (and yes, it is preposterous even compared with Britain’s self-inflicted Brexit adventure) opens an awful Pandora’s box. The European continent, painstakingly riveted together over the past five decades into a multi-ethnic community of 28 rule-based states, faces the danger of degeneration into babel of mini-states as separatist and autonomous movements are unleashed, many of them built on ethnic and xenophobic foundations.

    Fundamental as the Catalan challenge is to the EU, Brussels’ hands are tied in response. Its constitution dictates that the “Catalan problem” is a domestic problem for the Spanish government, and has to be resolved by the government in Madrid. But how does that Spanish government led by Mariano Rajoy bring any meaningful influence to bear when in Catalonia his party trails fifth, far behind a cluster of pro-independence parties?

    From a simple economic vantage point, Catalonia can argue that it has the critical mass and cultural and ethnic coherence to justify being treated as an independent nation. Its 7.5 million population is close to that of Austria. Its GDP of around US$314 billion makes it the world’s 34th largest economy, not far short of Austria (US$371 billion), and bigger than either Malaysia or Singapore. It claims strength in shipping, textiles, finance, services and a wide range of new hi-tech industries.

    Whatever the economic numbers, Catalonia’s principle challenge is to democracy and the effectiveness of the democratic process. Spain’s constitution forbids state referenda, so to go ahead with the poll eight days ago calling for independence was clearly in defiance of national laws.

    The pro-independence activists in Barcelona say that over 90 per cent of voters in the referendum called for independence, and are calling for immediate moves to that end.

    But there was only a 42 per cent voter turnout, which suggests just a third of the Catalan population actually supported a call for independence. And if you take the view that such an important vote should engage the entire Spanish population, then this amounts to less than 7 per cent of Spanish people are in support. It was controversial enough for Britain’s Conservative government to initiate Brexit even with 48 per cent of voters calling for exit: in democratic terms, just how credible can Catalonia’s claim be for a mandate for independence? As Oriol Bartomeus at the Autonomous University in Barcelona warned: “This is a process without a steering wheel and without brakes”.

    Among those alarmed at implications for the democratic process, Philip Stephens in the Financial Times noted last week that there is “a rising belief that disputes can be settled by a simple popular vote”, but that “history records they are more often a route to authoritarianism – a device for dictators and demagogues”.

    As the FT’s Stephens starkly warns: “The relationship between Catalonia and Spain ultimately will be decided by political agreement or by civil war.” So too for Hong Kong. So far, political agreement has prevailed, but if this fails we should be under no illusions – civil war would loom as clearly as it does today over the citizens of Barcelona.


    EU commissioner says Spain could be on the cusp of a civil war

    "A civil war is planned in the middle of Europe"

    Alexandra Ma
    Oct. 6, 2017

    A European Union commissioner has warned of a looming "civil war" in Spain over Catalonia's calls for independence.

    "The situation is very, very disturbing," said Günther Oettinger, the EU's budget commissioner, The Telegraph reported on Thursday.

    "A civil war is planned in the middle of Europe."

    "One can only hope that a conversation will be made between Madrid and Barcelona soon," Oettinger, who is from Germany, continued.

    He added that the EU could only mediate talks between the two sides "if asked."

    Spanish Prime Minister Mariano Rajoy, who views the referendum as unconstitutional, said on Wednesday: "The government is not going to negotiate any illegality, it will not accept any blackmail."

    Over 2.2 million Catalonians, or 42% of the region's electorate, voted overwhelmingly to separate from Spain last Sunday. The referendum was marred by violence as riot police clashed with demonstrators, and almost 900 people were injured that day.

    Catalonian lawmakers said earlier this week they would declare independence next Monday.


    Última edição por 5ms; 09-10-2017 às 03:52.

  8. #8

  9. #9
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    China survey puts services growth at 21-month low, blurs picture of resilient economy

    The private findings were in sharp contrast to official data which showed services activity expanded at the fastest clip since 2014 in September.

    Elias Glenn
    October 8, 2017

    Activity in China’s services sector grew at its slowest pace in 21 months in September as new orders cooled, a private survey showed, blurring the picture of how the economy is performing heading into a key Communist Party Congress.

    The findings of the Caixin/Markit survey reinforce views that China’s smaller companies are continuing to struggle, while large state-owned giants are apparently reaping most of the benefits from a year-long, government-led construction boom.

    However, many analysts believe China’s robust industrial rally cannot be sustained much longer, putting pressure on policymakers to finds ways to energize the lackluster private sector, which accounts for over half of the country’s investment and jobs.

    The central bank threw a fresh lifeline to smaller firms on Sept. 30 in an attempt to redress that deep structural imbalance, offering an earnings booster to banks if they ramp up lending to more vulnerable sectors of the economy.

    China is counting on growth in services, particularly high value-added services in finance and technology, to reduce the economy’s traditional reliance on heavy industry and investment.

    But Monday’s private survey suggested many services firms are facing a bumpy ride.

    The Caixin/Markit services purchasing managers’ index (PMI) fell to 50.6 in September, one of the weakest since the survey began in 2005.

    To be sure, the private findings were in sharp contrast to official data which showed services activity expanded at the fastest clip since 2014 in September.

    But an official factory survey showed a similar trend, with big companies seeing strong improvements in business conditions while smaller ones struggled to grow, exposing a key fault line underneath the rosy headline growth numbers.

    Still, Capital Economics’ China economist Julian Evans-Pritchard, who has been among those predicting a broader slowdown, said it was too early to tell if the weaker Caixin service survey pointed to a turning point just yet.

    Retail sales over the just-ended Golden Week holiday rose 10% from a year earlier, slowing but only slightly from the pace in 2016, data showed on Monday.

    “It is notable that there are signs of weakness in other parts of the economy and I do think services have softened a bit...I think we will see a slowdown in industrial production as well over the coming few months,” Evans-Pritchard said.

    After China posted forecast-beating growth of 6.9 percent in the first half, analysts have said it was only a matter of time before it started to lose steam, especially as the government looks to contain the risks from an explosive build-up in debt, a campaign which is pushing up borrowing costs.


    Chinese banks: liquidity, no tranqs
    The aim is structural reform rather than a feel-good injection

    October 4, 2017

    Family holidays can be very stressful. But China’s early October vacation is at least usually free of financial market worries, thanks to tranquillisers from the People’s Bank of China. This weekend, the bank duly detailed a plan to reduce banks’ reserve requirements ["coincidentemente", na segunda-feira a imprensa brasileira publicou que o Banco Central estuda reduzir compulsórios].

    Hong Kong’s financial stocks have jumped 5 per cent since, leading the China Enterprises index to a two-year high. But hopes of looser credit policies are unlikely to be fulfilled

    In theory, a laxer deposits-to-loans requirement could free up as much as Rmb1tn ($150bn) of liquidity — compared with Rmb140tn of deposits subject to the requirement. At least nine-10ths of banks will qualify for the relief, and the PBoC will target extra loosening at groups that provide “inclusive financial services”, such as small businesses and student loans.

    Some banks already benefit from a similar 2015 cut, which the new measure broadens. Implementation of this is delayed until January. The injection differs from previous pre-holiday sedatives in that respect. Banks have time to shift their loan books.

    The PBoC wants banks to tilt lending gradually away from over-leveraged state behemoths and towards underfunded small enterprises, which tend to be privately owned and more productive. China’s comparatively high reserve ratio encourages smaller, provincial banks to seek off-balance sheet funding. The reduction should allow them to use deposits instead, reducing their risks. ICBC, the world’s largest bank by assets and with deposits at four-fifths of liabilities, would be an incidental beneficiary.

    The aim is structural reform rather than a feel-good liquidity injection. Markets prefer the latter interpretation, however. That is what has lifted bank share prices above book value, making capital raisings a possibility. Banks would be wise to exploit the opportunity before this particular mini-bubble deflates.


  10. #10
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    ICYMI: China’s credit squeeze sends warning on global growth

    William Sterling
    July 18, 2017

    China has sent a deflationary chill through global markets this year by engineering a major slowdown in the growth of bank credit in the country.

    In fact, we would argue that the unravelling of many of the so-called “Trump trades” in global markets this year reflects the deflationary chill that China’s credit squeeze is creating, rather than simply registering scepticism about Trump administration policies.

    As the world’s second-largest economy, with a nominal gross domestic product of nearly $12tn, China is sneezing and the world is set to catch a cold — creating further downward pressure on commodity prices and US interest rates.

    Over the course of little more than a year, China went from exporting deflation to helping create the “global reflation” theme that was evident in global equity markets in the second half of 2016.

    In the first three months of this year, China’s nominal GDP grew by 11.8 per cent, almost double the rate recorded in the year to December 2015, when investors were concerned about a Chinese hard landing. The country’s import growth reached 20 per cent, giving a major boost to economies that depend on trade with China.

    In a highly leveraged economy such as China’s, however, growth is a lagged consequence of changes in the supply of credit. And China’s credit policy has turned sharply restrictive, upending the conventional wisdom that nothing would be done to rock the boat ahead of the 19th National Party Congress that will take place in the autumn. All the signs are that the boat is rocking.

    The most important global policymaker nobody has ever heard of is Guo Shuqing, the recently appointed chief of the China Banking Regulatory Commission (CBRC).

    With the implicit support of President Xi Jinping, Mr Guo has issued a flurry of new regulations aimed at tackling corruption and speculation, including a requirement that banks account for previously lightly regulated “wealth management products” in line with capital adequacy regulations.

    The result is that the credit impulse, best understood as “the rate of change of the rate of change” of credit relative to GDP, has declined by a whopping 17.5 per cent of GDP in the first quarter of 2017.

    Business and consumers used to borrowing considerable sums will be under pressure to curb their net spending just as there will be fewer new loans available for any borrowers under duress to refinance their existing loans.

    By our measure, the magnitude of this negative credit impulse has only been matched or exceeded a few times: in 1994, 2004-05 and 2010. But in those previous periods the negative credit impulse came against the backdrop of very robust growth in nominal GDP: 37 per cent in 1994 and 18 per cent in both 2004 and 2010.

    Signs of potential weaker growth in China are already showing up in the partial inversion of the yield curve for China’s sovereign debt and in the sharp divergence this year between the performance of globally traded Chinese stocks in the MSCI China index (up 25 per cent) and the lacklustre performance of the Shanghai and Shenzhen Stock Exchange Composite indices of domestically traded Chinese stocks (up 1.2 per cent and down 6.7 per cent respectively).

    The “stop-go” nature of China’s credit policy has been seen before. When growth accelerates, it leads to a negative credit impulse a few quarters later and vice versa when growth decelerates.

    Since 1995 the average duration of negative credit impulses has been about four-and-a-half quarters. Since this episode began in the fourth quarter of 2016, it might be early next year before the authorities once again push forward the credit throttle — and only in response to clear evidence that China’s economic growth has slowed.

    In the meantime, expect weaker commodity prices and less upward pressure on US interest rates.

    China’s impact on the world economy is significant. Over the past five years its nominal GDP has expanded by $3.7tn, an amount that exceeds the GDP of Germany. In contrast, the entire global economy has expanded its nominal GDP by only $2.2tn.

    As well as accounting for nearly 170 per cent of the growth in the world’s nominal GDP in this period, it seems that China may have made US corporate earnings great again. Per Commerce Department figures, rest-of-world profits for US corporations were up by 25 per cent in the first quarter of 2017, while domestically generated profits were down slightly and well below their peak of 2014.

    The key concern for global investors is that even though China’s credit policy may be almost as important to the global economy as shifts in Federal Reserve or European Central Bank monetary policy, China’s economic policymaking remains far less transparent than in many other key nations.

    Monitoring China’s credit impulse, therefore, is perhaps the best means open to investors to “watch what they do, not what they say”.


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