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Archive for the Economics Category

New Bank Overdraft Rule in the USA

Up until now if you took more out of your checking account that you had, creating a negative balance your bank typically honoured your check and whacked you with an overdraft fee.

Not anymore.

If you try to overdraft your account your request will be denied—unless you pay for overdraft protection, more fees!

Read more here

Who is In Worse Shape California or Ontario?

Investors who are under the illusion that all is well in Canada in regards to provincial finances may want to think twice.

Ontario leads the defict parade in Canada and for an interesting comparision between Ontario, Canada and California check it out here.

China’s Property: Bubble, Bubble, Toil and Trouble

As economist Xie points out, residential prices in China relative to per capita income are far and away the highest in the world. The housing price-to-income ratio in urban China is over 20, which means it takes the average citizen’s total wages for 20 years to buy an average dwelling. (By comparison, the highest housing affordability ratio for a U.S. city — Honolulu — is 8.2.)

Read more: http://www.time.com/time/magazine/article/0,9171,1971284,00.html#ixzz0iFWqVIxE

IS CHINA ABOUT TO LEAD US INTO A DOUBLE DIP?

At the beginning of the year we described China as one of our “5 biggest risks” of 2010.  Last week we mentioned (see here) the risks in the Chinese economy appear to be mounting as property prices surge and inflation begins to rear its ugly head.  Well, it looks as though we’re not the only ones who are concerned about the sustainability of the Chinese economic recovery.  According to Westpac Bank in Australia the leading economic indicators in China are beginning to roll over:

Read  more at the Pragmatic Capitalist here.

Is China’s Politburo spoiling for a showdown with America?

China has succumbed to hubris. It has mistaken the soft diplomacy of Barack Obama for weakness, mistaken the US credit crisis for decline, and mistaken its own mercantilist bubble for ascendancy. There are echoes of Anglo-German spats before the First World War, when Wilhelmine Berlin so badly misjudged the strategic balance of power and over-played its hand. This is worth a read go here.

Bank Reform - Back to the Future

Former US Fed Chairman, Paul Volcker speaks out on reforming the banking systems. It is time!

PRESIDENT OBAMA 10 days ago set out one important element in the needed structural reform of the financial system. No one can reasonably contest the need for such reform, in the United States and in other countries as well. We have after all a system that broke down in the most serious crisis in 75 years. The cost has been enormous in terms of unemployment and lost production. The repercussions have been international. Read the whole thing here.

India RBI begins tightening cycle, ups banks’ reserve ratio

Following on China’s lead the Central Bank of India is tigthening monetary policy and has indicated that there is more to come. As the old adage goes ” Don’t fight the FED”, of China and India that is.

Tighthing monetary policies such as raising bank reserve requirements and raising interest rates are tools Central banks use to slow down the economy and arrest inflationary pressures. Tends not to bode well for both equity and bond markets.

See the story here.

China continues to reign in loose monetary policy

China has rattled financial markets by moving faster than expected to tighten its grip on liquidity as a strong recovery and rising asset prices threaten to cause overheating in the world’s third-largest economy.

Societe Generale said in a research note in the wake of Tuesday’s auction that the central bank’s wording of “flexible and targetted” was currently still tightening.

“The hike in the reserve requirement and the draining of liquidity while in fashion with the notion of flexibility and targetting, cannot be dismissed as anything other than tightening no matter how minor at this stage,” SG said.

China is leading again, this time putting the brakes on by raising interest rates and tightening bank reserve requirements to arrest runaway stock market and real estate speculation. Will the rest of the world follow?

Read  More here.

Crisis expert says China’s boom to end soon

Noted economist and author Richard Duncan said that, faced with sluggish global growth and a tapped out U.S. consumer, there’s little hope that China can keep its factory-geared economy in motion much longer.

“China has followed an export-led growth model for the last 25 years, and it has just hit a brick wall when the U.S. economy went into crisis,” Bangkok-based Duncan said in an interview with MarketWatch.

Duncan is the former London-based head of global investment strategy at ABN Amro. In 2003 he authored “The Dollar Crisis,” which warned that imbalances in global trade would lead to a meltdown of the financial system.

See the full story here.

DEEP THOUGHTS FROM DAVID ROSENBERG

Gluskin Sheff & Associates’ chief economist David Rosenberg is well known for his sobering views on the economy and he makes some good points that up until now have fallen on deaf ears. The market has trumped his analysis so far, perhaps due to massive government monetary intervention into the economic system, but as central banks remove the economic stimulis perhaps its time to revisit what he has to say.

Read his thoughts at the Pragmatic Capitalist here.