Links: 2013-01-09
North America
“While workers intended to spend 10 to 18 percent of their tax-cut income, they reported actually spending 28 to 43 percent of the funds. This is higher than estimates from studies of recent tax cuts, and arguably a consequence of the design of the 2011 tax cuts. The shift to greater consumption than intended is largely unexplained by present-bias or unanticipated shocks, and is likely a consequence of mental accounting.”
US mortgages: Fed buying spurs hopes of US housing recovery /Euromoney magazine
“The Fed is buying around $1.3 billion of agency-backed mortgages a day and has indicated that it intends to keep doing so until there is substantial improvement in the US job market. Although this is the Fed’s third stab at it, the mortgage-purchase programme provides a solid floor from which to launch a turnaround in the housing market.
“The trends for recovery in US housing are good,” says Barbara Novick, vice-chair and head of government relations at BlackRock. “But the level of government support is not sustainable.””
“Obama’s willingness to take a more overtly adversarial stance is, in part, a nod to the reality that he’s about to start his second term with solid approval numbers — “Hit now, as hard as you can, because your power starts to die in six, eight months,” according to a top aide to a Senate Republican who has often locked horns with the White House.”
“Congress probably didn’t have trillion-dollar coins in mind, but there’s no textual or other legal basis for importing this probable intention into the statute. What 535 people might have had in their collective “mind” just can’t control the meaning of a law this clear.
It’s also quite clear that the minting of such a coin couldn’t be challenged; I don’t see who would have standing.”
Barbarous Relics – NYTimes.com
“I feel comfortable in my understanding of the economics of the platinum coin, but don’t claim any legal expertise. However, Laurence Tribe knows whereof he speaks — and he says that it’s quite legal. And so there you have it: if we have a crisis over the debt ceiling, it will be only because the Treasury department would rather see economic devastation than look silly for a couple of minutes.
For people like me, on the other hand, the economy is a social system, created by and for people. Money is a social contrivance and convenience that makes this social system work better — and should be adjusted, both in quantity and in characteristics, whenever there is compelling evidence that this would lead to better outcomes. It often makes sense to put constraints on our actions, e.g. by pegging to another currency or granting the central bank a high degree of independence, but these are things done for operational convenience or to improve policy credibility, not moral commitments — and they are always up for reconsideration when circumstances change.”
La moneda del billón de dólares | Economía | EL PAÍS
The Spanish are talking about the trillion dollar coin as is everyone else outside the US. Generally, people have to see this as a sign of extreme political dysfunction in the US. I see ratings downgrades coming.
Rage Against the Coin – NYTimes.com
“So minting the coin would be undignified, but so what? At the same time, it would be economically harmless — and would both avoid catastrophic economic developments and help head off government by blackmail.
What we all hope, of course, is that the prospect of the coin or some equivalent strategy will simply take the debt ceiling off the table. But if not, mint the darn coin.”
U.S. Might Lack Cash to Pay All Bills Feb. 15, Policy Group Says – Bloomberg
““Based on financial data from Treasury, we estimate that the government will be unable to pay all of its bills as early as Feb. 15,” Steve Bell, senior director of the economic policy project at the Washington-based Bipartisan Policy Center, said in an e-mailed statement today. “We have less time to solve this problem than many realize.”
Republicans in Congress want to focus on spending cuts in the current discussion over raising the debt limit, while Democrats counter that issues including taxes have to be a part of the negotiations.”
Dimon Leaves New York Fed Board as His Term Ends – NYTimes.com
“Mr. Dimon’s three-year term, his second on the board, expired at the end of December. While there are no official term limits, it is common for New York Fed directors to serve no more than two terms.”
Europe
Switzerland and Britain are now at currency war – Telegraph Blogs
“Analysts say the SNB has already bought $80bn of EMU bonds, enough to cover half the budget deficits of Euroland over the last year. It has been acting essentially as a conduit for capital flight from Italy to Germany.
It has since branched out, allegedly into Aussies, Loonies (Canada), Scandies, Won?, Real? but above all pounds. “There aren’t many places to go in this ‘ugly contest’ if you don’t like the euro, dollar, or yen,” said David Bloom, currency chief at HSBC.
“Everybody is trying to weaken their currency at the same time. The Swiss have got away with it and now the Japanese want to try. The Sandinavians are pulling their hair out. The Turks are cutting rates even though the economy is overheating, and putting in credit controls instead because they don’t want the currency to rise.””
“Buyers, including some Bank of Ireland shareholders, get 10pc interest per year from the bank for holding the debt.
The deal means a further reduction in the €4.7bn that the state pumped into Bank of Ireland to prevent its collapse.
The government currently holds 15pc of the Bank of Ireland”
Irish house prices to fall another 20pc, warns Fitch – Telegraph
“Irish house prices could fall a further 20pc and inflict stiff losses on holders of mortgage bonds, with a growing risk of property defaults across the eurozone periphery, according to Fitch Ratings.”
La crisis hace perder a las casas un tercio de su valor en cinco años – CincoDías.com
This article says estimates for the end of 2012 show Spanish house prices down by 33.3% in the five years since December 2007. They ended 2012 losing 11.3% of their value according to those estmates.
La economía española dejó de necesitar financiación exterior en el tercer trimestre – CincoDías.com
According to the Spanish national statistical office, the Spanish economy in Q3 2012 started to be able to finance itself from internal sources. I’m not sure how important a point this is but a lot of people point to the need for external financing as a big point when talking about the sovereign debt crisis.
German output rise fails to quell fourth-quarter contraction fears | Reuters
“The economy grew by a record 4.2 percent in 2010 and by 3 percent in 2011 but the economy ministry expects growth slowed to around 0.8 percent in 2012 and most economists believe it contracted in the fourth quarter.”
Germany’s Economics Minister:German GDP Grew By 0.75% In 2012 | MNI
“The German economy grew by some 0.75% last year, Economics Minister Philipp Roesler said Monday, calling this growth rate “robust”.
While economic output in the final quarter was weaker than expected, the current growth dent should prove temporary and the economy should pick up in steam through 2013, Roesler said.
The minister pointed to positive developments in manufacturing orders and improving investment sentiment. “We expect robust growth in 2013 as well,” he said.”
German Industrial Output Disappoints – WSJ.com
“Industrial output in Europe’s largest economy grew slightly on the month in November but fell short of expectations, further weighing on fourth-quarter growth prospects, data from the country’s economics ministry showed Wednesday.
The 0.2% monthly rise in adjusted terms in November was below expectations of a 1.0% increase in a survey of economists published last week by Dow Jones Newswires. The October figures were revised to show the month wasn’t as severe for industrial firms as previously thought, with output having fallen by only 2.0% instead of the 2.6% drop initially reported.
The ministry said industrial output in the fourth quarter was “likely” below the level of the third quarter.”
Appartementen 3,1% goedkoper in 2012: Netto.be more from netto.tijd.be
Asia
When stimulus becomes stealth nationalisation | FT Alphaville
“A big hat tip to Climateer Investing for helping us catch up on a Telegraph story from Ambrose Evans-Pritchard on Japan’s latest plan to stimulate itself out of trouble.
It, by the way, neatly sums up the problem associated with taking QE to the next level which, of course, for the Japanese authorities might have been buying equities outright rather than buying in ETF index form, which they’ve already been doing for a couple of years or so…
Think about it — a central bank en route to becoming a majority holder in a country’s primary equity ETF, is nothing more than a central bank en route to becoming the market.”
Japan’s downside from a weaker yen: Poor seniors – The Tell – MarketWatch
“A weaker yen may just be the medicine the doctor prescribed to boost Japanese industry’s global competitiveness, but a journey down the slippery slope won’t be without consequences.
Nobuyuki Saji, chief economist at Mitsubishi UFJ Morgan Stanley, warned in a note to clients Wednesday that the weaker yen could make Japan “a nation of poor seniors,” while the fact that Japan now has a trade deficit in everyday necessities suggests the currency’s depreciation will reduce the household sector’s real income.”
Australia
Spirits high despite trade deficit | The Australian
“Australia’s November trade deficit grew by $200 million to $2.6 billion compared with the previous month, as imports grew 1.8 per cent to $27.3bn, 50 per cent faster than exports, the ABS reported yesterday.
It was the 11th consecutive trade deficit and the biggest since March 2008 — but economists looked on the bright side.”
Australia Retail Sales Unexpectedly Fall on Weak Household Goods – Bloomberg
“Australian retail sales unexpectedly declined for the first time in four months in November as consumers spent less on household goods and clothing in an economy with a weaker employment outlook.
Sales dropped 0.1 percent to A$21.5 billion ($22.6 billion) from a month earlier, when they were unchanged, the Bureau of Statistics said in Sydney today. The result compares with the median forecast for a 0.3 percent gain in a Bloomberg News survey of 15 economists, none of whom predicted a decline.
The data underpins Reserve Bank of Australia Governor Glenn Stevens’s decision to make five rate reductions — totaling 1.75 percentage points from November 2011 to December — as he seeks to buttress a slowing economy. The benchmark rate is at 3 percent, matching a half-century low, as policy makers seek to stimulate industries outside of mining, where investment is expected to peak this year.”
Monetary policy
On the transient necessity of central bank independence | FT Alphaville
“Nowadays, the idea of not having an independent central bank is seen as being a bit backward. One could even say that central bank independence is widely accepted as the optimum set-up for any country’s monetary system, a reflection of its developmental status.
“Independent central bank? Check.”
“This country must be civilised. ”
Yet, can we really be so absolute about the matter?”
Technology
“According to a new report by BGR, Apple is preparing to launch one or more new iPhone models by mid-2013.
Canaccord Genuity analyst T. Michael Walkley in a note to investors said Apple’s iPhone 5 saw “very strong” demand in the holiday quarter, “likely pushing cumulative sales for fiscal 2013 above analysts’ consensus to 173 million units.” Apple will unveil a new “higher-end iPhone” in June of this year and a low-end model as well.”
Verizon Could Follow T-Mobile’s Lead by Ending Carrier Phone Subsidies – Droid Life
“Verizon CEO Lowell McAdam was quoted at CES this week saying that these subsidy-free plans would be a “great thing,” and that Big Red could move to those types of plans “very quickly” if the customers wanted it. AT&T’s Mobility Chief Executive Ralph de la Vega said more of the same, but doesn’t think that people are ready to pay for phones full price at the moment.
It’s no secret that the big carriers would love to make more money off the fancy new devices and phones that they sell, but it sounds like they won’t move towards them if the customers aren’t ready for it.”
SuperSpeed USB 3.0 to rival Thunderbolt speeds in 2014
“The newest version of the ubiquitous universal serial bus protocol is primed to get a performance boost in 2014, with data transfer speeds doubling to 10 gigabits per second while maintaining backwards compatibility with the huge existing USB ecosystem. “
Apple reportedly to roll out low-cost iPhone for emerging markets in 2H13
We’ve heard this rumour before. I don’t know how credible this is but it does have more specificity than other rumours we have seen on a cut-price iPhone. Let’s wait and see.
Huawei Announces the 6.1-inch Ascend Mate and the 5-inch 1080p Ascend D2 – Droid Life
So here’s a Chinese manufacturer coming out with a 1080p screen that’s 5-inches across. That’s pretty nice. The thing is this is just another competitor using Android and they have a 6.1-inch scree that’s 780p as well. That demonstrates what I said last month that EVERY Android manufacturer now has one or two phones that can compete with the iPhone on features, prominent among them being the screen size. To me, this also shows that the onslaught of Android product is going to be too big for Apple to compete. They will lose share in 2013 and this will materially impact earnings.
Video: Hands-on With the 6.1-inch Huawei Ascend Mate and Ascend D2 [CES 2013] – Droid Life
This phone is big. I think it’s TOO big but that’s just me. I suspect, though, that a lot of people will feel that way. The thing is, the fact that this company is making this phone tells you that larger phone size is a real issue for the smartphone market and it means that Apple’s iPhones increasingly are laggards on screen size, something I believe will hurt sales more and more over time.
Elsewhere
The Best Time to Buy Anything During the Year
“A bit of planning can save you a ton of money when it comes to buying throughout the year. Here’s your comprehensive, always up-to-date guide on the best times to buy everything this year.”
RG3’s dad says Redskins quarterback needs ACL replacement
“When Robert Griffin III underwent surgery early Wednesday to repair his torn right lateral collateral ligament, it was determined that his right anterior cruciate ligament was also damaged and needed reconstructive surgery for a second time since 2009, Griffin’s father told USA TODAY Sports.”
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