India’s new Raj(an) | Gavyn Davies
“In India, he believes that the unfair distribution of gains from land and property sales in the 2000s has caused a severe political backlash which now makes obtaining permission for new investment impossibly difficult. He says that the Licence Raj of the 1990s has been replaced by a Resource Raj in the 2010s, in which the supply side has atrophied while the government has tried to subdue political dissatisfaction by subsidising energy and bestowing other costly and inefficient favours through the fiscal system.
He is emphatic that the fiscal deficit must be brought down, that cronyism must end, and that the RBI should not be subjected to fiscal dominance by the government. Unfortunately, none of this will he control.
More relevant to his new role, his 2008 government report argued for the primacy of an inflation target for India, rather than the multiple indicators approach generally followed by the RBI. He has also been an advocate of freely floating exchange rates, with a more open capital account to encourage long term capital inflows.”
ITC Ban Deals Blow to Samsung in U.S. – WSJ.com
“The ruling could put pressure on the Obama administration, which only a few days earlier took the unusual step of vetoing an ITC ruling in favor of Samsung. The ITC ruling would have barred the sale of some older Apple iPhones and iPads.
The veto by the Obama administration of an ITC order to ban some Apple products earlier this month was the first in more than 25 years. U.S. Trade Representative Michael Froman made the decision based on policy concerns about companies obtaining product bans based on patents that cover technology used in industrywide standards.
Lawyers said Samsung could argue through the courts and lobby for a veto that banning Galaxy products would limit consumer choice in the market. But they note that obtaining a veto won’t be easy.
Apple was able to receive a veto by the Obama administration because the patents that Samsung hold are “standard essential patents”—those that must be licensed under fair and reasonable terms to other companies.”
Samsung Losses to Apple Give IPhone Maker Edge in Talks – Bloomberg
“Apple Inc. (AAPL)’s patent-infringement victory over Samsung Electronics Co. could go far in bolstering its claim of copying and providing an advantage in any settlement between the world’s two top smartphone manufacturers. “
Bond Hubris Overwhelms Fed in Riskiest Credit-Market Sectors – Bloomberg
“The amount of loans made this year that lack standard protections for lenders exceed the all-time high set in 2007, and only one other time have investors pumped more money into funds that buy lower-rated loans than they did last week. Bonds rated in the lowest category of junk accounted for the greatest percentage of speculative-grade offerings last month since 2011. “
Italian Bonds Advance With Spain’s as Reports Signal Recovery – Bloomberg
““There has been some improvement in data and the tone in peripherals has been fairly constructive,” said Peter Goves, a fixed-income strategist at Citigroup Inc. in London. “Spreads have tightened to Germany. In the absence of negative catalysts, this will probably continue in the near-term. That said, the euro-area economy is far from pre-crisis levels.”
Italy’s 10-year yield fell seven basis points, or 0.07 percentage point, this week to 4.19 percent at 5 p.m. in London yesterday, after reaching 4.17 percent, the lowest since June 10. The 4.5 percent bond maturing in May 2023 rose 0.505, or 5.05 euros per 1,000-euro ($1,334) face amount, to 102.795.
Similar-maturity Spanish yields dropped seven basis points to 4.50 percent after reaching 4.48 percent yesterday, the lowest since June 6. “
Eurozone banks need to shed €3.2tn in assets to meet Basel III – FT.com
“Europe’s biggest banks will have to cut €661bn of assets and generate €47bn of fresh capital over the next five years to comply with forthcoming regulations aimed at reducing the likelihood of another taxpayer funded bailout.
The figures form part of an analysis by the UK’s Royal Bank of Scotland – which singles out Deutsche Bank, Crédit Agricole and Barclays as the banks most in need of fresh capital – highlighting that five years on since the financial crisis, Europe’s banks are still “too big to fail”.”
Summers Gains Ground, but Yellen Still Leads Among Economists – Real Time Economics – WSJ
“Among economists surveyed this month by the Wall Street Journal, notably more believe President Barack Obama will choose Mr. Summers to be the next chairman of the Federal Reserve than did last month.
Janet Yellen, the Fed’s vice chairwoman, remains the front-runner but a month of news stories about Mr. Summers’ candidacy have dented her lead. Twenty-seven of forty-six economists polled said they expected her to be Mr. Obama’s nominee to run the Fed (six did not answer the question). In all, she garnered 68% — down from 83% in the last survey.”
Re-Capturing the Friedmans by J. Bradford DeLong – Project Syndicate
This bears noting given the debate in the blogosphere going on regarding Friedman. I would also say that I definitely have Austrian predilections in that liquidationism is important from a supply side perspective. That doesn’t say anything about the demand-side.
“The Friedmans almost always made the claim in its first form: they said that the government had “caused” the Great Depression. But when you dug into their argument, it turned out that what they really meant was the second: whenever private-market instability threatened to cause a depression, the government could avert it or produce a rapid recovery simply by purchasing enough bonds for cash to flood the economy with liquidity.
In other words, the strategic government intervention needed to ensure macroeconomic stability was not only straightforward, but also minimal: the authorities need only manage a steady rate of money-supply growth. The aggressive and comprehensive intervention that Keynesians claimed was needed to manage aggregate demand, and that Minskyites claimed was needed to manage financial risk, was entirely unwarranted.”
Friedman and the Austrians – NYTimes.com
Here Krugman says favorable things about Friedman in contrast to Hayek and Austrian economics and Hayek’s liquidationism strain.
Milton Friedman, Unperson – NYTimes.com
Here’s Krugman saying good things about Friedman, perhaps to tear him down later. Worth reading
Bad loans to weigh on Chinese banks’ first half profits | South China Morning Post
“”Chinese authorities’ tough stance on industrial overcapacity will initially mean rising overdue loans, and, over time, rising non-performing loans,” analysts at Nomura Securities said in a research note. “This will be a gradual process since NPL recognition and before-tax provisioning of bad debts is a somewhat more cumbersome procedure in China compared to developed markets.”
Banks’ profits will be underpinned by a stable net interest margin (NIM), a key measure of lending profitability, and a recovery in fee income growth driven by credit card and wealth management fees, analysts say.
“The slow move towards deposit interest rate liberalisation will benefit the outlook of NIM,” an analyst with a major mainland investment bank in Beijing said.”
Official manipulation adds 10 per cent to China’s GDP | South China Morning Post
“Study gives the lie to the economy-wide inflation rate, argues that housing costs are understated by Beijing’s statistical agency”
Apple Loses China Smartphone Market Share to Cheaper Models – Bloomberg
““Apple is only focused on the high-end segment, and China’s smartphone market growth right now is coming from the mid- to low-end,” Peng said. “Apple doesn’t have any products in the mid- to low-end and that’s where Xiaomi has been building their brand awareness.””
Amazon España desvía sus ventas a Luxemburgo para no pagar impuestos | Economía | EL PAÍS
This is a familiar story. Amazon has set up shop in a low-tax jurisdiction and routes sales through that jurisdiction to avoid tax. This is what Amazon does with Luxembourg for sales in Spain.
Japan says GDP growth could slow to 1 percent after sales tax hike | Reuters
“Japan’s economic growth will slow to 1.0 percent in fiscal 2014/15, less than half the pace expected this year, as a planned sales tax hike weighs temporarily on consumption, government forecasts showed.”
Japan GDP Clouds Tax Debate – Real Time Economics – WSJ
“Japan watchers were hoping today’s GDP figure would give some clarity to whether Prime Minister Shinzo Abe’s government will push ahead with a sales-tax hike to bring rapidly-increasing debt under control.
But the number – an annualized 2.6% growth in the three months through June – has further clouded the debate over the sales tax.
The number came in lower than the 3.6% rate economists expected and is likely to give firepower to those who contend the economic recovery is too fragile to withstand such a hike at this juncture.”
Japan growth slows in second quarter, adds to sales tax uncertainty | Reuters
“Japan’s economic growth slowed more than expected in the second quarter, offering ammunition to those seeking to temper a planned sales-tax increase even as government debt has risen past 1,000 trillion yen ($10.4 trillion).
But as the sharp slowdown was driven by an unexpected fall in corporate capital spending while personal spending remained hardy, the data may encourage Prime Minister Shinzo Abe to proceed with the tax hike and soften the pain by offering tax breaks to boost business investment.”
“Since launching in 2005, calorie-counting and exercise-tracking app MyFitnessPal has boostrapped its way to a profitable business reaching more than 40 million users worldwide. But, after years of going it alone, the company said on Sunday that it had raised $18 million from some of Silicon Valley’s biggest investors.
The Series A round was led by Kleiner Perkins Caufield & Byers and included Accel Partners. As part of the deal, Kleiner Perkins’ John Doerr and Accel’s Andrew Braccia will join the company’s board.”
China to set up more private banks to help small firms | Reuters
“China’s cabinet has unveiled plans to set up more private banks to boost financial support for cash-starved smaller firms, in the latest bid to bolster the slowing economy.”
I warn you, Mr Carney – a housing bubble is coming – Telegraph
“An equity loan scheme and state-backed mortgage guarantee programme would encourage more people on to the housing ladder, it was argued. House price inflation has been proceeding, unsurprisingly, at quite a clip ever since, at a time when real incomes remain squeezed.
This can have only one effect, as a glance at the latest data on the average house price-to-earnings ratio for first-time buyers reveals. It is on the way up again and now stands at 4.4:1.
That compares with 4:1 in the depths of the financial crisis in 2008 and 2:1 after the 1990s house price crash, which left millions of homes repossessed and homeowners suffering the miserable impact of negative equity. Its record high is 5.4, an unsustainable figure reached in 2007 before the wheels came off the economy. “
Canadian housing boom in ‘9th inning’ – Business – CBC News
“Last week, Statistics Canada reported that building permits in the residential sector fell 12.9 per cent in June, and permits for multi-unit dwellings — mostly condos — sank even further by 18.8 per cent.
Even more frightening, research conducted by RealNet Canada found that in some of the bigger markets — Toronto, Vancouver and Calgary — residential land investments for future home building has already crashed through the floor, plunging 51, 52 and 30 per cent respectively.
Housing sales have recently begun trending upwards again — even in Toronto and Vancouver — after almost a year’s slump brought on by Ottawa’s decision to apply the brakes on mortgages last July.
Bank of Montreal chief economist Doug Porter predicts next week’s report from CREA will show a 10 per cent surge in home sales from a year ago. He bases that on already reported data from big centres such as Toronto, Vancouver, Calgary and Edmonton, which all had boffo months, although there was a drawdown in Montreal and Ottawa.”
China’s first-half gold consumption jumps 54pc: CGA | South China Morning Post
“China’s gold consumption jumped 54 per cent in the first half of the year to 706.36 tonnes, the China Gold Association said, as lower prices of the precious metal attracted buyers.
China, which is set to overtake India as the world’s biggest gold consumer this year, consumed 832.18 tonnes in all of last year and about 460 tonnes in the first half of last year.
Output in China, the world’s biggest gold producer, reached 192.82 tonnes, up 9 per cent from a year ago, the association said in a statement on Monday.”
ekathimerini.com | Bundesbank report on Greece raises pressure on Merkel
“The Bundesbank, which declined comment, also described the risks associated with the existing aid package for Greece as “extremely high”, according to the report, and said the approval last month of a 5.8 billion euro (4.96 billion pounds) aid instalment to Athens had been “politically motivated”.
The report could not come at a worse time for Merkel, who is favoured to win a third term in the parliamentary election but could fall short of the votes she needs to retain power with her preferred partner, the business-friendly Free Democrats.”
ekathimerini.com | Greek economy shrank by 4.6% in 2013 Q2, 20th straight quarter of contraction
“The economy had contracted by 5.6 percent in the first quarter.
Last week, Finance Minister Yannis Stournaras insisted that the economy would shrink by about 4 percent overall this year. He expects growth to return next year.”
Smartphones Expose Camera Makers’ Shortcomings – WSJ.com
“Camera makers have pinned their hopes on high-end models with interchangeable lenses. The market is more niche, but these more expensive cameras generate much bigger margins—about 15% to 25%, say analysts, compared with low single digits for compacts.
Worryingly, though, sales of high-end cameras were also down in the latest quarter, by 4% at Canon and 5% at Nikon.
Both companies said sales were hampered by the economic slowdown in China, where the outlook remains uncertain. But business isn’t strong beyond Chinese borders, either. Nikon said it missed camera-sales targets in the Americas, Europe, and Asia outside Japan, and cut its operating profit forecast for the fiscal year ending March by 23.5%.
The camera makers may be unrealistic about the potential market for high-end models.”
Paul Krugman and ‘reality TV economics’ | The Market Monetarist
I agree with this. Krugman says a lot of politically-motivated stuff just to rile up people he sees as his adversaries. When I read his Friedman stuff, that’s the sense I got and this post puts it in a way that resonates for me. That said, I believe Krugman is right but Friedman has more following than Krugman admits. I think he is playing up the ‘no one follows Friedman anymore’ bit to get a Pavlovian response. I may have more on this later.
“The fact that Paul Krugman won the Nobel Prize in economics in 2008 is not what makes him a “popular” economist. In fact most people don’t even have a clue about what research he did to get his well-deserved Nobel Prize. Krugman is famous for being Krugman – not for being a great trade theorist (he is). I find that extremely unfortunate, but you can only blame Paul Krugman for that.
Like the Kardashians Paul Krugman’s business model is to say outrageous things. That has made him extremely popular among leftists around the world and hated by many on the right. Lately he has succeeded in stirring up trouble by trashing both Milton Friedman and Friedrich Hayek and belittling their contributions to economics and to the public discourse on economics.”
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