you can write a lot about the Chinese real estate sector, especially without reasoning and numbers:) I have no access to reputable information, therefore there is nothing to draw conclusions. but you can delve into the logic of others. especially if you believe that, that the date does not disprove the logic.
I repeat, but the arguments about the bubble" (I don't like this term, but I respect the versatility) in selected cities, this is not serious. you need to watch the relative volumes.
interesting argument about leverage, they say he is very low. here of course you can disagree with the data, but you can't ignore all the statistics around, you need to use something.
met Danske Bank leverage / debt figures, which aroused interest. look at the chart and don't worry about China. then see the second graph and don't worry about China at all. finally, look at the third graph and we understand where the dog is buried and who buried it there.
Again, it doesn’t mean anything yet, it just develop thoughts about, that the commonplace idea of debt in the PRC is not so simple.
The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession by Richard C. Koo
Chapter 1. Japanese recession.
1.1 Structural and banking sector problems cannot explain the duration of the recession.
Often the duration of the recession in Japan is explained by either structural problems, or problems in the banking sector. Both are not true.
Structural problems are usually associated with supply-side problems.. Therefore, the slogan of one of the prime ministers «no recovery without structural reform» implied the Regain-Techersky approach to reforms. Here Ku writes, they say, with the topic of structural reforms, I actually heard everyone's ears, but even before the early 90s, but they are not the main cause of the recession (sort of like his recommendations were part of the United States-Japan Structural Impediments Initiative (1991)).
Structural problems indicate, that the private sector is unable to produce quality goods at competitive prices. An economy with structural problems usually has large trade deficits, high inflation, and high % rates. Typical example (By the way, typical or only?) USA and Britain of the 70s.
Actually, the situation in Japan in the 90s was rather the opposite of the situation in the USA in the 70s. Low rates, deflation, rising yen, trade surplus – in Japan. In the USA, everything is exactly the opposite.. The concept can be described as: adequate offer, but lack of demand – in Japan, and adequate demand but insufficient supply in the USA. In principle, Japanese goods were in great demand everywhere, except for Japan itself. By the way, corporate profits were therefore good (through export).
The second main reason for the depression is called the problems in the banking sector, which for various reasons has become a bottleneck and is unable to saturate the system with money.. If companies are unable to raise money from the bank, then companies go to the open market with the issue of shares and bonds. Consequently, if the problem is the money supply, then the volume of placements should grow. However, nothing like this happened.. (There really is a catch. Poor balance – this is the reason for the high risk premium, which means that it can be simply unprofitable to raise funds by placing debt instruments and even more so shares. Here, a financial accelerator can significantly cloud an already good one., but not the strongest argument).
The same goes for non-resident banks. If there is a demand for money, then foreign banks not experiencing problems should increase their market share. Which also did not happen. (with 1997 years, foreign banks have no problems with opening branches at all, previously required some kind of permission).
In the event of a credit crunch in the United States in the early 90s (LBO, CRE S&L) American companies rushed to the debt market for funds (ie. an example of that, what should have happened to Japanese companies). But the most interesting thing, that Japanese banks were actively involved in the process of lending to American companies, which once again indicates the absence of a narrow neck. Ie. not that, so that everything is fine in the banking sector, but it wasn't the credit crunch that was at the heart of the Japanese recession.
1.2 Bubble collapsed triggered a balance sheet recession.
Japan – this is generally a very interesting country, but there is one phenomenon that is not reflected in theoretical economics. Since the early 90s, the Japanese private sector has been reducing its debt burden at 0x % rates. This phenomenon has not received theoretical attention due to simple logic.. If the company does not use free money, it means that it is not able to find any profitable opportunity and it should be liquidated by returning the money to shareholders. In essence, this is why the company exists, what is better than other organizational forms that multiplies money.
When companies, instead of raising funds for investment, pay off existing debt, then the economy loses demand through two channels:
1) Business does not reinvest profits 2) Business does not attract household savings.
At all, when economic agents stop absorbing savings, then the aggregate demand is directly reduced by the amount of savings also multiplied by the multiplier. Shrinking aggregate demand = shrinking GDP = recession.
As a result of the collapse of land prices (this is really a collapse, this is not for you -30% or even not -50%, -90% – this is almost the same as -100%, plus it's not in momentum, but for now forever) Japanese companies found themselves with «bad balances». Asset value dissolves, and the credit remained on the side of the passive. Wherein, how the business itself generated cash flow, and generates. Ie. you are fine, but a huge hole in the balance sheet, which is actually better to close, since from the point of view of financial analysis you are bankrupt, and who wants to deal with bankruptcy.
New business challenge – pay off debt as soon as possible. Thus, the company from a profit maximizer becomes a debt minimizer..
Here Ku also writes about, that Japanese companies had crazy leverage, as high growth rates turned a blind eye to all risks. Generally after a while, Japan closed its eyes a lot due to high growth rates.
Bubble collapse triggered losses equivalent to 3-year GDP (and here, if it's true, and lies the answer to all the controversy about whether the United States will be the same, as in Japan. Answer – No. For in Japan the losses were incomparably greater than in the USA. It is in the size of the holes in the balance that the whole point is). How much is Ku known, this is the largest los in world history during non-war times. Further it is clear: then, what is good for one is terrible for all at once. When everyone starts to pay off the debt, aggregate demand decreases and a recession sets in.
To understand in practice what happened, below is a graph about, who saves, and who borrows in the Japanese economy. Above zero – saving, below – borrowing. Look at non-financial companies. As a matter of fact, demand from the corporate sector decreased by 20% GDP. And this decline replaced the state (and declining private sector savings).
1.3 Fiscal incentives helped to keep GDP at the same level.
Firstly, Japan's savings rate has dropped significantly, which directly increases the share of consumption in personal income, plus reduces the share of dead savings that do not work because no one takes them out on credit. Just do, lower savings rate – it is a complex phenomenon, here is demography (which by the way is useful and not harmful in this case), and reduced income. But the most important thing – this is a reduction in expectations (apparently the Japanese have that part of the brain that speaks – that's it, you can save even more more, than the one who says – that's it, you can spend more). Secondly, and this can be seen from the previous graph – the budget went into deficit in response to what then appeared to be a cyclical recession. The irony is, that the state that kept the living standards at the same level is accused of mistakes that allegedly led to such a prolonged recession.
1.4 Debt minimization and monetary policy.
Logically, that in a balance sheet recession, the effect of monetary policy is limited by the fact, that the problem is in the plane of demand for cash. No demand – the price of money does not matter. You can say, that we are not talking about moving along the demand curve, a new demand curve with almost zero price elasticity of demand.
How the process of increasing the money supply from the Central Bank works? We buy bonds from banks, banks lend, funds go to deposits in the same banks, in fact, and further according to the money multiplier. But when there is no demand for credit, then capital injections from the Central Bank simply do not leave the banking system – stuck in excess reserves.
but, deng supply still hasn't diminished, and again thanks to the state. (By the way, it is easy to see the recovery in demand for credit in the mid-90s on the graph.. Ku writes about, that then the idea of cutting off incentives killed recovery. But here's the thing., and that the Asian crisis didn’t undermine exports, didn’t? In general, Ku has a lot of emphasis on internal Japanese processes and complete ignorance of external factors.)
The chapter ends with the idea of, that Germany also had something like a balance sheet recession. Thought is not particularly developed, but there is a schedule. Here, as they say, more questions, than answers about, what the author really wanted to say. To judge you)
________________________________________________________________ Let me remind you, that this is only the first chapter of eight, which, although it is called «Japanese recession», but still serves only as an introduction. The next chapter is about the characteristics of a balance sheet recession., and I will definitely write it down a little later.
Below is a technical picture for ES in daily format reveals the last line of defense., matching bottom 5 February at the level 1036. As you can see, the market is depressed and is below many MAs, but nervousness and fear prevents players from buying the market aggressively, which the 14% below the top, where they bought furiously. May is coming to an end and in theory we should be close to the bottom from which the summer rally should begin. If the level 5 February will not hold, then the next level of support 1025 per spot. Where in the archives in the charts I showed this level. For me, of course, I would like, so that there is a rebound from these levels and the formation of the bottom would make it possible to increase the LONG position.
The bullish trend was finally broken today, even on the day. Entering the bearish stage. Complete uncorrelation, and I think it makes sense to trade only according to the technical analysis of the instrument itself. Alpha analysts hope for a rebound tomorrow 0,5-1% – I think, the fall will intensify, despite being oversold. Tried to long in the morning (Eurobax confused me) was a little in the black, then I caught moose, and barely took his feet… Now about the lessons (personally for me).
1. Don't trade fancy, or waiting, and trade the chart. 2. Trade only typical situations (made pictures, regulations, I'll hang it on the wall now :)) 3. Don't listen to anyone, only myself. No matter what they say or write on the blogs, on TV, radio – largely, this is just unnecessary information noise.
I see, that the book is good and needs to be read. In fact, there is not much text there., conclusions too. Or rather, cautious conclusions. Let's put it this way., this is only the first step in information processing. Her, Information, still very, very little. There is nothing fundamentally new in nkiga. If you are a little interested in history, then the ideas are known and understood, but they are systematized in the book. There are no stories in the book. Ie. this is not a semi-fiction book about crashes and upheavals. It starts with a discussion of the methodology and moves on in style: we have collected the data – here's a table / graph – well, in general, everything is visible on it. The book is a little worse than expectations, but good at correcting ideas and guesses, actual confirmation or refutation of facts.
A short set of ideas:
1) Foreign debt defaults have always been paid, many times. Some countries are more prone to default, but it's not obvious. For example, Spain at one time was a record holder, but, seem to be, it was only an episode. Also data on external defaults, as well as internal (+ inflation, real estate, etc.) extremely low quality and very few of them (the authors are surprised, how can such a huge industry as the debt market exist without knowing its own history).
2) Defaults happen with completely different debt / GDP ratios (and others). Domestic debt, and private sector debt, along with inflation and financial / banking crises, form a single 'default' whole" to establish causal relationships in which it is extremely difficult. By simplifying: if it is not clear why this or that default occurred – look at the circumstances. Domestic debt is defaulted as easily as domestic debt. Which default is worse (internal or external) unclear, how the system reacts depending on the circumstances.
3) The printing press has always existed, just before he acted technologically more complicated – by reducing the share of precious metals in coins. Ie. inflationary and devaluation shocks have always been.
4) Financial and banking crises have a long history. A financial crisis is often followed by a debt crisis due to a buyout / bailout of the financial system (bailout). Bailout – the phenomenon is not new at all. And moral hazard is not a new phenomenon any more.
WANT THE TRUTH?OK!Everything about my statent, profitability and competence. I honestly say orderly * alsya to respond to all sorts of attacks of spiteful
quite accidentally looked into the spot market, more precisely in the market of bank gold. I knew, certainly, about spreads, but.. wow!!
below is the chart of purchase / sale prices for the year according to the version .
but spreads in one of the banks. Well well, we will buy as a couple of single-gram pieces for a year, to speculate)))
and now if you add the cost of storage.. safe/security/underground)
open an account in an American broker and buy GLD will be cheaper.
there is still a really wild business with coins, including those issued by the NBU. they say, here of course you need to think, but with the right approach and good distribution coins to regional collectors-physicists, can be cut by 50% per month))
showing that, why did I get out yesterday (and there is nothing more to show for this week)..
GLBL: level 5.60, emerged from the open, hidden shopper entry
SBAC: entrance by teip after parsing the hidden buyer
and now a little annoying, two more trades, in which I was not allowed by laser due to exceeding the permissible risk-stop. I know myself now – in these two trades I would be 100%, so for yesterday there was an opportunity not just to withdraw into an easy plus week, but also make it profitable.. however, I will not be clever in hindsight :) but now faith and understanding have strengthened a little, how can you have 19 unprofitable days in a row, and then one day close everything.
YH: before the start of the drain, the seller did not let it go higher, and then, in addition, I stepped below, what amplified the signal. the schedule just screams “sell at a risk of 3c”.
IMGN: but here I was just ready to hit at least 1k sherz, so sure. there and be on 250 lots for 8 was, there and smashed it unhurriedly, what was the second 3-4, to snatch the last, but most important, that before parsing, a super-good point for a short stop was indicated.
a difficult week. with risk spreading, I will time out at least a couple of the first trading days of the next week.
For starters, just a quote from Rosenberg: Real final sales, despite all the government’s efforts, have only managed to recover at a 1½% annual rate since the recession supposedly ended last summer. In a typical post-recession bounceback, the rebound is closer to 3½% and with far less intervention out of the Fed, Treasury, White House and Congress.
Мысль сводится к тому, that the purchases of residents without taking into account the dynamics of reserves are not growing as. It's even easier to follow – weak consumer behaves inappropriately than consumers behave during a cyclical recession. And that means, that the system will react very badly to the withdrawal of incentives, definitely worse than the market expects.
Let's look at the Real Final Sales of Domestic Products graph itself. Unlike Dave, I took a longer period and averaged over two periods. (originally on the chart – annualized quarterly data). Really, looks weak?
But the solution to the riddle seems to lie in another., namely, to slow the pace of recovery (when taking into account the cool base effect). All in all, you don't need to see the dynamics of Real Final Sales of Domestic Products, and somehow correlate it with the dynamics of GDP.
It is suggested to simply subtract one growth rate from another., and also average by 2 Quarters. Not so, to be very coherent methodologically, but I don't notice the space for statistical instrumental error for our task..
Actually the difference in growth rates.
So here, if we are comparing the current recession with the post-war ones., initially knowing, that they have a different nature, then the current backlog in domestic sales should not scare us in the same historical context..
In other words, no additional light in the realm of darkness we get using the dynamics of RFSoDP. The focus is now some slowdown in momentum and old friends. – capacity utilization and inflation, plus demand for credit + real estate + income without transfers.
