Tag Archives: Economic growth

Opening Quotes: Disconnected Stimulus

US & Europe believers are eagerly awaiting another fix …..

But the disconnects – in performance & cure all optimism in the power of the modern central bank- with China are opening very wide.

FT: ‘Hopes of stimulus steps supports stocks’

” …… investors are being presented, perhaps, with evidence from China of the limits to monetary policy’s sentiment-reviving qualities.

Speculation abounds that Beijing is preparing to again cut the reserve requirement ratios for the country’s banks in an effort to encourage lending as economic growth slows.

Any such move would follow last month’s first cut in borrowing rates since 2008, an easing of policy that many would have expected to encourage a stock market revival.

Yet on Thursday, the Shanghai Composite is down 1 per cent and sitting only about 0.5 per cent above its lowest closing level since the start of January.

Steelmakers and coal miners led declines in Shanghai amid weakening demand and falling prices. Indicative of the concerns about slowing growth in the world’s second-largest economy, shares in Sany Heavy Industry extended losses for a fourth day, as the company, China’s biggest machinery maker by sales, cut jobs.”

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Opening Quotes: Economics is NOT a Science

Seth Rinsen (FT): “Time for economists to eat humble pie – again”

I wouldn’t entirely agree with the analysis of the ‘euro-zone crisis’ ….. but throughly endorse his view of economists.

It ain’t no science:

“They fell victim to an exaggerated confidence in themselves. Most of us in the social sciences are aware of our limitations. Economists, for their sins, have worked themselves into a frenzy about being “scientific”. Overconfidence leads to hubris. The economists let their guard down.”

AND

“……..they indulged in predictions, the economist’s ultimate vanity, but their models are no more than equations with countless unknowns. The need to predict, a psychological urge in the economic tribe, led to the wildest warnings.”

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Opening Quotes – Rewriting the Bernanke Call (Again)

Front page of the FT: “Fed doubts big US jobless falls will last”

For good order Bernanke also dissed the notion the US is growing much quicker than the data suggests.

But – and this is Financial Capitalism 101 – given a choice – the (equity) markets will always take the cash and worry about the ‘real’ economy (= earnings) later.

“Rapid recent falls in US unemployment may prove to be a one-off unless economic growth picks up, Ben Bernanke, chairman of the US Federal Reserve, warned on Monday.

The downbeat comments, underscoring the Fed’s support for easy monetary policy, may calm investors who had begun to doubt the central bank’s forecast of exceptionally low interest rates until “late 2014”.

Phew – good to ‘calm’ investors.

Today.

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