Wednesday, March 03, 2010

That Global Aggregate Demand ...

The Fed's Beige Book is out, and even without the snow, the increases were "modest" ...

The bond king Bill Gross was writing about the fundamental economic problem of our age - lack of global aggregate demand. As the Bank Pay Rose Almost 10% in 2009, there is no wonder that the problem is our perception.

Also according to the latest China strategy report from CLSA Asia-Pacific Markets, China is NOT able to compensate the decline in the consumption in the US. Well, do not forget Europe and Japan too ... Click on chart to enlarge, courtesy of CLSA Asia-Pacific Markets.

Re-balancing of China's economy will be slow, and the folks at CLSA explain why:

... process will be gradual for four reasons. First, there is still a large share of the population who are subsistence farmers, with little cash income. Second, investment will continue to rise for several years by about 25% YoY, from a large base, as the government continues to build out public infrastructure (without running up a significant budget deficit), and therefore investment will continue to account for a large share of growth. Third, wary of the problems experienced in Korea, Taiwan and the US, Beijing is expanding the availability of consumer credit at a cautious pace. Finally, it will take many years to establish and fund health insurance and social security programmes that lead households to reduce their precautionary savings rate, freeing up more income for consumption.

BTW, the team at CLSA has got a lot of media attention lately, including some reports ... Listen and watch about the Greek leading indicator.

Well, but even serious people are playing games around the sovereign defaults.

Pullback is All But Assured ...


  1. Wouldn't it be nice to actually hear a guest complete a thought or a point made instead of hearing these utterly clueless CNBS hosts obfuscate the discussion by pulling it as many directions as possible in a 5 minute segment?

  2. Look here (copy the link in your browser) for an opinion by Barry Ritholtz :