Graph from Citi Research and Haver Analytics. If you want to construct your own graph, try the data from the US Department of Agriculture (using 2005 USD instead) labeled “GDP shares by Country and Region Historical”.
(Cardiff)
Via Quartz. (Cardiff)
First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries. All three bias in favor of their result, and without them you don’t get their controversial result.
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Mike Konczal, summarising a new paper by Thomas Herndon, Michael Ash, and Robert Pollin. The authors find flaws in the methodology used by Reinhart and Rogoff in their controversial work on the relationship between high debt levels and economic growth.
(Cardiff)
Or it is in this table from the NY Fed survey of Primary Dealers, anyway. That would be the Fed lowering monthly asset purchases in Treasuries and ABS to $70bn (from $85bn) by December in the median view.
Someone tell the gold market!
Oh wait.
China’s Q1 GDP, which at 7.7% missed estimates, looks even worse on an annualised QoQ basis (which is how most countries measure quarterly GDP). Chart from Alistair Thornton at IHS Insight.
From ekathimerini.
A German national was… arrested shortly before boarding a Lufthansa flight for Germany, according to authorities.
An inspection by customs officials reportedly revealed that his luggage contained 7,185 kilograms of gold and 293,435 euros in cash. The same suspect is believed to have attempted to smuggle out another bag containing 425 kilograms of silver.
Details of how precisely he was trying to do this are pending.
(David)
The amount Cyprus had to find from depositors went up by €5bn in the nine or so days between the initial stupid idea and the deal they all eventually reached. Cyprus is a (roughly) €18bn economy. If you didn’t laugh you’d cry.
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- Joseph writes here about some interesting bits in from the leaked draft Cyprus Debt Sustainability Analysis.
(- Kate)
Chart via Barclays economists, who add:
The US federal government posted a budget deficit of $106.5bn in March, in line with our forecast and the consensus (both $107.0bn) and substantially smaller than the $198.2bn deficit from March 2012. This brings the deficit for the first half of fiscal year 2013 to $600.5bn, an improvement of 22.9% relative to the same period last year. This was driven by a decline in outlays, which were down about 3% FYTD, but the CBO noted that much of this was due to timing effects and revisions to TARP cost estimates and pointed out that outlays would have been only 5% lower y/y in March absent these effects. Revenues also increased, with a $107bn rise in individual income and payroll tax receipts (12% higher FYTD) accounting for most of the improvement. While higher payroll taxes have helped push government revenues higher, it remains to be seen how substantial their effect on consumer spending will be.
(Cardiff)
One to keep an eye on:
That’s Japan’s 5 year, 10 year, and 30 year bonds all popping sharply since Kuroda hit the “quantitative and qualitative” easing button. The moves aren’t that big in nominal terms but for JGB’s they are dramatic — as Nomura said of the 30yr, it’s the sharpest three-day steepening in super-long zone since April 1995.
More broadly this might be profit-taking by large Japanese investors and banks in particular — see charts here — or the BoJ’s plan working or it be the start of something much more dangerous. As said, something to keep an eye on.
(David)
That chart shows Japanese investors resuming purchasing Irish bonds in February.
According to Nomura they were net buyers of Ireland fixed income products to the tune of JPY72bn ($0.8bn), the biggest net buying since September 2010. Not proof they will be big beneficiaries of Kuroda’s cash but it’s encouraging:
(David)
Nominal income growth trend since recovery started (from payrolls, including this morning’s report): steady, rising, insufficient.
(Cardiff)
Euros now make up only 24 per cent of their reserves, the lowest since 2002, and down from a peak of 31 per cent as recently as 2009. The dollar has held steady at about 60 per cent.
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Robin Harding, “Emerging markets dump euro reserves”
(Cardiff)
The economists found that the securitization workers showed no awareness that housing was about to become undone. To the contrary, during the peak of the bubble, they were far more apt to swap into more expensive homes and buy second homes than the control groups were. And workers at firms like Bear Stearns and Lehman Brothers were among the most aggressive with their own home purchases.
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Justin Lahart, citing a new paper by economists Ing-Haw Cheng, Sahil Raina, and Wei Xiong
(Cardiff)
Still, the experience of other capital-controlled countries gives us some lessons about how these regimes work out over time. Capital controls turn into trade controls, as the locals attempt to find ways to turn hard assets or non-banking services into foreign exchange. At some price, for example, you can buy a boat in Cyprus with post-haircut, capital-controlled local deposits, sail it to Lebanon, and then sell it for real, usable money. The same with antiques, jewellery, or anything else you can think of. Even capital goods such as fork lifts can be motored off in the middle of the night.
Of course the authorities anticipate some of these problems, but there are always new ones. Particularly after the initial shock of control imposition wears off, the population turns from productive effort to finding ways to game the system. Some cultures are more resistant than others to this change in character, but in all cases social cohesion and respect for law are eroded over time.
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‘Banco de Mattress’ looms for Cyprus — John Dizard’s column in this weekend’s FT
(Cardiff)
And proper ones are really really rare:
From Nomura about Cyprus:
Indeed, now that the banks have been shut it seems hard to imagine that a reopening would not lead to a massive run on the banks. At the very least, restrictions on what depositors will be able to do with their savings are likely to remain in place for quite some time…
The fact that Cyprus now faces days of bank holidays shows the total lack of preparedness of euro area policy makers to unexpected developments, almost five years into the crisis and almost one year after the request for help from Cyprus.
Conditions to restore confidence in the past included a fire side chat (think Roosevelt in 1933) and what Nomrua call a “regime shifting policy response”.
It’s hard to see Cyprus managing that kind of response any time soon. Credible “regime-shifting policies” are hard to come by.
(David)
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