Page 2 of 3 CREDIT BUBBLE
BULLETIN
Just the
facts
Commentary and weekly watch by Doug Noland
Commodities
Watch
November 9 - Bloomberg (Daniel Williams and Mahmoud Kassem): "China promised
$10 billion in cheap loans to Africa, pledged to cut customs duties and
distributed a newspaper with photos of Chinese leaders among beaming Africans,
part of an effort to fight claims it is exploiting the continent's resources.
At the close today of the two-day Forum on China-Africa Cooperation conference
in Sharm el-Sheikh, Egypt, China pledged to 'work within its means to increase
aid to Africa, reduce or cancel debts on African countries, in addition to
increasing investments in Africa and open more markets,' Egypt's state-run
Middle East News Agency reported."
November 9 - Bloomberg (Alan Bjerga and Jeff Wilson): "China's
corn harvest, the world's second-largest, plunged by a more-than-estimated 13%
to a four-year low because of droughts in the main growing regions, a survey of
farmers showed."
The CRB index was little changed this week (up 17.2% y-t-d). The Goldman Sachs
Commodities Index (GSCI) increased 1.0% (up 43.8%). Gold jumped 2.2% to close
at a record $1,119 (up 26.8%). Silver added 0.4% to $17.45 (up 54.4%). December
Crude declined 97 cents to $76.46 (up 71%). December Gasoline declined 0.4% (up
81%), and December Natural Gas dropped 4.2% (down 22%). December Copper added
1.3% (up 112%). December Wheat jumped 8.4% (down 12%), and December Corn rose
6.4% (down 4% y-t-d).
China Bubble Watch
November 13 - Bloomberg: "China's President Hu Jintao told Asia-Pacific
business leaders the world's most populous nation will take 'vigorous' steps to
boost household spending and reduce a reliance on investment and exports for
economic growth. 'Our focus in countering the crisis is to expand domestic
demand, especially consumer demand ... We want to 'increase people's ability to
spend,' he said."
November 13 - Bloomberg (Shamim Adam): "China is facing the biggest challenge
to its currency policy since the start of the global recession as economists
warn the peg to the dollar risks causing an asset bubble ... China's sales of
yuan to keep it fixed to the dollar contributed to a 29% jump in money supply,
and the peg helped spur more than $150 billion in speculative funds from
overseas in the past six months, China International Capital Corp. says. Record
apartment prices and a 74% climb in the benchmark stock index this year are
prompting warnings that the policy is inflating asset prices excessively. 'If
China keeps the peg, it will be powerless to prevent asset bubbles,' says Hu
... Greater China chairman at Goldman Sachs…"
November 9 - Bloomberg: "China's passenger-car sales rose 76% last month ...
October sales of cars, sport-utility vehicles and multipurpose vehicles climbed
to 946,400 units ... Sales in the first 10 months rose 45.2% from a year
earlier to 8.19 million."
November 11 - Dow Jones: "China's overall automobile sales could reach 13
million units this year, Dong Yang, executive vice president and secretary
general of the China Association of Automobile Manufacturers, said ... China's
automobile sales totaled 9.38 million units last year…"
November 11 - Bloomberg: "China's lending growth slowed in October as officials
considered more steps to tighten credit standards and avert asset-price
bubbles. Banks extended 253 billion yuan ($37bn) of new local- currency loans,
compared with 516.7 billion yuan in September ... M2 ... grew a record 29.4%
from a year earlier, the central bank said."
November 11 - Bloomberg: "China's industrial production and trade surplus
climbed in October, indicating a strengthening recovery in the world's
third-largest economy that's likely to amplify calls to let the yuan appreciate
... Production rose 16.1% from a year before, the most since March 2008 ...
Retail sales gained an annual 16.2% in October ... The trade surplus almost
doubled from September, to $24 billion…"
November 9 - Bloomberg: "China's central bank and banking regulator may 'soon'
issue measures to limit the use of debt in real-estate purchases after asset
prices climbed, a Shanghai official said. Regulators may reduce 'leverage
ratios,' Fang Xinghai, the director-general of Shanghai's financial services
office, said ... 'I would think that soon you will see these measures coming
out of the central bank and banking regulatory commission.'"
November 9 - Bloomberg: "China, the world's second-largest energy user, will
raise gasoline, diesel and jet fuel prices by as much as 8% tomorrow, the first
increase in more than two months…"
Japan Watch
November 10 - Bloomberg (Aki Ito): "Japan's current-account surplus
unexpectedly widened in September as worldwide government stimulus spending
helped to ease declines in exports. The surplus rose 0.2% to 1.57 trillion yen
($17.5bn) from a year earlier…"
November 11 - Bloomberg (Naoko Fujimura and Junko Hayashi): "Shiseido Co.,
Japan's biggest cosmetics maker, aims to accelerate China sales ... Sales may
grow about 20% in the 12 months ending March 2011, from about 15 percent
expected this fiscal year, Chief Financial Officer Yasuhiko Harada said…"
November 9 - Bloomberg (Wes Goodman and Cordell Eddings): "Japanese investors
who lived through a decade of deflation and recessions say US Treasuries are a
bargain even with yields at about the lowest levels since at least the 1960s.
Japan bought a net $105 billion of US government debt through August, exceeding
China as the biggest foreign buyer and boosting its holdings to $731 billion…"
India Watch
November 12 - Bloomberg (Kartik Goyal): "India's industrial production grew
more than economists forecast in September, adding to positive economic signs
as policy makers consider when to rein in stimulus measures. Output at
factories, utilities and mines rose 9.1% from a year earlier…"
Asia Bubble Watch
November 13 - Bloomberg (Christopher Anstey and Michael Dwyer): "The Federal
Reserve's policy of keeping interest rates near zero is fueling a wave of
speculative capital that may cause the next global crisis, Hong Kong's leader
said. 'I'm scared and leaders should look out,' said Donald Tsang, chief
executive of the city, said ... 'America is doing exactly what Japan did last
time,' he said, adding that Japan's zero interest rate policy contributed to
the 1997 Asian financial crisis and US mortgage meltdown ... 'We have a US
dollar carry trade at the moment,' Tsang, 65, said ... 'Where is the money
going - it's where the problem's going to be: Asia,' Tsang said. 'You can see
asset prices going up, not only in Korea, in Taiwan, in Singapore and in Hong
Kong, going up to levels that are incompatible or inconsistent with the
economic fundamentals."
November 12 - Bloomberg (Seyoon Kim): "South Korea's central bank kept its
benchmark interest rate at a record low for a ninth month, seeking to
strengthen the economy's recovery before increasing borrowing costs. Governor
Lee Seong Tae left the seven-day repurchase rate at 2%..."
Latin America Bubble Watch
November 12 - Bloomberg (Helder Marinho): "Banco do Brasil SA, Latin America's
biggest lender by assets, said third-quarter profit rose 6% as the bank
increased lending more than its competitors ... The lender's loan portfolio
grew 41% to 285.5 billion reais. Total assets increased 50% to 685.7 billion
reais."
November 9 - Bloomberg (Camila Fontana): "Brazil's current account deficit may
almost double in 2010 and reach the widest since 1998 as a local currency rally
boosts imports amid a consumer-led economic recovery, a central bank survey
shows. The gap will widen to $33.25 billion next year from an estimated $16.9
billion in 2009, according to the median forecasts from about 100 economists…"
November 12 - Bloomberg (Adriana Brasileiro): "Brazil's integrated electricity
grid leaves it vulnerable to the types of massive outages that occurred this
week when 40% of the country was plunged into darkness, according to a
government energy research agency. 'Brazil has the largest integrated power
grid in the world; it's fantastic because it facilitates electricity
transmission between regions, but the domino effect that happens when we have a
problem is a major inconvenience,' said Mauricio Tolmasquim, president of
Brazil's Energy Research Agency."
Unbalanced Global Economy Watch
November 13 - Bloomberg (Simone Meier): "The euro-area economy emerged from its
worst recession since World War II in the third quarter as exports from Germany
and France helped compensate for households' reluctance to increase spending.
Gross domestic product in the economy of the 16 nations using the euro rose
0.4% from the second quarter, when it fell 0.2%..."
November 13 - Bloomberg (Jana Randow): "Germany's economic recovery accelerated
in the third quarter as government stimulus programs fueled company spending
and a rebound in global trade boosted exports. Gross domestic product increased
a seasonally adjusted 0.7% from the second quarter…"
November 10 - Bloomberg (Vibeke Laroi and Marianne Stigset): "Norway's
sovereign wealth fund, the world's second largest, gained a record 13.5% in the
third quarter as stocks rallied on signs the global recession ended."
November 12 - Dow Jones: "Australia reported ... an unexpected surge in jobs
last month in the latest sign the country's economy was accelerating quicker
than expected ... The unemployment rate, meanwhile, rose slightly to 5.8% from
5.7%..."
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