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May 26, 2013

Asian Markets Latest News by MarketWatch; May 26, 2013.

Asia

China firms line up to offer public funds With regulatory door opening on June 1, firms like Orient Securities and Guotai Juan are exploring details involved with entering the business, Caixin Online reports.


Japan stocks plunge on yen strength, but off lows Japanese stocks suffer widespread losses on the yen’s strength and further profit-taking after concerns about a rise in bond-market volatility helped stoke extreme swings late last week.



Hong Kong stocks mildly lower; telcos, casinos off HONG KONG (MarketWatch) -- Hong Kong stocks were mildly lower Monday amid concerns the U.S. Federal Reserve may taper off its bond purchases, with casino-operators and telecommunication shares dropping while some property and banking firms advanced. The Hang Seng Index was off 0.1% at 22,593.30, while the Hang Seng China Enterprises Index gave up 0.1% to 10,711.97 after briefly edging higher. Shares of China Mobile Ltd. dropped 0.7% and China Unicom Hong Kong Ltd. fell 0.9%, while Sands China Ltd. declined 1.4%. On the upside, China Overseas Land & Investment Ltd. gained 1.1% and China Construction Bank Corp. inched 0.3% higher. China's Shanghai Composite eased 0.1% to 2,287.44. 9:43 p.m. Today

Drowning in a Liquidity Trap?; by Frank Shostak on May 24, 2013: CMI Gold and Silver - Articles of interest, May 26, 2013-


Articles of Interest

Drowning in a Liquidity Trap?
Frank Shostak
May 24, 2013
www.mises.org__

Bruce Bartlett recently lamented in The New York Times that given the current state of economic affairs we need more Keynesian medicine to fix the US economy. According to Bartlett, the core insight of Keynesian economics is that there are very special economic circumstances in which the general rules of economics don’t apply and are in fact counterproductive. This happens when interest rates and inflation rates are so low that monetary policy becomes impotent; an increase in the money supply has no boosting effect because it does not lead to additional spending by consumers or businesses. Keynes called this situation a “liquidity trap.” Keynes wrote,

There is the possibility ... that, after the rate of interest has fallen to a certain level, liquidity-preference may become virtually absolute in the sense that almost everyone prefers cash to holding a debt which yields so low a rate of interest. In this event the monetary authority would have lost effective control over the rate of interest.[1]

Bartlett holds that:

Under such circumstances government spending can be highly stimulative, because it causes money that is sitting idle in bank reserves or savings accounts to circulate and become mobilized through consumption or investment. Thus monetary policy becomes effective once again.
Bartlett regards this as an extremely important insight that policy makers have yet to grasp. According to our columnist, despite massive monetary pumping by the Fed since 2008, it has produced very little boosting effect on the economy. The Fed’s balance sheet jumped from $0.897 trillion in January 2008 to $3.3 trillion in early May 2013. The Federal Funds Rate target stood at 0.25 percent in early May against 3 percent in January 2008.

According to Bartlett,
In normal times, one would expect such an increase in the money supply to be highly inflationary and sharply raise market interest rates. That this has not happened is proof that we have been in a liquidity trap for several years. We needed a lot more government spending than we got to get the economy out of its doldrums.
Note also that Nobel Laureate in economics Paul Krugman holds similar views. For them what is needed is a re-activation of the monetary flow that somehow got stockpiled in the banking system. Observe that in the Keynesian framework the ever-expanding monetary flow is the key to economic prosperity. What drives economic growth is monetary expenditure.
Why is money not the driver of economic growth?
Contrary to popular thinking, monetary flow has nothing to do with economic growth as such. Money is simply a medium of exchange and nothing more than that. Also, note that people don’t ultimately pay for goods and services with money, but rather with the goods and services that they have produced.
For instance, a baker pays for shoes by means of the bread he produced, while the shoemaker pays for the bread by means of the shoes he made. When the baker exchanges his money for shoes, he has already paid for the shoes, so to speak, with the bread that he produced prior to this exchange.
Again, money is just employed to exchange goods and services. Being the medium of exchange, money can only assist in exchanging the goods of one producer for the goods of another producer.
What drives economic growth is savings that are used to fund the increase and the enhancement of tools and machinery, i.e., capital goods or the infrastructure that permits the increase in final goods and services: real wealth to support the lives and well being of people.
Contrary to popular thinking, an increase in the monetary flow is in fact detrimental to economic growth since it sets in motion an exchange of something for nothing — it leads to the diversion of real wealth from wealth generators to wealth consumers. This in the process reduces the amount of wealth at the disposal of wealth generators thereby diminishing their ability to enhance and maintain the infrastructure. This in turn undermines the ability to grow the economy.
What is behind the so called liquidity trap?
The fact that so far the Fed’s massive pumping has not resulted in a massive monetary flood should be regarded as good news. If all that new money were to enter the economy, it would have entirely decimated the machinery of wealth generation and produced massive economic impoverishment.
It seems that market forces have so far managed to withstand the onslaught by the US central bank. What allowed this resistance is not some kind of ideology against aggressive pumping by the Fed (in fact most experts and commentators are of the view that the Fed should create a lot of money in difficult times), but the fact that the process of real wealth generation has been severely damaged by the previous loose monetary policies of Greenspan’s and Bernanke’s Fed.
The badly damaged process of wealth generation has severely impaired true economic growth, and obviously this has severely reduced good quality borrowers and subsequently has reduced banks willingness to lend. Remember that in essence banks actually lend real wealth by means of money. They are just intermediaries. Obviously then, if wealth formation is being impaired, less lending can be done. We suggest that it is this fact alone that explains why all the pumping by the Fed has ended up stacked in the banking system. So far in early May banks have been sitting on over $1.7 trillion in surplus cash. In January 2008 surplus cash stood at $2.4 billion.

Given the high likelihood that the process of real wealth generation has been severely damaged, this means that the pace of wealth generation must follow suit. Now, contrary to popular thinking an increase in government spending cannot revive the process of wealth generation, but on the contrary it can only make things much worse.
Remember government is not a wealth-generating entity, so in this sense increases in government spending generate the same damaging effect as monetary printing does; it leads to the diversion of wealth from wealth generators to wealth consumers. Observe that in 2012, US government outlays stood at $3.538 trillion, an increase of 98 percent from 2000.
As long as the rate of growth of the pool of real wealth stays positive, this can continue to sustain productive and nonproductive activities.
Trouble erupts, however, when, on account of loose monetary and fiscal policies, a structure of production emerges that ties up much more wealth than the amount it releases.
This excessive consumption relative to the production of wealth leads to a decline in the pool of wealth.
This in turn weakens the support for economic activities, resulting in the economy plunging into a slump. The shrinking pool of real wealth exposes the commonly accepted fallacy that loose monetary and fiscal policies can grow the economy.
Needless to say, once the economy falls into a recession because of a shrinking pool of real wealth, any government or central-bank attempts to revive the economy must fail.
This means that a policy such as lifting government outlays to counter the liquidity trap will make things much worse.
Not only will these attempts not revive the economy; they will deplete the pool of real wealth further, thereby prolonging the economic slump.
Likewise any policy that forces banks to expand lending “out of thin air” will further damage the pool and will further reduce banks’ ability to lend.
Again the foundation of lending is real wealth and not money as such. It is real wealth that imposes restrictions on banks’ ability to lend. (Money is just the medium of exchange, which facilitates the flow of real wealth.)
Note that without an expanding pool of real wealth, any expansion of bank lending is going to lift banks’ nonperforming assets.
Summary and conclusion
Contrary to various experts, we suggest that in the current economic climate an increase in government outlays is not going to make Fed’s loose monetary policies more effective as far as boosting economic activity is concerned.
On the contrary, it will weaken the process of wealth generation and will retard economic growth.
What is needed to get the economy going is to close all loopholes for money creation and drastically curtail government outlays.
This will leave a greater amount of wealth in the hands of wealth generators and will boost their ability to grow the economy.

_________________________________________________________________
Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. His consulting firm, Applied Austrian School Economics, provides in-depth assessments and reports of financial markets and global economies. See Frank Shostak's article archives.
You can subscribe to future articles by Frank Shostak via this RSS feed.
Notes
[1] John Maynard Keynes, The General Theory of Employment, Interest, and Money, MacMillan & Co. Ltd. (1964), p. 207.

TWP Nick McDonald Market Commentary for This Week; May 26, 2013.


Nick McDonald provides an outlook for the week ahead on currency and equity markets.

 this week's free market commentary videos

The New York Times Global Update; May 26, 2013.

May 26, 2013
Compiled 20:31 GMT

Global Update 

 

 

TOP NEWS

Rockets Strike Hezbollah's Beirut Stronghold

By ANNE BARNARD
Four were wounded in a mysterious strike on Beirut suburbs controlled by the militant group Hezbollah that seems linked to the militant group's growing role in the Syrian war next door.

U.S. Shift Poses Risk to Pakistan

By DECLAN WALSH
An American withdrawal from Afghanistan and the curtailment of the drone campaign could plunge Pakistan's hotbed tribal areas into further chaos.

In Afghan Transition, U.S. Forces Take a Step Back

By AZAM AHMED
As the United States military moves into a support role in Afghanistan, a week spent with a brigade accompanying Afghan forces offered a direct look at the evolving training mission, for better or for worse.
World

Video: Creating Order From Chaos

As Syrians flee their homes, many end up in the sprawling refugee camp in Zaatari, Jordan. Kilian Kleinschmidt is tasked with settling thousands of families facing an uncertain future.
Opinion

Opinionator | The Great Divide

Rich Tourist, Poor Tourist

By TONY PERROTTET
Since the birth of leisure travel, holidays have been marked by extremes of luxury.
WORLD

Hezbollah Commits to an All-Out Fight to Save Assad

By ANNE BARNARD
Hassan Nasrallah, the leader of Hezbollah, said that the organization founded to defend Lebanon and fight Israel was entering a new phase, looking abroad to protect its interests.

Peres Says Israelis Must Overcome Skepticism About Peace

By JODI RUDOREN
At a conference in Jordan, President Shimon Peres of Israel said there was an urgent need for peace with the Palestinians.

Call for Calm After 3 New Arrests in British Soldier's Death

By JOHN F. BURNS
The police arrested three men in their 20s in an areas of southeast London not far from the site of a fatal attack on an off-duty soldier on Wednesday.
BUSINESS

Amma's Multifaceted Empire, Built on Hugs

By JAKE HALPERN
Mata Amritanandamayi, known as Amma, is a globe-trotting guru who embraces the masses - and a get-it-done management style for her charities.
Technophoria

If My Data Is an Open Book, Why Can't I Read It?

By NATASHA SINGER
Despite all the hoopla about an "open data" society, many consumers are being kept in the dark.
Novelties

Bequeathing the Keys to Your Digital Afterlife

By ANNE EISENBERG
An assortment of services can help you and your heirs organize the online accounts that you will eventually leave behind.
TECHNOLOGY

Chinese Telecom Companies Caught in Middle of Trade Dispute

By KEVIN J. O'BRIEN
An anti-dumping case brought by the European trade commissioner against Huawei and ZTE may have its roots in earlier trade disputes.

F.T.C. Is Said to Begin a New Inquiry on Google

By EDWARD WYATT
People contacted in connection with the case said that regulators were asking questions about Google's bundling of advertising services.
Bits Blog

Vintage Apple-1 Sells for Record $671,400

By STEVE LOHR
An Apple-1 computer, made in 1976 and originally priced at $666, sold for a record $671,400 at an auction in Germany.
SPORTS

Bayern Coach Leaves a Legacy That Will Be Hard to Beat

By ROB HUGHES
You could almost taste the hunger as Bayern Munich, twice-beaten finalists of the Champions League, finally broke through and won the title with a 2-1 victory over Borussia Dortmund.

Rosberg Wins Monaco Grand Prix

By BRAD SPURGEON
With his father, Keke, watching by the side of the track, Nico Rosberg won Formula One's most prestigious race on Sunday, exactly 30 years after Keke had won it.

A Student of Indy History, Hoping to Make Some

By BEN STRAUSS
Dario Franchitti, the defending champion at the Indianapolis 500, would get a record-tying fourth career victory if he wins Sunday's race.
U.S. NEWS

Last Inspection: Precise Ritual of Dressing Nation's War Dead

By JAMES DAO
At the Dover Port Mortuary, where the bodies of service members are brought to be prepared for funeral, no detail is too small, whether the coffin is closed or the body slated for cremation.

Quelling Anxiety Across the Chesapeake

By TRIP GABRIEL
The Chesapeake Bay Bridge stirs fear in no small number, but Alex Robinson's service, which ferries drivers across, helps allay the fears of some.

California Faces a New Quandary, Too Much Money

By ADAM NAGOURNEY
After years of battles over state budget deficits and spending cutbacks, an unexpected surplus has set off a debate about which programs to restore and how long the boon will last.
OPINION
Latitude

Drowning by Numbers

By CARLOS PUIG
The Mexican government plays politics with figures about drug-related deaths.
Op-Ed Columnist

Obama's Artful Anguish

By ROSS DOUTHAT
On national security, the president wrestles with his own record.
Op-Ed Columnist

Can 44 Subtract 43 From the Equation?

By MAUREEN DOWD
President Obama is running away from W.'s legacy, and so is W.

California Faces a New Quandary, Too Much Money: The New York Times Today's Headlines, May 26, 2013.



Today's Headlines

Sunday, May 26, 2013

Top News
Advocates for the disabled demonstrated in Sacramento to press state lawmakers to restore spending on social programs.
California Faces a New Quandary, Too Much Money

By ADAM NAGOURNEY

After years of grueling battles over state budget deficits and spending cuts, California has a new challenge on its hand: too much money.
Pakistanis in Multan, in Punjab Province, in January denounced American drone strikes.
U.S. Shift Poses Risk to Pakistan

By DECLAN WALSH

An American withdrawal from Afghanistan and the curtailment of the drone campaign could plunge Pakistan's hotbed tribal areas into further chaos.
Staff Sergeant Miguel Deynes, 35, at the Dover Port Mortuary, prepared the uniform of Captain Aaron Blanchard, an Army pilot killed in Afghanistan last month.
Last Inspection: Precise Ritual of Dressing Nation's War Dead

By JAMES DAO

At the Dover Port Mortuary, where the bodies of service members are brought to be prepared for funeral, no detail is too small, whether the coffin is closed or the body slated for cremation. 
Politics
Leak Inquiries Show How Wide a Net U.S. Cast

By ETHAN BRONNER, CHARLIE SAVAGE and SCOTT SHANE

Details of investigations into government leaks of classified materials also hint at the personal and professional cost for those caught up.
Defense Secretary Chuck Hagel arrived on Saturday for a graduation and commissioning ceremony at the U.S. Military Academy in West Point, N.Y.
Hagel Calls Sex Assaults in Military a 'Scourge'

By THOM SHANKER

Speaking at commencement at the United States Military Academy at West Point, Defense Secretary Chuck Hagel confronted the dark shadow of sexual assault in the military.
Secretary of State John Kerry spoke on Saturday in Addis Ababa, Ethiopia.
Kerry, in Africa, Presses Nigeria on Human Rights

By MICHAEL R. GORDON

A visit to Africa by Secretary of State John Kerry comes as amid several developments on the continent, but Syria was still on his agenda.
For more political news, go to NYTimes.com/Politics »
Business
An Amma embrace at the ashram.
Amma's Multifaceted Empire, Built on Hugs

By JAKE HALPERN

Mata Amritanandamayi, known as Amma, is a globe-trotting guru who embraces the masses - and a get-it-done management style for her charities.

Fair Game

Shareholders? Fuhgeddaboudit!

By GRETCHEN MORGENSON

It's that time of year when shareholders speak their minds at annual meetings. But that doesn't mean the companies' boards are always listening.
Last week at JPMorgan shareholders voted against splitting the jobs of chairman and chief executive officer, both held by Jamie Dimon.

Strategies

The C.E.O. Triumphant (at Least at Apple and Chase)

By JEFF SOMMER

It was a good week for leaders of two major American companies. But it brought frowns from some corporate-governance watchers.
For more business news, go to NYTimes.com/Business »
Technology

Novelties

Bequeathing the Keys to Your Digital Afterlife

By ANNE EISENBERG

An assortment of services can help you and your heirs organize the online accounts that you will eventually leave behind.

Technophoria

If My Data Is an Open Book, Why Can't I Read It?

By NATASHA SINGER

Despite all the hoopla about an "open data" society, many consumers are being kept in the dark.
Vintage Apple-1 Sells for Record $671,400

Bits Blog

Vintage Apple-1 Sells for Record $671,400

By STEVE LOHR

An Apple-1 computer, made in 1976 and originally priced at $666, sold for a record $671,400 at an auction in Germany.
For more technology news, go to NYTimes.com/Technology »
Sports
Goalie Henrik Lundqvist and the rest of the Rangers were helpless on a shot by Gregory Campbell in the second period Saturday that gave the Bruins a 2-1 lead.

Bruins 3, Rangers 1

Offense Vanishes; Rangers Follow

By BEN SHPIGEL

The Rangers were bounced from the postseason, a victim of their ineffectual offense and an inability to counter the Bruins' fourth line and a 22-year-old rookie.
. Interactive Box Score | Photographs  Slide Show: Game 5
. Roundup: Blackhawks Beat Red Wings to Stay Alive
Roland Garros, where the French Open is played, was named for a French World War I fighter pilot, who was a rugby player and not much interested in tennis.
A Puzzler in Paris: French Open or Roland Garros?

By CHRISTOPHER CLAREY

French speakers call the tournament Roland Garros. Native English speakers, despite repeated attempts to convert them, still overwhelmingly favor French Open.
Robbie Rogers after signing with the Los Angeles Galaxy of M.L.S. In February, he announced he is gay.
Rogers Says He's Ready for a Role as a Pioneer

By BILLY WITZ

Robbie Rogers, who retired from soccer when he announced in February that he was gay, says he saw a chance to do more by returning.
For more sports news, go to NYTimes.com/Sports »
Arts
Mr. Gioni estimated that nearly 500,000 people would come to see the Biennale by the time it ends on Nov. 24.
New Guide in Venice

By CAROL VOGEL

Massimiliano Gioni's ambitious Venice Biennale art extravaganza opens this week.
. Photographs  Slide Show: An Encyclopedic Scope
Will Arnett, left, and Jason Bateman in Times Square in a replica of the
Bananas, Anyone? The Bluths Are Back

By BRIAN STELTER

"Arrested Development," which became a cult hit after its cancellation in 2006, returns as a Netflix download series on Sunday.
. ArtsBeat: Videos and Interviews With the Cast
Henry Cavill stars as Superman in the new Warner Brothers movie, which will be released on June 14.
Alien, Yet Familiar

By DAVE ITZKOFF

In "Man of Steel," Zack Snyder is making the latest in recent spate of attempts to revive Superman as a film hero as popular as he is powerful.
. Photographs  Slide Show: Many Changes to a Blue Suit
For more arts news, go to NYTimes.com/Arts »
N.Y./Region
Beachgoers headed to the Hamptons on Friday via the Cannonball express from Penn Station.
As Boozy Invaders Hit Beach, Hamptons Sound a Snooki Alert

By JIM RUTENBERG

Across the Hamptons, some residents fear that a new wave of partyers driven north by Hurricane Sandy could exacerbate a shift in the societal order.
Rev. Michael Fugee appeared in court on Tuesday on charges that he had broken an agreement to never work with children.
Newark Monsignor Loses Job for Failing to Stop Priest's Work With Children

By MARC SANTORA and LAURIE GOODSTEIN

The dismissal of Msgr. John E. Doran is the latest fallout from a sexual abuse scandal that stretches back more than a decade.
The B&B Carousell's new pavilion has radiant floor heating and air-conditioning, allowing for year-round use.
Summer's Steeds, Back Home

By LISA W. FODERARO

After eight years away, 50 horses of the historic B&B Carousell are back in Coney Island with new coats of paint, refurbished joints and new tails.
. Video  Video: The Making of a Carousel
. Photographs  Slide Show: Carousel Horses Return Home to Brooklyn
For more New York news, go to NYTimes.com/NewYork »
Magazine
Billy Joel in Sag Harbor, N.Y., with his pug, Sabrina.
Billy Joel on Not Working and Not Giving Up Drinking

Interview by ANDREW GOLDMAN

And not caring what Elton John says about any of it.
Walls and her mother, Rose Mary, in the cottage on Walls's farm where Rose Mary lives.
How Jeannette Walls Spins Good Stories Out of Bad Memories

By ALEX WITCHEL

After writing a memoir about her difficult upbringing, Walls is ready to make things up.
 Christina Skyles (purple hair), Allen Ostergar (center, to right of tree) and other students from the B.Y.U. animation program.
When Hollywood Wants Good, Clean Fun, It Goes to Mormon Country

By JON MOOALLEM

B.Y.U.'s animation program is not your typical film school. And that's why its graduates actually get jobs.
. Video  Video: 'Pajama Gladiator' | 'Kites'
. Photographs  Photos: Students and Their Cartoon Alter Egos
For more from the Sunday magazine, go to NYTimes.com/Magazine »
Today's Video
Video Video: Creating Order From Chaos
As Syrians flee their homes, many end up in the sprawling refugee camp in Zaatari, Jordan. Kilian Kleinschmidt is tasked with settling thousands of families facing an uncertain future.
. Related Article
Video Video: Sponge Cake, a Vehicle for Summer Fruit
Melissa Clark demonstrates how a moist vanilla sponge cake is the perfect dessert with summer fruits, like strawberries.
Video Video: The Sweet Spot: Watching You Watching
A. O. Scott and David Carr discuss privacy, surveillance and how we invite Big Brother into our lives.
For more video, go to NYTimes.com/Video »
Editorials