Germany’s GDP contracts by 0.2pc

[LeveragedBuyout]

so japan had currency problem that doesnt fit its region, has beef with its third largest trading partner during 90s?

Not entirely sure I understand your question. Here's the USD/JPY since 1991:

Currency Exchange Rate - USD vs. JPY (BNP) - Data and Charts from Quandl

Note the sharp decline of the USD in the early 1990s as the Japanese economy collapsed and capital was repatriated to Japan. Strengthening of the JPY dramatically hurt Japanese exports. In addition, Japan never properly cleaned up its banks, and they existed in zombie form ever since 1991, thus depriving SMEs of capital. Japan's demographics are terrible, it's a rapidly aging society. Japan has barely reformed its economy, with only a financial reform in the late 1990s under Hashimoto, and some privatization under Koizumi. It has also continued to raise taxes.

That's what Europe is doing now, and no one should be surprised that Europe is suffering the same fate.

 

[Edison Chen]

I saw that WSJ article as well (http://online.wsj.com/articles/french-gdp-fails-to-grow-in-second-quarter-1407994573 ), and I think this is the key paragraph, both for Europe and Japan, but also eventually for the US and China, if we're not careful:

"But deeper worries loom, too. With each additional quarter of near-zero growth, the bloc's vulnerabilities—weak productivity, a stagnating labor force and fragile banking system—become more firmly entrenched. That could make the bloc resistant to stimulus from fiscal or monetary policies, a problem that has gripped Japan for years."

Reform. Reform. Reform. It can no longer be avoided.

Yes, all major economies slowed growth in 2014, but EU, US and China face different problems. As for China, the potential of productivity hasn't been exploited fully yet, the party is transferring the authorization power to market to boost productivity, Li's cabinet promised to cancel more than 2000 authorization rules, andChina still has new industry to be developed. So China's real economy might be weak now, but still have room in the future. But we have problem, China's M2 is 110 trillion yuan, but GDP is only half that amount, which means the stimulus could be uneffective. The US still maintains labor force advantage by immigration, this is the big difference between US and EU. US is still a competitive society like developing countries, unlike EU.

 

[LeveragedBuyout]

Yes, all major economies slowed growth in 2014, but EU, US and China face different problems. As for China, the potential of productivity hasn't been exploited fully yet, the party is transferring the authorization power to market to boost productivity, Li's cabinet promised to cancel more than 2000 authorization rules, caplus China still has new industry to be developed. So China's real economy might be weak now, but still have room in the future. But we have problem, China's M2 is 110 trillion yuan, but GDP is only half that amount, which means the stimulus could be uneffective. The US still maintains labor force advantage by immigration, this is the big difference between US and EU. US is still a competitive society like developing countries, unlike EU.

Agreed, China can achieve further growth by enacting reforms, but we already see push-back against the reforms and re-balance, like the article posted by TaiShang (Exposing a Hoax: 'Severe slowdown in China' and 'strong recovery in the U.S.' ) which essentially called for China to stay the course and continue its tidal wave of credit growth, investment growth and focus on export, instead of market liberalization and focus on domestic consumption. China's reform is not a fait accompli, it must be continually pursued with discipline.

As I have said before, though, I am optimistic about China as long as it continues to reform. If it doesn't, the above situation will start to apply there as well.

As far as the US, we are doing the opposite of reform by continuing to raise the cost of business with idiotic regulations, idiotic government entitlement plans, and idiotic new taxes. We have an exceptionally accomodative monetary policy, which has covered these flaws, but QE is coming to an end, so we will soon see that the economy cannot stand on its own. I predict several dark years ahead for the US (which in turn will aggravate the problems in Europe, Japan, and China).

 

[Edison Chen]

Agreed, China can achieve further growth by enacting reforms, but we already see push-back against the reforms and re-balance, like the article posted by TaiShang (Exposing a Hoax: 'Severe slowdown in China' and 'strong recovery in the U.S.' ) which essentially called for China to stay the course and continue its tidal wave of credit growth, investment growth and focus on export, instead of market liberalization and focus on domestic consumption. China's reform is not a fait accompli, it must be continually pursued with discipline.

As I have said before, though, I am optimistic about China as long as it continues to reform. If it doesn't, the above situation will start to apply there as well.

As far as the US, we are doing the opposite of reform by continuing to raise the cost of business with idiotic regulations, idiotic government entitlement plans, and idiotic new taxes. We have an exceptionally accomodative monetary policy, which has covered these flaws, but QE is coming to an end, so we will soon see that the economy cannot stand on its own. I predict several dark years ahead for the US (which in turn will aggravate the problems in Europe, Japan, and China).

Well, I am not quite familiar with the “idiotic regulations” of US, but US government do not take much responsibility of intervention in details of micro economy designs as Chinese government does, it means the market is still effective, all the rules are there, business just follow it. This is China's reform destination I think. China and the West could be two pole, China is too conservative on market flexibility, the US is just “go with the stream” by self adjustment. Neither is flawless. The perfect model would be a mixture of the two.

I am glad to see more reform is on the way. If the past reform of China is credit expansion like that in 1997 and 2008, the future would more focus on social reform, to accompany with monetary policy, as your call it market liberalization. The aim should be clean up the anti-market distortions, like the household registeration system, it hinders the free flow of factors (population and talented) of the market. Then we can talk about how to increase the consumption.

By the way, to what extent do you think the termination of QE will affect China and other emerging market? Sure China's export will be affected. As I know, China although have huge foreign currency reserve, still feel the financial turbulence. Maybe there is several dark years for the US, but nor all the states, some states are doing fine, like the North Dakota and Texas.

 

[As is - where is]

The reason that the Japanese economy contracted as much as it did this quarter (1.7%) is a new tax that Abe introduced (more specifically a large increase in the VAT). Since Japan has such a huge debt he is trying to minimize Japan's deficit.

 

[senheiser]

Not entirely sure I understand your question. Here's the USD/JPY since 1991:

Currency Exchange Rate - USD vs. JPY (BNP) - Data and Charts from Quandl

Note the sharp decline of the USD in the early 1990s as the Japanese economy collapsed and capital was repatriated to Japan. Strengthening of the JPY dramatically hurt Japanese exports. In addition, Japan never properly cleaned up its banks, and they existed in zombie form ever since 1991, thus depriving SMEs of capital. Japan's demographics are terrible, it's a rapidly aging society. Japan has barely reformed its economy, with only a financial reform in the late 1990s under Hashimoto, and some privatization under Koizumi. It has also continued to raise taxes.

That's what Europe is doing now, and no one should be surprised that Europe is suffering the same fate.

yet gdp per capita above EU, make no mistake america has nothing to offer you have to fight war to keep your high living standard high so you can keep printing money but you will end like Britain in 30 years and japan will be above you. Japanese maybe dont make babies but they arent invaded by third worlders and yet demographic trend in america go down as well

 

[Viny]

Probably 0.2 % contraction is because they have stopped manufacturing and selling things to european countries that dont pay :p

 

[LeveragedBuyout]

Well, I am not quite familiar with the “idiotic regulations” of US, but US government do not take much responsibility of intervention in details of micro economy designs as Chinese government does, it means the market is still effective, all the rules are there, business just follow it. This is China's reform destination I think. China and the West could be two pole, China is too conservative on market flexibility, the US is just “go with the stream” by self adjustment. Neither is flawless. The perfect model would be a mixture of the two.

I am glad to see more reform is on the way. If the past reform of China is credit expansion like that in 1997 and 2008, the future would more focus on social reform, to accompany with monetary policy, as your call it market liberalization. The aim should be clean up the anti-market distortions, like the household registeration system, it hinders the free flow of factors (population and talented) of the market. Then we can talk about how to increase the consumption.

By the way, to what extent do you think the termination of QE will affect China and other emerging market? Sure China's export will be affected. As I know, China although have huge foreign currency reserve, still feel the financial turbulence. Maybe there is several dark years for the US, but nor all the states, some states are doing fine, like the North Dakota and Texas.

I think China itself won't be directly affected by the end of QE, but it will be indirectly affected by the reduced trade flows with the countries that are directly affected by QE. We saw the emergence of the "fragile five" (Brazil, India, South Africa, Indonesia, Turkey) when the Fed announced that QE would begin to end. Their currencies quickly devalued, and inflation expectations rose. When QE ends, interest rates in the US will gradually begin to rise, and investment will flow out of the fragile five and back to the US to benefit from this safer yield. If the fragile five in turn have to raise interest rates to combat inflation and their weak currencies (as Turkey and South Africa were already forced to do), their economies will certainly slow down.

I agree that states like Texas and North Dakota are better insulated against recession, but it's precisely because they have lighter regulation and taxes than most of the other states. As basic economics dictates, when you incentivize something, you get more of it, and when you penalize something, you get less. TX and ND are business-friendly, so businesses move there from other states that punish businesses with heavy regulation and taxes (particularly CA and NY). With Obamacare, and the attending costs of administering it, layered on top, it's a weight on businesses across the US, no matter where they are located. That's the last thing we need.