MacroBusiness

1

China set to ease?

Exclusively from Michael Pettis newsletter: Credit growth in China has been tight in the past month or two.  This hasn’t yet shown up in the GDP growth numbers, but if low credit growth continues, it will almost certainly result in much slower GDP growth.  The main thing generating growth in China is investment, and investment is largely

37

Comment registration

Dear Readers, The ongoing troll tantrum means we’ve switched on registration for comments. This small impost will protect your avatars and keep the conversation genuine. Existing newsletter subscribers use the same login. You can register here. Any issues please contact us. Regards, MB

2

Pettis: China won’t save Europe

Exclusively from Michael Pettis’ newsletter: There is little chance that any BRIC rescue is likely to happen, and if it does, it would be bad news for Europe, not good. …My guess is that nothing will happen except a few token gestures aimed mostly at generating positive headlines and boosting confidence. Why? Because if Germany,

37

The “superb Macrobusiness”

I don’t want to waste your time with too much trumpet blowing but it’s not often you get a plug as spectacular as that received overnight at the Financial Times, the world’s most respected business newspaper. In a story about Australian banks, the FT’s Alphaville blog quoted extensively from Deep T.s excellent analysis of the

44

Respect please

Dear readers, A mix of active traders, buy and hold punters, as well as regular superannuation holders read MB. Can you please keep your comments respectful of that fact. Whilst some of you may make money out of the big price shifts we are witnessing, others will be suffering. Thanks for reading and commenting.

43

Readership Survey

Please take a few minutes to help us out by filling in the new MB readership survey. The results will help us sell advertising space and thereby bring you more MacroBusiness! All entries are anonymous.

6

Satyajit Das: Bail the banks, not the Greeks

Guest post by Satyajit Das The proposal to extend the maturity of Greek bonds emanating from the Élysée Palace reflects French strengths first identified by Napoleon III: “We do not make reforms in France; we make revolution.” Structured to meet a German requirement that private creditors contribute to the Greek bailout, the proposal falls short

3

Satyajit Das: CDS and Greece

Following is a guest post from Satyajit Das. The European Union’s linguistic gymnastics, redefining default as “restructuring” or “re-profiling” and the structure of any final deal on Greek debt has “real” implications for the arcane workings of the CDS market. In the film Casablanca, Rick (Humphrey Bogart) tells Captain Renault (Claude Rains) that he came to the city

23

Saul Eslake on commodity prices

Saul Eslake, Director of Productivity Growth Program at the Grattan Institute, yesterday presented a paper at the International Conference of Commercial Bank Economists in Amsterdam, the Netherlands, on some of the longer term demand and supply factors shaping the behaviour of commodity prices, over the past decade and over the next 5-15 years. The full paper is below and

29

Boganomics upsets The Australian

There’s nothing quite like the pleasure of being misquoted in the national broadsheet. That’s the experience of the Boganomics team today with The Australian selectively quoting from Friday’s runaway success story, CateGate, which was picked up by the Fairfax press. The Australian’s Cut and Paste section ran a series of excerpts today under the headline: Friends,

16

We’ve noticed

Houses and Holes posted 6.25 am. https://www.macrobusiness.com.au/2011/06/commodity-crash-building/ Karen Maley published 8.17 am. http://www.businessspectator.com.au/bs.nsf/Article/US-markets-Federal-Reserve-QE-bonds-inflation-budg-pd20110603-HFTBW?OpenDocument&src=sph

3

Chinese shadow banking

Exclusively from Michael Pettis newsletter: My SWS associate Chen Long tells me that last week’s markets indicate that monetary conditions in China are still pretty tight, as measured by the cost of short-term liquidity in the interbank market. As I have argued before, I think this says a lot more about the extent of domestic

4

Chinese inflation spreading

Exclusively from Michael Pettis’ newsletter: Quite a lot of data came in this week as I was recovering from the jet lag generated by last week’s trip to the US, and for good measure, the PBoC then raised minimum reserve requirements Thursday evening. I don’t have much to say about the hike, beyond what will

48

Saul reveals all

Following is a guest post from Saul Eslake on last week’s Budget. Also find below a considered set of charts that offer a very clear view of last week’s Budget revenue assumptions. If you want to understand the punt we’re taking on China, not to mention growth in capital gains, this document is a must

6

CDS: More liquidity, more risk

By Satyajit Das In an opinion piece entitled “Hedging bans risk pushing up debt costs” published on 9 March 2011 in the Financial Times, Conrad Voldstad, the chief executive of the International Swaps and Derivatives Association (“ISDA”) and formerly a senior derivatives banker with JP Morgan and Merrill Lynch, made the case against the EU

3

Guest post: Derivatives regulation Part II

By Satyajit Das A question of values … Derivative contracts are valued on a mark-to-market (“MtM”) basis. This requires valuation of the contracts based on the current market price. OTC derivatives trade privately. Market prices for specific transactions are not directly available. This means current valuations rely on pricing models. In current accounting argot, most derivatives are Level 2

12

Hats off to McKibbin

MacroBusiness would like to doff its hat to Warwick McKibbin. The current and soon to be former RBA member has embraced the spirit of the Trickster and thrown a big spanner into the works in Canberra’s bull factory. We don’t agree with everything Dr McKibbin has to say, and on some things he doesn’t say