China's urbanization unlikely to lead to fast growth of middle class

The number of people living in China's cities, which last year for the first time surpassed 50 percent of the national population, is considered a boon for the consumer goods market. That is based on the assumption that there will be more families with more disposable income when poor farmers from China's countryside move to cities and become middle-class industrial and office workers.

But the assumption overlooks a policy from the era of Chinese leader Mao Zedong that restricts the upward mobility of its rural citizens, says a University of Washington geographer.

This calls into question China's strength in the global market and its ability to overtake the United States as a global superpower, according to Kam Wing Chan, a UW professor of geography.

His findings are published in the current issue of the journal Eurasian Geography and Economics.

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http://www.sinodaily.com/reports/China_urbanization_unlikely_to_lead_to_fast_growth_of_middle_class_999.html

Recession: The Decimation of Bank Profits

Falling revenues, increasing losses, profits adrift: this is the Western banking background in late 2011! And yet all this is happening in a very favorable context for banking institutions’ balance sheets who continue to assign their own prices to their assets (using the accounting tricks of « hold to maturity » (1) – or « fair value »). But even this may not last more than a further quarter or two ... because of Greece and Euroland! And yes, they really are the causes of something very damaging to the banking model of recent decades, but not in the sense that Wall Street and the City would want to believe, i.e. because the Euroland banks would collapse dragging down the whole world with them (so far, only Wall Street and the City in 2008 gave us a banking system collapse, sealed off - for a time - by a raid on taxpayers' money (2)). No, if there really is Greek and Euroland responsibility, it’s in Euroland’s willingness to require creditors to include the losses in their balance sheets, putting pressure on the banks to take on a substantial portion of these losses. This wasn’t done in 2008. Greek debt is now at a 50% discount. But Greece is but a drop in the ocean of coming bank losses: the entire Western banking system floats on a sea of more than doubtful debts. 

Read More:

http://globalresearch.ca/index.php?context=va&aid=29190

Nick Beams - IMF Warning On Global Downturn

The International Monetary Fund (IMF) has added its voice to those of the World Bank and the United Nations in warning of a global slowdown and increased financial risks flowing from the eurozone crisis.

Revising its forecast for global growth in 2012 to 3.3 percent—0.7 percentage points lower than its September forecast—and warning of outright recession in Europe, the IMF said world recovery was threatened by “intensifying strains in the euro area and fragilities elsewhere.” Growth began to decline in the fourth quarter of 2011 “as the euro crisis entered a perilous new phase.”

While there had been higher than expected growth in the advanced economies, these developments were not expected to sustain significant momentum. In view of the often repeated claim that “emerging markets” will provide the basis for a new expansion of the world economy, the IMF’s comments on these regions were particularly significant.

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http://countercurrents.org/beams250112.htm

Ellen Brown - Why All the Robo-Signing? Shining a Light on the Shadow Banking System

The Wall Street Journal reported [6] on January 19 that the Obama administration was pushing heavily to get the 50 state attorneys general to agree to a settlement with five major banks in the "robo-signing" scandal. The scandal involves employees signing names not their own, under titles they did not really have, attesting to the veracity of documents they had not really reviewed. Investigation is revealing that it did not just happen occasionally, but was an industry-wide practice, dating back to the late 1990s; and that it may have clouded the titles of millions of homes. If the settlement is agreed to, it will let Wall Street bankers off the hook for crimes that would land the rest of us in jail - fraud, forgery, securities violations and tax evasion.

To the president's credit, however, he seems to have shifted his position on the settlement in response to protests before his State of the Union address. In his speech on January 24, President Obama did not mention the settlement, but announced instead that he would be creating a mortgage crisis unit to investigate wrongdoing related to real estate lending. "This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans," he said.

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http://www.truth-out.org/why-all-robo-signing-shining-light-shadow-banking-system/1327502824

Casey Research - Tehran Pushes to Ditch the US Dollar

Rumors are swirling that India and Iran are at the negotiating table right now, hammering out a deal to trade oil for gold. Why does that matter, you ask? Only because it strikes at the heart of both the value of the US dollar and today's high-tension standoff with Iran.

Marin Katusa

Chief Energy Investment Strategist

Casey Research

The official line from the United States and the European Union is that Tehran must be punished for continuing its efforts to develop a nuclear weapon. The punishment: sanctions on Iran's oil exports, which are meant to isolate Iran and depress the value of its currency to such a point that the country crumbles.

But that line doesn't make sense, and the sanctions will not achieve their goals. Iran is far from isolated and its friends – like India – will stand by the oil-producing nation until the US either backs down or acknowledges the real matter at hand. That matter is the American dollar and its role as the global reserve currency.

The short version of the story is that a 1970s deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on the all-important oil trade the US dollar slowly but surely became the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar's value up, up, and away. In addition, countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit from which to draw.

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http://www.caseyresearch.com/cdd/demise-petrodollar

David Cay Johnston - The siren call of austerity

The World Economic Forum opened in Davos amid choruses of central bankers and economists calling for governments to cut spending.

This message of austerity is like the call of the ancient Sirens, whose music lured sailors to shipwreck.

We should take a lesson from Odysseus, who poured wax into the ears of his crew and had himself lashed to the mast of his ship to resist the Siren call.

Austerity supporters are selling the idea that governments, like families, must cut back when income shrinks. But economically, governments are not like families.

Firing teachers, cops and government clerks will, for sure, reduce public spending. But budgets, like the song of the Sirens, are only part of the story. Listen only to the alluring lyrics and, like the many voyagers before Odysseus, we will suffer disastrous consequences – in our case falling incomes and worsening economies.

Read More:

http://blogs.reuters.com/david-cay-johnston/2012/01/27/the-siren-call-of-austerity/

Satyajit Das - Europe’s The Road to Nowhere, Part 1 – Fiscal Bondage

Financially futile, economically erroneous, politically puzzling and socially irresponsible, the December 2011 European summit was a failure. Only the attending leaders and their acolytes believe otherwise. German Chancellor Angela Merkel’s post-summit homilies about the “long run”, “running a marathon” and “more Europe” rang hollow.

The proposed plan is fundamentally flawed. It made no attempt to tackle the real issues – the level of debt, how to reduce it, how to meet funding requirements or how to restore growth. Most importantly there were no new funds committed to the exercise.

Fiscal Bondage…

The centrepiece of the new plan was a commitment to a new legally enforceable “fiscal compact” requiring government budgets to be balanced or in surplus, with the annual structural deficit not to exceed 0.5% of nominal Gross Domestic Product (“GDP”).

Read More:

http://www.nakedcapitalism.com/2012/01/satyajit-das-europe’s-the-road-to-nowhere-part-1-–-fiscal-bondage.html

Jeffrey Frankel - Will Emerging Markets Fall in 2012?

Emerging markets have performed amazingly well over the last seven years. In many cases, they have far outperformed the advanced industrialized countries in terms of economic growth, debt-to-GDP ratios, countercyclical fiscal policy, and assessments by ratings agencies and financial markets.

As 2012 begins, however, investors are wondering if emerging markets may be due for a correction, triggered by a new wave of “risk off” behavior. Will China experience a hard landing? Will a decline in commodity prices hit Latin America? Will the European Union’s sovereign-debt woes spread to neighbors such as Turkey?

Indeed, few believe that the rapid economic growth and high trade deficits that Turkey has experienced in recent years can be sustained. Likewise, high GDP growth rates in Brazil and Argentina over the same period could soon reverse, particularly if global commodity prices fall – not a remote prospect if the Chinese economy begins to falter or global real interest rates rise this year. China, in turn, could land hard as its real-estate bubble deflates and the country’s banks are forced to work off the bad loans.

Read More:

http://www.nationofchange.org/will-emerging-markets-fall-2012-1327164116

Nouriel Roubini - The Straits of America

New York - Macroeconomic indicators for the United States have been better than expected for the last few months. Job creation has picked up. Indicators for manufacturing and services have improved moderately. Even the housing industry has shown some signs of life. And consumption growth has been relatively resilient.

But, despite the favorable data, US economic growth will remain weak and below trend throughout 2012. Why is all the recent economic good news not to be believed?

First, US consumers remain income-challenged, wealth-challenged, and debt-constrained. Disposable income has been growing modestly – despite real-wage stagnation – mostly as a result of tax cuts and transfer payments. This is not sustainable: eventually, transfer payments will have to be reduced and taxes raised to reduce the fiscal deficit. Recent consumption data are already weakening relative to a couple of months ago, marked by holiday retail sales that were merely passable.

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http://www.project-syndicate.org/commentary/roubini46/English

Nouriel Roubini - Fragile and Unbalanced in 2012

NEW YORK – The outlook for the global economy in 2012 is clear, but it isn’t pretty: recession in Europe, anemic growth at best in the United States, and a sharp slowdown in China and in most emerging-market economies. Asian economies are exposed to China. Latin America is exposed to lower commodity prices (as both China and the advanced economies slow). Central and Eastern Europe are exposed to the eurozone. And turmoil in the Middle East is causing serious economic risks – both there and elsewhere – as geopolitical risk remains high and thus high oil prices will constrain global growth.

At this point, a eurozone recession is certain. While its depth and length cannot be predicted, a continued credit crunch, sovereign-debt problems, lack of competitiveness, and fiscal austerity imply a serious downturn.

The US – growing at a snail’s pace since 2010 – faces considerable downside risks from the eurozone crisis. It must also contend with significant fiscal drag, ongoing deleveraging in the household sector (amid weak job creation, stagnant incomes, and persistent downward pressure on real estate and financial wealth), rising inequality, and political gridlock.

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http://www.project-syndicate.org/commentary/roubini45/English