An Economic Place Holding Post


I don’t have much to say about these things.  I just want them noted and available for reference when more news comes to light. 

Japan slips into technical recession with latest contraction

TOKYO (AP) — Japan’s economy shrank in the July-September quarter as domestic demand declined, sending the nation into a technical recession.

The numbers from the Cabinet Office on Monday showed that gross domestic product, the value of a nation’s goods and services, declined at an annualized pace of 0.8 percent in the third quarter, and contracted a seasonally adjusted 0.2 percent from the previous quarter.

That meant the world’s third-biggest economy slipped into a technical recession, defined as two straight quarters of contraction, because it had contracted in the second quarter as well.

The government showed in its preliminary GDP estimates that domestic demand fell 1.2 percent at an annual rate, as businesses held back on investments.

Japan has been slipping in and out of such periods of contractions, while eking out growth in between. Weak GDP numbers could prompt fresh government stimulus measures.

Prime Minister Shinzo Abe has repeatedly promised to wrest Japan out of the doldrums and show GDP can stay in positive territory, a challenge for an industrialized economy like Japan that relies on exports for growth and whose population is aging.

Analysts say the government is now more likely to announce a spending package later this year, and the Bank of Japan could also move on further easing. Both would be a plus for the economy.

In one sign of hope, the numbers Monday show Japanese consumers are spending.

The government has been encouraging companies to give wage increases in negotiations that happen early next year, another move that could encourage spending.

I’ll save my next rant about the stupidity of GDP being a definitive metric at to whether or not an economy is in a recession for some other day.  But, I do enjoy the spinmeisters use of the word “technical” in this regard.  As if to say, it is only a technical recession, but, not a real one.  Contrast and compare the verbiage use to their condemnation of Canada’s economy from their recent “technical recession”.

This is, what, the second year of Japan’s most aggressive QE the world has ever known?  I think any rational person has gone beyond understanding that QE doesn’t work and now must move on to wondering what the central bankers are really trying to accomplish when they engage in QE. 

On another note which may or may not be related …..

Foreign holdings of US Treasury securities rise in September

WASHINGTON (AP) — Foreign holdings of U.S. Treasury securities edged up slightly in September even though holdings by China and Japan, the two largest foreign owners of Treasury debt, both fell.

The Treasury Department says total holdings of U.S. government bonds by foreigners edged up a slight 0.05 percent to $6.1 trillion in September. The increase came after a 0.3 percent drop in August.

China trimmed its holdings by 1 percent to $1.26 trillion. Japan, the No. 2 holder of Treasury securities, reduced its holdings by 1.7 percent to $1.18 trillion.

China and Japan have been ever so slowly selling off US treasuries.  On some months, both will actually increase their holdings, only to decrease them later. 

I’ll have to go back and check, but, the “$6.1 trillion” quoted seems remarkably the same for the last couple of years, in spite of tremendous overall growth in the national debt. 

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7 Responses to An Economic Place Holding Post

  1. Lars P. says:

    Let me see if I get this right.
    If the 6.1 trillion is the same for the last couple of years, the treasuries should still need to go somewhere. Where? QE comes to mind. The 83 billion per month QE would actually fit in with the deficit.
    QE forces the interest to go down as it reduces the number of bonds available. Who & when would buy bonds for very low interest? With less places to park the money due to QE, bonds are being bough for even lower interest and the existing money goes to even more riskier stocks.
    With the exponential increase in debt the central bank needs to keep interest low.
    QE goes only to the top tier of the society, the 0.0001, it does not “trickle down” – as we see average income has not got up since about 50 years, but feeds all kind of bubbles – property bubble, stocks bubble etc – this leads to increased inequality.
    There was a zerohedge post about having to work 11 years for a car & home now in comparison with 5 years – 50 years ago (number from memory, could be wrong).
    Which means the average income has gone down => less money to buy goods which leads to deflation if number of goods increase more then people – which was the case.
    But deflation is bad for debt.
    Majority of transactions worldwide are being computed in dollars. Which means if a country manages to devalue its currency against the dollar, it gets a competitive advantage for the product priced internally – if it is an export oriented country.
    This causes the dollar to go up. This and having the dollar as reserve currency allows for the parking of increasing number of dollars in the world economy, as long as the world economy expands.
    Zero interest, causes further all kind of side effects, like stocks buybacks on “free money” and non-profitable companies being kept alive on even further debt.
    What could go wrong?

    • DirkH says:

      Lars, it is not known how Fed and US admin keep treasury rates that low ATM. Because newly issued debt and the US debt sold by China, Russia, Japan do need to go somewhere.

      Remember the Belgian Bulge? An enormous treasury buying higher than Belgiums GDP , 300 bn or so, in a company called Clearstream or something, a broker for bonds. Maybe the Exchange Stabilization Fund or the Plunge Protection Team ( which actually exist) are behind it. With what money? Counterfeit money / electronically generated by them?

      For EU and Japan it is clear. ECB and BOJ do QE at the moment and finance all public debt of their territory and then some.

      How the US does it at the moment is unclear, but they ARE doing something. Otherwise TNX and other bond interest rates would be sky high now (as it is clear to anyone that the USA will not pay anything back. Only takers are central banks – IOW the West is bankrupt. There ARE NO PRIVATE BUYERS OF WESTERN BONDS. Depth of the market is a quarter of what it was 2 years ago, or so. It’s a headless chicken still walking!)

      • Lars P. says:

        I’m just an ignoramus in finance, but still wondering if some QE in one or 2 of the pillars not being enough to sustain the triangle? The available money being forced to move to the next available option? Especially if banks have to have a certain degree of treasury collateral? – ok this is something that could be relative easily disproved with real numbers…
        Also some of the money being “destroyed” – as is the case of Russian company debt decreasing from 700 billion to 500 billion – this opening the possibility of new debt opening money creation by the respective banks?
        (Question is if this is a more widespread case, not only Russian debt)
        But as said, as ignoramus, just looking and wondering.

        • DirkH says:

          “Also some of the money being “destroyed” – as is the case of Russian company debt decreasing from 700 billion to 500 billion ”

          Careful when measuring stuff in Dollars – the Dollar rose 20+% because of collapsing oil prices (Petrodollar and oil are inversely correlated). Russia probably did not experience any decline in Rubel based debt.

          Is the rising Dollar good for the USA? Well the USA is 20 trillion SHORT the Dollar! Expecting the biggest margin call in history right about now!!! What will the USA sell to cover the short? Land, resources, buildings, infrastructure. anything that can be sold. Harvests.

        • DirkH says:

          …as to measuring things in Dollars: Our Drecksmedia in Germany say, oh look, Gold is falling and falling. So I thought, oh really? Because I noticed no change in my holdings in Euros. Well turns out the idiot journalists looked at the Gold price in Dollars and completely missed that the Euro was falling perfectly synchronously with Gold – so Gold stayed constant in non-USD.

          So, they should have written: Gold and Euros are becoming worthless.
          But, that would be saying something bad about the Euro, and we can’t have that.

          The best description is: The Dollar is being short-squeezed. So the biggest Dollar short, the USA, will be CRUSHED – because the USA cannot COVER.

          So – will there be a Fed RATE HIKE? No. It would worsen the USD short squeeze. There will instead be USD printing.

    • suyts says:

      Heh! My memory still works, sometimes! In Nov 2014 foreign holdings exceeded $6.1tn …..

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