Bernanke’s Maradona swerve hits bonds; how the Federal Reserve chairman has managed to tighten US financial conditions by more than 100 basis points without touching the Fed funds rate

September 16, 2013 8:43 am

Bernanke’s Maradona swerve hits bonds

By Steven Major

Clues to Fed chairman’s plan were in ‘term premium’ talk

Has Ben Bernanke delivered a modern version of the Maradona effect? It may help to explain how the Federal Reserve chairman has managed to tighten US financial conditions by more than 100 basis points without touching the Fed funds rate. The analogy, first applied to monetary policy by Sir Mervyn King, former Bank of England governor, refers to the ability of famed Argentine footballer Diego Maradona to clear a path to goal by wrongfooting opposing players as they tried to anticipate his next move. The bond market may not have been wrongfooted by Mr Bernanke’s swerve if it had paid better attention to what he said in March this year. We are used to thinking of his May 22 comments on the phasing out of US quantitative easing as this year’s key event for financial markets. It marked the start of the sell-off in US Treasuries, which contributed to big ructions in many emerging markets. But it was the earlier speech that provided some clues. Speaking about long-term interest rates on March 1, Mr Bernanke mentioned the phrase “term premium” no less than 28 times. Read more of this post

New Zealand Winemakers Seek Protection for Local Labels

Updated September 16, 2013, 5:40 a.m. ET

New Zealand Winemakers Seek Protection for Local Labels

LUCY CRAYMER

MARLBOROUGH, New Zealand—When the first winemakers harvested grapes here in the 1970s, they joined an army of New World vintners taking on established producers such as France and Spain. Now, New Zealand’s winemakers are resorting to an Old World tactic to fend off a challenge from newer rivals—regional trademarks. As wine consumption booms in countries such as China and Russia, entrepreneurs are setting up vineyards there, raising fears among New Zealand growers about knockoff wines posing as premium labels exported from regions like Marlborough and Central Otago. New Zealand winemakers are lobbying for the same legal protection for their brands that French producers won for Champagne two decades ago. Read more of this post

A renewed attack on social media by the Chinese leadership isn’t just an offensive against bloggers and activists. It’s also an assault by the Communist Party on its own shortcomings

September 16, 2013, 12:44 PM

The Other Side of China’s Social Media Crackdown

By Russell Leigh Moses

A recently renewed attack on social media by the Chinese leadership isn’t just an offensive against bloggers and activists who dominate the daily online discourse in China. It’s also an assault by the Communist Party on its own shortcomings. The sweeping political strategy towards social media that’s been taking shape here began before President and Party chief Xi Jinping left for this year’s G20 summit in Russia, and it picked up speed and suspects while he was away.  That’s a clear sign that there’s consensus in the Party leadership about how to handle dissent. The first part of the attack strategy involved the coordinated clampdown on leading microbloggers and social celebrities whose followings often sideline messages from state authorities. Read more of this post

Japanese tofu prices are going up 20% because of Abenomics

Japanese tofu prices are going up 20% because of Abenomics

By Adam Pasick @adampasick 4 hours ago

Japan’s tofu manufacturers are planning to jack up prices by 20% this autumn—the first markup in 15 years—as a response to the rising price of American soybean imports, caused in part by a stronger Japanese yen. Prime Minister Shinzo Abe has pushed a series of reforms designed to rid the economy of deflation, but the policies have had harsh consequences for industries that must import dollar-denominated commodities like oil, natural gas, and soybeans. Japan is the biggest per capita consumer of soy foods—not just in tofu but in soy sauce, miso, edamame, and the smelly fermented delicacy known as natto—with the average adult consuming 24.3 kilograms per year. The country is reliant on imports for about three-quarters of its supply, according to the US Department of Agriculture; that percentage rose even higher after the Fukushima nuclear disaster, which rendered 22% of domestic supply unusable (pdf, pg 2) because of radiation fears. Yasuo Hachijin, head of an industry group in the Kinki region and president of Kyoto-based Global Protein Foods Inc., said the price of raw materials has climbed 20% over the last five years. He told the English-language Japan Times, that “the hike will not be enough to fill the gap and that the industry will have consider another one.” The Japanese tofu industry’s woes have been exacerbated by drought conditions in the American Midwest, which resulted in six weeks of rising soy prices through Sept. 16—the longest run of rising prices since 2009. Prices eased slightly this week due to reports of much-needed rain—a relief to US farmers, if not necessarily to their clients in Japan’s tofu factories. Read more of this post

China eyes private funds to tackle bad-debt buildup, avoid bailout

China eyes private funds to tackle bad-debt buildup, avoid bailout

5:23pm EDT

By Gabriel Wildau

SHANGHAI/BEIJING (Reuters) – Faced with a chorus of warnings that China risks choking on bad debts, Beijing is pushing banks to raise private capital in an effort to head off the need for a second government bailout in as many decades. The hangover from a credit binge that powered China’s swift recovery from the global financial crisis, combined with the economy’s slowdown, has prompted expectations of a repeat of the early 2000s, when Beijing shored up its major banks with hundreds of billions of dollars. Right now, however, authorities appear focused on pushing banks to bolster their balance sheets by aggressively enforcing new international bank capital requirements, known as Basel III. Read more of this post

China banks urged to note risks when making new products, adding that it would tighten controls on banks’ leverage level

China banks urged to note risks when making new products

1:32am EDT

BEIJING (Reuters) – China’s banking watchdog has told banks to be cautious in financial product innovation to head off possible risks in the sector, adding that it would tighten controls on banks’ leverage level. “A lesson from the global financial crisis tells us the overlapping of different businesses may intensify hidden risks,” Shang Fulin, the chairman of the China Banking Regulatory Commission, said in a statement on the commission’s website.

Dark side of the mooncakes: China’s war of graft hits high-end pastries

Dark side of the mooncakes: China’s war of graft hits high-end pastries

6:07pm EDT

By Megha Rajagopalan

BEIJING (Reuters) – Gold-encrusted mooncakes stuffed with shark’s fin are out of favour ahead of this week’s mid-autumn festival in China after a crackdown on corruption killed off demand for such lavish pastries – long used as a way to bribe officials. With more calories than a Big Mac, mooncakes are given as gifts to family, friends and employees during China’s Mid-Autumn Festival, which falls on September 19 this year. In recent years lavish varieties have popped up with jewellery-box style packaging, allowing cash, liquor or other goodies to be hidden in with the pastries. Read more of this post

Corruption and the world’s biggest building: 50-year-old billionaire behind the biggest building in China and the world has vanished; “There are more investigations, and more arrests, to come”

Corruption and the world’s biggest building

The New Century Global Centre is the biggest building in the world; 16 Wembley stadiums could fit underneath its vast roof.

By Malcolm Moore, Chengdu

5:35PM BST 13 Sep 2013

But the behemoth in the central city of Chengdu which formally opened at the end of last month, has become for many China’slargest and most embarrassing monument to the allegations of corruption that have wormed through the Communist Party. The 50-year-old billionaire behind the project, Deng Hong, once one of China’s richest men, has vanished and is thought to be in police custody. “We don’t know where he is,” a spokesman for his company, Entertainment and Travel Group (ETG) said. In his wake, more than 50 government officials have been detained by a series of overlapping investigations that reach to the highest level of the party, according to a former editor of a state newspaper. “There are more investigations, and more arrests, to come,” the editor added. Read more of this post

China replaces US as the people of ‘more, more, more’; more than 60% of citizens admitted to worshipping money, with more than 95% of citizens believing that Chinese people worship money too much

China replaces US as the people of ‘more, more, more’

Staff Reporter

2013-09-16

As China continues to develop into one of the world’s biggest and most important economies, the dreams of its people have also evolved. According to Chinese investment web portal Eastmoney.com, modern Chinese citizens have nine big wishes, and almost all of them are all about money. The most common wish among Chinese citizens nowadays is to make big money and become super wealthy. A joint poll conducted by Reuters and Ipsos in February revealed that China ranked no. 1 out of 23 countries surveyed when it comes to agreeing with the statement that “money is the best sign of a person’s success.” Around 69% of Chinese people polled agreed with the statement compared to just 33% of American participants. A survey conducted by China’s nationalistic Global Times tabloid also found that more than 60% of citizens admitted to worshipping money, with more than 95% of citizens believing that Chinese people worship money too much. Read more of this post

China Reins in Popular Online Voices With New Microblog Controls

China Reins in Popular Online Voices With New Microblog Controls

Chinese microblogger Dong Rubin mused to his 45,000 followers last month that he might face arrest amid a government crackdown on Internet rumors. On Sept. 10, he was detained for misreporting the worth of his business. Dong joined a group of people who had gone online to criticize government-sanctioned projects or voice political opinions and wound up in detention on unrelated allegations. This year, Dong opposed plans for an oil refinery in the southern city of Kunming where he lives, a project that spurred street protests. Read more of this post

Flurry of Chinese plans to build aviation hubs raises concern

Flurry of Chinese plans to build aviation hubs raises concern

5:32pm EDT

BEIJING (Reuters) – More than 50 cities in China have answered Beijing’s call for cleaner economic growth with plans for aviation hubs, airports clustered with industrial zones. The problem is that they may not all be needed. The cities hope the projects will attract investment in areas like logistics, high-technology and finance – the sort of businesses Beijing is encouraging to move the economy away from the smoke-stack industry that has driven rapid growth for years. But critics argue the projects will exacerbate a problem China is trying to stamp out – debt-fuelled construction that local authorities have used for years to boost their local economies. Read more of this post

Floating Casinos From Hong Kong Stealing Macau Gamblers

Floating Casinos From Hong Kong Stealing Macau Gamblers

When Li Yu wanted to take a gambling trip, she looked into Macau but found the hotels too expensive. So she booked a room on an overnight casino boat that sailed about an hour from Hong Kong into international waters before opening up its baccarat tables. “I don’t care about the food or other amenities, my sole purpose is to gamble,” said Li, a housewife from nearby Guangzhou who played into the early hours of the morning with about 70 others in the ship’s cramped casino. “It’s way cheaper than going to Macau.” Read more of this post