2017-10-18

Not the DeDollarization You Expected

Cryptocurrencies are in the middle of a classic bubble phase, but take a moment to digest this anecdote:
The South Korean government is preparing to tax Bitcoin use after the cryptocurrency’s trading volume largely increased past the country’s stock exchange Kosdaq. Han Seung-hee, the commissioner of the country’s National Tax Service, told lawmakers this weekend that the issue of how to best tax cryptocurrencies is being discussed, including the areas of capital gains tax, the VAT, and gift tax, Bitcoin.com reported.

South Korea’s lawmakers held a National Tax Service (NTS) hearing in Sejong last week on October 13th. The NTS Commissioner Han Seung-hee answered several questions about the taxation of cryptocurrencies.

Seung-hee was asked, “as the daily transaction value of virtual money grows beyond the Kosdaq, we must actively cope with the shift away from the conventional reservations. What is the taxation plan?” Business Post reported.
Korea Times: Bitcoin trades top tech-heavy on KOSDAQ

Chengdu Bans Unfinished Housing by End of 2022

Chengdu will no longer allow the sale of unfinished homes by 2020. Sale
Reporter learned from the Chengdu Municipal People's Government portal was informed that the General Office of the Chengdu Municipal People's Government on the 17th issued a "further accelerate the development of the city's finished housing development views" (hereinafter referred to as "the implementation of opinions"). "Implementation Opinions" pointed out that by the end of 2022, Chengdu, the newly started commercial housing and affordable housing finished residential area ratio will reach 100%, the full realization of Chengdu residential product structure from the water main to the finished house-based fundamental change. In addition, Chengdu will implement the finished house menu decoration, for the purchase of people to provide a variety of decoration style options.
iFeng: 这个城市5年后只卖成品房 毛坯房将成历史

2017-10-17

China Isn't Improving, It's Inflating

Global economic indicators, total social financing and rising producer price inflation all point to inflation coming out of China.
Bloomberg: Don't Panic: China's Debt Crackdown May Actually Be Good for Bonds
China’s deleveraging drive will benefit the nation’s bonds as it starts to weigh on the economy and prompts looser monetary policy, according to Fidelity International Ltd.

Bloomberg: What Debt Crackdown? China's Banks Are Bingeing on Bonds
China’s banks are still bingeing on short-term financing, defying analyst predictions that they would wean themselves off such debt as regulators intensify a crackdown on leverage.

Sales of negotiable certificates of deposit -- a key funding source for medium and smaller banks -- surged 49 percent from a year ago in the third quarter to a record 5.4 trillion yuan ($819 billion), according to data compiled by Bloomberg.

Bloomberg: Zhou's Leverage Warning Sends China Bond Yield to 2015 High
Yields on China’s 10-year sovereign notes spiked to the highest level since April 2015 on a closing basis, while a stock gauge of smaller companies slumped the most in three months, after the PBOC governor voiced his concern at the weekend that Chinese firms have taken on too much debt. The comments come amid a run of strong data, with better-than-expected producer price growth Monday underscoring the image of an economy still riding the wave of unsustainable leverage to achieve its growth targets.

“Investors, who have always been concerned with tighter financial regulations, are now especially sensitive to news that’s negative for bonds, such as improvement in the economy,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen.
China has to fund growth with credit. U.S. dollar credit has been tight since before 2008. The yuan saw devaluation pressure in 2008. It launched a massive stimulus that led to soaring home prices and a brief yuan devaluation in 2012, along with trillions of yuan in unprofitable investments. The attempt at a controlled slowdown led to the yuan devaluation in 2015 and global financial mini-panic in early 2016.

Without credit growth (or some major economic reforms), China's economy cannot grow at 6 percent. Since the developed world remains locked in slow growth with the global eurodollar system also growing slowly, a Chinese credit inflation necessitates "de-dollarization," inflating without concern for underlying foreign currency assets. If the growth is "good," value creation will outstrip credit creation. If the growth is "bad," China will be stuck with hundreds of billions, if not trillions of dollars more in debt with no dollar backing. The odds of a sudden and sharp yuan devaluation are rising.

19th National Congress: Deleveraging Will Have No Negative Effect on GDP

Set your watches!

iFeng: 十九大发言人:确保去杠杆不对经济增长产生负面影响
Bloomberg News reporter:

My question is related to China's economy. China for influence in the world economy growing, while China is facing domestic and international environment is quite complex. The Chinese government is currently working at the same time maintaining a high economic growth rate, pushing deleveraging. My question is, What is your vision for the future of the Chinese economy? Which do you think is more preferred between economic growth and deleveraging? Whether deleveraging higher priority?
19th National Congress spokesman Tuo Zhen:

I would like to point out that you can not put deleveraging and steady growth in opposition. In the long term, the initiative to leverage helping to eliminate the potential risks affecting the stable and healthy economic development, and enhance the economic development and long-term tenacity. We adhere to the general tone of the work while maintaining stability, continue to implement the proactive fiscal policy and prudent monetary policy, adhere to the supply-side structural reforms as the main line, a moderate expansion of aggregate demand, deleveraging and economic growth to create a good and stable macroeconomic environment . We insist on actively and steadily deleveraging, adhere to multi-pronged approach, a variety of measures of deleveraging, and properly handle the relationship between steady growth and deleveraging, to ensure that deleveraging does not adversely affect the economic growth. Currently, deleveraging has achieved initial results, no significant tightening effect on the economy.
There hasn't been much of an effect because China isn't deleveraging...

2017-10-16

Skipping the Dark, Marvel Superheroes Go Straight to Horror

How popular is horror amid a decline in social mood? Marvel is launching a trilogy of movies centered around younger mutants (in the vein of X-Men). Instead of typical superhero fare of heroes and comic quips, the movies will all fall in the horror genre.

Slash Film: ‘The New Mutants’ Will Be the First in a Trilogy of X-Men Horror Movies
Director Josh Boone says:
These are all going to be horror movies, and they’re all be their own distinct kind of horror movies. This is certainly the ‘rubber-reality’ supernatural horror movie. The next one will be a completely different kind of horror movie.

Our take was just go examine the horror genre through comic book movies and make each one its own distinct sort of horror film. Drawing from the big events that we love in the comics.
Discussing horror, the author of the article writes:
With horror undergoing a sort of popular renaissance, appealing to more types of audiences than ever (including yours truly), it’s smart for Boone to tap into the horror zeitgeist. It and Get Out are two of 2017’s biggest blockbusters and the success of the high concept slasher Happy Death Day over the weekend suggest that The New Mutants is on to something.
The marketing of the next Marvel superhero movie to hit theaters sticks with the tried and true formula:

Volatility in Chinese Data Will Spread

Coming on the heels of Friday's money and credit reports showing faster credit inflation, the PPI came in hot at 1.2 percent for September.
The supply side argument (China is closing zombie steel mills coal mines) doesn't explain the rise in prices because output is rising too. When marginal producers leave the market, output should decline and prices rise. The current boomlet has its origin in faster credit growth.

2017-10-15

China M2 Growth Ticks Up in September

Although M2 growth slowed over the past three-months, the September growth rate was 0.64 percent, higher that September 2016's 0.36 percent. New loans beat forecasts.
Reuters: China Sept new yuan loans rise to 1.27 trln yuan, above forecast

2017-10-12

Austria Moving Right Again

AP: Austria set for rightward political turn after Sunday vote
The Freedom Party is strongly euroskeptic. And while it has long distanced itself from its Nazi roots, and its leader, Hans-Christian Strache, has dismissed his own links with neo-Nazi organizations as youthful folly, its presence in a government could present a new challenge to moderate EU governments shortly after Germany's anti-migrant and EU-critical AfD gained seats in the federal parliament for the first time.

Few saw it coming two years ago. Back then, the Social Democratic-People's Party coalition fervently backed German Chancellor Angela Merkel's open border policy, as hundreds of thousands of mostly Muslim migrants flooded into Austria and beyond in their search for a better life in Europe's heartland. The two parties criticized the Freedom Party's call for closed borders and zero migration.
Anyone making predictions based on Socionomics saw it coming. At the time, I said Merkel's policy was almost perfectly wrong, indeed it may be impossible to make a policy more in contradiction with prevailing social mood. Allowing a migrant invasion of hostile foreigners at a time when the public is in a trend that could end with a total ban on immigration is insanity, unless your real goal is to ban immigration must faster than the social mood would otherwise allow.