Liquidity evaporates in China as ‘fiscal cliff’ nears

Unless China changes course, it is set to tighten fiscal policy by 5.5pc of GDP this year, five times Britain’s austerity dose annually since the Lehman crisis

Nobody can fault China’s leaders for lack of bravery. The Politburo has kept its nerve as the world’s most giddy experiment in credit-driven growth faces assault on three major fronts at once.

Real interest rates have rocketed. The trade-weighted rise in the yuan over the past two years has been spectacular. Fiscal policy is about to tighten drastically as the authorities clamp down on big-spending local governments.

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Japan is about to dive off its own version of the fiscal cliff

If you thought the US’s fiscal cliff—that combination of rising taxes and slashed fiscal spending that scared investors and shook the economy in December 2012—was bad, have a gander at what Japan’s prime minister, Shinzo Abe, faces. He entered the job with a mandate to grow the economy and escape deflation. But before Abe took over, the government passed a tax hike on consumption to show that the Japanese government is serious about shrinking its ¥1 quadrillion ($10.3 trillion) in public debt. Continue reading

US ‘seriously’ considering $1 trillion coin to pay off debt

The US is “seriously” considering creating a $1 trillion platinum coin to write down part of its debt to stop the world’s largest economy defaulting as early as next month, according to financial analyst Cullen Roche.

“I know it’s been spoken about at the White House and a number of prominent people, including congressman [sic], are talking about it,” he said. Continue reading

US Faces Credit Rating Downgrade By Three Top Firms This Year

In the fiscal cliff negotiations, Obama held the line against entitlement reform, but the resulting deal could lead to downgrades by all three top debt ratings agencies later this year.

When Standard and Poor’s cut the United States debt rating last year, the agency issued a press release outlining the reasons behind their historic decision. Amid criticism of partisan brinksmanship there was a bottom line which had to do with entitlements,

The [2011 debt] plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability. Continue reading

China and Germany Strengthen Cooperation With Nigeria

As America grapples with the fiscal cliff, China and Germany are increasing their military presence in an African nation vital to global seaborne trade.

Just last August, the Chinese military had discussions with the Nigerian government to upgrade the Nigerian Navy. During the discussions, Chinese military attaché to Nigeria, Kang Honglin, pointed to the fact that China has already helped Nigeria set up an ammunition assembly line. He then went on to talk about China’s desire to provide the Nigerian Navy with both the training and equipment necessary to secure the Gulf of Guinea. Continue reading

Goldman to Clients: Brace for Another 8% Drop in S&P

The S&P 500 is set to fall another 8 percent by the end of the year, on top of the 7 percent decline seen since the year’s high reached in September, according to a new strategy note by Goldman Sachs.

“Uncertainty swirling around the “fiscal cliff” that must be resolved by year end, the pending jump in capital gains taxes at the start of 2013, and the debt ceiling that will be reached in late February, represent clear and present downside risks to the market in the near term,” wrote the analysts, headed by Chief U.S. Equity Strategist David Kostin. Continue reading