China: Short Term And Medium Term Economic Performance

I’m writing on the heels of two trips to China during which I met with senior policy makers, bank executives and academics, just as the government launched its 12th Five-Year Plan, intended to rebalance the long-term growth model.

My meetings deepened my own impression and RGE’s long-standing house view of a potentially destabilizing contradiction between short- and medium-term economic performance: The economy is overheating here and now, but I’m convinced that in the medium term China’s overinvestment will prove deflationary both domestically and globally. - in Business Insider

Spain Is Too Big To Fail And Too Big To Be Saved

"I think the big question is not Portugal — that is too small — but rather whether the contagion could spread, over time, to Spain, a country that is on one side too big to fail, but from the other side too big to be saved.

There have been reforms that go in the right direction, but much more radical reforms need to be done to stabilize the economic, financial and fiscal conditions of Spain." - in Forbes

Related: iShares MSCI Spain Index (ETF)

ECB May Be Signaling A Series Of Rate Hikes

"If the ECB raises rates in April, in my view it signifies a series of rate increases." in CNBC

ECB April`s Rate Hike May Be Premature

They’re going to likely raise rates in April and then continue for a few times this year. But you have five countries in the periphery where there’s almost no growth or contraction, where you have severe banking problems, where you’ve had a loss of competitiveness, where there is a need to restore economic growth.

I fear that an early hike is going to increase the growth fragility, the worsening of competitiveness. - in Bloomberg.com

Even Before The Middle East Crisis, Oil Was Already Going Up

Even before the recent Middle East political shocks, oil prices had risen above 80- 90 a barrel, an increase driven not only by energy-thirsty emerging-market economies, but also by nonfundamental factors: a wall of liquidity chasing assets and commodities in emerging markets, owing to near-zero interest rates and quantitative easing in advanced economies; momentum and herding behaviour; and limited and inelastic oil supplies.

If the threat of supply disruptions spreads beyond Libya, even the mere risk of lower output may sharply increase the "fear premium" via precautionary stockpiling of oil by investors and final users. - in BusinessDay

Related: United States Oil Fund LP (ETF) (NYSE:USO), iPath S&P GSCI Crude Oil Total Return (NYSE:OIL)

Political Turmoil In The Middle East Increases The Risk Of Stagflation

Political turmoil in the Middle East has powerful economic and financial implications, particularly as it increases the risk of stagflation, a lethal combination of slowing growth and sharply rising inflation. Should stagflation emerge, there is a serious risk of a double-dip recession for a global economy that has barely emerged from its worst crisis in decades.

Severe unrest in the Middle East has historically been a source of oil-price spikes, which in turn have triggered three of the past five global recessions. The Yom Kippur war in 1973 caused a sharp increase in oil prices, leading to the global stagflation of 1974- 75. The Iranian revolution in 1979 led to a similar stagflationary increase in oil prices, which culminated in the recession of 1980- 81. And Iraq’s invasion of Kuwait in August 1990 led to a spike in oil prices at a time when a US banking crisis was already tipping America into recession. - in Business Day

Related: United States Oil Fund LP (ETF) (NYSE:USO), United States Natural Gas Fund, LP (NYSE:UNG), iPath S&P GSCI Crude Oil Total Return (NYSE:OIL), ProShares UltraShort DJ-UBS Crude Oi ETF (NYSE:SCO)

The Last Thing The Japan Needs Is A Strong Yen

"The Japanese already have a weak economy, the last thing they can afford is having the yen sharply higher. If the strengthening of the yen becomes excessive, Japan can make a case that "we are already on our knees" and further intervention is likely." - in The WSJ

Related: iShares MSCI Japan Index (ETF) (Public, NYSE:EWJ)

If An Agency Downgraded The US...

"If an agency downgraded the U.S. I think they'd probably have to headquarter themselves somewhere else. Politically it would not be popular." - in WSJ

Related: Moody's Corporation (NYSE:MCO)

There Are No Alternatives To The US Dollar As A Reserve Currency

"I'm not in the camp of those who think there's a chance of a long-term dollar collapse. What are the alternatives? People are sort of unhappy with the dollar, but the reality is there is no real alternative. A loss of the U.S. currency's preeminence will be gradual process, but I don't think the key role of the dollar is in jeopardy." - in The WSJ

Japan To Further Ease Monetary Policy

"They have already done QE I, QE II, now there will be a third round, and the third round might be larger than the smaller amount of quantitative easing that they have done so far." - in reuters

Related: iShares MSCI Japan Index (ETF) (NYSE:EWJ)

Japan Is Going To Need A Significant Depreciation Of The Yen

"Japan is going to need a significant depreciation of the yen to increase its net exports because domestic demand is going to be anemic for a while. Therefore on a fundamental basis, the yen is going to be much weaker rather than stronger because you need improvement of external balance given the shock to the domestic economy." - in CNBC Asia

Bloomberg Video Interview: Japanese Earthquake, Euro Zone Debt Problems And Markets

Video: Roubini Says Japan Quake 'Worst Thing' at Worst Time

March 11 (Bloomberg) -- Nouriel Roubini, founder of Roubini Global Economics, discusses the earthquake in Japan and the European debt crisis. He talks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)

If Oil Goes Up Another 15 to 20 Percent...

"If oil goes up another 15 to 20 percent [from the current prices], there's a risk to the US, the Eurozone, Japan." - www.arabianbusiness.com