when the temperature reaches a critical point

As China is one-third of the emerging economy bloc -- and exerts a great deal of influence over commodity prices that other emerging economies depend upon -- its monetary policy has a big impact on global financial markets. Its monetary stimulus in the first half of 2009 went disproportionately into property, stock and commodity markets. As profitability for the businesses that serve the real economy remain weak, little monetary stimulus went into private sector capital formation.
Japan's new ruling party DPJ has no vision like that. It doesn't have the guts to go against popular preference for a strong yen. Without a growing economy, though, the DPJ has little to play with. The whole country has sworn to debt, led by a government with a massive fiscal deficit. The DPJ may only reallocate some spending, which would make no difference for the economy. It seems Japan will remain in the icebox until the day of reckoning.

It seems limiting credit growth is the current policy focus. But if the economy shows further signs of weakness in the fourth quarter 2009 and first quarter 2010, the policy may revert to loose bank lending again. The zigzagging will stop when China's loan deposit ratio is high enough,polo ralph lauren, i.e. when increased lending increases interest rates. As the yuan is pegged to the dollar, China's monetary policy would become much less flexible after excess liquidity in the banking system is gone.

Most analysts think a benchmark for exiting a stimulus is robust economic recovery. That's not so. Loose monetary policy cannot bring back a strong economy due to the supply-demand mismatch formed during the bubble. Re-matching takes time, and no stimulus can bring a quick solution.
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Some may argue that Britain is not expensive anymore. The problem is that being less expensive is not good enough. Prices have to be low enough to attract non-financial economic activities despite a rising tax burden. The pound's value must be very low to achieve that goal. Five years ago, I predicted the pound and euro would reach parity. It seems the day is finally here. But I'm not sure parity would be enough; the pound may have to be cheaper.
Central banks also have been discussing the subject. Their messages are, first, that they know how to exit and will exit before inflation becomes a problem and, second,football cleats, that they don't see the need to exit anytime soon. They try to assure bond inventors not to worry about their holdings, despite low bond yields, while trying to persuade stock investors they need not worry about high stock prices, as liquidity will remain strong for the foreseeable future. So far, central banks have made both groups happy. But Australia's action is likely to raise concern among financial investors who hold expensive stocks and bonds.
If a central bank can keep real interest rates at zero, and real growth rates at 2.5 percent, leverage could be decreased 22 percent in a decade. If real interest rates can be kept at minus 1 percent, leverage could drop 30 percent in a decade. The cost is probably a 5 percent inflation rate. It works, but slowly.


The state sector ramped up investment somewhat for policy, not profit, concerns. Thus, China is experiencing a relatively weak real economy and red hot asset markets. Government policy is being pushed by both concerns. Cooling the asset bubble would cool the economy further. Not to cool the bubble could lead to a catastrophe later. Monetary policy zigzags, shifting according to concerns that arise, has the up hand.

The bottom line is that, regardless what central banks say and do, the world will be awash in a lot more money after the crisis than before -- money that will lead to inflation. Even though all central banks talk about being tough on inflation now, they are unlikely to act tough. After a debt bubble bursts, there are two effective options for deleveraging: bankruptcy or inflation. Government actions over the past year show they cannot accept the first option. The second is likely.


(Caijing Magazine) Australia recently raised its policy interest rate 25 bps, becoming the first major economy to do so since the financial crisis a year ago prompted all major economies to rapidly cut interest rates to historical lows.

I think Australia is raising interest rates ahead of others for a unique set of concerns. Australia has been experiencing property and household debt bubbles similar to those in the United States and Britain. Its bubbles are probably larger than America's. But because its commodity exports have performed well, its economy has fared better than others. Hence, its property market has seen less of an adjustment. A relatively good economy could embolden Australia's household sector to borrow more and continue the game. This is why it needs to increase interest rates -- to prevent the bubble from re-inflating. The United States and Britain don't have this problem; their household sectors are convinced that the game is finished and they must change.


Second, China's stimulus program will zigzag mainly through its lending policy. China's currency will be pegged to the U.S. dollar for the foreseeable future, which determines the end point for China's monetary policy. Its inflation and interest rates will likely be similar to those in the United States.


These snapshots of Britain, the euro zone and Japan suggest everyone needs a weak currency. Those that don't have one simply don't know yet. They'll come around eventually. One outcome could be rotating devaluations and high inflation for the global economy.
Each economy will exit at its own pace, according to local conditions. First, the United States and Britain, where property bubbles have burst and could not be revived through low interest rates, will increase rates next year at a pace in line with the speed of inflation expectation. Their goal is to keep real interest rates as low as possible to support financial institutions still sitting on mountains of bad assets. They don't want to stop inflation, but want to limit the pace of its increase. Through low real interest rates, their economies could decrease debt leverage. I think the Fed would raise interest rate by 100 bps in 2010, 150 bps in 2011, and 200 bps in 2012. The United States could be stuck with an inflation rate of 4 to 5 percent by 2012 – and for years to come.

By Andy Xie, guest economist to Caijing and a board member of Rosetta Stone Advisors Ltd.
The Fed hopes to fool bondholders or lock them in by quickly devaluing the dollar. Foreign bondholders have already realized losses. The dollar index is down 37 percent from its 2002 peak. A significant portion of this devaluation is a down payment for future inflation.


If stagflation is the goal, why might central banks such as the Fed talk tough about inflation now? The purpose is to persuade bondholders to accept low bond yields. The Fed is effectively influencing mortgage interest rates by buying Fannie Mae bonds. This is the most important aspect of the Fed's stimulus policy. It effectively limits Treasury yields, too. The Fed would be in no position to buy if all Treasury holders decide to sell, and high Treasury yields would push down the property market once again.
Developing countries with healthy banks have a different problem on their hands. By responding to falling imports with stimuli,cheap polo ralph lauren, they inflated their property markets. China, India, South Korea and Hong Kong have inflated property bubbles in spite of slower economic growth rates. The contradictions between a property bubble and a weak economy can lead to zigzags in policymaking.


The main purpose of monetary policy ahead is facilitating the deleveraging process, either through negative real interest rates and-or income growth. Preventing runaway inflation expectation is a key constraint on monetary policy. One key variable to watch is the price of oil, with its major impact on inflation expectation. If oil prices take off again, the Fed could be pushed to raise interest rates sooner and higher than expected.
I think Britain is pursuing devaluation for the same reason. Among all major economies, Britain's is the most dependent on global finance. It benefited greatly during the global financial boom that began in the mid-1990s. The British currency and property values appreciated dramatically, pricing out other economic activities. But now that the global financial bubble has burst, its economic pillar is gone. Other economic activities cannot be brought back to Britain without major cost cuts. But it can't cut taxes to improve competitiveness, as fiscal revenues depend on the financial sector and already face a major shortfall. Another option is to let property prices fall, as they have in Japan. But that choice might sink Britain's entire banking sector. Hence, devaluing the pound is probably the only available option for stabilizing the British economy.
My central point is that the global economy is cruising toward mild stagflation with a 2 percent growth rate and 4 percent inflation rate. This scenario is the best that the central banks can hope to achieve; it combines an acceptable combination of financial stability, growth and inflation. But this equilibrium is balanced on a pinhead. It requires central banks to constantly manage expectations. The world could easily fall into hyperinflation or deflation if one major central bank makes a significant mistake.

It is difficult to reverse this kind of stimulus. A complete reversal requires that household,louboutin pas cher, business and government sectors decrease debts to pre-stimulus levels. This is why national ratios of indebtedness-debt to GDP have been rising over the past three decades while central bankers smoothed economic cycles through monetary policy. It led to a massive debt bubble that burst, leading to the ongoing slump.


For Japan to avoid calamity, it should deal with deflation and skyrocketing government debt now. The only way forward is for the central bank to monetize Japanese Government Bonds. That would lead to yen devaluation and inflation. Pensioners will complain, but it's better than a complete meltdown later.




The current stimulus round is different in terms of its effects. Despite low interest rates,mercurial vapor, household and business sectors in developed economies have not been increasing indebtedness; falling property and stock prices have diminished their equity capital for supporting debt. The public sectors have rapidly ramped up debt to support failing financial institutions and increase government spending to cushion the economic downturn. Neither is easy to unwind.
In modern economics, monetary stimulus is considered an effective tool to soften the economic cycle. While there are many theories about why monetary policy works, the dirty little secret is that it works by inflating asset markets. By inflating risk asset valuation, it leads to more demand for debt that turns into demand growth. In other words, monetary policy works by creating asset bubbles.

Of course, central banks can suck in money from elsewhere to substitute money that's tied up in non-performing loans. They are unlikely to do so, however, as it would depress a good part of the economy in order to support the bad. And that could easily lead to another recession.
By some estimates, US$ 9 trillion has been spent to shore up failing financial institutions. A big chunk of that money was borrowed against illiquid and problematic assets on bank balance sheets. As the debt market refused to accept that collateral, governments and central banks stepped in. Today, it is impossible for banks to liquidate such assets without huge paper losses. Hence, if central banks call the loans, they are likely to go bankrupt.
Financial markets had been chattering about economic stimuli exits for about a month before Canberra's move. The consensus was that central banks would keep rates extremely low through 2010, and possibly beyond, on grounds that the economic recovery is still shaky.

Hyperinflation was used in Germany in the 1920s and Russia in late 1990s to wipe slates clean. The technique was essentially mass default by debtors. But robbing savers en masse has serious political consequences. Existing governments, at least, will fall. Most governments would rather find another way out. Mild stagflation is probably the best one can hope for after a debt bubble. A benefit is that stagflation can spread the pain over many years. A downside is that the pain lingers.


Of course, the euro zone is a mess, too. With high unemployment rates, a stagnant economy and imploding property markets in southern Europe, shouldn't the euro's value decline, too? Yes, it should. But it won't. The European Central Bank was structured solely to maintain price stability. With so many governments and one central bank, ECB is unlikely to change anytime soon. Hence, it won't respond to a strong euro quickly. A strong euro and low inflation could form a self-generating spiral, as we see in Japan. Even as interest rates in other economies rise, the euro zone's real interest rate could be higher still, supporting a strong euro.
Japan is a giant debt bubble. Its zero interest rate, supported by a strong yen and deflation, has turned the debt bubble into an iceberg. You don't have to worry -- until it melts. Unfortunately, when the temperature reaches a critical point, the iceberg will melt suddenly, all at once. That turning point will come when Japan begins to run a significant current account deficit. The day may be near.
Third, due to their strong currencies, countries in the euro zone and Japan will have higher real interest rates, lower nominal interest rates, and lower real economic growth rates. They will raise interest rates more slowly than the United States,nike soccer cleats, and will have lower inflation rates as well.







Can interest rate adjustments, currency devaluation and zigzag policymaking help unwind economic stimuli? It depends.

At some point, euro zone monetary policy may change. It would require governments in the zone's major economies come together and change the ECB. That may come in three years, but not now. The trigger could be one country threatening to exit the euro. Italy and Spain come to mind.
A review of unique factors and institutional biases around the world shows that exiting a stimulus would be quite different in different economies. The United States and Britain, the euro zone and Japan,nike mercurial vapor, and China and India are three blocs that face varying challenges and will handle stimuli exits in different ways.


Meanwhile, Japan is an enigma. It has been locked in a vicious cycle of economic decline with a strong yen and deflation. Most Japanese people have a strong yen psychology. Politicians and central bank leaders reflect this popular sentiment, which is based on an aging population. Wealth is concentrated among voting pensioners for whom a strong yen and deflation theoretically improve their purchasing power. But I think various theories that explain Japan's behavior are not good enough. The best explanation is that Japan is run by incompetents,chaussure louboutin pas cher, and some are downright stupid. They have locked Japan in an icebox and refuse to come out.
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The simple hand tools to build roads, remember when the scene of road, the couple sweet smile.
every morning, the couple so exercising to sweep the road.
Now, every day hundreds of people marching

others think she is difficult to survive, even survive much better than a vegetative state. After surgery, the poor husband can not afford expensive drugs to a fall in the mountains cutting their
Now, the > She said her husband's love for her is a miracle,polo ralph lauren shirts!
13 am, the temperature of Pengshui county only 13 ℃, 51-year-old Gong Jinghua and 58-year-old husband, Tuo this blog wearing only a thin short-sleeved T-shirt and shorts.
not cold.
they got up at 6 am, dress like that to go hiking shorts, obligations sweeping. Road, is dedicated to her husband, repair, and they called it
doctors removed from her brain tumor as big as an egg, treatment spent 380,000 yuan

Gong Jinghua Pengshui county live in the Fort River Street. In 2003, she had often a sense of dizziness, headache. August 2004, when her husband sent her to this blog Tuo West China Hospital in Chengdu, has been in a severe coma.
doctors have done 3 times for the Gong Jinghua craniotomy was successfully removed from her brain tumor as big as an egg, she survived.
that year before the Spring Festival, Gong Jinghua the hospital, like a vegetable.
discharged the past six months, seeing the doctor prescribed some medicine quickly finished, Tuo this blog is very anxious. Wife did not work, he removal companies in the county to work, wages are less, the trip to Chengdu, they spent a total of 38 million, to borrow from relatives and friends have borrowed times, can the doctor said, his wife must be at least 4 years of continuous medication .
His wife could not say anything, just nodded unsteadily.
Tuo started this blog to the riverside road with his wife every day,
no money to take medicine, he used his hands carved climbing.
Tuo letter of the Chi-kin, after stopping exercise will allow his wife to stand up again. He chose to insert Chishan close to home, he knew where the trail can be hardened through the Peak. First time, he took his wife to the foot, the results were collected over 2 yuan toll: cost-effective, and up pops the idea: took his wife to the foot, from morning till noon. From the wall behind the original edge of the county detention center, he has to repair the thorns out of a mountain road!
Gong Jinghua on very vague memory of that time, just remember that her husband work, she gave him delivery of water, wipe.
13th of this month, journalists at the starting point on that mountain to see, surrounded by a thorn bush and terrain is very steep, not to mention roads, most people want is very difficult to climb.
Tuo this blog to let his wife sitting beside the stone, they used simple tools to begin cutting road. Hungry, his wife handed him the dry food; thirsty, his wife handed springs. Hit rock can not be bypassed, and he has to burrows in stone, and then stand up, but also in the top of the holes ... ...

six months after the cutting of this blog Tuo bad three drill rod, the primitive mountain finally Completion of a total of more than 600 step Tikan,ralph lauren bikinis, bypassing the peasant music of the Tuo this blog said to his wife: climbing. At first, his wife refused, saying that tired. Tuo this blog, and took his wife's favorite fruit, said: puts the rhythm home.
the beginning, the couple reached the top,ralph lauren polo, at least 6 hours, are only two hours.
this toll road was built, the Pengshui county many people climbing up. This is the first desire Tuo this blog: , this section of the mountain Tuo hardening repair this blog:
insert more than 300 meters vertical height Qishan, hardening, many Tuo Zhi repair the stone steps into the slope by road. Now, from the foot to the top of stone steps, a total of 1065, nearly half built out of this blog Tuo Foundation.
climb a lot of people follow the See more and more people to climb every morning, the couple would get up at 6 am, go to the mountains sweeping.
These can not sweep the road, use the pockets down the mountain, go to the garbage station. Trip down, Gong Jinghua hands always have a number of non-recyclable garbage bag full of.
a mountain, the Tuo Zhi see the kids squatting on the road to eat a few snacks, plastic bag litter, they said nothing, deliberately swept around the clean, no child left behind sweep garbage. Down when they found that those who refuse gone.
2008, the collapse of a snow disasters, all the buried section of this road, some climbing exercise to see way up the rear who had stopped. Tuo Road, this blog decided to re-dig out. They cleared the debris by hand on the road two days later,ralph lauren shop, often with climbing Pengshui secondary Xie joined in, as 3 people like ant will move to the roadside debris, blood all ten fingers. Road re-linking, the Tuo this blog has spent a month, will deal with all the dirt around the clean, also clean up the roadside weeds to prevent snakes wounding.
It has been jokingly asked:
Since 2005, the couple has obligations to build roads, sweeping past 5 years.
wife and eventually became a healthy person, even the surgeon said the three 5 years down the same year that Gong Jinghua, like vegetative body is not only fully recovered, even before they are much better than the illness. Students also did not have other diseases. To the hospital, all in good condition.
Tuo this blog previously suffered from severe bronchitis, since, after hiking with his wife insisted, bronchitis, had made it since.
hospital, the doctor told Tuo this blog, Gong Jinghua must be reviewed once every 3 years, because until now, she has an artificial brain subcutaneous tube has been inserted into the stomach from the tumor site, the task is to make the affected area of ​​the pus direct discharge of liquid, so as not to cause infection in the brain.
Gong Jinghua remember in 2007 to review the situation in Chengdu: come. 'I said I was patient,ralph lauren shirts, ah, he did not believe until you see the wound on my head before he even said 3' miracle ', that did what I did not expect such a person can live to surgery like this. p>
Thirty years of marriage she and her husband, the two never had boring. Gong Jinghua temper, her husband told her jokes; Tuo this blog temper, she is waiting for him to find gas consumption was talking to him, never head-on collision. Gong Jinghua emptied the illness will be at home, but also owed a lot of debt, but never this blog Tuo said before his wife the money, there is always a person to bear the economic pressure, trying to make his wife happy.
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68527 2009 年 03 月 11 日 02:45 Reading (loading. ..) Comments (3) Category: Personal Diary
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Zhao and his wife Zhang Mei at the hospital. The doctor said, do in the future bone marrow transplantation,ralph lauren womens dresses, to 30 million.
school rushing stream near the bar, which is Zhao kids back to school (photo by volunteers.)

trainee reporter Feng Zhigang Guiyang Bijie text / Chart report

body temperature of 39.5 degrees Celsius, lying on the Guiyang Medical College Hospital in Zhao annoyance.
to yesterday, he struggles with his illness for 24 days.
Zhaopeng Gang has just been diagnosed with acute leukemia. Today, the 27-year-old rural support to live a substitute teacher from the greatest force of 114 school children. He wanted to soon return to their side, to hear recited.
9 years ago, only 18-year-old Zhao to his own power, run deep in the mountains in Guizhou, a rural school played. 9 years, he made this one thing: to allow local children's drop-out rate from 90% to 0.
Zhao fell ill, it has been concerned about his business school students in Guangdong for his donation of more than 70,000 yuan for medical expenses, and is ready to take over the teaching of his hand, , full of love witnessed this activity.
very poor village primary school

2009 年 10 the end of a small primary school Keteleeria influenza.
This is a county located in the state of poverty - Bijie City, County and generous rain washed mountain village Keteleeria Village Primary School. Rain washed village is extremely poor rural Guizhou, one of 100. 114 school students from around the rolling hills of a few kilometers.
school child has a fever of more than 20 cold, as the only two school teachers, Zhao and his wife Zhang Mei busy the past 10 days.
11 5 February, healed the sick students. Zhao fever, some serious. In order not to delay the child class, he adopted a
do not understand the medical knowledge of his wife to help him find vein injection. But 10 days later, body temperature jump to 40 ℃, repeated illness.

unconscious in twice, Zhao Zhang Meijiang about to Zhang Mei took home only 2,000 yuan, will be transferred to her husband, Guiyang Medical College Hospital. Hospital diagnosed with acute leukemia.
Zhao fell ill,ralph lauren men, the Keteleeria 114 primary schools children are forced to close. Local people said one is to teach low-paying, no one wants to substitute the mountains. Second, the villagers were less educated, so far can not find the teacher.
passionate young people to do the school

1980 Zhao born, 9-year-old mother died. A living by planting maize and other coarse grains, only 500 yuan annual income of the father, for he barely finished junior high school. Graduated that year, 49 year-old father suffering from jaw cancer, lying on the bed.
order to cure his father, he went to town to study medicine with a barefoot doctor. But not until the apprenticeship, the father to let go away.
asked his father before his death, when a rural doctor. To open a small clinic in the village, both for the villagers to see a doctor, is also a good means of livelihood.
year when he was 17 years old.
but one thing occurred after one year, changed him as Few junior high school in the village, or even not hire teachers because of the village primary school have been closed for several years, the village 90% of the children out of school. Once, the town was to the village, the people who laugh at Keteleeria Kawamura, Angrily, Zhao went to the township government, proposed to continue to do by his small village.
heard that schools have to run up, the parents sent more than 30 children at once, but the school where it? The original school building has been abandoned, the new school has not landed yet.
Zhao raise money on their own, rented a farmer's hut when the classroom. Schools only he a teacher, the classroom is no table, no bench, no stationery, and only a blackboard ... ...

school to do it,ralph lauren uk, the school children will soon increase from the initial 32 to 50, 80 months, and finally, the village all the children went to school, drop-out rate from 90% to 0.
township teaching achievements often the first

more school children, but the teacher he is the only one. After the deployment of teachers in the application within the foreseeable future, Zhao decided to just finish the first day to come and help his wife to drop out of school.
wife taught first, second and fourth grade, Zhao teach third, fifth and sixth grade.
the encouragement of her husband and Zhang spent three years, the middle and high school self-study courses.
2006, at the township 9 exams in primary school graduates, Keteleeria School took first place. Zhang Mei said, so that they couple is proud that the quality of teaching in primary schools Keteleeria township has been ranked the top three. Annual examination, Keteleeria Billing Division Primary Mathematics average score higher than the village average 10-20 points higher than four-fifth of the language also. Teaching performance often ranked first in the township.
Zhang Mei told City Express reporter, Zhao No Teacher, belonging to private substitute teacher. Couple combined annual income of less than 8,ralph lauren outlet,000 yuan.
Because of family poverty,ralph lauren shirts, school year, more than half of the total arrears of tuition fees for students, but also Zhao first cushion, and students pay the tuition fee for years, even he can not remember a specific number.
children.
Li, last February was instigated lie married. She was only 14 years old, just read the fourth grade. Remorse after her father, often crying in the drink.
Jiaming Fen, in April of this year, is read in fifth grade, she dropped out of school, married.
to Min Su, 16-year-old girl, dropped out last March to Guangzhou Panyu fellow workers to follow. Her monthly salary of 1,000 yuan, 800 yuan to the mother returned to see a doctor, a brother and sister to study.
... ...

.
He said the children's knowledge, the only known side of the mountain or the mountain, do not know how to write books on what high-rise buildings, even the traffic lights what is not known; for classroom less They have to squeeze in a three grade classrooms; because some teachers, they are only on the language and math; no sports facilities, they are the largest entertainment is ripped after-school child, hop rubber band; after school and they want to herd cattle, cut grass, mining yam ... ...

>
make him proud, to date, he and his wife had brought three graduates, seven or eight percent of middle school children to read, there are several on the high school.