Paddington

Post 241

A snapshot of what’s going on in the world’s economy.  Financial Ructions and book reviews can be a bit more technical so feel free to skip them.  See disclaimer at the end of this note.

Summary

News

Diamonds

According to wiki, diamonds are nature’s hardest material.

Anyway, the FT reports that diamond prices fell 18% last year.

US Housing Unaffordability

According to urban.org:

Canadian Housing Unaffordability

Since the Great Financial Crisis:

Eye-Popping Numbers

Restaurant Brands is a Canadian company that owns the following quick serve restaurant brands:

They have over 30,000 restaurants in over 100 countries.

4Q/2023 Results:

PM: Note that growth at Popeyes has slowed from the chicken sandwich frenzy years:

Less Happy

The happiest people according to the World Happiness Report:

  1. Finland
  2. Denmark
    • PM: There ain’t nothin like a Dane.
  3. Iceland
  4. Sweden
  5. Israel
  6. Netherlands
  7. Norway
  8. Luxembourg
  9. Switzerland
  10. Australia

Lower down:
15. Canada

20. UK

23: US

24: Germany

27: France

US Office Vacancies

According to CommercialEdge:

I Scream

Unilever owns a number of well-known brands such as:

They also own the following ice cream brands, which last year had €7.9 billion in sales.:

They have decided to separate the ice cream business from the rest of the group.

As part of a larger efficiency program, they will be letting go 7,500 employees.

Credit Card Delinquencies

According to the New York Fed:

Abortions

Medication abortions in the US now account for almost two thirds of the total (Guttmacher):

2020: 53%

2023: 63%

There were just over 1 million abortions in the US last year.

UK Inflation: Office for National Statistics

UK Inflation including housing costs:

Goods:

Services:

Core inflation excluding food, energy, alcohol and tobacco:

Big movers up:

Big movers down:

Financial Ructions

Note: ‘Financial Ructions’ is optional-to-read for those who are interested in taking a bit of a deeper dive…

Making Excuses?

An opinion piece in the Globe and Mail by Claude Lavoie (Department of Finance from 2008 to 2023.

He claims that the greatest inflation we experienced in forty years was mainly due to supply shocks.

  • And inflation recently coming down is mainly due to supply chains easing
    • And not because of softening demand resulting from higher interest rates.
  • PM: No.  The vast majority of the inflation was caused by an explosion in the money supply, combined with people not being able to leave their homes and spend on services.
    • The amount of cargo containers going through the port of LA during COVID
    • The following is from my post in June 2023:
    • Loaded container imports for the port of Los Angeles
      • 2019: 4.7 million
      • 2020: 4.8 million
      • 2021: 5.5 million (up 15% from 2020)
        • 2021 was the year inflation took off.
          • And of course, the US money supply (M2) went through the roof increasing 41% from December 2019 to December 2021.

NeverGrand

Chinese property developer Evergrande has been charged with fraud by the China Securities Regulatory Commission (Mingtiandi).

  • They claim Evergrande fabricated sales higher by $78 billion.
  • The company was slapped with a fine of RMB4.2 billion (US$583 million).
    • That should help them pay back their loans: $329 billion.
  • PM: Note that most of the debt is owed to local Chinese investors.
    • But international investors are owed more than $20 billion.
    • The company is in liquidation.
    • Stay tuned.

Japan Interest Rates

The Bank of Japan finally lifted its key interest rate out of negative territory.

  • From a range of -0.1% to 0% they have raised rates a whopping 0.1% to a range of 0% to 0.1%.
  • It was the first time the BOJ increased the interest rate since 2007.
  • They will continue monetising the debt with Quantitative Easing i.e. buying Japanese Government bonds.
  • But they will stop buying Nikkei Stock ETFs.
    • PM: Now that they got the stock market back to the highs of 1989.
    • PM: This is classic policymakers focusing on the symptoms of GDP (final spending) and stock markets rather than the fundamentals driven by price discovery in an unhampered interest rate market.
      • This really took off in earnest with the launch of Abenomics in 2012.
    • I had posted the following table back in 2021 to show the cost of monetising the country’s debt and distorting interest rates.
    • Growth in Japan was twice that of the US before 1990.
    • Since then, the US is twice that of Japan.
    • US GDP per capita vs. that of Japan:
      • 1990: 1.4x
      • 2021: 1.7x
 Japan GDP/Capita30yr Growth RateUS GDP/Capita30yr Growth RateGDP Spread
1960$6,261 $19,135 $12,874
1990$28,4225.7%$39,3032.4%$10,881
2021$35,2780.7%$61,2081.5%$25,930
  • Debt to GDP for Japan (IMF)
    • 1990: 63%
    • 2022: 261%

Vive le Kamikazenomics!

Industry In China: Growing

According to the National Bureau of National Statistics China, for the first two months of the year:

  • Industrial production was up 7%.
    • Some of the big gainers:
      • Electric vehicle charging facilities: +42%
      • Electronic components: +42%
  • Property investment is still falling: -9%
  • Retail sales were up 5.5%.
  • Sales of new commercial buildings: Down 29.3%
  • Imports: +6.7%
  • Exports: +10.3%
  • Inflation:
    • Jan: -0.8%
    • Feb: +0.7%
  • Producer prices (industrial):
    • Jan: -2.5%
    • Feb: -2.7%

Disclaimer: Note that Paulitical Economy™ should not be considered as investment advice, and I have not verified all of the sources of information.  It is meant for general interest purposes only.  Please consult an advisor if you plan on putting any of your hard-earned capital to work during these turbulent times.

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