Big Lychee, Various SectorsToday, 1:30 PM
It’s not as if 25 basis points is going to make a detectable difference to anything in reality, but Janet ‘accommodative’ Yellen just has todrag this out for at least a few months more.Still time for Hong Kong property developers to rope a few more suckers in…
Yes, you still have to sleep on the sofa until 2018.
Zero interest rates are supposed to encourage borrowing, and thus help the world recover from the financial crisis of 2008, which itself was caused by overly low interest rates and too much borrowing. The alternative is to instill financial rectitude by making borrowing painful – a system that served humanity well for thousands of years but seems just too much like hard work in today’s world.
Unusual economic events make for pretty strange charts. Here is a fairly normal one, showing how borrowing increased in three Asian countries as they developed over the years. It’s an easy graph, with the y axis showing credit as a percentage of GDP and the x axis showing time…
This is a weirder one. It shows the same thing but over the course of rises and falls in GDP per capita. It does not show time in the form of years, but you can spot events as lines go backwards or loop round. The Japan line’s reversals in direction show economic contractions that took place in (I think) the mid-70s, the late 90s, early 2000s and in the last few years, when the figure falls from around US$38,000 to US$35,000. The Korean line does a neat loop, which would have been the country’s sharp contraction around 2009, since when per-capita GDP has gone from approx. US$14,000 to over US$20,000…
And yes, China has reached roughly similar levels of credit-to-GDP before barely hitting per-capita GDP of US$5,000. I declare the weekend open with the comforting hope that it probably doesn’t matter and will surely sort itself out.
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