| Official Denials Run Rampant in India; "No Question" of Economic Crisis; Rupee Plunges to Record Low; Gold Coin Imports Banned Posted: 18 Aug 2013 09:59 PM PDT When news came last week that India tightened capital controls and banned gold imports, I pinged Pater Tenebrarum at Acting Man with a pair of comments. - Looks like India is about ready to blow up
- Looks good for gold
He agreed on both counts. "No Question" of Economic Crisis On Saturday came an "official denial" in an amusing way. Please consider "No Question" of India Economic Crisis. There is "no question" of India going back to an economic crisis experienced in 1991, as its rupee currency is now linked to the market and foreign exchange reserves are adequate, Prime Minister Manmohan Singh said on Saturday.
"There is no question of going back to 1991," Singh said in a Press Trust of India report published by the Economic Times newspaper on its website, making reference to a balance of payments crisis the country suffered that year.
"At that time foreign exchange in India was a fixed rate. Now it is linked to market. We only correct the volatility of the rupee."
The news agency report said Singh acknowledged India's ballooning current account deficit, which he blamed on large imports of gold as a contributing factor.
"We seem to be investing a lot in unproductive assets," Singh said.
India is trying to curb its citizens' apparently insatiable demand for gold, through measures such as hiking import duties, banning the import of coins and medallions and making domestic buyers pay cash.
The government wants to hold bullion imports this year to "well below" last year's figure of 845 metric tons. Complete Agreement I agree there is "No Question" of Economic Crisis. When a country implements capital controls and bans gold imports, the country is clearly in a state of economic crisis, no question about it. There is one difference between 1991 and now, because the rupee is no longer pegged. This means that instead of attempting to defend a rate with interest rates hikes or gold outflows, India " only" has to "correct the volatility of the rupee". Only? That's all? So why doesn't India do it? Don't Worry - Capital Controls are Not Capital Controls Last Wednesday the Reserve Bank of India denied capital controls were capital controls with promises stable policy environment. The finance ministry has said it will take all measures to provide a stable policy environment to stem the volatility in rupee and clarified that measures announced by the Reserve Bank of India (RBI) on Wednesday should not be seen as capital controls.
"There is no question of us putting any restriction on outflows... There is no control of outflows of dividends, profits, royalties, or on any kind of commercial outflows which happen in the normal course...," Department of Economic Affairs Secretary Arvind Mayaram told reporters on Friday. Official Denials Run Rampant in India The denial is rather amusing given "The RBI announced lowering of the limit on outward remittances by resident Indians to 75,000 dollars from 200,000 dollars a year and reduced the overseas investment limit for domestic companies under the automatic route to 100% of net worth from 400% of net worth earlier." Here is another humorous statement ""Gold, silver, platinum are what we believe as non-essentials. We have put curbs on that. I don't think we need any more curbs," he said. Another finance ministry official said the measures taken by the RBI cannot be termed as capital controls as they were aimed at ensuring prudent borrowings by corporates." Don't Worry, It's Not Capital Controls ... - If the measures are aimed at "prudent borrowing" (as determined by the state of course)
- If the restrictions limit outward remittances on individuals to $75,000 from $200,000
- If the restrictions the overseas investment limit for corporations
- If it pertains to gold, silver, and platinum
Anything else that's not capital controls? Not yet, but I expect more "non-capital controls" to be implemented next week. Food Inflation On Wednesday, the Wall Street Journal reported India Inflation Accelerates in July. India's inflation moved out of the central bank's comfort zone in July, as food prices rose and a weak local currency increased the cost of imports.
The wholesale price index, India's main inflation gauge, rose 5.79% from a year earlier, compared with 4.86% in June and at its fastest pace since February, data from the Ministry of Commerce and Industry showed Wednesday. That exceeded the median estimate of 5.00% in a poll of 13 economists. According to the Reserve Bank of India, inflation above 5.00% hurts the economy's growth prospects.
The latest data will increase the pressure on the central bank which is caught between rising prices and a slowing economy, and pose policy challenges to Raghuram Rajan, who takes over as central bank governor in early September. Though the wholesale inflation has eased from around 10% a couple of years ago, inflation at the retail level is still near double digits.
Food prices increased 11.91% from a year earlier in the past month, compared with 9.74% in June. Vegetable prices rose a staggering 46.59% in July, after a 16.47% increase in June. Onion Prices Up 144% Onions, a primary staple in the India diet are up a mere 144% according to Live Mint. The latest wholesale price index (WPI) numbers released on Wednesday show that onion prices rose 144% in July over the year-ago period, after a similar increase in the previous month. Since January, onion price levels have been nearly double what they were a year ago.
The persistent increase seems to be finally ringing alarm bells, with state governments across the country fighting to bring down prices. Higher onion prices have not only added to high food price inflation, but also rattled governments over the years, for example contributing to the defeat of the Bharatiya Janata Party (BJP) in state elections in Delhi in 1998. Hence the alarm! Enormous Property Bubble I have commented several times on India's property bubble. For example, please consider May 10, 2013: Huge Bubble in India Home Prices Ready to Burst August 1, 2013: India Housing Bubble Still Expanding Explaining the bubble is easy enough. Inflation is rampant and investors are willing to chase assets rather than hold on to declining Rupees. Rupee Hits Record Low of 62/Dollar Reuters reports Rupee hits record low of 62/dollar, foreign investors baulk. Finance minister Chidambaram tried to talk up the rupee on Friday after it plumbed another record low on concerns the Reserve Bank of India's (RBI) latest measures to defend the currency could be a step towards outright capital controls.
Traders said the RBI was forced to step in to prop up the rupee as measures from the central bank late on Wednesday restricting how much Indian citizens and companies can invest abroad were seen as yet another roll of the dice that is undermining investor confidence.
Concerns that policymakers were losing control over the currency spread to the stock market, which dropped 4 percent, its biggest one-day decline in nearly two years.
Indian policymakers have cobbled together a slew of steps over the past month in a bid to halt the rupee's slide, including the central bank's extraordinary steps on July 15 to drain cash from the system and raise short-term interest rates in an economy already growing at a decade low.
Yet none of the steps or the rhetoric so far have convinced investors that India can attract overseas investments, which is seen as essential in narrowing a record high current account deficit that is the biggest source of the rupee weakness. Rupee Plunges 40% in Two Years  The above chart explains the nature of the crisis: Rampant credit and monetary growth that has fueled inflation, capital flight, and a desire to hold gold. Currency Stress Hits India On June 24, I wrote Currency Stress Hits India: Rupee Near Record Low, Emerging Nations Face Capital Flight; Global Currency Crisis Awaits. Here is the pertinent snip. Defending the Rupee
Just like Brazil defending the real, India now feels compelled to defend the rupee. Good luck with that idea if capital flight takes off in a major way (and I suspect it will).
India does have currency reserves, but those can vanish in a hurry if things get out of hand. And if India does use currency reserves to defend the rupee, I rather doubt the India bond markets will take all that kindly to it.
Thus defending the rupee against further declines is easier said than done if the markets have indeed soured on the country, and that is precisely how it looks now.
Global Currency Crisis Awaits
A global currency crisis awaits. I do not know what country triggers first. It could easily be Japan, China, Brazil, India, Australia, Canada, the UK, or any of many countries in the eurozone (as well as numerous countries not on anyone's radar).
This sad state of affairs is courtesy of mad central bank monetary policies coupled with inane can-kicking fiscal policies everywhere you look. Just Your Imagination But hey, don't worry. There is " No Question" of economic crisis, not in India, nor anywhere else. It's all a figment of your imagination. So move along, and whatever you do, don't buy gold. To help prevent its citizens from doing such a foolish thing, India banned gold coin imports. What country is next to ban gold imports? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| 3D-Printing Spare Human Parts; Ears and Jaws Already, Livers Coming Up ; Need an Organ? Just Print It Posted: 18 Aug 2013 06:58 PM PDT Science marches on at a blistering pace. The star-trek "replicator" that seemed preposterously far-fetched is now here. For example: Accidentally cut your ear off? Just 3D print a new one 
This week, researchers at Hangzhou Dianzi University in China unveiled their Regenovo 3D printer. Unlike more familiar 3D printers, which work with plastic or metal dust, Regenovo prints living tissue – such as these little ears.
The Hangzhou team aren't the only ones 3D-printing spare parts for people. Earlier this year, a team at Cornell University in Ithaca, New York, also demonstrated an ear printer, and Organovo in San Diego, California, are on the way to building fresh human livers
3D Printer Provides Woman with a Brand New Jaw Last year, New Scientist reported 3D Printer Provides Woman with a Brand New Jaw An 83-year-old Belgian woman is able to chew, speak and breathe normally again after a machine printed her a new jawbone. Made from a fine titanium powder sculpted by a precision laser beam, her replacement jaw has proven as functional as her own used to be before a potent infection, called osteomyelitis, all but destroyed it.
The medics behind the feat say it is a first. "This is a world premiere, the first time a patient‐specific implant has replaced the entire lower jaw," says Jules Poukens, the researcher who led the operation at Biomed, the biomedical research department of the University of Hasselt, in Belgium. "It's a cautious, but firm step."
In this operation, a 3D printed titanium scaffold was steeped in stem cells and allowed to grow biocompatible tissue inside the abdomen of the recipient. Then, in 2009, researchers reported successfully printing copies of whole thumb bones - opening the way for the replacement of smashed digits using information from MRI scans.
By using an MRI scan of their patient's ailing jawbone to get the shape right, they fed it to a laser sintering 3D printer which fused tiny titanium particles layer by layer until the shape of her jawbone was recreated. It was then coated in a biocompatible ceramic layer. No detail was spared: it even had dimples and cavities that promoted muscle attachment, and sleeves that allowed mandibular nerves to pass through - plus support structures for dental implants the patient might need in future.
The team were astonished at the success of the four-hour jaw implant operation, which took place in June 2011 but which has only just been revealed. Need an Organ? Just Print It Please consider Scientists 3-D Print With Human Embryonic Stem Cells 3-D printers can produce gun parts, aircraft wings, food and a lot more, but this new 3-D printed product may be the craziest thing yet: human embryonic stem cells.
Using stem cells as the "ink" in a 3-D printer, researchers in Scotland hope to eventually build 3-D printed organs and tissues. A team at Heriot-Watt University used a specially designed valve-based technique to deposit whole, live cells onto a surface in a specific pattern.
The cells were floating in a "bio-ink," to use the terminology of the researchers who developed this technique. They were able to squeeze out tiny droplets, containing five cells or fewer per droplet, in a variety of shapes and sizes. To produce clumps of cells, the team printed out cells first and then overlaid those with cell-free bio-ink, resulting in larger droplets or spheroids of cells. The cells would group together inside these spheroids. Spheroid size is key, because stem cells need certain conditions to work properly. This is why very precisely controlled 3-D printing could be so valuable for stem cell research.
After being squeezed out of a thin valve, the cells were still alive and viable, and able to transform into any other cell in the body, the researchers say. It's the first time anyone has printed human embyronic stem cells, said lead researcher Will Wenmiao Shu, a professor at Heriot-Watt. The words fascinating and remarkable do not remotely describe this technology. Unbelievable comes close, yet here we are. I cannot imagine advancements in the next 20 years let alone 100 years from now. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Egyptian Stocks Sink, CDS Show Egypt in Top-10 Riskiest Countries; EU Ponders Suspending Aid; McCain, Rand Paul Issue Statement; Civil War? Posted: 18 Aug 2013 11:18 AM PDT The violence in Egypt following the military overthrow of former president Mohamed Morsi continues to escalate. Over 800 are dead according to official reports, thousands dead according to other reports. The stock market, bond market and credit markets have all responded. Credit Default Swaps (CDS) soared to 810, placing Egypt in the top-10 of countries likely to default on sovereign bonds. Please consider Egyptian Stocks Fall Most Since June as Violence Sparks Protests Egyptian shares fell the most in two months as Islamists called for more protests following a government crackdown that has left at least 800 people dead. Borrowing costs rose for the first time in seven weeks at an auction today.
The benchmark EGX 30 Index slumped 3.9 percent, the most since June 12, to 5,334.55 at the 1:30 p.m. close in Cairo.
Stocks slid as concerns of an escalation of violence grew following calls by supporters of former Islamist President Mohamed Mursi to continue demonstrations demanding his reinstatement. At least 173 people died in weekend clashes that followed the violent breakup of pro-Mursi protest camps on Aug. 14. The stock market closed Aug. 15 in the first unscheduled shutdown since January 2011, when it suspended trading for almost two months.
Yields Rise
Egypt sold 5.5 billion pounds at an auction of treasury bills today, with the yield on three-month notes rising 18 basis points from last week to 11.44 percent, according to central bank data on Bloomberg. The yield on nine-month bills advanced three basis points to 12.41 percent. Yields on both maturities had plunged 311 and 260 basis points, respectively, since the military deposed Mursi July 3. A 6.5 billion-pound auction, canceled Aug. 15 amid the unrest, will be held tomorrow, according to central bank data on Bloomberg.
Five-year credit default swaps, contracts which insure the country's debt against default, climbed to 810 basis points, according to CMA data, ranking Egypt among the 10-riskiest credits in the world. EU Considers Suspension of €5bn in Aid The Financial Times reports EU to consider suspension of €5bn in Aid to Egypt Brussels said it will "urgently review" relations with Egypt following an escalation in violence over the past week that has left EU leaders increasingly worried about the future of peace and stability in the Arab world.
EU officials said that the review was likely to recommend a suspension of various forms of aid and loans in total worth €5bn, which had been earmarked to help Egypt in its transition towards democracy following the popular revolution that ended the military regime of Hosni Mubarak two years ago. Suspension would require the backing of EU member states.
The EU together with its 28 member states in November promised Egypt a total of €5bn in grants and loans for a series of initiatives and projects on the condition that democratic reforms were implemented. There was no timescale for disbursement of the funds.
EU officials said that it was too early to identify exactly which parts of the EU-Egypt relationship would be affected by the review but they added that the blocking of funds was "very much on the table". McCain, Lindsey Graham Finally Stand with Rand on Egypt Aid In the US, Breitbart reports McCain, Lindsey Graham Finally Stand with Rand on Egypt Aid Sens. John McCain (R-AZ) and Lindsey Graham (R-SC) have finally come around to joining Sen. Rand Paul (R-KY) in believing that the U.S. should cut off aid to Egypt amid the deteriorating conditions in that country.
In a joint Friday afternoon statement, McCain and Graham called for the $1.5 billion of annual U.S. aid to Egypt to be cut off until conditions improve there.
"The massacre of civilians this week in Egypt has brought our longstanding relationship with that country to a fork in the road," McCain and Graham said. "The interim civilian government and security forces – backed up, unfortunately, by the military – are taking Egypt down a dark path, one that the United States cannot and should not travel with them."
Both Graham and McCain opposed an amendment Paul offered in late July that would have redirected the $1.5 billion per year the U.S. spends on Egypt to help rebuilding the interior of the United States. "All I can see is the billions of American tax dollars that he chooses to send overseas," Paul said on the Senate floor during that battle, according to Politico. "The president sends billions of dollars to Egypt in the form of advanced fighter planes and tanks while Detroit crumbles.
"In our hour of need in our country, why are you sending money to people that hate us?" Paul added.
When McCain opposed Paul's amendment cutting off aid to Egypt, he argued that such a move would hurt Israel. "This is a question of whether the senator from Kentucky knows what's better for Israel, or if Israel knows what's better for Israel," McCain said.
Graham made the same argument. "I have a letter here from AIPAC [American Israel Public Affairs Committee] I asked them to comment," Graham said, according to Foreign Policy magazine. Graham then cited the AIPAC letter: "We do not support cutting off all assistance to Egypt at this time." Clearly Rand Paul had this correct from the start. Civil War Possibilities Pater Tenebrarun at the Acting Man blog comments on the chaos, asking Could a Civil War Break Out? As most of our readers know, we have followed the events in Egypt off and on ever since the so-called 'Arab Spring' led to the deposition of former strongman Hosni Mubarak.
Here is a list of the most recent articles, which have followed the brief stint of Mohammed Morsi as president.
Initially we pointed out that the 'new boss was the same as the old one'. He had simply adopted the state's apparatus of coercion for his own purposes. We then pointed out that he had failed in the most important task of his presidency: namely that of improving the economy. It is very difficult to do so, given the vested interests in Egypt. It is for instance estimated, that the army controls roughly 40% of the economy. Thus any reform attempt that may result in reducing the army's influence on economic life is probably doomed from the outset. Our friend Raj reports regularly from Egypt, and he too stated very early on that unless Morsi managed to right the economy, he was going to be doomed.
Let us not forget, it was probably mainly a surge in food prices that ultimately led to the downfall of Mubarak. What Egypt needs more urgently than anything else is free market capitalism.
Following the bloody confrontation between the army and the supporters of Mohammed Morsi – who, it must be pointed out once again, won the election fair and square and was deposed in a coup – one must fear that the chaos will worsen and could eventually morph into a civil war type situation. In that case, we would expect the military to install a junta and attempt to rule the country under emergency regulations.
In the 'Egyptian street' people are convinced that Morsi was only deposed after the US secretly gave its placet to the coup, and very likely this interpretation is correct. After all, the Egyptian military relies heavily on US aid, therefore it probably wouldn't take such a step without first getting the nod from the puppet masters holding the purse strings.
Mubarak's reign has shown that it is in principle possible to oppress the population of Egypt for a long time. The army is no doubt counting on its superior firepower to enable it to do the same thing again. It has already arrested the most important leaders of the Brotherhood, thereby 'decapitating' its main enemy.
The main problem is actually not that the Brotherhood insists on the return of the legitimately elected president Morsi, the main problem is that many people have nothing left to lose due to the miserable economic situation. Moreover, like many other Arab states, Egypt's demographics are such that there is a very large contingent of young people. Young people are by nature less likely to shirk confrontation, they are more hot-headed and less risk-averse than older people. Many are also jobless and see no future for themselves in today's Egypt. It may therefore not be so easy to suppress the revolt and the probability of a civil war breaking out cannot be dismissed out of hand. Egyptian Pound  Civil War Has Started It appears to me that a civil war has already started. Regardless, the pertinent question is "How quickly can the military suppress the violence?" I do not know the answer to that. However, one can watch the stock market, interest rates, credit default swaps, and the Egyptian pound to survey the progress. The currency has stabilized for now, but indicators in aggregate are not so promising. Initially, yields fell following the overthrow of Morsi. Now, along with CDS, they are on the rise. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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