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Wed, 24th May 2017

Anirudh Sethi Report

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Archives of “money” Tag

US Student Debt Soars to $1.3 Trln, Hurting Household Purchasing Power

US student loans, having boomed in the past 8 years, surged to their all-time highest at an aggregated $1.3 trln, representing roughly 11 percent of total outstanding household debt in the US, with over 7 mln borrowers unable to serve their obligations.

The situation is significantly holding back the improvements in consumer sentiment, offsetting recent improvements in the labour market, and limiting the prospects of US economic growth.

With some 72 percent of the US GDP driven by consumer purchases, the mounting concerns over student loans, especially non-performing loans (NPLs), are becoming an increasingly prominent factor is assessing the prospects of any further economic acceleration. Particularly so, as the Federal Reserve is normalising the US monetary conditions with borrowing costs going up, the issuance of the debt and refinancing of existing loans is now more expensive, and the downside risks of the monetary policy are increasingly prominent in the projected dynamics of the broader GDP expansion.

According to the Federal Reserve Bank of New York, during the past 15 years, the burden of student loans in the US economy has increased from just 3.3 percent of overall household indebtedness in 2003 at $240.7 bln to the current $1.3 trln, or 10.6 percent of total household debt. About 44 mln Americans currently have a student loan to service, and about every sixth borrower has defaulted on their obligations.

Half Of Canadians Have $200 Or Less In Savings

Two months ago, when quoting the CEO of cell phone insurer Assurant, who appeared on Bloomberg TV to discuss business trends, one of his quotes caught our attention: “the reality is, half of Americans can’t afford to write a $500 check,” Colberg said. We decided to look into the CEO’s claim about the woeful state of US finances. What we found is that according to a recent Bankrate survey of 1,000 adults, 57% of Americans don’t have enough cash to cover a mere $500 unexpected expense. Turns out the CEO was right. And while that may appear dire, it is a slight improvement from 2016, when 63% of U.S. residents said they wouldn’t be able to handle such an expense.

The Bankrate survey findings echoed research published last year by the Federal Reserve, which found that 46% of respondents said they would be challenged to come up with even less, or $400, to cover an emergency expense, and would likely borrow or sell something to afford it. When the Fed asked what types of emergency expenses Americans had actually faced in the last year, more than one out of five cited a major unexpected medical expense. The average expense: $2,782, or almost seven times higher than the Fed’s hypothetical $400 surprise bill.

How does this stunning statistic compare to some other developed nations?

It turns out that the state of half of US finances, deplorable as it may be is positively shining, not to mention “twice as good”, when compared to the country’s neighbor to the north, where a recent Ipsos survey on behalf of accounting firm MNP, found that more than half of Canadians are living within $200 per month of not being able to pay all their bills or meet their debt obligations. Needless to say, if $500 in savings is bad, half that amount is outright bizarre.

China Reserves Jump Most In 3 Years to $ 3.03 Trillion

In all the drama surrounding the French elections, few noticed the PBOC’s announcement that China’s FX reserves rose for the third straight month in April, increasing by $20.45 billion to $3.03 trillion, more than the $11 billion expected and the single biggest monthly increase in three years going back to April 2014, on the back of a weaker dollar and increasingly more draconian capital controls on outflows.

Cited by the WSJ, some economists attributed April’s increase to a dollar that continued to decline in the past month especially after Trump said the U.S. currency “is getting too strong.” The value of other currencies in China’s reserve basket, including the euro, the British pound and Japan’s yen, similarly played a significant role in the rise, said Yan Ling, an economist with China Merchants Securities.

Besides USD softness (USD has weakened against the CFETS basket by over 2% year-to-date through April) and perhaps stronger RMB sentiment, the capital flow management measures introduced over the last several months have also contributed to the slowdown in outflows, Goldman speculated in a Sunday note. That could reverse, as there may be incremental relaxation of the capital account as the flow situation has improved and an overly tight capital account could hinder legitimate international trade and the authorities’ long-term RMB internationalization goals.

China greasing economy with $55bn in tax breaks

China’s State Council on Wednesday approved 380 billion yuan ($55.1 billion) in tax relief that will mainly favor farmers and small businesses in a move that is seen as both economic and political.

The second large-scale tax cut to follow last year’s comes as China’s economy is forecast to slow down in the latter half of 2017, during which the Communist Party will convene its 19th National Congress and reshuffle top leadership.

China will modify its value-added tax this July by removing the 13% bracket while retaining the 6%, 11% and 17% tiers. The 13% rate currently applies to farm products and natural gas, but they will move to the 11% category. Farmers as well as households that purchase rice and vegetables will likely benefit from this change.

For smaller companies, those that pay 300,000 yuan or less in annual taxable revenue qualify for preferential tax treatment. The ceiling will be lifted to 500,000 yuan. Furthermore, small businesses and startups will be allowed to deduct 75% of research and development costs, up from 50%. These tax breaks will remain in effect until the end of 2019.

The Chinese government enacted about 500 billion yuan worth of corporate tax cuts in 2016. Helped also by a surge in infrastructure spending, the real economy grew 6.9% during the January-March period this year, marking the second quarter of economic acceleration. However, the People’s Bank of China, the country’s central bank, has been gradually raising market interest rates in order to rein in the real estate bubble.

More Than 90% Of India ATMs Run Dry

Five months have passed since the demonetisation drive, but the people of India continue to face a shortage of cash in banks and ATMs. The Times of India reports that more than 90% of the ATMs in the northern region do not have cash, and in the southern states as many as 65% of ATMs have run dry.

 

Speaking to TOI, State Bank of India (SBI) deputy general manager Ajoy Kumar Pandit said the customers are losing confidence in them due to the crisis. “Nearly 70 per cent of our 648 ATMs in the three districts are out of cash. The rest will also become dry in the next few days as we do not have cash to refill the machines. We are helpless from our side,” he said.

WSJ on Yellen:”indicates era of extremely stimulative monetary policy is coming to an end”

The Wall Street Journal recap of Yellen’s speech and remarks earlier today

  • Ms. Yellen said the Fed was moving away from its efforts to revive a recession-scarred economy and focusing instead on maintaining the gains of the past few years
  • That will change the central bank’s policy-making stance, she said
  • Noting that Fed officials plan to continue gradually raising interest rates unless the economy begins to deteriorate
  • The Fed’s benchmark short-term interest rate will continue to move up to its long-term average, she said.
None of which comes a surprise, Fed communication efforts in past days have been on this message.

China’s top securities regulator vows to punish “iron roosters” with no dividend payout

China’s top securities regulator urged listed companies to reward investors with cash dividends, vowing to punish stingy “iron roosters.”

Liu Shiyu, Chairman of the China Securities Regulatory Commission (CSRC) also warned listed firms against raising money for blind investments, or designing complicated share structures that facilitate insider trading and other malpractices.

 “Paying cash dividends is a basic way to reward investors … and the ultimate source of a stock’s intrinsic value,” Liu said in a recent speech, a transcript of which was posted on CSRC’s website on Saturday.

CSRC will take “tough measures” against those “iron roosters” who haven’t plucked a single feature for many years, even though they have the ability to pay dividends, Liu said.

Liu, installed as head of China’s securities watchdog following the 2015 stock market crash, has made investor protection his priority, having stepped up a crackdown on market manipulation and tightened disclosure rules.

Comments from China meetings coming out from Ross/Tillerson/Mnuchin

No joint statement released from the White House

Comments from Tillerson”
  • Trump/Xi had frank,, candid open talks
  • Trump raised serious concerns about the impact of China’s industrial, cyber, agricultural policies on US jobs
  • Agreed to Increase cooperation to convince North Korea to curb nuclear program
  • Trump/Xi Shared view that North Korea nuclear advancement has reached serious stage
  • noted importance of adherence to international norms in south China in East China Sea’s
  • agreed to new format for US China talks
  • Xi invited Trump for a state visit at a future date
  • Understood the US rresponse  to Syria chemical attacks because of the deaths of children
Mnuchin comments:
  • Held first comprehensive economic dialogue with Chinese counterparts on Friday
  • The Treasury Department will address currency issue in regular report
Commerce Secretary Ross
  • Most significant result of US China talks was hundred day plan
  • given range of issues between US and China the pace may be ambitious, but there is growing rapport between the two countries
  • Objective of  100 day plan is to increase US exports to China and reduce trade deficit
  • China expressed an interest in reducing net trade balance  because of the impact it is having on money supply and inflation

WhatsApp plans to enter India digital payment services

Facebook’s WhatsApp messaging service plans to enter digital payments in India, where it will take on Alibaba Group Holding-backed digital wallet company Paytm that has added millions of customers following a government push to promote electronic payments.

Digital payments in India received a fillip after Prime Minister Narendra Modi last year recalled high-value notes of 500 rupees and 1,000 rupees that accounted for 86% of the currency in circulation. The move, aimed at curbing unaccounted wealth, triggered a cash shortage in Asia’s third-largest economy, prompting people to explore new digital cash options.

 Paytm, backed by China’s Alibaba Group, is consolidating its leadership in India with more than 200 million users. In 2015, Alibaba and its financial-services affiliate Zhejiang Ant Small & Micro Financial Services Group, invested over $500 million for a 40% stake in One97 Communications, the parent of Paytm. Zhejiang Ant is the parent of Alipay, China’s biggest mobile-payment service.

Paytm had signed up over five million new users within days after the currency ban in November.

Japanese retailers quickly embracing bitcoin payments

Image result for bitcoinTwo Japanese retailing groups soon will accept bitcoin payments, a move that is likely to promote wider use of the virtual currency among domestic consumers.

Electronics chain Bic Camera is teaming up with Tokyo-based bitFlyer, which runs the largest Japanese bitcoin exchange. This Friday, they will begin a trial run of bitFlyer’s bitcoin payment system at Bic Camera’s flagship shop in Tokyo’s Yurakucho district and at Bicqlo Bic Camera, the hybrid outlet with Uniqlo located in Shinjuku.

 Customers are allowed to pay up to 100,000 yen ($904) using the cryptocurrency, and they will also get reward points at the same rate as for cash payments. Bic Camera may introduce the payment system at other locations based on usage trends at the two Tokyo stores.

Recruit Lifestyle, the retail support arm of human resources conglomerate Recruit Holdings, is partnering with another Tokyo bitcoin exchange operator, Coincheck. The virtual currency will become a payment option at shops that have adopted AirRegi, the point-of-sale app developed by Recruit Lifestyle, by this summer.

By using tablets or other devices provided by the store and one’s own smartphone, the customer can deduct the amount on the bill from the designated bitcoin account. Coincheck will convert the bitcoins into yen and transfer the funds to the store.