Global central bank gluttony?

Is it behind the treasury rally?   RBS estimates that global demand for high quality bonds is $1.2 tn while "net" supply is only $600 bn.  Meanwhile, U.S. banks increased treasury holdings by 23% in the first quarter. So there’s lots of cash and a “net” shortage of bonds.  The word “net” is key, since the too meager supply is net of the 60%+ of all securities being issued in the world that are being purchased by central banks.  (FT Weekend, p 12)

They want to take you higher.

The U.K. is thinking of raising rates to avert inflation, whilst the ECB is planning to lower the deposit rate to a minus number to fight deflation at the same time.  Why is it that England, with much higher interest rates than Germany and an equally tight fiscal policy, is having more inflation while Germany is having less inflation?  (FT Weekend, p1)

Is an irreplaceable symbol of Chicago’s heritage at risk?

Walgreens, based in Illinois, owns 45% of Boots, the UK pharmacy.  It is considering exercising its option to acquire the balance.  That would allow it to move its official headquarters to the UK, where it would benefit from lower worldwide taxes.  Walgreens grew to a national chain during Prohibition, with sales driven by the high-quality "medicinal" whiskey it stocked under-the-counter to supply "alcoholics" holding prescriptions, which were as freely-available then as prescriptions for “medicinal” marijuana are in Massachusetts today.  Can there be a prouder symbol of Chicago’s past?

The Inscrutable East: Up? Down? Sideways?

The official Chinese manufacturing index rose from 50.4 in April to 50.8 in May.  To stimulate the economy, bank reserve requirements have been reduced.  Meanwhile, housing prices dropped from April to May, or so they say. China is still targeting 7.5% growth in 2014. Can they make it happen?  Doesn’t the market expect/fear worse? (FT Mon p4)

Spain's government proposed to lower the top corporate tax rate to 25%. Are trade wars becoming tax wars?

Even though Pres. Obama might not approve because of the subversive ideas it would give to US companies. . . Spain is planning to cut the top corporate tax rate from 30% to 25% to stimulate the economy. The government believe they must do this to be internationally competitive.  (FT, Mon p3)

The allies have our backs, just like in 1944.

This week’s D-Day celebrations on the beaches in France will, of course, include our then ally Russia, despite the anti-Russia sanctions about which the remaining allies are united.  But the FT senses some cracks in the alliance:  "European officials, however, suggest there is a difference of views about the nature of the separatists in eastern Ukraine, with the US tending to see unrest as being instigated by Moscow, while some in Europe believe the rebellion to be more organic."  Besides, Europe needs the gas and we don’t.

China and the Revenge of the Sith.

Robot Wars? Last year China bought 36,560 robots, up 60% from 2012, replacing Japan as the world’s biggest buyer of automatons. Japan bought 26,015 and the US, in third position, 23,679.  This was according to an FT article on page one on Monday. 

Problem solved bionically? I was reminded of the above today, when the FT (p6) discussed Japan’s declining workforce.  Last year Japan’s population declined by about 200,000 (0.17%), so we can estimate that the workforce dropped by 120,000.  But if the new robots work three shifts plus the weekends, a robot might be the equivalent of four human workers.  This means the Japan’s workforce was basically flat on a robot-adjusted basis, and soon it may be growing.