Category: Economy

US already in ‘recession,’ extend tax cuts: Bill Clinton

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Former President Bill Clinton told CNBC Tuesday that the US economy already is in a recession and urged Congress to extend all the tax cuts due to expire at the end of the year.

In a taped interview aired on “Closing Bell,” the still-popular 42nd president called the current economic conditions a “recession”  and said overzealous Republican plans to cut the deficit threaten to plunge the country further into the debt abyss. (Clinton’s office released a statement after the interview).

“What I think we need to do is find some way to avoid the fiscal cliff, to avoid doing anything that would contract the economy now, and then deal with what’s necessary in the long term debt-reduction plans as soon as they can, which presumably would be after the election,” Clinton said.

“They will probably have to put everything off until early next year,” he added. “That’s probably the best thing to do right now. But the Republicans don’t want to do that unless he agrees to extend the tax cuts permanently, including for upper income people, and I don’t think the president should do that.”

However, Clinton did say that Congress would be best off agreeing, at least for the time being, to extend all the tax cuts that are set to expire at the end of the year, including the so-called Bush tax cuts named after Clinton’s successor, George W. Bush.

Those across-the-board cuts have been criticized by Democrats who say they were skewed toward upper-income earners.

To counter the cuts, President Obama proposed the Buffett Rule — which was ultimately defeated — that would have imposed a surtax on millionaires.

On tax questions in general, Clinton said it’s reasonable to expect top earners to pay more and he defended the current tax structure, which he said wouldn’t look so bad if the economy was doing better.

“They’re still pretty low, the government spending levels. But I think they look high because there’s a recession,” he said. “So the taxes look lower than they really would be if we had two and half or 3% growth and spending is higher than it would be if we had two and a half or 3% growth, because there are so many people getting food stamps, so many people getting unemployment, so many people on Medicaid.”

In the midst of a heated re-election campaign, Obama has faced a barrage of bad news lately, from anemic job growth and an increase in the unemployment rate  to weak factory and housing activity. First-quarter gross domestic growth  registered a meager 1.9%.

Like the current Oval Office resident, Clinton blamed much of the economic damage on the sovereign debt crisis  — “this European thing that’s having a bigger impact than people know” — as well as politics, saying, “The thing that cost jobs here has been the Congress’s policies.”

Politically, Clinton has found himself in a ticklish spot lately as reports have re-emerged about his sometimes ambivalent stance toward Obama. He recently praised Republican challenger Mitt Romney’s record in private equity at Bain Capital, another remark that amplified the notion that the two don’t always see eye-to-eye.

Clinton said Obama is “on stronger ground” when he challenges Romney’s record as governor of Massachusetts, not as a businessman at Bain.

“There’s a company not doing well, that’s failing, and you buy it and have to impose some economies there and cutbacks because you’re trying to turn it around so it can thrive in the economy. Whether you succeed or fail, that’s a good thing to do,” he said. “If you go in and buy a company and intentionally load it up with debt, loot its assets and the people lose their jobs and retirements…that’s a bad thing.”

“So to make a judgment on that, you have to know a lot of facts about every case,” Clinton added. “I just think we’d all be a lot better off if we talk about we have two people running for the president. What would they do?”

Clinton had an average approval rating of 55%during his two terms, compared to 49% for Obama, who currently is at 46%, according to Gallup. Clinton made no predictions about the election but he said it will be important for Obama to draw clear lines in order to win.

“The most important thing in this election is what will President Obama do and what will Gov. Romney do with the economy and how will they deal with people who disagree with them,” Clinton said. “Will they be divide and conquer, or would they be, ‘let’s bring everyone together’?”

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© 2012 CNBC.com

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Policy mis-steps leading India into stagflation trap: Pros

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India`s economy grew at its slowest pace in nine years over the first quarter of 2012 and inflation stayed stubbornly high at 7%, which say experts is pushing policymakers into a “stagflation” trap.

“Stagflation is going to persist for the next quarter or two as growth continues to remain sub-trend and inflation remains above-trend,” Taimur Baig, Chief Economist, Global Markets Research, Deutsche Bank told CNBC.

Baig forecasts inflation will accelerate to 7.5% and 7.8% in the second and third quarter driven largely by rising costs of importing fuel as a result of a weaker rupee.

On the growth side, the prospects for the economy, which grew at just 5.3% over January-March, are bleak with GDP expectations now under 7% for the current fiscal year that began April 1, as the government struggles to attract investments. For India, which expanded 8.4% in 2011, this is considered sub par.

The government has been baffling investors with several policy flip-flops. Last year the government cleared and then stalled foreign direct investment in multibrand retailing and early last month it postponed by a year the implementation of new rules cracking down on tax avoidance.

“With policy paralysis not likely to ease any time soon, India may have to settle for sub-par growth and elevated inflation over the next couple of years,” Leif Eskesen, Chief Economist for India and ASEAN at HSBC, said in a research note. He, however, does not think India`s economy is experiencing stagflation at the moment.

But slowing GDP growth coupled with rising prices, gives little room for fiscal or monetary maneuvering. Add to this a ballooning budget deficit, which limits the government`s ability to implement new measures to kick-start the economy.

The government is under pressure to put its fiscal house in order and cut, for example subsidies on fuel. Besides political pressure not to do so, such a move also fans inflation.

In 2011, India spent USD 15 billion on fuel subsidies and this figure is forecast to rise to USD 18 billion this year, according to Baig. Without subsidies, he estimates diesel and kerosene prices could rise by 30-35%, and add 3-4% to inflation.

“The fact is that when going gets tough, you have to pay the price for economic mismanagement, but it is getting harder to do that. Pressure is rising to cut subsidies and to kick start structural reforms, but it`s going to be difficult to do because of political pressure and public opposition,” Ramya Suryanarayanan, Economist, Group Research, DBS Bank, said.

She adds that tackling lower growth via interest rate cuts will not work to stimulate the economy right now, as such a move would result in further weakening the Indian rupee which has already fallen to record lows against the US dollar this year.

“Growth is weak and it`s going to stay weak. This trap that has emerged is because of slowing structural growth – a situation that can`t be dealt through rate cuts by the central bank,” said Suryanarayanan.

In April, the Reserve Bank of India (RBI) cut rates by an unexpectedly sharp 50 basis points as growth concerns took center stage.

Eskesen agrees that the central bank will have very limited room to ease monetary policy at its next meet on June 18. “The lingering inflation pressures suggest that monetary policy cannot be eased aggressively. Instead, traction on deep-rooted structural reforms is needed to significantly improve the inflation-growth trade-off,” he said.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Stiglitz: ECB can do ‘a lot more’ on crisis

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The European Central Bank has the ability to do more to tackle to the euro zone’s debt crisis than it has been doing, Nobel Laureate and Professor at Columbia University Joseph Stiglitz told CNBC’s “Worldwide Exchange” Friday.

“The ECB has the tools to do more than it has been doing. European governments have the first obligation but in the absence of that the ECB has the ability to do a lot more than it had been doing,” Stiglitz said.

Stiglitz won the Nobel prize for economics in 2001.

Europe’s debt crisis has been stoked to new crisis levels in recent weeks as an indecisive Greek election last month led to the need for new elections on June 17. Opinion polls have see-sawed between showing leads for the pro-bailout parties and those that have called for the bailout agreement to be ripped up.

Spain has become the latest problem child of the bloc as its banking system comes under renewed pressure and government borrowing costs near the crucial 7% level, prompting suggestions the country is on the verge of a bailout.

Stiglitz said it was difficult to ascertain the full impact that a Greek exit would have on the global economy.

“We don’t know the full impact of a Greek exit and we don’t know the full financial (picture). When Greece restructured its debt there was no trauma (but) this would be a bigger event and so it could have a more traumatic effect,” he said.

He added that he was concerned about high unemployment and the lack of sustained economic growth across the euro zone.

“I am worried about high unemployment and that it will be persistent. GDP has not yet recovered to 2008 levels and in my mind, will there be enough robust growth to get unemployment down? I don’t see that (happening) in Europe or the U.S. anytime soon,” he said.

Euro zone unemployment stands at a 17-year high of 11%.

© 2012 CNBC.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

This summer an ‘Eerie Echo’ of pre-Lehman: Zoellick

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The summer of 2012 is looking like an “eerie” echo of 2008 but euro zone sovereign debt has replaced mortgages as the risky asset class that markets are anxious about, said Robert Zoellick, President of the World Bank.

Banks are under stress and depositors have begun to “jog,” Zoellick wrote in an editorial in the Financial Times on Thursday.

“The European Central Bank, like the US Federal Reserve in 2008, has sought to reassure markets by providing generous liquidity, but collateral quality is declining as the better pickings on bank balance sheets are used up,” he added.

To prevent investors from fleeing in panic, Europe must be ready with more than liquidity injections to contain the consequences of a possible Greek exit. “If Greece leaves the eurozone, the contagion is impossible to predict, just as Lehman (Brothers` collapse) had unexpected consequences,” Zoellick said.

What is needed is a so-called “euro-sovereign” guarantee of bank deposits and other liabilities, as the guarantees of some national sovereigns are unlikely to be sufficient.

In the op-ed, Zoellick argues Europe needs to deploy euro zone bonds, recapitalize banks by using funds from the European Stability Mechanism (ESM) and provide medium-term funding assurance to countries such as Spain.

The creation of euro zone bonds has been a controversial subject with France`s new President Francois Hollande calling for the currency bloc to issue common bonds and Germany rejecting such a move on the grounds it will weaken fiscal discipline.

But Zoellick argues time is running out and euro zone leaders “may be nearing a `break the glass` moment: when one smashes the pane protecting the emergency fire alarm.”

If a crisis does occur, the European Central Bank may not have the ability to “respond fast, fully, and forcefully” because of differences on the bank`s board, Zoellick said.

“A Greek exit would trigger a hit to confidence in other sovereign euro assets. Euro zone leaders need to be ready. There will not be time for meetings of finance ministers to discuss the outlook and debate the politics of incrementalism. In panicked markets, investors flee to safe assets, sparking other flames.”

By CNBC`s Jean Chua.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asia can save world from ‘double dip’: Strategist

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian economies – including China – have enough firepower to pull the world out of recession if a global double-dip recession occurs, according to Anthony Chan, Asia sovereign strategist at AllianceBernstein.

Chan wrote in a blog post that Asian countries still have room to stimulate their economies should the global economy slump as it did during the 2008 financial crisis.

“On the monetary policy front, we think central banks in the region have room to cut interest rates and stimulate their economies, since real interest rates are high,” said Chan.

“Currently, real rates outside of China stand at around 0.5% to 1.2%, but we expect disinflationary pressures to continue, which would further increase the policy flexibility of countries across the region,” he said.

According to AllianceBernstein calculations, China`s one-year lending rate stands at 3.16% in real terms, with Indonesia`s real rate at 1.25% and Malaysia`s at 0.95%.

Chan said the region`s countries – in particular, China, Singapore and South Korea – have scope for fiscal as well as monetary stimulus.

“China`s budget deficit was only a modest 1percent of GDP in 2011, which leaves plenty of room to pursue the `proactive fiscal policy` referred to in recent policy statements,” he said.

“Given that China still has a long way to go before reaching a mature stage of economic development, we think there is plenty of room for the government to rev up demand by `fast tracking` new major investment projects if necessary,” he added.

Chan warned however that Asian countries do not have the same amount of fiscal and monetary firepower at their disposal as during the 2008 crisis.

“Most Asian economies are more highly leveraged than they were in 2008, with a significant rise in loan-to-GDP ratios in recent years,” he said. “The fiscal positions of most countries in Asia are much worse than they were just before the collapse of Lehman Brothers in 2008. Hong Kong and Singapore are the only countries in the region expected to enjoy budget surpluses in 2012.”

Marc Faber, the famously bearish economist and author of the Boom, Gloom and Doom newsletter, said on Friday that he is “100%” certain the world is heading for a double dip recession .

“I think we could have a global recession either in the fourth quarter or early 2013,” Faber told CNBC`s “Fast Money Halftime Report“.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Banks recapitalisation is a ‘Necessary Evil’: Strategist

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Recapitalizing insolvent European banks such as Bankia is a “necessary evil”, but some should still be allowed to fail, Sean Corrigan, chief investment strategist at Diapason Commodities Management, told CNBC.

Bankia, Spain`s fourth largest bank, requested a 19 billion euro (USD 24 billion) bailout from the Spanish government on Friday. The government is expected to recapitalize the troubled lender using Spanish sovereign bonds, which Bankia can then use as collateral in order to tap European Central Bank funds.

“I think the idea that we have to address bank insolvency is clearly the crux that should have been addressed years ago,” Corrigan told CNBC`s “Squawk Box Europe” on Monday.

“If this is the start of the process, good, but we have to have failures in it as well. Europe is grossly overbanked,” he said.

Corrigan added that recapitalizing Europe`s banking sector was vital to re-establish growth in the region.

“Four years after the crisis, we have finally realized some banks should fail, and a lot of them need rescuing. If we put the banking system back together on a properly capitalized basis, with failures included in that mix, then we can start the credit process, and the distribution of savings, and the formation of financial capital. Then we will get our growth in Europe,” he said.

Last week, the Greek central bank confirmed the country`s four largest banks will receive an 18 billion euro (USD 22.6 billion) government bailout, allowing them to re-access ECB funds.

For an alternative view on Bankia`s recap, see here

– By CNBC.com`s Katy Barnato

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Facebook ‘classic example of investor greed’: Expert

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Facebook`s dismal initial public opening was a product of greed and dangerous investing in “fad” Internet social networks, Vanguard CEO Jack Bogle told CNBC Tuesday.

As the Facebook IPO continues to get slammed in the open market, the famed buy-and-hold value investor and index fund advocate expressed little sympathy for the wave of negative headlines Facebook is enduring.

“This is a classic example of investor greed, including institutional greed and underwriter greed and company greed,” he said on CNBC`s “Street Signs” program. “So the message is, when all the parties to a transaction are greedy, this is the kind of outcome you can expect.”

Facebook debuted on the market Friday and priced at USD 38, at the top end of its expected range. But trading opened a half-hour later than scheduled because of technical glitches at the Nasdaq trading platform, and the momentum only got worse from there.

While the stock finished its first day slightly higher, it got crushed on Monday, losing about 11%, followed by another substantial loss Tuesday.

For Bogle, the slide in the much-hyped Facebook is typical of the perils investors face when trying to pick individual stocks.

“Nobody can predict their price performance, nobody can predict their future value,” he said. “While nobody can predict the future price of the total stock market, we can predict its future performance, which depends clearly and 100 percent on how the underlying American economy does, how corporations do in the long run.”

While acknowledging that US growth is likely to be slower than in the past, he said betting on the economy is still safer than putting faith in startups and IPOs.

“Stocks can do what they wish and to some extent the market can do what it wishes,” Bogle said. “But when you look back at the grand wave of IPOs, the new economy and Internet and information age back in the late `90s and early 2000s, it`s a fad. It`s in the price of the stock and people are looking for a free ride upward in the new world. Truth be told, the old world persists in making its reality felt.”

“I remain buttressed somewhat by Facebook and the other Internet and social network companies that are lined up out there,” he added. “Watch out. It`s a dangerous game.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Facebook’s stock may keep falling: ‘There’s no bottom’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Call it the Friday Facebook Fiasco – or a more colorful alliterative of your choice. Regardless, the chaotic opening of the much-hyped social network`s stock scared away investors on Monday-and may keep them away.

Talk also lingered over whether Facebook could monetize its 900-million-strong user base, as well as whether CEO Mark Zuckerberg really cared enough to make sure his shareholders are happy.

Overall, the twin worries of Facebook`s pricing combined with the shaky mechanics of its trading to create a pungent air of uncertainty around the company.

As a result, Facebook opened Monday below its USD 38 Friday open and moved sharply lower through the day.

“They should have delayed it,” says Dave Rovelli, managing director of US equity trading at Canaccord Genuity in New York. ” They shouldn`t have opened until 1 o`clock (Friday), until they fixed the glitch.”

The Nasdaq exchange, which houses many of the market`s biggest tech names, had trouble matching orders Friday morning and missed the expected 11 am Facebook kickoff.

Nevertheless, the stock made a quick move higher at the open, but then meandered through most of the session before finishing modestly higher at USD 38.23 on a powerful move from underwriter Morgan Stanley to defend the opening price.

Now, the stock faces nothing but questions as a market love affair quickly turned to estrangement. Underwriters were left powerless to support the price because the stock opened well below the USD 38 breakeven level, and rumors swirled that lawsuits would be forthcoming from those who didn`t get orders filled properly.

“All the buy-side institutions are shorting it. You can get a borrow on it and everyone`s leaning all over it. There`s no bottom,” Rovelli says. “The next catalyst is going to be earnings, which is three months away. So there`s no reason to jump in here. You`re catching a falling knife.”

In a previous CNBC.com interview, Rovelli had advised investors to stay away from the stock until the company had more visibility on how it would grow revenue.

Without more proof of growth capability, investors decided that perhaps the initial Facebook pricing range, with a low end of USD 28 a share, was more accurate than the final range.

“What we`re seeing here is the market is converging back to reality,” Daniel Ernst, principal at Hudson Square Research, said on CNBC`s “Squawk on the Street” program. “We liked it at the bottom of the first range. The lower 30s, high 20s, we`d be more interested…Right now we`re kind of sitting on the sidelines and watching it.”

For Ernst, the story of Facebook is that as market sentiment cools, trader mentality will focus back on the fundamentals of value and earnings power.

“No doubt this is a fantastic company – 53% operating margins, 901 millions users around the world – they can provide detailed targeting to advertisers,” he said. “I think this is going to reinvent digital advertising. I just don`t want to pay 70 times earnings for it. I`d rather pay 50, 40 times earnings for that. So when we see earnings grow, either they`ll grow into the multiple or the stock will pull back.”

Companies more reasonably priced compared to earnings and revenue, such as Amazon, Google and Apple, are much more enticing, he said.

For others, though, that specter of how trading went Friday coupled with other uncertainties to make the stock something to avoid for now.

“Unless you really want it in your portfolio I would wait for stability,” says Phil Silverman, managing partner at Kingsview Capital in New York. “It was a total fiasco on Friday. I was really surprised it went down. It just showed you that at this point there`s time to buy.”

Interestingly, the broader stock market managed to put up a strong gain despite Facebook tanking, though some continued to worry that the fortunes of the two were entwined.

“When you do see some of these bigger IPOs start to really make headlines, it tends to mark the top of a market move,” says Brian LaRose, analyst at United-ICAP in Jersey City, NJ “We feel that could very well be the case here. When you look at many of these equity indexes, we feel we`re in a peaking mode.”

If nothing else, the problems with Facebook – after all the hype and expectations that the stock would soar and perhaps end the market`s May selloff – could be further detriment to the already-battered sentiments of average investors.

“It leaves a bad taste in everyone`s mouth,” Canaccord`s Rovelli says. `We`re trying to get the retail investor back on board, and everyone who bought it is getting creamed.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Jamie Dimon: Trading losses are not life threatening

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Although JPMorgan Chase suffered a trading loss of at least USD 2 billion due to a failed hedging strategy, it will not be life threatening to the bank, CEO Jamie Dimon said in an interview aired Sunday.

“This is a stupid thing that we should never have done but we`re still going to earn a lot of money this quarter so it isn`t like the company is jeopardized,” he said in an interview with NBC`s “Meet with Press.” “We hurt ourselves and our credibility, yes – and that you`ve got to fully expect and pay the price for that.”

In response to JPMorgan`s trading loss, the Securities and Exchange Commission has begun an investigation into the bank`s trades. Dimon said the company is also doing its own internal investigation.

“So we`ve had audit, legal, risk, compliance, all of our best people looking at all of that,” Dimon responded. “We know we were sloppy. We know we were stupid. We know there was bad judgment. We don`t know if any of that is true yet. But of course regulators should look at something like this. That`s their job.”

“We intend to fix it and learn from it and be a better company when it`s done,” he added.

In the company`s earnings call just a few weeks ago, Dimon dismissed reports that a trader had amassed a large position that prompted hedge funds to bet against the “London Whale” as a “complete tempest in a teapot.”

“So first of all, I was dead wrong when I said that,” Dimon said about his previous remarks. “I obviously didn`t know because I never would have said that. And one of the reasons we came public was because we wanted to say, `You know what, we told you something that was completely wrong a mere four weeks ago.`”

In hindsight, Dimon said the bank took “far too much risk” in how it managed its securities portfolio.

“The strategy we had was badly vetted,” he added. “It was badly monitored. It should never have happened.”

Although Dimon said he does not agree with all of the provisions within Dodd-Frank , he does support higher capital and liquidity requirements.

“Our biggest exposure – you know what they are? Loans. You`re not going to make (it) risk-free. But we agree with a lot of the standards that are going to make it better,” he said.

Moving forward, Dimon acknowledged that the magnitude of JPMorgan`s trading loss could provide more ammunition for regulators. He added that this is an unfortunate and inopportune time for JPMorgan to have experienced such a mistake.

“This is a mistake,” he said. “We`re going to pay a price for it. I understand it. We deserve a lot of the criticism we`re getting.”

Indeed, some critics have already seized the moment. Rep. Barney Frank, D-Mass., told ABC`s “This Week” that he hopes the final version of the Volcker rule will prevent the type of trading that led to the massive loss at JPMorgan.

A piece of the financial regulation known as the Volcker rule would prevent banks from certain kinds of trading for their own profit. Dimon has said the trading involved in the USD 2 billion loss would not have fallen under the rule.

The USD 2 billion loss came in the past six weeks. Dimon has said it came from trading in so-called credit derivatives and was designed to hedge against financial risk, not to make a profit for the bank.

Sen. Carl Levin, D-Mich., said the banks will lose their fight to weaken the rule.

“This was not a risk-reducing activity that they engaged in. This increased their risk,” Levin told NBC.

“So we`ve got to be very, very careful that the regulators here are not undermined by this huge effort to weaken the rule by putting in a huge loophole” that includes the trading involved in the JPMorgan loss, he said.

Dimon`s appearance on the show was retaped after news of the trading loss broke. In the original interview, Dimon discussed the topic “is America better off than four years ago?”

Addressing public anger toward Wall Street, Dimon said he wants a more equitable society and does not mind paying higher taxes. But he said attacking all of business is “very counterproductive.”

Dimon is likely to face further questions about the trading incident on Tuesday at the company`s shareholder meeting.

-AP, Reuters contributed to this report.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Inflation puts China’s new consumption story at risk

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Overall inflation may have moderated in April, but food prices are still high in China, which could dampen spending and put the country’s new consumption-led growth plan at risk, experts tell CNBC.

China`s annual consumer inflation eased to 3.4% last month from 3.6% in March but food prices were 7% higher from a year earlier.

“The risk is that food prices are high (and) they could go higher. That takes a real bite out of real consumption. You are left asking what are the genuine growth drivers here?” Ben Simpfendorfer, Managing Director, Silk Road Associates, said on CNBC Asia`s “The Call“.

As rising food prices eat into consumer spending, China will find it more difficult to ramp up household consumption, which accounts for about 34 percent of China`s GDP, according to Simpfendorfer.

China has been trying to rebalance its economy to become more dependent on domestic consumption rather than exports. But rising costs, especially of food that makes up over 30% of Chinese household expenses, according to the United Nations Food and Agriculture Organization, could scuttle these plans.

Tomo Kinoshita, Chief Economist Asia ex Japan at Nomura International, who forecasts inflation will rise above the government target of 4 percent by the end of the year, adds that the price rise won`t be limited to food, but will be seen across the board for consumer goods.

“I think this is because of the rising wages. (Rising wages) will have a fundamental impact on non-food prices. So, it`s not only food prices, it`s also non-food prices picking up,” Kinoshita said.

Twenty one Chinese provinces, autonomous regions and municipalities raised minimum monthly wages by nearly 22% last year, according to state media.

While wage hikes can help soften the impact of rising prices, Simpfendorfer says real inflation figures are much higher and the CPI (consumer price index) data released by the government are downplaying the price pressures building in China.

“The actual inflation numbers are likely much higher (than official government figures). We have been touring some third-tier cities recently like Shouguang, when you talk to locals they say (inflation) figures of around 10% are certainly reasonable,” he said.

Evidence of a slowdown in spending is reflected in recent retail sales, which grew just 15.2% in March and 14.7% in January-February, compared to an 18.1% year-on-year increase in December.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow