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In China the Government owns the Banks; the bankers do not own the Government. China’s stimulus plan is working better than in the US and the UK because the government is using the banks for public ends, rather than allowing the banks to use the government for private ends. In the USA, the banks are the most powerful lobby on Capitol Hill; they own the Government.

The USA is spending trillions of greenbacks to bail out its banking system, leaving its economy to languish, as China, now called a “miracle economy,” decoupled from the rest of the world, is maintaining a phenomenal 8% annual growth rate. That, by the way, is being questioned by lots of Pols, commentators, economists and other talking heads, as they ask how that growth is possible, when other countries relying heavily on exports have suffered major downturns and remain in the doldrums. Read more

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Japan’s gross domestic product (GDP) achieved the first growth in five quarters in the Q-2, indicating that the world’s second largest economy has climbed out of recession. According to a preliminary report released by the cabinet office Monday, the Japanese economy grew by an annualized 3.7% in real terms in the April-June period, the first rise since the Q-3 Y 2008 when Japan, along with the 15-nation Euro-zone, sank into its first recession in seven years as the global financial crisis took a heavy toll on the world’s second largest economy and curbed demand for its exports.. The expansion in GDP, which was lifted by consumer and government spending, came following a revised annualized 11.7% plunge in the previous quarter and a revised 13.1% dive in the October-December quarter of 2008. On a quarter-on-quarter basis, the economy rose 0.9% in the Q-2, said the office in a preliminary report. Meanwhile, consumer spending was up 0.8%quarter-on-quarter in real terms while corporate capital spending dipped 4.3 percent, according to the report. Public investment jumped 8.1% , pushed by the government’s fiscal stimulus packages to fight the recession, compared with a 9.5% fall in housing investment.

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HK shares rally for 5th month, up 3% on week. Both markets recorded another month of hefty gains in July, the seventh successive monthly gain for Shanghai and the fifth winning month for Hong Kong, fuelled by positive earnings momentum and analyst upgrades. In the absence of a major disappointment in US economic data due next week, or in corporate earnings that will continue to trickle in through August, analysts expect the stock markets to continue their upward trajectory. China’s 4 trillion yuan (US$585.5B ) stimulus package, unprecedented lending growth and stabilising economy have helped to propel a more than doubling of the Shanghai index from last October’s two-year low and fuelled a 43 % surge in Hong Kong shares

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The sharp decline in the US economy is ending and recovery will come about slowly according to a report released by the International Monetary Fund (IMF) yesterday.

In an annual report on the world’s largest economy, IMF stuck to its earlier forecasts that the US GDP will contract by 2.6% in 2009 and then rise by 0.8% in 2010.

Due to the large monetary and fiscal stimulus and wide range of measures to restore the financial stability, “the sharp fall in economic output seems to be ending, and confidence in financial stability has strengthened,” the IMF said in its report after the Article IV annual consultation with US officials. However, “financial strains are still elevated and the outlook remains for only a gradual recovery, with risks still tilted to the downside,” it said.

Also on Friday, the US Commerce Department reported that the US economy fell at a more subdued 1.0% pace in the Y 2009 Q-2, a strong signal that the worst recession since the Great Depression has eased, and is coming to a close.

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Personal income in the US surged in May thanks to an infusion of government stimulus funds, while consumers raised their spending modestly as confidence about the state of the economy continues to improve. Most of the monthly rise was the result of Federal benefit transfers and lower taxes. Americans, still facing rising job cuts and falling home prices have been saving most of the additional funds, lifting the savings rate to a 16 yr high in May. “Households are reverting to a more sustainable spending path vis-à-vis income that allows scope for paying down debt and adding to savings,” said Joshua Shapiro, chief US economist at MFR. Official figures showed last Friday that incomes jumped by 1.4% last month, or US$167.1B, beating economists’ expectations and doubling the previous month’s revised rise of 0.7 %. Personal consumption expenditure rose by 0.3% or US$25.1B last month, in line with estimates, and a rebound from April’s pull-back.

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The U.S. economy shrank in the Y 2008 Q-4 at its fastest rate since 1982 after a massive decline in inventories held by companies, according to official figures released on Friday.

Economists said that given bleak near-term prospects for consumption and investment, the US faced its worst economic downturn since the second world war, with even the US$787B stimulus plan signed by President Barack Obama earlier this month promising little immediate relief. “Finally the GDP data have caught up to the severity of the recession and, unfortunately, we expect the first quarter report to show similar weakness to the fourth quarter,” wrote an economist.

Updated data showed US gross domestic product contracting at an annualized rate of 6.2% in Y 2008 Q-4, below both the first estimate of a 3.8% c fall and economists’ predictions of a revision to a 5.4% decline. The biggest reason for the contraction was a revision to inventories, which are estimated to have fallen by US$19.9B rather than up by US $6.2B, shaving 1.1% points off the final figure.

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