Adair Turner writes:  Financial markets were surprised by the Bank of Japan’s recent introduction of negative interest rates on some commercial bank reserves. They shouldn’t have been. The BOJ clearly needed to take some new policy action to achieve its target of 2% inflation. But neither negative interest rates nor further expansion of the BOJ’s already huge program of quantitative easing (QE) will be sufficient to offset the strong deflationary forces that Japan now faces.

In 2013 the BOJ predicted that its QE operations would deliver 2% inflation within two years. But in 2015, core inflation (excluding volatile items such as food) was only 0.5%. With consumer spending and average earnings falling in December, the 2% target increasingly looks out of reach.

The unanticipated severity of China’s downturn is the latest factor upsetting the BOJ’s forecasts. But that slowdown is the predictable (and predicted) consequence of debt dynamics with roots going back to 2008.

Excessive private credit growth in the advanced economies before 2008 left many companies and households overleveraged, and their attempted deleveraging after the global financial crisis erupted that year threatened Chinese exports, employment, and growth. To offset that danger, China’s rulers unleashed an enormous credit-fueled investment boom, pushing the debt/GDP ratio from around 130% to more than 230%, and the investment rate from 41% of GDP to 47%. This in turn drove a global commodity boom, and strong demand for capital-goods imports from countries such as South Korea, Japan, and Germany.

But the inevitable consequence within China was wasteful construction investment and enormous overcapacity in heavy industrial sectors such as steel, cement, and glass. So even though service-sector expansion supports strong employment growth (with 13.1 million new urban jobs created in 2015), the Chinese industrial sector is in the midst of a hard landing.

Indeed, official survey results suggest that manufacturing has contracted for six months in a row. This, in turn, has reduced demand for commodities, driving countries such as Russia and Brazil into recession, and posing a major threat to African growth. Lower industrial imports are having a major impact on many Asian economies as well. South Korea’s exports fell 18% year on year in January, and Japan’s fell 8% in December.

In the eurozone, annual inflation is running at 0.2% – still far below the European Central Bank’s target, and German exports to China are down 4%. As a result, at its March meeting, the ECB’s Governing Council may also consider moving interest rates further into negative territory, or increasing the scale of its QE program.

But it is increasingly clear that ultra-low short and long-term interest rates are not boosting nominal demand.

The BOJ’s announcement of a negative interest rate certainly did produce a currency depreciation. But a lower yen would help Japanese exporters only if China, the eurozone, and South Korea – all themselves struggling with deflationary pressures – do not match Japan’s rate cuts.

At the global level, currency depreciation is a zero-sum game – we cannot escape a global debt overhang by depreciating against other planets.

Depressed equity markets and falling bond yields worldwide in January 2016 thus illustrate the global nature of the problem we face. Demand is still depressed by the overhang of debt accumulated before 2008. Indeed, this pre-2008 debt has not gone away; it has simply been shifted between sectors and countries.

Total global debt (public and private combined) has increased from around 180% to more than 210% of world GDP. Faced with this reality, markets are increasingly concerned that governments and central banks are running out of ammunition to offset global deflation, with the only tools available those that simply redistribute demand among countries.

But the fact is that central banks and governments together never run out of policy ammunition to offset deflation, because they can always finance tax cuts or increase public expenditure with printed money. This is precisely what the Japanese authorities should do now, permanently writing off some of the BOJ’s huge holdings of Japanese government bonds and canceling the planned sales-tax increase which, if it goes ahead in April 2017, will further depress Japanese growth and inflation.

There are no credible scenarios in which Japanese government debt can ever be repaid in the normal sense of the word “repay”: and none in which the bulk of the BOJ’s holdings of Japanese government bonds will ever be sold back to the private sector. The sooner that reality is admitted, the sooner Japan will have some chance of meeting its inflation targets and stimulating total demand, rather than seeking to shift it away from other countries.

Nouriel Roubini writes:  Since the beginning of the year, the world economy has faced a new bout of severe financial market volatility, marked by sharply falling prices for equities and other risky assets. A variety of factors are at work: concerns about a hard landing for the Chinese economy; worries that growth in the United States is faltering at a time when the Fed has begun raising interest rates; fears of escalating Saudi-Iranian conflict; and signs – most notably plummeting oil and commodity prices – of severe weakness in global demand.

And there’s more. The fall in oil prices – together with market illiquidity, the rise in the leverage of US energy firms and that of energy firms and fragile sovereigns in oil-exporting economies – is stoking fears of serious credit events (defaults) and systemic crisis in credit markets. And then there are the seemingly never-ending worries about Europe, with a British exit (Brexit) from the European Union becoming more likely, while populist parties of the right and the left gain ground across the continent.

These risks are being magnified by some grim medium-term trends implying pervasive mediocre growth. Indeed, the world economy in 2016 will continue to be characterized by a New Abnormal in terms of output, economic policies, inflation, and the behavior of key asset prices and financial markets.

So what, exactly, is it that makes today’s global economy abnormal?

First, potential growth in developed and emerging countries has fallen because of the burden of high private and public debts, rapid aging (which implies higher savings and lower investment), and a variety of uncertainties holding back capital spending. Moreover, many technological innovations have not translated into higher productivity growth, the pace of structural reforms remains slow, and protracted cyclical stagnation has eroded the skills base and that of physical capital.

Second, actual growth has been anemic and below its potential trend, owing to the painful process of deleveraging underway, first in the US, then in Europe, and now in highly leveraged emerging markets.

Third, economic policies – especially monetary policies – have become increasingly unconventional. Indeed, the distinction between monetary and fiscal policy has become increasingly blurred. Ten years ago, who had heard of terms such as ZIRP (zero-interest-rate policy), QE (quantitative easing), CE (credit easing), FG (forward guidance), NDR (negative deposit rates), or UFXInt (unsterilized FX intervention)? No one, because they didn’t exist.

But now these unconventional monetary-policy tools are the norm in most advanced economies.

Some alleged that these unconventional monetary policies  were a form of debasement of fiat currencies.

Instead, inflation is still too low and falling in advanced economies, despite central banks’ unconventional policies and surging balance sheets.

The reason ultra-low inflation remains a problem is that the traditional causal link between the money supply and prices has been broken. One reason for this is that banks are hoarding the additional money supply in the form of excess reserves, rather than lending it (in economic terms, the velocity of money has collapsed).  Unemployment rates remain high, giving workers little bargaining power. And a large amount of slack remains in many countries’ product markets, with large output gaps and low pricing power for firms (an excess-capacity problem exacerbated by Chinese overinvestment).

And now, following a massive decline in housing prices in countries that experienced a boom and bust, oil, energy and other commodity prices have collapsed.

The recent market turmoil has started the deflation of the global asset bubble wrought by QE.

How long markets not only ignore the real economy, but also discount political risk?

Welcome to the New Abnormal for growth, inflation, monetary policies, and asset prices, and make yourself at home. It looks like we’ll be here for a while.

The internet can be responsible for worsening behavior already harmful to the marginalized; in this case, we delve into the issue of human sex trafficking, and how the internet has turned it into an epidemic.  Human Sex Trafficking Report

In what is being seen as a major breakthrough  the government of Luxembourg has thrown its financial muscle behind plans to extract resources from asteroids, some of which are rich in platinum and other valuable metals. It plans to team up with private companies to help speed the progress of the industry and draw up a regulatory framework for it.

One such firm, Deep Space Industries, wants to send small satellites, called Fireflies, into space from 2017 to prospect for minerals and ice. The satellites would hitch a ride on a rocket, and larger craft would then be used to harvest, transport and store raw materials.

Metals such as nickel and iron, which are plentiful on Earth, could be processed while in orbit and used to build equipment or spacecraft. And it may eventually be possible to extract valuable minerals from asteroids cheaply enough for it to be worth bringing them back to Earth.

Rival Planetary Resources has a slightly different plan, in which telescopes would be used to analyse asteroids before craft were sent to mine them. Its backers include Google co-founder Larry Page and billionaire businessman Ross Perot, and it thinks it could be operating in space by 2025.

One of the difficulties facing these would-be space miners is cost, which is fittingly astronomical. Nasa’s Osiris-Rex expedition, which aims to bring just two kilos of asteroid material back to Earth by 2023, is set to cost $1bn. But Deep Space Industries thinks it can get the ball rolling by putting three of its Fireflies in space for just $20m.

The other obvious barrier is the technological progress that is still required if commercial asteroid mining is to become practically possible and economically viable.

However, considerable as these hurdles are, experts believe the legal component is the most pressing. Late last year, the US government made an attempt to update the law on space mining, producing a bill that allows companies to “possess, own, transport, use, and sell” extra-terrestrial resources without violating US law. The problem is that putting this into practice violates the OST.

US lawyer Michael Listner, who founded thinktank Space Law and Policy Solutions, says the US law is incompatible with the OST and risks souring international relations: “China and Russia will want in. If you have conflicts of law, things start getting dicey and that could lead to legal and political conflict.”

Newman believes that one reason why Luxembourg has included plans for drawing up a regulatory framework is to show the world that work is under way on untangling such legal knots. “This is something for investors to hang their hat on,” he says, “to give them confidence and say that there is a nascent legal framework.”

But Dr Gbenga Oduntan, a space law expert at the University of Kent, warns that the international community needs to get its act together quickly. “What we don’t want is a free-for-all over asteroids,” he says. “We need to come together and do that thinking, because the law we have right now does not allow us to repatriate resources for commercial purposes.”

One way to do this, he suggests, is to draw on existing legislation such as the UN Convention on the Law of the Sea, which governs how nations use the ocean. Another option might be to revive the Moon Treaty of 1979, which deemed space to be the “common heritage of mankind” but failed to win support from any space-faring nation.

Such complex legal wrangles could indeed prove harder to overcome than other difficulties, such as the huge costs involved. But some experts believe that investing large amounts early on could create a space economy in which costs are forced down by collaboration.

Ian Crawford, professor of planetary science at Birkbeck, London, says asteroid miners would most probably start off by mining water-ice, which can be broken down into hydrogen (for fuel) and oxygen (for supporting life).

It is much cheaper to produce water in space than to take it there, and this process could generate revenue and technical support from other players in the space game. Once companies had that revenue stream under their belts, they could start thinking more seriously about the more costly business of extracting minerals and bringing them back to Earth.

“Eventually you can imagine the whole process supporting itself,” says Crawford. “The main hurdle is the initial investment, and it seems these companies think they can get started and jump over that hurdle.” But he agrees that the more pressing concern is the legal picture, which “badly needs to be updated”.

Christopher Barnatt, professional futurist and author of The Next Big Thing: From 3D Printing to Mining the Moon, says history shows us that if governments such as Luxembourg’s get behind asteroid mining, the space industry will deliver on its promise.

“With the moon landings, the aspiration was way ahead of the technology. [President] Kennedy had spoken to Nasa and they’d said it couldn’t be done. He thought it could. We’ve got evidence from throughout history that when we commit ourselves to a broad goal, we can achieve it.”

The ramifications could be huge, he believes, as progress in one technology spurs breakthroughs in another.

“If you can use asteroids to make fuel, a lot of space exploration becomes cheaper. Then there’s progress in robotics and artificial intelligence… it all starts to make things possible.”

A Wounded Deutsche Bank Lashes Out At Central Bankers: Stop Easing, You Are Crushing Us

It is inconceivable to imagine Africa without its elephants. Yet as poaching reaches critical levels, we are heading ever-closer to that grim reality. We take an in-depth look at why the demand for ivory skyrocketed, how the illegal wildlife trade is a threat to global security and what is being done to save Africa’s elephants from extinction.

Claims of resigned Ukraine’s Economic Development Minister Aivaras Abromavicius about corruption in the government could indicate failure of introduced reforms, International Monetary Fund (IMF) Managing Director Christine Lagarde said.

“His [Abromavicius’s] recently announced resignation is of concern,” Lagarde stated. “If the allegations that he makes in his resignation are correct, then it is obviously an indication that the anti-corruption measures that were committed to by the government are not yet working.”

Abromavicius announced his plans to resign because he was unable to work effectively. In his resignation letter, the minister named corruption and political pressure as reasons for the decision.

Lagarde noted that Abromavicius conducted “good and solid reforms” in Ukraine, and paid tribute to his effort.

“We have known all along that in relation to corruption, a lot of work needs to be done,” she added.

In March 2015, the IMF approved a four-year $17.5-billion assistance package to Ukraine to help the recovery of its ailing economy. To receive the financial aid, Kiev has committed to complex reforms, including enhanced anti-corruption policies.

Thomas PIketty writes:  It will be important for European leaders—the French and Germans in particular—to acknowledge their errors. We can debate endlessly all sorts of reforms, both small and large, that ought to be carried out in various eurozone countries: changed opening hours for shops, more effective labor markets, different standards for retirement, and so on. Some of these are useful, others less so. Whatever the case, however, the failures to make such reforms are not enough to explain the sudden plunge in GDP in the eurozone from 2011 to 2013, even as the US economy was in recovery. There can be no question now that the recovery in Europe was throttled by the attempt to cut deficits too quickly between 2011 and 2013—and particularly by tax hikes that were far too sharp in France. Such application of tight budgetary rules ensured that the eurozone’s GDP still, in 2015, hasn’t recovered to its 2007 levels.  A New Deal for Europe