Incoming Premier Li Keqiang has yet to declare the new government’s stance on the property market, but it appears to be putting citizens’ wellbeing ahead of property speculators. The State Council’s new plan includes minimum-wage rises, higher interest rates for savers, and a clamp down on corruption and the hidden incomes of the elite. Conspicuous consumption is out, while redistribution of wealth to the middle and working classes, by funding a social safety net, is in.

Rapid urbanisation is expected to continue over the next decade. China’s new leaders have pledged to reform the antiquated and rigid residential-permit system, or hokou, that has split China’s population along urban-rural lines, preventing millions of Chinese who are registered as rural residents from settling in cities and enjoying basic urban welfare and services.

So with Shanghai apartments selling at 45 times average national income, making housing available and affordable may be an immediate priority.  The condos and ghost towns built in recent years which stand empty – because they are pure investments – represent an obvious social resource.

The first signs of the new administration’s intent arrived with the announcement of a 20% capital gains tax on house sales. There will also be new controls on home mortgages. Cities with overheated property markets will likely to raise the down payment requirement for second homes to 70% and the mortgage interest rate to 1.3 times the benchmark. The measures will do little to harm the homebuilding industry, claim industry insiders, but real estate investment could cease to be China’s main growth driver.

Because so much land has been expropriated from farmers, the government intends to protect them from losing their land. “If the urbanization process becomes a process of depriving and harming farmers’ interests, it cannot be sustained and society cannot maintain stability,” the Office of Central Rural Work Leading Group warns.

The real estate bubble has, of course, been created by a credit bubble. When lending conditions were loosened in January and February, property investment rose by 23% versus the same period in 2012. But bringing lending under control could have unpredictable consequences – affecting the livelihoods of 50 million construction workers.

No wonder China’s leadership appears rather downbeat – and reluctant to abandon export-led growth. Rebalancing the economy away from excessive fixed investment would lead to mass layoffs, while asset markets are still fragile, bank balance sheets are a shambles, and local authorities are struggling to finance themselves. If a consumer economy emerges, it may prove a little different from the one that investors expect.

See: Buy India, Sell China [Zerhohedge]

Even if Starbucks threatened to pull out of the UK entirely it still wouldn’t be a threat. Obviously, as long as there is a market for coffee chains in Britain, a competitor would simply take their place.

It is time to call Starbucks’ bluff and send them packing. Its troubles are only a sign of things to come for corporate tax avoiders, as George Osborne, Britain’s chancellor of the exchequer is likely to find the G8 countries receptive to the idea of a war on tax havens, given the state of their finances.

Something tells me though that Starbucks won’t abandon the UK market to the competition, come hell or high water.

A groundbreaking study by Professor Gordon Hughes of the University of Edinburgh – which applied rigorous statistical analysis to years of actual wind farm performance data from wind farms in both the UK and in Denmark – showed that due to wear and tear, the average UK wind farm’s potential electricity output had fallen by one third.

The lifetime cost per unit of electricity generated by wind power will be considerably higher than official estimates. These costs will become apparent to owners once the warranty period expires. Already, many UK wind farm owners are discovering that they don’t own a money printing machine, but a clunker that costs hundreds of  thousands of pounds to maintain every year.

“Bluntly, wind turbines onshore and offshore still cost too much and wear out far too quickly to offer the developing world a realistic alternative to coal,” says Dr John Constable, director of Renewable Energy Foundation.

It makes more business sense to have everyone involved in a product work in the same place, argues General Electric. If workers in different departments physically share the same space, cross-interest conversations that lead to productivity or design improvements can happen more easily.

The wave of outsourcing in the last decade wasn’t necessarily done for smart, rational business reasons. These manufacturers didn’t factor in other costs – like manufacturing synergies, intellectual property, cheaper transport costs etc – besides how much cheaper the labour was. It’s harder for the Chinese to knock-off Western products, if they’re not made there.

Now that inflation-adjusted average wages in China, Eastern Europe, and Central Asia have more than tripled over the decade from 2000 to 2010, according to the International Labor Organization – while developed world wages haven’t changed – those additional factors are becoming ever more apparent.

Major impact storms,  3 or greater on the US coast, by Decade:

• 1911-1920   8 majors   27 hit points
• 1930s 8 majors 28 hit points
• 1940s  10  Majors  ( one  double hit,  1947 so it could be 11)  34  hit points
• 1950s  9 majors,  37 hit points
• 1960s  7 majors, 25 points
• 2001-2010  7 majors   22 hit points

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A Series of unfortunate events: Scenario planning in an uncertain world

After all, the Obama administration is vulnerable because of its cosy “revolving door” ties to Wall St – it has very few high level Treasury officials who don’t have significant experience in large too big to fail banks – its failure to punish those responsible for the systematic fraud that led to the financial crisis, and because the entire premise of the administration’s efforts to handle the foreclosure crisis was based on helping the banks.

It’s intriguing therefore, that Romney turned on the TBTF banks in the first presidential debate. By specifying certain banks as Too-Big-to-Fail, the government has given “the biggest kiss to New York banks I’ve ever seen… And its killing regional and small banks.” Romney wants to get rid of the Dodd-Frank legislation which designates the biggest banks as “systemically important financial institutions” – though its highly debatable whether Dodd-Frank has harmed smaller banks in the short-run, as Fortune magazine argues.

This echoes comments made by Dallas Fed president Richard Fisher: “Hordes of Dodd-Frank regulators are not the solution; smaller, less complex banks are. We can select the road to enhanced financial efficiency by breaking up TBTF banks-now.”

There’s a growing roster of former executives of American financial giants who are embracing the core tenets of the Glass-Steagall act. Calling for the re-enactment of Glass-Steagall is the new black on Wall St. Even former Citigroup CEO Sandy Weill, the man whose signature accomplishment led to the repeal of the Depression-era law that separated the businesses, is an advocate. Here’s a list of key figures backing reform, published by American Banker, with some surprising names:

Phil Purcell, former chief executive of Morgan Stanley
John Reed, former chairman of Citigroup
David Komansky, former chief executive of Merrill Lynch
Rep. Walter Jones, R-N.C
Richard Fisher, president of the Federal Reserve Bank of Dallas
Sheila Bair, former chairman of the Federal Deposit Insurance Corp.
Tom Hoenig, FDIC board member and former president of Federal Reserve Bank of Kansas City
Simon Johnson, former chief economist of the IMF, and co-author of “13 Bankers”
Sen. Sherrod Brown, D-Ohio
Sen. Bernie Sanders, I-Vt.
Camden Fine, president of the Independent Community Bankers of America
Mervyn King, Governor of the Bank of England

Pension funds, insurance companies and other institutional investors have been making massive bets on commodity prices, as have retail investors through mutual funds and structured notes. It all started in 2006, when the IRS allowed funds to sidestep the law established in 1936 and revised in 1954, which restricted mutual funds from owning more than 10% of total assets as commodities, through 72 private letter rulings (PLRs). Exceeding that limit would have previously made mutual funds liable for corporate income tax.

One after another mutual funds requested an exception from IRS that allowed them to set up commodity investments using derivatives. To meet the guidelines for the special tax treatment, the funds set up “sham” companies in the Cayman Islands. But they are now at the mercy of an IRS which may revoke previous rulings that have allowed mutual funds and structured notes,

The mutual fund industry has built a major new asset class “on a surprisingly thin legal basis” says Reuters. If Congress confirms that the IRS acted legally – in which case every mutual fund is automatically going to be able to exceed restrictions on commodities ownership – or it is going to eliminate the mutual fund exemption, and reverse the existing PLRs.

Judging by the political mood in Washington, in which the mutual funds’ controlled foreign corporations are “corporate fictions, offshore shams, paper exercises whose sole purpose is to make an end run around the legal restrictions on commodity investments by mutual funds,” it would be foolhardy to think things are going to go the mutual funds way, especially as this would only send another wave of money into commodities markets.

Assuming Congress is determined to restrict the speculation which now dominates commodity exchanges, then the secret “Bona Fide Hedging” exemptions that Goldman Sachs and 14 others have obtained from the CFTC since 1991, and which allowed them to masquerade as physical hedgers and escape virtually all limits placed on speculators, could be the next to be addressed.

The twin effect of China’s downturn and Europe’s double-dip recession has already turned into a full-blown shock for much of Asia. Europe’s economy, which has already fallen off the edge of the precipice, is much larger than the US, after all. And manufacturing activity there has contracted for 13 months in a row, as new orders have dwindled.

With the euro-zone now in recession – even if no-one’s officially admitting it yet – the weakness has spread to Germany and France (where the property market is in freefall). With the European financial system imploding – and with Spain’s bank run accelerating – a repeat of the stock market slide of 2008 could be around the corner. And it’s sobering to think that Europe’s banking system is about three times the size of America’s.

Because European and American companies have so successfully controlled costs, earnings haven’t suffered much yet – and earnings growth in the US remains positive. But the squeeze is coming, as trailing earnings indicate. The biggest fall in durable goods orders in three and a half years, in August, points to a sharp slowdown in manufacturing, and is entirely consistent with the rapidly deteriorating profits backdrop.

Even though the Business Round Table’s CEO economic outlook index plunged to 66 in the third quarter – third largest drop in its history – from 89.1 in the second quarter (it dropped from 78.8 in Q3 2008 to 16.5 in Q4 2008) American CEOs still seem to be behind the curve – though they are planning to spend the next six months slashing capital expenditures and jobs.

Certainly, the recent pop in the market above 1425 to a post-crisis high sits badly with the facts on the ground. As quantitative easing’s Fibonacci sequence of diminishing returns suggests, the market will not resist this recessionary data for long. Nor will it resist the deteriorating geopolitical outlook in Asia and the Middle East.

IMF chief, Christine Lagarde, has called for urgent measures across the world to head off a fresh global slump, pointing out the latest emergency measures of central banks in the US, Europe and Japan, are not enough to secure recovery.

SocGen’s famous bear, Albert Edwards, puts it more bluntly: “The S&P will be led hand-in-hand by the economic cycle over a cliff into free-fall. That will be the third phase of this secular valuation bear market…The resilience of the US equity market in the face of a rapidly deteriorating profits backdrop points to continued high levels of investor hope. The vice-like grip of the bear will soon squeeze that hope from their gasping, broken bodies.”