经济学人 2016-02-13

 in tandem
compile GDP statistics
as if it is set in stone
 A narrow surplus
a wide deficit
sudden shifts in the level of output
encouraged broader thinking
move in step with GDP
The Economist explains
Why GDP is so difficult to measure
Jan 27th 2016
MEASURING output is the best way we have of taking the temperature of an economy. But the industry standard, gross domestic product (GDP) has a host of weaknesses. 【It is reliant on an arbitrary definition of what is productive, so it includes childcare by nannies but not by house-husbands and wives.】【 It takes no account of who is doing the producing】, meaning an economy could have a single worker or full employment.【 It ignores the underground economy to a large extent】, guaranteeing that production always undershoots reality. But more than any of these, GDP is extremely difficult to measure.
In July 2015 America's Bureau of Economic Analysis (BEA) announced that GDP had grown by 2.3% in the second quarter. 【This was below expectations; US stockmarkets slipped in response. But in August and September, the BEA issued revisions that pushed growth up to 3.7% and then to 3.9%. Suddenly, America's economy was seen to be roaring ahead again, even though nothing extra had been produced. 】The BEA publishes its first estimate for the last quarter of 2015 on January 29th. Commentators believe it will show that the economy slowed to around 1%. But that figure is almost certain to change, possibly significantly, in future releases. 【The actual performance of the economy is likely to remain unclear.】
The problem is not with the BEA. Among national statistics offices, studies have shown that its revisions are no larger than average.【 The issue is the near-impossible task which it has been set. Economic data have to be both timely and reliable. Yet these attributes often seem mutually exclusive. Data produced quickly tends to be inaccurate; compiling numbers meticulously takes time.】 Then are the revisions themselves. These take two forms. First, the data used for initial estimates are based on partial information and trend projections. When more actual numbers begin to trickle in, the aggregate result is changed, as was the case with the BEA’s assessment of second-quarter growth in America. 【Second, statistics offices habitually review how they compile GDP statistics, to reflect the new sources or concepts. Messing around with a methodology can have major effects: the BEA recently revised down GDP growth in 2011-14, removing $70bn from the economy in an instant. Consequently, America's recovery from the global financial crisis now looks less impressive.】
Chunky revisions to GDP are a thorn in the side of government and business alike.【 Central bankers typically look 18 months into the future (and so are less concerned with the recent past), but for those working to balance the government’s books, sudden shifts in the level of output are awkward. A narrow surplus can become a wide deficit if the size of the base suddenly shrinks. 】Companies rely on headline economic indicators to make investment decisions and forecast likely demand. 【The solution might be a shift in mentality. GDP growth is treated as if it is set in stone, even as it is regularly revised. This is unhelpful. The BEA has recently encouraged broader thinking, by publishing an average of GDP and gross national income, another measure of output that ought to move in step with GDP. It often doesn’t. But by considering the two in tandem, measurement errors in both carry a lighter weight.】 There is no perfect way to capture the state of an economy. This approach is the best that exists.
The Economist explains
How shadow banking works
Feb 1st 2016
vowed to put a leash on
ON JANUARY 5th, in a campaign speech in New York, American senator Bernie Sanders pledged to break up banks that were deemed “too big to fail” and vowed to put a leash on their shadowy cousins. Janet Yellen, Federal Reserve’s chair, has admitted that shadow banks pose “a huge challenge” to the world economy. In an editorial for the New York Times in December, Hillary Clinton called for tough measures to contain the global bogeyman. 【Politicians and economists who often have little in common, unanimously agree that shadow banking, left to its own devices, has the potential to trigger another financial collapse. What are shadow banks and why is there such a fuss about them them?】
The term “shadow bank” was coined in 2007 by Paul McCulley of PIMCO, a big bond fund to describe 【risky off-balance-sheet vehicles hatched by banks to sell loans repackaged as bonds. Today, the term is used more loosely to cover all financial intermediaries that perform bank-like activity but are not regulated as one.】【 These include mobile payment systems, pawnshops, peer-to-peer lending websites, hedge funds and bond-trading platforms set up by technology firms.】【 Among the biggest are asset management companies.】【 In 2013 investment funds that make such loans raised a whopping $97 billion worldwide. Companies looking for cash also lean on bond markets that offer extraordinarily low interest rates. 】Globally, between 2007 and 2012, firms thus raised $1.7 trillion by issuing corporate bonds. Money-market funds that invest in short term securities like US treasury bills have taken off too. In China alone, they grew six times to 2.2 trillion yuan ($341 billion) between mid-2013 and December 2015. In December they hit a sweet spot when Federal Reserve hiked interest rates for the first time in nearly ten years. The Financial Stability Board, an international watchdog estimates that globally, the informal lending sector serviced assets worth $80 trillion in 2014 up from $26 trillion more than a decade earlier.
【Shadow banks have flourished in part because the traditional ones, battered by losses incurred during the financial slump, are under pressure. Tighter capital requirements and fear of heavy penalties have kept them grounded.】【 In China, where banks are discouraged from lending to certain industries and are mandated to offer frustratingly low interest rates on deposits, non-banks fill the gap.】【 About two-thirds of all lending in the country by shadow banks are in fact “bank loans in disguise”, reckons the Brookings institution, a think tank.】 Critics worry that unlike banks, which lend against deposits from customers, 【non-banks loan money using investor’s cash and rotating lines of credit. 】【This is especially risky when skittish investors who bet on short term gains withdraw their money at once. 】But non-bank financing need not always be a bad thing.【 It offers an additional source of credit to individuals and businesses in countries where formal banking is either expensive or absent.】【 It also takes some burden off banks which have big “maturity mismatches” (the difference between the amount of time a depositor's money is parked in the bank minus the time that it is loaned out).】
And belatedly, regulators, too, are waking up to the new financial order. 【Banks must now declare structured investment vehicles on their balance sheets.】【 Authorities have considered imposing leverage limits on various forms of shadow banks in America and Europe. In January last year, America’s Federal Housing Finance Agency proposed new rules that would require all non-banks to have a minimum net worth of $2.5m plus a quarter percentage point of the outstanding loan stock that they service. Only then would they be able to sell their loans to Fannie Mae and Freddie Mac, which buy American mortgages from banks, bundle them into securities and resell them to investors with a guarantee. 】The move aims to protect the two government-backed housing giants against under-capitalised lenders. It is a small start to rein in an industry that accounts for a quarter of the global financial system.