<img class="float_right" src="http://static6.businessinsider.com/image/511a9eda69bedd9813000017-550-412/jacob-lew-1.gif?maxX=400" border="0" alt="jacob lew" width="400" />For the past four years, fighting a global economic crisis has been the U.S. <keyword id="6374832" type="ORGANIZATION" weightage="60" keywordseo="Treasury">Treasury</keyword> Secretary’s top priority.
Though the U.S. economy seems to be entering a period of recovery, President Obama’s Treasury Secretary nominee, Jacob “Jack” Lew, would still face enormous challenges in office.
A battle over raising the debt ceiling and a longer-term debate about America’s debt and deficits are examples.
A still-shaky euro zone and China’s continuing economic evolution are likely to add plenty of international issues to the next Treasury ‘s agenda.
Lew served as <keyword id="6358021" type="PERSON" weightage="60" keywordseo="budget">budget</keyword> director to both Bill Clinton and Barack Obama and has plenty of experience in fiscal issues and Congressional wrangling.
He also worked for several years in a high-ranking role at Citigroup, but many Washington watchers have noted that Lew has less experience in financial markets than his predecessors.
With Lew’s Senate confirmation hearings set to get underway tomorrow, <keyword id="1769041" type="UNKNOWN" weightage="60" keywordseo="The-Financialist">The Financialist</keyword> asks the questions we’d like answered about what a Treasury Secretary Lew might do in office.
How would you balance the need to reduce America’s budget deficit with the impact significant spending cuts could have on the economy?
Under current laws, by 2015 the U.S. budget deficit is expected to shrink from 5.3 percent of GDP to 2.4 percent, according to the Congressional Budget Office (CBO).
However, deficits are set to hit 4 percent of GDP by 2023. By the end of this fiscal year, U.S. debt will account for 76 percent of GDP, the highest level since 1950.
Many economists believed the so-called fiscal cliff, a package of tax increases and $1.2 trillion in federal spending cuts over the next decade, would have caused another recession if it had gone into effect as planned at the beginning of the year. Even without the cuts, U.S. GDP contracted in the last quarter of 2012, and unemployment remains at 7.9 percent.
Lew presided over budget talks in 2011 that resulted in spending caps set to slash federal outlays by about $900 billion over the next decade. It is important to know his thinking on addressing U.S. debt and deficits during a nascent economic recovery.
What is your stance on entitlement reform?
The Congressional Budget Office forecasts that Medicare, Medicaid and Social Security spending will increase from 10 percent of GDP to 16 percent over the next 25 years.
Lew is said to be a strong advocate of these so-called entitlement programs, which are likely to be a key part of an upcoming battle this year between Republicans and Democrats in Congress over raising the debt ceiling.
President Obama has suggested recently that changing the inflation index for Social Security benefit increases and charging higher Medicare premiums to wealthy recipients might be an acceptable way to curb entitlement spending. What entitlement reforms would Lew support?
How should the United States deal with China on currency valuation issues?
Former Treasury Secretary Henry Paulson and outgoing Secretary Timothy Geithner were both interested in and deeply knowledgeable about China.
Lew has less experience with the country Republican presidential candidate Mitt Romney said he would label a currency manipulator on his first day in office. The Treasury refused such a label last year but said in a November report that the yuan is “significantly undervalued.”
With China set to become the world’s largest economy by purchasing power parity as soon as 2017, according to PricewaterhouseCoopers, it is worth asking how a Treasury Secretary Lew would handle the currency valuation issue.
Tell us your view on the European debt issue — is the European sovereign debt crisis still an issue that could negatively impact the U.S. economy?
The impact of the European debt crisis on the U.S. economy has been an ongoing source of concern for the Obama administration. While in office, Secretary Geithner repeatedly urged bold action to end the crisis. Five years on, the euro zone may have finally turned a corner and given itself the tools to effectively manage the crisis.
In the past year, European governments have agreed to better coordinate their economic policies. They’ve also agreed to form a banking union, overseen by the European Central Bank, to regulate the continent’s 6,000 lenders.
These are certainly the sorts of bold actions the Obama administration and Secretary Geithner wanted to see, but what does Lew think the euro zone’s remaining needs and challenges are?
Could the capital requirement outlined in Dodd-Frank act as a brake on the U.S. economy?
The Dodd-Frank Act requires U.S. regulators to implement strict capital requirements that are bound to impact the balance sheets of U.S. banks and U.S. subsidiaries of large foreign banks. These rules are layered on top of strict international standards known as Basel III.
Banks argue that having multiple capital buffers limit the amount of money they are able to put to work in the economy. Regulators recently agreed to extend the full implementation of Basel III to 2019, partly to offset concerns that a quick adoption of its capital requirement would tighten lending and hurt the global economy.
An incoming secretary should spell out his views on how to balance financial regulation with the need to maintain lending to businesses and households.
Are Basel III standards strong enough to avert the threat of future bank failures?
Last summer the U.S. Federal Reserve officially came out in favor of the Basel III capital requirement rules. Secretary Geithner is also a strong advocate of Basel III. But over on Capitol Hill, some lawmakers say Basel III rules do not go far enough in offsetting a potential financial crisis.
In a letter last fall to key regulators, including Federal Reserve Chairman Ben Bernanke, Senate Banking Committee members Sherrod Brown, D-Ohio, and David Vitter, R- La., called for tougher capital rules that “properly align incentives for megabanks by lessening government support for the financial sector, and reassure financial markets that the U.S. financial system is healthy.” Which side of this debate does Lew fall on?<a href="http://www.thefinancialist.com/?pid=BI">The Financialist</a> is a digital magazine presented by Credit Suisse that looks at the trends and ideas that drive markets, businesses and economies.

6 Questions For Treasury Secretary Nominee Jack Lew

Where's the world heading?<a href="http://www.thefinancialist.com/our-dovish-fed-the-fomcs-new-voting-members/"></a>
<a href="http://www.thefinancialist.com/credit-suisse-2013-global-growth-forecast/">The Financialist</a>, <keyword id="48085" type="CITY" weightage="60" keywordseo="Credit-Suisse">Credit Suisse</keyword>'s online publication on economic trends and projections, has created an awesome color-coded map that shows its economists' forecasts for real <keyword id="35050" type="CITY" weightage="60" keywordseo="gdp">GDP</keyword> growth during 2013. As well, they broke down country-by-country specific data and a projection of GDP per capita for a range of nations.
Check it out below:
<div class="image-container click-to-enlarge" style="width:1000px"><div class="image"><a title_source="The Financialist" title_caption="" class="zoomin" href="http://static4.businessinsider.com/image/50ef1a8fecad040131000023-960/financialist%20infographic.png"><img src="http://static4.businessinsider.com/image/50ef1a8fecad040131000023-950-2796/financialist%20infographic.png?maxX=1000" border="0" alt="Map Global Growth Rates" width="1000" /></a></div><a href="http://www.thefinancialist.com/credit-suisse-2013-global-growth-forecast/">The Financialist</a></div>

Credit Suisse's 2013 Growth Forecast For Every Major Economy In The World

<div class="image-container float_right" style="width:400px"><div class="image"><img src="http://static6.businessinsider.com/image/4f0da24269bedd904a00000d-590-443/charles%20evans.jpg?maxX=400" border="0" alt="Charles Evans Federal Reserve Chicago" width="400" /></div>APCharles Evans, right, president of the <keyword id="6355253" type="ORGANIZATION" weightage="60" keywordseo="Federal-Reserve">Federal Reserve</keyword> Bank of Chicago.</div>As Chairman of the Federal Reserve, <keyword id="45366" type="PERSON" weightage="60" keywordseo="Ben-Bernanke">Ben Bernanke</keyword> does not have absolute power over the direction of U.S. monetary policy. Rather, he must develop a consensus from amongst the differing viewpoints of the 12 members of the Federal Open Market Committee (<keyword id="136502" type="ORGANIZATION" weightage="60" keywordseo="FOMC">FOMC</keyword>).
And with each passing year, the FOMC gets an injection of fresh blood.
The Federal Reserve district presidents for Richmond, Atlanta, Cleveland, and San Francisco are no longer voting members of the FOMC. They've been replaced by the presidents of the St. Louis, Kansas City, Boston, and Chicago.
<a href="http://www.thefinancialist.com/our-dovish-fed-the-fomcs-new-voting-members/">The Financialist</a>, a digital magazine sponsored by Credit Suisse, has a great set of profiles on each of the voting members.
"Our review suggests the FOMC will remain decidedly dovish in 2013," they conclude.
NOTE: Thanks to <a href="http://www.thefinancialist.com/our-dovish-fed-the-fomcs-new-voting-members/">The Financialist</a> for letting us feature their profiles.

HAWKS & DOVES: Meet The 12 People Who Will Control America's Monetary Policy In 2013

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5474f78469bedda02d3ab53f-922-691/shopping-at-mall.jpg" alt="Shopping at Mall" border="0"><a href="https://www.flickr.com/photos/anotherpintplease/5720082734/in/photolist-9HsVj7-cDNbkN-suyed-7cvZUH-e4UJr9-yqPgw-3urwXP-3Tgea-7yGCdL-5TQjzb-4TbraU-8TZfEH-pyXo9J-oU4doY-64hGXC-8B5Z5o-pxD6qp-4HkugE-94QAGK-9RjV9c-7dG8Xd-pyXoD1-pyaV3M-amVvQT-8U48Fb-aV4DNX-8U3jm3-nD9Lwm-nF7Py6-pytyUV-py7ssk-9bxJZP-hKgjrN-7fEwuW-8U3iS9-3uzbs7-9RnNvE-8vEXHS-pQnfRv-biVsKD-9RnPgj-98wzk-fmZrwZ-7C6xsF-o2EFGs-oUycFM-nccK5f-f8ZLkj-8RwVgK-b9xgfV">Flickr / jpellgen</a></img></div></div></div>Foot traffic and <keyword id="6354851" type="ORGANIZATION" weightage="60" keywordseo="Retail">retail</keyword> sales are declining at U.S. shopping malls, and the reason is no surprise: the relentless rise of online retail.
Yet Credit Suisse still expects real estate investment trusts focused on malls to perform quite well.
A paradox? Not quite.
First, sales remain strong at so-called class-A malls that include chic foreign brands such as Zara and Uniqlo. What's more, the forces of supply and demand seem to be doing their thing: recent growth of mall square footage has been just 1 percent per year, and the result is a 94 percent occupancy rate.
With little slack, owners should be able to raise rents by an average of 13 percent in 2015, according to Credit Suisse, which also forecasts that malls will be the best investments among REITs in 2015, expecting them to yield 14 percent returns. Take that to the bank - it's on the second level, just past the food court.<a href="http://www.thefinancialist.com/?pid=BI">The Financialist</a> is a digital magazine presented by Credit Suisse that looks at the trends and ideas that drive markets, businesses and economies.

Now Might Not Be A Bad Time To Invest In Shopping Malls

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/54662912ecad041f716c8461-710-532/port-of-long-beach-9.jpg" alt="port of long beach" border="0"><a href="http://en.wikipedia.org/wiki/File:POLB_Cranes.JPG">Wikimedia Commons</a></img></div></div></div>Until recently, it cost just $750 to ship a 20-foot container of goods from East Asia to the U.S. West coast.
But that cost has been rising due a labor conflict between the 20,000 workers of the International Warehouse and Longshoreman's Union and the Pacific Maritime Association's 29 ports on the West Coast. A collective contract expired July 1, and workers have been engaging in a work slowdown since. The port of Tacoma, Washington, for example, is moving just 10 to 18 containers per hour, compared with a normal rate of 25 to 35, according to Credit Suisse.
And the slowdown is spreading to the ports of Los Angeles and Long Beach, which handle 20 percent of the nation's traffic.
Retailers are less than thrilled at the prospect of shipping delays heading into Christmas. Some shipping companies are adding surcharges for delays of between 75 and 100 percent of the cost of delivery, and truckers at the Long Beach and L.A. ports are charging more as well. But somebody's bad news can be somebody else's good news as well: Credit Suisse says the troubles will offer a competitive advantage to importers that ship goods to East Coast ports or by air.<a href="http://www.thefinancialist.com/?pid=BI">The Financialist</a> is a digital magazine presented by Credit Suisse that looks at the trends and ideas that drive markets, businesses and economies.

America's Longshoremen Are Creating A Headache For Retailers

<img src="https://static-ssl.businessinsider.com/image/5499be12ecad04f927e1c926-1200-924/1280px-thai_house_cement_mixer.jpg" alt="cement mixer" border="0"><a href="http://upload.wikimedia.org/wikipedia/commons/thumb/b/b5/Thai_House_Cement_Mixer.JPG/1280px-Thai_House_Cement_Mixer.JPG">Wikimedia Commons</a></img>Cement is the most energy-intensive of all U.S. manufacturing industries, according to the Energy Information Administration.
It would follow, then, that lower fuel costs should be a boon for the industry.
But even with the benefit of falling oil prices, cement makers will still struggle to stay profitable in 2015, according to Credit Suisse. The reason: widespread weakness in global economic growth means less appetite for new construction, which will put pressure on cement prices.
"As such, we are doubtful of how much of the benefit of lower energy prices will actually be witnessed in incremental gross profit," says Credit Suisse analyst Harry Goad.
Some companies will do better than others, and what's marking that difference is simple: it's geography. In Europe, where the economic recovery is virtually stalled, demand for cement should remain sluggish. Yet in the U.S., where the recovery is growing stronger by the month, cement consumption is up 7 percent year-to-date and housing starts are forecast to rise. Cement companies in developing countries have mixed outlooks: margins and capacity utilization are likely to fall in Brazil and Russia because of slower economic growth. China doesn't look so great either: after dramatic growth in cement consumption from 2010 to 2013, it slowed in the first three quarters of this year and volumes should be more or less flat in 2015, according to Credit Suisse.
<a href="http://www.thefinancialist.com/?pid=BI">The Financialist</a> is a digital magazine presented by Credit Suisse that looks at the trends and ideas that drive markets, businesses and economies.

The Cement Business Is Extremely Energy-Intensive

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/53ff97276bb3f715476391f3-1200-924/blackstone-schwarzman-1.jpg" alt="blackstone schwarzman" border="0">REUTERS/China DailyStephen Schwarzman, chairman and CEO of the Blackstone Group</img></div></div></div>FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
<a href="http://blogs.wsj.com/moneybeat/2014/08/28/private-equity-is-coming-to-a-401k-near-you/" target="_blank">You Will Soon Be Able To Invest Your 401K In Private Equity</a> (The Wall Street Journal)
According to Wall Street Journal financial reporter Daisey Maxey, "some big names of the private-equity world are working to make private-equity funds an option in defined-contribution retirement plans, such as 401(k)s, as soon as next year." 
Investment in private equity has traditionally been limited to the very wealthy, However, Maxey believes that, "Offering such investments within a 401(k) plan isn't as exotic as it may sound: pension-fund investors have long been able to invest in the deals, but those investors are drying up as pension funds fade out." 
David O'Meara, a senior investment consultant at Towers Watson Investment Services added that, "private-equity investments are already offered within some defined-contribution plans, though that is rare and the products don't offer daily pricing and liquidity"
<a href="http://www.aei-ideas.org/2014/08/fewer-americans-now-self-identify-as-middle-class/" target="_blank">Fewer And Fewer Americans Call Themselves 'Middle Class'</a> (AEIdeas)
According to American Enterprise Institute money and politics columnist James Pethokoukis, years of stagnant wages, declining labor force participation, and job polarization have led to fewer and fewer Americans in the middle class. Citing a recent Pew Research Poll, Pethokoukis writes that in 2008, 72% of Americans considered themselves to be either middle class or upper-middle. That number has fallen to just 57% in 2014. In that same time, those who self-identify as either lower-middle class or lower class shot up from 25% all the way up to 40%.
<a href="https://www.fidelity.com/viewpoints/investing-ideas/case-for-stocks-now" target="_blank">Now Is A Good Time To Buy Stocks</a> (Fidelity)
So far in 2014, stock have been riding high. The S&amp;P 500 shot past the 2000 point mark for the first time in its history. However, "amid all the good news, some investors have grown nervous that the markets are due for a correction or that stocks have reached the kind of heights that preceded the major bear markets of 2001 and 2008."
Fidelity fund Sonu Kalra and Gavin Baker believe that while the short-run is uncertain, the long-term potential for stocks remains attractive.
"Valuation remains pretty close to historical norms, above the historical average but not dramatically above it," says Kalra. "I would describe the market overall as fairly valued-but that doesn't mean we can't continue to see gains. The U.S. economy continues to grow at a slow but steady pace and, historically, bull markets have ended with a slowdown in the economy. But given that we are in the fifth year of a bull market, I do think you need to be selective about what you own and look for real opportunities."
<a href="http://www.thefinancialist.com/capital-allocation-beyond-making-money/" target="_blank">What A Company Does With Its Money Is Just As Important As How Much It Earns</a> (The Financialist)
Although most people focus on the earnings aspect of financial reports, "yet just as important to shareholders-if not more so-is what a corporation does with its cash once it's made it." The Financialist's Jens Erik Gould, argues that "this process known as capital allocation goes a long way to determining what future earnings headlines will say and where a company's stock price will be."
Gould points that, "amazingly, CEOs tend not to be particularly skilled in capital allocation. Most earn their positions by excelling in other areas, such as marketing, engineering, production or administration. But once in charge, they quickly realize that allocation is their primary task."

Private Equity Funds Could Come To Your 401k Plans As Soon As Next Year

<div class="KonaFilter image-container float_right"><div class="image on-image"><img src="http://static2.businessinsider.com/image/52571b33ecad04b47c6c3097-1200-924/us-bullion-depository-fort-know.jpg?maxX=480" border="0" alt="us bullion depository fort know" width="480" /><a href="http://upload.wikimedia.org/wikipedia/commons/7/7e/U.S._Bullion_Depository.jpg">Wikimedia Commons</a>The U.S. Bullion Depository near Fort Knox, Kentucky.</div></div>On October 17, the U.S. will hit the <keyword id="648838" type="UNKNOWN" weightage="60" keywordseo="debt-ceiling">debt ceiling</keyword>, which means the government will no longer be able to borrow money by issuing bonds. From there, the Treasury will rapidly run out of cash as it pays its obligations.
Experts agree that this could lead to the worst-case scenario of a default.
However, many sharp-minded finance folks have floated some non-traditional ways around the debt. Ideas include minting a <a href="http://www.businessinsider.com/how-the-white-house-should-bring-back-the-platinum-coin-secretly-2013-9">trillion dollar coin</a> or issuing <a href="http://www.businessinsider.com/treasury-could-issue-super-premium-bonds-2013-10">premium Treasury bonds</a>.
The analysts at Credit Suisse think that the U.S. could actually start selling its <keyword id="18712" type="ENTERTAINMENT" weightage="60" keywordseo="Gold">gold</keyword> reserves to raise cash. Here's <a href="http://www.thefinancialist.com/winding-up-the-financial-doom-and-gloom-machine/">The Financialist's Ashley Kindergan</a>:
There are less obvious solutions, too. For one, the Treasury could take steps to sell the country's gold reserves. Former Treasury Secretary Tim Geithner rejected that tack in 2011 because it would send a signal of absolute dysfunction to financial markets. But as Credit Suisse pointed out in its interest rate strategy note last week, "faced with a choice to either fail to pay someone or to liquidate gold holdings and make everyone whole, Secretary Lew could conceivably argue that it is in the best interest of the public to sell gold in order to avoid jeopardizing the United States' credit."
At this point, it looks like the debt ceiling may be <a href="http://www.businessinsider.com/closing-bell-october-10-2013-2013-10">delayed for another six weeks</a>.

CREDIT SUISSE: The US Treasury Could Make The Case For Selling The Gold Reserves

<div class="KonaFilter image-container float_right"><div class="image"><img src="http://static3.businessinsider.com/image/52b4753c6bb3f7e718f848cf-680-510/argentina-peso-currency.jpg?maxX=480" border="0" alt="argentina peso currency" width="480" /><a href="http://commons.wikimedia.org/wiki/File:Anverso_-_Billete_10_centavos_de_Peso_Moneda_Nacional_%28Argentina%29.png">Wikimedia Commons</a></div></div>It's just been total chaos in the Argentina in recent days and months.
Moments ago, Argentina said it would loosen capital controls that had been intended to keep money from leaving the country.
Argentines will be allowed to trade in their pesos for dollars in line with their income starting Jan. 27, reports Bloomberg's Daniel Cancel.
This is a major announcement because with central bank reserves dwindling to <a href="http://www.reuters.com/article/2014/01/23/argentina-peso-idUSL2N0KX0QQ20140123">around $29 billion</a>, Argentina has had itself in the extraordinarily troubling position of potentially being unable to <a href="http://www.businessinsider.com/argentinas-currency-problems-2013-12">finance its debt obligations to other countries or afford crucial imports like fuel</a>.
In its effort to limit foreign currency transactions, Argentina had put into place capital controls. Argentines have had to fill out applications to receive dollars for their pesos. The government had also put into place massive taxes for citizens who wished to spend money overseas.
All of this led to a burgeoning black market, where the exchange rate was for Argentine pesos has been actually much substantially more unfavorable. But the fact that Argentines were willing to accept a huge discount for their pesos reflected how difficult it was to go <a href="http://www.reuters.com/article/2014/01/23/argentina-peso-idUSL2N0KX0QQ20140123">through legal means</a>.
Unfortunately, these growing currency black markets had made the capital controls less effective.
On Thursday, Argentina shocked everyone by saying it had abandoned its interventionist monetary policy, which caused the peso to <a href="http://www.businessinsider.com/chart-of-the-day-2014-1">dropped a breathtaking 13%</a> against the dollar.
The plunging currency only added to fears that inflation would or continue to plague the troubled country.
In it's statement today, Argentine Cabinet Chief Jorge Capitanich said that the peso had reached an acceptable level.
According to Bloomberg, the peso is now at 7.88 per dollar. On the black market its closer to 13 per dollar.
This story is obviously fast-moving and developing.
For more on this story, read <a href="http://www.businessinsider.com/argentinas-currency-problems-2013-12">The Financialist's excellent write-up, which uses research from Credit Suisse's Casey Reckman</a>.

Argentina Just Made A Huge Change To Its Currency Policy A Day After Its Peso Crashed

<div class="KonaFilter image-container display-table float_right"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/527d1b67ecad04785d0cd410-1200-924/art-cashin-26.jpg" border="0" alt="Art Cashin" />AP ImagesArt Cashin</div></div></div>We're seeing increasing amounts of evidence to suggest that <a href="http://www.businessinsider.com/loan-growth-is-accelerating-2014-4">business spending activity is picking up</a>.
The most compelling evidence that many analysts are pointing to is the recent <a href="http://www.businessinsider.com/business-lending-is-back-2014-4">acceleration of commercial and industrial loans</a> (C&amp;I) as reported by the Federal Reserve.
"Why is lending increasing so fast in the US?" asked <a href="http://www.thefinancialist.com/business-lending-is-back-and-its-a-good-thing/">The Financialist's Jens Erik Gould</a>. "There are two primary factors: a recovering economy and loose monetary policy meant to entice businesses to take on more debt."
That first point is good news, but that second point raises a red flag for some.
Since the financial crisis, the Federal Reserve has kept monetary policy very loose. Indeed, the Fed's balance sheet has <a href="http://www.businessinsider.com/jamie-dimon-on-the-feds-balance-sheet-2014-4">ballooned from $1 trillion in 2007 to more than $4 trillion today</a> as it bought up financial assets and flooded the economy with cash.
However, much of that cash hasn't moved much. Specifically, borrowing and spending in the business world has been very low. And as a result, inflation has remained very low.
Now, the <a href="http://www.businessinsider.com/monday-scouting-report-apr-14-2014-2014-4">anecdotes are pouring in</a> to confirm the Fed's lending data. UBS's Art Cashin wrote about it this morning citing one bank's anecdote. He also issued a somewhat ominous warning (emphasis added):
...In a front page article this morning, the WSJ says that all may be changing. They say banks are beginning to lend and business are beginning to borrow. Here's a bit:
The increase in commercial lending is helping big banks offset slack demand for mortgages and other types of consumer loans, which has weighed on overall lending numbers. The six banks posted 2.9% growth in overall lending in the first quarter.
Andrew Cecere, chief financial officer of U.S. Bancorp, the fifth-largest U.S. lender by assets, said in an interview Wednesday the bank has seen increased demand for commercial loans from small businesses to midsize companies and large corporations. The Minneapolis bank posted a 9.7% increase in commercial loans outstanding in the quarter, to $113.8 billion, helping to drive a rise in first-quarter net income.
"There's just a general higher level of interest in loan activity and lines of credit," he said.
The implications of this are potentially huge - to the economy; to the stock market; to Fed policy; and perhaps, most importantly, to inflation. In a fractional banking system, money gets velocity when it's lent. High velocity risks hyperinflation. We'll discuss more fully next week.
Cashin has <a href="http://www.businessinsider.com/art-cashin-on-money-stock-and-inflation-2013-2">long warned</a> that an increase in the velocity of money could quickly turn hyperinflationary.
While he may sound extreme, he's not the only person warning about the perils of increased lending activity on the back of a mountain of loose money.
"Over the past 15 weeks there has been a sharp acceleration in bank lending, which is now growing at an 8.6% annual rate, and could suggest animal spirits are reviving," noted <a href="http://www.businessinsider.com/the-most-important-charts-in-the-world-2014-4#liz-ann-sonders-charles-schwab-20">Charles Schwab's Liz Ann Sonders</a>. "But it does mean we need to keep an eye on the velocity of money to gauge the risk of an inflation scare."
We'll surely hear more about this.
<div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image"><a title_source="Business Insider, Liz Ann Sonders" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/5344460ceab8eacb700d57f4-960/liz-ann-sonders-charles-schwab.jpg"><a href="http://www.businessinsider.com/the-most-important-charts-in-the-world-2014-4#liz-ann-sonders-charles-schwab-20"><img src="https://static-ssl.businessinsider.com/image/5344460ceab8eacb700d57f4-1200-900/liz-ann-sonders-charles-schwab.jpg" border="0" alt="liz ann sonders charles schwab" /></a></a><a href="http://www.businessinsider.com/the-most-important-charts-in-the-world-2014-4">Business Insider, Liz Ann Sonders</a></div></div></div>

Everyone's Talking About This Bullish Trend, But Art Cashin Warns It's Hyperinflationary

<div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/53ff2e226bb3f7071f6391f1-1200-800/rtr3vy0b.jpg" alt="bridge american flag" border="0">REUTER/Mike SegarA giant American flag hangs from the West tower of the George Washington Bridge in between New York and New Jersey.</img></div></div></div>GDP grew at a blazing 4.2% rate in Q2.
The most exciting line item of the GDP report is real nonresidential fixed investment, which is a fancy way of saying business investment. In Q2 it jumped a whopping 8.4%, which was much stronger than the initial 5.5% estimate.
"The drivers in this category included impressive gains in structures spending (9.4% from the previously reported 5.3% increase) and business equipment expenditures, 10.7% versus the initial estimated of 7.0%," noted Bloomberg economists Rich Yamarone.
This suggests "that businesses began to put cash to work in Q2 as the US economy rebounded from the early-year growth stumble," said TD Securities' Gennadiy Goldberg.
<h3><div class="KonaFilter image-container display-table float_right click-to-enlarge"><div><div class="image"><a title_source="Morgan Stanley" title_caption="Big companies are sitting on mountains of cash." class="zoomin" href="https://static-ssl.businessinsider.com/image/53ff42ffecad04506f50b799-960/chart-1035.jpg"><img src="https://static-ssl.businessinsider.com/image/53ff42ffecad04506f50b799-899-594/chart-1035.jpg" alt="cash" border="0" /></a>Morgan StanleyBig companies are sitting on mountains of cash.</div></div></div>This Is What We've Been Waiting For</h3>
The financial crisis was highlighted by a credit crunch, which left even the most financially healthy corporations strapped for cash. As a result, corporate America had been accumulating an hoarding <a href="http://www.businessinsider.com/173-trillion-of-corporate-cash-in-q1-2013-5">trillions of dollars of cash on their balance sheets</a>.
And because growth has been slow and the outlook uncertain, corporations have largely returned excess cash flows to investors through <a href="http://www.businessinsider.com/albert-edwards-warns-of-slowing-buybacks-2014-8">share buybacks</a> and dividends.
But with the economic recovery and bull market in stocks entering its sixth year, <a href="http://www.businessinsider.com/morgan-stanley-2014-us-economic-outlook-2013-12">economists</a> and <a href="http://www.businessinsider.com/bianco-whole-debate-about-the-sp-500-2013-10">strategists </a>have argued that the next leg of growth would have to be driven at least in part by a boom in business spending.
<div class="KonaFilter image-container display-table float_right click-to-enlarge"><div><div class="image"><a title_source="Gluskin Sheff" title_caption="America's stuff is super old." class="zoomin" href="https://static-ssl.businessinsider.com/image/52a8981069beddd4105b4867-960/chart-927.jpg"><img src="https://static-ssl.businessinsider.com/image/52a8981069beddd4105b4867-946-665/chart-927.jpg" alt="aging assets" border="0" /></a>Gluskin SheffAmerica's stuff is super old.</div></div></div>With growth picking <a href="http://www.businessinsider.com/q2-gdp-2014-8">finally picking up</a>, <a href="http://www.businessinsider.com/replacing-aging-capital-stock-is-bullish-2013-12">equipment getting old</a>, and <a href="http://www.businessinsider.com/loan-growth-is-accelerating-2014-4">lending activity</a> getting looser, it appears that now is as good a time as ever for the U.S. spending boom to finally happen. Here's a round up of some of the recent signals from <a href="http://www.businessinsider.com/credit-suisse-on-the-capex-revival-2014-8">The Financialist's Ashley Kindergan</a>:
...So far this year, Federal Reserve Bank of Philadelphia surveys show that an average of 30.5 percent of businesses plan to increase spending over the next six months, up from 27 percent over the same period in 2013. The portion that plans to cut spending, meanwhile, has declined from 13 percent to 6.7 percent. (It's worthwhile to note that both figures mark a 180-degree turnaround: Over the same time period in 2009, only an average of 18 percent cited plans to expand spending, while 25 percent said they planned to cut.) Further evidence that there's optimism in the air: The Conference Board's CEO Conference Survey index sat at 62 out of a possible 100-points this month, and anything above 50 is considered positive. And more than three-quarters of CEOs expect profit growth over the next 12 months.
With aggregate lending standards relaxing over the past two-plus years, banks are seeing higher demand for commercial and industrial loans from companies with at least $50 million in sales. The net percentage of banks citing higher loan demand in their most recent quarter has been positive since the first quarter of 2013. In July's quarterly survey, 36 percent of banks surveyed said demand for C&amp;I loans from large and middle-market companies had grown over the past quarter, compared to just 5.3 percent that reported flagging demand.
"Of course, more important is the recent widespread strengthening in the business and consumer surveys, which suggests that GDP growth in the third quarter could be a decent 3.0%," said Capital Economics' Paul Dales.
Hopefully, all of this good news is real and it'll provide the juice the economy and the markets need.
<div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/53ff45616bb3f7ab786391f1-800-673/chart-1036.jpg" alt="lending standards" border="0">Federal ReserveFew loan officers are tightening standards, and demand for loans is up.</img></div></div></div>

A Key Part Of The Economic Recovery Everyone's Been Waiting For Is Finally Happening

<div class="KonaFilter image-container display-table float_right"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/52fe3909ecad04ab1b063b84-852-639/horse-race-winner-3.jpg" alt="horse race winner" border="0">AP Photo/Garry Jones</img></div></div></div>FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
<a href="https://www.thefinancialist.com/is-the-bull-market-over/" target="_blank">The Economy Is In A State Of Reflation</a> (The Financialist)
Global GDP remains sluggish and benchmark interest rates remain close to zero around the world.
Credit Suisse Asset Management Systematic Allocation Strategies founding partner Jonathan Wilmot "has a name for this kind of lopsided recovery: Reflation, which he defines as a period during which nominal and real GDP growth accelerates, but short- and long-term interest rates remain lower than is typical during an economic expansion."
"While many are calling for a spike in rates any day now, Wilmot says that the economic state of reflation tends not to be short-lived. Even if rates jump in the short term, they will quite likely remain below their historical averages for longer than many investors expect... If the bond market remains relatively subdued in response to improving economic data, corporate profit growth could continue to be strong and equities could continue their outperformance relative to fixed income for several years or more."
<a href="http://www.blackrockblog.com/2014/08/26/position-portfolio-rates-start-rise/" target="_blank">These Are The Assets You Should Avoid In The Face Of Rising Rates </a>(BlackRockBlog)
The consensus coming out of the Federal Reserve's recently released minutes along with the Jackson Hole Symposium suggests that interest rates are likely to be on the rise. Russ Koesterich CFA, chief investment strategist for BlackRock believes "the Fed is likely to begin raising rates in the first half of 2015, and the first rate hike could come as early as March."
According to Koesterich, you should avoid treasury bonds with two to five-year maturities as well as commodities like gold. "While longer-term interest rates have remained stable, the prospect for an early Fed tightening is exerting downward pressure on the prices of shorter-maturity Treasury bonds- particularly those with two- to five-year maturities - and pushing yields higher." In addition, "the prospect for tighter monetary conditions is driving the dollar higher and putting downward pressure on many commodities." As a result, these two asset classes are likely to become more volatile than stocks. 
Koesterich believes that, "although not cheap, stocks have the tailwinds of still-low rates and improving economic conditions at their back." Thus, they may prove to be a more resilient investment. 
<a href="http://blog.columbiamanagement.com/asset-allocation-where-does-fixed-income-fit-it" target="_blank">Bonds Will Likely Disappoint In the Second Half Of This Year</a> (Columbia Management)
So far in 2014, bonds have been performing very well due to underwhelming growth and fall rates. In fact, according to Columbia Management's Global Asset Allocation Team,"longer duration U.S. bonds [are] performing even better than equities." This is in spite of "negative sentiment on bonds [that] had been building in concert with expectations of improved growth and higher rates." 
However, the team, still "expects bonds to deliver negative or relatively low returns unless growth disappoints in the second half." This is because, although "U.S. rates may appear low in absolute terms, [when] compared with the rest of the developed world, they are actually higher in a relative sense than at any previous point in this cycle."
<a href="http://www.businessinsider.com/us-economy-could-expand-for-another-5-years-2014-8" target="_blank">The Market Expects The US Economy To Expand For Another 5 Years</a> (Deutsche Bank)
Since we are now in the sixth year of economic recovery and in the midst of a bull market, as we over due for another recession? No so says Deutsche Bank Security's chief economist Torsten Slok. "Recessions don't happen because of a clock ticking. Recessions happen because of imbalances in the economy or too tight monetary policy... In other words, with the fed funds rate well below neutral for many more years this expansion will likely also continue for many more years." 
"One way to quantify how long time this expansion will continue is to look at the length of expansions and the level of the fed funds rate when expansions ended, i.e. just before recession began," said Slok. "On this measure the market still expects this expansion to continue for another five years or so."

The Conditions Are Right For Stocks To Beat Bonds For Years

<div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/53ee84d0eab8eafd439845e8-800-600/london-big-ben-2.jpg" border="0" alt="london big ben">Alyson Shontell/Business Insider</img></div></div></div><a href="http://www.wellsfargo.com/economicsemail">The UK May Not Hike Rates Until Well Into 2015</a> (Wells Fargo)
The consensus among economists is that the UK will commence tightening its monetary policy in Q1 2015. Wells Fargo believes there's reason to think it could come a bit later.
"The Bank of England has pledged to keep its Bank Rate at 0.50 percent, where it has been maintained since March 2009, until spare capacity in the British economy has been more fully absorbed," they write. "Unfortunately, spare capacity is an unobservable variable, and it can vary over time due to fluctuations in actual GDP growth and changes in potential GDP growth, which is also unobservable. Wage growth is an observable variable that should be inversely correlated with spare capacity in the labor market (i.e., as spare capacity in the labor market falls, wage growth should rise), and we think that it will be very important to watch wage growth in coming months-the MPC has essentially told us to do so-to determine the timing of the first rate hike by the BoE since 2007. The consensus forecast among economists (as measured by Bloomberg) looks for the MPC to commence its tightening cycle in Q1-2015, and the yield curve implies that investors believe the first rate hike will happen by then as well. Our forecast looks for the first rate hike to occur in the second quarter of next year. In any event, the MPC likely will not raise rates this year, unless wages accelerate significantly over the next few months."
<a href="http://www.thereformedbroker.com/2014/08/15/chart-o-the-day-sp-500-current-vs-historical-valuation/">Nine Out Of 16 Equity Valuations Above Average</a> (Josh Brown)
Josh Brown points us to this table from Bank of America showing a snapshot of the S&amp;P500's valuation on sixteen metrics. US large cap stocks are currently at or above their historic valuation on nine of them.
<div class="KonaFilter image-container"><div class="image"><img src="https://static-ssl.businessinsider.com/image/53ee814069beddaf592f3638-572-489/screen-shot-2014-08-15-at-9.17.02-am.png" border="0" alt="s&amp;p valuations" width="735" height="628"><a href="http://www.thereformedbroker.com/2014/08/15/chart-o-the-day-sp-500-current-vs-historical-valuation/">Bank of America via Josh Brown</a></img></div></div>
<a href="http://www.blackrockblog.com/2014/08/15/middle-east-tensions-oil-prices-equity-portfolios/">Stick With Energy Stocks</a> (BlackRock)
BlackRock's Russ Koesterich believes that on valuations alone, energy stocks still look good, regardless of what's happening geopolitically.
"Despite outperforming year-to-date, energy sector valuations still have room to grow, as measured by looking at the S&amp;P Global 1200 Energy index," he writes. "Multiples are still at a discount to their 10-year average and fund positioning is low, as I point out in my new <a href="http://www.blackrock.com/investing/literature/market-commentary/oils-precarious-balance-market-perspectives-sept-2014.pdf">Market Perspectives paper</a>. In addition, I continue to see good free cash flow and several recent investment projects are beginning to bear fruit. In particular, I see good opportunities in certain integrated companies and exploration and production companies where there is resource growth. You can read more about my outlook for oil prices, and what this means for investors, in <a href="http://www.blackrock.com/investing/insights/market-perspectives">the full Market Perspectivespiece, "Oil's Precarious Balance, and you can </a><a href="http://youtu.be/-xrXHB-yLmI">listen to a client call on the subject here</a><a href="http://www.blackrock.com/investing/insights/market-perspectives">.</a>
<a href="http://www.voxeu.org/article/secular-stagnation-facts-causes-and-cures-new-vox-ebook">About That Secular Stagnation Book</a> (VoxEU.org)
On Friday Paul Krugman <a href="https://twitter.com/NYTimeskrugman/status/500279589349105664">said</a> a new book compiled by Vox.eu on secular stagnation is a must-read. He happens to be a contributor, but he has a point. <a href="http://www.voxeu.org/article/secular-stagnation-facts-causes-and-cures-new-vox-ebook"></a><a href="http://www.voxeu.org/article/secular-stagnation-facts-causes-and-cures-new-vox-ebook"></a>
"Our authors are far from a homogeneous group - they come from different continents and different schools of thought," VoxEU says. "Their contributions were uncoordinated and they do not entirely agree, but a fairly strong consensus has emerged on three points. 
<ul>
<li>"First, a workable definition of secular stagnation is that negative real interest rates are needed to equate saving and investment with full employment.</li>
<li>"Second, the key worry is that secular stagnation makes it much harder to achieve full employment with low inflation and a zero lower bound on policy interest rates.</li>
<li>"Third, while it is too early to tell whether secular stagnation is going to materialise in the US and Europe, economists and policymakers should start thinking hard about what should be done if it does. Doing so is a no-regret option.</li>
</ul>
<a href="https://www.thefinancialist.com/theres-no-such-thing-as-normal-anymore/" target="_blank">Bond Yields Won't See A Massive Sell-Off Yet Because Corporations Have Plenty Of Cash And Credits Have Been Performing</a> (The Financialist)
As the Federal Reserve winds down its quantitative easing program, people have started to worry about the bond market.
Credit Suisse's Senior Advisor, Robert Parker "expects a slow burn over the next 18 months in which bond yields do rise but still remain well below their historical averages." Despite the fact that he isn't expecting "further upside" for corporate bonds, he also doesn't expect a massive selloff because most credits have been performing, and corporations "are also sitting on plenty of cash and are less leveraged than in recent years".
He also points out interesting investment opportunities in equities. He believes that North Asian markets (including Japan, South Korea, China, and Taiwan) are attractive. And he expects Southeast Asian markets to underperform.

Here's Why The UK May Not Hike Rates Until Well Into 2015 

<div class="KonaFilter image-container float_right"><div class="image on-image"><img src="http://static6.businessinsider.com/image/525f0cc769bedd4f2d916a1a-612-459/bernoulli-3.jpg?maxX=480" border="0" alt="bernoulli" width="480" />Wikimedia</div></div>FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors. 
<a href="http://www.thefinancialist.com/make-the-right-choice-three-steps-to-effective-decision-making/">What An 18th Century Swiss Physicist Can Teach Us About Proper Decision Making</a> (The Financialist)
Credit Suisse Global Financial Strategy Chief Michael Mauboussin gives a brief lecture about why Swiss physicist Daniel Bernoulli can help us make better decisions: whereas, for millennia, man kept trying to reproduce flight through simple observation and classification (i.e. "birds fly, so a flying machine should have feathers), Bernoulli went back and figured out flight's root cause: fluid dynamics. At that point, it was only a matter of time before someone like the Wright Brothers figured out a way to put his theory into practice. For investors, the key is to efficiently get through the first two stages of discovery to make it to the third stage: definition, or causality. 
<a href="http://www.marketwatch.com/story/how-now-dow-theory-2013-10-16">The Dow Theory Has Still Not Flashed Its Sell Signal</a> (MarketWatch)
Dow Theory adherents rely on the Dow Industrials average confirming retracements in the Dow Transports average (and vice-versa) to make market decisions. Given that both have seen recent corrections, one might think we are near a sell signal. Not so, says Marketwatch's Mark Hulbert: "...we're still a long ways from a sell signal. The next step would be for either one or both Dow averages to fail to surpass their September closing highs (15,676.04 for the Industrials and 6,726.94 for the Transports) and then both break below their Oct. 8 closing lows (14,776.53 and 6,446.75, respectively). ... therefore, we can wait and let the market tell its story. In the meantime, because the Dow Theory assumes that the most recent signal remains in place until overturned, the Dow Theory remains bullish."
<a href="http://blogs.wsj.com/economics/2013/10/16/home-shoppers-kicking-the-tires-but-delaying-deals/">Further Evidence That Housing Is Cooling Off</a> (Wall Street Journal)
This week, <a href="http://www.businessinsider.com/a-housing-mini-bubble-may-have-already-popped-2013-10">we gave you anecdotal evidence</a> for why the housing market was slowing down: "serious" homebuyers appear to have replaced investors or flippers as the market's main drivers. Today, we got more data showing this is happening on a national scale. According to real estate data firm Redfin, formal offers for homes declined -11.8% in September. That's the largest drop-off of 2013 - and nowhere near the 4.5% gain seen last September. "Our clients are concerned about fluctuating mortgage rates as well as the government shutdown and debt ceiling battle. When people feel uncertain about their wealth and the economy, buying a home falls to the bottom of their to-do list," Redfin's New York manager said in a press release.
<a href="http://advisorperspectives.com/commentaries/isharesblog_101613.php">Since At Least 1988, Expanding Growth + Falling Inflation = Stick With Stocks</a> (Russ Koesterich)
The following table from a forthcoming paper by BlackRock's Russ Koesterich indicates that since 1988, stocks have outperformed bonds when there's been high growth and non-existent inflation:
<div class="KonaFilter image-container click-to-enlarge"><div class="image"><a title_source="Koesterich" title_caption="" class="zoomin" href="http://static3.businessinsider.com/image/525f063ceab8ea141e916a16-960/shortterm_suprises_table.jpg"><img src="http://static3.businessinsider.com/image/525f063ceab8ea141e916a16-1200-414/shortterm_suprises_table.jpg" border="0" alt="Short Term Suprises Table" width="800" /></a><a href="http://advisorperspectives.com/commentaries/isharesblog_101613.php">Koesterich</a></div></div> 
He writes: "today's environment... should be good for both developed and emerging market stocks, although the performance of the latter will be somewhat dependent on the future path of monetary policy. As we write in the paper, my research team has found that the sweet spot for (monthly) developed equity performance has been a combination of global economic expansion and declining US inflation. Meanwhile, emerging market stocks generally tend to perform best in environments of falling inflation."
<a href="http://advisorperspectives.com/commentaries/acm_101613.php">It May Not Be As Exciting, But Only Day Traders Should Care About The Headlines</a> (Advisors Capital Management)
If you tried to make financial decisions based on the drips of information coming out of Washington for the past two weeks and you weren't a day trader, you've made a huge mistake. "...investors can inflict great harm on themselves by reacting to the news, if they fail to get out and also get back in at precisely the right time. Being off by a mere 15 seconds on either side of the trade can be very costly. The discussions are taking place behind closed doors, and leaks of progress or failure can occur at any time with no notice and move the market up or down quite sharply. So, it is very easy to get whipsawed by the latest developments. In contrast, being invested and staying the course hurts only if a serious default is allowed to occur."

FINANCIAL ADVISOR INSIGHTS: Here's What An 18th Century Swiss Physicist Can Teach Us About Decision Making

<div class="KonaFilter image-container display-table float_right click-to-enlarge"><div><div class="image on-image"><a title_source="REUTERS/Guang Niu" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/54d20445dd08955a148b456e-960/rtroeol.jpg"><img src="https://static-ssl.businessinsider.com/image/54d20445dd08955a148b456e-1200-1715/rtroeol.jpg" border="0" alt="panda china strong" /></a>REUTERS/Guang Niu</div></div></div>Back in October, the Financial Times wrote that <a href="http://www.ft.com/cms/s/0/28f6b8d4-59cd-11e4-9787-00144feab7de.html#axzz3QfsPJAxr" target="_blank">China's outbound investment will soon surpass the amount invested inside the country</a>, marking a new step in the rise of this new economic power. 
"This is just a matter of time; if it doesn't happen this year then it will happen in the very near future," Zhang Xiangchen, China's assistant minister of commerce, told the paper.
Not only China is on the verge of becoming a net exporter of capital, it has already overtaken its Western counterparts as a primary source of credit for the developing world. And from this financial prominence it will likely want to exercise political influence, too.
In other words, China's foreign investment is coming soon to a country near you! And it's going to change the entire world. Here's a summary of China's progress so far:
China investments' abroad are massive, amounting to $870 billion at the end of last year, <a href="http://www.heritage.org/research/projects/china-global-investment-tracker-interactive-map" target="_blank">according to data released by the Heritage Foundation</a>, an American research institute. 
This map below, also from the <a href="http://www.heritage.org/research/projects/china-global-investment-tracker-interactive-map" target="_blank">Heritage Foundation</a>, shows the current reach of Chinese investments. The larger the pie, the bigger the investment. 
<div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image"><a title_source="Heritage Foundation" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/54d20445dd08955a148b456b-960/screen shot 2015-02-03 at 3.20.44 pm.png"><img src="https://static-ssl.businessinsider.com/image/54d20445dd08955a148b456b-1200-924/screen shot 2015-02-03 at 3.20.44 pm.png" border="0" alt="China Global Reach" /></a><a href="http://www.heritage.org/research/projects/china-global-investment-tracker-interactive-map">Heritage Foundation</a></div></div></div>
The United States leads the way, having received a little more than $72 billion since 2007. Of these, the most recent and largest share is in capital investments, showing that Chinese investors are going after stocks as much as commodities and real estate.
Australia's wealthy metal sector has also received attentions over the year, totalling more than $30 billion that Chinese corporations invested in mining companies and projects Down Under.
The latest wave of investments has also come to Britain and its property and real estate sector.
It "[...] will further accelerate the flow of outbound capital from China, in particular into favoured markets like Australia, the US and the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword>," <a href="http://www.ft.com/cms/s/0/28f6b8d4-59cd-11e4-9787-00144feab7de.html#ixzz3QhTpAxZU" target="_blank">Alistair Meadows, head of international capital in Asia-Pacific for JLL, the real estate investment consultancy, told the FT</a>.
Almost half of the worldwide investments, about $395 billion, are in the energy sector.
This makes sense as China is more and more in search of foreign energy sources to sustain its growing pace. In 2013, China imported nearly 60% of its oil and 30% of its gas, <a href="http://www.foreignaffairs.com/articles/139425/damien-ma/chinas-search-for-a-new-energy-strategy" target="_blank">Foreign Affairs reported</a>.
When China invests in one country, it quickly becomes the biggest creditor, sometimes to the extent of altering the economic and diplomatic scenario. 
Here are three examples.
<h2>China in Africa:</h2>
China first started investing in Angola in 2004, when a Chinese program of road investments was agreed in exchange for a share of Angola's vast oil reserves. 
Five years later, <a href="http://www.aljazeera.com/programmes/insidestory/2014/05/china-africa-investment-exploitation-201454154158396626.html" target="_blank">China became the biggest trading partner not only of Angola, but for the whole of Africa</a>. Last year, China pledged investments of $20 billion in African infrastructure alone. But there is much more than roads and bridges: Chinese investments in Africa are in the tens-of-billions of dollars, and cover everything from real estate to minerals to financial services.
Countries like Chad and Niger now owe to China about 15 times what they receive from the International Monetary Fund (chart below).
Even in Sierra Leone, which <a href="http://www.worldbank.org/en/topic/health/brief/world-bank-group-ebola-fact-sheet" target="_blank">received a new wave of IMF funds to fight ebola</a>, China leads the way by far.
This chart compares current open loans granted by the IMF in its development projects in Africa with Chinese direct investments between 2008 and 2014: 
<div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image"><a title_source="Data: IMF, Heritage Foundation/Graphic: Stefano Pozzebon/BI" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/54d20445dd08955a148b456c-960/screen shot 2015-02-03 at 2.59.04 pm.png"><img src="https://static-ssl.businessinsider.com/image/54d20445dd08955a148b456c-1127-260/screen shot 2015-02-03 at 2.59.04 pm.png" border="0" alt="IMF vs China In Africa" style="line-height: 1.5em;" /></a>Data: IMF, Heritage Foundation/Graphic: Stefano Pozzebon/BI</div></div></div>
Chinese investment is mainly intended at sourcing raw materials to feed China's manufacturing sector, with almost no other local processing than shipping them from the mine to the harbour. 
Africans are already complaining of the downside of this practice: "We lose all the job creation opportunities, because all the jobs are still made by Chinese in China," <a href="http://www.aljazeera.com/programmes/insidestory/2014/05/china-africa-investment-exploitation-201454154158396626.html" target="_blank">Joseph Onjala, senior research fellow at the Institute for Development Studies at the University of Nairobi, told Al Jazeera</a>.
<h2>China in Latin America: </h2>
China is a big lender to both Venezuela and Argentina, the two most troubled countries of the region.
Both Nicolas Maduro, Venezuela's president, and Cristina Fernandez de Kirchner, his Argentinian counterpart, have been long neglected by Western creditors. They both <a href="http://uk.businessinsider.com/china-has-venezuela-on-its-knees-2015-1" target="_blank">ended up knocking on the door of the Chinese in search of cash</a>. 
According to <a href="http://www.bubblear.com/author/biancafernet/" target="_blank">Bianca Fernet of The Bubble</a>, China is taking big - possibly unpopular - risks by lending heavily to the Latin American pair:
When China comes into countries like Venezuela, Argentina, or Russia during a crisis situation, it can paint itself as superhero falcon, saviour of the day. But the reality is that swooping into resource-rich countries where no one else dares tread and shoving harsh terms down desperate leaders' throats is at least as predatory as what Argentina's famed vultures did, or possibly more so.
<h2>China in Asia:</h2>
China is a heavy investor in Pakistan and Bangladesh, in both cases outstripping the loans these countries receive from the IMF and other Western partners. 
<div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image"><a title_source="Data: IMF, Heritage Foundation/Graphic: Stefano Pozzebon/BI" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/54d20445dd08955a148b456d-960/screen%20shot%202015-02-03%20at%202.58.54%20pm.png"><img src="https://static-ssl.businessinsider.com/image/54d20445dd08955a148b456d-876-474/screen%20shot%202015-02-03%20at%202.58.54%20pm.png" border="0" alt="Screen Shot 2015 02 03 at 2.58.54 PM" /></a>Data: IMF, Heritage Foundation/Graphic: Stefano Pozzebon/BI</div></div></div>
<a href="http://www.heritage.org/research/projects/china-global-investment-tracker-interactive-map" target="_blank">Chinese investments in the Middle East have funnelled $55 billion to the region between 2007 and 2014</a>, according to the data from the Heritage Foundation.
Once again, it is mainly directed towards energy projects, but the United Arab Emirates' rising real estate sector is also becoming a new target. In May 2012 alone <a href="http://www.cncec.com.cn/html/home/index.html" target="_blank">China National Chemical Engineering Group</a> invested almost $3 billion on the shores of the Arab Emirates. And the Chinese slice of Dubai and Abu Dhabi's wealthy real estate / property market amounts now to more than $5.5 billion. Last year <a href="http://www.cnbc.com/id/101988850#." target="_blank">CNBC Inside Wealth declared Dubai the best place in the world for real estate returns</a>.
Indonesia has received $8 billion for its mineral resources, about the same in transportation deals, and $13 billion in the energy sector. 
Even Japan and India, two of China's rivals for dominance of Asia, have been the target of a spending spree of $1.6 billion and $12 billion, mainly before 2013 when <a href="http://www.businessinsider.com/tensions-in-the-south-china-sea-explained-in-18-maps-2015-1" target="_blank">the political tensions</a> in the region started to raise some eyebrows. That year territorial disputes over the Senkaku Islands, a rocky archipelago in the East China Sea, caused the trade between China and Japan to fall by 4%, the first time in three years.
The reduction in China-Japan business was bilateral. <a href="https://www.thefinancialist.com/territorial-dispute-disrupts-sino-japanese-trade/#sthash.eMBCcVyv.dpuf" target="_blank">Jonathan Holslag, a research fellow at the Brussels Institute of Contemporary China Studies, told The Financialist</a> that:
"The growing dependence of Japan on China […] is not a very desirable evolution so there is a lot of thinking going on to try to diversify away from China, to conclude commercial partnerships with the countries of Southeast Asia and with India and some places as far as the Middle East and Africa."
<h2>China even has its own World Bank</h2>
Later this year two international institutions, the New Development Bank and the Asian Infrastructure Investment Bank, will soon start to operate as an alternative to the Western-backed World Bank. Both of them are China's pet projects.
The first was launched in July 2014 with the other countries that form the BRICS group (Brazil, Russia, India, China, and South Africa). Headquartered in Shanghai, <a href="http://brics6.itamaraty.gov.br/media2/press-releases/214-sixth-brics-summit-fortaleza-declaration" target="_blank">its declaration of intent is to</a> "strengthen the cooperation among our countries [BRICS]" in counterweight to the Western-dominated IMF and World Bank.
The second institution is open to 21 countries in Asia and the Pacific. But heavyweights like Australia and South Korea did not show up in Beijing at the official launch in October 201,4 <a href="http://www.affairscloud.com/china-launches-aiib-in-asia-to-counter-world-bank/" target="_blank">allegedly after pressure from the US</a>. (Indonesia was also absent initially <a href="http://thediplomat.com/2014/12/asian-infrastructure-investment-bank-an-idea-whose-time-has-come/" target="_blank">but later decided to join in</a>.) 
Commenting on the initiative, <a href="http://www.economist.com/blogs/economist-explains/2014/11/economist-explains-6" target="_blank">the Economist wrote that</a>:
China will use the new bank to expand its influence at the expense of America and Japan, Asia's established powers. China's decision to fund a new multilateral bank rather than give more to existing ones reflects its exasperation with the glacial pace of global economic governance reform.
China has lost patience trying to change Western institutions from within, and "<a href="http://www.economist.com/blogs/economist-explains/2014/11/economist-explains-6" target="_blank">is taking matters into its own hand</a>," wrote the Economist. The fact is that China has already edged out the West as the investment kingpin in the developing world, in economic terms.
Expect political dominance to follow.

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