rlirph

China and Its Predatory Currency Policy

Each country has its own best interests in its policies. It is great to see the China government has finally done something good for its own citizens, that is improving their quality of lives, even though they are still decades behind us. You can sense that their people are happier now than ten years ago. Can you say the same thing about us? We are facing the same old problems when I was in college forty years ago - twin deficits - fiscal and trade deficits. We are unwilling to have fiscal discipline (government and citizens) and unwilling to sacrifice (like drive a smaller car or to save) that has led us to our present situation. Unfortunately we have forty years to create the problems. The problems will not go over overnight...

A US Expat Living In Guangzhou

Good Time to Buy Chinese Currency: Follow the 'Hot Money'

Michael Pettis wrote earlier about where the "hot money" went. It could not go into the stock market because it was halved in seven months. The hot money could not go into local real estate market because housing prices everywhere in China except Shanghai has been going down for the past eight months. The inflow of money if calculated correctly went to the "underground finance companies" which loan out money at 5% per month.

For those who live in China please check with your local business pals. I live in Guangzhou and their answers lead me to believe it is impossible for local small businesses to borrow from local banks. To obtain the funding they must borrow from "underground finance companies" which in the US would be called loan sharks.

Who is to blame? Naturally the Chinese government who set up those ridiculous capital control mechanisms. While the government complains about the amount of inflow of foreign capital do you know that I can not wire out the "foreign capital"? Once the foreign capital arrives and even if the money moves to a CD it cannot be converted back into foreign currencies and to be wired out.