Glen88

Will Obama Replace Geithner with Dimon?

My vote would definitely be for Ralph Gomory.

A compassionate, pragmatic, intellectual. That he is so little known is a shame.

Foreign Treasury Holders: What Is China Doing Now?

A tremendous amount of UK purchases area as a proxy for China. Brad Setser would reconcile all the TIC data before moving to the Big House.


On Nov 24 04:31 AM Dave Wrixon wrote:

> If you take away purchase from UK and Japan which probably consist
> largely of purchase made on behalf of the Fed, then Treasuries are
> flat lining. That is not adequate because the US needs very substantial
> growth to cover it borrowing requirements.

The Truth Behind China's Currency Peg

Peter,

You need to consider what happens when an asset turns into a Liability. China's advantage of cheap labour has hidden the fact that it is poorly utilized. Compare man-hour averages in the production of goods between China and the West. With a revaluing of the Yuan, labour will no longer be 'cheap'.

You can compare the labour content of manufacturing. The West, by necessity always has considerably higher utilization rates (in hours not $). Such a readjustment will be felt by Chinese producers. BYD, whom utilized hand assembly, premised on cheap labour, might look less appealing to Warren.

Dollar vs. Yuan: Exchange Rates Aren't the Problem. Or the Solution

Patrick,

That is why the only way to address this issue is by force. Balance trade by import certificates.

Chinese Exports: Can Emerging Markets Replace the U.S. Consumer?

I am waiting to see how mercantiilst Japan is going to have a trade surplus with mercantiilst China, and vice versa.

IEA Whistleblower: Governments Underplaying Peak Oil

The real value of oil is not its energy content but its role as a energy storage medium. Generating energy, or capturing it is getting easier and cheaper. While storage solutions are not as well developed, there is an increasingly good pipeline of potential means.

The Economy Is Bipolar: Get Used to It

Here is another interesting analogy. The US is the hippocampus of the worlds financial brain. Its nimble-ism is akin to plasticity. Its plasticity makes it prone to instability (seizures or mood swings). At the same time it can more quickly adapt to disruptions, with neurogenesis based plasticity being related to the speed and ease in which it can adapt. Of course there is consistent stability outside of the hippocampus (the elites are the PFC, and they always get paid).

How Hyperinflation Can Accompany a Deepening Recession

Sometimes I think that if hyper inflation comes to pass in the US, the aggregate loss of purchasing power would reverberate across the world. Thus triggering competitive devaluations.

If everyone did this at once, and directed the newly printed money towards debt reduction for those most in need, we could call it a Jubilee.

Weak Dollar Is the Price to Pay for Economic Growth

Dave,

You are also missing the the fact that in increase in the value of the Yuan, which is inevitable, will magnify labour inefficiencies in China.

Asian Production Networks: China's Exchange Rate Policies Could Hamper Their Growth

Dave,

It is wrong to view China's currency regime and reserve growth as an investment. China providing the US with cheap credit is an implicit result of maintaining low Yuan. Not the other way around. They were not investing in the US. They were using the ability of the US to willing absorb massive trade surpluses. Wait to see if they can find any other willing countries. Europe will engage in protectionism far quicker. Japan, they themselves are mercantilist. There are few markets big enough to replace the US in facilitating large trade surpluses.

On Oct 21 04:52 AM Dave Wrixon wrote:

It is also becoming clear that US consumer is a lost cause
> and that providing him with cheap and easy credit is a waste of resources.
> It is certainly pointless selling to him for a loss. So the Yuan
> will appreciate against the dollar, and probably sooner than you
> think. Of course once a firm trend is set the Dollar will plunge
> rapidly falling even below fair value, which won't be very much anyway.
>
>
> Have you seen how the Pound is performing lately? It seems to be
> going into tight correlation of with the Gold Price. When was the
> last time that happened? Mind you it is still unable to appreciate
> against the Czech Crown. Trust me the dollar is lost cause.

China September Data: Long-Term Overcapacity Problem Is Intensifying

Michael,

You should have a look at Bomlat's data......
bomlat.blogspot.com/20...

The Dollar Is Now China's Problem

While I agree with you typically good comments, I do wonder about the US's ability to capitalize on any comparative advantage a devalued currency would bring.

As Japan has shown, as with most other mercantilist, even when exchange rates tip the advantage to foreign production, it does not occur. Japan never became a good customer of the US. I doubt China will either. If markets were truly free, Toyota and Honda would not be closing plants in the US while keeping Japanese ones open.

Trade with such nations needs to balanced by force.

On Oct 13 12:03 PM Moon Kil Woong wrote:

> China's real problem is not the dollar but the RMB. No longer can
> they sustain a devalued RMB in the face of a rapidly depriciating
> dollar. Inevitably they must face what all developing contries face
> as the mature from Japan to S. Korea, a rising cost of labor and
> the rising value of their local currency.
>
> If they want to be productive they should focus on fixing their own
> house first. If they want to dump dollars and devalue our currency
> let them. It may be bad for the US short term but long term it's
> good for us long term. Otherwise, they wouldn't want to keep the
> Yuan weak.

Currency Depreciation and Global Imbalances

Re. China's recovery and the worthiness of government stats.

Bomlats blog is a good place to find underlying data. Eg......

bomlat.blogspot.com/20...

"China’s heavy-duty truck market recorded an aggregate sales of approximately 274,000 units, representing a year-on-year decrease of 28.0%. At the same time, demand for engineering trucks such as tipper trucks and concrete mixer trucks had been thriving since March, during this period, driven by catalysts like national investment, the launch of industry revitalization proposals, and fuel tax reform, while the stabilization of logistic market after May substantially brought up the sales of tractors to a large extent"

China Needs to Look Within for Solutions to the Falling Dollar

Peter has been consistent in raising the alarm about unbalanced trade long before most. It is just recently, that the media has paid him greater attention. The question is not where was he before, but were was the media.

Here are some references from 2003-2004

news.google.ca/archive...

eg.

"The assumption that the trade deficit also costs the United States jobs is what alarms economists like Peter Morici, a business school professor at the University of Maryland.

Morici estimates that the persistent trade deficit has cost the nation upwards of 1.3 million jobs at a time when the Labor Department says 8.2 million are looking for work.

"We have a consumer economy, and when imports satisfy consumer demand, that puts limits on domestic growth,'' Morici said. "This is the primary reason we have an economic recovery which has, until very recently, produced meager job growth.''


On Oct 09 10:17 AM coreopsis wrote:

> Interested in links to the 'professor's' articles predicting the
> current economic crisis...or perhaps he is simply another academic
> that claims knowledge about a class of problems that only manifests
> itself ex post facto. As Nassim Taleb says, history doesn't run in
> reverse, and the fallacy of belief in the academic community is indeed
> a key reason why the Black Swan was not identified.

China Wants a Global Currency? Here's How

While I believe that Peter is absolutely correct on the impact of China's currency policy on the US, I do not share his belief that a change ratios will help.

Historically nations that followed the Asian Economic Development Model have not ever transitioned to a balanced model. Japan never became a good customer of the US. Even today, it will shut down US plants while keeping much higher priced Japanese ones operating.

The world needs a system that balances trade with something more than a hope and a prayer.