Posts Tagged ‘trade surplus’

The Marriage of Mercantilism and Corporatism: When Free Trade Is Not ‘Free’

The Marriage of Mercantilism and Corporatism: When Free Trade Is Not ‘Free’

Courtesy of JESSE’S CAFÉ AMÉRICAIN

"The consequences of this policy are also stark and simple: in effect, China is taxing imports while subsidizing exports, feeding a huge trade surplus. You may see claims that China’s trade surplus has nothing to do with its currency policy; if so, that would be a first in world economic history. An undervalued currency always promotes trade surpluses, and China is no different." Paul Krugman

And he is exactly right. As regular readers know this matter of Chinese mercantilism and its toleration and acceptance by the West has been a key observation and objection here since 2000. Any economist who does not understand that devaluing and then maintaining an artificially low currency peg with a trading partner distorts the nature of that trade should review their knowledge of algebra.

And yet it was in 1994 during the Clinton Administration that China was permitted to obtain full trading partner "Most Favored Nation" status, while vaguely promising to float their recently devalued currency some day, and address the human rights issues that were endogenous to their non-democratic, totalitarian government.

"From 1981 to 1993 there were six major devaluations in China. Their amounts ranged from 9.6 percent to 44.9 percent, and the official exchange rate went from 2.8 yuan per U.S. dollar to 5.32 yuan per U.S. dollar. On January 1, 1994, China unified the two-tier exchange rates by devaluing the official rate to the prevailing swap rate of 8.7 yuan per U.S. dollar." Sonia Wong, China’s Export Growth

This served Mr. Clinton’s constituents in Bentonville quite well, and has some interesting implications for the Chinese campaign contributions scandals. It supported the Rubin doctrine of a ‘strong dollar’ while facilitating the financialization of the US economy and the continuing decline of the middle class wage earners, under pressue to surrender a standard of living achieved at great cost. "How I Learned to Stop Worrying and Love the Currency Collapse." and China’s Mercantilism: Selling Them the Rope

Not to limit this, George W. ratified the arrangement when he took office, and so it has gone on for almost fifteen years…
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Dollar Hegemony and the Rise of China

Michael Hudson writes a letter. 

Dollar Hegemony and the Rise of China

Courtesy of Michael Hudson 

Hudson to Premier Wen Jaibao, March 15, 2010

Dear Premier Wen Jiabao,

I write this letter to counteract some of the solutions that Western politicians are recommending for China to cope with its buildup of excess foreign-exchange reserves. Raising the renminbi’s exchange rate against the dollar will not cure the China-US payments imbalance. The dollar glut will continue, and so will the currency fluctuation among the dollar, euro and sterling, leaving no stable store of value. The cause of this instability is that each of these three currency areas has grown top-heavy with by debts in excess of the ability to pay.

What then should China should it do with its buildup of excess reserves, if not recycle its inflows into their bonds? Four possibilities have been suggested: (1) to revalue the renminbi, (2) to flood China’s economy with credit (as Japan did after the Plaza Accord of 1985), (3) to buy foreign resources and assets, and (4) to use excess dollars to buy back foreign investments in China, given US reluctance to permit Chinese investment in America’s own most promising economic sectors.

I explain below why China’s best course is to avoid accumulating further foreign exchange reserves. The most workable solution is to use its official reserves to buy back US and other foreign investments in China’s financial system and other key sectors. This policy will seem more natural as a response to an escalation of US protectionist moves to block Chinese imports or block China’s sovereign wealth funds from buying key US assets.

China’s excess reserves will impose a foreign-exchange loss (as valued in renminbi)

Every nation needs foreign currency reserves to ward off currency raids, as the Asia Crisis showed in 1997. The usual kind of raid forces currencies down. Speculators see a central bank with large foreign currency holdings, and seek to empty them out by borrowing even larger sums, selling the target currency short to drive down its price. This is the tactic that George Soros pioneered against the British pound when he broke the Bank of England.

Malaysia’s counter-tactic was not to let speculators cover their bets by buying the target currency. Its Malaysia’s success in resisting that crisis showed that currency controls prevent speculators from “cashing out” on their exchange-rate bets, blocking their attempt to…
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Niall Ferguson: The Dollar Is Finished And The Chinese Are Dumping It

Niall Ferguson: The Dollar Is Finished And The Chinese Are Dumping It

Courtesy of Joe Weisenthal at Clusterstock

Economic historian Niall Ferguson warns that China’s love affair with the dollar is fading faster than anyone realizes.

TechTicker: "The idea they don’t have anywhere else to go or would shoot themselves in the foot if there were a steep decline in the dollar or appreciation of their currency reassures many people in Washington ‘we can relax’," he says. "An appreciation of the renminbi may reduce value of their international reserves but increases the value of every other asset the Chinese own," most notably the commodity assets they have been buying all over the world.

China’s "current strategy is to diversify out of dollars and into commodities," Ferguson says. Furthermore, China’s recent pact with Brazil to conduct trade in their local currencies is a "sign of the times."

Perhaps most importantly, China’s massive stimulus program is helping to generate internal consumption in the People’s Republic, meaning local manufacturers are less dependent on exports. Because of the "rapid growth" of Chinese domestic consumption, Ferguson predicts China’s international trade surplus could be gone by next year.

 

 

 


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Kimble Charting Solutions

Bank Breakout Of Financial Crisis Highs or Double Topping Again?

Courtesy of Chris Kimble

If the saying “So Goes The Banks, So Goes The Broad Market” is true, banks are facing a critical breakout/resistance test in my opinion.

This chart looks at Financials ETF (XLF) over the past 12-years. This chart reflects that a double top took place prior to the financial crisis getting started.

XLF has remained inside of rising channel (1) since the lows in 2012. It hit double resistance at (2), then it declined nearly 25%.

The decline then tested rising support at (3) and a strong rally has followed. The rally now has XL...



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Zero Hedge

"Panic, Pure Panic" - Chilean Peso Collapses To 800/USD, Blowing Through Record Lows

Courtesy of ZeroHedge View original post here.

The Chilean peso extended a four-day losing streak on Tuesday, sinking by the most in eight years, to a new record low at 800/USD.

Source: Bloomberg

Bearish market sentiment, political chaos, and a national strike intended to ratchet up pressure on the government and its plans to change the constitution...

...



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Phil's Favorites

This Fed President Thinks Wall Street Banks Should Stop Whining for the Fed to Bail Them Out and Plan for their Own Liquidity

Courtesy of Pam Martens

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis

Later this afternoon, Neel Kashkari, the outspoken President of the Federal Reserve Bank of Minneapolis, will deliver the keynote address at a conference on “Wisconsin and the National Economy” at the Madison campus of the University of Wisconsin. Tomorrow, he’ll be taking questions at a Town Hall in the University of Wisconsin’s Student Union on the La Crosse campus.

Given Kashkari’s recent remarks on his lack of sympathy for the whining New York bankers who are demanding a liquid...



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The Technical Traders

Welcome to the Zombie-land Of Investing - Part II

Courtesy of Technical Traders

In Part I of this research post, we highlight how the ES and Gold reacted 24+ months prior to the 2007-08 market peak and subsequent collapse in 2008-09.  The point we were trying to push out to our followers was that the current US stock market indexes are acting in a very similar formation within a very mature uptrend cycle.

We ended Part I with this chart, below, comparing 2006-08 with 2018-19.  Our intent was to highlight the new price hig...



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Insider Scoop

Stocks That Hit 52-Week Highs On Tuesday

Courtesy of Benzinga

This morning 131 companies set new 52-week highs.

Things to Consider:
  • Microsoft (NASDAQ: MSFT) was the largest company by market cap to set a new 52-week high this morning.
  • Fast Lane Holdings (OTC: FLHI) was the smallest company by market cap to set a new 52-week high.
  • Advanced Energy Indus (NASDAQ: AEIS) was the biggest loser of the group, declining 8.94% after reaching its new 52-week high.

The stocks that set new 52-...



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Digital Currencies

3 Reasons Why One Trader Didn't "Manipulate" Bitcoin Price To $20K

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Bitcoin price highs in 2017 were not the result of a single trader on an exchange, the CEO of payment company Circle claims. In a series of tweets on Nov. 4, Jeremy Allaire disputed ...



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Chart School

Gold Gann and Cycle Review

Courtesy of Read the Ticker

Gold has performed well, golden skies are here again. In fact it has been a straight line move, and this is typically unusual and a pause can be expected.

It seems the markets are happy again, new highs in the SP500, US 10 year interest rates look to re bound, negative interest may soften. The US FED has reversed their QT and now doing $250BN (not QE) repo. The main point is the FED has stopped QT, and will do QE forever. The evidence now is the FED put is under market risk and the possibility of excessive losses do not exist. 

Point: If in future if there is market risk, the FED will print it's way out of it.
Subject To: In this blog view. The above is so until the amount required rocks confidence in the US dollar as a reserve currency.&n...



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Lee's Free Thinking

Today's Fed POMO TOMO FOMC Alphabet Soup Unspin

Courtesy of Lee Adler

But make no mistake, if the Fed wants money rates to stay down by another quarter, it will need to imagineer even more money.

That’s on top of the $281 billion it has already imagineered into existence since addressing its “one-off” repo market emergency on September 17. This came via  “Temporary” Repo Man Operations money, and $70.6 billion in Permanent Open Market Operations (POMO) money.

By my calculations that averages out to $7.4 billion per business day. That works out to a monthly pace of $155 billion or so.

If they keep this up, it will be more than enough to absorb every penny of new Treasury supply. That supply had caused the system to run out of money in mid September.  This flood of paper had been inundati...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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