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HomeShould We Have Trusted the Chinese to Let the Yuan Appreciate?
Posted by Larry Doyle on October 8th, 2010 8:58 AM |
To what degree can international trading partners trust each other in the face of an ongoing decline in overall aggregate global demand for goods and services?
More specifically, to what degree can the two major economic superpowers, those being the United States and China, trust each other in the midst of major economic challenges. While everybody can smile for the camera at trade conferences and international economic summits, what happens when those officials go home and implement policy? As with most things in life, we are wise to watch what is done to a far greater extent than what is said. Why do I raise this topic now?
Let’s look in the rear view mirror to mid-June at which point in time our wizards in Washington celebrated as the Chinese announced that they would agree to let their currency, the yuan, appreciate in value. (more…)
Beggar Thy Neighbor
Posted by Larry Doyle on October 5th, 2010 12:17 PM |
So much has happened along our economic landscape over the last two to three years that it is hard to weigh the magnitude and depth of many of the developments. That said, the simple fact is the tectonic plates underlying our global economy have shifted massively as a result of the enormous financial earthquake of 2008. While global governments and central banks have performed varying degrees of triage to save states, nations, and regions, the movements of the plates are continuing along under the surface. To that end, what is the economic reality now bubbling above the surface given the shift in our tectonic plates below? Let’s navigate and review the reality known as Beggar Thy Neighbor, defined by our friendly Investing primer as,
An international trading policy that utilizes currency devaluations and protective barriers to alleviate a nation’s economic difficulties at the expense of other countries. While the policy may help repair an economic hardship in the nation, it will harm the country’s trading partners, worsening its economic status. (more…)
Will China 2009 Repeat United States 1929?
Posted by Larry Doyle on December 7th, 2009 12:05 PM |
“Those who do not learn from history are doomed to repeat it.”
George Santayana (Spanish born American Philosopher, Poet and Humanist who made important contributions to aesthetics, speculative philosophy and literary criticism. 1863-1952)
The economic boom of The Roaring Twenties here in the United States was closely linked with the massive financing of debt provided to post WWI-Europe. The U.S. was the envy of the world given its economic engine and subsequent economic surplus. Economic historians are well aware that the excess capacity in the United States precipitated The Great Crash of 1929.
Fast forward 80 years. Is China 2009 the equivalent of the United States 1929? Is the United States 2009 the equivalent of Europe 1929? How will the relationship between the People’s Republic of China and the United States play out? I addressed this critically important dynamic this past January in writing, “Prisoner’s Dilemma.”
I recently read and reviewed a fabulous piece produced by Black Swan Trading addressing this topic. This short piece, entitled Currency Currents, is strongly recommended. I submit:
Therefore, I think the key macro event i.e. major sustained risk event, will likely flow from protectionism. Rebalancing is the trigger for protectionism in a world when the major player, China, suppresses its currency. (more…)
John McCain Gets America’s Rage
Posted by Larry Doyle on November 23rd, 2009 3:45 PM |
Who does not respect John McCain? Despite what one may think of McCain’s political views, his personal character and courage are unquestioned. His “straight talk express” did not carry him to the White House, but it gained him the respect of many people from both sides of the aisle.
Today, Senator McCain shares a recent experience which highlights the rage boiling in America at this very moment. The Wall Street Journal provides a forum for McCain in a CEO Council Report entitled, “How to Rebuild Global Prosperity.” I thought so highly of this entire report that highlighted it in the Newsworthy section of Sense on Cents.
I thank The WSJ for producing such a comprehensive report, and I welcome sharing Senator McCain’s thoughts and opinions which were included in the Economy and Finance section of the report:
JOHN McCAIN: I’d like to tell you what I think is happening in Arizona and across America.
I have never seen anything like I am seeing in America today. My home state of Arizona is the second hardest-hit state. We have real unemployment around 17%. The level of anger and frustration and the anger is directed at what we do in Washington and what you do on Wall Street. (more…)
The China Syndrome 2009
Posted by Larry Doyle on November 17th, 2009 11:53 AM |
I am typically reluctant to merely link to articles which I find extremely compelling and newsworthy. I thoroughly enjoy referencing other’s works while adding my own thoughts and perspectives. That said, every once in a while an article comes along which truly deserves to be highlighted in its entirety for its depth of detail and global perspective. I find it interesting that the article I find so compelling is produced not here in the United States, but in the United Kingdom. I thank KD for bringing it to my attention.
From the Telegraph.co.uk, China Has Now Become the Biggest Risk to the World Economy:
President Obama said before going to China this week that Asia can no longer live by shipping goods to Americans already in debt to their ears Photo: AP
“The inherent problems of the international economic system have not been fully addressed,” said China’s president Hu Jintao. Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.
While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. “I’m more worried about deflation,” he said. (more…)
Dr. Edwin Vieira’s Amazing Crystal Ball, 2006
Posted by Larry Doyle on March 24th, 2009 9:52 PM |
I will admit that I am not a student of the Great Depression, but I have started reviewing that period. Obviously I, like every American, hope our economy stabilizes and we regain our footing and return to prosperity. While the pragmatic optimist in me believes that can happen, the trader and risk manager in me tells me to review the Depression, understand the dynamics, assess the risks of our current period, and prepare accordingly.
I hope and believe people who have been reading my work for a while appreciate that I am not an alarmist. Whether working on Wall Street as a trader and salesman or now writing for Sense on Cents, a measured, analytical approach has always generated the best results. In that vein, I discount speculators and salesmen who attempt to make a buck from heightened levels of anxiety. That said, the elevated levels of risk in our economy, markets, and global finance require an equally elevated sense of risk analysis and historical analysis.
Given some of the economic saber rattling emanating from China and the lessened fiscal support emanating from Europe, the threats of global protectionism are clearly growing. That scenario also occurred during the Depression. (more…)
