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With needed reforms, the debt to GDP ratio would be less than half as large as the US's is. They will come, IF the dominate worker's party, PT, does collapse as is beginning to look likely. Not only are many life-long members of PT now turning against it, but it has financial problems as well. - Corporations once supported it as the "devil they knew" (how to bribe, etc. for big government contracts but some CEO are going to, or in danger of going to, jail now as part of the 2.2 billion dollar scandal ). Also the courts have ordered PT to pay fines for some illegal election procedures back in 2008, I think it was, with many more such actions to come.
PT can no long do as it pleases.

 

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More firm now is Brazil/China growing partnership:

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For 8 years or so, China's currency became more valuable wrt the dollar. That trend may be over. In less than two years, their currency rapidly became more important in trade.

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Countries from Central and Eastern Europe are expected to become hot destinations for Chinese tourists, with a string of tourism cooperation agreements signed recently between the two sides.
This from: http://www.chinadaily.com.cn/m/ningbo/topnews.html
And dozens of other very brief developments by China and new trading partners, mainly in central and eastern Europe. Most of these brief notes can be expanded. For example the first above:

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One of the representatives from 11 participating counties (and dozen of travel agencies) "signing in" on the signature board. She look like she may be "East European" to me. Air fares were subsidized, but not "free." Even with its reduced growth rate (still four times greater than the US's) China is an "Up and Coming" power in world trade.

 

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The dollar may be over-valued due to the "safe-haven" demand. - Makes getting US trade deficit reduction nearly impossible. So Chains gains dollars every year and buys more gold with them - Day or reckoning is coming. Like the yuan as part of the SDR basket, it is only a question of when, not if.

 

You have been saying that for years now and more specifically, you predicted the demise of the dollar (i.e. people would rush to dump dollars) back on October 31, 2014. It didn't happen, and there was no reason for it to happen. Instead, the dollar was and remains at historic highs. This is more of the same nonsense. What does over valued mean exactly Billy T?

The price of the dollar, like other currencies, is determined by what buyers and sellers are willing to pay and accept for it at any point in time. The reason the dollar is strong is because people and more specifically foreign buyers want the dollar. And that strengthened dollar is now slowing US economic growth. The US Dollar is facing the problems faced by the Swiss Franc. The strong dollar is slowing the US economy. The US, like the Swiss, would welcome a weaker currency, because it strengthens their economy. It makes goods and services produced in the US cheaper when they are sold overseas which creates a stronger demand for those goods and services. This has been explained to you numerous times over the years. And frankly, I am more than a little perplexed by your fixation with China and why you think it is relevant or why you think a Chinese government newspaper where the Chinese government controls the press is a credible news source.

 

First, you sourced this through Active-Man.com which is a website pushing a political agenda. So anything taken from this site must be viewed with that understanding in mind. This is the actual source material.

http://www.swift.com/about_swift/sh...n/swift_com/2015/PR_RMB_into_the_top_five.xml

For many years now, the US has been trying to get the Chinese government to do what it has done, allow for the strengthening of China's currency. As we have discussed before, it was an unfair trade practice giving Chinese produced goods a perpetual and substantial trade advantage. Japan had a similar trade strategy back in the 70's, 80's and 90's.

A strengthening Chinese yuan isn't a bad thing for the US, it is a good thing. And as previously explained, a strong yuan isn't a threat to the US dollar. The yuan will not replace the US dollar as a world reserve currency anytime soon or in the foreseeable future for all the previously explained reasons. China's main threat to the global economic stability is China's internal political instability and its increasing embrace of nationalism and militarism. That is China's true threat to the world. Like Russia, China's use of its military to annex the territory of its neighbors is a true threat to the world order and to the global economy. It is a war which can only be one if the West acquiesces to China's ambitions and I don't see that happening either. China nor Russia can win a military engagement with the West and I think they know that.

The biggest threat to the US Dollar as a reserve currency comes from the American Republican Party (e.g. threatening debt defaults or other similarly stupid fiscal policy like refusing to invest in infrastructure). The biggest threat to the US and the US currency comes from within the US, not from without, and that threat is the Republican Party (e.g. folks like Canadian Ted and Rand Paul, Michelle Bachman, Rush Limbaugh, Fox News, et al.).

PS: Removing the Oxford Club references from your posts was a good move given its founder's previous publishing ventures - nothing like being sued by your subscribers and the SEC for fraud. You really need to check your sources Billy T. There are a lot of unscrupulous people out there which prey on folks like you (i.e. people who have little knowledge of macroeconomics and business).

 

Australia and Japan were to be the most important trade partners within the US's IPP, but not even the Congressional Democrats like the TPP enough to help it pass on the "fast track."

PS to Joepistole You need to attack (show wrong) the facts, not the sources. Graph I gave of the declining number of yuan needed to buy a dollar is correct, regardless of where I copied it from. In post 805, I quote (in larger type) the IMF's David Lipton saying " the yuan is no longer undervalued."
Do you disagree with him? Don't believe my facts so can only attack source of my graph?

 

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Original caption given below:
People visit the exhibition stand of CRRC Corp, a new conglomerate formed by the merger of China's top two high-speed rail makers, China North Railway (CNR) and China South Railway (CSR), at the UrTran 2015 International Urban Rail Exhibition in Beijing, capital of China, June 16, 2015. The three-day UrTran 2015 exhibition kicked off at China International Exhibition Center in Beijing Tuesday

China is doing well in international sales of high speed trains. Brazil's Rio/ Sao Paulo line is in negotiations and I think California is near that point too, but China will need a US partner to get the deal. Turkey's is nearing completion and there are several in Asia. Most US trains belong in museums.

 

Add this to last paragraph of prior post 809. (more sales of China's high speed rail technology):

* to help some, that is -58F !

 

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25% of world's 2015 instillation will be in China!

 

Well it is more than just your sources. It's what they allege as well. Just because someone says something or writes something it doesn't make it so. Economic facts are like pieces of a puzzle, they have to fit together to form a picture. Unfortunately, what you and those you cite do is take a piece of information and create an entirely new picture, a picture often more suitable to politics than to economics. Below is an article which summarizes my response to your assertion with respect to the value of the yuan. China's huge stockpile of US Dollars is undervaluing the yuan. Yeah, China is still manipulating its currency and the Yuan is still undervalued.

http://www.theguardian.com/world/2015/jun/06/china-yuan-us-economy-trade-deficit

 

I don't feel qualified to disagree with the IMF, so yes I accept their judgment that the yuan is no longer undervalued. (i.e. only take about 6 to buy a dollar, not 8 as it did when all agree it was undervalued).

Your article make two arguments supporting that point of view, but both basically come down to the observation that the value of the yuan is not behaving as the economic text books predict it should, - Ergo is being indirectly manipulated (Article admits it is not being directly manipulated as it was when 8 were required to buy a dollar.)

Here is their first argument:
" The textbook story is that capital is supposed to flow from slow-growing rich countries to fast-growing developing countries like China. The logic is that capital is plentiful in rich countries, but relatively scarce in developing countries; therefore it should get a better return in developing countries.
This means that investors in rich countries should want to send their money to China in search of higher returns. Flows of capital from rich countries to China would mean that China is running a trade deficit rather than a trade surplus. So even though a trade surplus of 2% of GDP is much better than one of 10%, China still has some way to go before its trade situation is in line with what the textbooks predict."

That is quite twisted and almost self contradictory, plus ignores the risk considerations! Yes a lot of capital has been created by the FED but it is not flowing any where, not even into the US economy - as banks have much higher lending standards now than pre-2008.

Also they can't with one breath complain that China drove the value of its currency down by excessive creation of it and in the next breath claim capital is relatively scarce in developing country China!

They even admit that China's trade surplus has declined 80% (10% down to 2% of GDP) but refuse to admit the obvious, like the IMF stated: I.e. now that value of yuan has increase, the exporters don't have an unfair advantage anymore.

Their second argument is the one you mentioned ("a huge stock pile of dollars"):
Yes, as text books teach, buying up foreign currency with your currency does lessen the amount of it and increase the amount of your own. Brazil has done this in the past (Taken dollars out of circulation by purchasing them from companies that earned them via exports and using newly printed real to buy them with.)
But China owned many of the companies, selling US plastic junk toys (hula hoops, etc.) so got its huge stock pile of dollars, without printing yuan, to make them in surplus with artificially lower value.
Getting a huge pile of dollars by selling plastic junk, especially back when workers were exploited (paid little) dose not pump out freshly printed yuan and lower its value. Your article needs to get the basics facts about how China got the huge pile of dollars correct. Not assume they printed yuan in excess to buy the dollar out of circulation, like Brazil did.

However, even more damaging to their argument than these two counters, is that it assumes that what text books predict must happen and as it is not, China must now be indirectly manipulating the yuan - I.e. yuan should be even stronger with only 4 or 5 needed to buy a dollar, not the current ~6.

They seem to be totally ignorant that many old economic text predictions have been "inverted" by the new normal. For example the text books predict that if the economy is improving then stock should be rising in price, but when the economy improves they have been falling as investors fear that the Fed will cease the stimulus ("take the punch bowl away") as most believe the rapid run up in DOW, etc. to new historic highs every month or so for last few years has been due to the QEs and other stimulus. Likewise text books predict that commodity prices should rise with the post 2008 recovery, but they have fallen!

I.e. the very foundation of their argument ("Economic text books predict...") has been turned upside down by the "new normal."
Thus I'll stick with the IMF's experts, not some article which has it foundation (text books predict) now inverted and its facts wrong.

 

Very true and it certainly applies well to the article you quoted from with both its foundation now inverted and its facts wrong, but rarely to the IMF, I quoted from.

Your newspaper article, contradicting the IMF, is by one Dean Baker. I've never heard of him - what are his qualifications compared to the IMF's?

 

Well I am not surprised, you haven't heard of many noteworthy economists. Two, you rarely, if ever cite first primary references. You, as in the case, cite what someone else said the primary source said or wrote. And if you did a little research you could find out who Dean Baker is.


Areas of expertise
Macroeconomics • Budget and taxes• Social Security • Inflation and interest rates • Trade
Biography
Dean Baker formerly was an assistant professor of economics at Bucknell University. He is currently a co-director of the Center for Economic Policy Research (CEPR) in Washington, D.C.
Education
Ph.D. Economics, University of Michigan (1988)
M.A. Economics, University of Denver (1983)
B.A. History, Swarthmore College (1981)

http://www.epi.org/people/dean-baker/

Dr. Baker makes a very basic and uncontroversial point, China's hording of foreign cash reserves is a form of currency manipulation. As Dr. Baker points out, the IMF failed to take note of China's huge foreign cash reserves and the impact that has on the value of its currency. That is a fact, and it isn't even controversial.

 

Well, being unqualified never stopped you before, so why should it now? But yet somehow you feel qualified to dispute the article written by a Ph.D. in economics and call his argument stupid…hmm.

Except, it isn’t to anyone with some basic knowledge of macroeconomics, there isn’t anything in the least bit contradictory. What doesn’t make sense is your notion that risk is somehow important here? Investment risk has nothing to do with monetary supply. And this has nothing to do with Fed monetary policy. You are not making any sense; your lack of qualifications is probably why.

Except, that isn’t what they claimed, I suggest you go back and reread the article.

Except, you are misconstruing what was written, it was acknowledged that China’s trade surplus. But that doesn’t mean China still doesn’t retain an unfair competitive advantage with currency manipulations, as Dr. Dean pointed out in his article. This shouldn’t be difficult to understand, for your edification, below is a link explaining international capital flows.
http://www.econlib.org/library/Enc/InternationalCapitalFlows.html

Well that is a massive dump of confusion and misinformation and most of it is irrelevant to boot. The fact is China is hording foreign currency reserves and in the process over valuing those currencies and devaluing its own. How China got those cash reserves or whither China expanded or shrunk the supply of the yuan is really immaterial to the fact China is manipulating currency in order to gain a trade advantage.

Actually, how do you know what the economic text books predict, given you have never opened one, much less read one? Macroeconomics is a complicated subject. There are many variables. If you had actually read an economic text book, you would be familiar with the phrase “ceteris paribus” (i.e. all other things being equal). Economic text books do not make predictions without that condition. I know this is difficult for you, but all things must be considered, if you had actually read and economic textbook or taken an economic class, you would know that.

Unfortunately for you Billy T, economic text books aren’t fallacious. I suggest you read the links I have provided to you on international currency flow. Your ignorance of economics would be excusable if you admitted your ignorance and had some intellectual honesty. But that isn’t the case.
With respect to stock prices, I don’t know where you have been but stock prices have been improving as the economy has improved. The fact that there are day to day variations in stock prices doesn’t nullify that very basic fact. By the way, the Fed ended monetary stimulus a long time ago. Stock prices this year are at all-time highs. So you assertion that stocks have not risen is just false and easily proven so. Stocks as a group are up 1% - 3% this year, depending on the day. The fact that stock prices vary daily, doesn’t mean there is anything wrong with economic text books.

The reason stock and bond markets are reacting to a potential interest rate increase is because , as has been repeatedly explained to you over the years, higher interest rates reduces the value assets and increases the cost of doing business, this too has been explained to you on numerous occasions. It’s just a matter of math. If the Fed times it right, the Fed’s interest rate increase will be offset by business growth. There is some uncertainty in the Fed’s ability to pull that off without adversely affecting business and that uncertainty increases risk. Some businesses are highly dependent on interest rates (e.g. mortgage REITS). Interest rate increases are important, because they do slow economic growth in order to control inflation.

With respect to commodity prices, they have risen with the improving economy. Oil is now higher than it was during the recession. In 2009 gasoline was selling for a dollar and change per gallon. Gasoline is now selling between $2 and $3 per gallon. Last year oil went from over a $100 per barrel to $40 per barrel because there was a dramatic increase in supply. No economic laws were violated. An improving economy doesn’t negate the laws of supply and demand; you know that old text book thingy.
Gold has fallen, and for a variety of reason. Gold isn’t primarily an industrial metal. Gold is primarily a speculative metal, so gold prices are not tied to cyclical economic performance, per se. People like you who thought they knew all about economics bought gold speculating the dollar would collapse because of Fed’s accommodative monetary policies (“punch bowl). And when gold went from $1,900 to $1,100 and change, people like you were left scratching their heads. Because as previously discussed, you don’t understand economics much less inflation. Your much vaunted multiyear prediction that there would be a run on the dollar on October 31 of last year failed to materialize because you believe in economic nonsense. You were warned and all of this was explained to you beforehand, but still you clung to your beliefs preferring belief to actual fact and reason.

The fact is as Dr. Dean pointed out, the IMF failed to account for the impact on China’s extraordinary foreign cash reserves on the value of foreign currencies. As Dr. Dean pointed out, whither the Federal Reserve sits on dollars or China sits on dollars, it has the same effect. It increases the value of the dollar relative to the yuan and is a currency manipulation. Now given people are trying to push the Pacific Trade Agreement fast track authority through congress, that isn’t a politically popular position. But that political unpopularity doesn’t make it any less real.

The problem isn’t with economic texts Billy T, but with rather your lack of knowledge of economics.

 

Are there actually people out there who think that having a low value currency is an "unfair" advantage ?

 

Just having a low value currency in and of itself isn't an unfair trade advantage. But when a country manipulates its currency in order to devalue its currency, that constitutes an unfair trade advantage.

 

Some countries want their currency to have a high value, some want it to have a low value,
but they all manipulate it.

 

Well, that is broad brushed to the point of being useless for anything other than demagoguery. Countries use a variety of fiscal and monetary policies to manipulate their economies in order to achieve and maintain "full employment" and those policies may have secondary and tertiary effects on currency values and foreign trade. But that is very different than currency manipulation with the intent of keeping a permanent trade advantage, things that China has done and continues to do.

Every business day the market determines the price of the dollar and other major world currencies. The dollar and other world currencies are not pegged as is the Chinese Yuan. China has made progress but much remains to be done.