post election commentary - foreign central bank election reactions and US dollar -
The scuttlebut seems to be that China has read the US election results as an indicator that new economic countermeasures are now likely to be enacted re Chinese imports into the USA (prior to the election, some democrats had proposed enacting a 27% tariff against Chinese imports). In order to minimize future losses and prepare for fewer exports to the US market in light of a possible tariff or other anti-free market legislation from the upcoming US congress, the Chinese central bank appears to have abruptly changed its policy re the recycling of the Chinese trade surplus back into US dollars (i.e. buying US treasuries) and is instead shifting it's US foreign exchange surplus dollar 'reserves' into other currencies instead.
This move has already caused a 3% devaluation of the US dollar, and as a result will cause a proportional increase in the US dollar denominated price world market commodities i.e. oil, precious metals, as well as significantly higher prices for all imported goods. The 'tin foil hat' crowd is of the opinion that this is just the beginning, that the next result will be an unavoidable interest rate increase by the US Fed next month to try and slow the US dollar's descent - which will immediately migrate to higher credit card and ARM interest rates.
Re: post election commentary - foreign central bank election reactions and US dollar -
Actually the articles you posted are completely unrelated to the election results. They don't even mention the election or Democrats. Nor do they mention the mythical countermeasures you cite.
Why did you feel it necessary to mischaracterize the articles in this way?
Re: post election commentary - foreign central bank election reactions and US dollar
oh please ... it's not politically correct to print US 'mainstream' news stories which make a blatant link between the election results and negative economic reactions. But if you want it spelled out without sugar coating, you are welcome to read it much more blatantly in the foreign press ...
(snip)"Richard Lee, a currency analyst at [UK based - sic] FXCM, said that the outcome of the U.S. mid-term election might prompt China to quicken its diversification process.
"With the Democratic Party now controlling both sectors of Congress, protectionist measures may be forth coming, along with the usual global jawboning," he said. "In order to pre-empt such scenarios, Chinese officials are electing to quicken the process of further revaluation while reminding the U.S. how much weight the Asian nation holds in the global arena."(snip) from
and from Russ Winter in Turkey ...
(snip)The Democratic takeover of Congress on the same day China announced record trade surpluses with the US, suggests a shift in the sands in the tired, old symbiotic “relationship”. Some observers claim that basic globalization trends started under Clinton are still in play. I think that ignores strident anti-globalization beliefs among not just new members of the US Senate such Sherrod Brown, but also Majority Leader Harry Reid. This speech last year is representative of the later’s view. And it’s not just Democrats, but key Republicans such as Graham, and Grassley that are backing sanctions against China. Counter-globalization winds should not be underestimated at this juncture.
The initial Chinese response to this prospect is from classic Sun Tzu, “Art of War”, and that’s to employ a not so subtle threat aimed right at the heart of the enemy’s self inflicted weak point, his addiction to economic subsidies, and Ponzi finance. The Chinese diversification talk about using gold, is a small part and ruse to the real response, and is code word for diversifying generally away from US Old Maid Cards (Treasuries, agencies, MBS). The threat is in reality, hardly subtle, although Riskloves in this market may be clueless about it. "(snip) from
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Re: post election commentary - foreign central bank election reactions and US dollar
I still am wondering why you so blatantly mischaracterized the original two articles you linked. Why did you imply that they said something they did not say?
Quote:
Originally Posted by Melonie
(snip)"Richard Lee, a currency analyst at [UK based - sic] FXCM, said that the outcome of the U.S. mid-term election might prompt China to quicken its diversification process.
"With the Democratic Party now controlling both sectors of Congress, protectionist measures may be forth coming, along with the usual global jawboning," he said. "In order to pre-empt such scenarios, Chinese officials are electing to quicken the process of further revaluation while reminding the U.S. how much weight the Asian nation holds in the global arena."(snip) from
http://www.marketwatch.com/News/Stor...&dist=aolclick
Ah, I see.... this UK-based currency analyst is your source for what the newly elected Congress will do.... based no doubt on all that inside information he has on the US Congress and it's new leadership's plans from his vantage point in the UK. ::)
Quote:
Originally Posted by Melonie
and from Russ Winter in Turkey ...
(snip)The Democratic takeover of Congress on the same day China announced record trade surpluses with the US, suggests a shift in the sands in the tired, old symbiotic “relationship”. Some observers claim that basic globalization trends started under Clinton are still in play. I think that ignores strident anti-globalization beliefs among not just new members of the US Senate such Sherrod Brown, but also Majority Leader Harry Reid. This speech last year is representative of the later’s view. And it’s not just Democrats, but key Republicans such as Graham, and Grassley that are backing sanctions against China. Counter-globalization winds should not be underestimated at this juncture.
The initial Chinese response to this prospect is from classic Sun Tzu, “Art of War”, and that’s to employ a not so subtle threat aimed right at the heart of the enemy’s self inflicted weak point, his addiction to economic subsidies, and Ponzi finance. The Chinese diversification talk about using gold, is a small part and ruse to the real response, and is code word for diversifying generally away from US Old Maid Cards (Treasuries, agencies, MBS). The threat is in reality, hardly subtle, although Riskloves in this market may be clueless about it. "(snip) from
http://wallstreetexaminer.com/blogs/winter/?p=97
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This blogger doesn't quote Harry Reid or any other Democrat calling for sanctions or a "27% tariff against Chinese imports" --- he simply links to a speech in which Reid said no such thing, and then proceeds to mischaracterize it -- much like your OP.
Re: post election commentary - foreign central bank election reactions and US dollar
oh please #2 ... in the interests of DD harmony I'm going to assume that you truly aren't aware of such developments.
from last month's Chinese People's Daily at
(snip)"Two US senators came under fire yesterday after they vowed to force a vote on a bill to impose a 27.5 per cent tariff on Chinese goods, a move that could damage the trade relationship between the United States and China.
Senators Charles Schumer and Lindsey Graham vowed to force a vote by Saturday on legislation to impose a 27.5 per cent tariff on Chinese goods if the government does not significantly raise the value of its currency within six months.
"As an advocate of free trade, I wrote a letter on behalf of my association to all the members of the House and Senate, asking them to oppose the Schumber and Graham proposal," said Frank Keating, president of American Council of Life Insurance (ACLI).
ACLI is a Washington-based trade association whose 377 member companies account for 91 per cent of the life insurance industry's total assets in the United States.
"It is encouraging to see that Schumber said he didn't expect the bill to go anywhere," added Keating, a former Oklahoma governor who has also served under Presidents Ronald Reagan and George H.W. Bush.
"It is impossible for this legislation to pass," said Mei Xinyu, a trade researcher at the Chinese Academy of International Trade and Economic Co-operation. "And the yuan's appreciation is insufficient to rein in the growth of China's exports.""(snip)
Of course, that was then and this is now ! Chuck Schumer, Lindsey Graham etc. will be present in the next congress, their party will hold a majority in both houses, 4th quarter US economic reports re the Chinese trade deficits and US jobs will probably be el-stinko (if for no other reasons than Christmas shopping and a cutback in construction), thus more pressure than ever will exist to reintroduce this bill.
Also, the democrats 'owe' American unions some 'payback' for being instrumental in voting them into the majority position this week, and American unions are strong backers of the proposed tariff ( the unions themselves have been opposed to free trade with China since 2000 under Bill Clinton when he 'normalized' trade relations with China). Before you question the validity of this assertion I'll again post a link to a 2000 archive news story at
The Chinese are obviously aware of all of these things, and chose to take pre-emptive action against the strong possibility that Schumer's bill will be re-introduced in the next congress and, in the absence of sufficient opposition by remaining house republicans (who killed the bill last month but were voted out of office this week) the bill is now very likely to pass.
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Re: post election commentary - foreign central bank election reactions and US dollar
... and if there is any question as to how rising protectionism against China is likely to play out in the US economy, you might want to check out
(snip)"Hard Landing with U.S. Recession: Goldilocks Meets Three Ugly Bears
The Longer We Wait, the Harder They Fall
The negative development and bearish shocks of the slowdown scenario get exacerbated into more severe movements in asset prices that lead to a US recession (0-1% growth by Q4 of 2006 and negative growth by Q1 of 2007) and a more pronounced global growth slowdown (global growth below 3.2% by Q1 of 2007). Thus, the US economy experiences a hard landing while the rest of the world is unable to decouple from the US slowdown.
The bearish forces of the "Slowdown" scenario (above) become more severe in this hard landing scenario: the housing slowdown turns into a severe slump that negatively affect both residential investment and consumption; the stagflationary effects of oil add to the economic slowdown; and the delayed effects of increases in policy interest rates in the US aggravate the slowdown and ensuing recession.
Specific triggers for this hard landing are the concurrent occurrence of most, if not all, of a variety of shocks. First, tensions with Iran and other geo-strategic shocks lead oil price to rise close or above $80 dollars a barrel. [ for status on 'trigger #1 see news clip at - sic]
Second, the stagflationary effects of this shock slowdown growth in US and other G7 countries and cause a persistent increase in core inflation that forces most central banks to tighten sharply monetary policy. But in the US the Fed pause of August 2006 is followed by an easing - a cut in the Fed Funds rate - by the fall or winter of as the economy spins into a recession and inflationary pressure somewhat peak. [ for status on 'trigger #2' look for next week's November CPI and core inflation report - October core inflation was up 2/10 of a % in a single month - sic ]
Third, the growing tensions between the US and China risk to lead to a trade war as China refuses to move its currency, the US responds by branding China as a currency manipulator and by initiating legislative actions leading to the imposition of trade restrictions against Chinese goods; asset protectionism also increases as the attempt by US creditors to diversify away their holdings of dollar assets from bonds into equities and FDI is met with political resistance in the US; also, trade and asset protectionism leads China and other creditors of the US to threaten reducing its financing of the US deficits and diversify away out of dollar assets. [ this is what all the previous posts were talking about - sic ]
Fourth, the US housing bubble sharply bursts - with housing prices falling more than 10% on average - and leads to a sharp slowdown in US consumption growth that leads to a near recession in the US by late 2006 and an actual recession by early 2007. [ as to the status of 'Trigger #4', the number of available news links is overwhelming, with homebuilder CEO's all saying there is no bottom in sight - sic ]
The US slowdown and the global oil shock are then transmitted to the rest of the world and the world is unable to decouple from the US recession.
In asset markets, housing and equities have a sharp contraction; the dollar weakens sharply relative to floating currencies and Asian currencies as economic slowdown and trade and investment tensions lead investors to dump dollar assets. Long term interest rates would tend to rise following the inflation shock, the reduced foreign financing of the US twin deficits and the falling dollar. But once the US recession and sharp global slowdown is under way, oil and commodity prices fall and long term interest rates tend to decline.
The Bretton Woods 2 regime of vendor financing of the U.S. twin deficits starts to seriously unravel as the willingness of both [foreign - sic] central banks and foreign private investors to keep on financing the US external deficit shrinks."(snip)
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Re: post election commentary - foreign central bank election reactions and US dollar -
Melonie, we all know you are anti-Democrat. EVERY article you post is anti-Democrat. Well, I'm anti-Republican, and am overjoyed that the Republicans lost control of the House and the Senate. Middle Class priorities are more important than big business and the upper middle class and wealthy reaping all the financial rewards.
Re: post election commentary - foreign central bank election reactions and US dollar
^^^ well, that's a wonderful theory if in fact it does happen. But based on the early signs of economic change, corporations will indeed wind up paying higher taxes (at least until they relocate out of the country or stop turning a profit as the economy slows), the 'wealthy' will still benefit (via their hedge fund investments which increase in value when the US dollar / stock markets go down - and via their tax-free / tax-advantaged investments that you and I can't afford the minimum buy-in to purchase ourselves), and it will be Joe Sixpack who in fact takes it on the chin due to higher income taxes on any paycheck earnings over $29,700 a year (the second tax bracket where people actually start paying income taxes), devalued purchasing power of his 401k, and higher prices for oil / gas / food / damn near everything imported from China, as the US dollar's exchange rate drops making all 'world market commodities' more expensive in US dollar terms + Chinese tariffs specifically adding 27.5% to the price of all Chinese goods imported into the USA. That one issue is going to create havoc at WalMart on the first day of the month as soon as the tariff is enacted !
Actually I did post a pro-Democrat economic position article -
- the subtitle of which was 'Undeclared War on the Middle Class', where the clearly liberal author discusses these very issues !
And for the record, I'l nearly as anti-Republican as I am anti-Democrat on economic issues, because to put it simply they both spend our tax money like drunken sailors, they both are all too ready to borrow (via gov't bonds we and our children will be paying off for decades to come) in order to support their drunken sailor spending habits, and because they both make economic policy choices with a long term cause and effect horizon of the next election !
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Re: post election commentary - foreign central bank election reactions and US dollar
Quote:
Originally Posted by Melonie
they both spend our tax money like drunken sailors
That is incorrect.
Drunken sailors spend their own money.
Re: post election commentary - foreign central bank election reactions and US dollar
Quote:
Originally Posted by Jay Zeno
That is incorrect.
Drunken sailors spend their own money.
and they often spend it on dancers }:D