US inflation rises even as China grows reserves at $1million per minute?

[EJ]

Japanese automakers are expanding - in Japan
April 17, 2007 (Associated Press)

TOKYO - At a time when Detroit's Big Three are closing plants and slashing jobs to revive their ailing business, their Japanese counterparts are busy opening plants in Japan for the first time in decades.

That's because there's strong demand for fuel-efficient small cars such as the Toyota Yaris and Honda Fit -- all of which are made in Japan -- as well as luxury models and hybrids, most of which are made here.

But there's also a shift away from the conventional wisdom that automakers are best off making cars in the same region where they sell.

AntiSpin: Political changes in Japan bear watching. The first Japanese premier in more than 50 years who was born after WWII won the last election on a platform that included greater independence from the US. Japan will develop its own military, with it, its own military industrial complex.

Why build cars in the US when Japan can build them in Japan? Or China? In terms of trade, Japan is now exporting more to China than to the US, and developing tight political relations. When the yen is on the rise, and the dollar on the way down, now is the time to shift labor policy to focus on domestic production.

If US manufacturers aren't going to increase employment of American auto workers and the Japanese aren't, who will? The Koreans? The Chinese? It's likley to keep getting harder to point to where new non-Fire Economy jobs are going to come from.

Fed's Plosser says inflation uncomfortably high
April 17, 2007 (Reuters)

Inflation is uncomfortably high and the U.S. central bank needs to remain vigilant about it, Philadelphia Federal Reserve Bank President Charles Plosser said on Tuesday.

Plosser, regarded as one of the more hawkish among Fed policy-makers, said that inflation was not coming down fast enough.

"Inflation is uncomfortably high from my perspective and not declining as rapidly as I'd like to see it," he told a meeting of business executives hosted by Rutgers School of Business.

He said he was not sure if the annual inflation rate would moderate toward 2 percent, but did not specify what inflation gauge he was referring to.

AntiSpin: The Fed can talk about inflation any way it wants because the term "inflation" no longer has meaning. Government inflation numbers are now so abstract, so completely a matter of interpretation of measures which themselves are based on opinion–hardly disinterested–of what is and is not relevant to measure, such is what is "core," what is "volatile," what is "increasing in utility," and what merely costs more dollars to buy. You may ask, how did the discussion of inflation deteriorate to the level of children arguing whether a certain cloud floating the in the summer sky looks like an elephant or a rabbit? But here we are.

Inflation is now entirely about managing expectations. If everyone expects it, everyone gets it. A Fed official saying that he is worried about inflation is in fact telling the markets not to worry about it because the Fed is on the case. The Fed is forever trying to talk inflation expectations down, except when it's trying to talk them up. If Fed officials aren't saying they are worried about inflation, and are worried about "deflation" as they said they were in 2001, that means back up the truck and buy gold, the Fed's about to spin up a few terabytes of money–time to acknowledge that it's time to drop the references to printing presses.

What grows US$1 million a minute?
2007/4/17 (William Pesek - Bloomberg)

Economists don't like to admit to being stunned by anything, even in unpredictable Asia. Last week, UBS AG's Jonathan Anderson couldn't seem to help himself.

The cause of the Hong Kong-based economist's dismay: China's currency reserves rose US$1 million a minute in the first quarter.

"This is more than just a jump," Anderson said in a report released Sunday. "The magnitude and the abruptness of this acceleration are simply stunning."

AntiSpin: The greatest challenge for the Fed in this game is that the economy is slowing rapidly in some ways but not in others. The retail sales numbers are impressive and don't suggest a recession in the offing. Stock market inflation is doing nicely. Housing inflation is moderating, but not crashing–yet. That will depend on employment, which depends on government spending, which depends on foreign lending. Which takes us full circle back to our first story, Japan. Japan threw the bonar support hot potato to China back in 2004. They have been tossing it from left hand to right ever since while looking for another US trade partner to toss it to. At $1 million bonars per minute, Hank's (as in Henry Paulson, US Secretary of the Treasury, previously CEO Goldman Sachs) delay the delay in making arrangements for a suitable catcher is getting painful.

Prof. Peter Morici (we last spoke to him in January) put it best today: "The Federal Reserve will not likely be able to accomplish both moderate inflation and reasonable GDP and employment growth. Faced with choosing between instigating a recession or an inflation spiral it cannot much slow, the best policy course will be to do nothing."

Long term, doing nothing will not be an option, as that way leads to both recession and inflation.

[Uncle Jack]

Re: US inflation rises even as China grows reserves at $1million per minute?

Nothing? They'll still be talking up a blue streak!

[jk]

china's decreasing dependence on the us market

as china's dependence on its u.s. export market diminishes, so does its incentive to support the dollar.

http://www.nytimes.com/2007/04/18/bu...f046ab&ei=5070

[bill]

Re: US inflation rises even as China grows reserves at $1million per minute?

That's because there's strong demand for fuel-efficient small cars such as the Toyota Yaris and Honda Fit -- all of which are made in Japan --

The fuel efficient auto’s as well as other carbon reduction products the Japanese can produce will see more investment funds coming it’s way in the name of security. As I see it per “National Security and the Threat of Climate Change” report http://www.npr.org/documents/2007/ap...ty_climate.pdf, the global warming/carbon reduction industries now can tap into the future flow of security funds.
The http://en.wikipedia.org/wiki/CNA_Financial_Corporation did the report.

If George Bush gets his latest budget through Congress, he will have spent $750bn of American taxpayers' money on the wars in Afghanistan and Iraq in a little over five years. Environmentalists drool when they imagine what they could have done with a fraction of that money. Even a quarter of the total, say a meagre $200bn, could have paid for enormous strides towards a low carbon economy. It could, for instance, have paid to transform the way we generate electricity, by capturing carbon and storing it in the ground, rather than releasing it into the atmosphere.

That, when it happens, will be a massive, international infrastructural project. But if governments approached it with the degree of urgency, will and wherewithal they apply to traditional national security threats - with the seriousness and money-no-object commitment Bush and Blair showed to the "war on terror" - then suddenly it would look eminently possible. So this makes political sense: cast global warming as an environmental or science issue, and it will be given a budget to match. Cast it as a problem for the big boys, on a par with nuclear proliferation or international terror, and then it should get a big-boy budget and attention.

http://www.guardian.co.uk/science/st...059655,00.html

[Finster]

Re: US inflation rises even as China grows reserves at $1million per minute?

Fed's Plosser says inflation uncomfortably high
April 17, 2007 (Reuters)

Inflation is uncomfortably high and the U.S. central bank needs to remain vigilant about it, Philadelphia Federal Reserve Bank President Charles Plosser said on Tuesday.

Plosser, regarded as one of the more hawkish among Fed policy-makers, said that inflation was not coming down fast enough.

"Inflation is uncomfortably high from my perspective and not declining as rapidly as I'd like to see it," he told a meeting of business executives hosted by Rutgers School of Business.

He said he was not sure if the annual inflation rate would moderate toward 2 percent, but did not specify what inflation gauge he was referring to.

AntiSpin: The Fed can talk about inflation any way it wants because the term "inflation" no longer has meaning. Government inflation numbers are now so abstract, so completely a matter of interpretation of measures which themselves are based on opinion–hardly disinterested–of what is and is not relevant to measure, such is what is "core," what is "volatile," what is "increasing in utility," and what merely costs more dollars to buy. You may ask, how did the discussion of inflation deteriorate to the level of children arguing whether a certain cloud floating the in the summer sky looks like an elephant or a rabbit? But here we are.

Inflation is now entirely about managing expectations. If everyone expects it, everyone gets it. A Fed official saying that he is worried about inflation tells the markets is in fact saying not worry about it because the Fed is on the case. The Fed is forever trying to talk inflation expectations down, except when it's trying to talk them up. If Fed officials aren't saying they are worried about inflation, and are worried about "deflation" as they said they were in 2001, that means back up the truck and buy gold, the Fed's about to spin up a few terabytes of money–time to acknowledge that it's time to drop the references to printing presses.

I couldn't agree more. These guys keep talking about how inflation is too high, but let's look not at what they say, but what they do. Some of the same people who are mouthing this hawkish rhetoric have been voting in favor of keeping Fed policy right where it is. And the more they talk about "core" inflation, the more apparent it is that they want to put the lowest possible spin on the inflation already being registered.

So-called "core" versions of inflation indices were originally touted as giving us a better look at the "underlying trend", by removing the "volatile" food and energy components. But if that's all they did, then why are they persistently running cooler than the "headline" numbers? If this premise were valid, wouldn't longer term averages, say over a year or two, converge?

And why, if you're just interested in removing volatility from the data, couldn't you just take a moving average in the first place?

What is even more vexing is the way the mainstream financial media plays right along, uncriticially accepting what they are fed by Washington and Wall Street. Last CPI release (March), you were hard pressed to even catch the overall CPI figure as it whizzed by, while you were treated to repeated comments about how the markets were inspired by the "lower-than-expected" inflation report. If you really listened closely, you might have been fortunate enough to catch a year-over-year quote. So while the annual CPI was up 2.8%, and the overall monthly CPI was up 0.6% (a whopping 7.4% annualized) you couldn't miss the very non-threatening-sounding one-month "core" increase of 0.1%.

[spunky]

Re: US inflation rises even as China grows reserves at $1million per minute?

You have to watch 4hrs of CNBC to get 5 minutes of useful information. People dont like pictures they tell the truth, you are fat.



I was disturbed yesterday while looking for chalking at Walmart. All the very cheapest things were sold out. Paint, small fixtures, tape, anything that you had multiple choices on none of the higher priced products were sold, zero. The store wasnt very crowded, and the shopping carts people were pushing were empty. So much left over easter merchandise of all types. What happended to targeting the higher end customer.:confused:


Curious to to see how inflation/ energy costs will eat up Big wally late this summer.

Mees beginning to the think the american consumer is finally tapped out.

[c1ue]

The Japan, China, and US Menage a Trois

I visited Japan in late March, and on the way over was seated next to a CEO of a Japanese software company.

We had a very interesting conversation: Basically after talking about the usual platitudes, I asked him about how he viewed the present state of the US economy given China, the housing market, and Japan's last 3 (5)decades of economic alliance with the USA.

Here's what I got out of the conversation.

1) While Japan is exporting more to China than the US in the official markets, the overall US-Japan trade is still greater. The reason this does not show in official statistics is that a large chunk of defense related manufacturing by Japan for the US is concealed.

2) Japan has completely committed to being the US' partner. This means that even should hyperinflation occur, Japanese companies would build factories in the US to prop up US incomes. He also believes China would do this but on this point I disagree.

3) In addition to the economic commitment, Japan is also relying on the US to serve as a military balance against the numerically superior (and soon economically larger, in absolute terms) China.

4) A weak yen is not an issue for Japan, while import prices rise - the Japanese currency account surplus means that the real effects can be delayed or concealed for a very long time.

All in all, a very interesting conversation.