Strong Dollar Policy...More Fun With Numbers.

[c1ue]

Re: Strong Dollar Policy...More Fun With Numbers.

Many of America's trading partners, however, are pushing the other way. In Asia, traders said central banks in South Korea, Taiwan, the Philippines, Thailand, Indonesia and Hong Kong again intervened to slow the dollar's fall against their currencies.

Yes, this is not unexpected. But it still is amusing that those dumb morons in the small Asian countries still think they can hold back the American tide of falling greenbacks.

Its going to be Argentina all over again for at least a few of these idiots.

[jk]

Re: Strong Dollar Policy...More Fun With Numbers.

Yes, this is not unexpected. But it still is amusing that those dumb morons in the small Asian countries still think they can hold back the American tide of falling greenbacks.

Its going to be Argentina all over again for at least a few of these idiots.

at some point the big asian treasury buyers- china and japan - might figure out that they're better off letting the dollar go down. given that both are commodity importers, they will suddenly realize that their imports would become a lot cheaper. you might think import prices would just rise, in dollars, and they will, but that will knock out american demand, thus leaving real prices cheaper for asian consumers and industries. [this is the scenario peter schiff was espousing years ago - i think it will happen someday, but i'm not holding my breath.]

[c1ue]

Re: Strong Dollar Policy...More Fun With Numbers.

China and Japan are the big Treasury holders and thus have a different capability than the Thailands, Taiwans, and what not.

My point was that the CBs of these nations are seriously deluded if they think they can buy out the dollars the Treasury and Fed are shooting off in all directions.

Japan's behavior this year can be explained as an attempt to keep the yen cheaper vs. the dollar; clearly this isn't working and so the open question is what Hatoyama will decide to do.

The interesting part is that despite Japan's $8T government deficit, it has $700B in Treasuries. Could the Treasuries be used to re-orient the Japanese economy by buying 2 or 3 years of grace time on the existing debt?

Is't that what China is doing? (not buying time via temporary debt relief, but buying time via stimulus spending. Still buying time)

[Slimprofits]

Re: Strong Dollar Policy...More Fun With Numbers.

Thomson Reuters
UPDATE 1-Japan Fujii: U.S. worried about weak dollar
10.09.09, 06:39 AM EDT

By Stanley White

http://www.forbes.com/feeds/afx/2009...fx6984678.html

The dollar is becoming weaker and the United States has a sense of crisis about its currency, Jiji news agency quoted Japanese Finance Minister Hirohisa Fujii as saying on Friday.

'The United States talks about a strong dollar, but in reality the currency is becoming weak,' Fujii said during the recording of a TV programme, according to Jiji news.

'American people have a sense of crisis about their own currency.'


Jiji: http://www.jiji.co.jp/

[halcyon]

Re: Strong Dollar Policy...More Fun With Numbers.

paul krugman on the benefit of a floating currency [a depreciating currency] for economic recovery:
wsj/

Funny thing, Krugman is right on the history of gold standard and the faith of France during 1914-1939. One needs to read "The Gold Standard Illusion" by Kenneth Mouré (Oxford University Press, 2002) to find out.

In short, France's dogmatic adherence to the gold standard and franc/gold peg ratio caused a deep deflationary depression and no recovery for them. The others de-pegged and recovered.

This much is a fact.

Now, whether this pertains to our scenario right now and the faith of USD is - imho - another matter.

However, as a whole gold standard is no quick fix for US. Gold doesn't make all the existing debt go away. Gold doesn't fix the trade imbalances, over-valued USD and undervalued Renminbi. Those need to be fixed via other means.

Nor is gold standard that much better for growth and stability. This is explained well in "Gold Standard in Theory and History" by Eichengreen (Routledge, 1997).

If one wants to really understand how the end-game is going to be played, I suggest googling/amazoning those books up and educating oneself. They are an inoculation against the worst of gold-mythology that is out there. Don't get me wrong, there's good stuff also being pushed by gold bugs, but some of their reasoning is so inane and wrong it hurts the brain.

[touchring]

Re: Strong Dollar Policy...More Fun With Numbers.

at some point the big asian treasury buyers- china and japan - might figure out that they're better off letting the dollar go down. given that both are commodity importers, they will suddenly realize that their imports would become a lot cheaper. you might think import prices would just rise, in dollars, and they will, but that will knock out american demand, thus leaving real prices cheaper for asian consumers and industries. [this is the scenario peter schiff was espousing years ago - i think it will happen someday, but i'm not holding my breath.]

At least for China, that will never happen in the near to medium term. They want jobs more than anything else. Imports don't matter, if they are expensive, let them be.

If Americans consume less, then they will want American and European jobs to produce stuff that they don't currently, such as in the aerospace and high speed train transport industries, to offset job losses in existing industries.

I'm no doubts that within 10 years, China will create its own widebody jumbo jet that can rival Airbus and Boeing.

[jk]

Re: Strong Dollar Policy...More Fun With Numbers.

However, as a whole gold standard is no quick fix for US.

right. the [relatively] quick fix is inflation.

At least for China, that will never happen in the near to medium term. They want jobs more than anything else. Imports don't matter, if they are expensive, let them be.

If Americans consume less, then they will want American and European jobs to produce stuff that they don't currently, such as in the aerospace and high speed train transport industries, to offset job losses in existing industries.

I'm no doubts that within 10 years, China will create its own widebody jumbo jet that can rival Airbus and Boeing.

china may not be able to continue on this mercantilist path, once the europeans as well as the americans essentially stop importing because of their reduced consumption. there are jobs to be created in serving an increasingly well-off chinese population: that's what they've got to figure out. look at the u.s. after wwii- yes, there were exports but i think the bulk of the economy was oriented towards serving the domestic market, which was big enough and growing fast enough to make it rewarding in itself.

[touchring]

Re: Strong Dollar Policy...More Fun With Numbers.

right. the [relatively] quick fix is inflation.

china may not be able to continue on this mercantilist path, once the europeans as well as the americans essentially stop importing because of their reduced consumption. there are jobs to be created in serving an increasingly well-off chinese population: that's what they've got to figure out. look at the u.s. after wwii- yes, there were exports but i think the bulk of the economy was oriented towards serving the domestic market, which was big enough and growing fast enough to make it rewarding in itself.

Europeans and Americans won't stop importing, and Chinese consumers will continue to increase their consumption at a natural pace.

As a proof, Singapore exports have almost recovered to pre-Lehman levels. Exports dropped single digit in August, much lower than US unemployment.
http://www.monstersandcritics.com/ne...ases-in-August

Taiwan exports dropped 12% in September.
http://www.bloomberg.com/apps/news?p...d=aFZag9hjNzxk

China exports are expected to rise year end.
http://news.alibaba.com/article/deta...ports-may.html

If you could compare the two, Asian exports are doing way better than unemployment figures in the US.

With all the money printing, the money has to go somewhere, that is into consumption and imports.

The way Wall Street works is that consumption must rise in order for profits to rise (so Asian exports will have to rise since the bulk of goods are manufactured in Asia). And ironically, employment, especially expensive employment, must fall in order for costs to fall (so unemployment must rise). A weaker yuan helps Wall Street companies decide to move more jobs to China.

[GRG55]

Re: Strong Dollar Policy...More Fun With Numbers.

Europeans and Americans won't stop importing, and Chinese consumers will continue to increase their consumption at a natural pace.

As a proof, Singapore exports have almost recovered to pre-Lehman levels. Exports dropped single digit in August, much lower than US unemployment.
http://www.monstersandcritics.com/ne...ases-in-August

Taiwan exports dropped 12% in September.
http://www.bloomberg.com/apps/news?p...d=aFZag9hjNzxk

China exports are expected to rise year end.
http://news.alibaba.com/article/deta...ports-may.html

If you could compare the two, Asian exports are doing way better than unemployment figures in the US.

With all the money printing, the money has to go somewhere, that is into consumption and imports.

The way Wall Street works is that consumption must rise in order for profits to rise (so Asian exports will have to rise since the bulk of goods are manufactured in Asia). And ironically, employment, especially expensive employment, must fall in order for costs to fall (so unemployment must rise). A weaker yuan helps Wall Street companies decide to move more jobs to China.

I am increasingly becoming a convert to EJ's "Bubble with Chinese characteristics" thesis. Read an article in the FT about Chinese steel production...currently at 600 million tonnes per year capacity, but some 120 million tonnes now idle...and they are building 60 million tonnes more capacity as part of the stimulus program.

Now either China becomes the world's lowest cost [government subsidized] producer and puts everyone else out of business, or imo more likely they get blocked out of some of their current markets as protectionist measures are put in place by governments from India to Europe to the USA to protect their domestic steel industry.

Makes no sense to me that the world's biggest steel producer, one that has to import most of the inputs including the iron ore and the coking coal, is adding 10% more capacity...this can only end in tears...

[touchring]

Re: Strong Dollar Policy...More Fun With Numbers.

I am increasingly becoming a convert to EJ's "Bubble with Chinese characteristics" thesis. Read an article in the FT about Chinese steel production...currently at 600 million tonnes per year capacity, but some 120 million tonnes now idle...and they are building 60 million tonnes more capacity as part of the stimulus program.

Now either China becomes the world's lowest cost [government subsidized] producer and puts everyone else out of business, or imo more likely they get blocked out of some of their current markets as protectionist measures are put in place by governments from India to Europe to the USA to protect their domestic steel industry.

Makes no sense to me that the world's biggest steel producer, one that has to import most of the inputs including the iron ore and the coking coal, is adding 10% more capacity...this can only end in tears...

They'll find ways to export their steel. Send the steel to Korea or India and then re-export.

Perhaps they calculated that it is better to convert the dollars into steel production equipment than buy treasury.

Since you live in the Middle East, you will know that autocratic governments that are not elected by fair elections fear jobless people more than anything else. People with nothing better to do get involve in nasty endeavors, politics, terror, revolution planning etc.

The number one agenda of the communist government and all autocratic regimes is to keep their people occupied. It doesn't matter if they slog or earn low pay - the key is to keep them busy, working non-stop. China will create work for its people even if the work is unproductive and wasteful.

If there's really no export market for steel, they can create the demand by demolishing all homes more than 20 years old, rebuild them. Besides, there are millions of substandard buildings that will collapse when there's an earthquake, rebuilding all of them will probably utilize billions of tons of steel.

If you look hard enough, there's plenty of use for the steel. ;)

[kartius919]

Re: Strong Dollar Policy...More Fun With Numbers.

1914 was the beginning of WW1. I'm not sure what you mean by "others de-pegged and recovered." Can you provide examples in which other nations were better off? If i recall correctly, it was splendid times in Germany during the hyperinflation. Then they got Hitler. Hurray for Hitler. Clear example of the stability of fiat currencies?

You also seem to gloss over the 18th century in which the golden age of fiat arrived in France in all its glory. But no, lets just focus on 25 years of history and ignore the rest.

What is the worst of gold-mythology? What is so inane and wrong it seems to hurt your brain?

[c1ue]

Re: Strong Dollar Policy...More Fun With Numbers.

They'll find ways to export their steel. Send the steel to Korea or India and then re-export.

This is possible, but what is more likely is that China is going to have a mini-steel sudden stop.

The massive capacity in question was built because China's subsidy on energy, low labor costs, lax environmental regulation, plus a low cost of commodities combined with their own infrastructure needs to yield a compounding juggernaut.

The problem now is that China is producing almost 1/2 of the world's steel even as steel demand dropped nearly 10% in 2009.

http://www.worldsteel.org/?action=newsdetail&id=274

production-08.jpg

On the other hand steel use:

Steel use 2001 2007.jpg

This looks like a nice trend, but for one detail:

http://www.worldcoal.org/resources/c...el-statistics/

Top Users of Steel (2008)

PR China	426Mt	USA	98Mt	Japan	77Mt
South Korea	59Mt	India	53Mt	Russia	35Mt

Per Capita Use of Steel (2008)

Per capita use of steel varies significantly around the world (kg per capita):

South Korea	1210kg	USA	316kg
Chinese Taipei	718kg	Brazil	124kg
Italy	582kg	India	44kg
Germany	502kg
Spain	441kg	World	190kg

China already uses as much steel per capita than the infamously wasteful US. Of the list of top users per capita more than China, all are export nations with Spain being the biggest real estate bubble.

How much more steel can China use?

While demand in some parts of the world will no doubt increase, it is not clear to me either how China's production and consumption can continue to grow largely in isolation.

Are that many new skyscrapers planned still in the big cities?

[touchring]

Re: Strong Dollar Policy...More Fun With Numbers.

China already uses as much steel per capita than the infamously wasteful US. Of the list of top users per capita more than China, all are export nations with Spain being the biggest real estate bubble.

How much more steel can China use?

While demand in some parts of the world will no doubt increase, it is not clear to me either how China's production and consumption can continue to grow largely in isolation.

Are that many new skyscrapers planned still in the big cities?

In Singapore, in the last 4 years alone, they had demolished perhaps 100 buildings and skyscrapers mostly 20-40 years old to make way for higher density developments. Some of the project demolished were as new as 10 years old.

China has a lot more buildings to demolish than Singapore, perhaps to a factor of 100.

It sounds wasteful, but the free money to rebuild all came from America, courtesy of American banks and the Federal Reserve.

[c1ue]

Re: Strong Dollar Policy...More Fun With Numbers.

In Singapore, in the last 4 years alone, they had demolished perhaps 100 buildings and skyscrapers mostly 20-40 years old to make way for higher density developments. Some of the project demolished were as new as 10 years old.

Unless the old building is much smaller than the new one, it is debatable how much new steel is needed. The steel beams in a building are the easiest to salvage and rework/reuse.

As for China - outside of Shanghai China doesn't have the luxury of being a city-state financial haven like Singapore.

Singapore in fact has one of the highest steel usage per capita:

http://www.sametal.com/en/vision4.html

However, the largest consumers are in Asia: Singapore (1,200 kg/capita), Taiwan ROC (over 970 kg) and Rep. of Korea (830 kg).

1200 kg/steel per capita! Are you telling me China is going to achieve this level at a 1.3B people scale?

I think not.

[touchring]

Re: Strong Dollar Policy...More Fun With Numbers.

Unless the old building is much smaller than the new one, it is debatable how much new steel is needed. The steel beams in a building are the easiest to salvage and rework/reuse.

As for China - outside of Shanghai China doesn't have the luxury of being a city-state financial haven like Singapore.

Singapore in fact has one of the highest steel usage per capita:

http://www.sametal.com/en/vision4.html



1200 kg/steel per capita! Are you telling me China is going to achieve this level at a 1.3B people scale?

I think not.

Well, i don't know, i only know that China is operating like a command economy on the macro level. The authorities could dictate the builders to build 1000 of those if they want to.



For as long as America is willing to print money, China will need to spend the money. If the money is garbage, then it will be spent on garbage.

As for high steel consumption per capita of Singapore, it could be due to the fact that they are pulling down and rebuilding so many buildings, and demand from the ship and oil rig building industry.