the strong usd

[touchring]

Re: the strong usd

it took a few years for the southeast asian crisis to spread. u.s. markets didn't peak until years after the baht crisis that started things. i don't know how to draw the connections but i suspect they exist.

tighter money raises interest rates and lowers equity and commodity values since you've raised the discount rate with which to value future returns. in finster's terms, if the dollar is rising and everything else is falling the essence is that the dollar is getting more valuable. therefore that dollar can buy more "stuff" of any and every kind. since we're used to taking the dollar as a given, we see this as a fall in asset prices.

The South east asian crisis is mostly a localized property and banking crisis caused by corruption. Too much money poured into property projects and banks that financed these projects became bankrupt.

Even though it devasted the affected countries, the scale is nothing compared to what is happening today. It also did not cause any war to breakout even though Indonesia had a change in government.

The problem today is much more complicated and there's also geopolitics at play, i.e. Iran, Russia and Turkey and South China Sea.

[jk]

Re: the strong usd

harald malmgren:



Retweeted Booms and Busts Show #MBGA

I fear we are facing sequence of 2 powerful blows: stagnation/deflation followed by strong inflation as only means to climb out



jk- i.e. ka-poom

[jk]

Re: the strong usd

https://twitter.com/RaoulGMI/status/1038754719085326337

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So much gold left UK in July that it helped UK trade stats; GLD (vaulted in London) lost 20t of gold in July - yet gold prices FELL. Either London bankers are defying a fundamental law of economics (demand up, price down) or something else is going on. http://FFTT-LLC.com

[Chris Coles]

Re: the strong usd

https://twitter.com/RaoulGMI/status/1038754719085326337

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More



So much gold left UK in July that it helped UK trade stats; GLD (vaulted in London) lost 20t of gold in July - yet gold prices FELL. Either London bankers are defying a fundamental law of economics (demand up, price down) or something else is going on. http://FFTT-LLC.com

Looking at that cup shaped graph, I am constantly reminded of The Downwave by Robert Beckman https://almostalwaysthinking.com/200...ave-revisited/ which set out a detailed description of Catastrophe Theory, http://www.businessdictionary.com/de...he-theory.html where the charts show a slight downturn followed by a period where they return to their original high and then completely collapse.

[touchring]

Re: the strong usd

https://twitter.com/RaoulGMI/status/1038754719085326337

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More



So much gold left UK in July that it helped UK trade stats; GLD (vaulted in London) lost 20t of gold in July - yet gold prices FELL. Either London bankers are defying a fundamental law of economics (demand up, price down) or something else is going on. http://FFTT-LLC.com

I read that other than forcing the Fed to reduce interest rates hikes, the US can setup a national sovereign fund to weaken the dollar.

I mean, there must be some other ways to "manipulate" the currency, otherwise, how does China depress the RMB despite the huge trade surpluses?

[Chris Coles]

Re: the strong usd

I read that other than forcing the Fed to reduce interest rates hikes, the US can setup a national sovereign fund to weaken the dollar.

I mean, there must be some other ways to "manipulate" the currency, otherwise, how does China depress the RMB despite the huge trade surpluses?

I can see that you seem never to have had a direct, face to face conversation with a member of their CCP; you do not argue with them. Period!

[touchring]

Re: the strong usd

I can see that you seem never to have had a direct, face to face conversation with a member of their CCP; you do not argue with them. Period!

Actually, I have, and I'm quite familiar with this. It's partly due to communist thinking, and is also an East Asian culture to parrot the official line. Confucianism? Just look at North korea you'll know, it will be even more extreme than a CCP member.

[jk]

Re: the strong usd

I read that other than forcing the Fed to reduce interest rates hikes, the US can setup a national sovereign fund to weaken the dollar.

I mean, there must be some other ways to "manipulate" the currency, otherwise, how does China depress the RMB despite the huge trade surpluses?

print yuan and use them to buy other currencies. voila! the yuan is lower.

[touchring]

Re: the strong usd

print yuan and use them to buy other currencies. voila! the yuan is lower.

To be frank, I don't think anyone wants RMB. If I'm going to China, I'll get some RMB, but other than that, I don't see any need. It's not used in international commerce, and the Chinese banks don't seem reliable either.

[dcarrigg]

Re: the strong usd

I think what many folks used to western-style capitalism find it hard to wrap their heads around is this: They're not playing monopoly; they're playing risk. All the banks are state owned. RMB is worth exactly what the CCP wants it to be worth. If it starts looking any different, even intraday, they will call the banks. Banks will fix it. Not too different from the LIBOR or the gold spot, except for who's calling the shots and what the game is they're playing. China has the worst corporate debt load of any of the EMs. But I'm less worried about it. Mostly because they're playing a different game. It's a means to an end rather than an end in and of itself.

Ever ask yourself why a small state-owned real estate development firm from Dailan now owns the theater on Boston Common and produced that Jurassic World movie everyone went there to watch earlier this summer? Ever hear of the State-owned Assets Supervision and Administration Commission? Few people pay attention to it. But more should. It's only 15 years old. But it has about $30 trillion in assets. That's trillion. With a T. Maybe 50% more than the entire market cap of the New York Stock Exchange. Under centralized leadership. It's the largest economic entity in the world. Period. And it has only just recently been testing the waters. Maybe $1 trillion of those $30T is comprised of overseas assets. A small fraction of what's to come.

But this is what belt and road is about, right? Push it outwards. Not just what to do with overcapacity. But how to expand and grow state-owned assets. Of course, there's no wall between the assets and the state itself. They're there to serve the interests of the state. And the interests of the state are not always as simple as the interests of a corporation. So the SASAC is something without western analog--part arm of a political party, part sovereign wealth fund, part arm of the state, part regulator, part welfare provider, part corporate board, etc. It brags about paying taxes, worries about unemployment, cares about party members and political loyalty, cares about foreign policy, etc.

So this is how you execute the Made in China 2025 Plan and other things like it. They simply set goals and corporate leaders meet them, or heads roll. If they want greater R&D in a given sector, the corporations jump to and say, "How much?" Of course, the goals aren't exactly secret. They're right in the 5 year plan, for anyone to read. Speculating what China's going to do is like speculating what the clock is going to do after you wind it.

[touchring]

Re: the strong usd

I think what many folks used to western-style capitalism find it hard to wrap their heads around is this: They're not playing monopoly; they're playing risk. All the banks are state owned.

I've said this many times, "authoritarian capitalism" whereby the state is the company.

Deng copied the Singapore model created by Lee Kuan Yew, but the Singapore model has already proved to be a failure because the native fertility rate has plunged to 0.5 or lower. They managed to covered it up by importing whole families, from India, Malaysia and Indonesia with kids tagging along to beef up the fertility rate to a less scary 1.25, but the actual native born fertility ratio is the most pathetic in the world, way lower than Japan - which is the poster boy for low fertility.

No more than 1 newborn out of 4 adults born in Singapore.

China will have a fun time in 10 years if they pursue this fun model.

[dcarrigg]

Re: the strong usd

I've said this many times, "authoritarian capitalism" whereby the state is the company.

Deng copied the Singapore model created by Lee Kuan Yew, but the Singapore model has already proved to be a failure because the native fertility rate has plunged to 0.5 or lower. They managed to covered it up by importing whole families, from India, Malaysia and Indonesia with kids tagging along to beef up the fertility rate to a less scary 1.25, but the actual native born fertility ratio is the most pathetic in the world, way lower than Japan - which is the poster boy for low fertility.

No more than 1 newborn out of 4 adults born in Singapore.

China will have a fun time in 10 years if they pursue this fun model.

Oh yeah, well I think you have much more direct experience than I. Mine is not firsthand. Only what I get from books and documents.

But a big difference I think also between China and Singapore is that Singapore does it to reward expat millionaires and kleptocratic ruling families with high-ranking government jobs or board seats at Temasek, etc. They're still playing monopoly. The goal is to get all the money and property for yourself and use it to extract rents from everyone else. There's no higher purpose. I'm not convinced that's the case with China. China has geopolitical aspirations that require actually growing a middle class and sharing some of the economic boom more widely. And Chinese leadership has a fundamentally different political ideology than "grab all the money you can, stuff it in your ears, and watch the world burn from your penthouse," which I'm pretty certain the Lee family would do just as well as any given Russian or American oligarch family.

I guess that's my thesis here. That in Singapore, the end goal was to turn the state into a hedge fund that can extract rents from its people. There is no higher purpose. That is the purpose. They don't care about poor people--either natives or expats. They'll cane a broke German backpacking teenager for petty nonsense. They'll execute a street-level petty drug dealer. Unless the drug dealers are rich. Then they can cruise around swanky hotels with impunity selling whatever drugs they want to expats from San Francisco.

In China, the goal is world domination. To the extent banks and funds exist, they exist to serve the state, not the other way around. Yes, they're both intertwined public and private sectors in a similar way, but the master/slave relationship is reversed. Monopoly vs. Risk. Singapore is playing monopoly--you might call that authoritarian capitalism. But China is playing Risk. That game's different.

And thinking along those lines, it might be worthing asking whether they really give a shit or place even one tiny iota of value in the capitalism part of authoritarian capitalism, or if they're just using it as a means to other ends. My guess is that they're not being sneaky "secret capitalists." The CCP is actual mostly full of real Marxists, who are using capital markets as a tool so long as it suits them, but who have no legal, mystic, philosophical, or other attachment to property rights, markets, capitalism, or any of that. It allows them to be agnostic. To play the game "and cheat," like they seem to with the currency setting. But it's not cheating. They wouldn't even have to (or want to!) do it if they were playing Monopoly like other countries. But they're playing Risk. So they need to build strategic components soup to nuts at home. They need to be less reliant on export markets. So they need to increase domestic consumption. And that means they need to enrich their middle class, something leaders playing Monopoly have no interest in.

This is much less a conspiracy theory than the damned mission statement on the first page of the five year plan, which reads:

The period covered by the 13th Five-Year Plan will be decisive for finishingbuilding a moderately prosperous society in all respects. We must implement the
strategic plans and policies of the CPC Central Committee, achieve an accurate
understanding of profound changes in domestic and international environments and
circumstances faced by China in its development efforts, proactively adapt to,
understand, and guide the new normal in economic development, and comprehensively
advance innovative, coordinated, green, open, and shared development so as to ensure
that a moderately prosperous society is established in all respects.

Okay. A bit of a wonky translation. And full of stupid business-speak jargon. But you know what shines right through? That they're playing Risk. If they were playing Monopoly, they would not be interested in being "moderately prosperous," nor in the "international environment." The next page talks about education levels and increasing (proudly!) the number of public sector or state-owned jobs and suring up domestic agriculture production and improving environmental quality and remediating contaminated sites--this is all stuff the economic barons playing Monopoly usually spend millions to fight against! The last thing it talks about in that brief 2 page intro is the Party and the Military and soft power (and the Chinese Dream!).

The Chinese Dream of the rejuvenation of the nation and the core socialist valueshave gained a firm place in people’s hearts. China’s soft power has continued to becomestronger. Notable achievements have been made in military reform with Chinesecharacteristics, and new steps have been taken to strengthen and revitalize the armedforces. A new phase has begun in the all-around strengthening of Party self-governance,and significant headway has been made in improving Party conduct and building aclean government. New heights have been reached in China’s economic strength,scientific and technological capabilities, defense capabilities, and international influence.

I take them at their word on this. I think it's pretty straightforward. The entire economy exists to serve these ends. It's Risk, not Monopoly.

[jk]

Re: the strong usd

i'm not sure everyone here knows the board game "Risk."

[Chris Coles]

Re: the strong usd

I recently met with and had a very brief conversation with a very senior Chinese banker. He was a member of a panel to whom I had the opportunity to ask a question. Every other European banker mumbled their answer; whereas, he answered in a distinctly open manner and I came away with the firm impression that he was telling the truth. Soon afterwards, we exchanged business cards and I got a firm handshake.

My impression from recent contact with both sides of the equation is that business, (while always acting in the long term interests of the CCP and totally accepting their rule), are left to their own devices and are doing their best to improve the Chinese economy. Indeed, my meeting with him has left me deep in thought as to whether I should abandon any thought of a Western model for my future and instead, fully embrace China as my future partner. Looking back in history, indeed, many decades ago; the same thoughts must have crossed the minds of those originally attracted to emigrate to the USA. Migration is always driven by a refusal to accept new thinking by one's home nation; where greater potential lies in another nation. If China becomes careful to attract those of us who have lost faith in Western economic thinking; they may well become the new horizon; replacing the US as the target for new progress.

Yes, there are many detractions too; but that could have been said by the original settlers in Virginia. Yes, indeed, the word is RISK.

[touchring]

Re: the strong usd

Oh yeah, well I think you have much more direct experience than I. Mine is not firsthand. Only what I get from books and documents.


But a big difference I think also between China and Singapore is that Singapore does it to reward expat millionaires and kleptocratic ruling families with high-ranking government jobs or board seats at Temasek, etc. They're still playing monopoly. The goal is to get all the money and property for yourself and use it to extract rents from everyone else. There's no higher purpose.

It's not as simple as this. Money is only a means to an end, to achieve greater ambition and fame. It's like Zuckerberg, he's not just interested in money, he wants to rule the world, influence how americans vote. We all know this. And just like every giant corporation has staff, a "company-country" has citizens that you need to take care of to prevent a revolt.

The CCP might be financially very powerful, no doubt about this, but you can't be a superpower just by being financially strong, otherwise Japan would already be more powerful than China. Likewise, you can't be a superpower by having the toughest military and equipment, otherwise Hilter would have won the war.

The ambition of any dictatorship is very dangerous as history has shown. Plenty of examples during WWII. Dictators are dangerous not just to foreign adversaries but even more dangerous to the citizens of the country. The US also nearly had a dictator (the deep state), and it remains to be seen if this dictatorship can be restrained.