the strong usd

[Chris Coles]

Re: the strong usd

did i already share this?
https://blog.evergreengavekal.com/in...-new-cold-war/

if this is a repeat, forgive me- i've lost track of what i've said where. whether or not a repeat, i strongly recommend it.

Such a possibility brings me back to themes outlined in Our Brave New World. Back in 2005, we argued that in a “globalizing” world, intellectual property would become ever more valuable. But, of course, for such a construct to sustain value, governments would have to agree to protect it.

This brought to my lips a choked laugh!

[Woodsman]

Re: the strong usd

In the end, maybe China's devaluation doesn't matter much to the real US economy. A reduction of trade with China might just benefit the US economy longer term. It does matter quite a bit to the financial economy, hence all of the sturm und drang and falling stock markets, and such. But if it hurts the FIREmen, all the better.

It is interesting that China resorted to such a dramatic devaluation, and so quickly. Along with the HK events, it might be a tell that things are even shakier over there than everyone suspected. If China goes Tienanmen Square on HK, Trump's position might actually be stronger as the rest of the world confronts the reality of CCP's ruthlessness. If Xi does nothing with HK, he looks weak. And if the economy starts shrinking on top of that? Optically, the Chinese do not appear to be working from a position of strength. Their transparency is for sh!t anyway, so who's to say it's not a Potemkin Village through and through. Bad Orange Man might just turn out to be a great statesman after all.

Meanwhile, the Strategy of Tension is going swimmingly here in the Home of the Brave. And aren't they so gladio for it.

[touchring]

Re: the strong usd

did i already share this?
https://blog.evergreengavekal.com/in...-new-cold-war/

if this is a repeat, forgive me- i've lost track of what i've said where. whether or not a repeat, i strongly recommend it.

Looking at past articles, the author has a sino fetish. Don't know about the validity of what he writes though.

[jk]

Re: the strong usd

Looking at past articles, the author has a sino fetish. Don't know about the validity of what he writes though.

if i'm not mistaken gavekal has had one of its [few] offices in hong kong for decades. might explain his sino fetish.


re cny
jeff snider, in a long, ongoing series of brief pieces worth following, as well as in interviews on macrovoices, has been tracking eurodollar crises/liquidity squeezes over the last several years. we are currently in the 4th round, and it looks to be a doozy. according to his analysis it's not chinese currency manipulation ["PBOC Governor Yi Gang is a passenger here, not the man pulling the levers behind the scenes."] nor is it capital flight. it's a global dollar shortage.

https://www.alhambrapartners.com/201...the-clockface/

luke gromen's take is that the dollar shortage is the federal gov'ts funding needs sucking up all the liquidity. meanwhile dollar debtors, e.g. em's, need usd's to make their payments.

the usd's global role is shrinking. but the overhang of dollar debt from the age of the u.s.'s now-fading hegemony is still a heavy burden. fewer u.s. imports, esp energy, is reducing the flow of dollars to the rest of world.

we've always looked at the impact of triffin's dilemma on the u.s., as the u.s.'s hegemonic role required u.s. trade deficits with their inevitable consquences on the u.s. economy. now, with the u.s. supplying fewer dollars, triffin's dilemma is cutting the other way. triffin's dilemma, the necessity of u.s. deficits to meet the world's need for dollars to provide liquidity and facilitate trade, is coming to a crisis - dilemma indeed- and an ending. this is simultaneously increasing pressure all around the world for non-dollar-denominated trade, reinforcing and accelerating the decline of the dollar's central role in the global economy. the usd will continue to be A reserve currency, but it will no longer be THE reserve currency.

but for now the liquidity squeeze will continue to push the dollar higher. until it doesn't.

trump has been talking explicitly about weakening the dollar. it's what HAS to happen anyway, because of the huge debt and the even huger off-balance-sheet unfunded liabilities of e.g. social security, medicare, medicaid. treasury intervention in the forex market, increased fiscal activity [i.e. even bigger deficits], mmt, send everyone a check, whatever... eventually the liquidity will be created and the dollar will weaken at least in terms of purchasing power. vis a vis other currencies is more complicated, as we can expect a recapitulation of beggar-thy-neighbor devaluations [how long have i been saying we're repeating the 1930's? hopefully this time as farce.]

we've got a front seat watching history unfold. might as well enjoy the show.

[touchring]

Re: the strong usd

if i'm not mistaken gavekal has had one of its [few] offices in hong kong for decades. might explain his sino fetish.

Tough to know which reports are for real and which are propanganda nowadays.

[thriftyandboringinohio]

Re: the strong usd

Tough to know which reports are for real and which are propanganda nowadays.

It sure is touchring.
For China I use this method.

First I check a confirmed propaganda source and read through it to get the talking points and themes for this week's propaganda.
Next I read through other sources I hope are independent, and stay alert for the known propaganda themes to pop up.
If the propaganda shows up, I move along to another info source.

[jk]

Re: the strong usd

i don't recall the exact content of that article but i do recall their book, "clash of empires." it is not and cannot be chinese propaganda.

the chinese would prefer to go back to business as was usual, in which they sell us goods, hollow out our economy and steal ip while the u.s. goes about its neo-liberal business of maximizing profits and ignoring geopolitics.

above i said "sun tzu would be proud" of china waging war while the u.s. didn't even notice. i think sun tzu would have been unhappy about the hoopla china made around the "made in china 2025" plan. i know it was for domestic propaganda purposes, but i wonder if its ambition finally woke up western observers to what was going on.

the world is not, as the neo-liberals liked to believe, one big happy marketplace. we kept the manufacture of military hardware domestic and will military allies, even though it would have been cheaper to do otherwise. that was obviously a national security decision. finally we are realizing the same should be true of electronics in general, generic medications, and a host of other technologies.

the hope that admittance of china to the wto would eventually integrate china into the global economy and that in turn would lead to chinese liberalization didn't work out. they weren't really integrated into the global economy in a normal way, because they subsidized certain industries in order to capture the manufacturing and technology. and they certainly haven't liberalized domestically. i haven't read allison's "thucydides' trap", but it shows that in 12 of 16 cases in the last 500 years, when there was a dominant power threatened by a rising power, it lead to war. let's hope it's another cold one, perhaps with some proxy wars here and there.

[dcarrigg]

Re: the strong usd

german industry is about to be hollowed out. and of course germany has already fully exploited its southern european markets at the cost of running up enormous target 2 balances which will be written off when the eurozone falls apart.
.

Thoughts on this: I mean, on one hand, German industry was already hollowed out. There's plenty of songs about Bochum a la Springsteen. The Ruhrgebiet didn't get its name for nothing.

On the other hand, German social policy even after Schroeder gutted it is fairly robust (sozialmarktwirtschaft), and a combination of their tripartide corporate board structures, ordoliberal ideals, and the Mittelstand make it a nation whose manufacturing industry is significantly less dependent on typical hot capital flows than most.

I think everyone here who points out the EU is not well structurally designed is generally correct. But Germany herself as a nation is relatively insulated and relatively less dependent on large, publicly-traded firms. Not so much that they're invincible or untouchable. But it's a strange place. Limited homeownership. Never had a price run-up in real estate. Industry dominated by private family mid-sized firms. A weird artisan mentality with everything, even the butcher and the baker are respected pros who get pensions and decent pay. Whole 3-tier school system churns out apprentices trained and ready for work.

Of course, the same worldwide trends apply. Labor's share is declining. Capital's share is increasing. China is having a huge impact. No denying it. Also means it's increasingly dominated by the service sector, which is some 70% of its economy now, with FIRE and business services representing about half of that. So comparatively less FIRE dependent than the US or UK. But not by a hell of a lot.

I'm not sure I have a clear take here. I can see both pros and cons for the argument.

[dcarrigg]

Re: the strong usd

the world is not, as the neo-liberals liked to believe, one big happy marketplace...the hope that admittance of china to the wto would eventually integrate china into the global economy and that in turn would lead to chinese liberalization didn't work out.

Exactly. Markets don't do magic by themselves, and you have to get the political institutions right first. Just because there's a KFC, doesn't mean anything is actually liberalized. Of course, it wasn't about China specifically, but resisting the idea generally.

Like I said before, it's not hard to see what China's up to if you look at the 5-year-plans. Interestingly, they're simultaneously trying to increase the service sector from 47% to 56% of the economy and increase exports. They're also trying to increase the urbanization rate from 56% to 60% (4% of China's still a lot of people, government's going to build 20 million housing units to help effectuate this). They also want to double the number of international patents and crank R&D spending up by 12%.

In a weird way, they're getting near the end now. The 2025 plan will have to be carried forth through the 14th 5 year plan which should come out in 2021.
I expect them to plod along generally toward the old goals until then. But it will be curious to see if we get a major goal shift at that point.

[thriftyandboringinohio]

Re: the strong usd

...eurodollar crises/liquidity squeezes over the last several years. we are currently in the 4th round, and it looks to be a doozy. according to his analysis it's not chinese currency manipulation... nor is it capital flight. it's a global dollar shortage.

https://www.alhambrapartners.com/201...the-clockface/

...fewer u.s. imports, esp energy, is reducing the flow of dollars to the rest of world.

... with the u.s. supplying fewer dollars, triffin's dilemma is cutting the other way... but for now the liquidity squeeze will continue to push the dollar higher. until it doesn't.

... treasury intervention in the forex market, ...even bigger deficits, mmt, send everyone a check, whatever... eventually the liquidity will be created and the dollar will weaken ...

we've got a front seat watching history unfold. might as well enjoy the show.

Thank jk. I finally made it through the article you linked to above.
He makes a pretty compelling argument.

If inflation is always and everywhere a monetary phenomena, then GRG55 is right. We would expect "endless ka" as too few dollars chase too many goods. Perhaps disinflation becomes true deflation.
Cash is king?
Gold is widely accepted money and has been doing nicely for a few years now, which supports the hypothesis.

[jk]

Re: the strong usd

Thank jk. I finally made it through the article you linked to above.
He makes a pretty compelling argument.

If inflation is always and everywhere a monetary phenomena, then GRG55 is right. We would expect "endless ka" as too few dollars chase too many goods. Perhaps disinflation becomes true deflation.
Cash is king?
Gold is widely accepted money and has been doing nicely for a few years now, which supports the hypothesis.

too few dollars => disinflation/deflation but the "too few" depends in large measure on usd denominated debts that need to be paid. as those are paid off/paid down, the need for dollars will decline. meanwhile deficits will continue to rise even without recession, moreso with recession, and the dollars will be printed. we will shift from a deflationary regime to an inflationary one. so it's not ENDLESS ka, it just feels that way.

[Chomsky]

Re: the strong usd

[QUOTE]trump has been talking explicitly about weakening the dollar. [/QUOTE]


Seems as if Snider always has an answer for everything.

The dollar is no one’s tool. There are those who claim the US will come out and signal its intentions to weaken its currency before too much longer; President Trump reportedly itching to do so. The backrooms are already filling up with faceless bureaucrats lighting up their cigars and planning for a new currency value.

They are reading up on the relevant chapters in the textbook.

But that’s the thing about the eurodollar – it’s also no one’s currency. It is called a dollar and is supposed to be a dollar; it just hasn’t been in a very, very long time. Its value isn’t a value at all. At most, it is a signal and an import indication.

What it indicates right now is trouble. Trouble for China. Trouble for Germany. Trouble for all those in between. And trouble for the US.

https://www.alhambrapartners.com/201...currency-wars/

[globaleconomicollaps]

Re: the strong usd

trump has been talking explicitly about weakening the dollar.


Seems as if Snider always has an answer for everything.




https://www.alhambrapartners.com/201...currency-wars/

When I read something like this it makes me mad:

"Nobody is devaluing their currency. It’s the tell-tale sign of the eurodollar downgrading and damaging the whole global economy. "

Did China take some action that caused their currency to drop suddenly overnight or not? I'm guessing that what he means is that China has allowed its currency to float. That means they stopped intervening in the bond markets to buy US govt treasuries when the currency drops. In other words the natural level of the RMB is lower not higher.

The thing I don't understand is that China stopped being a net buyer of treasuries in 2014. What exactly happened to cause this sudden drop?

I never understand exactly what that guy is saying. He is like an oracle. You need to interpret his remarks.

[Mega]

Re: the strong usd

Gold jumping this morning Limey time

[jk]

Re: the strong usd

When I read something like this it makes me mad:

"Nobody is devaluing their currency. It’s the tell-tale sign of the eurodollar downgrading and damaging the whole global economy. "

Did China take some action that caused their currency to drop suddenly overnight or not? I'm guessing that what he means is that China has allowed its currency to float. That means they stopped intervening in the bond markets to buy US govt treasuries when the currency drops. In other words the natural level of the RMB is lower not higher.

The thing I don't understand is that China stopped being a net buyer of treasuries in 2014. What exactly happened to cause this sudden drop?

I never understand exactly what that guy is saying. He is like an oracle. You need to interpret his remarks.

i also find snider very hard to understand. as best as i can figure, he's saying there wasn't a meeting of some committee which said "let's devalue the rmb this week." instead the global monetary system, fundamentally the eurodollar system, is spinning out of control and everyone is doing their best to cope using their limited abilities to direct events.