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chinadaily (chinadaily)
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a silver-lining for U.S. economy: weak dollars boost export !!!

US trade gap narrows to 2-year low
(agencies)
Now there comes a good news for America. The US trade deficit unexpectedly fell to a two-year low in September as a weakening dollar has fueled exports, offsetting the impact of soaring oil prices.
The trade gap narrowed to US$ 56.5 billion, 0.6 per cent lower than US$ 56.8 billion in August, the U.S. Commerce Department said Friday..
The narrowing of the U.S. trade gap suggested stronger-than-expected economic activity in the third quarter that could lead to an upward revision of the 3.9 percent rise in gross domestic product (GDP) initially estimated by the Bush administration.
"It's a larger improvement than anticipated, and likely will lead to a revision of growth in the third quarter," said Sal Guatieri, BMO Capital Markets. "We could see the GDP number revised to 4.5 percent or so."
The improving trade snapshot came against an increasingly bleak outlook for the US economy amid a persistent housing slump and forecasts of sharply slowing growth for the fourth quarter as high oil prices bite.
"With domestic spending growth expected to slow sharply as housing continues to decline and consumers wilt under pressure from falling house prices and rising energy prices, strong export growth is crucial to keep the US economy moving forward," said Nigel Gault, US economist at Global Insight. He said the contribution of foreign trade to growth is "crucial if the US is to avoid recession."
Exports led the September improvement, rising 1.1 percent to a record US$140.1 billion dollars as Americans sold more food as well as industrial, automotive and consumer goods abroad.
The dollar's depreciation in the past few months played a role in the export gains. The trade gap with the European Union plunged 37.1 percent to US$ 6.4 billion, and fell 3.2 percent with Canada to US$ 4.9 billion.
The weak dollar is performing its magic as exports are surging and the trade deficit is narrowing, analysts believe.
The head of the Manufacturers Alliance/MAPI, Thomas Duesterberg, welcomed the improving balance of trade as "one of the few remaining pillars of growth in the weakening US economy."
"Recent weakness in the dollar should maintain the improving trend in the future," he added.

2007-11-10 03:08 PM

chinadaily (chinadaily)
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a strong U.S. economy benefits the world

Now, seems the weak dollar is performing its magic, as U.S. exports are surging to Asia, Europe, and elsewhere.

2007-11-10 03:12 PM

interesting (Steven Schreiber)
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As I consistently say: everything is fine. People should not confuse their silly preoccupations with progress in the economy.

2007-11-10 03:26 PM

tongluren (tongluren)
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Famous Last Words

"Everything is fine."

2008 is turning out to be a very "interesting" year, as in "May your life be interesting." I hope Interesting will find it so.

We are just seeing the FIRST tranche of collapses in the markets (since Interesting is so very fond of markets). Just the subprime writedowns are hundreds of billions of dollars - capitalized, that represents trillions of dollars of stock market "wealth" (which is not permanence anyway) simply vanish.

Here a trilion, there a trillion, it soon adds up.

And that is only the beginning. Next comes the credit card debacle - as the economy slows, it is estimated that over 20 million Americans won't be able to pay their credit cards. This one is a little smaller, only about $100 billion dollars packaged into tiered CDOs. But it is yet another layer of losses, and more vaporization of "wealth."

Everything is fine.

2007-11-10 04:09 PM

tekvicious (Hybrid Theory)
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Yeah,yeah,yeah...I said it before and I say it now. Devalue the dollar, reel your citizens general spending habits back into check, increase exports...its a pendulum effect.
The worth of ones 'dollar' is not the only sign of 'how thigs are going'.

2007-11-11 12:38 AM

kongque
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QUOTE:

Originally posted by tongluren at 10-11-2007 18:09
"Everything is fine."

2008 is turning out to be a very "interesting" year, as in "May your life be interesting." I hope Interesting will find it so.

We are jus ...

............ this will give us a good chance to ban lots of US goods ............. recalls by the millions ............

Now what goods would anyone want to import from the US??? All the Amerikans here complain that their shop shelves are full of goods "made in China" .......... so why would we bother to bring it back???

Might help their struggling primary sector - but they can't get labour to harvest the crops - and they are already so heavily subsidised that the weaker dollar won't help much.

Who would buy a Ford - they had to recall more than 1 million vehicles last year............ and what else does the US produce - aircraft that are recalled more than the cars and military hardware that is fast becoming redundant due to the global shift in the style of warfare ................. all the drop in $$$$US does is increase the price of goods for the consumer because the importers will still out weigh the exporters........ rubbery figures..................... but it sure is good for those of us with the cash to make a few big investments in the ruptured housing market.................

2007-11-12 07:51 AM

interesting (Steven Schreiber)
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Yep.

Everything is fine. I don't really see a problem. $100 billion dollars disappears? Petty cash, less than one percent of the entire economy. I'm sure many times that "disappears" each year as businesses close. It's the net losses to the entire economy that count and the US is probably going to have higher GDP growth than normal over the next couple of quarters. To add to the situation, employment is already rising and is above the level considered "full employment" for the US economy while it does not seem to be concentrated in temporary/seasonal labor. Everything is fine.

2007-11-12 09:47 AM

chinadaily (chinadaily)
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US sees no rapid shift in China's currency reserves

(AFP)

Amid a plunging US dollar, China has again threatened to diversify its mountain of dollar foreign reserves but US officials are unperturbed while experts do not see a rapid shift by Beijing.

A senior official in China last week underscored the need for Beijing to shift part of its 1.4 trillion dollars in reserves toward presently stronger currencies, like the euro.

Comments particularly by Cheng Siwei, vice chairman of China's national parliament, that strong currencies ought to be given more weight in the Chinese reserves to offset the losses in weak ones, sent the greenback into a tailspin.

While China plans to gradually decrease its relative reliance on the greenback as a backstop currency, it is unlikely to do it in a rapid fashion, analysts say.

"Beijing is not about to shoot itself in the foot by carrying out a mass sell-off of greenbacks," Stratfor, a private US intelligence firm, said in a bulletin to clients.

Such a move would wipe out much of China's foreign reserves "in less than the blink of an eye", it said, adding that Beijing wanted "just to slow or stop its purchase of new batches" of the greenback.

But the latest Chinese suggestions do point to imminent changes in Beijing's method of currency reserve management -- changes being discussed in top Chinese political circles -- such as investing in assets with higher rates of return, like the euro or other investment instruments such as equity or energy assets, Stratfor said.

To date, only 200-400 billion dollars of China's foreign currency reserves have been designated for spending elsewhere -- notably below the 650 billion dollars threshold suggested in March.

US financial and economic czars were unperturbed by the latest reports on Beijing's reserves diversification plans, underlining the dollar's status as the dominant reserve asset and traditional safe-haven currency.

Cheng's remarks sent tongues wagging in the US Congress, which has often been critical of Beijing's refusal to make its yuan currency more flexible.

At a Congressional hearing on the American economic outlook, Federal Reserve Chairman Ben Bernanke was asked to comment on the reports of Beijing reserves switch from the dollar.

"How worried are you about that? How likely is it to occur? How much credibility do you give this statement that was made yesterday?," asked Senator Chuck Schumer, a proponent of sanctions on Beijing if it does not make the yuan more flexible.

Bernanke said, "I'm not particularly concerned about any major change in the (reserves) holdings of China or any other country."

He noted however that "sovereign wealth funds" -- investment vehicles funded by a country's foreign reserves -- and "portions of reserve accumulations" were reviewing their bets across currencies for higher returns.

"But again, I don't see any significant change in the broad holdings of dollars around the country -- around the world. Dollars remain the dominant reserve asset and I expect that to continue to be the case," Bernanke said.

US Treasury Secretary Henry Paulson also defended the dollar's position.

It has has been the world's reserve currency since World War II and "there's a reason," he said. "I put the US economy up against any in the world in terms of competitiveness."

Statements from Chinese officials that their currency reserves were too heavily skewed toward the dollar are not new.

Three months ago, when US lawmakers threatened sanctions against China over the yuan issue, reports said Beijing hinted using a "nuclear option" -- unloading its US dollar denominated assets to sink the greenback.

US President George W. Bush cast doubt at the reports but responded that "it would be foolhardy for them to do this" and that such a move would be more detrimental to China than the US.

Bush was confident the United States and China could resolve any of their differences "in a cordial way."

2007-11-12 02:59 PM

chinadaily (chinadaily)
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sure!

Bush was confident the United States and China could resolve any of their differences "in a cordial way."

2007-11-12 03:00 PM

wowzers (Andrew)
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QUOTE:

Originally posted by chinadaily at 2007-11-12 15:00
Bush was confident the United States and China could resolve any of their differences "in a cordial way."

I am sure that the Chinese people and the American people share that sentiment!

2007-11-12 03:20 PM

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interesting (Steven Schreiber)
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I'm not sure why this becomes news or why it promotes shrillness. It doesn't really matter anyhow and shows why I hate monetarism and its adherents.

2007-11-12 03:22 PM

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tongluren (tongluren)
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Sure, Everything is Fine

Yes, $100 Billion is not gonna do much.  How about a trillion, and concentrated in the premier financial houses?

The premier universities in China, including those in Hong Kong, should work on a new specialty - the studies of CDOs, and the creation of an efficient market to provide liquidity and accurately price these vile frauds.

As of 2004, the nominal "value" of these flights of fancy had reached US$270 TRILLION!!  What is more frightening is of course the history of these outright frauds.  The typical bundle would put together a few billion dollars of financial paper of dubious merit, such as subprime mortgages, hire a "credit rating agency" such as Fitch or some other, slap a seal of approval on the resulting CDOs, with 70% "rated" as AAA quality, with only 4% of the whole mess rated as BBB.  THEN the fun begins.  The 30% that is not AAA is again "repackaged" into CDO Squared (it truly requires imagination and credulity!!), with the rating agencies AGAIN tiering the resulting derivatives, with 70% AGAIN rated as AAA, and only 4% rated as BBB!!  This sleight of hand is repeated across many dubious asset classes.

What is even more befuddling is how anyone, let alone the most sophisticaled of Western financial institutions, would gladly buy (you'd think they'd have to be bribed) would buy such voodoo and pay tens of billions of dollars for them, given the fact that these derivatives are illiquid, have no market, and thus have no readily ascertainable price.  Given the very small amounts bought by the Chinese banks, they are paragons of responsibility compared to the major Western and Japanese financial institutions in that regard.

Therein lies the opportunity.

Actually come to think of it - Hong Kong would probably be the better place to set this up.  Either the Hong Kong University or one of the other major universities in Hong Kong can set up a new department to study the mechanics of CDOs, AND to assist the Hong Kong authorities to set up an electronic trading market for these CDOs.  These vile instruments are devilishly complicated - BUT the market has a way of setting prices for them.

In very short order, there would be a HUGE reshuffling of the balance of power in the international financial scene, with many of the Western and Japanese major institutions seeing a huge block of their equity marked to market. There is no doubt that the Chinese banks and funds will become stronger by comparison in the exercise.

This would be a major strategic move, aimed at shifting the paradigm.  China's exposure in this debacle is very minor, being in the single digit billions.  But for the Western and Japanese financial houses - be they banks, insurance companies, hedge funds, etc., if their CDO exposure is really "marked to market," you'd see TRILLIONS wiped from their supposed equity.  China would be doing the world a favor by preventing these behemoths from continuing to lie to their investors and say that "All is Fine", much like what Interesting is doing here.

One immediate benefit would be to queer CITI's ability to fund the BHP takeover of Rio Tinto (which would mean much higher iron ore prices for China) - they had just announced funding BHP to the tune of $70 billion.

2007-11-12 03:28 PM

#12

kongque
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QUOTE:

Originally posted by tongluren at 12-11-2007 17:28
Yes, $100 Billion is not gonna do much. How about a trillion, and concentrated in the premier financial houses?

The premier universities in China, including those in Hong Kong, should work on a ...

It is all simply game playing by those who understand the game - already they have seen the move did not create the desired effect and have announced the US is slowing - now we all know the effect of market manipulation does not take effect so quickly so this raises the issue of game playing.

As for steel prices rising for China - they might - the industry is out for as much profit as it can squeeze from the commodity - the most likely effect will be increased prices for the domestic market and they will claim that "prices are forced up by high demand in China" they did this about three years ago and even kept the wick turned up after it became general knowledge that there had been an 18% downturn in demand from China - so it is simply profit taking at criminal levels.

The general public has absolutely no inkling of what drives the price structure - they rely on toothless tiger "watchdog" quangos to look after them when all the time they are simply bled dry by massive multinational companies which thumb their noses at all forms of regulation.

The reason the companies get awy with what they do is because people are too stupid to control them - if people would simply follow the common sense approach and buy less when price increase then they would find the prices would quickly drop - but no - fuel prices rise and instead of catching the bus or walking they still buy the same amount of fuel - food prices rise they still buy the stuff instead of being super selective and choosing cheaper lines or buying less of the expensive lines.

We are victims of our own stupidity and the money vacuums know our weaknesses too well.

2007-11-15 02:24 PM

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interesting (Steven Schreiber)
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One trillion wouldn't do much either. Stop playing Doctor Evil, it's banal.

2007-11-15 02:37 PM

#14

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