Les Jones

Money trouble in Big China

Tuesday, November 17th, 2009 | Economics | Permalink | 2 Comments |

Telegraph - China has now become the biggest risk to the world economy

“The inherent problems of the international economic system have not been fully addressed,” said China’s president Hu Jintao. Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.

While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. “I’m more worried about deflation,” he said.

By holding the yuan to 6.83 to the dollar to boost exports, Beijing is dumping its unemployment abroad – “stealing American jobs”, says Nobel laureate Paul Krugman. As long as China does it, other tigers must do it too.

Tags: china

China moves to become a global currency

Thursday, October 8th, 2009 | Economics | Permalink | No Comments |

Telegraph - China calls time on dollar hegemony

You can date the end of dollar hegemony from China’s decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners.

Beijing does not need to raise money abroad since it has $2 trillion (£1.26 trillion) in reserves. The sole purpose is to prepare the way for the emergence of the yuan as a full-fledged global currency.

“It’s the tolling of the bell,” said Michael Power from Investec Asset Management. “We are only beginning to grasp the enormity and historical significance of what has happened.”

Continue reading the rest of this post right here ›››

Tags: china, gold, inflation

2009 stimulus spending by country as a percent of GDP

Friday, August 7th, 2009 | Economics | Permalink | 2 Comments |

This really shows that this is a global slowdown, not just something specific to the U.S., though the U.S. meltdown is having secondary effects due to the sheer size of our economy.

That chart is from Eric Janzen’s latest piece, Debate: Are China’s stock and property markets dual bubbles that are about to pop? (subscription required). He’s not convinced they’re quite about to pop, but that they probably are at or near the top.

In summary:

• The Fed will not raise interest rates to protect the dollar or before unemployment falls for six months or more, regardless of cost-push and supply crash inflation.
• The dollar will rise in flight to safety response by global investors when China’s dual stock and property bubbles collapse in Q4 2009.
• China is about where Japan was in late 1989 and the U.S. in early 2000, near the top of both stock market and housing bubbles, or at least close enough for the adventurous gambler to short it.

So China has its problems, too. That’s good only in the sense that the best thing going for the U.S. is that other countries may be more screwed up than us, which would allow us to preserve our position as the world’s reserve currency. It’s bad in that a crash in China could have unsettling results on the now-fragile U.S. economy.

Tags: china, eric janszen, porkulus