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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (2755)	3/23/2004 3:29:36 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Text: ECB President Trichet Interview with Handelsblatt Tuesday, March 23, 2004 7:46:00 PM marketnews.com WASHINGTON (MktNews) - The following is the first of two parts of the transcript of the interview of European Central Bank President Jean-Claude Trichet with Germany's Handelsblatt, released on the publication's web site Tuesday: Handelsblatt: Mr. President, one of the main problems facing the economy in Europe has been the development of the euro/dollar exchange rate. When the exchange rate approached 1.30 dollar, you expressed your concern about this. Are you less concerned now that the exchange rate is well below that? Trichet: "As President of the European Central Bank (ECB), I was the first to point out in Europe that we were not satisfied with excessive exchange rate movements. The market participants took that as an important message. [The market took that as a message - LOL - If wishes were fishes - Mish] Then we had the position of the Eurogroup, of Europe as a whole and finally the position adopted by the G7 in Boca Raton, all of which contained the same message, which included the point that excessive exchange rate movements are not desirable. [What a ninny - it is intervention that is causing excessive swings, not the lack thereof. Statements by the G7 are meaningless - mish] It is very important that all of us in Europe and in the U.S. speak the same language on the euro/dollar relationship. I stand completely by our European consensus and by our joint declaration in the G7." Handelsblatt: You recently stated that the risks involved in your main scenario of a continued gradual upturn have been balanced. Have the data of the past few weeks done anything to change this assessment? Trichet: "As you know, we meet every month to analyse the situation and the 18 members of the Governing Council collectively work out their precise diagnosis. We do this in an exceptionally transparent manner. You know our analysis from the last meeting and we will present a new analysis after the next one. On the economic side our working assumption is of a gradual European recovery. We are currently analysing data coming from the economy. We are vigilant and alert. In case our expectations for stronger household consumption and overall domestic demand were not to materialize, we would work out our assessment accordingly, fully in line with our monetary policy strategy." [First hint of a rate cut in Europe if consumer spending dies - mish] Handelsblatt: Chancellor Gerhard Schroeder has made it clear that he considers the prime interest rates in Europe to be too high. Do you regard this as unsolicited interference? Trichet: "Many years ago, when I was Governor of the Banque de France, my friends at the Deutsche Bundesbank told me that this happened from time to time and that it was Chancellor Adenauer who was the first to do so. Overall, this appeal by Chancellor Adenauer helped to build the reputation of the Deutsche Bundesbank because afterwards the central bank took its decisions in full independence." Handelsblatt: Does this mean that demands for an interest rate cut, like those coming from the Chancellor, could deter the ECBs Governing Council from doing just that? Trichet: "I am convinced that true independence means that you do not allow yourself to be influenced in one direction or another. Everyone knows and can see that we do not do something because we are asked to do it. In the same way we should not refrain from doing something just because we have been asked to do it. That would be childish. We have to analyse the situation without any prejudice, on the basis of facts and figures, in full independence, and make certain that we come to the right decision in line with our monetary policy strategy." Handelsblatt: You keep complaining about weak consumer confidence. Could lowering the interest rate help to prop it up? Trichet: "In the normal course of economic activity, recovery most often starts with net exports, then passes over to investment and then, as the third stage of the rocket, so to speak, arrives at consumption. The first two rocket stages have ignited and we continue to follow the relevant hard data. We now have to examine very carefully the ignition process of the third stage. It is clear that household consumption is not only driven by the impact of stronger exports and investment, but also by consumer confidence. We have ascertained that consumer confidence today is not necessarily at the level that would be justified by the basic economic data." [consumer's not spening enough over their - they should import ome of ours - we sure know how to spend. Is that what they want? Mish] Handelsblatt: Why is that? Trichet: "I see three reasons. First, the development of the labour market is not satisfactory. This in turn comes from the structural impediments which characterize Europe and from the previous phase of the cycle. We have good reasons to think that this situation will progressively improve. [Jobs jobs jobs - everyone everywhere thinks jobs will get better. - mish] Second, there is the unfortunate phenomenon that public opinion very often discovers the problems at the moment they are tackled, when governments, parliaments and social partners carry out the structural reforms that are urgently needed. This late and brutal discovery could have a negative impact on confidence. Had the public been more aware of the underlying problems, the reforms, when decided upon and implemented, would have increased confidence. That is the reason why we believe that transparency, pedagogy and tireless explanations are an essential part of preparing structural reforms: we all have a role to play in this domain, including the ECB, to make clear to people the advantages of the reforms as regards growth, job creation and higher standards of living. And third, there is a further point which touches upon the primary objective of the ECB. In a number of countries part of the population has the feeling that the inflation rate could be higher in the future and that their purchasing power will not be appropriately preserved. This has a negative influence on consumer confidence. We, on our side, have all reasons to trust that we have inflation under control and that prices will be in line with our definition of price stability. And we tell the public that we, as the guardians of the currency, are defending their purchasing power, that they can trust us and that they can invest and consume with full confidence." [everyone confident of low inflation everywhere - mish] Handelsblatt: Speaking of structural reforms, are you satisfied with the pace at which they are being implemented in Europe? Trichet: "We want to help explain to citizens why the reforms are necessary and facilitate their implementation. We have made no bones about the fact that we have been disappointed with regard to fiscal policy. But the very countries whose fiscal policies have been so disappointing have recently shown courage in the way they have started to tackle the structural reforms. That also needs to be said. Naturally, we would always prefer a faster pace. But we do not underestimate the complexity of this urgent task." Handelsblatt: In the past few months there has been a great deal of political controversy over the Stability and Growth Pact. Is the ECBs ability to ensure price stability restricted by the fact that it was not possible to enforce compliance with the deficit limits? Trichet: "We will carry out the ECB's mandate to secure price stability, which is so essential for the confidence of European citizens, no matter what happens in other areas of economic policy. It is our duty according to the Treaty to be an anchor of stability and therefore an anchor of confidence particularly in difficult times." [Fuck jobs we will fight inflation first. Different attitude here for sure - mish] Handelsblatt: Is there a need to amend the Pact? Trichet: "My colleagues and I do not believe that it would be advisable to amend the Maastricht Treaty or the Stability and Growth Pact. We share the assessment of the EU Commission that the implementation could be improved upon. With a better economic analysis and understanding of the structural aspects of fiscal policy, it would most likely be possible to improve on the implementation. If we understand better what should be done during good times this could be useful as well. There is much that we could improve upon without changing the wording of the texts." Handelsblatt: Would it be possible to effectively oblige the countries newly joining the European Union to comply with the deficit limit rules, before they are allowed to introduce the euro? Trichet: "Unfortunately, three countries have failed to comply with the deficit limits set forth in the Treaty. The ECB Governing Council very promptly made it clear that it completely supports the EU Commission in its insistence on compliance with the Pact, and it has regretted the decision of the majority of the EU Council to refrain from carrying out immediately the normal procedure. However, I note that 12 countries have respected the conditions of the Pact. Furthermore it is important to realize that the very same majority in the EU Council has called upon the countries concerned to commit themselves to taking appropriate measures to bring the deficit back to under three percent of the gross domestic product, and to actually meet this commitment, as otherwise the sequence of sanctions of the Pact will be set in motion. One cannot say that the Pact is dead. The very fact that we are talking about it so much shows that it is alive. Of course, it applies to all 25 current and future EU Member States." -more- [TOPICS: M$X$$$,M$$EC$,M$$FX$,MI$$$$] Text: ECB President Trichet Interview with Handelsblatt -2- Tuesday, March 23, 2004 7:46:00 PM marketnews.com WASHINGTON (MktNews) - The following is the second of two parts of the transcript of the interview of European Central Bank President Jean-Claude Trichet with Germany's Handelsblatt, released on the publication's web site Tuesday: Handelsblatt: Do you share the fear that is occasionally expressed that the EU enlargement could exert such great pressure on the monetary union that in the end it could actually break up? Trichet: "I am troubled to see from time to time in the 15 EU Member States a certain pessimism, a negative perception. Enlargement proves that we have done the right thing in creating the European Union. It is time to celebrate. Enlargement is good for growth, not only in the countries newly joining the EU, but in the rest of Europe as well. I would compare the entry of 75 million people into the European Union of the '15' on 1 May 2004 with the accession of 45 million Spaniards and Portuguese into the smaller European Union at that time of the '10'. Who would seriously claim that the accession of Spain and Portugal was not a good thing for Europe or that we have not all profited from it?" =========================================================== good interview Mish

To: yard_man who wrote (2755)	3/23/2004 3:47:48 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Chips on the Table in U.S.-China Trade Dispute By K.C. Swanson TheStreet.com Staff Reporter 3/23/2004 7:14 AM EST A trade showdown is looming between the U.S. and Chinese governments, and the flashpoint is semiconductors. American chipmakers are deeply unsettled by a recent Chinese mandate that they must link up with Chinese companies by June 1 if they want to sell Wi-Fi, or wireless local area networking, chips into the local market. The kicker: China wants the U.S. firms to share technological know-how with the local outfits, in a country renowned for theft of intellectual property. If that weren't enough to raise hackles on both sides of the Pacific, late last week the U.S. government filed a World Trade Organization complaint on a separate front, objecting to the heavy tax imposed on semiconductors imported into China. That the chip trade disputes have become so heated and public shows that China will be anything but a passive customer for advanced American technology. Indeed, the wrangling speaks to Beijing's own ambitions to push the Chinese economy further along into high-tech areas like semiconductors. Though the WTO complaint garnered more press, chip leaders say they're more worried by the Beijing mandate on Wi-Fi chips, which requires them to join forces with one of two dozen Chinese companies versed in a domestic Wi-Fi security standard known as WAPI, or wired authentication and privacy infrastructure. To get access to the WAPI protocol, U.S. chipmakers say they are being asked to divulge details of their own technology to Chinese counterparts. "The way in which the Wi-Fi encryption technology has surfaced has been more disconcerting [than the tax dispute] and portends a future standards issue," said Debbie Leilani Shon, a former assistant U.S. trade representative in the Clinton administration who currently teaches international trade policy at the University of Southern California. "This is a technical barrier to trade, and the way it has evolved is very blatant." The situation has aroused consternation among U.S. chipmakers angling for a share of the fast-expanding China semiconductor market. China is expected to become the second-biggest chip market in the world by 2010, according to IDC, up from its current third-place ranking. Last year, Intel (INTC:Nasdaq - news - research) claimed $3.7 billion worth of sales into the market, amounting to a sizable 12% of its total revenue and making it the lead chip supplier into China. China still imports about 80% of the chips it needs, but the country's own semiconductor supplier base is growing quickly with help from both its government and overseas partners. U.S. companies are therefore wary of handing over details of their chip technology that emerging Chinese competitors could adapt and use to sell their own semiconductors. "It's clear China must be viewing [Wi-Fi] as a very large market and therefore they want to establish their own market, which in and of itself is not an issue," said George Scalise, president of the Semiconductor Industry Association, the trade group leading the opposition to the rule. "Where the violation comes in is in requiring foreign companies to provide intellectual property to a limited set of local Chinese companies." The WTO says countries can't require technology transfers in exchange for allowing access to their markets, trade experts say. Shifts Behind the Wall In fact, Beijing's stance on Wi-Fi chips marks a striking shift. Over the past few years, the Chinese government has sought technical input from the likes of Texas Instruments (TXN:NYSE - news - research) and Nokia (NOK:NYSE - news - research) to help develop China's own cell-phone standard, known as TD-SCDMA, or time division synchronous code division multiple access. The recent change of tone thus comes as an unwelcome surprise. Intel has publicly balked at Beijing's demands, no doubt a source of frustration after the chip giant has already spent some of last year's $300 million Centrino ad budget in China. Visitors to a Shanghai computer mall in December saw corridors bedecked with hanging promotional posters for Centrino. Meanwhile, the WTO dispute over taxes filed by the Bush administration last week centers on the fact that China slaps a tax of 17% on imported semiconductors but, after rebates, only 3% on domestically designed and produced chips. The U.S. Trade Representative Robert Zoellick reckons that the import tax cost U.S. chipmakers $344 million last year. "It certainly looks illegal," said J. David Richardson, professor of economics in the Maxwell School of Syracuse University. "But subsidies like these are a gray area." Beijing argues that the tax doesn't discriminate, since foreign companies can become eligible for the full tax rebates if they agree to design and manufacture chips in China. Yet many chipmakers remain leery of moving advanced work to China, given that country's spotty record on intellectual property protection. In any case, the SIA maintains that China's tax policy violates its commitments as a member of the WTO, which prohibits countries from favoring domestic business. U.S.-based trade experts and tech officials seem taken aback by the surge of protectionist feeling from China, given that many had believed the new generation of Beijing leaders was more supportive of open trade. Yet the political situation in Beijing is far from straightforward, given apparent differences of opinion within China's sprawling bureaucracy. Last summer the Chinese seemed to be leaning toward quietly resolving the U.S. complaint over taxes, according to Scalise. One of China's government agencies had concluded that the higher tax in imported chips was unfair, he said. But in an unexpected shift, the government then backed off a decision that would have favored U.S. chipmakers. Talks to resolve the chip trade dispute will get under way as early as this week, when the SIA meets with Chinese officials in Geneva. More formal government discussions will take place in Washington on April 21. At least U.S. chipmakers are in a much better bargaining position with Beijing than their counterparts in more commodity markets, say trade experts. Intel and other Wi-Fi purveyors have something the Chinese want: advanced technology. That's not true for U.S. companies in the textile industry, for example, where trade tensions have also surfaced. Textile makers have already lost substantial business to China but can only compete on cost, where they operate at a disadvantage to low-cost Chinese rivals. In contrast, "high-tech issues are ripe for diplomatic resolutions, because technology is an expanding pie," said Richardson. "There are enough gains in high-tech trade to spread between both parties and make everyone into a winner." For Intel and other U.S. chipmakers that see China as a huge market for high-end fare like Wi-Fi, a resolution to the trade disputes can't come fast enough. thestreet.com

To: yard_man who wrote (2755)	3/23/2004 5:13:11 PM
From: mishedlo	Respond to of 116555

A question of perspective economist.com Great article on treasuries and risk Mish

To: yard_man who wrote (2755)	3/23/2004 5:21:12 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Great article on oil Read it! Energy Information Administration chief Guy Caruso said at an oil industry meeting in San Antonio on Monday that he was "really concerned" about thin U.S. gasoline inventories, which are running about 13 million barrels lower than the agency had projected. The volatile gasoline landscape has drawn the attention of lawmakers from both political parties, making it a likely issue in this presidential election year. Democrat Sen. Ron Wyden of Oregon on Monday reintroduced a bill requiring the Federal Trade Commission to act on what he called anti-competitive industry pricing policies. The FTC earlier this month opened an informal probe into California's retail gasoline prices -- the highest in the nation -- at the urging of Democratic Sen. Barbara Boxer of California. Oil and gas refiners have denied using any anti-competitive practices, instead blaming high prices on tight supplies caused by dozens of different gasoline-blending rules for metropolitan areas and the lack of enough imports of the motor fuel. Republican Sen. Chuck Grassley of Iowa said soaring gasoline prices are a good reason for the Senate to pass a stalled energy bill. money.excite.com

To: yard_man who wrote (2755)	3/23/2004 5:40:17 PM
From: NOW	Read Replies (1) \| Respond to of 116555

i think his points are worrisome.