Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Trends Worth Watching -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (976)	4/11/2008 9:51:40 AM
From: richardred	Respond to of 3363

Increase in Trade Deficit Raises Concern Thursday April 10, 9:04 pm ET By Martin Crutsinger, AP Economics Writer Second Month of Increase in Trade Deficit Raises New Worries for US Economy WASHINGTON (AP) -- The U.S. trade deficit unexpectedly increased for a second straight month in February, raising concerns that the economy's one standout performer could be starting to flag. The Commerce Department reported Thursday that the deficit between what the U.S. imports and what it sells abroad rose 5.7 percent to $62.3 billion in February, the highest level since November. Imports of goods and services shot up 3.1 percent to an all-time high of $213.7 billion, reflecting a big surge in imports of foreign cars. Exports also set a record, rising by 2 percent to $151.4 billion, reflecting strong gains in the sale of American-made heavy machinery, computers and farm goods. Critics claimed that the sharp rise in the trade deficit showed the continued failure of President Bush's policies emphasizing negotiating free trade agreements as a way to promote U.S. jobs by boosting exports. With businesses cutting 80,000 jobs last month, the most in five years, and the country likely in a recession, the debate over trade is expected to intensify in this election year. Republicans contend Bush's policies reflect the reality of the new global economy, while Democrats argue that the president has contributed to the loss of more than 3 million manufacturing jobs since he took office. "Wages are falling and the middle class is shrinking because of trade deficits," James Hoffa, president of the International Brotherhood of Teamsters, said Thursday at the end of a three-day convoy across Pennsylvania aimed at highlighting the failings of Bush's trade policies. Trade is shaping up as a key issue in the presidential campaign and in the fight for control of Congress. In an early showdown, the Democratic-led House voted 224-195 on Thursday to reject Bush's effort to force Congress to vote within the next 90 legislative days on a free trade agreement with Colombia. The administration charged that Democrats were forsaking a key South American ally while Democrats said Colombia needed to do more to halt the violence against union organizers before they would consider the trade pact. The vote also calls into question pending free trade deals with South Korea and Panama. In other economic news, the number of newly laid off workers filing claims for unemployment benefits fell sharply last week after having hit the highest level in more than two years in the previous week. The Labor Department said applications for jobless benefits totaled 357,000 last week, down by 53,000 from the previous week. Economists said the wide swings reflected in part the trouble the government is having in seasonally adjusting the figures. Meanwhile, the nation's retailers reported mixed results in March. Wal-Mart and Costco Wholesale Corp. were among the best performers. Other retailers said their sales suffered from the weak economy and an early Easter that dampened clothing sales. On Wall Street, investors were encouraged by the big drop in weekly applications for jobless benefits and the better-than-expected performance for some big retailers. The Dow Jones industrial average rose 54.72 points to close at 12,581.98. For the first two months of this year, the trade deficit is running at an annual rate of $727.6 billion. Last year, the deficit declined to $708.5 billion for the entire year, fueled by a boom in exports. It marked the first decline in the trade deficit after five straight years of records. With the economy battered by a prolonged slump in housing and a severe credit crunch, trade has been one of the few sources of strength. However, analysts said based on the rising deficit in the first two months, trade will likely provide less of a boost in the first three months of this year, making it more likely that the overall gross domestic product turned negative. Brian Bethune, chief U.S. financial economist for Global Insight, said he expected GDP would decline at an annual rate of 0.1 percent to 0.2 percent in the first quarter. The classic definition of a recession is two consecutive quarters of declining GDP. Bethune said the big jump in auto imports in February may be reflecting a move by American consumers toward more fuel-efficient foreign cars, which would be another blow for struggling U.S. automakers. Many analysts believe the two-month jump in the deficit will be reversed in coming months because they think a recession in the United States will cut into demand for foreign goods as well as U.S.-made products. For April, the politically sensitive deficit with China dropped by 9.6 percent to $18.4 billion, the lowest imbalance in a year. The improvement reflected big declines in imports of computers, cell phones and other telecommunications equipment as well as clothing. Even with the decline, the U.S. deficit with China remained the largest with any country. The next highest deficit was an imbalance of $6.9 billion with Japan. America's foreign oil bill fell 5.7 percent to $37.7 billion in February, marking the first monthly decline in a year. It occurred even though the average price for imported crude oil hit a record of $84.76 in February. With crude oil prices hitting new records above $110 per barrel, analysts believe the petroleum bill will resume rising in coming months. The deficit with the European Union rose to $6.9 billion in February, up 13.5 percent from January, even though U.S. exports to Europe hit an all-time high, reflecting the fact that a decline in the dollar to record lows against the euro has boosted the price competitiveness of American products. (This version CORRECTS the deficit figure to $62.3 billion, not $63.2 billion.) biz.yahoo.com

To: richardred who wrote (976)	8/20/2011 9:54:27 PM
From: richardred	Read Replies (1) \| Respond to of 3363

China’s $3.2 Trillion Headache Yao Yang 2011-08-18 China’s $3.2 Trillion Headache BEIJING – While the downgrade of United States government debt by Standard & Poor’s shocked global financial markets, China has more reason to worry than most: the bulk of its $3.2 trillion in official foreign reserves – more than 60% – is denominated in dollars, including $1.1 trillion in US Treasury bonds. So long as the US government does not default, whatever losses China may experience from the downgrade will be small. To be sure, the dollar’s value will fall, imposing a balance-sheet loss on the Peoples’ Bank of China (PBC, the central bank). But a falling dollar would make it cheaper for Chinese consumers and companies to buy American goods. If prices are stable in the US, as is the case now, the gains from buying American goods should exactly offset the PBC’s balance-sheet losses. The downgrade could, moreover, force the US Treasury to raise the interest rate on new bonds, in which case China would stand to gain. But S&P’s downgrade was a poor decision, taken at the wrong time. If America’s debts had truly become less trustworthy, they would have been even more dubious before the agreement reached on August 2 by Congress and President Barack Obama to raise the government’s debt ceiling. That agreement allowed the world to hope that the US economy would embark on a more predictable path to recovery. The downgrade has undermined that hope. Some people even predict a double-dip recession. If that happens, the chance of an actual US default would be much higher than it is today. These new worries are raising alarm bells in China. Diversification away from dollar assets is the advice of the day. But this is no easy task, particularly in the short term. If the PBC started to buy non-dollar assets in large quantities, it would invariably need to convert some current dollar assets into another currency, which would inevitably drive up that currency’s value, thus increasing the PBC’s costs. Another idea being discussed in Chinese policy circles is to allow the renminbi to appreciate against the dollar. Much of China’s official foreign reserves have accumulated because the PBC seeks to control the renminbi’s exchange rate, keeping its upward movement within a reasonable range and at a measured pace. If it allowed the renminbi to appreciate faster, the PBC would not need to buy large quantities of foreign currencies. But whether renminbi appreciation will work depends on reducing China’s net capital inflows and current-account surplus. International experience suggests that, in the short run, more capital flows into a country when its currency appreciates, and most empirical studies have shown that gradual appreciation has only a limited effect on countries’ current-account positions. If appreciation does not reduce the current-account surplus and capital inflows, then the renminbi’s exchange rate is bound to face further upward pressure. That is why some people are advocating that China undertake a one-shot, big-bang appreciation – large enough to defuse expectations of further strengthening and deter inflows of speculative “hot” money. Such a revaluation would also discourage exports and encourage imports, thereby reducing China’s chronic trade surplus. But such a move would be almost suicidal for China’s economy. Between 2001 and 2008, export growth accounted for more than 40% of China’s overall economic growth. That is, China’s annual GDP growth rate would drop by four percentage points if its exports did not grow at all. In addition, a study by the China Center for Economic Research has found that a 20% appreciation against the dollar would entail a 3% drop in employment – more than 20 million jobs. There is no short-term cure for China’s $3.2 trillion problem. The government must rely on longer-term measures to mitigate the problem, including internationalization of the renminbi. Using the renminbi to settle China’s international trade accounts would help China escape America’s beggar-thy-neighbor policy of allowing the dollar’s value to fall dramatically against trade rivals. But China’s $3.2 trillion problem will become a 20-trillion-renminbi problem if China cannot reduce its current-account surplus and fence off capital inflows. There is no escape from the need for domestic structural adjustment. To achieve this, China must increase domestic consumption’s share of GDP. This has already been written into the government’s 12th Five-Year Plan. Unfortunately, given high inflation, structural adjustment has been postponed, with efforts to control credit expansion becoming the government’s first priority. This enforced investment slowdown is itself increasing China’s net savings, i.e., the current-account surplus, while constraining the expansion of domestic consumption. Real appreciation of the renminbi is inevitable so long as Chinese living standards are catching up with US levels. Indeed, the Chinese government cannot hold down inflation while maintaining a stable value for the renminbi. The PBC should target the renminbi’s rate of real appreciation, rather than the inflation rate under a stable renminbi. And then the government needs to focus more attention on structural adjustment – the only effective cure for China’s $3.2 trillion headache. project-syndicate.org