HOME



Digby's Hullabaloo
2801 Ocean Park Blvd.
Box 157
Santa Monica, Ca 90405



Twitter:
@digby56
@DavidOAtkins @Gaius_Publius

emails:
Digby:
thedigbyblog at gmail
David:
isnospoon at gmail
Dennis:
satniteflix at gmail
Gaius:
publius.gaius at gmail.com








Infomania

Salon
Buzzflash
Mother Jones
Raw Story
Huffington Post
Slate
Crooks and Liars
American Prospect
New Republic
Common Dreams
AmericanPoliticsJournal
Smirking Chimp
CJR Daily
consortium news

Blog-o-rama

Eschaton
BagNewsNotes
Daily Kos
Political Animal
Driftglass
Firedoglake
Taylor Marsh
Spocko's Brain
Talk Left
Suburban Guerrilla
Scoobie Davis
Echidne
Electrolite
Americablog
Tom Tomorrow
Left Coaster
Angry Bear
oilprice.com
Seeing the Forest
Cathie From Canada
Frontier River Guides
Brad DeLong
The Sideshow
Liberal Oasis
BartCop
Juan Cole
Rising Hegemon
alicublog
Unqualified Offerings
Alas, A Blog
RogerAiles
Lean Left
Oliver Willis
skippy the bush kangaroo
uggabugga
Crooked Timber
discourse.net
Amygdala
the talking dog
David E's Fablog
The Agonist


Saturday Night at the Movies by Dennis Hartley review archive

01/01/2003 - 02/01/2003 02/01/2003 - 03/01/2003 03/01/2003 - 04/01/2003 04/01/2003 - 05/01/2003 05/01/2003 - 06/01/2003 06/01/2003 - 07/01/2003 07/01/2003 - 08/01/2003 08/01/2003 - 09/01/2003 09/01/2003 - 10/01/2003 10/01/2003 - 11/01/2003 11/01/2003 - 12/01/2003 12/01/2003 - 01/01/2004 01/01/2004 - 02/01/2004 02/01/2004 - 03/01/2004 03/01/2004 - 04/01/2004 04/01/2004 - 05/01/2004 05/01/2004 - 06/01/2004 06/01/2004 - 07/01/2004 07/01/2004 - 08/01/2004 08/01/2004 - 09/01/2004 09/01/2004 - 10/01/2004 10/01/2004 - 11/01/2004 11/01/2004 - 12/01/2004 12/01/2004 - 01/01/2005 01/01/2005 - 02/01/2005 02/01/2005 - 03/01/2005 03/01/2005 - 04/01/2005 04/01/2005 - 05/01/2005 05/01/2005 - 06/01/2005 06/01/2005 - 07/01/2005 07/01/2005 - 08/01/2005 08/01/2005 - 09/01/2005 09/01/2005 - 10/01/2005 10/01/2005 - 11/01/2005 11/01/2005 - 12/01/2005 12/01/2005 - 01/01/2006 01/01/2006 - 02/01/2006 02/01/2006 - 03/01/2006 03/01/2006 - 04/01/2006 04/01/2006 - 05/01/2006 05/01/2006 - 06/01/2006 06/01/2006 - 07/01/2006 07/01/2006 - 08/01/2006 08/01/2006 - 09/01/2006 09/01/2006 - 10/01/2006 10/01/2006 - 11/01/2006 11/01/2006 - 12/01/2006 12/01/2006 - 01/01/2007 01/01/2007 - 02/01/2007 02/01/2007 - 03/01/2007 03/01/2007 - 04/01/2007 04/01/2007 - 05/01/2007 05/01/2007 - 06/01/2007 06/01/2007 - 07/01/2007 07/01/2007 - 08/01/2007 08/01/2007 - 09/01/2007 09/01/2007 - 10/01/2007 10/01/2007 - 11/01/2007 11/01/2007 - 12/01/2007 12/01/2007 - 01/01/2008 01/01/2008 - 02/01/2008 02/01/2008 - 03/01/2008 03/01/2008 - 04/01/2008 04/01/2008 - 05/01/2008 05/01/2008 - 06/01/2008 06/01/2008 - 07/01/2008 07/01/2008 - 08/01/2008 08/01/2008 - 09/01/2008 09/01/2008 - 10/01/2008 10/01/2008 - 11/01/2008 11/01/2008 - 12/01/2008 12/01/2008 - 01/01/2009 01/01/2009 - 02/01/2009 02/01/2009 - 03/01/2009 03/01/2009 - 04/01/2009 04/01/2009 - 05/01/2009 05/01/2009 - 06/01/2009 06/01/2009 - 07/01/2009 07/01/2009 - 08/01/2009 08/01/2009 - 09/01/2009 09/01/2009 - 10/01/2009 10/01/2009 - 11/01/2009 11/01/2009 - 12/01/2009 12/01/2009 - 01/01/2010 01/01/2010 - 02/01/2010 02/01/2010 - 03/01/2010 03/01/2010 - 04/01/2010 04/01/2010 - 05/01/2010 05/01/2010 - 06/01/2010 06/01/2010 - 07/01/2010 07/01/2010 - 08/01/2010 08/01/2010 - 09/01/2010 09/01/2010 - 10/01/2010 10/01/2010 - 11/01/2010 11/01/2010 - 12/01/2010 12/01/2010 - 01/01/2011 01/01/2011 - 02/01/2011 02/01/2011 - 03/01/2011 03/01/2011 - 04/01/2011 04/01/2011 - 05/01/2011 05/01/2011 - 06/01/2011 06/01/2011 - 07/01/2011 07/01/2011 - 08/01/2011 08/01/2011 - 09/01/2011 09/01/2011 - 10/01/2011 10/01/2011 - 11/01/2011 11/01/2011 - 12/01/2011 12/01/2011 - 01/01/2012 01/01/2012 - 02/01/2012 02/01/2012 - 03/01/2012 03/01/2012 - 04/01/2012 04/01/2012 - 05/01/2012 05/01/2012 - 06/01/2012 06/01/2012 - 07/01/2012 07/01/2012 - 08/01/2012 08/01/2012 - 09/01/2012 09/01/2012 - 10/01/2012 10/01/2012 - 11/01/2012 11/01/2012 - 12/01/2012 12/01/2012 - 01/01/2013 01/01/2013 - 02/01/2013 02/01/2013 - 03/01/2013 03/01/2013 - 04/01/2013 04/01/2013 - 05/01/2013 05/01/2013 - 06/01/2013 06/01/2013 - 07/01/2013 07/01/2013 - 08/01/2013 08/01/2013 - 09/01/2013 09/01/2013 - 10/01/2013 10/01/2013 - 11/01/2013 11/01/2013 - 12/01/2013 12/01/2013 - 01/01/2014 01/01/2014 - 02/01/2014 02/01/2014 - 03/01/2014 03/01/2014 - 04/01/2014 04/01/2014 - 05/01/2014 05/01/2014 - 06/01/2014 06/01/2014 - 07/01/2014 07/01/2014 - 08/01/2014 08/01/2014 - 09/01/2014 09/01/2014 - 10/01/2014 10/01/2014 - 11/01/2014 11/01/2014 - 12/01/2014 12/01/2014 - 01/01/2015


 

This page is powered by Blogger. Isn't yours?

Hullabaloo


Monday, August 29, 2011

 
Meanwhile, in China...
by David Atkins ("thereisnospoon")

The problem hasn't received as much press attention as the domestic or Eurozone troubles, but China is in its own world of hurt right now, too. The Chinese economy has grown too much, too fast and is currently suffering both from a real estate bubble and from having purchased too many foreign treasuries and having allowed its currency to depreciate too far to aid its manufacturing sector. The result? Massive inflation:

In the first seven months, the CPI gained 5.5 percent from a year earlier, well above the government's target ceiling of 4 percent for this year.

In July, CPI even jumped 6.5 percent year-on-year, reaching its highest level in 37 months, placing the government in a tough position with worsening global liquidity in sight.

The Producer Price Index, which is used to calculate inflation at the wholesale level, jumped 7.5 percent year-on-year in July.

The stubbornly high inflation rate has been driven by rising food costs, which jumped by 14.8 percent in July from a year ago.

The price of pork, a staple food in China, soared by nearly 57 percent in July.

Addressing a Forum on China's Macroeconomic Conditions and Macro Policies in Singapore, Zhang Liqun, an economist from the Development Research Center, said he expected the inflation pressure resulting from surging food prices to start easing as supply increases.

It's not just food. Cab drivers in China are striking nationwide despite fears of retribution from the supposedly Communist government:

Woe is the taxi driver in China.

The roads are clogged with about 40,000 new cars a day, the price of gasoline has doubled in the last five years and passenger fares have barely budged even though everything else in the country is getting more expensive.

Fed up with their shrinking profit margins, 1,500 cabbies in the eastern city of Hangzhou went on strike this month demanding higher fares.

“Ten years ago, taxi drivers belonged to the high income group. Now we have become part of the low income group,” a Hangzhou cab driver told the Oriental Daily, explaining how his pay after expenses had dropped from about $730 a month six years ago to $470 today.

It’s no wonder then that taxi drivers have become the poster children of China’s nagging inflation, which grew 6.5% in July from a year ago to reach a 37-month high.

Their struggle to make ends meet underscores the pressure on China’s broader working class population who are most vulnerable to consumer price increases. And when they strike, they remind the central government how inflation can trigger social unrest...

Guo said there have been 60 taxi strikes since 2004, including a violent demonstration by 9,000 drivers in the western city of Chongqing in 2008.

In an article published Thursday in the official Communist Party mouthpiece the People’s Daily, cab drivers in Beijing said they had to work up to 18 hours a day and give half their earnings to lease their cars.


This sort of thing cannot continue. So China may finally allow appreciation of their currency in order to curb inflation and reduce the risk incurred from owning so many foreign currency bonds. The only problem for China is that this will hurt their domestic manufacturing economy at a time when the economy is already slowing worldwide:

China's government may be about to let the yuan-dollar exchange rate rise more rapidly in the coming months than it did during the past year. The exchange rate was frozen during the financial crisis, but has been allowed to increase since the summer of last year. In the past 12 months, the yuan strengthened by 6 per cent against the dollar, its reference currency.

A more rapid increase of the exchange rate would shrink China's exports and increase its imports. It would also allow other Asian countries to let their currencies rise or expand their exports at the expense of Chinese producers. That might please China's neighbours, but it would not appeal to Chinese producers. Why then might the Chinese authorities deliberately allow the yuan to rise more rapidly?

There are two fundamental reasons: reducing the portfolio risk and containing domestic inflation.

Consider first the authorities' concern about the risks implied by its portfolio of foreign securities. China's existing portfolio of some US$3 trillion (Dh11.01tn) worth of dollar bonds and other foreign securities exposes it to two distinct risks: inflation in the US and Europe, and a rapid devaluation of the dollar relative to the euro and other currencies.

Inflation in the US or Europe would reduce the purchasing value of the dollar bonds or euro bonds. The Chinese would still have as many dollars or euros, but those dollars and euros would buy fewer goods on the world market.

Even if there were no increase in inflation rates, a sharp fall in the dollar's value relative to the euro and other foreign currencies would reduce its purchasing value in buying European and other products. The Chinese can reasonably worry about that after seeing the dollar fall 10 per cent relative to the euro in the past year - and substantially more against other currencies.

With the Eurozone in crisis and the future of the Euro itself in question, there is no telling what may befall treasuries and the U.S. dollar. In any case, China would be wise to strengthen the yuan and acquire a little more financial independence--except for the fact that the Chinese economy still depends mostly on its manufacturing sector, which can only be hurt by a stronger yuan.

The other thing a stronger yuan would mean is higher prices for Chinese goods overseas (that's why it would hurt Chinese manufacturing.) It's a dirty secret that one of the reasons Americans haven't complained too badly about a lack of rising domestic wages is that there has been price deflation in cheap manufactured goods from China at the local Target or WalMart. Increase the prices of those goods, and it will have social and economic ripple effects in the American economy as well.

This is all part of why no single nation can truly control its own financial destiny. The world is now a globally interconnected system: one that is far too dependent on elite financial institutions and the rapacious greedheads who run them, and far too little interested in the general welfare of the real people who toil every day to put food on the table all across the planet.

Sooner or later, the sovereign nations of the world will need to come together in a spirit of mutual cooperation, understanding that a slowly rising tide lifts all boats, that massive income inequality is to be avoided, that bubbles need to be popped through government intervention before they grow too big, and that allowing financial institutions to control our collective destinies is a very bad idea.


.

Search Digby!