Welcome to the Hardcore Husky Forums. Folks who are well-known in Cyberland and not that dumb.
DM to Financial Market Guru guy
doogie
Member Posts: 15,072
Looks like things are looking up!
Comments
Everybody says so.
But, fuck, the one thing on which I do not think we (the royal we) have settled is, what is the "right" inflation test analysis? Even if we settle on the right bundle of goods, it doesn't feel inflationary to me if there is a reasonable, or at least rational, economic explanation for price increase other than monetary inflation and pure loss of buying power. That is, if the currency is still a proxy for a robust economy, or the expectation / speculation of it, then do we have real inflation? So stories about supply chains and actual robust demand need not apply to our conversation.
One example is the stock market. Earnings, real value stories and other normal measures of the pie getting larger are disconnected from prevailing prices. There has to be some speculation built in there for post-COVID economis parties. But still, major disconnect. Not inflation in the Germany post WWI sense; but inflationary nonetheless.
For monetary policy inflation, I'm still waiting for the $15 loaf of bread. Am I wrong here?
A lot of this changed with the budget deals with Clinton and Gingrich and even Greenspan way back when...they were looking for ways to limit the SS spending going forward and juice the GDP numbers. It some ways it works, but long-term it helps further divide the haves from the have-nots. And the unforeseen consequence has been that it let the Federal Govt spend itself silly racking up debt.
https://www.zerohedge.com/economics/mysterious-111-billion-payment-gap-talk-town
But as I pressed on through the article, I started to get the punchline, which I think is this:
... As in the 1930s, no country wants to see a stronger currency and become a larger net importer of goods (and exporter of jobs). That includes China. To avoid excess FX appreciation on the back of its huge trade surpluses and the rising capital inflows from global markets happily shrugging off any Biden appeals to trans-Atlantic values, Beijing may not only allow easy access to the promised USD50,000 in per capita annual FX outflows, but permit this for buying foreign financial assets or property! Let’s see if this is actually delivered, but if it is, more levitation for all assets outside China seems assured. Ta-dah! Let’s just try not to think of the risks involved from the asset-liability imbalances as foreign capital flows into China, and those FX flow back out again rather than boosting its FX reserves – especially if that FX flows into US assets, helping to push up US real yields even faster
This point of no home team wanting its currency to be over-valued is for most people not an obvious one, but this article is a good explanation for why that is.
@godawgst
@Houhusky
thoughts?
OBK is on the Creepycoug no-fly list. Will always be. You can roll around in the dirt with him in the Tug. But you damned-well better clean yourself up and put on a jacket when you come back to the Club.
... As in the 1930s, no country wants to see a stronger currency and become a larger net importer of goods (and exporter of jobs). That includes China. To avoid excess FX appreciation on the back of its huge trade surpluses and the rising capital inflows from global markets happily shrugging off any Biden appeals to trans-Atlantic values, Beijing may not only allow easy access to the promised USD50,000 in per capita annual FX outflows, but permit this for buying foreign financial assets or property! Let’s see if this is actually delivered, but if it is, more levitation for all assets outside China seems assured. Ta-dah! Let’s just try not to think of the risks involved from the asset-liability imbalances as foreign capital flows into China, and those FX flow back out again rather than boosting its FX reserves – especially if that FX flows into US assets, helping to push up US real yields even faster"
Comments:
Here are interesting stats with the understanding that this is an Cheetas to Lambchops comparison in the sense that who knows what is being included and excluded in the comparison ~ a sardonic but relatable chestnut saying that I love as a stats guy which I always keep in mind when I look at stuff like this is:"figures lie and liars figure".
The obvious point of comparison is about comparing the trajectory of the growth rate... yow, china is off the charts in the trajectory comparison.
The global comparison shows that #3 eventually is India which brings up my main point... the most relevant measure of economic growth over time is measured as a function of new economic household formation.
I'm defining "new economic household formation" as the combination of two factors:
1. The demographic of under 30 youth that as they mature, they enter the work force and set up an independent "economic household" and
2. The hidden factor of those that were living below the average consumption standards of the local economy as measured in a country and regions around the world that are now beginning to grow equity, and are consequently increasing their consumption patterns of raw materials, products and services from previously low 3rd world standards to the average consumption levels of the established economic households in their region [another source of forming a new "economic household".
Simply put, the highest growth rate countries are China and India because the industrialization and build out of infrastructure has created enough critical mass over time to change the consumption patterns from a largely decentralized rural society into the growth patterns associated with industrialization and "modern" urban styles of consumption ~ the very same phenomenon we witnessed in the United States between 1860-1960.
The above breathlessly states an essential underlying difference between emerging economies when compared with those of the mature major markets of the US, Japan, the EU [with the exception of the eastern states] and Germany.
What we are now witnessing in China is amazing when viewed from a historical perspective ~ the trajectory of the accumulation of capital, coupled with the continuing build out of infrastructure which will continue to be supported by way above average new household formation, and way below average cost of manufacturing due to the still way below cost basis of labor and materials is launching them into the strongest economic position we have seen since the American industrial revolution.
Within that context, the government of China is happy to see the inflow of balance of trade excess capital and their existing Government policy to prohibit / limit foreign investment of the accumulated capital of Chinese individuals and corporations is likely to continue indefinitely as it serves to force reinvestment and consumption within the Chinese economy [which only makes it stronger].
I froze on this piece:
What we are now witnessing in China is amazing when viewed from a historical perspective ~ the trajectory of the accumulation of capital, coupled with the continuing build out of infrastructure which will continue to be supported by way above average new household formation, and way below average cost of manufacturing due to the still way below cost basis of labor and materials is launching them into the strongest economic position we have seen since the American industrial revolution.
What this seems to tell me is that the good times for which everyone pines is when you're in the high-growth trajectory part of the cycle. Capital and wages are at the right point of equilibrium, you have few externalities screwing it up, and you have real, organic growth measured by something real - incremental household establishment. You're right ... what better way to measure how well you're doing than incremental household formation? It factors in so many things in one, clean, easy-to-understand variable.
I wonder ... does that mean we are past our heyday? Do we just need fewer people in the US who have higher levels of education for high-level service and technology jobs? Export that and import the stuff that comes out of manufacturing economies? In other words, truly laissez faire capitalism (will be hard to sell these days ... take a spin in the Tug to see what I mean). Or said another way, is it just more fun to be in an emerging economy than a mature economy?
Your comment about China and India also resonates with me relative to a post @godawgst made in response to my dogmatic "where else you gonna go" routine when responding to arguments that the US economy is fundamentally a house of cards that will collapse. @godawgst posited, "China and India". Perhaps time to consider that as a reality. Does this threaten our perch as world leaders with the chosen reserve currency?
Anyway, this was brilliant @DawgsCanDance .
@DerekJohnson are you paying attention? Quality stuff Stalin.