Hah. Also, the unemployment won't drop down so much because a lot of illegals will go back to where they came from, or have already done so.
Or, they will think 2ce before coming here.
I have great sympathy for the illegals. Some of them are trying to avoid starvation.
Didn't China undervalue its currency for years to keep exports up. Maybe now it will use some of the huge amount of our money/treasury bills to actually buy something from us.
So much for the "China is going to exponentially suck up all marginal oil production" theory.
Also, I think it highly likely that Chinese businesses recklessly increased production capacity on the expectation that foreign demand would always increase; encouraged by Chinese govt moves to limit currency adjustment and prop up foreign consumption by buying US govt debt.
I think that cat's out of the bag. It's ironic, but growth seems to have slowed faster in the rest of the developed world than it has here, and developing Asia is still raising rates and constricting credit. The authorities in just about everywhere else on the planet seem willing to take their medicine. The idea that exports are going to lead our way out of this is a bit of a stretch.
The willingness of the American consumer to dig ever deeper into debt is impressive, as is the aiding and abetting of the authorities here. The reasoning at Treasury and the Fed seems to be, "if we can just get them to borrow another 5% of income!"
Also, I think it highly likely that Chinese businesses recklessly increased production capacity on the expectation that foreign demand would always increase...
Kung Fu Panda
Absolutely, there are going to be some major over-capacity issues within a year from now, and it won't just be hotel rooms in Vegas.
If the GDP was boosted by a change in the trade balance, which was helped by a weak dollar and weak economy for the US; then what happens when we get that "strong dollar" Paulson wants? What happens to the earnings of companies like IBM which benefitted greatly from the weak dollar, instead of growth?
Just wondering.
The olympics are beginning this friday, opening ceremoniew saturday. We knew that the Chinese government was ordering shut-downs on factories, and curtailing domestic transportation fuels. I am curious about the extent these moratoriums have affected the demand for gas/diesel.
Secondarily, i wonder whether the sudden difficulties that tourists are encountering in obtaining visas is another deliberate way to reduce demand on the local vehicle traffic, and therefore helping improve the air the athletes are sure to be complaining about.
From the picture of Beijing in todays papers, i don't see how the air is going to clear up by friday.
"The danger is that China - and the rest of the global economy - will slow down too quickly, and U.S. exports will be negatively impacted. That could lead to more unemployment in the U.S. than I'm currently forecasting, and also a deeper recession."
Oh dear, CR is now starting to channel Roubini. Now I'm getting scared.
Also, a lower trade deficit means less money for foreign governments to recycle into US debt, just when our governemnt is embarking on a huge bailout borrowing binge. Higher interest rates?
Bob_in_MA writes: The willingness of the American consumer to dig ever deeper into debt is impressive, as is the aiding and abetting of the authorities here. The reasoning at Treasury and the Fed seems to be, "if we can just get them to borrow another 5% of income!"
To some extent, the government is making the decision for the consumer...sending him rebate checks that are actually just more debt creation. Propping up home prices with bailouts that are actually just more debt creation. And of course, keeping some borrowing rates (ARM mortgages and even conforming fixed rate loans) just above zero in real terms, for those with decent credit.
"James B writes:
Also, a lower trade deficit means less money for foreign governments to recycle into US debt, just when our governemnt is embarking on a huge bailout borrowing binge. Higher interest rates?"
There's two sides to every trade. Foreigners buy Treasurys because they have to - the current account deficit has to be financed by foreigners buying US assets. That is an accounting identity. Thus, if the current account deficit drops, the need for external funding also drops. I.e., there will be domestic savings to replace the foreign savings.
If the deficit is closing as a result of strong net exports, growth will increase, and so you'd expect higher rates.
If the deficit is closing because there's a deflationary spiral and domestic demand is collapsing along with GDP, then you'd expect lower rates.
James B writes:
Also, a lower trade deficit means less money for foreign governments to recycle into US debt, just when our governemnt is embarking on a huge bailout borrowing binge. Higher interest rates?
Higher real interest rates, for sure. Nominal rates will only drop if we have a big drop in the price of everything else (notably, financial assets).
Also, I think it highly likely that Chinese businesses recklessly increased production capacity on the expectation that foreign demand would always increase...
Kung Fu Panda
I'd like to think the Chinese have invested in industrial capacity wisely.
Alas, the judgement and self-control displayed in their stock market suggests they may have done otherwise.
China needs a slowdown; their govt has been avoiding even more rampant inflation by taking their trade surplus and putting it into US treasuries. Check Brad Setser's blog and he explains it very thoroughly.
So, how are you going to tell 300 million people to go back to the country side to till the earth? I suspect, over the next 24-36 months, social anxiety and unrest. I will now coin the term "economic devolution".
O/T but kinda funny...."geeze were not generating those fees anymore so go get a government contract"....
"The U.S. Treasury today said it hired Morgan Stanley to study the department's new authority over Fannie Mae and Freddie Mac, the country's two largest sources of mortgage financing.
We have no plans to utilize the temporary authorities,'' the Treasury said in a statement released in Washington.This action should be interpreted as a prudent preparedness measure, and nothing more"
"Kung Fu Panda writes:
China needs a slowdown; their govt has been avoiding even more rampant inflation by taking their trade surplus and putting it into US treasuries. Check Brad Setser's blog and he explains it very thoroughly."
They'd only be suppressing inflation if they let the yuan rise. They've only held inflation down by subsizing energy costs.
Re: The top people should be booted out, and replaced by executives who have the confidence of the markets, said Janet Tavakoli, a finance industry consultant and observer of both firms. Large Freddie Mac shareholders, speaking on the condition of anonymity, echoed those sentiments.
Why is there a link to Fannie corruption for this thread? Why beat this horse over and over in an abusive retarded way??? Tanta wrote a sloppy blog, why continue to humiliate her under the guise of a dumbass story on China that has nothing to do with Fannie? Is this a new way to get people to be off topic??
The export part of your argument makes sense. However, what I think you are ignoring is the part argued by Setser (The Quiet Bailout) and others that the US economy is holding up because of the foreign cash infusion. Will it keep coming is the other question. Also, this is the reason why you are not seeing the numbers that will make you call for a severe recession.
Hence, in my view, US exports need to increase AND foreign cash needs to keep coming in for your unemployment forecast to come true. Else we and have a severe recession.
If ever we needed real-world examples of "moral hazard" and conflicts of interest, it's Freddie Mac (FRE) and Fannie Mae (FNM).
This company has to answer to shareholders, to our regulator and to Congress, and those groups often demand completely contradictory things, Mr. Syron said in an interview.
Therein lies the problem. The Times piece goes on to recount how a Democratic Congressman once called up Syron and screamed at him to buy more mortgages from low-income borrowers. Under pressure, Syron and his team capitualated, figuring if things went wrong, the government would bail them out anyway:
Mr. Syron and Mr. Mudd eventually yielded to those pressures, effectively wagering that if things got too bad, the government would bail them out.
The thinking was that if something really bad happened to the housing market, then the government would need Freddie and Fannie more than ever, and would have to rescue them, Mr. Andrukonis said. Everybody understood that at some level the company was putting taxpayers at risk.
And there's the lesson. When this crisis is over, Fannie and Freddie should be privatised. Using tax payer money to subsidize cheaper housing and insure against risky lending behavior shouldn't be part of government's mandate. But they won't be privatized, of course. Because, by then, the crisis will be over, shareholders will want that government guarantee, and no one else will care anymore.
Ahem: Inbound traffic is off almost 14% from June 2007.
China knows. The LA ports (LA & Long Beach) are seeing double digit y-o-y container volume declines. - Rob Dawg | 08.05.08 - 1:24 am |
No hat tip? Sniff.
Seriously, As I've previously mentioned this will be a "thin" Christmas. The retailers are bracing for low numbers by planning low product stock. It's going to be depressing walking through empty aisles with empty pockets.
If oil prices stay up, global growth in the countries that import from the US get kicked in the nuts. If it drops, it's only likely that other reasons are behind the global slump, like bursting asset bubbles in many markets and a major credit crunch. My bet is that growth is slowing more multiple reasons, and oil will pull back more, but it wont be enough to reignite the economies like the US, Spain, Italy, Ireland, Japan, Canada, Australia, etc. Too many are going down at once.
Take a look at my previous link. It shows you that US export orders are already in trouble. Then look at the US trading partners...who gets the US Exports?
Some excellent charts were collected to reflect CR's post/comments...(CR heez gots better graphs this time)
Wow, if Chinese exports are almost flat YoY and the GDP is still growing at 10% YoY, that better mostly be growth in consumption rather than capital spending.
Otherwise they could be heading for an industrial apocalypse.
OTOH, China is currently facing a shortage of coal and electricity which
is constraining economic activity. They also are deliberately limiting economic activity around Beijing on account of the Olympics.
Even if their exports slow they still have to rebuild from an earthquake and improve their domestic infrastructure. Maybe they won't grow at 10+% rate but they should still continue to suck up more and more of the world's coal, oil and other commodities.
Fannie Mae is raising some fees on mortgage loans its purchases, marking the fourth increase in nearly a year, to reflect higher credit risk and offset losses from continuing market deterioration.
Matthew Seltzer, analyst at Barclays Capital, said Fannie Mae has indicated over the past year that its rising fees have aimed at maintaining capital as losses and expectations of losses mounted.
"The flip side is that these fees have a cost," he said.
"Originators are the ones that have to pay these up-front fees, and the originators need to be compensated. They most likely will turn around to the borrowers and factor those higher fees into higher mortgage rates," Seltzer said. "What's the effect? All else being equal, it has the effect of pushing mortgage rates higher, which is not exactly conducive to generating new business."
"The danger is that China - and the rest of the global economy - will slow down too quickly, and U.S. exports will be negatively impacted. That could lead to more unemployment in the U.S. than I'm currently forecasting, and also a deeper recession."
I could not agree more with your assessment, but would like to add a couple of factors.
1) As the rest of the consuming world slows down, they'll drop their rates. As soon as they do that the dollar will begin its rise, and US exports won't look quite as cheap.
2) An increase in the strength of the dollar coupled with the existing (and heightened) worldwide demand slowdown will continue to put a damper on commodity prices, allowing US exports to hopefully remain competitive even when considering the strengthened currency.
In my mind, a lot rides on the strength of the dollar. If foreign banks continue their dogmatic approach to "inflation fighting" rate setting, they'll hit the wall very hard indeed when inflationary pressures subside rather quickly, which they're about to do. This will strengthen the dollar, and we have to hope that this happens at about the same time as the financial system comes back online in the US. Too soon and we're toast.
The Port of Long Beach is the second busiest seaport in the United States and the tenth busiest port in the world. It is in Long Beach, California and it adjoins the separate Port of Los Angeles, the busiest port in the United States. It is the fifth busiest gateway by value when compared with all U.S. freight gatewaysland, air, and sea
Chinese run - They manage most of the LB port = I believe they even got the former Navy base. The Chinese are/were looking at the same type setup in Seattle and Port Arthur, TX
Port of Long Beach
Latest Month
Container Trade in TEUs*
June
Fiscal Year to Date***
2008**
2007
% Change
2008**
2007
% Change
LOADED INBOUND
2,503,056 2,751,577 -9.0%
To Date as of June/Yearly
LOADED OUTBOUND - Same date range
1,345,837 1,060,167 26.9%
EMPTIES - Same date range
1,197,067 1,590,696 -24.7%
You cant put a price on patriotism. But if you did, you would want to aim at around $95,000.
That is the modest amount Morgan Stanley is charging the U.S. Treasury to advise the overwhelmed agency on what to do about misbehaving governmental stepchildren Fannie Mae and Freddie Mac.
The pittance will only cover Morgan Stanleys expenses. $95,000 for five months of work, after all, is less money than a single banker right out of business school makes.
Been out of pocket all day, sorry for posting this on the new thread but IMO the NYT piece was a Freddie hit job.
I have to side with Tanta on this one. Taxpayer money would never be at future risk if the GSEs had been properly capitalized in the first place. The GSEs did not even get a (competent) regulator until OFHEO (previously HUD). OFHEO did a bangup job considering how little money Congress gave them, but the GSEs played by the rules that were in effect at the time. So now we need to properly capitalize them because we know now that as serial bubble blowers we will have more occasions in the future when real estate will go down for extended periods. No free lunch there.
The mixed mission makes the GSEs the most difficult management challenge in the western world IMO. They run the largest derivative books in the world to hedge the interest rate risk of their both their held-for-investment and guaranteed mortgages.
The GSEs ran afoul of a confusing accounting change one year (lo and behold, there were no investigations by the Bush administration to determine if the money center banks were complying with the same rules) and their political enemies pounced. The banks were determined to widen spreads on mortgages (to increase their profits by increasing your and my borrowing costs) by dismembering the GSEs and fluffed up the accounting problems as a scandal.
Syron came in on the tail end of this. The GSEs are the good guys in all of this, no matter how much the banks try to influence the media. If the choice is to believe Tanta or to believe the banks, I will take Tanta every time.
"tyaresun writes:
Hence, in my view, US exports need to increase AND foreign cash needs to keep coming in for your unemployment forecast to come true. [Else we and have a severe recession.]"
I know you asked CR, but it's not clear your scenario is possible.
The balance of payments is an accounting identity. If U.S. net exports (emphasis on net) increase, net foreign money coming in has to decrease. (If we're not talking net exports, then things obviously depend on what you assume for imports.)
The only way net exports can improve while having rising foreign inflows would be for increased capital flight from within the U.S. That is not necessarily a good thing; the analogy in the stock market is heavy insider selling.
Morgan Stanleys banker on the restructuring will be Robert Scully, the former co-president of the firm who has also focused closely on advising global sovereign governments and now, his own. Scully is a capital markets expert who also recently advised on the reverse takeover by Kohlberg Kravis Roberts of its KKR Private Equity Investors business.
See Also:
Prior to March 23, 2006, we were an indirect wholly-owned subsidiary of GMAC LLC, formerly known as General Motors Acceptance Corporation, which we refer to (together with its subsidiaries unless the context indicates otherwise) as "GMAC." On March 23, 2006, an investor entity owned by affiliates of Kohlberg Kravis Roberts & Co. L.P., Five Mile Capital Partners LLC, Goldman Sachs Capital Partners and Dune Capital Management LP, which we refer to as our "Sponsors," acquired a controlling equity stake in our company from a subsidiary of GMAC. In connection with the acquisition:
an affiliate of our Sponsors, GMACCH Investor LLC, which we refer to as our "Sponsor stockholder," acquired outstanding shares of our common stock from GMAC for approximately $1.5 billion in cash;
I'm leaning toward the industrial apocalypse thing. To reference Brad Setser's work (yet again), if I read his work correctly, China has been starving industries that focus on domestic demand to support export sectors.
Also, folks might want to take a look at Baltic countries and Spain. These countries appear to be in far worse shape than the US and don't have the luxury of a reserve currency.
Ive been watching Spain. It's going to hell in a handbasket. The funniest thing was the year before, where we got the same stupid explanations as we did in the US, as to why it wasnt a bubble.
Found the forums on IHB - I had no idea they even existed. I'm glad that some fellow travelers found my CDS posts of value.
Oh, and apologies for the convoluted "Magic Box" explanation of CDOs. When I get drunk, I put that hard-earned, high-quality liberal arts education on the back burner, and instead regress to 11th Grade Honors English Extended Metaphor Hell.
Read in BW that people are pulling kids out of tutoring to save money. Anyone hear about enrollment in expensive schools dropping? Then I know we are in trouble.
Ive been watching Spain. It's going to hell in a handbasket. The funniest thing was the year before, where we got the same stupid explanations as we did in the US, as to why it wasnt a bubble."
It's been entertaining. The story was that Spanish mortgages were safe because the loan-to-value was capped at 80%. Too bad the appraisal was at 125% of value. Oops.
What's your story? Just curious, I've been reading your posts for some time now and haven't ever gotten the lowdown on what you do/how you arrived here.
On that note, what Tanta & CR should really do is establish username & passwords w/profiles for the more prolific posters here - it would be nice to find out everyone's deal.
Friedman, Billings, Ramsey & Co. analysts said Freddie Mac will report a second-quarter profit, instead of loss as previously forecast, because an increase in interest rates boosted the value of some assets.
...ac... Wow, if Chinese exports are almost flat YoY and the GDP is still growing at 10% YoY, that better mostly be growth in consumption rather than capital spending.
Over the period, beijing has put administrative controls on lending, as well as upping the reserve requirements and jawboned cooling it. Still, local straps are loathe to reign in their pet projects, same as it ever was.
My guess is that it's impacted infrastructure projects and capex at the plant level, but not to the degree hoped.
Yupleau,
Name-calling, citing authorities but not data, and using ad hominem political attacks betray you as a newcomer. Don't care you you work for, post something relevant or get off the blog.
China needs to start consuming some more of their own production capacity - plain & simple.
And they have the reserves to easily do it... something like $2T.
So take $2T and divide by something like 500 million (WAG on the number of households) generates about $4K per household... that's something like 3 years their median income.
Given their median household income of something like $1000-$1500/year the Chinese could in effect 'make work' for the whole damn country for 3 years and still not run out of reserves.
China has options if China decides to implement them.
Dude, that makes me uncomfortable just looking at it. I have a gnarly fear of heights.
John Lee - As we go down, squares and suits will be begging me for a lung full. Good thing I like to share, although I was rejected by Tanta this morning.
Ive been watching Spain. It's going to hell in a handbasket. The funniest thing was the year before, where we got the same stupid explanations as we did in the US, as to why it wasnt a bubble.
Born and bred dopes.
Geoff
30% down really puts one's skin in the game.
Their bubble is a soap bubble next to our weather balloon.
You know, at times here, I feel like I am sitting on a jury of people like you, who are able to see through all the Bernanke-Paulson-Bush manipulative crap to the truth.
Wall Street and hedge funds don't want to see it, because it's very threatening to them. And they will go down in flames.
But it's pretty reassuring that some intelligent people who are plugged into reality can still see truth.
Along with insights of CR and Tanta, it actually validates that American people are still fighting for their country against criminal mafia types. It may go down as the bloggers' version of 1776.
As an anecdotal - regarding the China slow down - it really is hitting parts of the industrial sector harder than others.
One of the companies I sell for has a number of plants in China (all metal working, all targeting western WOFI transplants - very little of the production is shipped back to NAFTA Zone currently... some goes to Euro Zone due to the unbelievably high currency spread)... But they tell me these plants are marginally profitable now due to increased costs (all inputs: labor, materials, capital and even taxes). They wish they hadn't built the damned thing - or at least built it long ago & had sold out by now.
Ya they don't ring a bell at the top for them either.
Another buddy runs a couple plants in SE China - but does it from the US via internet & Blackberry. He said there have been thousands of smallish plants closed in his sector by both the gov't & economic conditions. These are low skill & low value added plants... TPTB are actively pursuing capture of much higher wage, skill, value added jobs & so far have been successful at attracting them (think aerospace, biomed & such). He says they got a long way to go - its one thing to make sneakers but its a whole other thing to make landing gear that consistently passes FAA and is still cheaper than western product.
It will be interesting watching it develop - I just hope it doesn't get too damned interesting. I really don't want to live in exciting times - not that exciting anyway.
Ive been watching Spain. It's going to hell in a handbasket. The funniest thing was the year before, where we got the same stupid explanations as we did in the US, as to why it wasnt a bubble.
Well, I'm going to be taking my vacation in Spain in a few weeks, so I'll let you know what I see there. Madrid, Cordoba, Granada and Barcelona. All the big cities except Valencia, which I already know pretty well.
Like I said before, even at the peak Spain was a country of economic contrast. Lots of partying and spending mingling with poverty, often in close proximity. Spain was never as rich as all the construction cranes and Euro-trash money made it appear. Barcelona became the epicenter of conspicuous Euro consumption, so it will be interesting to see if there's any change in the party there. I do know there's lots of prime real estate for rent in Barcelona at cheaper rates than a year or two ago.
dryfly: "China has options if China decides to implement them."
Consumption. Why can't they be more like us??
They are rather stymied on the CIC SWF front. And there's only so much that state investment can do domestically without huge boondoggles. Can't envision a Japan style bridges to nowhere exercise or the like.
I'm afraid a helocopter drop would largely go into savings against a backdrop of job fears. Either that or reflate the equities and RE bubbles.
rich: I couldn't agree more. I felt a little crazy before finding CR, because everyone I know thinks things are hunky-dory, the market is honest and true to Adam Smith, and the media wants us to understand the truth about the world. The fact that so many others were calling BS was a relief. That most are not as bearish as I has really pulled me back from the ledge. And I'm probably the dumbest mofo here...it must be even better for the smart dudes.
While I water the lawn and flowers and do a BBQ, stuff this in your face, then Ill be right back:
At Fannie Mae, led by one super-connected Democratic party insider after another, "there was sort of a revolving door with, you know, political appointees and other people in Washington. In retrospect, we can all say they were too political and not enough managerial. They didn't have the business skills or want to have the business skills," says Lockhart.
But on top of that, he says, "Obviously, Fannie was mismanaged--and it was mismanaged, in my view, on purpose to be able to manipulate earnings to maximize bonuses."
If it proves true, that's criminal, right?
"Yes," says Lockhart. "The SEC [Securities and Exchange Commission] says it's fraud, and I cannot disagree with them."
This spring, OFHEO and the SEC agreed that Fannie Mae should be fined $400 million for the faulty bookkeeping that enriched its executives--one of the largest civil penalties in accounting fraud. All but $50 million of that is for the "Fair Fund," created by the corporate accountability law, the Sarbanes-Oxley Act. The Fair Fund channels such fines to investors. In addition, Fannie Mae will be restating its earnings going back to 2001, with the correction potentially totaling $11 billion or more.
Lockhart articulated OFHEO's findings for the House Financial Services Committee this past June: "[Fannie Mae's] previous management team, led by Chairman Franklin Raines, violated [the] public trust. By encouraging rapid growth, unconstrained by proper internal controls, risk management and accounting systems, they did serious harm to Fannie Mae while enriching themselves through manipulating earnings.
"The result," Lockhart told Congress, "was an estimated $10.6 billion of overstated profits, well over $1 billion of costs to fix the problems, and ill-gotten bonuses in the hundreds of millions of dollars."
Lockhart testified that an in-depth examination discovered an arrogant corporate culture where "the ends justified the means." OFHEO found that Fannie Mae--seeking to manage earnings that were directly connected to management bonuses--gave short shrift to risks. And when interest rates fell in 2002, the cost was billions of dollars in losses.
"They co-opted their internal auditors," he told Congress, and "they stonewalled OFHEO."
The end result was lucrative for those at the top. "From 1998 to 2003, the total compensation of CEO Franklin Raines exceeded $90 million, of which $52 million can be directly tied to achieving earnings-per-share goals," Lockhart testified. Indeed, during that same period OFHEO found that, taken together, Fannie executives made about $250 million in bonuses.
Fannie has also established a new executive compensation structure, with performance goals linked to the mission of affordable housing and an improved, more responsible and investor-responsive corporate culture.
That was from: Publication Date: 01-SEP-06
Delivery: Immediate Online Access
Author: Schiavone, Louise L.
Company: Federal Home Loan Mortgage Corp.; Federal National Mortgage Association
Clyde, what about the performance, can we start there????
What's your story? Just curious, I've been reading your posts for some time now and haven't ever gotten the lowdown on what you do/how you arrived here."
I've worked in a variety of roles in fixed income (rates, not credit) for some time, either as an external consultant or for a period on the buy side. I usually just comment on how bond investors view things; I do my best to remain agnostic on the direction of markets.
They are rather stymied on the CIC SWF front. And there's only so much that state investment can do domestically without huge boondoggles. Can't envision a Japan style bridges to nowhere exercise or the like.
I'm afraid a helocopter drop would largely go into savings against a backdrop of job fears. Either that or reflate the equities and RE bubbles.
Truly an embarrassment of riches.
Anak Krakatau | Homepage | 08.05.08 - 9:07 pm | #
Actually if they get in a bind - it doesn't matter what they spend it on in the short run - just spend it. If there was a lesson from the Japanese 'disaster' it is that high levels of national savings makes it damned hard to have a real disaster (lotsa people starving, high levels of UE).
I mean even with he huge gov't debt Japan has - the nation as a whole is still a very significant net saver. China isn't the same but it isn't like us either (hey big spender).
China could mandate the SWFs to lend to domestic sectors focused on domestic agricultural production... or subsidize 'pollution abatement'.
Who says the SWFs have to act like state own monstrosities OR like for-profit corporations. I mean they are in a unique position for a while (until it is squandered if things don't balance out in say 3-4 years).
I mean they could do quite well with some kind of a micro-loan program. Some will gamble on the Shanghai exchange but not all, probably not even most.
Its really the only way China re-balances without a crash (coupled to us). Likewise it would 'help' us break our addiction to SWF & FCB 'easy money'. One of the few win-wins out there even if it is painful at first.
Though you seem to have articles of faith for the limitless increase in the rate of oil production (in addition to you market agnosticism)
"
In the short term, they can hit pretty high oil extraction rates, if they wanted. They won't be able to store it anywhere, so that would be a stupid thing to do.
But that doesn't mean I think that there's unlimited supplies of the stuff.
Is there any reason China cannot just start putting credit cards in everyone's hands (who has a job) and have a repeat of the US post-WWII? Why do they need us, or anyone else, to buy their goods?
They've doubled their CCs in the last year or so. Why not just go hog wild?
Who says the next bubble has to involve us yankees?
I hope you see where this goes, cause I don't have time for this:
OFHEO has taken several actions to protect borrowers and ensure that the Enterprises are buying
quality loans. In December 2006, OFHEO directed Fannie Mae and Freddie Mac to comply with the
Interagency Guidance on Nontraditional Mortgage Product Risks issued by the bank regulators in
September 2006.
the freight charge for container going to US from china is at all time high here on the west coast. I know east coast is even higher at more ridiculously rate . I don't know what is going on here. the Oil is coming down but my freight charge is going up (just got a call from my freight forwarder TODAY for another hike)... so go figure..
China is facing slow for sure. I read report saying about 47000 factories are closing due demand, higher cost of labor and etc. the government is prompting exporting by increase rate govt subsidize on export items. I think we definitely see more regulations/tightenings after Olympics.
shanghai "A" stock market is a not mature system(personally I think it is a joke and it is more of casino than a financial system); people are yelling at the government to "bail them out".
"Currently Smoking Cannabis writes:
Is there any reason China cannot just start putting credit cards in everyone's hands (who has a job) and have a repeat of the US post-WWII? Why do they need us, or anyone else, to buy their goods?
They've doubled their CCs in the last year or so. Why not just go hog wild?"
They need the infrastructure to handle the expansion of retail credit (legal, operational), as well as changing the psychology of consumers to use credit.
Or they could stupidly hand out money to anyone who can fog a mirror, and end up in the exact same position as some other unnamed countries.
OT but given the recent sale by Merrill of its portfolio at a massive discount what is the current value of the Bear Stearns portfolio backed by the Fed. Think they'd be lucky to get 22cents.
I'd like to make this really simply, but to show collusion between Fannie and OFHEO and which connects to The Bush HomeOwnership Society may take a while, but, this is interesting:
OFHEO expects that the Fannie
Mae enforcement action will be
completed through the administrative 30%
phase by 2009. Opportunities are
available for appeal, and the Department
25% of Justice will represent OFHEO in any
appeal to the D.C. Circuit Court. In 2007
these litigation activities represented 25 20%
percent of OFHEOs resources, and the
agencys FY 2008 budget includes
significant resources for this litigation.
Hmmm, sounds like OFHEO has an agenda to protect the performance of Fannie -- which makes me think, Conflict Of Interest.
Now on to the flowers and BBQ and then performance metrics and mechanics
They've doubled their CCs in the last year or so. Why not just go hog wild?
Who says the next bubble has to involve us yankees?
Hole in that theory for now is that China has bee raising rates in the past few years. The Chinese are still reeling from a stock bubble burst, i don't think the gov't wants people to get loose with money...They do watch what is going on over here...
Your faith in the ability of 'they' to materially increase production rates is appealing, wish I could join you...given the synchronous decline in global demand, that ability is unlikely to be tested anytime soon. And like as not, a global recession resulting in a dramatic reduction in oil prices will result in another cycle of underinvestment in productive capacity.
Goal 1.1 Monitored the remediation efforts of the Enterprises. Both
Fannie Mae and Freddie Mac have made considerable
progress, yet have substantial work to do to correct their
internal controls and accounting problems.
Goal 1.1 Ensure the Enterprises are
adequately capitalized.*
nsured that both Fannie Mae and Freddie Mac were adequately capitalized for the first three quarters of the year and maintained a mandatory capital surplus 30% over the
regulatory minimum capital levels.
Oh shit, that's right they changed that didn't they, i.e, the 30% thing
The Enterprise is cooperating with OFHEO in accomplishing our mutual goal of remediation. As a result of the increased operational risk at Freddie Mac, OFHEO directed Freddie Macto maintain a targeted capital surplus of 30% over their minimum capital requirement. To date, Freddie Mac has maintained a surplus in compliance with this directive.
Oh, here it, the totally fraudulent bullshit from OFHEO, that proves they support accounting fraud and the agenda of The Bush Coup to distort the reality of the law:
In lifting a 2006 consent order, the Office of Federal Housing Enterprise Oversight said Tuesday that "two years of hard work" by Fannie Mae officials had resolved many internal accounting and management problems. Regulators will continue reducing surplus capital requirements imposed on Fannie Mae after the company was forced to restate several years of earnings, OFHEO said.
On March 1 OFHEO removed a cap on the size of Fannie Mae's mortgage portfolio -- loans or mortgage-backed securities the company holds for investment.
China needs to start consuming some more of their own production capacity - plain & simple.
And they have the reserves to easily do it... something like $2T.
The problem is a) the consumer doesn't have that wealth, and b) you can't just give it to them without ruining the profit incentive that drives investment and work (and got China that wealth to begin with).
That's one of the hardest problems with managing economy. It's also worrisome that historically countries frequently use war as a "legitimate" means of redistributing wealth.
I noticed that while the US economy began growing again in the 1930s, the distribution of wealth didn't start to change until later in the 40s (at least according to the data I was looking at -- sometimes you have to be careful with the Interblogs).
The problem is a) the consumer doesn't have that wealth, and b) you can't just give it to them without ruining the profit incentive that drives investment and work (and got China that wealth to begin with).
Do what they do here and give it away to the people at the top and let it trickle...slowly...down... That way a majority of the people will still believe they have to work hard
RayOnTheFarm writes:
Had a family that wanted to rent one last week..........to live in.
Believe it or not, its been done already...
Actually the US Army used something like them for officer housing once upon a time.
Spain - A co-worker is from Spain. Dad was making big money with real estate. Dad is now a very worried man.
China. China now has over a million chinese in Africa. More than the Brits at their peak. Chinese are busy little buying and building bees - especially in resources, roads to get them to the ports, and port facilities.
The US Navy just activated/upgraded a command/Task group in that area of the world. Someone is doing geo=political thinking about those busy little builder bees.
kind of agree that there are domestic options for China's SWFs. The ag spending thing if production linked would be non WTO friendly, but who cares anymore about that? Pollution abatement is surely needed, but should be enterprised based. But a major hurdle is the lack of institutional structure and legal integrity needed to carry out those types of programs. I used to think they could take some pointers from USDA, for example, or exchange traded pollution rights, etc. We're no longer much of a model in that respect, if we ever were. Being in Asia for a while, the saddest thing I've witnessed is what has happened to the reputation of the institutions of the U.S. But the Chinese instruments are even blunter, and maybe fortunate for them they know they are.
"energyecon writes:
bond guy,
Your faith in the ability of 'they' to materially increase production rates is appealing, wish I could join you...given the synchronous decline in global demand, that ability is unlikely to be tested anytime soon. And like as not, a global recession resulting in a dramatic reduction in oil prices will result in another cycle of underinvestment in productive capacity.
As in all things, time will tell."
Well, I realize I should have phrased it "extraction rate", not "production".
Given sufficient investment, and a willingness to something stupid (pump oil out of the ground and immediately dump it on the surface), I don't see any law of physics limiting extraction rates anywhere close to where we are now.
As noted, "they" won't do that, as it would be stupid thing to do. But what it points to is that the limit factor of production is not just some mystical property of some magical curve fitted to oil production data, it's the investment in the entire chain of infrastructure to take the extracted stuff and turn it into refined products.
That investment did not occur, and so it's not surprising that production peaked.
Is there any reason China cannot just start putting credit cards in everyone's hands (who has a job) and have a repeat of the US post-WWII?
Credit didn't initially create post WWII. It was the wages and pensions of people who fought in the war and built the planes and tanks that created it (not to mention the benefits of actually winning the war without having any of our cities levelled). That gave the consumer credibility to ultimately get credit cards that they probably wouldn't have gotten otherwise.
Again the economic benefits of credit come from mutual trust (making people willing share resources and thereby use them more efficiently). The government can't force that on lenders if the borrowers are believed to be untrustworthy. That just refocuses the lack of trust from borrowers to the government.
Good point, and one I've considered, too. Finance might be considered to be economics shading into sociology. Econ doesn't tell you much about the "correct" distribution of resources or calls-on-resources. Finance, OTOH, takes a specific social solution to that question, or "state", as a given.
Hence, for instance, the seemingly nonsensical idea of a state in the midst of a war going "bankrupt". The sovereign state can call on all resources in the midst of a struggle, no? Yet states needed and continue to need to worry about the social implications of each additional increment of resources they call, and how they call it and from whom, even in the midst of life-or-death struggles like WW2. See "A Free Nation Deep In Debt".
Ultimately, it's not simply a matter of calls-on-resources but of who has control over them and on what social terms.
Errr, rumor has they like Buicks.
Lawyerliz | 08.05.08 - 7:05 pm |
Always have. Maybe Henry Luce talked up Buicks to CKS since the nationalist gov't vehicles you see in photos from the late 40's were always Buicks. Later, in martial law Taiwan, you could relish the sight of chrome helmeted MP's riding four to a bright red Electra 225 convertible. Top down. Lovely memories. Never figured GM would have gone the Buick route in the mainland, but they have. Most common vehicle on the road is a Buick minivan that I don't know is even available stateside. Also see these bulbous mini-Buicks, must be no more than 1.0 litre shitboxes. Not yer daddy's Buick...
"Is there any reason China cannot just start putting credit cards in everyone's hands (who has a job) and have a repeat of the US post-WWII?"
One further comment. It took decades for consumer credit to be accepted in the U.S. after the Depression.
But year after year, banks found that consumer lending was safe, so they kept loosening standards. On the consumer side, being indebted was found not to be the end of the world, so they were more comfortable with the stuff.
If you can get your hand on Minsky, he wrote a lot about that effect. Stability breeds instability.
That gave the consumer credibility to ultimately get credit cards that they probably wouldn't have gotten otherwise.
Consumer credit of the CC variety didn't take off in a big way until well after WW2. One major contributing factor was the growth and merging of the credit bureaus. A stream of info about a consumer that carries forward and doesn't rely on a personal or close-range relationship with the lender makes quite a difference. I've been floating the idea of starting up third-world bureaus, myself. Even for late-movers, the additional value of the data collected might catch a bid as access to credit expands. A slow-down now might be the pause that allows an entry while others are distracted.
I don't understand how foreign scrip can get spent in a domestic market? How do they put the 2 T to work without converting the $ to yuan? Otherwise they can only buy US goods and services with $, and what the hell can we sell them on that scale?
As long as commodities' sales are settled in $, that's where they can use our scrip to buy real stuff with value, but if there's a dollar crisis, I doubt the Saudis, GCC, will continue to accept $ and definitely not Russia.
Maybe the Chinese middle class would like to have a second home in Florida or SoCal...
Pollution abatement is surely needed, but should be enterprised based. But a major hurdle is the lack of institutional structure and legal integrity needed to carry out those types of programs.
That's why they have so damned much pollution - if left solely up to 'the market' & 'enterprise' they will be up to their eyes & tumors in pollution... Pollution is one of those costs that I incur but you pay with every breath you take whether you patronize my services or not so there is precious little incentive to abate it at the micro level UNLESS a rather heavy handed but impartial third party institution offers either carrots, sticks or some of both.
China has none of that - just 'the party' - plenty of 'heavy handedness' but little or no impartiality. Kind of like if the energy companies established our energy & pollution policies in private collusion with our bureaucrats. We know that could never happen here...
ac: But China isn't coming out of a pit. Wouldn't their building our crap be similar in the developmental stage to us building stuff to blow up? So they make some cash selling lead-filled toys to Yanks, and transition to domestic consumption. Just as we went from making tanks and bombs to refrigerators and washing machines?
Barley writes:
As a cultural thing, you can not carry one debt from year to year. You must pay it off and/or renew the debt.
I have never heard this. Very interesting. How did you learn this? I only ask because my inlaws are Chinese and it's news to me. (Not doubting, just curious.)
"Is there any reason China cannot just start putting credit cards in everyone's hands"
As a cultural thing, you can not carry one debt from year to year. You must pay it off and/or renew the debt.
And if the government doesn't trust consumers to think for themselves then why would they ever give them credit?
This is the problem with a philosophy of government where regulators and government officials are necessary because the masses are too dumb to think for themselves. It necessarily implies that consumers shouldn't be allowed to have too much credit.
In fact it's basically a statement that they shouldn't have too much credit.
Right now you almost have to agree with that view... yet at the same time consumer credit seems essential to having a modern economy. Countries without it generally seem to resemble places like North Korea (and China until more recently).
I don't understand how foreign scrip can get spent in a domestic market? How do they put the 2 T to work without converting the $ to yuan? Otherwise they can only buy US goods and services with $, and what the hell can we sell them on that scale?
As long as commodities' sales are settled in $, that's where they can use our scrip to buy real stuff with value, but if there's a dollar crisis, I doubt the Saudis, GCC, will continue to accept $ and definitely not Russia.
First off my guess is the world DOES continue to accept USD even with our two decade long mismanagement of our economy by the White House & Congress (I partially absolve the Fed - only partially - because I believe it is the massive deficits, both gov't & current account deficits - that allows the dollar peg & forces the hand of the Fed).
The question is at what exchange rate will they accept them? Probably at a lot weaker dollar than we have now.
If the Chinese dump dollar assets (they don't actually own dollars - they own our T Bills, MBS & such)... it will push the dollar lower for sure. But they have $2 eff'ing trillion of them... they don't have to spend them all over-night to keep their people from starving.
So they sell T Bills & exchange for yuan on the open market. If they get too much deflation from that - then print more yuan somewhat to offset the swelling.
It won't be perfect for them but a lot better than our options (seeing T Bills collapse & our domestic interest rates sky REGARDLESS of what the fed does).
Yeah, low volume and serious restrictions on short selling individual stocks. ETFs were OK, but multiple attempts at shorting vulnerable individuals were denied and rejected (No stock available). BS, fraud, etc.etc. Slot machines are less rigged.
"Pollution is one of those costs that I incur but you pay with every breath you take whether you patronize my services or not so there is precious little incentive to abate it at the micro level UNLESS a rather heavy handed but impartial third party institution offers either carrots, sticks or some of both."
Yes, getting those externalities back into the producers costs where they belong. I think it would be a combination of clearer regs, stricter enforcement, and crony invested scrubber technology.
That's why they have so damned much pollution - if left solely up to 'the market' & 'enterprise' they will be up to their eyes & tumors in pollution...
That's where I'd be more amenable to regulation -- if there's a general agreement that it needs to be done, but no individual incentive ever to do it (kinda like building roads).
As I see it that's very different from regulation that says that people shouldn't be able to borrow/lend huge amounts of money to flip houses if that's what everybody wants to do.
The present 5 year plan also has an explicit directive to mitigate pollution.
The issue, however, isn't the rule book, which actually exceeds US EPA standards.
It's enforcement on the local level.
However, should TPTB decide to 'clean up' - they have zero compunction in shooting the local mayor in the head and replacing him/her with a more compliant follower.
Interestingly, for the first time, the central directive is, People First. Look back at the past 50 years - it has ALWAYS been, Party 1st.
However, should TPTB decide to 'clean up' - they have zero compunction in shooting the local mayor in the head and replacing him/her with a more compliant follower...
"all executions are belong to us"
"cutsz ratres and we remooses riquridity, because all yur liqidz are belong to uz"
"Four of America's 10 fastest-dying cities are in the Buckeye State, according to a list produced by Forbes magazine.
Canton, Cleveland, Dayton and Youngstown get the dubious distinction, based on their anemic population growth and their sluggish gains in overall economic activity.
"Despite a decade of national prosperity, the former manufacturing backbone of the U.S. is in rougher shape than ever, still searching for some way to replace its long-stilled smokestacks," said the Forbes article, published online today.
Ohio's four cities are the most of any state on the list, followed by Michigan with two, Detroit and Flint."
Barley writes: As a cultural thing, you can not carry one debt from year to year. You must pay it off and/or renew the debt.
I have never heard this. Very interesting. How did you learn this? I only ask because my inlaws are Chinese and it's news to me. (Not doubting, just curious.)
Currently Smoking Cannabis | Homepage | 08.05.08 - 10:04 pm | #
I'd guess it's one of those New Year's superstitions. My wife's in-laws are ethnic Chinese and she found a website with a laundry list of things to do. Most of them were news to me. I'm guessing that once they get to trusting CC companies, they'll be just fine with having credit cards. Some people are just naturally suspicious of someone who sends "you are pre-qualified for this card!!"
Well, my family was never motivated enough to look up those superstitions, we just knew there were a lot of them. My wife thought she should know them.
But it could have been her brother's marriage I was talking about.
Don't speak any Chinese, except to play mah jong. My grandfather was born in San Francisco, my dad in Montana,...so I'm not "really" Chinese. True Chinese want to be buried in China.
sdtfs: My wife used to frustrate the hell out of people who would ask, "What are you?" She always said, "I'm an American. I was born in Newport Beach."
For some reason, people often act as if this is a rude answer.
Whatever...brunch with my inlaws rules. Dim Sum makes me a happy "lofan." (That means "honkey" in Cantonese.)
"Trade has also boosted GDP (trade contributed 2.4% to the Q2 GDP growth), and has kept U.S. manufacturing employment from falling sharply as usually happens in a recession. This last point has been important in my forecast that headline unemployment wouldn't reach 8% in this cycle."
So the slowdown everywhere will not affect US exports but only imports to USA?! Recession works both ways. Headline number is gonna be 25 percent at least by 2011. This is collapse and quite possible end of USA.
I just had a very fine chinese white/vanilla tea, nize.
As I suspected it will take ages and capitalist revolution before that given Tiger is anything but paper tiger.
dryfly writes:
I don't understand how foreign scrip can get spent in a domestic market? How do they put the 2 T to work without converting the $ to yuan? Otherwise they can only buy US goods and services with $, and what the hell can we sell them on that scale?
As long as commodities' sales are settled in $, that's where they can use our scrip to buy real stuff with value, but if there's a dollar crisis, I doubt the Saudis, GCC, will continue to accept $ and definitely not Russia.
First off my guess is the world DOES continue to accept USD even with our two decade long mismanagement of our economy by the White House & Congress (I partially absolve the Fed - only partially - because I believe it is the massive deficits, both gov't & current account deficits - that allows the dollar peg & forces the hand of the Fed).
I don't think the Chinese are planning ahead any more effectively than other countries. $$ are still accepted for oil, so the Chinese might as well spend them on oil while they still work. They're sticking with what got them this far, manufacturing for export, and don't want to try something else ... Dryfly, you are right, pollution abatement would be a tremendous blessing to the Chinese, and to the world. A decrease in coal emissions would be wonderful.
Dryfly, you are right, pollution abatement would be a tremendous blessing to the Chinese, and to the world. A decrease in coal emissions would be wonderful.
Sue (Capital S) | 08.06.08 - 6:46 am | #
And it would drive non-export employment across their whole country. Unlike us they have the reserves & low costs to actually do it without a lot of up front economic pain.
I'm with you on this...the Chinese don't run anything better than anyone else. The funny thing about some on this forum is that the have polished off the commie supplied koolaid and believe everything presented by that autocratic country. They only managed to create an enormous equities bubble which has collapsed by 40% siphoning off the few assets of their largely peasant population and now I'm supposed to believe that they all the other precepts of economic mastered. We won't even start with the fact they are building massive amounts of commercial real estate that will NEVER be utilized and will be become a millstone around the necks of the public/private banks. To all these theories in resurgence of the late great Chinese empire I say...PLEASE STOP!
All of you people posting here should understand that every trade deficit dollar that we send to China is one less dollar available to spend in the US. A year ago, I had a cracked windshield that needed replacing on my Honda Civic. So I called Geico and got the run around on how they only would pay for generic glass- you know, the crap from China. The same crap that was on the car from when it cracked the last time, except this time, a large rock hit the windshield in the corner and shattered glass INTO the cabin because the Chinese glass has no shatter containment on the cabin side. Okay, so I fought and fought, and got OEM PPG glass approved. The glass shop must have missed this detail on the order form and installed the crap glass anyway, and charged Geigo for the PPG glass. I was like beside myself, so I wrote down the part number from the crap glass and Googled it. I discovered that the glass can be purchased in bulk from China for $30/windshield. I did some more investigative work, and discovered that it about the same to ship from China to the US than price of the glass! I then discovered that the shipping containers are expensive (2 tons of steel), and that China subsidizes the containers! So a product that costs 3x more to make in the US, which would give people jobs and keep money in this country is instead pocketing some Joe's windshield outfit $30 more, and depriving our economy $60 per windshield. Companies like Geico should not be able to force global trade on people like this. When you walk into Wal-mart and see absolute crap on sale for 10x what it cost them to buy it from China- THAT'S A PROBLEM! If you don't believe that 10x is a good estimate- look at how much Wal-Mart imports for China, which is somewhere around 80% of their product (~20 billion/year), and then look at their sales numbers (~350 billion/year). The ratio is definitely over 10 for everything imported from China. And your "stimulus checks" get spent where? Wal-Mart...who gets their product from...China. The real insult is when you walk into a Wal-Mart in California, Arizona, Nevada, Florida, and ask for help...and the worker doesn't speak a word of English. NOW THAT'S ANOTHER PROBLEM!
I had a similar problem with headlamp replacements. Get them from the dealer and not a parts store or you may get crap. The first headlamp burnt out at about 50K. Then I replaced with a headlamp from an auto parts store and it lasted six months and burnt out again! Replaced it again (from a parts store) and it burnt out about eight months later! Went to the dealer and got the replacement and it has been OK for over 2 years and counting.
Don't know who's still atop this thread, but for those latecomers.
Yes, our mfg is a relic. Revive it? It's not about wages or freight, guys. It's about indirect labor, pensions, liability insurance, state taxes, social security, etc, etc.
On the "their not playing on an even field" topic you want to add factors like currency manipulation, lack of pollution control, no OSHA, no collective bargaining, and no daffodils in the parking lot, be my guest.
But unless innovation and keeping cutting edge home (Germany has done a hell of a job here) is part of your DNA and job description, then lay off the belly aching, and get out there and maximize utility with the rest of the debtors. Your bed, sleep in it.
The impact on the economy by the Olympics is greatly exaggerated. Beijing represents less than 5% of China's economy overall at best. It is similar to the impact of the Atlanta Olympics on the US economy. China's leaders met last week in a major economic pow-wow and chose growth over controlling inflation. Sure China is slowing down, hard not too given the symbiotic relationship with US, but a collapse is wishful thinking on the part of "red China" righties and lefties. China is the fastest growing market for US exports and now close to if not greater than exports to Japan. This is a bright spot, something rarely talked about in the media. Thanks for pointing it out here!
DK:
The most profitable in terms of business operations are product design and marketing. That's why Wall Mart and the rest are willing to outsource manufacturing to China. However that is not the problem, the trade is beneficial when the trade is fair. It is beneficial because consumer can save money and firms can produce more.
The problem with China, since they have been manipulating their currency, the trade is not exactly fair.
The problem of China, the will of their government to interfere with the market forces will backfire and consequences of such interference might be very grave, over the time.
Also it is a huge and time consuming step for a country to move from being cheap manufacturing hub to actually forming international firms capable of designing unique and demanded products. And it takes much more then NY Times fear screaming articles for China to be able to do that.
that would surely create another summer rally, just imagine the relief of Treasury Department, and all of executives of the US S&L Banks...
Aint happening though; the only people our congress intends to screw is, us good old/dependable US taxpayers (especially those in the middle just trying to shot for stars).
First?
Anyone here?
L-liz:
You Floridians are fast.
Hah. Also, the unemployment won't drop down so much because a lot of illegals will go back to where they came from, or have already done so.
Or, they will think 2ce before coming here.
I have great sympathy for the illegals. Some of them are trying to avoid starvation.
Didn't China undervalue its currency for years to keep exports up. Maybe now it will use some of the huge amount of our money/treasury bills to actually buy something from us.
Errr, rumor has they like Buicks.
China, the world economic cog, cannot slow down. That is unCommunistic of them.
Also, we are weird.
But I am hungry and going home now. No computer at my tiny place in Dade.
Yes computer at my place in Brevard.
Hey default are you out there?
Your posts have been extensively quoted on the Irvine Housing Blog.
So much for the "China is going to exponentially suck up all marginal oil production" theory.
Also, I think it highly likely that Chinese businesses recklessly increased production capacity on the expectation that foreign demand would always increase; encouraged by Chinese govt moves to limit currency adjustment and prop up foreign consumption by buying US govt debt.
If China's exports to the US drop, then their accumulation of export dollars should drop.
If they stop accumulating dollars, then where will they get the currency to keep buying our dodgy debts?
If they stop buying our dodgey debts, how can we pay for the party?
Exports always go up!! I cheated, I am really leaving now.
The danger is that China - and the rest of the global economy - will slow down too quickly, and U.S. exports will be negatively impacted.
European June Retail Sales Decline by Most Since at Least 1995
I think that cat's out of the bag. It's ironic, but growth seems to have slowed faster in the rest of the developed world than it has here, and developing Asia is still raising rates and constricting credit. The authorities in just about everywhere else on the planet seem willing to take their medicine. The idea that exports are going to lead our way out of this is a bit of a stretch.
The willingness of the American consumer to dig ever deeper into debt is impressive, as is the aiding and abetting of the authorities here. The reasoning at Treasury and the Fed seems to be, "if we can just get them to borrow another 5% of income!"
Also, I think it highly likely that Chinese businesses recklessly increased production capacity on the expectation that foreign demand would always increase...
Kung Fu Panda
Absolutely, there are going to be some major over-capacity issues within a year from now, and it won't just be hotel rooms in Vegas.
If the GDP was boosted by a change in the trade balance, which was helped by a weak dollar and weak economy for the US; then what happens when we get that "strong dollar" Paulson wants? What happens to the earnings of companies like IBM which benefitted greatly from the weak dollar, instead of growth?
Just wondering.
The olympics are beginning this friday, opening ceremoniew saturday. We knew that the Chinese government was ordering shut-downs on factories, and curtailing domestic transportation fuels. I am curious about the extent these moratoriums have affected the demand for gas/diesel.
Secondarily, i wonder whether the sudden difficulties that tourists are encountering in obtaining visas is another deliberate way to reduce demand on the local vehicle traffic, and therefore helping improve the air the athletes are sure to be complaining about.
From the picture of Beijing in todays papers, i don't see how the air is going to clear up by friday.
Just wondering... in the desert.
"The danger is that China - and the rest of the global economy - will slow down too quickly, and U.S. exports will be negatively impacted. That could lead to more unemployment in the U.S. than I'm currently forecasting, and also a deeper recession."
Oh dear, CR is now starting to channel Roubini. Now I'm getting scared.
Also, a lower trade deficit means less money for foreign governments to recycle into US debt, just when our governemnt is embarking on a huge bailout borrowing binge. Higher interest rates?
Bob_in_MA writes:
The willingness of the American consumer to dig ever deeper into debt is impressive, as is the aiding and abetting of the authorities here. The reasoning at Treasury and the Fed seems to be, "if we can just get them to borrow another 5% of income!"
To some extent, the government is making the decision for the consumer...sending him rebate checks that are actually just more debt creation. Propping up home prices with bailouts that are actually just more debt creation. And of course, keeping some borrowing rates (ARM mortgages and even conforming fixed rate loans) just above zero in real terms, for those with decent credit.
Already happening -
FT.com / US / Economy & Fed - Service sector slump raises recession fears
Funny title. Recession fears. Uh, hullo....anyone home? We're already in one, and it is going global.
"James B writes:
Also, a lower trade deficit means less money for foreign governments to recycle into US debt, just when our governemnt is embarking on a huge bailout borrowing binge. Higher interest rates?"
There's two sides to every trade. Foreigners buy Treasurys because they have to - the current account deficit has to be financed by foreigners buying US assets. That is an accounting identity. Thus, if the current account deficit drops, the need for external funding also drops. I.e., there will be domestic savings to replace the foreign savings.
If the deficit is closing as a result of strong net exports, growth will increase, and so you'd expect higher rates.
If the deficit is closing because there's a deflationary spiral and domestic demand is collapsing along with GDP, then you'd expect lower rates.
James B writes:
Also, a lower trade deficit means less money for foreign governments to recycle into US debt, just when our governemnt is embarking on a huge bailout borrowing binge. Higher interest rates?
Higher real interest rates, for sure. Nominal rates will only drop if we have a big drop in the price of everything else (notably, financial assets).
Also, I think it highly likely that Chinese businesses recklessly increased production capacity on the expectation that foreign demand would always increase...
Kung Fu Panda
I'd like to think the Chinese have invested in industrial capacity wisely.
Alas, the judgement and self-control displayed in their stock market suggests they may have done otherwise.
China needs a slowdown; their govt has been avoiding even more rampant inflation by taking their trade surplus and putting it into US treasuries. Check Brad Setser's blog and he explains it very thoroughly.
So, how are you going to tell 300 million people to go back to the country side to till the earth? I suspect, over the next 24-36 months, social anxiety and unrest. I will now coin the term "economic devolution".
O/T but kinda funny...."geeze were not generating those fees anymore so go get a government contract"....
"The U.S. Treasury today said it hired Morgan Stanley to study the department's new authority over Fannie Mae and Freddie Mac, the country's two largest sources of mortgage financing.
We have no plans to utilize the temporary authorities,'' the Treasury said in a statement released in Washington.This action should be interpreted as a prudent preparedness measure, and nothing more"
The Chinese will drastically cut rates if they see that the market headed down during the games.
Money mangers have been asked not to talk down the market.
Re: Note: Please don't miss Tanta's post this morning on the NY Times and Freddie Mac.
LOL, didn't she get enough shit or what? ROTFLMAO!
"Kung Fu Panda writes:
China needs a slowdown; their govt has been avoiding even more rampant inflation by taking their trade surplus and putting it into US treasuries. Check Brad Setser's blog and he explains it very thoroughly."
They'd only be suppressing inflation if they let the yuan rise. They've only held inflation down by subsizing energy costs.
Some excellent charts were collected to reflect CR's post/comments...(CR heez gots better graphs this time)
immobilienblasen
Re: The top people should be booted out, and replaced by executives who have the confidence of the markets, said Janet Tavakoli, a finance industry consultant and observer of both firms. Large Freddie Mac shareholders, speaking on the condition of anonymity, echoed those sentiments.
Why is there a link to Fannie corruption for this thread? Why beat this horse over and over in an abusive retarded way??? Tanta wrote a sloppy blog, why continue to humiliate her under the guise of a dumbass story on China that has nothing to do with Fannie? Is this a new way to get people to be off topic??
CR,
The export part of your argument makes sense. However, what I think you are ignoring is the part argued by Setser (The Quiet Bailout) and others that the US economy is holding up because of the foreign cash infusion. Will it keep coming is the other question. Also, this is the reason why you are not seeing the numbers that will make you call for a severe recession.
Hence, in my view, US exports need to increase AND foreign cash needs to keep coming in for your unemployment forecast to come true. Else we and have a severe recession.
Would love your response.
Aw shucks. Those 20 foot containers make great storage for square hay bales and they were getting really cheap.
Had a family that wanted to rent one last week..........to live in.
Freddie (FRE) and Fannie (FNM) CEOs: Don't Blame Us, Congress Made Us Buy Those Crap Mortgages
Freddie (FRE) and Fannie (FNM) CEOs: Don't Blame Us, Congress Made Us Buy Those Crap Mortgages
If ever we needed real-world examples of "moral hazard" and conflicts of interest, it's Freddie Mac (FRE) and Fannie Mae (FNM).
This company has to answer to shareholders, to our regulator and to Congress, and those groups often demand completely contradictory things, Mr. Syron said in an interview.
Therein lies the problem. The Times piece goes on to recount how a Democratic Congressman once called up Syron and screamed at him to buy more mortgages from low-income borrowers. Under pressure, Syron and his team capitualated, figuring if things went wrong, the government would bail them out anyway:
Mr. Syron and Mr. Mudd eventually yielded to those pressures, effectively wagering that if things got too bad, the government would bail them out.
The thinking was that if something really bad happened to the housing market, then the government would need Freddie and Fannie more than ever, and would have to rescue them, Mr. Andrukonis said. Everybody understood that at some level the company was putting taxpayers at risk.
And there's the lesson. When this crisis is over, Fannie and Freddie should be privatised. Using tax payer money to subsidize cheaper housing and insure against risky lending behavior shouldn't be part of government's mandate. But they won't be privatized, of course. Because, by then, the crisis will be over, shareholders will want that government guarantee, and no one else will care anymore.
Why didn't Tanta dig up something on that un-named source?
Re: The Times piece goes on to recount how a Democratic Congressman once called up Syron and screamed at him to buy more mortgages
This sounds like politics suddenly!
Ahem:
Inbound traffic is off almost 14% from June 2007.
China knows. The LA ports (LA & Long Beach) are seeing double digit y-o-y container volume declines. - Rob Dawg | 08.05.08 - 1:24 am |
No hat tip? Sniff.
Seriously, As I've previously mentioned this will be a "thin" Christmas. The retailers are bracing for low numbers by planning low product stock. It's going to be depressing walking through empty aisles with empty pockets.
If oil prices stay up, global growth in the countries that import from the US get kicked in the nuts. If it drops, it's only likely that other reasons are behind the global slump, like bursting asset bubbles in many markets and a major credit crunch. My bet is that growth is slowing more multiple reasons, and oil will pull back more, but it wont be enough to reignite the economies like the US, Spain, Italy, Ireland, Japan, Canada, Australia, etc. Too many are going down at once.
Take a look at my previous link. It shows you that US export orders are already in trouble. Then look at the US trading partners...who gets the US Exports?
http://www.ny.frb.org/research/directors_charts/us_exports.pdf
http://www.newyorkfed.org/research/directors_charts/us_exports2.pdf
50% is Japan+Canada+Europe.
Canada is ripe for a housing bust, so they are screwed. Japan is declaring recession now (yet again) Europe? Wutever.
Some excellent charts were collected to reflect CR's post/comments...(CR heez gots better graphs this time)
Wow, if Chinese exports are almost flat YoY and the GDP is still growing at 10% YoY, that better mostly be growth in consumption rather than capital spending.
Otherwise they could be heading for an industrial apocalypse.
OTOH, China is currently facing a shortage of coal and electricity which
is constraining economic activity. They also are deliberately limiting economic activity around Beijing on account of the Olympics.
Even if their exports slow they still have to rebuild from an earthquake and improve their domestic infrastructure. Maybe they won't grow at 10+% rate but they should still continue to suck up more and more of the world's coal, oil and other commodities.
Retail prices will go up in December. Better do your Christmas shopping NOW!
Re: Note: Please don't miss Tanta's post this morning on the NY Times and Freddie Mac.
Fannie Mae raises fees again to mitigate losses
Fannie Mae raises fees again to mitigate losses
| Reuters
Fannie Mae is raising some fees on mortgage loans its purchases, marking the fourth increase in nearly a year, to reflect higher credit risk and offset losses from continuing market deterioration.
Matthew Seltzer, analyst at Barclays Capital, said Fannie Mae has indicated over the past year that its rising fees have aimed at maintaining capital as losses and expectations of losses mounted.
"The flip side is that these fees have a cost," he said.
"Originators are the ones that have to pay these up-front fees, and the originators need to be compensated. They most likely will turn around to the borrowers and factor those higher fees into higher mortgage rates," Seltzer said. "What's the effect? All else being equal, it has the effect of pushing mortgage rates higher, which is not exactly conducive to generating new business."
"The danger is that China - and the rest of the global economy - will slow down too quickly, and U.S. exports will be negatively impacted. That could lead to more unemployment in the U.S. than I'm currently forecasting, and also a deeper recession."
I could not agree more with your assessment, but would like to add a couple of factors.
1) As the rest of the consuming world slows down, they'll drop their rates. As soon as they do that the dollar will begin its rise, and US exports won't look quite as cheap.
2) An increase in the strength of the dollar coupled with the existing (and heightened) worldwide demand slowdown will continue to put a damper on commodity prices, allowing US exports to hopefully remain competitive even when considering the strengthened currency.
In my mind, a lot rides on the strength of the dollar. If foreign banks continue their dogmatic approach to "inflation fighting" rate setting, they'll hit the wall very hard indeed when inflationary pressures subside rather quickly, which they're about to do. This will strengthen the dollar, and we have to hope that this happens at about the same time as the financial system comes back online in the US. Too soon and we're toast.
OT: I guess the NCUA shuts credit unions on Tuesdays.
Page not found The Post and Courier - Charleston SC newspaper
Small fry. 260 members and $460K in assets.
A self correcting economy, nothing to see here
The Port of Long Beach is the second busiest seaport in the United States and the tenth busiest port in the world. It is in Long Beach, California and it adjoins the separate Port of Los Angeles, the busiest port in the United States. It is the fifth busiest gateway by value when compared with all U.S. freight gatewaysland, air, and sea
Chinese run - They manage most of the LB port = I believe they even got the former Navy base. The Chinese are/were looking at the same type setup in Seattle and Port Arthur, TX
Port of Long Beach
Latest Month
Container Trade in TEUs*
June
Fiscal Year to Date***
2008**
2007
% Change
2008**
2007
% Change
LOADED INBOUND
2,503,056 2,751,577 -9.0%
To Date as of June/Yearly
LOADED OUTBOUND - Same date range
1,345,837 1,060,167 26.9%
EMPTIES - Same date range
1,197,067 1,590,696 -24.7%
So let's see, the slowdown in the US kills the homebuilders, financials, retailers and resort/casino companies...
Meanwhile the parallel slowdown in Europe kills off the alternate demand source for expensive consumer gadgets (from companies like Apple/RIMM).
And finally, the Asian slowdown kills the booming business for Caterpillar and other heavy industrial equipment companies.
What's left?
Morgan Stanley Gets $95K to Restructure Fannie and Freddie
Morgan Stanley Gets $95K to Restructure Fannie and Freddie - Deal Journal - WSJ
You cant put a price on patriotism. But if you did, you would want to aim at around $95,000.
That is the modest amount Morgan Stanley is charging the U.S. Treasury to advise the overwhelmed agency on what to do about misbehaving governmental stepchildren Fannie Mae and Freddie Mac.
The pittance will only cover Morgan Stanleys expenses. $95,000 for five months of work, after all, is less money than a single banker right out of business school makes.
Bawhawlolhahwhahahah
Lawyerliz -
Where oh where have I been quoted over at IHB?
Crazy markets today, none of us have any idea why stocks continue their ascent & credit spreads tighten.
Cheers,
Is that just the initial consultation fee?
Been out of pocket all day, sorry for posting this on the new thread but IMO the NYT piece was a Freddie hit job.
I have to side with Tanta on this one. Taxpayer money would never be at future risk if the GSEs had been properly capitalized in the first place. The GSEs did not even get a (competent) regulator until OFHEO (previously HUD). OFHEO did a bangup job considering how little money Congress gave them, but the GSEs played by the rules that were in effect at the time. So now we need to properly capitalize them because we know now that as serial bubble blowers we will have more occasions in the future when real estate will go down for extended periods. No free lunch there.
The mixed mission makes the GSEs the most difficult management challenge in the western world IMO. They run the largest derivative books in the world to hedge the interest rate risk of their both their held-for-investment and guaranteed mortgages.
The GSEs ran afoul of a confusing accounting change one year (lo and behold, there were no investigations by the Bush administration to determine if the money center banks were complying with the same rules) and their political enemies pounced. The banks were determined to widen spreads on mortgages (to increase their profits by increasing your and my borrowing costs) by dismembering the GSEs and fluffed up the accounting problems as a scandal.
Syron came in on the tail end of this. The GSEs are the good guys in all of this, no matter how much the banks try to influence the media. If the choice is to believe Tanta or to believe the banks, I will take Tanta every time.
This slowdown is reflected in the Shanghai SSE composite index that is off about 54% from the peak
Remembers ladies and gents(even you CSC) it is impossible for domestic retail investors to short this market...
I will take you on right now Anonymous. Put them up.
THANKS rowen!
"tyaresun writes:
Hence, in my view, US exports need to increase AND foreign cash needs to keep coming in for your unemployment forecast to come true. [Else we and have a severe recession.]"
I know you asked CR, but it's not clear your scenario is possible.
The balance of payments is an accounting identity. If U.S. net exports (emphasis on net) increase, net foreign money coming in has to decrease. (If we're not talking net exports, then things obviously depend on what you assume for imports.)
The only way net exports can improve while having rising foreign inflows would be for increased capital flight from within the U.S. That is not necessarily a good thing; the analogy in the stock market is heavy insider selling.
Tim: Got it. Thanks.
Re: Fannie bailout
Morgan Stanleys banker on the restructuring will be Robert Scully, the former co-president of the firm who has also focused closely on advising global sovereign governments and now, his own. Scully is a capital markets expert who also recently advised on the reverse takeover by Kohlberg Kravis Roberts of its KKR Private Equity Investors business.
See Also:
Prior to March 23, 2006, we were an indirect wholly-owned subsidiary of GMAC LLC, formerly known as General Motors Acceptance Corporation, which we refer to (together with its subsidiaries unless the context indicates otherwise) as "GMAC." On March 23, 2006, an investor entity owned by affiliates of Kohlberg Kravis Roberts & Co. L.P., Five Mile Capital Partners LLC, Goldman Sachs Capital Partners and Dune Capital Management LP, which we refer to as our "Sponsors," acquired a controlling equity stake in our company from a subsidiary of GMAC. In connection with the acquisition:
Re: The GSEs are the good guys in all of this
Clyde how do you feel about offshore drilling and Obama?
"and also a deeper recession."
CR is dipping a toe in the water. In 6 months he'll be telling us to buy lead, plant vegetables, and hang a clothes line. This is so "it."
Keep you arms and legs inside the handbasket at all times. Going down!
Clyde,
Do ever read the SEC reports on the GSEs? Do you have any clue as to what your saying?
Is Tanta posting as Clyde and trying to defend that dumbass post this morning?
ac,
I'm leaning toward the industrial apocalypse thing. To reference Brad Setser's work (yet again), if I read his work correctly, China has been starving industries that focus on domestic demand to support export sectors.
Also, folks might want to take a look at Baltic countries and Spain. These countries appear to be in far worse shape than the US and don't have the luxury of a reserve currency.
KFP - not to be confused with KFC.
Ive been watching Spain. It's going to hell in a handbasket. The funniest thing was the year before, where we got the same stupid explanations as we did in the US, as to why it wasnt a bubble.
Born and bred dopes.
China doesn't slow benignly, or at least has never had to weather it since opening to investment in the 80's.
Operational leverage is a bitch on the downside.
The U.S. doesn't slow benignly, or at least has never had to weather it since the last peak credit contraction in the 30's.
Financial leverage is a bitch on the downside.
Lawyerliz -
Found the forums on IHB - I had no idea they even existed. I'm glad that some fellow travelers found my CDS posts of value.
Oh, and apologies for the convoluted "Magic Box" explanation of CDOs. When I get drunk, I put that hard-earned, high-quality liberal arts education on the back burner, and instead regress to 11th Grade Honors English Extended Metaphor Hell.
Cheers,
Read in BW that people are pulling kids out of tutoring to save money. Anyone hear about enrollment in expensive schools dropping? Then I know we are in trouble.
"Geoff writes:
KFP - not to be confused with KFC.
Ive been watching Spain. It's going to hell in a handbasket. The funniest thing was the year before, where we got the same stupid explanations as we did in the US, as to why it wasnt a bubble."
It's been entertaining. The story was that Spanish mortgages were safe because the loan-to-value was capped at 80%. Too bad the appraisal was at 125% of value. Oops.
Bond Guy -
What's your story? Just curious, I've been reading your posts for some time now and haven't ever gotten the lowdown on what you do/how you arrived here.
On that note, what Tanta & CR should really do is establish username & passwords w/profiles for the more prolific posters here - it would be nice to find out everyone's deal.
Just my two cents...
Cheers,
Yupleau,
Do pray tell, what does the ever-so-competent and non-partisan SEC say about the GSEs?
Forget China! What's going to happen to Dubai and the GCCs as oil reverses? Talk about apocalypse in the making!
what is this/
Fee Letter: that certain Fee Letter dated as of August 2, 2005 among the Arrangers and GMACCH Investor LLC
Clyde,
Anyone that starts out a question here on this blog with, "Do pray tell," has to be a shill...
OT: Analyst predicting that Freddie will report a profit tomorrow.
Bloomberg: Freddie Mac to Report Quarterly Profit, Miller Says
Friedman, Billings, Ramsey & Co. analysts said Freddie Mac will report a second-quarter profit, instead of loss as previously forecast, because an increase in interest rates boosted the value of some assets.
...ac... Wow, if Chinese exports are almost flat YoY and the GDP is still growing at 10% YoY, that better mostly be growth in consumption rather than capital spending.
Over the period, beijing has put administrative controls on lending, as well as upping the reserve requirements and jawboned cooling it. Still, local straps are loathe to reign in their pet projects, same as it ever was.
My guess is that it's impacted infrastructure projects and capex at the plant level, but not to the degree hoped.
...for Countrywide?
Yupleau,
Name-calling, citing authorities but not data, and using ad hominem political attacks betray you as a newcomer. Don't care you you work for, post something relevant or get off the blog.
Re: Clyde writes:
I will take you on right now Anonymous. Put them up.
Clyde | 08.05.08 - 8:15 pm | #
Damn it Clyde, I'm making dinner and you seem so eager, and that pisses me off, because I'm busy and this will have to wait a few seconds.
You do sound like an agitated Tanta and you seem to represent her interests, so I'll check back and we can go over a few reports.>ok?
China needs to start consuming some more of their own production capacity - plain & simple.
And they have the reserves to easily do it... something like $2T.
So take $2T and divide by something like 500 million (WAG on the number of households) generates about $4K per household... that's something like 3 years their median income.
Given their median household income of something like $1000-$1500/year the Chinese could in effect 'make work' for the whole damn country for 3 years and still not run out of reserves.
China has options if China decides to implement them.
We on the other hand are a bit more constrained.
You know CSC that if we are in the handbasket, your stash is going to flame out before we hit that 9th canto. There goes your good humour.
CSC
Check out this pool...
snopes.com: Devil's Swimming Pool -- Victoria Falls
Tim, easy. You're going to tweak CSC out!
Also, the unemployment won't drop down so much because a lot of illegals will go back to where they came from, or have already done so.
A big part of why Dish Network is having an awfully high churn rate.
China needs to borrow Uncle Mao's credit cards.
Had a family that wanted to rent one last week..........to live in.
Believe it or not, its been done already...
containerbay and SuperBox
Dude, that makes me uncomfortable just looking at it. I have a gnarly fear of heights.
John Lee - As we go down, squares and suits will be begging me for a lung full. Good thing I like to share, although I was rejected by Tanta this morning.
Mostly OT: Cyclists show up wearing masks to Beijing, cause a stir.
- NY Times
Ive been watching Spain. It's going to hell in a handbasket. The funniest thing was the year before, where we got the same stupid explanations as we did in the US, as to why it wasnt a bubble.
Born and bred dopes.
Geoff
30% down really puts one's skin in the game.
Their bubble is a soap bubble next to our weather balloon.
How did you get to be so intelligent?
You know, at times here, I feel like I am sitting on a jury of people like you, who are able to see through all the Bernanke-Paulson-Bush manipulative crap to the truth.
Wall Street and hedge funds don't want to see it, because it's very threatening to them. And they will go down in flames.
But it's pretty reassuring that some intelligent people who are plugged into reality can still see truth.
Along with insights of CR and Tanta, it actually validates that American people are still fighting for their country against criminal mafia types. It may go down as the bloggers' version of 1776.
Clyde,
Your being an ass! Relax and have a drink, while I get you some info (bitch).
As an anecdotal - regarding the China slow down - it really is hitting parts of the industrial sector harder than others.
One of the companies I sell for has a number of plants in China (all metal working, all targeting western WOFI transplants - very little of the production is shipped back to NAFTA Zone currently... some goes to Euro Zone due to the unbelievably high currency spread)... But they tell me these plants are marginally profitable now due to increased costs (all inputs: labor, materials, capital and even taxes). They wish they hadn't built the damned thing - or at least built it long ago & had sold out by now.
Ya they don't ring a bell at the top for them either.
Another buddy runs a couple plants in SE China - but does it from the US via internet & Blackberry. He said there have been thousands of smallish plants closed in his sector by both the gov't & economic conditions. These are low skill & low value added plants... TPTB are actively pursuing capture of much higher wage, skill, value added jobs & so far have been successful at attracting them (think aerospace, biomed & such). He says they got a long way to go - its one thing to make sneakers but its a whole other thing to make landing gear that consistently passes FAA and is still cheaper than western product.
It will be interesting watching it develop - I just hope it doesn't get too damned interesting. I really don't want to live in exciting times - not that exciting anyway.
JP why are the masks black? they look like Caucasian Ninjas or something... Hope they don't all walk into a bank like that.
Anyone here have a full ninja costume?
Well, I'm going to be taking my vacation in Spain in a few weeks, so I'll let you know what I see there. Madrid, Cordoba, Granada and Barcelona. All the big cities except Valencia, which I already know pretty well.
Like I said before, even at the peak Spain was a country of economic contrast. Lots of partying and spending mingling with poverty, often in close proximity. Spain was never as rich as all the construction cranes and Euro-trash money made it appear. Barcelona became the epicenter of conspicuous Euro consumption, so it will be interesting to see if there's any change in the party there. I do know there's lots of prime real estate for rent in Barcelona at cheaper rates than a year or two ago.
I mean, in Euros. Not dollars.
dryfly: "China has options if China decides to implement them."
Consumption. Why can't they be more like us??
They are rather stymied on the CIC SWF front. And there's only so much that state investment can do domestically without huge boondoggles. Can't envision a Japan style bridges to nowhere exercise or the like.
I'm afraid a helocopter drop would largely go into savings against a backdrop of job fears. Either that or reflate the equities and RE bubbles.
Truly an embarrassment of riches.
rich: I couldn't agree more. I felt a little crazy before finding CR, because everyone I know thinks things are hunky-dory, the market is honest and true to Adam Smith, and the media wants us to understand the truth about the world. The fact that so many others were calling BS was a relief. That most are not as bearish as I has really pulled me back from the ledge. And I'm probably the dumbest mofo here...it must be even better for the smart dudes.
Clyde,
While I water the lawn and flowers and do a BBQ, stuff this in your face, then Ill be right back:
At Fannie Mae, led by one super-connected Democratic party insider after another, "there was sort of a revolving door with, you know, political appointees and other people in Washington. In retrospect, we can all say they were too political and not enough managerial. They didn't have the business skills or want to have the business skills," says Lockhart.
But on top of that, he says, "Obviously, Fannie was mismanaged--and it was mismanaged, in my view, on purpose to be able to manipulate earnings to maximize bonuses."
If it proves true, that's criminal, right?
"Yes," says Lockhart. "The SEC [Securities and Exchange Commission] says it's fraud, and I cannot disagree with them."
This spring, OFHEO and the SEC agreed that Fannie Mae should be fined $400 million for the faulty bookkeeping that enriched its executives--one of the largest civil penalties in accounting fraud. All but $50 million of that is for the "Fair Fund," created by the corporate accountability law, the Sarbanes-Oxley Act. The Fair Fund channels such fines to investors. In addition, Fannie Mae will be restating its earnings going back to 2001, with the correction potentially totaling $11 billion or more.
Lockhart articulated OFHEO's findings for the House Financial Services Committee this past June: "[Fannie Mae's] previous management team, led by Chairman Franklin Raines, violated [the] public trust. By encouraging rapid growth, unconstrained by proper internal controls, risk management and accounting systems, they did serious harm to Fannie Mae while enriching themselves through manipulating earnings.
"The result," Lockhart told Congress, "was an estimated $10.6 billion of overstated profits, well over $1 billion of costs to fix the problems, and ill-gotten bonuses in the hundreds of millions of dollars."
Lockhart testified that an in-depth examination discovered an arrogant corporate culture where "the ends justified the means." OFHEO found that Fannie Mae--seeking to manage earnings that were directly connected to management bonuses--gave short shrift to risks. And when interest rates fell in 2002, the cost was billions of dollars in losses.
"They co-opted their internal auditors," he told Congress, and "they stonewalled OFHEO."
The end result was lucrative for those at the top. "From 1998 to 2003, the total compensation of CEO Franklin Raines exceeded $90 million, of which $52 million can be directly tied to achieving earnings-per-share goals," Lockhart testified. Indeed, during that same period OFHEO found that, taken together, Fannie executives made about $250 million in bonuses.
Ok Clyde,
This is simple and fast:
Fannie has also established a new executive compensation structure, with performance goals linked to the mission of affordable housing and an improved, more responsible and investor-responsive corporate culture.
That was from: Publication Date: 01-SEP-06
Delivery: Immediate Online Access
Author: Schiavone, Louise L.
Company: Federal Home Loan Mortgage Corp.; Federal National Mortgage Association
Clyde, what about the performance, can we start there????
"Default writes:
Bond Guy -
What's your story? Just curious, I've been reading your posts for some time now and haven't ever gotten the lowdown on what you do/how you arrived here."
I've worked in a variety of roles in fixed income (rates, not credit) for some time, either as an external consultant or for a period on the buy side. I usually just comment on how bond investors view things; I do my best to remain agnostic on the direction of markets.
bond guy,
Though you seem to have articles of faith for the limitless increase in the rate of oil production (in addition to you market agnosticism)
Clyde,
I'm going to this now:
2007 Performance and Accountability Report:
http://www.ofheo.gov/media/pdf/OFHEOPARNovember2007508.pdf
Are yah there still?
They are rather stymied on the CIC SWF front. And there's only so much that state investment can do domestically without huge boondoggles. Can't envision a Japan style bridges to nowhere exercise or the like.
I'm afraid a helocopter drop would largely go into savings against a backdrop of job fears. Either that or reflate the equities and RE bubbles.
Truly an embarrassment of riches.
Anak Krakatau | Homepage | 08.05.08 - 9:07 pm | #
Actually if they get in a bind - it doesn't matter what they spend it on in the short run - just spend it. If there was a lesson from the Japanese 'disaster' it is that high levels of national savings makes it damned hard to have a real disaster (lotsa people starving, high levels of UE).
I mean even with he huge gov't debt Japan has - the nation as a whole is still a very significant net saver. China isn't the same but it isn't like us either (hey big spender).
China could mandate the SWFs to lend to domestic sectors focused on domestic agricultural production... or subsidize 'pollution abatement'.
Who says the SWFs have to act like state own monstrosities OR like for-profit corporations. I mean they are in a unique position for a while (until it is squandered if things don't balance out in say 3-4 years).
I mean they could do quite well with some kind of a micro-loan program. Some will gamble on the Shanghai exchange but not all, probably not even most.
Its really the only way China re-balances without a crash (coupled to us). Likewise it would 'help' us break our addiction to SWF & FCB 'easy money'. One of the few win-wins out there even if it is painful at first.
They got options.
"energyecon writes:
bond guy,
Though you seem to have articles of faith for the limitless increase in the rate of oil production (in addition to you market agnosticism)
"
In the short term, they can hit pretty high oil extraction rates, if they wanted. They won't be able to store it anywhere, so that would be a stupid thing to do.
But that doesn't mean I think that there's unlimited supplies of the stuff.
I sure was looking forward to reading
"ac writes:
your liquidity are belong to us,
and my favorite
can I haz baleoot"
apoplogies to the liqudity providers. Its just funny.
Is there any reason China cannot just start putting credit cards in everyone's hands (who has a job) and have a repeat of the US post-WWII? Why do they need us, or anyone else, to buy their goods?
They've doubled their CCs in the last year or so. Why not just go hog wild?
Who says the next bubble has to involve us yankees?
Clyde,
I hope you see where this goes, cause I don't have time for this:
OFHEO has taken several actions to protect borrowers and ensure that the Enterprises are buying
quality loans. In December 2006, OFHEO directed Fannie Mae and Freddie Mac to comply with the
Interagency Guidance on Nontraditional Mortgage Product Risks issued by the bank regulators in
September 2006.
the freight charge for container going to US from china is at all time high here on the west coast. I know east coast is even higher at more ridiculously rate . I don't know what is going on here. the Oil is coming down but my freight charge is going up (just got a call from my freight forwarder TODAY for another hike)... so go figure..
China is facing slow for sure. I read report saying about 47000 factories are closing due demand, higher cost of labor and etc. the government is prompting exporting by increase rate govt subsidize on export items. I think we definitely see more regulations/tightenings after Olympics.
shanghai "A" stock market is a not mature system(personally I think it is a joke and it is more of casino than a financial system); people are yelling at the government to "bail them out".
anyways.. just my 2 bps..
"Currently Smoking Cannabis writes:
Is there any reason China cannot just start putting credit cards in everyone's hands (who has a job) and have a repeat of the US post-WWII? Why do they need us, or anyone else, to buy their goods?
They've doubled their CCs in the last year or so. Why not just go hog wild?"
They need the infrastructure to handle the expansion of retail credit (legal, operational), as well as changing the psychology of consumers to use credit.
Or they could stupidly hand out money to anyone who can fog a mirror, and end up in the exact same position as some other unnamed countries.
This blog is sometimes so damn funny. Not CR and Tanta but some of the posts.
Just noodling here but it would make a great sitcom for a financial TV show...
On the other hand CNBC does pretty good standup.
China is/will transition from a mostly export economy to their own domestic consumption. We did.
"Imports have slowed, and U.S. exports are increasing fairly rapidly"
Unless of course US exports are really manufactured overseas?
OT but given the recent sale by Merrill of its portfolio at a massive discount what is the current value of the Bear Stearns portfolio backed by the Fed. Think they'd be lucky to get 22cents.
Clyde,
I'd like to make this really simply, but to show collusion between Fannie and OFHEO and which connects to The Bush HomeOwnership Society may take a while, but, this is interesting:
OFHEO expects that the Fannie
Mae enforcement action will be
completed through the administrative 30%
phase by 2009. Opportunities are
available for appeal, and the Department
25% of Justice will represent OFHEO in any
appeal to the D.C. Circuit Court. In 2007
these litigation activities represented 25 20%
percent of OFHEOs resources, and the
agencys FY 2008 budget includes
significant resources for this litigation.
Hmmm, sounds like OFHEO has an agenda to protect the performance of Fannie -- which makes me think, Conflict Of Interest.
Now on to the flowers and BBQ and then performance metrics and mechanics
They've doubled their CCs in the last year or so. Why not just go hog wild?
Who says the next bubble has to involve us yankees?
Hole in that theory for now is that China has bee raising rates in the past few years. The Chinese are still reeling from a stock bubble burst, i don't think the gov't wants people to get loose with money...They do watch what is going on over here...
bond guy,
Your faith in the ability of 'they' to materially increase production rates is appealing, wish I could join you...given the synchronous decline in global demand, that ability is unlikely to be tested anytime soon. And like as not, a global recession resulting in a dramatic reduction in oil prices will result in another cycle of underinvestment in productive capacity.
As in all things, time will tell.
Goal 1.1 Monitored the remediation efforts of the Enterprises. Both
Fannie Mae and Freddie Mac have made considerable
progress, yet have substantial work to do to correct their
internal controls and accounting problems.
Goal 1.1 Ensure the Enterprises are
adequately capitalized.*
nsured that both Fannie Mae and Freddie Mac were adequately capitalized for the first three quarters of the year and maintained a mandatory capital surplus 30% over the
regulatory minimum capital levels.
Oh shit, that's right they changed that didn't they, i.e, the 30% thing
This blog has gone totally corporatist.
Ok, let's go back over here:
The Enterprise is cooperating with OFHEO in accomplishing our mutual goal of remediation. As a result of the increased operational risk at Freddie Mac, OFHEO directed Freddie Macto maintain a targeted capital surplus of 30% over their minimum capital requirement. To date, Freddie Mac has maintained a surplus in compliance with this directive.
http://www.ofheo.gov/media/pdf/fy04auditedfinancials.pdf
Anonymous writes:
"This blog has gone totally corporatist."
Hasn't gone totally anything but entropic.
Oh, here it, the totally fraudulent bullshit from OFHEO, that proves they support accounting fraud and the agenda of The Bush Coup to distort the reality of the law:
In lifting a 2006 consent order, the Office of Federal Housing Enterprise Oversight said Tuesday that "two years of hard work" by Fannie Mae officials had resolved many internal accounting and management problems. Regulators will continue reducing surplus capital requirements imposed on Fannie Mae after the company was forced to restate several years of earnings, OFHEO said.
On March 1 OFHEO removed a cap on the size of Fannie Mae's mortgage portfolio -- loans or mortgage-backed securities the company holds for investment.
Anonymous writes:
This blog has gone totally corporatist.
Anonymous | 08.05.08 - 9:35 pm | #
You've got to be kidding. Or you got better herb than I did. Put up or shut up.
China needs to start consuming some more of their own production capacity - plain & simple.
And they have the reserves to easily do it... something like $2T.
The problem is a) the consumer doesn't have that wealth, and b) you can't just give it to them without ruining the profit incentive that drives investment and work (and got China that wealth to begin with).
That's one of the hardest problems with managing economy. It's also worrisome that historically countries frequently use war as a "legitimate" means of redistributing wealth.
I noticed that while the US economy began growing again in the 1930s, the distribution of wealth didn't start to change until later in the 40s (at least according to the data I was looking at -- sometimes you have to be careful with the Interblogs).
The problem is a) the consumer doesn't have that wealth, and b) you can't just give it to them without ruining the profit incentive that drives investment and work (and got China that wealth to begin with).
Do what they do here and give it away to the people at the top and let it trickle...slowly...down... That way a majority of the people will still believe they have to work hard
The legal infrastructure will go something like "if you screw up you will go to the gallows".
RayOnTheFarm writes:
Had a family that wanted to rent one last week..........to live in.
Believe it or not, its been done already...
Actually the US Army used something like them for officer housing once upon a time.
Spain - A co-worker is from Spain. Dad was making big money with real estate. Dad is now a very worried man.
China. China now has over a million chinese in Africa. More than the Brits at their peak. Chinese are busy little buying and building bees - especially in resources, roads to get them to the ports, and port facilities.
The US Navy just activated/upgraded a command/Task group in that area of the world. Someone is doing geo=political thinking about those busy little builder bees.
"Is there any reason China cannot just start putting credit cards in everyone's hands"
As a cultural thing, you can not carry one debt from year to year. You must pay it off and/or renew the debt.
dryfly,
kind of agree that there are domestic options for China's SWFs. The ag spending thing if production linked would be non WTO friendly, but who cares anymore about that? Pollution abatement is surely needed, but should be enterprised based. But a major hurdle is the lack of institutional structure and legal integrity needed to carry out those types of programs. I used to think they could take some pointers from USDA, for example, or exchange traded pollution rights, etc. We're no longer much of a model in that respect, if we ever were. Being in Asia for a while, the saddest thing I've witnessed is what has happened to the reputation of the institutions of the U.S. But the Chinese instruments are even blunter, and maybe fortunate for them they know they are.
Ever since Jerry Lewis, I cannot make fun of Chinese people. I much prefer to make fun of Americans.
"energyecon writes:
bond guy,
Your faith in the ability of 'they' to materially increase production rates is appealing, wish I could join you...given the synchronous decline in global demand, that ability is unlikely to be tested anytime soon. And like as not, a global recession resulting in a dramatic reduction in oil prices will result in another cycle of underinvestment in productive capacity.
As in all things, time will tell."
Well, I realize I should have phrased it "extraction rate", not "production".
Given sufficient investment, and a willingness to something stupid (pump oil out of the ground and immediately dump it on the surface), I don't see any law of physics limiting extraction rates anywhere close to where we are now.
As noted, "they" won't do that, as it would be stupid thing to do. But what it points to is that the limit factor of production is not just some mystical property of some magical curve fitted to oil production data, it's the investment in the entire chain of infrastructure to take the extracted stuff and turn it into refined products.
That investment did not occur, and so it's not surprising that production peaked.
I think that part went well, and now we should look at how performance is measured and why the rules were changed...
Is there any reason China cannot just start putting credit cards in everyone's hands (who has a job) and have a repeat of the US post-WWII?
Credit didn't initially create post WWII. It was the wages and pensions of people who fought in the war and built the planes and tanks that created it (not to mention the benefits of actually winning the war without having any of our cities levelled). That gave the consumer credibility to ultimately get credit cards that they probably wouldn't have gotten otherwise.
Again the economic benefits of credit come from mutual trust (making people willing share resources and thereby use them more efficiently). The government can't force that on lenders if the borrowers are believed to be untrustworthy. That just refocuses the lack of trust from borrowers to the government.
ac,
Good point, and one I've considered, too. Finance might be considered to be economics shading into sociology. Econ doesn't tell you much about the "correct" distribution of resources or calls-on-resources. Finance, OTOH, takes a specific social solution to that question, or "state", as a given.
Hence, for instance, the seemingly nonsensical idea of a state in the midst of a war going "bankrupt". The sovereign state can call on all resources in the midst of a struggle, no? Yet states needed and continue to need to worry about the social implications of each additional increment of resources they call, and how they call it and from whom, even in the midst of life-or-death struggles like WW2. See "A Free Nation Deep In Debt".
Ultimately, it's not simply a matter of calls-on-resources but of who has control over them and on what social terms.
Yuppers:
Please stop hammering Clyde.
You've made your point.
Thank you.
Errr, rumor has they like Buicks.
Lawyerliz | 08.05.08 - 7:05 pm |
Always have. Maybe Henry Luce talked up Buicks to CKS since the nationalist gov't vehicles you see in photos from the late 40's were always Buicks. Later, in martial law Taiwan, you could relish the sight of chrome helmeted MP's riding four to a bright red Electra 225 convertible. Top down. Lovely memories. Never figured GM would have gone the Buick route in the mainland, but they have. Most common vehicle on the road is a Buick minivan that I don't know is even available stateside. Also see these bulbous mini-Buicks, must be no more than 1.0 litre shitboxes. Not yer daddy's Buick...
In case you're interested, of course.
"Is there any reason China cannot just start putting credit cards in everyone's hands (who has a job) and have a repeat of the US post-WWII?"
One further comment. It took decades for consumer credit to be accepted in the U.S. after the Depression.
But year after year, banks found that consumer lending was safe, so they kept loosening standards. On the consumer side, being indebted was found not to be the end of the world, so they were more comfortable with the stuff.
If you can get your hand on Minsky, he wrote a lot about that effect. Stability breeds instability.
ac,
That gave the consumer credibility to ultimately get credit cards that they probably wouldn't have gotten otherwise.
Consumer credit of the CC variety didn't take off in a big way until well after WW2. One major contributing factor was the growth and merging of the credit bureaus. A stream of info about a consumer that carries forward and doesn't rely on a personal or close-range relationship with the lender makes quite a difference. I've been floating the idea of starting up third-world bureaus, myself. Even for late-movers, the additional value of the data collected might catch a bid as access to credit expands. A slow-down now might be the pause that allows an entry while others are distracted.
dryfly,
I don't understand how foreign scrip can get spent in a domestic market? How do they put the 2 T to work without converting the $ to yuan? Otherwise they can only buy US goods and services with $, and what the hell can we sell them on that scale?
As long as commodities' sales are settled in $, that's where they can use our scrip to buy real stuff with value, but if there's a dollar crisis, I doubt the Saudis, GCC, will continue to accept $ and definitely not Russia.
Maybe the Chinese middle class would like to have a second home in Florida or SoCal...
BTW, what is up with that "Load In" chart? Seems a bit jerky.
Pollution abatement is surely needed, but should be enterprised based. But a major hurdle is the lack of institutional structure and legal integrity needed to carry out those types of programs.
That's why they have so damned much pollution - if left solely up to 'the market' & 'enterprise' they will be up to their eyes & tumors in pollution... Pollution is one of those costs that I incur but you pay with every breath you take whether you patronize my services or not so there is precious little incentive to abate it at the micro level UNLESS a rather heavy handed but impartial third party institution offers either carrots, sticks or some of both.
China has none of that - just 'the party' - plenty of 'heavy handedness' but little or no impartiality. Kind of like if the energy companies established our energy & pollution policies in private collusion with our bureaucrats. We know that could never happen here...
UNACCEPTABLE!
As Americans we are responsible for the poor Chinese. We must bail them out, therefore, I propose the Chinese Auction Facility.
ac: But China isn't coming out of a pit. Wouldn't their building our crap be similar in the developmental stage to us building stuff to blow up? So they make some cash selling lead-filled toys to Yanks, and transition to domestic consumption. Just as we went from making tanks and bombs to refrigerators and washing machines?
Barley writes:
As a cultural thing, you can not carry one debt from year to year. You must pay it off and/or renew the debt.
I have never heard this. Very interesting. How did you learn this? I only ask because my inlaws are Chinese and it's news to me. (Not doubting, just curious.)
and what the hell can we sell them on that scale?
Loads of stuff. Capacity utilization is still low by historical standards.
Note: Please don't miss Tanta's post this morning on the NY Times and Freddie Mac.
"Is there any reason China cannot just start putting credit cards in everyone's hands"
As a cultural thing, you can not carry one debt from year to year. You must pay it off and/or renew the debt.
And if the government doesn't trust consumers to think for themselves then why would they ever give them credit?
This is the problem with a philosophy of government where regulators and government officials are necessary because the masses are too dumb to think for themselves. It necessarily implies that consumers shouldn't be allowed to have too much credit.
In fact it's basically a statement that they shouldn't have too much credit.
Right now you almost have to agree with that view... yet at the same time consumer credit seems essential to having a modern economy. Countries without it generally seem to resemble places like North Korea (and China until more recently).
What to do? What to do...
Big revelation: For today's huge rally the volume was about a quarter of what we've been seeing lately during down days. FWIW.
NorkaWest,
Ok!
And couldn't the same credit structures just open ops in China? Americans are broke and delinquent, so why not just open a new office in Shanghai?
CSC,next you are going to tell me you have kids...
You want to fix the Chinese and let 'em stay fixed? Infect them with the same microbe we've got:
nephew
I know a handful of guys who aspire to being the Bernays of China. Lot's of pretenders but no real contenders.
Tim: Nope. 18 years of wild rabbit sex and not a brat to show. (Debated deleting this line) You just gotta aim lower. (or higher, depending)
OK, that was filthy and I am ashamed.
I don't understand how foreign scrip can get spent in a domestic market? How do they put the 2 T to work without converting the $ to yuan? Otherwise they can only buy US goods and services with $, and what the hell can we sell them on that scale?
As long as commodities' sales are settled in $, that's where they can use our scrip to buy real stuff with value, but if there's a dollar crisis, I doubt the Saudis, GCC, will continue to accept $ and definitely not Russia.
First off my guess is the world DOES continue to accept USD even with our two decade long mismanagement of our economy by the White House & Congress (I partially absolve the Fed - only partially - because I believe it is the massive deficits, both gov't & current account deficits - that allows the dollar peg & forces the hand of the Fed).
The question is at what exchange rate will they accept them? Probably at a lot weaker dollar than we have now.
If the Chinese dump dollar assets (they don't actually own dollars - they own our T Bills, MBS & such)... it will push the dollar lower for sure. But they have $2 eff'ing trillion of them... they don't have to spend them all over-night to keep their people from starving.
So they sell T Bills & exchange for yuan on the open market. If they get too much deflation from that - then print more yuan somewhat to offset the swelling.
It won't be perfect for them but a lot better than our options (seeing T Bills collapse & our domestic interest rates sky REGARDLESS of what the fed does).
its called full disclosure...
Yeah, low volume and serious restrictions on short selling individual stocks. ETFs were OK, but multiple attempts at shorting vulnerable individuals were denied and rejected (No stock available). BS, fraud, etc.etc. Slot machines are less rigged.
How do they put the 2 T to work without converting the $ to yuan?
it does get coverted thats why inflation has been running hot
dryfly:
"Pollution is one of those costs that I incur but you pay with every breath you take whether you patronize my services or not so there is precious little incentive to abate it at the micro level UNLESS a rather heavy handed but impartial third party institution offers either carrots, sticks or some of both."
Yes, getting those externalities back into the producers costs where they belong. I think it would be a combination of clearer regs, stricter enforcement, and crony invested scrubber technology.
Anonymous writes:
How do they put the 2 T to work without converting the $ to yuan?
it does get coverted thats why inflation has been running hot.
Schiff calls this "exporting our inflation."
America's theme song for the next decade:
YouTube -
"Slot machines are less rigged."
Yup, Pulled all my capital and exported it right out of this casino after that. Banana Republic.
Re: China conversion from export to domestic consumption:
Equipment and finance presentations from last spring's Asian Pacific Business Outlook conference held at USC.
There is an explicit government mandate to increase domestic consumption within PRC, away from the dominant export model.
Remember, the Party does not work on quarterly plans - they work on 5 year plans.
(PDF alert)
http://www.apbo2008.com/Presentations/WhiteDrive.pdf
http://www.apbo-conference.com/Presentations/APBO20080408.pdf
There is an explicit government mandate to increase domestic consumption within PRC, away from the dominant export model.
Best o' luck to them.
I hope they do better than Fed did with its mandate to make the economy better.
Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported.
I guess this comports with Setser, who shows that the dollar exports are not increasing, but actually surpassing forecasts.
Brad Setser: Follow the Money » Blog Archive » Old habits die hard …
I guess oil and the housing slowdown is putting a damper on spatially large, but low cost, exports (e.g. furniture).
Hmmm. A container of iPods or mattresses.
Exit writes:
.....
There is an explicit government mandate to increase domestic consumption within PRC, away from the dominant export model.
Remember, the Party does not work on quarterly plans - they work on 5 year plans.
not 10 year plans, or run it by the seat of the pants Eurozone and FED/Treasury...
is the plan called "buy now or have your moneys confiscated forever via inflation?"
That's why they have so damned much pollution - if left solely up to 'the market' & 'enterprise' they will be up to their eyes & tumors in pollution...
That's where I'd be more amenable to regulation -- if there's a general agreement that it needs to be done, but no individual incentive ever to do it (kinda like building roads).
As I see it that's very different from regulation that says that people shouldn't be able to borrow/lend huge amounts of money to flip houses if that's what everybody wants to do.
The present 5 year plan also has an explicit directive to mitigate pollution.
The issue, however, isn't the rule book, which actually exceeds US EPA standards.
It's enforcement on the local level.
However, should TPTB decide to 'clean up' - they have zero compunction in shooting the local mayor in the head and replacing him/her with a more compliant follower.
Interestingly, for the first time, the central directive is, People First. Look back at the past 50 years - it has ALWAYS been, Party 1st.
Before CSC gets to it:
YouTube - The Beastie Boys - (You Gotta) Fight For Your Right (To Party)
Tim: Nope. 18 years of wild rabbit sex and not a brat to show. (Debated deleting this line) You just gotta aim lower. (or higher, depending)
I debated suggesting that you should try "moving on to something other than wild rabbits", then thought better of it.
Hey dryfly, you seen this yet? From Spokane...
Dry Fly
Lefty's should carry this stuff.
Ooops, LINK>>>
Gargantuan Scale Model of Shanghai in 2020 – Neatorama
However, should TPTB decide to 'clean up' - they have zero compunction in shooting the local mayor in the head and replacing him/her with a more compliant follower...
"all executions are belong to us"
"cutsz ratres and we remooses riquridity, because all yur liqidz are belong to uz"
Rustbelt rot continues. This is where the most municipal and corporate defaults will occur. Ground zero.
Forbes.com list of 'fastest-dying' cities includes four in Ohio | The Columbus Dispatch
"Four of America's 10 fastest-dying cities are in the Buckeye State, according to a list produced by Forbes magazine.
Canton, Cleveland, Dayton and Youngstown get the dubious distinction, based on their anemic population growth and their sluggish gains in overall economic activity.
"Despite a decade of national prosperity, the former manufacturing backbone of the U.S. is in rougher shape than ever, still searching for some way to replace its long-stilled smokestacks," said the Forbes article, published online today.
Ohio's four cities are the most of any state on the list, followed by Michigan with two, Detroit and Flint."
apologies, I just could hold back no longer....
back to your regulalry shed-yuled export model and consumption delfationista debt debalce.
cracker -
look, if you're going to mangle it, do it wrong.
Engrish.com
Exit: That video just made my night. Rad.
Hey, Paris Hilton is running for President.
Paris Hilton Responds to McCain Ad from Paris Hilton, Adam "Ghost Panther" McKay, Chris Henchy, and Jake - Video
CSC - here's another for you
YouTube -
Barley writes:
As a cultural thing, you can not carry one debt from year to year. You must pay it off and/or renew the debt.
I have never heard this. Very interesting. How did you learn this? I only ask because my inlaws are Chinese and it's news to me. (Not doubting, just curious.)
Currently Smoking Cannabis | Homepage | 08.05.08 - 10:04 pm | #
I'd guess it's one of those New Year's superstitions. My wife's in-laws are ethnic Chinese and she found a website with a laundry list of things to do. Most of them were news to me. I'm guessing that once they get to trusting CC companies, they'll be just fine with having credit cards. Some people are just naturally suspicious of someone who sends "you are pre-qualified for this card!!"
Exit: Wayne's World FUBARed Holoscan.
It's OK.
sdtfs fixed it.
I did?
sdtfs: Aren't your wife's inlaws YOUR parents? Was this some kind of LSAT test question?
Well, my family was never motivated enough to look up those superstitions, we just knew there were a lot of them. My wife thought she should know them.
But it could have been her brother's marriage I was talking about.
Got it.
Josun!
Or Ni Hao!
To my inlaws, it's always "Josun!"
The key here, for the housing market, is that the next wave of defaults will be hitting middle to upper middle class neighborhoods.
Where I'm located, "subprime" is a code word, so the local conventional wisdom is that there's no housing bubble...
In about 12 months, I'm sure the Foreclosure Relief Act of 2008 will be revisited once TPTB realize that subprime was not contained...
More generous provisions ahead.
oops, wrong thread...
Don't speak any Chinese, except to play mah jong. My grandfather was born in San Francisco, my dad in Montana,...so I'm not "really" Chinese. True Chinese want to be buried in China.
To my inlaws, it's always "Josun!"
In the morning...in Guangdong...
sdtfs: My wife used to frustrate the hell out of people who would ask, "What are you?" She always said, "I'm an American. I was born in Newport Beach."
For some reason, people often act as if this is a rude answer.
Whatever...brunch with my inlaws rules. Dim Sum makes me a happy "lofan." (That means "honkey" in Cantonese.)
rowen writes:
oops, wrong thread...
rowen | 08.05.08 - 11:13 pm | #
Don't sweat it. Subprime is always on topic everywhere in the land of CalculatedRisk. Don't you know by now, we are all subprime.
CSC
Nah I figure you for more a gweilo
then a lofan
Maybe even a dabizi
China needs to "grow" its internal market and depend less on exports. Perhaps this slowdown will stimulate that.
Here, I'm trying to reconstruct the portfolio, and all I've got so far is "short 20ft TEUs" and "long 420"...Youse guys are NO help at all...
Late to the party. We are overpaid. Go to epsiode 5. Two Chinas
news + public affairs player: video
gweilo
Hah. I cannot wait to drop this on the Chungs.
i read this entire thread
and have only one thing to add
this thread is a three ring psychosis
you guys are awesome
"Trade has also boosted GDP (trade contributed 2.4% to the Q2 GDP growth), and has kept U.S. manufacturing employment from falling sharply as usually happens in a recession. This last point has been important in my forecast that headline unemployment wouldn't reach 8% in this cycle."
So the slowdown everywhere will not affect US exports but only imports to USA?! Recession works both ways. Headline number is gonna be 25 percent at least by 2011. This is collapse and quite possible end of USA.
Manufacturing employment fell by 35,000 in July, bringing losses over the past
12 months to 383,000."
Now only 13,5 million workers out of 157 million are working in that sector.
I just had a very fine chinese white/vanilla tea, nize.
As I suspected it will take ages and capitalist revolution before that given Tiger is anything but paper tiger.
Decreasing inbound traffic could also be result of higher cost of transporting across the Pacific.
"The yellow jester does not play,
But quietly pulls the strings,
And smiles as the puppets dance
IN THE COURT OF THE CRIMSON KING."
Sorry it's "gently", not "quietly"
OK, I just read the whole thread too. My only question is whatever happened to good ol' Clyde?
We hardly knew ye'.
dryfly writes:
I don't understand how foreign scrip can get spent in a domestic market? How do they put the 2 T to work without converting the $ to yuan? Otherwise they can only buy US goods and services with $, and what the hell can we sell them on that scale?
As long as commodities' sales are settled in $, that's where they can use our scrip to buy real stuff with value, but if there's a dollar crisis, I doubt the Saudis, GCC, will continue to accept $ and definitely not Russia.
First off my guess is the world DOES continue to accept USD even with our two decade long mismanagement of our economy by the White House & Congress (I partially absolve the Fed - only partially - because I believe it is the massive deficits, both gov't & current account deficits - that allows the dollar peg & forces the hand of the Fed).
I don't think the Chinese are planning ahead any more effectively than other countries. $$ are still accepted for oil, so the Chinese might as well spend them on oil while they still work. They're sticking with what got them this far, manufacturing for export, and don't want to try something else ... Dryfly, you are right, pollution abatement would be a tremendous blessing to the Chinese, and to the world. A decrease in coal emissions would be wonderful.
BTW, what is up with that "Load In" chart? Seems a bit jerky.
-Elvis
Think Christmas toys and clothes. Evidently the stuff we sell the rest of the world isn't needed especially at Christmas.
Dryfly, you are right, pollution abatement would be a tremendous blessing to the Chinese, and to the world. A decrease in coal emissions would be wonderful.
Sue (Capital S) | 08.06.08 - 6:46 am | #
And it would drive non-export employment across their whole country. Unlike us they have the reserves & low costs to actually do it without a lot of up front economic pain.
Let's hope they do.
Chinese real estate boom over, says official media - MarketWatch
Sue (Capital S),
I'm with you on this...the Chinese don't run anything better than anyone else. The funny thing about some on this forum is that the have polished off the commie supplied koolaid and believe everything presented by that autocratic country. They only managed to create an enormous equities bubble which has collapsed by 40% siphoning off the few assets of their largely peasant population and now I'm supposed to believe that they all the other precepts of economic mastered. We won't even start with the fact they are building massive amounts of commercial real estate that will NEVER be utilized and will be become a millstone around the necks of the public/private banks. To all these theories in resurgence of the late great Chinese empire I say...PLEASE STOP!
All of you people posting here should understand that every trade deficit dollar that we send to China is one less dollar available to spend in the US. A year ago, I had a cracked windshield that needed replacing on my Honda Civic. So I called Geico and got the run around on how they only would pay for generic glass- you know, the crap from China. The same crap that was on the car from when it cracked the last time, except this time, a large rock hit the windshield in the corner and shattered glass INTO the cabin because the Chinese glass has no shatter containment on the cabin side. Okay, so I fought and fought, and got OEM PPG glass approved. The glass shop must have missed this detail on the order form and installed the crap glass anyway, and charged Geigo for the PPG glass. I was like beside myself, so I wrote down the part number from the crap glass and Googled it. I discovered that the glass can be purchased in bulk from China for $30/windshield. I did some more investigative work, and discovered that it about the same to ship from China to the US than price of the glass! I then discovered that the shipping containers are expensive (2 tons of steel), and that China subsidizes the containers! So a product that costs 3x more to make in the US, which would give people jobs and keep money in this country is instead pocketing some Joe's windshield outfit $30 more, and depriving our economy $60 per windshield. Companies like Geico should not be able to force global trade on people like this. When you walk into Wal-mart and see absolute crap on sale for 10x what it cost them to buy it from China- THAT'S A PROBLEM! If you don't believe that 10x is a good estimate- look at how much Wal-Mart imports for China, which is somewhere around 80% of their product (~20 billion/year), and then look at their sales numbers (~350 billion/year). The ratio is definitely over 10 for everything imported from China. And your "stimulus checks" get spent where? Wal-Mart...who gets their product from...China. The real insult is when you walk into a Wal-Mart in California, Arizona, Nevada, Florida, and ask for help...and the worker doesn't speak a word of English. NOW THAT'S ANOTHER PROBLEM!
DK,
I had a similar problem with headlamp replacements. Get them from the dealer and not a parts store or you may get crap. The first headlamp burnt out at about 50K. Then I replaced with a headlamp from an auto parts store and it lasted six months and burnt out again! Replaced it again (from a parts store) and it burnt out about eight months later! Went to the dealer and got the replacement and it has been OK for over 2 years and counting.
Don't know who's still atop this thread, but for those latecomers.
Yes, our mfg is a relic. Revive it? It's not about wages or freight, guys. It's about indirect labor, pensions, liability insurance, state taxes, social security, etc, etc.
On the "their not playing on an even field" topic you want to add factors like currency manipulation, lack of pollution control, no OSHA, no collective bargaining, and no daffodils in the parking lot, be my guest.
But unless innovation and keeping cutting edge home (Germany has done a hell of a job here) is part of your DNA and job description, then lay off the belly aching, and get out there and maximize utility with the rest of the debtors. Your bed, sleep in it.
sorry,
""they're" not playing...""
The impact on the economy by the Olympics is greatly exaggerated. Beijing represents less than 5% of China's economy overall at best. It is similar to the impact of the Atlanta Olympics on the US economy. China's leaders met last week in a major economic pow-wow and chose growth over controlling inflation. Sure China is slowing down, hard not too given the symbiotic relationship with US, but a collapse is wishful thinking on the part of "red China" righties and lefties. China is the fastest growing market for US exports and now close to if not greater than exports to Japan. This is a bright spot, something rarely talked about in the media. Thanks for pointing it out here!
DK:
The most profitable in terms of business operations are product design and marketing. That's why Wall Mart and the rest are willing to outsource manufacturing to China. However that is not the problem, the trade is beneficial when the trade is fair. It is beneficial because consumer can save money and firms can produce more.
The problem with China, since they have been manipulating their currency, the trade is not exactly fair.
The problem of China, the will of their government to interfere with the market forces will backfire and consequences of such interference might be very grave, over the time.
Also it is a huge and time consuming step for a country to move from being cheap manufacturing hub to actually forming international firms capable of designing unique and demanded products. And it takes much more then NY Times fear screaming articles for China to be able to do that.
Chinese capacity at least partly can redirect to China's internal market and Asian consumerism (see exports to Russian Siberia as a small example).
1980s Japan overpaid for US assets but China might buy at firesale prices.
Imagine the (still unlikely at this point) press release for the Chinese communist army owning Fannie or JP Morgan.
"Chinese communist army owning Fannie"
that would surely create another summer rally, just imagine the relief of Treasury Department, and all of executives of the US S&L Banks...
Aint happening though; the only people our congress intends to screw is, us good old/dependable US taxpayers (especially those in the middle just trying to shot for stars).