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China Currency Devaluation Continues–Advantage Donald Trump?

August 12th, 2015 Comments off

 

Yesterday’s devaluation of 1.9 percent in the value of the Yuan was followed today by another cut of one percent by China’s central bank in the national currency’s competitive value. With July’s decline of 8 percent in China’s exports, following in the wake of the collapse in equity values on the Chinese stock markets, Beijing is clearly worried.

A devaluation of three-percent in the value of nation’s currency, particularly when the fall in value is not the result of market forces but of deliberative monetary policy, is a very big deal in global finance. A nation does not willingly sabotage and debase its own currency when its economy is enjoying robust growth. Currency devaluations are specific acts of monetary policy enacted by the sovereign when its economy is in jeopardy. Thus, despite the official statistics emanating from Beijing on GDP growth and other rosy prognostications, the Chinese economy is facing gathering headwinds. With a low rate of domestic consumption as a proportion of its total GDP, Beijing has undertaken a radical monetary devaluation in an act of desperation, hoping to kickstart exports by cheapening its currency.

Now the remaining major economies must also worry, as the People’s Republic of China has declared an all-out currency war, with the major victim–and target–being the American economy. And the repercussions are not only economic; Donald Trump is poised to take full advantage of China’s currency manipulation as he maintains his frontrunner status in the race for the Republican Party’s nomination for President of the United States. Trump has already gotten ahead of his GOP competition by pontificating on the damage to America’s economy by allowing China’s currency devaluation to be spared any meaningful policy response by Washington, ultimately costing American workers their jobs.

It may be that the monetary policy measure executed by the People’s Bank of China will have its greatest impact and consequences on domestic American politics, with long-term results that may be the opposite of what Beijing desires.

 

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China Devalues Currency as Chinese Economy Hits Headwind

August 11th, 2015 Comments off

 

The People’s Bank of China, Beijing’s central bank, imposed a surprise devaluation of 1.9 percent in the value of the nation’s currency, the Yuan or Renminbi. This sudden move by the economic central planners in the People’s Republic of China was in response to a cascade of worrying trends confronting the leadership of the world’s second largest economy.

A country devalues its currency in response to bad economic trends, and never for positive reasons. The negative news emerging from China’s manufacturing sector, in combination with the collapse in the Chinese stock market, has led to the decision to devalue the Yuan, hoping that this policy move will boost Chinese exports. The problem is that this move hurts everyone else, especially the United States. What the financial commentator James Rickards described in his book as “Currency Wars” just got a massive dose of escalation from Beijing, which will likely trigger counter-moves by other major economies that will ultimately damage the global economy as a whole.

 

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China Stock Market Continues To Tumble

July 28th, 2015 Comments off

Monday, July 27 witnessed the largest fall in share prices in major Chinese stock markets, especially the Shanghai Composite Index, in a decade. The fall of more than eight percent was followed on July 28 by a further drop in China’s stock market by 1.6 percent. These declines come after the massive intervention in the stock market by Beijing, following significant losses in equity values a few weeks ago.

Having frozen much of the market, and injected massive cash allotments into listed shares, amplified by the China authorities compelling companies to purchases stocks, while forbidding the sell-off of shares in many cases, Beijing had thought the problem had been solved. As the past days show, however, central government intervention in the equity markets only temporarily stalled the deflating of this large Chinese asset bubble.

The volatility now existing in China’s stock markets illustrates the overall fragility of much of the Chinese economic model and its opaque financial underpinnings.

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China Stock Market Crashing and Burning Before Our Eyes

July 8th, 2015 Comments off

While the world has been sidetracked by the never-ending Greek Debt Crisis, another economy with a GDP that is 40 times the size of Greece is giving signs of serious, even critical financial weakness. The world’s second largest economy, and supposedly most-powerful “communist” nation, has seen its stock market enter a downward spiral that Beijing seems helpless to retard.

As the Chinese economy slowed down over the past year, China’s equity market soared by 100 percent or more, creating the largest bubble in the Far East. Now, for the past three weeks, the Shanghai index has been witnessing a massive sell-off that has contracted its value by more than 30 percent. The government, fearing a financial panic and social instability as tens of millions of Chinese investors rush for the exits, has been trying every stratagem known to man to halt and reverse this slide, including compelling government companies to buy massive blocks of shares , cutting interest rates and temporarily halting trading in some companies. All to no avail.

As the implosion in Chinese equity markets continues, the rest of the world is starting to take notice. It should. If what is occurring in China is no mere correction but an actual financial panic, the resulting  damage to China’s economy and fiscal health will impact Chinese imports for its massive industrial sector, negatively impacting global commodity prices at an already fragile moment for the global economy. All this will only heighten the already elevated level of volatility among the world’s financial markets.

The world may be about to discover the true significance of China’s emergence as one of the two largest economies on the planet. During the past several years, many business analysts have warned of the proliferation of signs that much of China’s spectacular economic growth was based on bubbles financed by the central government. There have been numerous  accounts of new cities built with virtually no inhabitants, of vacant office complexes and condominiums. In effect, a trail of pump-priming that has artificially boosted GDP growth in an economy that is still characterized by a very low level of internal consumption, especially in comparison with Western economies, has been the primary driver of China’s economic expansion. There have been earlier signs of an unsustainable real estate bubble and a flood tide of debt by municipal governments and economic enterprises that defy rationality . What is now occurring on the Chinese stock market may be a leading indicator that all is not well with Beijing’s still highly-centralized economic model. Should things unravel beyond the capacity of the government to control, it may be that China in 2015, as with the United States in 2008, will become the primary catalyst of a severe global recession.

 

 

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China’s Economic Growth Slows To Lowest Level Since 1990

January 20th, 2015 Comments off

China’s National Bureau of Statistics released GDP growth figures for 2014, indicating that the world’s second largest economy grew that year by 7.4 percent (http://www.stats.gov.cn/english/PressRelease/201501/t20150120_671038.html), below the planned rate of 7.5 percent but exceeding expectations of 7.2 percent. Even if the figures released by Beijing’s NBS are accurate, they reflect a continuing trend of diminishing rates of growth over the past several years, and are the lowest level of GDP growth in 24 years.

But are the official figures on China’s GDP growth believable? Many elements of China’s macroeconomic performance are shrouded in opacity. The architecture of this vast economy  is formulated from a fundamentally contradictory hybrid mix of private sector capitalism and still overwhelming and largely inefficient state controlled sector, especially in heavy industry. Much of China’s growth in the past, impressive as it seems by overall world standards, was based on massive government spending on underutilized infrastructure; the accounts of entire blocks of apartment buildings that remain unoccupied are well known. There are the dangerous property bubbles, early signs of deflation, and rising debt levels in both the public and private arenas, with growing signs of a future explosion in bad debts held by Chinese financial institutions.

Officially, China’s leadership has resorted to what they call the “new normal,” a more sustainable rate of economic growth. The reality is likely a lot more murkier and volatile than the official statistics and pronouncements would indicate.

The clear trend of diminishing rates of GDP growth in China, whether extrapolated from official figures or derived from a more nuanced assessments of China’s economic performance, are already having an effect on the entire global economy. As with the United States, the massive size of the Chinese economy means that lower GDP growth rates create a head wind for the global economy as a whole. It is therefore no surprise that the International Monetary Fund has just revised its forecast of global economic growth downward by the most substantial margin in three years, to 3.5 percent from the 3.8 percent projected only  three months ago by the IMF (http://www.imf.org/external/pubs/ft/survey/so/2015/NEW012015A.htm). This is a harbinger of what lies in store for the global economy as the formerly massive rates of Chinese economic expansion continue to recede.

 

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

 

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Hillary Clinton Nude

Hillary Clinton Nude

 

China’s Local Government Debt Explodes

January 2nd, 2014 Comments off

While much of the discourse on public debt and deficits among economists and media pundits has been related to  the Eurozone Crisis, especially regarding Greece, or major developed economies such as the United States and Japan, much less has been heard about China’s fiscal status. Yet, one of the most rapidly growing factors of public debt is occurring right now, in China, largely under the radar of the so-called fiscal prophets of doom.

At present, according to always questionable  official statistics from Beijing, China’s total public debt represents 58 percent of the nation’s GDP. This is significantly lower than is the case with Japan and the United States. However, it is the rate of growth of that debt, particularly in connection with Chinese local governing authorities, that may begin to sound alarm bells. It appears that following the global economic and financial crisis of 2008, cities across China embarked on a massive borrowing and spending binge in a super-charged Keynesian effort to sustain China’s traditional  high annual rate of economic growth.

China’s  National Audit Office (NAO), following directives from the national authorities in  Beijing, undertook an extensive accounting and auditing of the books of all of  the nation’s local spending authorities. What they discovered was that in only three years, China’s local public debt grew by a staggering 70 percent, reaching a total of 17.7 trillion yuan, equivalent to nearly three trillion U.S. dollars. Another statistic is sounding alarm bells in China; up to 80 percent of all bank lending in China during the period following the onset of the global economic crisis was to local governments.

The vast spending spree by city governments across China has erected vast quantities of housing stock and commercial edifices that are unoccupied and infrastructure projects that are underutilized. Some economists, particularly outside of China, may defend this massive and largely uncontrolled public debt expansion as enlightened public policy, aimed at preventing high rates of unemployment in China. However, China’s national leadership is clearly worried about this stunning rate of growth in public debt at the local level, far outstripping real economic growth rates.  Beijing knows that seeding official GDP growth rates with an  unrestrained tidal wave of red ink is not a sustainable economic path to pursue. The dilemma for Beijing’s economic policymakers is this; now that they know  they have a serious problem of exploding public debt, what options are open to them that impose the least degradation to their cherished high rate of annual GDP growth? Their ultimate answer will inevitably have profound implications for the entire global economy.

 

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

 

Hillary Clinton Nude

 

Hillary Clinton Nude

HILLARY CLINTON NUDE

Hillary Clinton Nude

China’s Hard Economic Landing Appears Imminent

August 1st, 2012 Comments off

As a percentage of GDP, China’s economic stimulus program of 2009 was the largest in the world, and second place to the U.S. in monetary terms. Ironically, the supposedly communist economy of the People’s Republic of China became the last best hope of world capitalism, in the wake of the global financial and economic crisis that began in 2008. Now, it appears, things may be unwinding in a bad way for Beijing.

Copying its capitalist rivals, Beijing’s hybrid government/private economy poured massive amounts of cash into creating new asset bubbles, particularly in real estate. China built shopping malls with no customers, cities with no inhabitants and roads with no traffic. Extravagantly redundant infrastructure was constructed with stimulus money, goosing China’s GDP with annual double digit growth rates. This model was clearly unsustainable; China’s leaders were hoping to buy time so that the nation’s major export markets in Europe and the U.S. would recover with their own stimulus programs, and resume  their buying spree of cheap Chinese goods.

“Kick the can down the road” became the official credo of economic policymakers responding to the global economic crisis. As with other economies pursuing this shortsighted policy prescription, China failed to address the fundamentals of its economic challenge. The proportion of domestic consumption as a share of  GDP in China is less than half the ratio of its customers in the developed world. With its economic ascendancy dependant on overseas customers, the stagnation and contraction of the economies of those customers leaves a void that Beijing cannot cover by building the economic version of sand castles.

With the Eurozone tottering on the edge of the abyss, the U.K. mired in recession and the U.S. growth rate so anemic, even with trillion dollar plus annual deficits, that it is now at stall speed, it appears that the policymakers in Beijing may have lost their stimulus spending bet.  Domestically, the Chinese PMI  (Purchasing Managers Index)  has slumped to the lowest level in eight months. Other indicators, even amid the opaqueness of China’s official economic data, point increasingly towards a hard economic landing  for the world’s second largest economy. The consequences will be dire, not only for  China, but also for the global economy as a whole.

 

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WALL STREET KILLS--A CHILLING NOVEL ABOUT WALL STREET GREED GONE MAD

 To view and listen to the YouTube video audio excerpt  “Wall Street Kills,” click image below:

 

 

Sex, murder, financial power and pathological greed come together in the explosive suspense thriller by Sheldon Filger, WALL STREET KILLS: A NOVEL ABOUT FINANCIAL POWER, VIOLENT SEX AND THE ULTIMATE SNUFF MOVIE.
This video provides a free audio reading from chapter one of “Wall Street Kills.” The scene depicted involves two characters from “Wall Street Kills” having a business conversation in a Los Angeles suburb. One character is Peter Hoffman, director of new business development for a secretive Wall Street hedge fund and private equity group. The other character is Daniel Iachino, president of a major independent film company specializing in “adult entertainment” for niche markets. Hoffman is on a mission to investigate if portraying unsimulated violent death in the form of entertainment would be a lucrative business investment. The conversation between the two men quickly focuses on the phenomenon of snuff movies.

 

 

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China And The Global Economic Crisis

March 7th, 2009 Comments off
When Chinese Premier Wen Jiabao spoke before 3,000 legislators in the Great Hall of the People in Beijing, his words were broadcast live to a vast audience, not only in China but also throughout the globe. The most important economists, financial analysts and entrepreneurs on our planet attentively dissected everything Wen said, be it overtly expressed or subtlety placed between the lines. For it is now to China, not the United States, that the nations impacted by the Global Economic Crisis look to for salvation, and assurance that a synchronized global recession does not become an L-shaped depression of long duration.
Based on the declines in stock markets throughout the world, it appears that Premier Wen disappointed those in the West, Japan and the U.S. desperately praying that he would go far beyond the earlier promise of a 4 trillion-yuan stimulus package, equivalent to about $586 billion, to enhance domestic demand in China. Wen stuck with the 4 trillion-yuan figure, adding details as to where the stimulus package will be directed. Wen indicated that the priorities of the Chinese government would include infrastructure investment, tax reform, industrial restructuring, scientific innovation, social welfare and increasing urban and rural employment. He also indicated that the annual budget would incur a deficit of about $140 billion, equal to about 3% of China’s GDP.
Wen’s external audience had placed their bets on a significantly larger Chinese stimulus package of between $1 trillion and $1.5 trillion. However, the Chinese leadership has apparently made a far more sober and strategic calculation with respect to the Global Economic Crisis than has been the case with the political and financial elites in the United States, United Kingdom, Japan and the Eurozone. The primary concern in Beijing is maintaining social stability during a likely long economic depression, with many unpredictable and dangerous manifestations of this global disaster still in front of us. While accepting some degree of deficit spending will be necessary to modify the repercussions to China’s employment situation due to global demand destruction afflicting major components of China’s export-oriented industrial base, limits have clearly been imposed that do not compromise the nation’s long-term fiscal health.
Compare the 3% deficit forecast in China with the Obama administration’s upcoming deficit of $1.75 trillion, a staggering sum of borrowed money, equal to 12% of America’s GDP. Unlike the United States, which is the largest debtor nation in the world, China has substantial reserves of foreign currency, sovereign investments and domestic savings, enabling it to fund its deficits and stimulus spending without requiring external sources of credit. In the long term, the far more cautious and strategic approach of China towards meeting the challenge of the Global Economic Crisis will better serve her long-term national interests amid an unstable and uncertain global future.

There is another inference to draw from Premier Wen’s presentation on the economic problems confronting Beijing. While not belittling the acute and dangerous challenges that the Global Economic Crisis poses for China, the nation’s leadership seems to have taken a long view that suggests the following: by playing her cards carefully, China may be able to exploit the Global Economic Crisis in such a manner that she will emerge as the dominant economic power in the world.

With the United States reduced to literally begging China to buy her Treasuries, a vital imperative necessary to finance Washington’s stratospheric deficits, it may be that China is already positioned for global economic dominance, so long as she succeeds in maintaining her social cohesion during the difficult years that lie ahead.

 

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

China And U.S. Hold Talks Amid World Economic Crisis

December 4th, 2008 Comments off

Talks on mutual economic issues involving the United States and the Peoples Republic of China are now taking place in China amid the worsening global economic and financial crisis. The series of talks will occur over a two-day period. According to Chinese officials, the global economic crisis will dominate the discussions.

On the U.S. agenda is an attempt to resolve a dispute about the value of the yuan, the Chinese currency. These meetings are occurring under the auspices of the China-US Strategic Economic Dialogue, established in 2006 by the two major trading partners. The purpose of the dialogue is to iron out economic issues and disputes involving China and the United States. in his

Chinese Vice-Premier Wang Qishan, who is attending the meetings, the talks for China, told the Chinese and American participants that, “Making joint efforts to tackle the current global economic crisis is the most urgent task before us.”

Global Economic Crisis

November 28th, 2008 Comments off

What began as a global financial crisis has truly become a virulent global economic crisis. The credit crunch that has clogged the arteries of the world financial system has now caused an economic meltdown of global proportions. No economy, big or small, developed or undeveloped is being spread.

The danger confronting policy makers and citizens as the international community and individual sovereign nations are passing through uncharted but stormy waters. Parallels are already being drawn to the Great Depression of the 1930s. More dire, several very learned financial experts and economists have warned that what the world confronts is a mega-economic crisis that may even dwarf the Great Depression.

Recently, even China’s high growth rate has receded. It was hoped at one time that the Chinese economy could rescue the planet from a worldwide recession. scenario is no longer operative. The Eurozone, the U.K. and the U.S. are now experiencing negative growth in their GDP. A terrifying global economic crisis is about to inflict staggering pain throughout the globalized, interconnected planet.