Markets - Chinese sinking, US in a Bull

I didn't say they didn't. I was saying we do it too. It's pretty much the fed's job. & we may not peg exchange rates, but we have other peg's that effectively manipulate the exchange rates.

In grad school I used to sing in my head.....Interest rate peg, it's our favorite monetary policy....to the tune of PEG by Steely Dan.


Even trump knows.

“I want a strong dollar, but I want a dollar that does great for our country, not a dollar that’s so strong that it makes it prohibitive for us to do business with other nations and take their business,” Trump said during a speech in March, before launching into criticism of Fed Chairman Jerome Powell.

“We have a gentleman that likes a very strong dollar in the Fed,” he added, referring to Powell.

 

China relies on government finance officials to decide what gets funded and what doesn't. And their companies frequently don't know enough about the marketplace to know what projects to ask for. Executives tend to be narrow-minded in their thinking, and they typically ask for projects similar (or identical) to ones that were just completed. So their goal is to become the biggest manufacturer of this one product in China. They do not diversify and build upstream factories to make raw materials for their existing plant, or downstream factories to make products from the product they make. They do not invest in parallel technologies for producing other products. What they are making makes money, so they want to make more of it. When you get enough executives/companies with this attitude, you end up with triple the capacity that you have demand for, and some (or all) of the companies wind up idling equipment (and wasting the capital it took to build that factory). Sadly, other manufacturing plants in Asia often get affected by China's over-capacity, which drives the price for products down to levels where other companies can't compete.

In the U.S., companies do a careful dance of announcing expansions in advance to let the competition know that new capacity is going to come on-line, to scare them away from doing their own expansion. And they're spending their own money, not asking the government for it, so they complete more due diligence on the marketplace. They are also more likely to invest in "vertically-integrated" manufacturing chains and parallel technologies.

Another issue is that the finance officials in China have so much power, so much so that all of the brightest students want to go into finance. Going into engineering is a fall-back option. Engineering jobs do not pay that well, and they often have to start as factory workers (especially women) before they can actually work as an engineer.

 

Part of it is the China “reopen “ trade hasn’t been very strong. Economists have suggested the people are afraid to spend their saving due to fears of returns to covid lockdowns. At least that’s what the word on CNBC has been.

Benefit is it’s helped keep oil down and not strained supply chains.

 

Apropos to nothing but didn’t one of our Trumpaloons just two months ago say China was about to replace the US as the worlds currency of record and that is was Biden’s fault?

It’s alway amusing when these chuckleheads talk about thing they know nothing about. Which to be frank is mostly everything..

 

That would be @gatorplank who we should expect to respond to this news