Google-translated excerpt. Also quoted other excerpts from this article in other relevant threads.
"2015 - YEAR FALL YUAN"
- What's happening to the world economy?
- Like it or not like it, but the trend of the global economy are set mainly by one factor. In a broad sense, it is the economic policy of the United States of America, which splits in two: is the policy of the US government has a policy the Fed - Federal Reserve System. These two policies are not the same and not really consistent, which also creates problems for the world economy. But in any case, without analyzing this factor, we can not understand what is happening in general.
Let's see. The United States Government has reported in this fiscal year, which they ended October 1 to a record low for the last time the budget deficit of 2.8 percent of GDP to the US. However, keep in mind that due to last year's government shutdown (stopping the government) a significant portion of the costs that should have been made in the past fiscal year, have been made in this, in the current fiscal year. You see, they formally belong to the past year, but in fact from an economic point of view, they have influenced the current year. And significantly affected because it is a real stuffing money. It is this circumstance largely determined the fact that this year has been more or less calm, at least in its first half. He was calm and the United States, it was relatively quiet and emerging markets, and relatively quiet for Europe.
Now the results of budget cuts began to affect, and see what happens. Now all are revising our outlook for the coming year - the IMF, World Bank - all who do it, downward. Because everyone knows: the inflow of fresh money into the economy will not. Accordingly, there is no growth. It will be much smaller than it is.
Reduce costs - it is the policy of the US government. Now about Fed policy. It is this year coincides with the policy of the government, because at the end of last year began to decline program of quantitative easing (QE). In October, the program was halted. And now the big question arose about what will do the Fed, because many expect that it will begin to raise rates. But it should be said at once: the Federal Reserve itself, in my estimation, has not yet developed a strategy for the next year.
- Since the collapse of the system is located in the last 10 years, or not yet?
- They themselves do not believe that they are in collapse. Of course, they realize that they are in a situation in which never were. But nevertheless believe that sooner or later it will cope if they behave correctly. And then economic growth alone will resume all the problems that were somehow solved.
- And what influence the reduction stuffing money that comes with 2008?
- The first is under attack were emerging economies. Currencies of all developing countries in a fever. In February fell even yuan, and from what I understand, now all converge in the forecast for that next year it will fall. So the next year - the year of the fall of the yuan - the strongest emerging currencies. I'm not talking about the other currencies of developing countries, they are very much fell against the dollar. In the same row, and Russia. We somehow forget that the ruble began to weaken at the beginning of the year, along with all other: Indian currency fell and Brazil.
CONCEPT OF KICK
- And what will happen to the world economy?
- The prognosis depends on the strategy of the Federal Reserve System. The Fed is now in a very difficult position. How Come? Expected of them, that the reduction in rate of QE will be raised. Last time this happened in 2007. This means that the dollar will strengthen further, for example, in relation to the euro.
Where will this lead? I have seen data to October, it so happened that one day they published States and Germany. Industrial orders in US significantly lower expectations, while Germany is much higher expectations. Ie industrial orders go from the United States to Germany. Soon it will be expressed in the fall of industry in the US and the possible growth of the industry in Germany. And the Fed knows this, because there is, at its last meeting, the issue has already been discussed.
And here he is, corridor opportunities: Once you got is not very significant - 1.24 - 1.25 of a penny - depreciation of the euro against the dollar, and already there is a significant change flow. Deteriorating foreign trade balance data for the US, in general, everything slows down.
- That is the strengthening of the dollar has on the US economy?
- Even a slight strengthening of the dollar, a slight shift of as if in a few months can destroy all the positive results that they considered to be achieved. I repeat, the Fed sees it, but the market expects that the rate will be increased. And from my point of view, in a good autumn 2015 the Fed to announce a new program of quantitative easing. While here, I do not consider the factor of the global decline in prices for raw materials.
- What accounts for expectations to raise rates?
- It is believed that the zero rate - this is not normal. See, really fell unemployment officially. Data on job creation grow. By the way, in October, assuming Initial jobless claims, they almost reached historic lows. Figure was - 266, and a historic low - 258,000 initial claims for unemployment insurance, which was typical of the period of rapid growth. Then this figure has deteriorated, that is, it was one week in all this well, but it was the same! Now the figure is kept at about 300 thousand, but it is still considered the norm.
- In a word, your point of view, America's economy is recovering or not?
- Let's just say it is temporarily cured. How Come? Because in fact there was a large injection of liquidity. In addition, thanks to shale gas revolution they managed to stabilize the trade deficit. This local growth spurt associated with the influence of local factors existed. But as soon as slightly strengthened on this basis, the dollar, the whole trend went back. The deficit is growing, orders go, and the Federal Reserve will have to decide on a new quantitative easing. And all of them are waiting for a rate hike.
- There is a third solution: Germany oxygen shut ...
- It should be somewhere somehow maneuver. In fact, the solution is clear. It is in a sense comical. Why Bernanke ( Ben Shalom Bernanke - Chairman of the Board of Governors of the US Federal Reserve from February 2006 to February 2014 - approx. ed .) and said that Fed policy and government policy are incompatible. He wrote regularly, after each meeting, "malyavu" government in general to all, but including government: expensive American government that you do nonsense, reduce the budget deficit? Of some abstract considerations? I've been trying to print money, for what? In order to make loans cheaper for you 2 per cent, 2.5 per cent penny. Now less than 2.5 percent of the value of 10-year bonds. Print money, do not worry. Dispersal of the economy as quickly as possible.
From which comes the Fed itself and the current economic theory, the theory of the crisis? That during the crisis the economy need to give a good kick to it from this kick soared well, so that could waved his own wings. And then she earns. Will wave of growth, and due to this "free flight" you recoup the cost of the most kick. And Bernanke wrote: I see that you kick the economy gave a little, although I will create all conditions for this.
Who read my book - will understand that such a representation is false. But, well, it worked before.
- Since 70 years old, huh?
- Yes, 70 years. Just was a time when there are conditions for growth. And how do you interpret the result, that is another matter. Whatever you do, you will still increase anyway will. And you interpret a certain way. The concept of a kick, flying kick and paying for - an interpretation of what was. Bernanke called for: give a kick, and now the Fed reduces its and the government.
- If the Fed did raise rates, then what?
- It will be a general ... 2015 will be very difficult, very antsy. And then they in any case have, in my view, to declare QE.
- Again ?!
- Again. But they sell QE, I do not know. Let's put ourselves in the place of Janet Yellen, Fed chairman. Suppose it is true disciple of Bernanke because America with Bernanke was very lucky. The fact that he was at the head of the Fed in such a critical moment, it's fantastic, because he is a man with a great knowledge and a brilliant intuition, ready to unconventional steps, ready to push them to explain. I do not believe that Yellen could inherit all of these qualities, but also, for example, it still continues the line of Bernanke. But she was trapped. Whatever could she do? She understands that the new QE is inevitable, but does not know how to sell it to the public. Then I went to her place on the way the rate increase, and the sooner the better, and got to the deteriorating situation in the US economy such that the public itself would require a new QE.
- Why is the public against QE ? That is, inflate the money on, what's the problem? Or fear of inflation?
- Including the fear of inflation. Now this period: all that is done, does not correspond to economic theory. But no one is reviewing the economic theory, all of her stick.
- What, a liberal?
- This is a common monetarism.
- Milton Friedman and everyone else?
- Milton Friedman - is one of the options. He, in fact, a lot of practice. This Irving Fisher - all monetary theory. Actually, since Fisher through Knight, Friedman, who else ...
- Friedrich Hayek?
- No, Hayek - it is just an Austrian. There is a theory, she says quite certain things, it makes definite predictions. None of it did not refuse. She continues to make predictions. She says: QE - that means inflation in the future.
- But for some reason it does not happen.
- It somehow does not occur, but the worse ...
- ... What will happen, right?
- Yes, all say the dam will burst. But when the dam burst ...
- And you, it means that such consequences do not believe me? There is even the term "helicopter Bernanke". Do you also believe that a helicopter can dump dollars and all will be well?
- It is necessary to throw as much as you need. This is a separate issue. In my book actually drawn in the last chapter, an innovative framework for the analysis of cash flows of the global economy. Yes, it does not look as innovative, it can be quite boring text, but it is innovative, there are arguments about how we can manage the whole process.
THE CHINESE ECONOMY WILL COLLAPSE WITHIN 5 YEARS
- What is the situation in China? Many people say that this is the next world hegemony after American ...
- China is trying to accelerate due to lending, a completely insane lending its own economy. He is trying to cause inflation in response to deflation. In this case, really nothing is impossible. Producer price deflation for three years.
- That is, there is no demand, right? Produce, and no one needs?
- Nobody needs and you reduce prices.
- But economic growth persists, 7 percent. Ostensibly? Or paint them?
- You know, there are already serious doubts, including in China, that's all it is. But no, of course, will not now in this business and understand specifically to climb. Well, continues to grow, it is supported. This is done by bad debts and so on and so forth. And this deflationary wave goes around the world, and the crisis - this is a deflationary crisis in the first place. And we see it. China, Europe, with its real deflation ... There's 0.5 percent rise in prices in the year somehow squeezed, and now the fall in oil prices, I do not know exactly the price will go negative.
- Explain why deflation - is that bad?
- This is the worst. That's what most always afraid Keynes ( John Maynard Keynes - economist - approx. ed .) and what is always called upon to fight. Because then just keep the money becomes the most profitable strategy. Produce, invest, do nothing, just store. That is tezavrirovat. And this process is self-sustaining. The higher the deflation, the more people hoarded money, so again above deflation ...
- What is the fundamental cause of deflation?
- Let's turn to the book. The fact that we have the wrong, perverted little mind, grafted traditional economic theory. She says that economic growth - is the norm, and the economic crisis - this is some trouble, not the norm. But I got something else. The economic crisis - is the norm, and in fact is required to make a great effort to understand: why in certain periods we see economic growth?
There is an explanation of why we have seen, for example, during the industrial revolution. But it is clear that by the 70s not XX, and the XIX century deflationary crisis has become permanent, which is only occasionally interrupted by ... That is, we have entered a period of permanent crisis, which sometimes takes time.
What are the elements of this crisis? Two world wars, three depression. Depression 1873 - 1914's, then what is called the Great Depression, followed by a big crisis' 70s, and finally, the current depression, one might say, is the fourth. Two world wars, depression and a bunch of four failures in the development of most of the world - Latin America, Africa, a number of countries in South-East. The next anticipated event - a collapse of the Chinese economy.
- Still, you insist on this?
- Continue to insist ...
- Chinese miracle burst?
- I was afraid that in August this year. It seems that in February will be two years since I made such a prediction, it fell on YouTube. I said that the Chinese economy will collapse within five years, but not in the next two years. But in August, I was very worried that my forecasting abilities will be called into question, because, damn it, the Chinese economy can not survive until February. Because everything went bad. In September they announced quantitative easing in Chinese. The Central Bank has supported the system. A couple of weeks ago they lowered the refinancing rate. Well, in general, until February survive, my forecasting abilities, thank God, will not be affected.
But now, rather, the question is, whether the Chinese economy will survive the 15th year, because imbalances accumulate huge way, bad debts are rising rapidly, began to decline in housing prices. $ 4 trillion invested in this very case. Prices began to fall. The government in recent years has tried to carry out administrative measures in order to prevent the formation of a bubble in the housing market, but these measures nor to no avail. Today, the government says, do what you want, buy, just to support the market. Still, prices are falling. Again, this 4 trillion, of which a significant portion of burn, it's become a bad debt ...
- And all this, too, was tied to a mortgage? Just as in America in 2008?
- All for a mortgage! And building on debts tied, and construction companies all heavily in debt, and local budgets, and so on and so forth. Only one this ball is really worth all the gold reserves of China.
- Which is somewhere 2 - 3 trillion?
- 3 trillion. And this is only one ball. We do not believe metallurgy, state-owned enterprises, mainly steel, with pereizbytochnymi capacity, reserves. It depends on many factors. Therefore, the main problem now: whether China will survive 2015.
"Do you think such a unique CHINA?"
- And if you will not survive? What scenario?
- You know, it is difficult to imagine that the economy of a country's economy will collapse ... of this magnitude with such imbalances, of course, collapses the first time in the world.
- This is similar to how the collapse of the USSR?
- It's not like the Soviet Union, it is very unlikely. The Soviet Union was not so unbalanced. And with external economies ties were small. And then the full integration of a giant internal imbalance, with a huge imbalance in the global economy. That is, it is generally the first such event ... In any case, we should have at least some analogues, and I even analogs is difficult to imagine.
- Well, Andrew ninth - Deputy Director of the Institute of Sino-Russian strategic cooperation, said that the crisis is not terrible for China. Will be rice, and this is important. There's just poor people. A 300 million middle class, says jail-shoot, and everything will be fine with them. That is within the country is not terrible, but apparently scared, you think?
- If all goes there quietly, without incident, then to the outside world it would be, of course, a great gift.
- Markets are released?
- All the same, it is necessary to produce and where to translate something? Already transferred to Vietnam, Thailand, Myanmar, Bangladesh, Indonesia. Look, India is ready, it even acquired a new government at this point, which can take advantage of the best of the situation. They have the same problem all the time there is a change in government and a flirtation with socialism. And right now there is a government that is not flirting with socialism. India is ready to start taking investment if they will go.
Something will go to the United States, yes. When people talk about the reindustrialization of America, this is nonsense. In fact, there are some examples, but statistically they are very minor. There are some companies even have a separate industry, but it is very small compared to the total volume. Nevertheless, still leave something to the United States, something will go to Europe ... There is, at least the periphery countries that are ready. Unemployment - 20 percent youth - 50, the cost of labor is reduced, increasing exports. So if China collapses, they have good logistics relative to the market.
- That is the world of themselves, and not notice the collapse of China's economy?
- Peace, on the contrary, breathe a sigh of relief - if all goes "in Dzevyatouski" if the Chinese will decide all their internal problems. Switch to a bowl of rice, for them it does not matter. In this case, indeed, have to solve the problem of 300 million middle class. It is only necessary to understand that there is a middle class - those who from $ 300 a month is obtained. This is a relatively middle class ... China is now struggling to survive. That's why I say that, at least in 2015, they are likely as many expect will be a weakening of the yuan is strong enough.
- But for Chinese exports it's profitable? US accuses China of constantly undervalued!
- No, wait! Until February of this year, the yuan has grown continuously for 12 years. Therefore, and was shocked when he suddenly collapsed and, by the way, many were ruined, because all are betting that the yuan will continue to grow. A number of forex traders fail because it was impossible to imagine that the yuan will fall. The next year, I think it is quite a trend this is. But China will fight. Look, all the data is very bad, getting worse. What grows? Growing surpluses in China, but it does not grow at the expense of export growth, - well, export is growing, but not the 7 percent rate, and due to the reduction or slowdown of import ...
- They are imported mainly raw materials?
- Import raw materials, imported cars. They import and food, among other things, in large quantities. This country - one of the largest buyers of food. So for food there too may be some progress. China - a mystery in 2015. Hold on, maybe, but right now I would have such a solid rates did until February. In any case, you have to watch carefully.
- And if you still Chinese authorities can not cope with the situation and the crisis bowels out? And in China, millions of troops, weapons of mass ... no accident that China began to foreign expansion, captures deposit capture transport corridors, even some non-economic things start to knock down the crisis.
- You, by the way, you know that he has on every side stepped a long time ago? That all these cries, they winter, early spring ... He left the Paracel Islands, ceased to produce oil. What the Chinese can do? Well, they have an army. What will they do? Vietnam will win? What does this have to the dollar? We will win? This is the dollar which is relevant?
A long time ago, American companies are looking for new bases. Vietnam is developing. Myanmar announced a democratic state, almost. Because they say: "You need cheap labor - please, no question, but you really forget about their democracy." And India with a billion population? Do you think China is such a unique? The world is full of those who are ready to take his place, who stands at the ready and already quietly takes this place. And again, not only in Southeast Asia, but also in southern Europe.
- The question is whether China is willing to accept it?
- What do you mean "I do not accept"? Well, you did not take. Here I do not come to you invest, you say: "I do not accept the fact that I did not come to investments that do not build more factories. I do not accept that! "How does it look?
- Expansion impossible from China, do you think? Domestic sources of growth had not? So they made the iPhone, and make their own Chinese phones so that they take over the world, can not? Lenovo and other IT -companies?
- No, of course. You build some alternatives, but I am an economist, I do not fantasize.
DISCARDING THE DOLLAR AS A FORCED TRANSITION TO SURROGATES
- Several of the BRICS countries together all the time there has been talk about moving calculations on bilateral relations without the participation of the dollar. This is seen as a big threat to the dollar ...
- This is ridiculous seen as a threat to the dollar. I would have considered it as a threat to the BRICS, in a sense.
- That is, the dollar can not refuse?
- You see, the dollar BRICS does not get any.
- And this is what threatens us?
- That's imagine that we are payments in dollars and yuan. What happened to us with the ruble during the year? Imagine a Chinese businessman, that's how they behave in rubles calculations? Ruble - is that from their point of view? What was the ruble at the beginning of the year and now. When you have a ruble falls twice or close to it for a year, then how to settlements in rubles? On the other hand, we have the yuan, which grew, grew, grew, and everyone is used to. Then fell slightly, and now, most likely, will fall too. And from our side to settle accounts in RMB unless we understand what the yuan? And what we hedge risks?
By the way, there was also a funny story about the threat dollar. Amazingly, I just laughed and rolled on the floor laughing. That we so describe that here is another threat to the dollar. But in fact, the British and the Germans created at clearing houses for direct payments in euro and yuan, bypassing the dollar. There sit still businessmen who understand to count every penny. And they, of course, understood that fluctuations in the euro and the yuan must somehow insure and hedge. And they watch schemes hedging risks of direct payments euro-yuan. And they made this scheme ... with dollar instruments! Only with dollar instruments they got to hedge risks such trade!
- Why do we need a dollar, if we are to each other very well sell?
- Good question. For us, it sounds like some kind of political action, we struggle with the global hegemony, we are struggling with the dollar, we are at the forefront. But then the question arises, you try to explain it a normal businessmen who count every penny, how to do calculations in currencies that are unstable to each other, are unstable to all other currencies, and how to hedge risks?
Politically, this struggle with the dollar looks very nice, but ...
- ... The dollar is impossible to get away?
- The dollar itself out. What is happening when reduced QE? He leaves, and, of course, there, on the periphery, serious problems begin: the calculated?
- Normally there is no money, we will do what we have ...
- We will do what we have, that's right. This decision, which declared the offensive, but in fact ...
"For abandoning the gold standard humanity paid the two world wars"
- What is the dollar general? Than he is unique, so why all need? Why, in your view, the dollar is at the heart of all? Despite the QE and the Fed, despite the exorbitant debts of America ...
- Again, I will refer to his book. It shows that due to the coincidence of a number of factors - and it does not merit the United States - there has developed the most advanced in the world at that time, the system of division of labor. The book describes in detail what happened in the 80 years of the XIX century. What are the prerequisites, all fast enough ... And actually developed the foundations were laid, perhaps, to the 20th years of the twentieth century already, when more or less complex structure. What does it mean more developed? This means that manufactured goods are produced, a greater variety of industrial products. We can live in peace in their country, yes, we have a low level of division of labor, we are satisfied, but want something like that ... Remember, in the Soviet Union would like to tape, you want the radio, I want something like that to work properly and do not break. So, we need a variety of goods. And to buy it all, you need dollars.
- Prior to the abolition of the gold standard clear, but now a dollar - unsecured piece of paper?
- The gold standard - is absurd, for refusing to which humanity paid the two world wars. Why enter the gold standard, which was introduced in the 44th year, the peg the dollar to gold and now this whole system? Keynes was against as a theoretician, but he was also an Englishman. He realized that if left as is, it will be only one dollar currency for the whole world, and he had to save a pound. Peg the dollar to gold - it was a way to save a pound.
- That is a special operation in Britain? And speaking of gold, Rothschild mean?
- It does not matter. Yet there was no Rothschilds, and gold already. You imagine in 1944. Do you have a German brand, but you know that it will not be fast. Do you have the Italian lira, but it is about will not happen.
- Finance defeated ...
- ... And the world in general there is no currency, which makes sense to speak. Only a dollar. There is still some pathetic pound issued by heavily in debt to the United States.
- Crumbling empire.
- Completely dying empire. And in 1944, the Bretton Woods ( Bretton Woods - a mountain resort in the state of New Hampshire, in the north-eastern United States, where in July 1944 took Monetary and Financial Conference of the United Nations. It laid the foundations of the Bretton Woods monetary system, in which world currencies were tied to the US dollar, and the dollar was pegged to gold. It was also decided to set up the IMF and the World Bank - approx. Ed .) created the conditions to exist in addition to the dollar other currencies. Only thanks to the Bretton Woods system you exist at all other currencies.
- They could not be, could be only one dollar?
- Of Course. And still today the only world currency - the dollar. Eur? Yes, Europe can not even hold QE really ... There economists already clear that the euro - the currency of a dependent, the euro has the same branch of the dollar, as well as all other currencies. And we say: the ruble - a branch of the Federal Reserve, our central bank - a branch of the Fed, and this must be fought.
- So you agree that we are a branch of the Federal Reserve?
- Of course, I agree! In the same way as all other currencies ...
- That is the rejection of the dollar - a world war?
- This is not World War II, it is the collapse of the world economy. And as there will continue to be, a world war, not World War II, a lot of local wars, every man for himself ...
- Still, it turns out that the dollar's dominance came situationally, thanks to the war, so he took a place ...
- No, the dollar was at that time and at the moment in any case still associated with the economy, with the highest level of division of labor. Yes, we can say that right now in the US, maybe not this level of division of labor. But this system has long moved beyond a single country, and it supports itself.
- Let's take a simple example. Here we are sitting here. You as the smartest, most intelligent. We all have different products, something manufactures, markets. You write on paper receipt that you are the smartest, the best. We agree that your receipts accepted as means of payment. And start to communicate. While you're writing a receipt, everything is fine, but as soon as receipts instead of one you start to write two receipts ... went uncontrolled emissions. That is today the main problem of the dollar is that the people who run this system, allow illegal things from the perspective of the global economy.
- Wait here, I told you about the issue of new ads QE. You tell me right now, here acknowledge my whole story. Say, if printing a lot of dollars, there will be inflation. Well, a lot of printed dollars - there is a world of inflation.
- Just accumulate dollars in reserves of China. Japan, Russia. That is generally accepted framework for manipulation occurs dollar. Now there is no division of labor, there is no demand for US goods. There is a demand for Chinese goods.
- But if you buy the iPad, which is made in China, then, generally speaking, you pay money to America, not China. China gets a penny from this iPad, and so you can say, oh, I bought the Chinese. Garbage it, you bought an American iPad. And a big part of what makes China, goes to America, and China gets his commission because the Communist Party explained its working people that the low salary - it is for the good of the revolution and communism. That is, American corporations simply rent from China labor no more.