[Pops]

Why is Chinese demand down, and will it continue to fall or will it pick up?

Over-exuberance.

Or...

I think I just saw their growth was the lowest in twenty-something years. Could be the commies listened to Jimmy Carter while the rednecks in the US blew him off. But instead of putting on a sweater they put on the hard hat and took advantage of the last hoorah to build up their infrastructure before the onset of decline. Who cares if the bills never get paid or who goes bankrupt due to no cash flow if the assets are in place?

They have proved very adept at being an economic colonizer, they own energy resources around the world, including Oklahoma - heck, they own the USs biggest pork packer.

[AndyA]

lowest growth since 1990. That would explain why growth has been so high, but what is underlying the slowdown? Limits to growth?

[Pops]

Over-exuberance I think, worse than in the US, they overbuilt so much trying to stimulate their economy they have no tenants for whole cities.

If it turns out peak oil is decades away, the "scarcity" of the oughties will be directly attributable to China's forced growth.

[radon1]

http://www.zerohedge.com/news/2015-01-2 ... disturbing

But even more disturbing than China's growth forecast, is what the IMF sees global growth doing, which nobody will be shocked to learn, has once again been drastically slashed lower.



Why is this disturbing? Because as the world is slowly learning, it is all about trade, and central banks can't print trade.

Without a rebound in global trade, there can be no rebound in global growth period. And indicatively, 2014 global trade was originally expected to grow by 5.5% in the IMF's January 2013 forecast. It closed at 3.1%, or nearly 50% lower. Expect the 2015 forecast for trade, currently at 3.8%, to also be slashed to a sub 3% print when all is said and done - the first time trade will have a 3%-handle in the 21se century!

[Pops]

Pops, at least the Chinese also invested in a real practical electric transport system. Useful EV's (electric trains) and an electric transmission system that goes where the trains go . . . the tracks (or catenaries). Perhaps in recognition of peak oil? Nah.

No one is that smart!

Really, any infrastructure investment now is a good thing I think, which is why the current push towards privatization and profit at all costs is so bad. There isn't much profit in resilience, once all the derivatives cancel each other out you're left with a bunch of nothin.

At least in the depression you could wipe with worthless stock certificates.

[radon1]

http://www.zerohedge.com/news/2015-01-2 ... wn-4-trill

In fact, as the chart below shows, the global dollar economy is not only shrinking fast, but it is doing so at the fastest pace since the Lehman collapse, having shrunk by $4 trillion, or a whopping 5%, in just the last 6 months!

[Pops]

The value of the dollar is increasing (up 8% against the euro in 6 months) so the nominal value of everything else - in dollars - is declining. Again, not really a measure of GDP, just a measure of the strength of the dollar.

Now, if you were to look at why the dollar is so strong ...

[kublikhan]

2014 global trade was originally expected to grow by 5.5% in the IMF's January 2013 forecast. It closed at 3.1%, or nearly 50% lower. Expect the 2015 forecast for trade, currently at 3.8%, to also be slashed to a sub 3% print when all is said and done - the first time trade will have a 3%-handle in the 21se century!

This is not correct. World trade clocked in sub 3% growth for several years in the past decade. 2008, 2009, 2012, etc:

World trade growth of 2.0% in 2012 was down sharply compared to the 5.2% recorded in 2011.

Chart1: Growth in the volume of world merchandise trade and GDP, 2005-14a
Annual % change

Trade to remain subdued in 2013 after sluggish growth in 2012

[radon1]

Dollar is the world's de facto money. The rest is derivatives. Even the US cannot do without the dollar.

[Pops]

The correct answer is the dollar is the safe haven currency. It's value rises when people get worried.

The Euro is the second choice but the EU isn't looking so hot right now.

And China is looking pretty weak so it's foreign reserve holdings of dollars fell by a hundred billion in the 3rd qtr - don't find anything more recent - as investors pulled out.

LOL, there are a lot of recession/deflation predictors out there, just none in this thread.

ETA Links
http://www.bloomberg.com/news/2014-10-1 ... -seen.html
http://useconomy.about.com/od/Asia/fl/C ... Growth.htm

[Subjectivist]

The correct answer is the dollar is the safe haven currency. It's value rises when people get worried.

The Euro is the second choice but the EU isn't looking so hot right now.

And China is looking pretty weak so it's foreign reserve holdings of dollars fell by a hundred billion in the 3rd qtr - don't find anything more recent - as investors pulled out.

LOL, there are a lot of deflation indicators out there, just none in this thread.

I saw a presentation recently predicting massive deflation in America because as the baby boom generation retires and passes on there are not enough younger people with money to buy their empty nest houses. That means we will have a housing glut for the next decade to fifteen years as the bulge retires and eventually moves into retirement homes or nursing facilities. That means house prices will be deflated for quite a long time, just like happened in Japan for the last 15 years.

[ROCKMAN]

Pops - A report from just last Dec: "Foreign Exchange Reserves in China decreased to 3840000 USD Million in December of 2014 from 3887700 USD Million in September of 2014. Foreign Exchange Reserves in China averaged 730415.67 USD Million from 1980 until 2014, reaching an all time high of 3993212.72 USD Million in June of 2014 and a record low of 2262 USD Million in December of 1980. Foreign Exchange Reserves in China is reported by the People's Bank of China."

So a 3.4% decreases. Not great but not the end of the world considering they have $trillions soaked away. I assume a big reason it didn't drop further is the amount of US denomination they hold.

[radon1]

Looks like the Chinese authorities are preparing for tougher times:

http://www.scmp.com/news/china/article/ ... iversities

Mainland universities have been told to step up propaganda and teaching of Marxism and Chinese socialism, amid calls from President Xi Jinping for greater "ideological guidance" for teachers and students.

Citing a joint directive from the State Council and the General Office of the Communist Party's Central Committee, Xinhua reported that improving ideological and propaganda work was a "major and pressing strategic task" on campus

[Sixstrings]

The value of the dollar is increasing (up 8% against the euro in 6 months)

By the way, I'd say now really is the time for big increases to the minimum wage.

While the dollar is headed up. That way the inflationary effect of higher wages gets balanced out.

And barring wages going up.. if the dollar is going to stay high, and this is long term, then maybe I'm for free trade after all. That way we get cheap imports and de facto wage boost, even if nominal wages remain stagnant.

[evilgenius]

lowest growth since 1990. That would explain why growth has been so high, but what is underlying the slowdown? Limits to growth?

How about math?

[evilgenius]

The value of the dollar is increasing (up 8% against the euro in 6 months)

By the way, I'd say now really is the time for big increases to the minimum wage.

While the dollar is headed up. That way the inflationary effect of higher wages gets balanced out.

And barring wages going up.. if the dollar is going to stay high, and this is long term, then maybe I'm for free trade after all. That way we get cheap imports and de facto wage boost, even if nominal wages remain stagnant.

+1, mostly. Higher wages, no matter the source, are still going to be considered inflationary by the Fed. What we're really talking about is boosting demand in some way that makes sense to all of us at a local level. That's where we can utilize the cheaper Chinese inputs. and use the higher wages to leverage our consumption. That leverage, coming as it would at a level that would create demand for orchestrated hierarchies of supply in places that aren't local, but which are more tuned into actual demand, should eventually help out the rest of the world.

[radon1]

lowest growth since 1990. That would explain why growth has been so high, but what is underlying the slowdown? Limits to growth?

Any slowdown can be explained by one or more of these three things:

1. Lack of money (poor policy choices)
2. Lack of people
3. Lack of resources (limits to growth)

[evilgenius]

Over-exuberance I think, worse than in the US, they overbuilt so much trying to stimulate their economy they have no tenants for whole cities.

If it turns out peak oil is decades away, the "scarcity" of the oughties will be directly attributable to China's forced growth.

I don't think over-exuberance is necessarily what we are really looking at when we try to place the blame in China. It is, yes, but it is a symptom. You could say that they over built because they couldn't face changing how they approached the rule of law.

China has continued to hold the approach that above all there must be central planning. Their central planning may be flexible, but it surely is not flexible like the rule of law is. What? You might be asking. The rule of law is not flexible. It is, actually, in that it conforms to the norms of society. The rule of law changes as society changes. Chinese central planning changes in response to the dictates of a murky understanding of what the few in charge want. The rule of law is much more responsive than that, and, oddly, consistent.

[ROCKMAN]

Six - And much would increasing the MW improve the economy:

"Given the continuing campaigns by unions, workers, politicians and others to raise the federal minimum wage, it bears asking: Just who are minimum-wage workers, anyway? Perhaps surprisingly, not very many people earn minimum wage, and they make up a smaller share of the workforce than they used to. According to the Bureau of Labor Statistics, last year 1.532 million hourly workers earned the federal minimum of $7.25 an hour. That group represents 2% of the nation’s 75.9 million hourly-paid workers. In 1979, when the BLS began regularly studying minimum-wage workers, they represented 13.4% of hourly workers."

So in the last 35 years the percentage of workers earning minimum wage decreased from 13.4% to 2.0% according to the gov't. Pretty good progress IMHO. Also good to remember that there's a potential for a number of workers to lose their jobs if there's a significant increase in MW if employers seek to cap their total salary budget. And some of those job losers could be making more then minimum wage: in order to maintain net cash flow higher paid workers might be replaced by lower paid workers at the new MW.