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The Unintended Consequence Of The Soaring Dollar
It seems the S&P 500's recent strength is somehow comforted by the fact that the USD is riding high on its cleanest dirty shirt meme at 34 month highs but unfortunately for the Chinese (and their practical peg to the USD), things are a little less fun than in the old mercantilist manipulation days. The implicit benefit that dollar flows appear to be getting (via the wealth effect in the US stock market) is not there in China (lower equity ownership); in fact, the rising Yuan is drastically hurting them as despite export orders remaining in growth mode, the China Daily reports that "most exporters in the delta region have told us that the rising yuan value has led to a big profit decline." Of course, the exporters are calling for a weaker Yuan but as the nation struggles with an exploding shadow banking system, bubbles in real estate and credit, and inflation concerns it knows that any implicit effort to weaken the CNY will create a surge in capital inflows and fuel further imbalances. China remains in the middle of the 'currency war'-driven inflation rock and 'sagging growth' hard place; and with two 91-day bill issues in the last week (in addition to repo) the clear signal (masked by export data fudges) is that China is much more worried about inflation than it is letting on (and has little ability to manage hot money inflows).
The rising value of the yuan has made it difficult for exporters in the Pearl River Delta region to make money, even though they saw an increase in orders in April, an industrial survey said on Tuesday.
"Exports from the delta region increased a lot last month, but exporters have found it hard to make profits given the yuan's appreciation," said Xiao Feng, deputy general manager of One Touch Business Services Co, a Chinese provider of foreign-trade services.
...
"However, most exporters in the delta region have told us that the rising yuan value has led to a big profit decline," said Xiao, without elaborating on how much profits have declined.
The People's Bank of China last week set the daily reference rate of the yuan against the dollar at 6.1980, the highest in 19 years. Indicators show that capital flows into China have accelerated in recent months.
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"Some companies have borrowed in dollars, converted them into yuan and bought into yuan-denominated assets, waiting for the Chinese currency to strengthen further. The inflows have brought about pressures for the yuan exchange," Liu said.
With the introduction of measures to crack down on hot money inflows, there is a possibility of a weak yuan exchange rate in the near future
...
Zhang Zhenghu, deputy general manager of the overseas sales branch of Gree Electric Appliances, said the company had to increase the price of its products early this year because of the yuan appreciation
...
"Yuan appreciation burdens most Chinese exporters heavily. We had to increase the price to make a sustainable business profit in the overseas market," Zhang said.
...
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Damn those unintended consequences!!
7 years of 'unintended consequences' down the drain!
And we're on Double Secret IRS Probation! You know what that means....
http://rutube.ru/video/305e70221020c9f0bdca820bb412cdcb/
France is now in full scale revolution mode.
"Big Trouble in Little China" FTMFW!!!!
You were not put on this earth to "get it", Mr. Burton!
For all you who are S-L-O-W-L-Y following the narrative:
~~~
The 'unintended consequences of the soaring dollar is..."
TOGA PARTY!
i thought wall street didn't like a strong dollar?
Wall Street will love the dollar when the collapse is near...I guess USD will remain a safe haven since the US has military bases all over the fuckin globe...so everyone is buying the dollar and in the process Gold price is dropping....and i guess people who are long the USD dont collect much interest holding it, so they plow it into US equities...which is lifting the bids in the algo driven markets. Basically this mad rush for US equities is the final act of this collapse...dont know how long this will last but the end game is surely near. And I am sure Wall Street is already taking short positions to take advantage of the future stock market blow-up
Shoot, we rolled ours on first thing this morning. Had a funny feeling.....
Well, dumping treasuries like there's no tomorrow would sure dampen the dollar's strength.
Just sayin ...
CPL, Good to here from you.
dollar rallying is such a joke... Its like watching a race between weight watchers...nobody really wants to watch, yet you cant take your eyes away!!
Kitco's explanation of gold going up: bullish outside markets, strong technical pressure
Kitco's explanation for gold going down: bearish outside markets, strong technical pressure
so basically: ah who the hell knows?
USD start running on Friday when Jawboning Report about QE tapering hit the tape.
I don't see how FED will taper anything with -0.7% PPI, that's deflation.
FED target 2.5% inflation.. Though numbers are cooked still. Employment is
not there (6.5% target) Inflation not there either, why is the f*ck they jawboning
about tapering.. Economic indicators are suck big time, They should Add more QE
based on data, forget about tapering.
Time to reallocate some of those forex reserves
Strong dollar = deeper recession
That's what Larry Summers said back in 2009 and again in 2010. With HSBC paying off 14,000 people and retial plunging and joblessness soaring...it's gonna get even more painful for many I'm afraid.
"What does that mean? ‘China is here?’ I don’t even know what the hell that means! All I know is this Lo Pan character comes from out of thin air in the middle of a goddamned alley, while his buddies are flying around on wires, ripping everyone to shreds...and he just stands there, waiting for me to drive my truck straight through him?! With LIGHT coming out of his mouth?!"
Good ol' Jack Burton
Some would say these (and most other) consequences are not unintended at all...........
Rising dollar and falling yen. Intended. Financial engineering is the only play left now that the U.S. has let the barn door open.
Love the David Lo Pan shot from Big Trouble in Little China.
"Are you crazy? Is that your problem?"
There is an excellent scene in that movie that reminds me of the fate of the fate of the US dollar
Add "Chinese Super Villain" to the list of unsustainable bubbles.
BTW - been enjoying a lot of your input on other threads lately, Thunder Child.
Kim Cattrall was gorgeous in that movie.
http://img.photobucket.com/albums/v686/Alderaan/vlc2012-05-1003-54-23-19.jpg
And that movie was supposed to be the sequel to your nom de plume. I forget sometimes how long Kim's had "it" going on.
Actually, the sequel was supposed to be "Buckaroo Banzai Against the World Crime League". Tragedy that it never got made.
"What Wang, What will never bother mankind again???"
I never drive faster than I can See, and
Have you paid your dues Jack? Yes Sir, The Check's in the Mail...
You've got hyper-inflations now beginning in Argentina, Brazil, India, Vietnam and Japan.
Of course the Dollar is going to be bid. Temporarily.
When the "market" turns over, where is the floor for the dollar.
Somewhere in Sub-basement "D".
the dollar is "high" all right
it's the hangover I'm worried about
Its actually the unintended consequences of deposit confiscation. People are rushing into USD and buying US stocks. The CB's cannot confiscate stock holdings. The CB's can screw around with your cash and Tresuries, but they cannot confiscate equity.
Well, I am sure that the left wing, short fingered vulgarians are trying how to confiscate stocks as well, but they have only tax rates to impact equity at this stage.
Additionally, all the CEO's of the equity companies are their major political donors (see Eric Scmidt - GOOG, and Suckerberg - FacePlant) for Obama and his confiscatory ass wipes in the US.
enough of this constant left right bs. when are you guys going to realize that both dems and repugs are there to serve their bankster corporate crony paymasters. politicians, regulators, supremes-- all captured by the money. us gov policy is dictated by international corporate bankster funded predators who use social issues and left right bs to keep the sheep in the wool. if you still think its about dems and repugs, you are big part of the problem.
The left is running this country and they are running it into the ground. They run nearly every government office in the land whether federally or locally. So fuck you for blaming republicans.
Follow Abe of Japan and print until the US dollar crashes and burns. Bubble Bernanke and the Fed will follow Japan.
After all the US fed is directing the Japanese Central bank.
The US will follow Japan off the cliff.
FRB's new slogan, much like an old Camel cigarettes commercial:
"Shadow Banking -- Everybody's Doing It!"
http://memegenerator.net/instance/37848295
I was thinking it was more akin to the old Smith Barney ads...
We make money the old-fashioned way, we print it.
The Chinese will just have to lower the quality of the cheap shit they make
Nearly all brand names in electrical tools are made in China. Not one brand holds up any more. They are all shit. High quality shit or low quality shit. It is still shit.
And few people realize how many parts that go into so-called "Made/Assembled in USA" stuff is actually Chinese shit. When GE refuses to disclose where the faulty bolts were made, in their Blow-Out-Preventer valves, then you can be assured it is made in China shit.
When GE refuses to disclose where the faulty bolts were made, in their Blow-Out-Preventer valves, then you can be assured it is made in China shit.
I cannot think of a single GE Appliance not made in China.
Jack Welch, an American icon!
Well, it is offical Fed policy(snickers) to have a strong dollar.
Is the dollar rising? Or is it just not falling as fast as the rest of the shit paper currencies?
I look at the currencies as a group of sky divers. Some stretch and fall slower than the rest, a couple ball up and fall faster than the rest....
So some are falling slower than others, some are falling faster than others...
But they all are falling to their natural value...
It's falling with style, like Buzz Lightyear.
It's an attempt to make your currency look the ugliest.
Beauty doesn't win a currency war.
Japan implodes first, then it's on to the next one.
Taking it from the Picture of Lo Pan on the cover, I guess there's ;
A Little Trouble in Big China......
Cramer's face is slowly being sucked into the black hole of its mouth as he has lost control over his slobber. Can't wait to see the ears go.
China is more worried by inflation than the US since its citizens are not comatosed couch potatoes too lazy to react, whereas the Chinese can take being shot at and will go out and attack corrupt local officials if too much shit is going down.
Too much inflation spells the worst sort of problems for the Chinese govt...it is the worst of the evil choices.
They may as well dump all their USD and buy gold.
Agree, The average Chinese citizen lives much closer to the edge. Inflation, when food takes up 75% of wages is a scary proposal.
If the choice is death by starvation or protest(attack) on .gov, folks in any country will get off the couch.
They say after you have gone about 2.5 days without food you are highly unlikely to be rational in your actions. Thats why the free bread they gave away at the Colosseum was so important.
http://finance.yahoo.com/news/north-carolina-may-ban-tesla-151842940.html
Moar green shoots coming, Bossman.
A cesspool of middleman that we are swimming in is another hidden tax.
Strong dollar is bad for China but great for Italy, Greece, Spain, Europe in general. Bring it home, baby!
Maybe the Chinese should consider having their OWN currency? Instead of a US dollar as seen in a red mirror?
What a fucking disgarece this whole sytem is.
n/a
Yes, this is why the exporters turned to currency arbitrage, even though it makes the situation worse by driving up the yuan. If the yuan is going up and crushing your profits, do currency arbitrage to survive, pushing the yuan up further and forcing more exporters into currency arbitrage......
Yeah, that's the problem with trying to control the whole macro economy with printing money or whatnot. There are so many micro issues at work that they start squirting out of the perfect bubble you create. Then you start trying to control all those micro issues and it works for a short while, then.... kaboom.
Its almost as if every action... has a reaction.
Currency wars, then real wars.
Bigger and better bombs.
Instead of Weapons of Mass Deception, it's Weapons of Mass Destruction.
Sinking slower (while circling the drain) than others is not the same as "Soaring". Soaring is what happens when you rise above the others, who are either stationary or also rising -- relaive to an External Reference Frame.
Right now, ALL fiat currencies are circling the Big Drain. Some faster than others. Keep perspective.
odd that a communist country would have more trouble manipulating their economy than the free enterprise has trouble manipulating its own economy...
HAHAHAHAHA...you said we have free enterprise in the US...what a joker :-D
'manipulates' is not a charcteristic of any free enterprise system.... sorry you missed that bit of sarcasm.
:)
A rising US Dollar should put downward pressure on US indexes, including the S&P500.
Below is an overlay of the S&P500 and US Dollar. There is lag between these two, but they do realign eventually.
http://bullandbearmash.com/chart/us-dollars-inverse-relationship-plus-le...
I heard that argument a while back in regards to UST's, ie., "record low UST yields are signaling a coming equity correction/crash". Man, those people lost a shitload of money.
All this for a Chinese girl with green eyes
No..two girls with Green eyes!
This is good news: Mr. Gutenberg can print more paper and a fleet of choppers can drop them on burning problems.
It appears that the chicom capitalists are getting a good reaming from the wall streeter criminal empire. I doubt they will learn their lesson so I suspect the chicoms are stuck in the peg and will just keep building crappy cities in the middle of nowhere until things improve.
Martin Armstrong says the rest of the globe is falling apart. The USD is the only game in town. Was the world's reserve currency and has now become the INTERNATIONAL CURRENCY. The global flight to safety is beginnnig and the destination is the USD and USD denominated assets. This flight to safety by world capital is going to crush US exports and the USA will sink lower into its recession (or depression, whichever word you use). The USD will be the last to peak. Then the reset. Makes sense to me.
Strong Dollar? Against all other devaluing currencies, maybe. A truly strong dollar would not have lost over 95% of its purchasing power. A strong dollar would also lead to that dreadful DEFLATION. The Federal Reserve won't allow that to happen.