BRIC+ News & comments

China raised their bank reserve requirements again overnight to 21.5%, which is a record high. This marks the ninth such increase since last October.* This means that banks must keep 21.5% of deposits on hand and keeps money from being lent out. from: http://www.topstockportfolios.com/r.../1/0/5bc524c0c80250348022c0ef0e08aabe418d5446

* BT comment: China, unlike the US, wants to and is serious about controlling inflation. The value of China's currency is going up, slowly now, but in a couple of years (IMHO) it will have the tie to the sinking dollar cut and then soar in value as dollar's value starts to plunge downward. Currently 6.47 RMB = a dollar, but I would not be surprised to see the RBM more valuable than the dollar by Halloween 2015 as I have long predicted there will be a run on the dollar one year earlier (by Halloween 2014 or sooner). If that is true, guess who buys oil and who cannot afford to at the elevated prices China's rapidly growing demand will force on the static or shrinking supply.
 
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Billy T said:
* BT comment: China, unlike the US, wants to and is serious about controlling inflation.
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That's because inflation is a problem in China, and not in the USA. China exhibits high inflation, and has for a long time. The USA exhibits low inflation, and has for years (since the financial crash). The implication that the USA needs to be worrying more about controlling inflation (and not, y'know, stimulating growth and hiring) begs the question of what planet you are on.

Also, for about the 10 millionth time, inflation and exchange rate are not the same thing.
 
quadraphonics said:
Billy T said:
* BT comment: China, unlike the US, wants to and is serious about controlling inflation.
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That's because inflation is a problem in China, and not in the USA.... Also, for about the 10 millionth time, inflation and exchange rate are not the same thing.
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You did not understand the now red text was contrasting US and China's problems - Theirs is to lower inflation, US's is to make some, avoid deflation. Bernanke's main fear.

I certainly know inflation and exchange rates are not the same thing but they are related as I now discuss:

Bernanke's efforts to make some inflation in US have made a great deal of inflationary pressure in many other countries, China included. I.e. part of China's inflation problem was made in the US with US interest rates so artificially low. Those low rates were supposed to get Americans buying, especially houses, and the demand would help boost prices (can you say make inflation?)

When an economy is stagnate, a little inflation is a good thing as even without low interest rates it encourages people to buy today, not next month when prices are higher. Deflation does exactly the opposite of course and that was Bernanke's greatest worry. Deflation discourage buying and makes recovery from the recession much harder so Bernanke has made historically low interest rate by buying bonds, especially with short maturity terms. (High bond demand drives price up and rate down.)

When the US is pushing interest rate down, as it is, there is a flux of "carry trade" dollars to other countries with normal rates - that both causes inflation in them and upwards evaluation of their local currency, which the dollars are buying = surplus of dollars vs. local currency. I.e. While different, inflation and exchange rates are linked.

For example, just now the dollar will buy 1.572 Brazilian Real, a year ago, when less had flooded into Brazil, a dollar would buy 1.83 R$. About three years ago, a dollar would buy 3 R$. I.e. there is not much Brazilian demand for the flood of steadily decreasing in value dollars, so Brazilian won't pay as many Real for them now. Basically all the world is trying to get out of dollars, but there are few alternatives, gold is one so it will rise more, IMHO. When US loses it AAA rate, it will not just be a flood, but a broken dam with few wanting that tidal wave of dollars leaving the US. (Sorry about the mixed metaphors.)

PS I am just glad I do understand all this AND foresaw it coming (along with a yet to come run on the dollar) long ago, so to protect my self I moved a lot of dollars to Brazil and got more than 4 R$ for each. That has nearly tripled my money in dollars. Many other "Johnny's come later" invested in Brazil and their buying of stocks has more than tripled the stock prices in R$. Putting both factors together makes me up in dollar about 10 fold. It really pays to understand these things and be able to correctly foresee where the trends will take you.
 
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"... General Electric is bidding for about $3 billion of Brazil energy contracts over three years ... work that includes supplying Petroleo Brasileiro SA with equipment for its floating production vessels. ... The company is also talking with Petrobras on supplying subsea wellhead systems, {a VP} said.

“We have equipment and services from the subsea well up to the refinery,” {a VP} said. “This is a terrific opportunity.” Earlier this week GE won three contracts worth $350 million in Brazil, including deals to provide subsea logistics services to Petrobras and drilling systems for Royal Dutch Shell Plc. Brazil, home to the biggest oil discovery in the Americas in the past three decades, is seeking to more than double its oil output by 2020.

GE plans to hire 500 workers for its Brazilian oil and gas business before year-end, an increase of about 42 percent, {VP for GE’s oil and gas division in Latin America} Martins said. ..." From: http://noir.bloomberg.com/apps/news?pid=20601109&sid=acl0i3mBSdYU&pos=12
 
"... The yuan strengthened as much as 0.15 percent to 6.4635 per dollar, a 17-year high, after the National Business Daily newspaper said there is speculation China will announce a “relatively important” currency policy on June 19. ..." From: http://noir.bloomberg.com/apps/news?pid=20601087&sid=aqLHFWRXZdFw&pos=3

Billy T bets, if anything is announced, it will be another step towards making the Yuan more freely traded internationally. China is slowly taking steps to make the strong Yuan an alternative to the weak dollar for central banks to hold.
 
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“ White Sea off the coast of northern Russia, June 16, 2011.
Scientists believe whales could be friendlier to humans without clothing. Natalia Avseenko, 36, was able to hold her breath and swim underwater for an incredible 11 minutes. The minus one degree Centigrade waters are cold enough to kill a normal person in 15 minutes. Beluga whales generally shy away from conventional scuba divers because they dislike the bubbles they produce.” From: http://usa.chinadaily.com.cn/world/2011-06/17/content_12724130.htm Where there is at least late on 19 June 2011 a third photo of Natalia, nude on top of the ice getting ready to enter the water, with the two whales seeming to eat from her hand.

If you want to get or send copies, here are the links:
https://lh6.googleusercontent.com/-XQ-8ELT1oM4/TfvIwBL6gVI/AAAAAAAAAEw/vqnnDDX3xGY/beluga1.jpg

https://lh5.googleusercontent.com/-L-p7hHvXxIo/TfvIwOuVfHI/AAAAAAAAAEs/4C9arQUsbac/s512/beluga2.jpg

Stored by Tiassa as the origionals at ChinaDaily don't up load any more (as I expected would happen, so asked her for help)
 
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Brazilian Real going up and dollar going down has given the Real a 45% gain in value relative to dollar since 2008. This, with the collapse of home prices in the US, makes it seem to Brazilians that they are almost giving away for free nice condos etc. in Miami, etc. I.e. Miami condos now cost a Brazilians less than half what they did only 2.5 years ago!

"...The Brazilian real’s increase against the dollar since the end of 2008 is the best performance among 25 emerging-market currencies tracked by Bloomberg. The nation’s economy, Latin America’s biggest, grew 4.2 percent in the year through March 31, compared with U.S. expansion of 2.3 percent. ...

As many as half of the downtown Miami condos that have been sold to foreigners* for more than $500,000 since January were purchased by Brazilians, said Craig Studnicky, president of International Sales Group LLC, an Aventura, Florida, property- marketing firm. ..."

From: http://noir.bloomberg.com/apps/news?pid=20601087&sid=aUWpYGLTLZrk&pos=6

* Three or more years ago, it was Canadians, escaping their cold winters, who dominated the foreign purchases of S. Florida condos. Because the seasons are reversed in the two hemispheres, there is probably a very profitable half-year time-share deal to be made between Brazilians and Canadians. - I.e. both spend their winters on Florida's beaches instead of in heavy sweaters for half the normal cost of owning a condo in Florida. Great for retired persons. Any Canadians reading and interested, drop me PM, even if just interested in idea as a business.
 
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“… Sinopec, which operates 13 of China's 20 mega-refineries with more than 10 million tons of refining capacity, ... will expand China's refining capacity to a new high to meet the nation's increasing demand for oil, analysts said. - build a refining complex with an annual processing capacity of 32 million tons in China's eastern Jiangsu province. … with construction slated to begin in 2013 and the plant becoming operational in 2016, according to the report. … the majority of crude oil for Sinopec's planned refining complex will come from overseas. "That's why it selected a coastal city as the location for the refineries."…”
From: http://usa.chinadaily.com.cn/business/2011-06/18/content_12728549.htm

Billy T comment: It is quite obvious to me where the oil that expands China’ refined product more than threefold will mainly come from: Venezuela, which currently send the US > 10% of its total oil imports. (1st graph below, but note the volume of oil has been about constant but as percent is falling as US imports more.) Hugo now must send this oil the US gulf coast refineries which were designed to refine that heavy crude. This oil along with much more China is helping Hugo Chavez develop from the world’s largest known deposit will all be going to China 5 years from now when this new, port city, refinery is ready to start processing it into gasoline, jet fuel, bunker oil for China’s new aircraft carries (first of five has already had some sea trials and is now back in port for installation of radars and weapon systems etc.) Venezuela's oil will be going to China to repay the huge investment China has and is making in development of Venezuela. At least $50 billion dollars in the last few year with two new refineries also.

As US needs the refined product from these gulf coast refiners, so it plans a new pipeline to bring Canadian shale oil to the gulf’s refineries when Hugo cuts the US off from this oil. Here is the planned route (but there are some NIMBY problems with local mayors and at least one state etc., so route may change and it is not even sure the pipeline will get built before Hugo cuts the US off from the oil. )

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"... Known as "Keystone expansion," {DASHED LINE IN THE MAP} the project is an expansion of an existing pipeline that now terminates in Oklahoma. Stretching over 1,600 miles -- four times the length of the Trans-Alaska system -- the new pipeline would be one of the biggest in the country. ..."
From: http://money.cnn.com/2010/12/23/news/economy/oil_sands_pipeline/index.htm?a=4

SUMMARY: Here again is another example of how China is "eating the US's lunch" (or oil in this case.) High speed rail exports is another. Trade with S. Korean, yet another, not to mention most of the rest of Asia as China increasing supplies their hi-tech needs in trade for their cheap labor, low value added, components China imports from them. China/ India have agreed to expand their trade to 100 billion dollars value per year, but they don't plan to use dollars. China agreed to import more from India so the trade is balanced.

Text below map and summary of my post 62 are from: http://www.sciforums.com/showpost.php?p=2667151&postcount=62
 
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The following is end of official statement by Director-General of the Policy Planning Department of Chinese Ministry of Foreign Affairs. -published 24June2001 on page 8 of the China Daily:

Over the past decades, we have been trying to explore our own path of development, and fortunately we have succeeded in many ways. The return of Hong Kong and Macao to the motherland has enriched the concept of "one country, two systems" in both theory and practice. We succeeded in solving the employment problem in the countryside on the basis of establishing township enterprises and we succeeded in solving banking problems at the beginning of this century, so we survived the international financial crisis in 2008. We also constantly update our concept of development in order to keep pace with the changing times.

China has no strategic intention to challenge the current international system. It has no intention to forge military alliances or to fight for a greater sphere of influence. The current international system is built on the basis of lessons and experiences of two world wars. It reflects, to some extent, the reality of the world and the balance of power. It has played a very important role in maintaining the peace and security of our world. China too has benefited from this.

China is becoming increasingly integrated into the international system. In 2001, China joined the World Trade Organization. Now China is an important member of the International Monetary Fund (IMF) and the World Bank. China continues to play an increasingly important role in the activities of the United Nations, G20, the World Bank, the IMF and other international organizations, and has proven that it is willing and able to work within, rather than outside this system.

The international community should accommodate China's peaceful development rather than fear it, help rather than hinder it, and support rather than constrain its efforts.

We can clearly see from the 2008 financial crisis that the current international system is not entirely functional. The international system should be reformed and improved to keep pace with the changing times, so as to be fairer and more rational.

A chief economist from the IMF believes that the GDP of developing countries will soon outstrip the developed countries in the near future. So it is reasonable that developing countries want a bigger voice in the IMF and World Bank.

Full text available on line at: http://usa.chinadaily.com.cn/epaper/2011-06/24/content_12765854_2.htm
 
"... A report from Standard Chartered Bank last week showed China's foreign exchange reserves expanded by $196 billion in the first four months of this year. About 75% of that investment was in non-U.S. dollar assets. This is the biggest gap between accumulated reserves and purchased U.S. debt by China in at least five years. As the dollar's value weakens, China has taken steps to distance itself from the currency, and attempted to strengthen its own by investing more in gold and other assets.

Money Morning Chief Investment Strategist Keith Fitz-Gerald said China's diversification means the yuan is backed by better assets than other countries' currencies. "That is why the yuan is likely to emerge as a new reserve currency, and yet another argument for owning the yuan as an investment," said Fitz-Gerald. 'This is the full circle nobody expects and one of the reasons I frequently refer to China's yuan as the only currency on the planet with adult supervision.' ..."From: http://moneymorning.com/2011/06/27/invest-in-the-yuan/
 
China "... Land of opportunity. Huge population. Highly educated. Strong work ethic. Relatively clean balance sheet that could be useful down the road to mop up any problems along the way. Big infrastructure projects that are opening up the hinterland to the same prosperity of the coastal cities. But there are certainly risks:

Corruption. There was a recent report that came out of the Chinese government’s equivalent of the Auditor General reporting on ethics in the big State Owned Enterprises (SOEs). They flagged 2 dozen problems in these large firms, such as overspending, embezzling money, accounting discrepancies, etc. ...

Education. The formal education system is very good at teaching a lot of young Chinese to memorize facts. Those analytic skills are important but the system doesn’t encourage enough creativity and originality. ...

Lifting the middle-class enough to drive a consumption economy. ... The next 5-year plan will try to accomplish this by beefing up social security, healthcare and education (all of which individuals had to shoulder by themselves previously). The hope is that they will ease consumers’ consciences about this and make the confident enough to spend like Americans. ...

Paying the bill for all the infrastructure projects. The big infrastructure projects are truly something to behold in China, compared to our decaying infrastructure from the 1950s. ... China spent $300 billion on high-speed rail in the last decade. Can they keep spending like that?...

Corporate Governance and Accounting Standards. ... There has to be transparency and confidence. These strings of frauds doesn’t help. For the moment, many Chinese companies defend themselves by saying that they shouldn’t be persecuted because of the bad actions of a few “bad apples.” ...

Income Inequality. As long as the economy is growing and jobs are being created, the Chinese people are happy. ... If {2008 crisis} happened again, and a government stimulus was too slow in responding, I would be worried about an unhappy populace. Chinese are not shy about sharing their displeasure compared to Americans. ...

Water. It’s not the lack of oil or natural gas or iron ore that worries him about China’s future. It’s water. It doesn’t get talked about enough. It should.

From: http://blogs.forbes.com/ericjackson/2011/06/29/what-are-the-7-biggest-risks-facing-china/

BT comment: Author, a financial adviser, just returned from 2weeks in China and is avoiding the common comments like banks with bad loans, etc.
 
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"... Zhang Gong, director of the Beijing Municipal Commission of Development and Reform, said that the average wages of the city's urban population increased 4.4 percent (after deducting price factors) in the first half of 2011, while the average wages of the city's rural population increased 6.5 percent. The local government's goal was 7 percent. ..." From: http://usa.chinadaily.com.cn/china/2011-07/22/content_12965828.htm

Note "after deducting price factors" is their way of stating "real purchasing power" or "real salaries", which in the US are now approximately static but were declining under GWB. Billy T notes that the current 5 Year nation plan calls for 5% real salary increase each year, and in 2010 real salaries in rural areas increased nearly 10% and out of pocket health care / medical cost dropped from 2/3 to only 1/3 of the cost. In the coastal areas, there is now a labor shortage.

In 2010, Foxcomm raised nominal salary 30% (inflation was about 5%) but still had to close two factories due to lack of workers. They were reopened in the interior. Jobs are plentiful there too as China builds new railroads, power plants, smart grids, and 100 new cities for 1 million population each. A few of these new cities are not yet occupied, but will be as China is both urbanizing and still growing, despite the one child policy which is being relaxed. (Farms are being consolidated into large, more efficient, mono-cultures, etc. as it is now legal for farmers to lease their farm and move to the growing cities.) - China is now making the same transition from the "family farm" to "agra-business" that the US made in the early 1900s.
 
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Sleeping, traveling and dining by Indian train, Maharajas' Express, which is one of six luxury trains in India. Cost is Rs 212,000 ($4,725) for a single cabin for the seven day trip ($675/day). Round trip starts from Delhi and passes through Agra, Gwalior, Khajuraho, Bandhavgarh, Varanasi, and Lucknow, before returning to Delhi.

As is true in China, some in democratic India are “more equal than others.”
 
Many have wondered what S.A.M. looks like, what she does when not posting:

Perhaps like this?
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watching the country slide by from her single cabin on the Maharajas' Express?
 
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Rasing salaries 30% in 2010 did not get the number of workers Foxconn needed so they closed two coastal factories and re-opened them in the interior. Now they are turning to automation to solve China's labor shortage:

"... Foxconn, the maker of Apple's iPhone and iPad, {plus products for HP, Sony & Nintendo} plans to rely more on robots for manufacturing over the coming years, allowing the company to invest more in research and development and save on labor costs. ...

Local Chinese media, however, reported that {CEO} Gou had said the company plans on deploying 1 million robots over the next three years to complete routine assembly tasks. Foxconn currently uses 10,000 robots.

Foxconn needs to automate more of its manufacturing processes in order to make up for labor shortages and stay ahead of its competitors, said Amy Teng, an analyst with research firm Gartner. ..." From: http://www.computerworld.com/s/arti...acturing?source=CTWNLE_nlt_dailyam_2011-08-01

Billy T comment: China's "One Child" policy will make it necessary for China to turn ever more to automation in the future as the average age of the population increases. China is expected to see it total population start to decline in a couple of decades more. Less resources will be needed after that. China is preparing for the future very well, IMHO.
 
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Billy T said:
Rasing salaries 30% in 2010 did not get the number of workers Foxconn needed so they closed two coastal factories and re-opened them in the interior. Now they are turning to automation to solve China's labor shortage:

"... Foxconn, the maker of Apple's iPhone and iPad, {plus products for HP, Sony & Nintendo} plans to rely more on robots for manufacturing over the coming years, allowing the company to invest more in research and development and save on labor costs. ...

Local Chinese media, however, reported that {CEO} Gou had said the company plans on deploying 1 million robots over the next three years to complete routine assembly tasks. Foxconn currently uses 10,000 robots.

Foxconn needs to automate more of its manufacturing processes in order to make up for labor shortages and stay ahead of its competitors, said Amy Teng, an analyst with research firm Gartner. ..." From: http://www.computerworld.com/s/arti...acturing?source=CTWNLE_nlt_dailyam_2011-08-01

Billy T comment: China's "One Child" policy will make it necessary for China to turn ever more to automation in the future as the average age of the population increases. China is expected to see it total population start to decline in a couple of decades more. Less resources will be needed after that. China is preparing for the future very well, IMHO.
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There is plenty of foreigners who need jobs,Americans,Africans,Mexicans etc.I wonder if China will ever consider hiring foreigners? Just a thought.
 
X-Man2 said:
There is plenty of foreigners who need jobs,Americans,Africans,Mexicans etc.I wonder if China will ever consider hiring foreigners? Just a thought.
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I bet only if they have some very special skill China needs. Generally as China moves higher up on the value added chain, they want other countries to remain lower down and send China low cost components for inclusion in their higher value added products, not their unemployed.

Also historically Chinese have considered themselves to be a superior race, not to be "contaminated" by foreign blood. I suspect that POV is still quite common.
 
"... China’s Dagong Global Credit Rating has announced a downgrade of US sovereign debt to A from A+. According to Xinhua, Dagong's decision was based on "the fact that the U.S. national debt growth had outpaced economic growth and fiscal revenue, hurting the country's debt-paying ability."

Xinhua also reports that the cut to A with a negative outlook was a result of the increased debt-limit and fights between political parties and that the interests of the country's creditors are short of systematic protection both politically and economically. ..."
From: http://www.stateofthemarkets.com/re.../1/0/a128a07a5141afcecb987e6fc9197c5499c8e3d7
 
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