BRIC+ News & comments

[Billy T]

... BTW, I think that figure is wrong, or somehow misstated. According to BusinessWeek, Brazil only issued 70k work visas last year - and that was apparently a huge year for work visas ...

It surely is correct, because few other than the Brazilians who left Brazil 10 or so years ago in search of jobs, speak Portuguese, most now returning are Brazilians and do not need a work visa.

If 9 out of 10 returning are Brazilians, then your 70K becomes 700,000 which is even far greater* than the data I gave, so perhaps only 7 or 8 out of 10 now coming to Brazil are Brazilians returning. Also some non-Brazilians, like me, don´t need work visas either, just to retire in Brazil. I did have a visitor´s visa each time I came to check out conditions here, but now am a "permanent resident" with no visa of any type.

* My 550,000 (post 599) was the total from three different countries, not just the USA. The migration from Brazil to USA before the 2008 economic problems has definitely reversed now as my local paper reported at least a year ago but actual numbers are hard to document.

 

[Billy T]

"... The interest rate on a one-year loan will be cut by a quarter percentage point to 6.31 percent effective Friday, the {Chinese} central bank announced. It was the first rate cut since November 2008. ...

Among other measures in recent weeks, Beijing has announced 66 billion yuan ($10 billion) in spending on building affordable housing and 26.5 billion yuan ($4.2 billion) to subsidize sales of energy-efficient appliances. ..." from: http://finance.yahoo.com/news/china-cuts-key-lending-rate-111718900.html?a=2

 

[Billy T]

Insignificant by itself, but not as part of a growing trend is:

"... Pfizer’s 20-person surveillance testing group in Groton, Connecticut, part of the company’s Scientific Laboratory Services team that tests products manufactured by contractors, will be moving to Singapore sometime next year. Pfizer confirmed the planned move in an email, saying it was a cost-cutting measure. ..." From: http://pharmalive.com/news/index.cfm?articleID=843732&categoryid=9&newsletter=1

 

[Billy T]

China's Top Ten Trade Partners, 2010:

Rank Country/region …Volume (billions of dollars) …% change over 2009
1 United States 385.3..….29.2%
2 Japan ……….297.8..….30.2%
3 Hong Kong ..230.6…...31.8%
4 South Korea ..207.2 ….32.6%
5 Taiwan …….145.4……36.9%
6 Germany …..142.4……34.8%
7 Australia …..88.1……...46.5%
8 Malaysia ….74.2………42.8%
9 Brazil ……..62.5………47.5% China´s fastest trade growth with a top 10 partner (Chinese trade now more important to Brazil than the US is).
10 India …….61.8……….42.4%*

*China and India have agreed to bring trade into balance at value of 100 billion per year in their mutual currencies, with no use of dollars. – A bonus for India that normally has a chronic trade deficit with China.
Note also that only China´s US trade grew less than 30% YoY. With some of its lesser trading partners (in Africa & SE Asia) China´s trade is up more than 50% YoY. The US, with 22.7% of China´s top 10 traders, is still the most important single country taking Chinese exports, but not as large as China´s trade with the EU is.

Also note that US / Chinese trade is only about 20% of Chain´s total trade when the lesser than top 10 are also included, and China´s exports to US are at most 12% of China´s exports. If they suddenly fell to zero, the growth in exports to the other nations taking 88+% of China´s exports would in one year keep China´s total exports still expanding!

China´s export history with world followed by the US percentage, is:
2001 . 266.1 . 38.4%
2002 . 325.6 . 38.5%
2003 . 438.2 . 34.8%
2004 . 593.3 . 33.2%
2005 . 762.0 . 32.0%
2006 . 968.9 . 29.7%
2007 . 1,217.8 . 26.4%
2008 . 1,430.7 . 23.4%
2009 . 1,201.6 . 24.6%
2010 . 1,577.9 . 23.1% A 40% reduction in US relative importance to China in 10 years.

Above data from: https://www.uschina.org/statistics/tradetable.html

On the YoY time scale, China has been reducing its holdings of US Treasury paper, and decreasing the average maturity, most years but “operation twist, which made longer term interest relatively higher than short term paper, recently reversed that trend. None the less the time is coming when China´s growing domestic demand and shift of exports to non-US nations will permit China to tell the US:

We don´t need to sell to you any more and you can only buy if we lend to you, which we now stop: Go to Hell. FED is already main holder of US Treasury promises. No nation can prosper by selling its debt to itself and there seems to be no reason to expect the annual deficits to decrease.
US needs China much more than China needs the US. China is winning the economic WWIII. US is headed for depression.

 

[Billy T]

Note the difference between China & US retail sales growth:

"... If you’re like most Americans, you haven’t been doing much shopping lately. In fact, U.S. retail sales fell by two-tenths of a percent in May. That marked the second-straight month of negative growth, the first time that’s happened in more than two years.

Plus, if you back out auto sales, the May number was even worse — negative four-tenths of a percent. The report was an unwelcome surprise, because a drop in gasoline prices* during the month should have freed up more dollars for clothes, food and other products.

Obviously, the numbers are bad news for retail stocks, but the problem is much bigger than that. Consumer spending accounts for 70% of economic growth, so a slowdown like this could cause serious damage to second-quarter GDP.

But while things are going from bad to worse here, it’s a completely different story on the other side of the Pacific Ocean.

China’s Ministry of Commerce just reported that May retail sales there grew by 13.8% on a year-over-year basis. In addition, China’s 100 biggest retailers increased their sales by 20.9% in the first five months of the year. ..." Part of the text form this video: http://www.uncommonwisdomdaily.com/chinese-consumers-pick-up-the-slack-from-america-14449?FIELD9=2

* Billy T comment: There are several reports that the Saudies have boosted oil production to a 30 year high as part of a deal with Obama to hold gasoline prices low until after the US election. Then the Saudies will cut production way back to drive gas prices above $5/gallon to compensate for their losses on their current sales.

I think these reports may be true, but perhaps are just coming from the Romney campaign with no support, but Saudi oil production is now at a 30 year high!

 

[Billy T]

"... The {Brazilian} real depreciated 1.2 percent to 2.051 per U.S. dollar at 3:46 p.m. in Sao Paulo. The yield on the interest-rate futures contract due in January decreased two basis points, or 0.02 percentage point, to 7.71 percent. It touched a record low 7.65 percent on June 14.

“Inflation isn’t a problem now, and the central bank will have to cut borrowing costs to stimulate investment,” Andre Perfeito, the chief economist at Gradual Investimentos, said in a phone interview from Sao Paulo. “The outlook abroad is getting worse again and commodities are falling. The central bank doesn’t have any reason not to keep cutting rates.” ..."
From Bloomberg (but via search box with Brazil as entry)

Billy T comment: This is good news for me. I leave, with wife, for annual visit with heirs* in USA in a few days - when we return I´ll get at least $20,000 more out of USA. Perhaps much more, but then will need to fill in forms, instead of just put cash in pockets (10K officially is my wife´s as that is the "no-forms" limit / person.)

See post 585 & 577 of this thread to understand more about Brazil´s "Poupança glitch" problem in interest rates dropping - All making people who had hot money in Brazil want dollars to take funds out - more dollar demand means those people with Real wanting to convert to dollars must pay more real for each dollar. (R$2.05 /$ now!). Thus, two factors** (EU´s problems making dollar stronger) + drop interest rates in Brazil, make this an exceptionally good time for me to get more out of dollars and into Real.

------
* All assembling for two weeks in rented beach house on NC´s outer banks.

**Both factors will not exist in less than two years (EU uncertainities over and certainly no more Euro into dollars flood by then & China will again be driving commodity prices higher). Thus, just on the change in FX rates - I should be able (but will not) go back into dollars with at least 15% dollar gain.

 

[Billy T]

"... Since its launch two years ago, the world's biggest and most ambitious biometric database has gathered the information of 200 million people. But it's not run by the US or China, but by the Indian Government. 12 billion fingerprints, 2.4 billion iris scans and 1.2 billion photographs of faces. That's a hell of a photo album. ..." From: http://www.idgconnect.com/blog-abstract/545/dan-swinhoe-india-biometrics-on-an-eye-popping-scale

Billy T notes something inconsistent here. - Even if all 10 fingers gave finger prints that is 1.2 billion > 200 million people. I suspect they ment millions, not billions and that 200 million more people have been processed in the last two years. However, the basic story - India is leading world in biometirc ID of its population is probably correct. Why I don´t know. I would have guessed China would hold that position.

 

[Billy T]

"... China and Brazil on Friday announced a currency exchange, (190 billion yuan for 60 billion real equal to $30 billion dollars), a step toward a broader agreement among emerging economies to pool resources as a bulwark against world financial uncertainties.

"We recognize that developed economies are still in crisis. The BRICS (Brazil, Russia, India, China and South Africa) are the most dynamic, and we'll continue to expand," Mantega told media at the United Nations' sustainable-development conference, Rio+20, in Rio de Janeiro. ..."

From: http://usa.chinadaily.com.cn/world/2012-06/22/content_15518807.htm

Bold added by Billy T who notes that with mutually exchanged currencies in reserves equal to 30 billion dollars, there is no need for dollars even with imbalanced trade for many years.

ALSO at Rio+20 Earth Summit:

"... Making structural changes to its economy is China's top priority, despite the slowdown in growth, said Zhu Min, deputy managing director of the International Monetary Fund on Thursday. "Changing structure is more important than economic growth for China today," Zhu said in an interview with China Daily on the sidelines of the Rio+20 Earth Summit. China needs to move from a more export and investment-driven model to a consumption-driven one, and make changes to improve people's income by cutting taxes and increasing wages and to further open the service sector, he said. ..."

From: http://usa.chinadaily.com.cn/epaper/2012-06/22/content_15518335.htm

Billy T comment: the bold is exactly what Billy T forecast years ago that China would do as its main export markets (US & EU) are broke and can only buy if China lends them the money, which China is reluctant to do more of and now is doing less.

 

[Workaholic]

China to create special currency test zone

http://edition.cnn.com/2012/06/29/business/china-qianhai-currency-zone/index.html?hpt=hp_bn1

Excerpts:

China plans to create a special zone to experiment with currency convertibility in Shenzhen, the city where it introduced key economic reforms three decades ago.

The measure will enable Hong Kong banks to lend renminbi directly to companies in Qianhai Bay -- a new economic zone on a peninsula across the water from Hong Kong -- according to Chinese state media.

The Qianhai experiment follows a series of steps taken by the Chinese government to move towards making the renminbi a convertible currency that analysts believe could one day vie with the US dollar for pre-eminence in global markets.

But China has installed speed bumps to ensure the renminbi cannot travel freely across the border for pure financial transactions. Beijing is aware that hasty capital account openings can spark situations such as the 1997 Asian financial crisis.

Liu Ligang, an economist at ANZ, said the risks of the latest measure were greater than those attached to the 1980s opening.

"Money is fungible. Like water, it flows to low levels. So if money can flow from Hong Kong to Qianhai, the money will flow from Qianhai to other parts of China that can offer higher returns."

He said China had to ease its control of interest rates and deepen the domestic bond market before opening the capital account to lessen the risk of speculative capital rushing in and local companies accumulating dangerously big foreign debts.

Comment: Holding RMB seems like a good idea. China's leaders seem to be on top of things as far as economic management goes...compared to US/European leaders at least.

 

[kmguru]

US needs China much more than China needs the US. China is winning the economic WWIII. US is headed for depression.

The fact that our exports are going up...it may take a little longer than the prediction but we are heading there...

 

[Billy T]

The fact that our exports are going up...it may take a little longer than the prediction but we are heading there...

The main driver of the coming depression is the growing debt and the trade balance is of little importance. In fact an improving trade balance prior to the depression and even significant trade surplus during the depression is to be expected.

The US mid west will export every more grains, etc. to feed the pigs in China, etc. (location of more than half the world´s pigs as pork is the favorite Chinese meat with rapidly growing demand as they become richer, and eat more meat). Also Asian demand for thermal coal, which US has in abundance will help with US trade balance, even in the depression. During the depression, Americans will not be importing as much as even during the current "belt tighting" / deleveraging. These factors will give the US a trade surplus during the coming depression.

SUMMARY: The improving balance of trade is an early indicator of an approaching depression, for nations like the US which mainly export items with very low labor content* - few jobs - and have lost the ability to compete globally in jobs that employ many.

* The highly industralized, capital intensive, coal mining and agricultural of the US for export together can employ less than 5% of the population. The low comparative level of math and sciences eduction in the US, means that India, etc. will do the development of software, etc. more cheaply than US can. The world´s most modern factories are no longer in the US - many were paid for by rich Americans - their "trickle down" tax savings of course went where the labor costs were much lower and the markets much larger - (300+ million Chinese with purchasing power growing by double digits annually and most yet to buy their first refrigerator or TV - not the "replacement only" market of the US.) And China is less than half the Asian market!

What will the 95% do for a job? The US cannot avoid depression by local jobs, like one man cutting the hair of another or flipping burgers at Big Mac.

 

[kmguru]

Should not higher exports provide jobs to the masses in the USA? That can stabilize the debt issue for a while?

 

[Billy T]

Should not higher exports provide jobs to the masses in the USA? That can stabilize the debt issue for a while?

not many jobs in the industries where US will be exporting - thermal coal and mid west food, both very low labor and high capital industries. Less than 5% of US jobs, even if railroad and port workers are included.

I won´t check, but am quite sure that once the FED stops printing money and interest rates return to normal, then the total balance of payments surplus (partly increased by lower imports) will pay only a tiny fraction of the interest cost on the growing debt. I.e. not only will government spending increasingly exceed its income, but government will be borrowing to even pay the interest on the old debt.

Also important source of growing debt is the increasing collection of Social Security by the swelling number of retiring baby boomers. They were in their highest tax paying years before they retired so this is a "one / two punch" hitting the government.

 

[kmguru]

BT...what do you think about this chart?

 

[Billy T]

BT...what do you think about this chart {in post 614}?

Probably the best way to underst

 

[quadraphonics]

(Chart is GDP per person)

No, it's share of world GDP - that's why the vertical axis is labeled in percentages, and all the countries add up to "100" every year. How would you even draw a chart of share of world GDP in per-person terms?

but also note that most of US GDP has zero value two years later.

This statement has no discernable relationship to any feature of the graph in question. This is just you spouting your pet talking points without any relevance.

I.e. if the chart had only two year (or more) lasting value per capita, China´s share would be about twice that of the US as China´s GDP does not include things like NFL, Basketball, baseball, broadway shows, etc. and the associated cost like trips to see them, hotel rooms when out of town and beer etc. drunk thers and in bars celibrating after victories, etc.

So you honestly think that China doesn't have sports and entertainment, nor drinking? You think they're some kind of Stalinist charicature of ascetic worker drones, who do nothing but hard labor and consume nothing but subsistence cereals or something?

Clearly you have never been to China and are simply talking out of your ass. If not, please provide some actual data on expenditures on sports and entertainment in China and how they compare to other countries. That, or drop this whole offensive, misleading canard. This is a country that spent billions on fancy-looking buildings for the previous summer Olympics, after all.

I will just guess to illustrate my point about the capital deployed per job:

Yeah, why deal with reality when you can just make up numbers that support your pre-existing bias. That's how science works, right?

but China has a labor shortage, driving wages up (on national average) ~15% annually and three times faster than inflation.

If you believe the inflation statistics produced by the CCP, that is. But, those are nothing but baseless propaganda - nobody seriously thinks they're accurate. Here's a post by business professor at Tsinghua University's Econ and Management school on the subject:

http://chovanec.wordpress.com/2012/04/21/bloomberg-inflated-notions/

CPI is calculated based on a basket of goods, the exact composition of which is not disclosed by Chinese authorities, although some analysts have done a decent job of trying to re-engineer it. I’m sure you could come up with a basket that shows consumer inflation at 3.6%. Whether that reflects what consumers are actually feeling, though, is another matter. The picture is complicated by the fact that the government knows what is in the basket and can target those items for price controls and other forms of intervention. That keeps the prices for the select items — and the index — down, for a while at least. But it doesn’t solve price pressures, it only distorts their impact on the economy.​

And labor shortages don't normally cause wages to increase faster than inflation, in the first place. They drive wages up, sure, but inflation follows right along - because the increased wages show up as increased production costs, which show up as increased prices.

When was the last time in US you saw a human digging a ditch for pay (not in his own yard)?

I see it all the time. It's just that said human tends to have a high school education and be operating a backhoe. Apparently we're to believe that we'd be more "competitive" if we replaced that with a dozen illiterate peasants digging with their bare hands or something? It would certainly make it easier for the government to ensure a "rising standard of living" for them, but nobody would call it "progress."

 

[kmguru]

Well, things are not going well I assume...let us regroup...and think differently...

 

[Billy T]

"... Indonesia is already by far the world's largest thermal coal exporter. In fact, in 2011 the nation exported 280 million metric tons, more than twice the level exported by its nearest rival, Australia. (As a point of reference, Indonesia exports almost 11 times more coal than the United States). According to statistics from Australia's Bureau of Research and Energy Economics (BREE), in 2011 Indonesia accounted for 35% of the world's thermal coal exports.

Additionally, Asian countries currently import more than two thirds of all exported coal. Placed in the center of the sea lanes* that dominate Asian trade, Indonesian exporters are in a particularly strong position to deliver coal to the big developing importers like China and India, as well as the developed markets of Taiwan, South Korea and Japan (which has ramped up coal use in the wake of the Fukushima nuclear disaster). ..."
From: email from Peter Schiff´s Euro Pacific Capital´s 20 July news letter.

*Billy T comment: Perhaps US will export less cola, not export much coal as I had assumed early even even though it has a few hundred years of US energy needs in coal as it is much farther from the demand centers.

 

[quadraphonics]

*Billy T comment: Perhaps US will export less cola, not export much coal as I had assumed early even even though it has a few hundred years of US energy needs in coal as it is much farther from the demand centers.

Strange how all of your "BRIC+" comments are about the USA. I guess that's what the "+" stands for?

How about you rename this thread "BRIC+ Eats USA" if you're determined to make it about nothing other than that?

 

[Billy T]

Strange how all of your "BRIC+" comments are about the USA. I guess that's what the "+" stands for?...

No the + stands for other not fully developed countries.

Originally Posted in 617 by kmguru :
"... Should not higher exports provide jobs to the masses in the USA? That can stabilize the debt issue for a while? ...”

As I try to answer direct questions, Billy T replied:
"...not many jobs in the industries where US will be exporting - thermal coal and mid west food, both very low labor and high capital industries. Less than 5% of US jobs, even if railroad and port workers are included. ..."

Then today when I learned Indonesia, (one of the "+ countries") already was exporting nine times more thermal coal than the US is and has lower cost to mine and transport to #1 & #2 importers (China & India) I felt need (in post 618) to correct my prior post replying to kmguru.


This is the second time TODAY you have nit pick at a post of mine as "off thread" when I was replying to Jeeves and Carcano here: http://www.sciforums.com/showpost.php?p=2956243&postcount=24
To save you (and others) the trouble here is post 24 in full:

It is reply to others (first Jeeves then Carcano) Jeeves has admitted part of his post I corrected was in error. (I often correct errors.)

In any case, even if not just replies, fact that nations which once lead the world and had their currency universally accepted, do need to adjust to lower living standards (relative to others, if not absolute, due to technology and medical advances), so post showing this adjustment is coming to US with rise of China is very much on thread.

Note that it is actually on thread. Who made you the "On Thread" god? Don´t you have something more rewarding to do than nit pick at my posts for being "off thread"?