Sunday, October 16, 2005

CHINESE SPENDTHRIFT PROGRAM FAILS

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By Elaine Meinel Supkis

Treasury Secretary Snow who got his office because the previous TS was canned for suggesting the Iraq war would cost more than $120 billion, is hard at work trying to convince the Chinese that our way of doing things is great and they should imitate us, not the Japanese.

Needless to say, this is failing in translation. From the NYT:
Administration officials say the plan is part of an effort to put the yuan into a broader debate over China's lopsided reliance on exports as the main source of economic growth.

The plan, to be discussed in two days of talks here and in Beijing, calls for China to speed up the privatization of state-owned companies, including banks; to develop a Chicago-style futures market for currency trading; to establish an independent credit-rating agency; and to crack down on bailouts for banks left holding bad loans.

"What we tried to do is take a quantum leap in sophistication and scope," said Timothy D. Adams, undersecretary for international affairs at the Treasury Department. "It gives you a picture of the truly complex nature of what we are trying to do."

Though many of the ideas are familiar, and often supported by Chinese leaders in principle, the list reflects an increased effort to lecture China about internal financial issues.
In between begging on his knees for more money so we can continue to run deep in the red, he thinks he can tell the Chinese how to best run a country? This is like the local lush leaving his barstool to go across the street to lecture a banker about money managment. "Jusssh don't pay attenshion to yer tab, jusssh tell da bartender you will pay next Tuessshday! Sheee?"

Yup, very convincing.
That could backfire.
Hahaha. Flaming train wreck ahead!
Chinese leaders invariably bristle at pressure from American officials, and they could view the new American "priorities" as an unwelcome intrusion.

The new tack comes as Treasury Secretary John W. Snow continues to show little progress on the volatile economic dispute with China over exchange rates.
You know, the Japanese manipulate our currency totally. All they do is buy our debts and bouy up the dollar. Every time we tried to shake them they laughed and kept the exchange rate in a very strict 105-110 limit. It seldom deviates. Do we see the Japanese Prime Minister sending envoys here to beg us to steady our currency? Ha. See?

Speaking of which, here is a Japanese take on all this: From the Asahi Shimbum:
In China today, a popular satirical song goes something like this: The hospital doors are wide open. But we can't go in because we're broke. Once we get sick, we panic. Oh, how we yearn for the days of a planned economy.

It is not uncommon to hear such songs whose lyrics are full of venom about the state of China's medical services.

When the state ran the economy from top to bottom, employers took care of medical and other expenses. But with the advent of a market economy, many state-owned companies were disbanded. Suddenly, people were having to fork out for their own medical care.
Well, we could have China do it our way: nearly bankrupt the government trying to keep a creaky, ill designed system running, one that brings ruination upon anyone without extensive health insurance.
Market forces have brought havoc to not only medicine but also welfare and pension systems. The vast ocean of poor people across China are in dire straits indeed.

Even the government-affiliated research institute of labor and wages has warned that the social order will no longer be maintained in five years.

Against this background, riots have flared in rural areas after farmers were dispossessed of their land for paltry sums in the name of development.

Inevitably, corrupt local government officials and developers are colluding. According to a pro-mainland Hong Kong newspaper, 60,000 riots erupted across China in 2003.
The Japanese won't be so indelicate as to mention the explosion of anti-Japanese riots, eh? The peasants certainly are on the march and this certainly scares the Chinese leaders who will take care of this through various means, none of which will please Americans since this means ending the gravy train we all enjoy riding.

The Japanese didn't fear any backlash for their ineptitudes because the ethos of Japan right now is to commit suicide which many young and middle aged people do, in great numbers. The mind-numbing despair is so great in Japan, the main form of entertainment is end of world violence or impossible sexual tensions that are relieved in antisocial ways. The ability to build families is collapsing rapidly. Japan is imploding in a spectacular way. They hide behind a stronger America but this is a dead end as America, when it goes inevitably bankrupt, will be forced to abandon Japan.

From Yahoo news:
The declines in the first half of the month haven't made anyone calmer. The Dow Jones industrial average has fallen 281.36 points, or 2.66 percent so far. Percentage declines in the Nasdaq composite and the Standard & Poor's 500 are even steeper: The Nasdaq has lost 4.03 percent and the S&P, 3.44 percent.

Now that we're midway through the month, it's worth looking back at what past Octobers have brought and looking ahead to assess investors' biggest fears for the immediate future.

If investors think October has the potential for absolute misery, it's because most of the market's darkest days came in October: the crash of 1929, the Black Monday crash of 1987 and 1989's Friday the 13th mini-crash. According to "The Stock Trader's Almanac," Oct. 11 has historically been the worst trading day of the year.
The thinking is, October is when brokers and financial officers living in NYC suddenly notice it is getting very nasty outside and the sunny optimism fades rapidly.

After 9/11, this gloom rose but Bush and Greenspan rained money and loot and tax cuts on everyone and we had a very false prosperity built entirely on running up gigantic debts. Every time the red ink was slowed, the economy died so they kept it going until now when the dragon of inflation and the goblin of cost over runs team up to destroy profits and kill jobs. Just in time for Halloween.
Investors have been hoping for months that the Federal Reserve would signal the end its short-term interest rate increases. Instead, notes form the Fed policy maker's Sept. 20 meeting read "further rate increases will probably be required."

"We are now convinced the Fed it going to tighten through year-end and into 2006," Rosenberg said.

Kleintop's assessment of the Fed watch is "we're all at that same point of wondering what the end is."

Why is this so important? Because stocks rally near the end of a Fed tightening regime.
Cheap money ain't gonna happen no more. Note this article doesn't mention China anywhere. The only way we can create cheap money is the ancient way: print a lot of dollars. This will kill the currency as the Japanese cannot buy up $200+billion loose dollars every year. Their trade deficit is only $60 billion a year. The Chinese could in tandem buy up this excess currency with the Japanese since both run a deficit of about $200 billion a year but alas for us, it is time for them to kill the big, fat goose, America.

Urp.

There is no stock market rally coming out of this mess.

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