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luni, 10 august 2015

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duminică, 9 august 2015

Mish's Global Economic Trend Analysis

China's Exports Plunge 8% in July; Spotlight on US Trade Imbalance With China

Posted: 09 Aug 2015 04:25 PM PDT

In addition to bubble-busting events in real estate and the Chinese stock market, China now has to deal a plunge in exports.

Following Saturday's report Chinese Exports Slump Over Eight Percent, analysts expect more China stimulus.

Chinese exports tumbled 8.3 percent in July, their biggest drop in four months and far worse than expected, reinforcing expectations that Beijing will be forced to roll out more stimulus to support the world's second-largest economy.

Imports also fell heavily from a year earlier, in line with market forecasts but suggesting domestic demand might be too feeble to offset the weaker global demand for China's exports.

Exports to the European Union fell 12.3 percent in July while those to the United States dropped 1.3 percent. Demand from Japan, another big trading partner, slid 13 percent.

"A recovery in external demand remains far off and economic growth will continue to rely on domestic demand, which implies policies should continue to be relaxed in the second half," wrote Qu Hongbin, China economist at global bank HSBC.

China recorded a trade surplus of $43.03 billion for the month, below forecasts of $53.25 billion.

Economists also blame a strong yuan for the export weakness, with ANZ Research estimating the currency's nominal effective exchange rate has risen by 13.5 percent since June 2014.

Analysts say Beijing has been keeping its yuan strong to wean its economy off low-end export manufacturing. A strong yuan policy also supports domestic buying power, helps Chinese firms to borrow and invest abroad, and encourages foreign firms and governments to increase their use of the currency.

"These factors suggest that China's exports will continue to face strong headwinds," Liu Ligang and Louis Lam said in an ANZ Research note on Saturday, adding that they doubted Beijing would hit its trade growth target of 6 percent for this year.

Cries for More Stimulus

Excessive stimulus created property bubbles and an enormous stock market bubble.

The average stock speculator has not even graduated from high school. The Washington Post reports:

"Before peaking on June 12, China's stock market had risen by about 150 percent in a year, completely divorcing itself from increasingly worrying economic and corporate fundamentals. Frenzy gripped the nation; from high school students to farmers, ordinary Chinese citizens pooled ideas to take advantage of what looked like easy money. Thousands of people gathered in "street stock market saloons" in Shanghai from early afternoon until late in the evening to swap tips."

Yet analysts want and expect more stimulus. The cry "do something" is overpowering even though huge problems were created precisely by "doing something", typically stimulus to meet absurd growth targets.

Mish Action Item Proposal

No one in their right mind believes Chinese growth is as high as China proclaims. And if China wants to do something that truly makes sense, I offer this simple proposal: abolish growth targets completely.

Then, no analysts could make inane comments about needing more stimulus to meet targets, because there would be no inane targets to hit.

Spotlight on US Trade Imbalance With China

On May 5, Fortune reported U.S. trade deficit with China reaches all-time high.

Just as the debate over free trade deals heats up in Washington, free trade advocates were hit with the ill-timed news that the trade deficit surged to $51.4 billion in March, up sharply from $35.9 billion in February.

The rise was due mostly to an increase in imports, which skyrocketed by 7.7%, while exports increased just 0.9%. The U.S. trade deficit with China was $37.8 billion, or 74% of the total and the highest ever monthly deficit with that country on record. The overall monthly deficit was the highest since 2008, while the increase from February to March represented the largest monthly leap since 1999.

Current US Trade Numbers

The above report was based on March trade, no doubt affected by the end of the West coast port strike.

So let's hone in on the BEA Balance of Trade Report released August 5, for the month of June.

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $43.8 billion in June, up $2.9 billion from $40.9 billion in May, revised. June exports were $188.6 billion, $0.1 billion less than May exports. June imports were $232.4 billion, $2.8 billion more than May imports.

The June figures show surpluses, in billions of dollars, with South and Central America ($3.5), OPEC ($0.7), and Brazil ($0.6). Deficits were recorded, in billions of dollars, with China ($29.0), European Union ($13.9), Germany ($6.8), Mexico ($5.4), Japan ($5.2), Canada ($3.1), South Korea ($2.3), Italy ($2.2), France ($1.7), India ($1.6), Saudi Arabia ($0.5), and United Kingdom ($0.2).

The balance with Canada shifted from a surplus of $0.2 billion in May to a deficit of $3.1 billion in June. Exports decreased $1.1 billion to $23.0 billion and imports increased $2.2 billion to $26.2 billion.

The deficit with Mexico increased $1.3 billion to $5.4 billion in June. Exports increased $0.1 billion to $20.0 billion and imports increased $1.4 billion to $25.5 billion.

Comparison

For July, China recorded a $43 billion trade surplus with the world. The latest numbers from the US are for June, but let's assume they will not change much.

Of China's $43 billion surplus, $29 billion of it is from the US, the other $14 billion with the rest of the world.

Analysts claim the "Yuan exchange rate has risen by 13.5 percent since June 2014".

And on May 26, the IMF made this statement "Appreciation over the past year has brought the exchange rate to a level that is no longer undervalued."

Yet, the US deficit with China persists, as do cries of Yuan manipulation in Congress.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Buchanan: Obama vs. Bibi

Posted: 09 Aug 2015 09:24 AM PDT

Pat Buchanan is the only high-profile Republican making any sense on the treaty with Iran.

I discussed this on August 3 in Gulf Countries Now Back Iran Deal; Buchanan Explains Republicans' No-Win Situation.

Obama vs. Bibi

Buchanan continues to hit them out of the park. Here is his latest: Obama v. Bibi -- Fight to the Finish

In his desperation to sink the Iran nuclear deal, Bibi Netanyahu is taking a hellish gamble.

Israel depends upon the United States for $3 billion a year in military aid and diplomatic cover in forums where she is often treated like a pariah state. Israel has also been the beneficiary of almost all the U.S. vetoes in the Security Council.

America is indispensable to Israel. The reverse is not true.

Yet, without telling the White House, Bibi had his U.S. ambassador arrange for him to address a joint session of Congress in March -- to rip up the president's Iran nuclear deal before it was even completed.

Bibi has since inspired and led the campaign to get Congress to kill the deal, the altarpiece of the Obama presidency.

Israel Ambassador Ron Dermer, a former Republican operative now cast in the role of "Citizen Genet," has intensively lobbied the Hill to get Congress to pass a resolution of rejection.

If that resolution passes, as it appears it will, Obama will veto it.

But this is not Israel's deal. It is our deal, and our decision. And Israel is massively interfering in our internal affairs to scuttle a deal the president believes is in the vital interests of the United States.

When the U.S. and Israel disagree over U.S. policy in the Mideast, who decides for America? Them or us?

Why does Barack Obama take this? Why does John Kerry take this?

One can only imagine what President Eisenhower would have done had he seen Bibi at the rostrum of the U.S. House of Representatives, ripping apart his Middle East policy. Or had Ike learned that an Israeli ambassador was working the halls of Congress to kill an arms deal he and John Foster Dulles had just negotiated.

Lest we forget, Ike told his wartime colleague, Prime Minister Anthony Eden, to get his army out of Suez or he would sink the British pound. Ike then told Prime Minister David Ben-Gurion to get his army out of Sinai or face U.S. economic reprisals.

Eden and Ben-Gurion did as they were told.

That was an America respected by friend and foe alike.

When Harry Truman felt that Gen. Douglas MacArthur had been insubordinate in resisting presidential restrictions on his actions in Korea, Truman fired the general and astounded the nation.

Yet this president and John Kerry have been wimpishly seeking for weeks to placate Netanyahu. And Bibi is no Douglas MacArthur.

Time to stop acting like wusses.

The president should declare Dermer persona non grata and send him packing, then tell the Israeli government we will discuss a new arms package when you have a prime minister who understands that no nation interferes in the internal affairs of the United States. None.

That could bring Bibi's government, with its single-vote majority, crashing down. And why not? After all, Bibi was a virtual surrogate for Mitt Romney when Mitt was trying to bring down Obama.

Obama and Kerry are never running again. Deep down, they would surely relish taking Bibi down. And they could do it.

Deal or no deal, it is time America started acted like America again.

The Way to War

Bibi is the way to war. So are the positions of any Republicans who wish to undo this deal. It is both hypocritical and unwise for Republican candidates to moan the US cannot trust Iran, then give Iran every reason to not trust the US.

To help end this mess, the US should do exactly what Buchanan says, send Israel Ambassador Ron Dermer packing.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Seth's Blog : "I didn't do anything"

"I didn't do anything"

That's the first and best defense every toddler learns. If you don't do anything, you don't get in trouble.

Somewhere along the way, it flips. "I didn't do anything when I had the chance," becomes a regret. The lost opportunity, the hand not extended, the skill not learned...

Wouldn't it be great if we knew what our regrets were when we still had time to do something about them?