Is Asian Money contributing to inflation, world food & petrol prices?

[BV]

Yes it is and here is why:

During the sub-prime crisis, Spengler, a writer in Asia Times
wrote this:

"A major theme is missing from the central bankers' annual retreat at Jackson Hole, Wyoming.
Everyone is talking about the collapse of the US home-price bubble and the danger of recession, but no one is talking about the suckers who financed the bubble, namely the savers of Asia. Asia will do so no longer.
If the United States wants Asian investors to continue to take risk on its shores, it will have to allow them to buy solid US companies, rather than the sort of debt derivatives that blew up this summer."

Asia Times Online :: Asian news and current affairs - Western grasshoppers and Chinese ants

Well...it now seems like some Asian money is indirectly flowing into quality stocks but this is not enough.
As the US chose to devalue it's currency to get out of their financial crisis now China has trillions of worthless US$.
They can't exchange it and they can't get much interest for it, so it seems that they are now spending it stocking up on raw materials, food and petrol.
This will increase world inflation, will cripple some economies and will bring misery and hunger to many people around the world.

The following article explains

Rice, death and the dollar
by Spengler
The global food crisis is a monetary phenomenon, an unintended consequence of America's attempt to inflate its way out of a market failure. There are long-term reasons for food prices to rise, but the unprecedented spike in grain prices during the past year stems from the weakness of the American dollar. Washington's economic misery now threatens to become a geopolitical catastrophe.

Here is the link to the whole article
Asia Times Online :: Asian news and current affairs

 

[chilliaa]

Yes it is and here is why:

During the sub-prime crisis, Spengler, a writer in Asia Times
wrote this:

Asia Times Online :: Asian news and current affairs - Western grasshoppers and Chinese ants

Well...it now seems like some Asian money is indirectly flowing into quality stocks but this is not enough.
As the US chose to devalue it's currency to get out of their financial crisis now China has trillions of worthless US$.
They can't exchange it and they can't get much interest for it, so it seems that they are now spending it stocking up on raw materials, food and petrol.
This will increase world inflation, will cripple some economies and will bring misery and hunger to many people around the world.

The following article explains


Here is the link to the whole article
Asia Times Online :: Asian news and current affairs

Dont get me started on this topic
Step back for a moment and think rationally, where did all the western countries get money to finance their deficits. Whilst western consumers were spending in excess of their earnings, asians were saving. Asian savings were and are transferred to western economies as the balancing item. This cannot keep occuring, eventually there will have to be payback. Watch out when this occurs.

 

[GreatPig]

Whilst western consumers were spending in excess of their earnings, asians were saving.

I don't think it's general consumer spending levels that are the issue, but rather spending on imports specifically. With say the US and China, the US deficit arises due to Americans spending more on Chinese imports than vice-versa, and I think this deficit has mostly arisen due to the cheap labour costs in China so that a lot of manufacturing has been moved to China (and other Asian cheap-labour countries).

Since the US pays in US$ rather than gold as in the old days, there's no limit to how big the deficit can grow, since they can just keep printing US$ (figuratively speaking). And what can the Chinese do with all those US$ they receive in payment for their trade surplus? Not much other than invest them back in the US, where they multiply in the US banking system fueling even more credit. Whether these funds are directly invested in quality investments or crud that allows credit expansion, it puts upward pressure on asset prices and leads to bubbles, as we are currently witnessing.

Unfortunately both the US and China are between a rock and a hard place. If the US restricts imports from China, that will drive up prices of those imported items in the US adding to inflation, since presumably locally made equivalents will also be more expensive. And that will also reduce China's exports, leading to oversupply and economic slowdown, which would likely have a knock-on affect to Australia's exports to China. Unless China can stimulate local demand more, which would probably mean higher wages (and thus inflation), they need to keep exporting more and more to fuel their economic growth - and consequently fuel bigger and bigger asset bubbles in the US and other deficit countries. When these bubbles burst, everyone will suffer.

Talk about a highway to hell...

A good book on the subject is The Dollar Crisis by Richard Duncan.

GP

 

[BV]

Dont get me started on this topic
Step back for a moment and think rationally, where did all the western countries get money to finance their deficits. Whilst western consumers were spending in excess of their earnings, asians were saving. Asian savings were and are transferred to western economies as the balancing item. This cannot keep occuring, eventually there will have to be payback. Watch out when this occurs.

Chilliaa

Spengler seems like a good writer but he also seems like he is a little biased.
It wasn't only the Japanese and other asian savers who lost money due to the subprime loans, it was also European pension funds (German etc) and some Australian funds as well.
What happens when you are chasing up high returns?
The risk increases.
Have you read the articles in detail?
It's a very difficult situation we are in
and it will probably get worse before things get any better.

Here is some more food for thought
http://www.somersoft.com/forums/showthread.php?t=42380

 

[grossreal]

hi all
whats all that worthless money good for
for me simple
equity lend against it in the country to be used in another country.
now its no longer worthless.
and yes they have a lot of it.
the us dollars is not alot of use unless you can leverage off it and you can.
and you can do it very effectively

 

[BV]

hi all
whats all that worthless money good for
for me simple
equity lend against it in the country to be used in another country.
now its no longer worthless.
and yes they have a lot of it.
the us dollars is not alot of use unless you can leverage off it and you can.
and you can do it very effectively

Grossreal

But the Chinese don't have the need for additional borrowings & leverage.
They can buy outright whatever they want and they are not likely to run out of US$ any time soon. In fact they have so much money that they don't know what to do with it.
What worries me though is their massive consumption & stockpiling of world resources because they are pushing up energy and food prices and contributing to inflation.

Cheers

 

[grossreal]

hi bill.
they don't need the currency
but I do
and the use of equity lending is something unusual to there market.
this to me will be a new frontier.
and the equity locus of europe are nothing
if you can get the dragon locus formulated correctly.
undestanding equity trading is not hard
we are one of the leading countries and our people are some of the best at it (the trouble has been to gain lines or links to the equity holders and to this end hell of a lot of people and intitutions are pumping there time and staff into this field).
most groups in the equity holder areas use cash and the as alot of people say and its in the links of this thread
just like you get the political group you voted for the same goes for a free market.
this is the market that the equity locus perform at there best.
the reason that the equity guys have not been to the front of the news papers for some time is very simple.
they bought into the revalued companies and alot have been hit not by sub prme but by the likes of tha anz opes and the insurance companies in the states that have hit there values.
they are not out by a long shot I think they have been hit around the head a few times.
and a couple are a bit punch drunk at the moment.
but they are always looking for equity, as I am and the biggest amount of equity is in two places at the moment china and india
both of which do very little equity trading.
and this equity is true cashflow equities and is made up out of cash,property,and value.
this I see is alot bigger problem to be worried about.
unless you are on the other side of the ledger and are sailing with a good equity player.

 

[alexlee]

But the Chinese don't have the need for additional borrowings & leverage.
They can buy outright whatever they want and they are not likely to run out of US$ any time soon. In fact they have so much money that they don't know what to do with it.
What worries me though is their massive consumption & stockpiling of world resources because they are pushing up energy and food prices and contributing to inflation.

Wait until the US market slowdown reveals just how much useless stuff (factories, office buildings, white elephant 'biggest and best' projects) the Chinese have been building. They'll need their reserves to bail out their banks.
Alex

 

[BV]

Wait until the US market slowdown reveals just how much useless stuff (factories, office buildings, white elephant 'biggest and best' projects) the Chinese have been building. They'll need their reserves to bail out their banks.
Alex

Yes, it will all be revealed.
I've read somewhere that the Chinese are building a new city
the size of New York every 6 months and are moving their young population into those cities.
If this continues there will be no people left in the farms and people will starve.
I wonder if this has something to do with their stocking up of rice.

 

[alexlee]

Yes, it will all be revealed.
I've read somewhere that the Chinese are building a new city
the size of New York every 6 months and are moving their young population into those cities.
If this continues there will be no people left in the farms and people will starve.
I wonder if this has something to do with their stocking up of rice.

Rice prices have already come back down. Read about the JAPANESE stockpile of rice. That is SUCH a classic Japanese bureaucrat's solution. The WTO requires us to import rice? Ok, we'll buy it, but we won't actually release it into the Japanese market because the LDP depends on rural support. So who cares if our people paying triple the price for domestic rice. We'll just store it all and use it for food aid and animal feed.
Alex

 

[trendsta]

my view ..

the main cause of inflation is: many trillions 'created' from thin air, then used to speculate on assets, rather than for productive use and to remove various demand/supply constraints ... over time spiral grows and grows ...

as of recently many of these constraints are being hit due to rising demand and not enough supply.. medium-long term unlikely to be resolved until capital (human, financial, time) is moved from excess areas (financials, asset speculation sectors etc) and moved to areas where there are genuine demand/supply constraints...

i.e. get rid of excess brokers, insurers, real estate agents, and other financial workers and move them to engineering, mining, farming etc... in practise this takes time and requires some pain - a recession/slowdown.

Similar situation happened in 00-03 .. excess tech companies went bankrupt and excess people from tech sector were made redundant and eventually went to other 'more productive' areas .. possibly became real estate agents in US.. lol

 

[boomtown]

Meh.

You need to be careful whenever dealing with trade statistics with China. Trade statistics only show the value of the goods exchanged - they dont show who ultimately gets the economic benefit of the transaction.

For example, Mattel manufactures Barbie dolls in China and sells them cheap in the US through WalMart. The Barbies retail for about $19.99.

But Mattel actually owns the factories in China. So it is just trading with itself. Any "profit" that the Chinese factory makes (which is minimal) just goes back to Mattel shareholders.

The only thing that stays in China are the wages which are about $1 US per hour. But when you read the trade stats the US just bought 4 million Barbies at $19.99 each and all of a sudden the US has another $80 million to throw on its trading deficit. When really US shareholders are getting the benefit of 95% of that $80 million.

Sure the Chinese have built up massive stores of foreign currency and have done very well. But so have the shareholders of multinationals.

 

[boomtown]

Wait until the US market slowdown reveals just how much useless stuff (factories, office buildings, white elephant 'biggest and best' projects) the Chinese have been building. They'll need their reserves to bail out their banks.
Alex

The debt attached to the average Chinese company (all major companies are 60% owned by the State) is absolutely staggering.

And if they do manage to pay their debt then corruption takes care of any profit.

 

[topcropper]

Yes, it will all be revealed.
I've read somewhere that the Chinese are building a new city
the size of New York every 6 months and are moving their young population into those cities.
If this continues there will be no people left in the farms and people will starve.
I wonder if this has something to do with their stocking up of rice.

Just a few short years ago, 50% of Chinese workers were farmers or farm workers. Those workers just managed to feed the entire population.
At the same time, 3% of Australian workers were farmers. Those farmers fed the nation with one third and exported the other two thirds.

Along with the industrialisation of China, will be the mechanisation of China's agriculture. There are 300 million farm workers that will no longer be needed once China mechanises it's farms.

Farm workers leaving the rural areas doesn't mean everyone will starve.

See ya's.

 

[grossreal]

hi all
yes china is building masses of cities and they have no intention at this stage of stopping in the near future.
but what do cities need.
yes you quessed it infrastructure.
and this is the big boom
roads and rail
water and drainage
and no this is not the major at this stage
its the smaller areas that will be majors.
as for companies
well the problem is that these have been run as regional monopolies.
and they did not need to make a profit.
now they do not only that they want to list.
and if I have anything to do with it acouple will
and these are not little companies.
the whole business community want to list.
problem
how
as its not in there manuals or training so it new to them
but not to us.
alot of people on this board will have been involved in a list of some sort from ipo to seed capital to buying start up company shares.
in china this is not the case.
most would not understand or been involved in anything like this.
yes they are buiding a new city every 6 months the size of sydney.
but also they have more millionaires per capita then the us.
and most have never got involved in a list at all.
now thats interesting

 

[alexlee]

The debt attached to the average Chinese company (all major companies are 60% owned by the State) is absolutely staggering.

And if they do manage to pay their debt then corruption takes care of any profit.

The debt IS from corruption. Many of those companies wouldn't get loans if they weren't protected by the local party cadre. The biggest problem (and this was a big part of the problem with Japan as well) is how / when the loan is considered 'bad'. In Japan banks kept lending money to their favoured clients to pay interest (i.e. capitalising interest) to avoid forcing them into bankruptcy. I see no reason why the Chinese wouldn't do exactly the same thing. When companies actually go out of business even WITH bank protection....
Alex