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Bernanke is at it again, but July 13, 2011

Posted by hslu in Economics, Energy, Global Affair, Gold, jobs, Oil, Politics, stocks.
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Will QE2.5 and QE3 generate jobs?

The answer is “NO.”

It will pop up stock market which Bernanke is intended to do. The rational behind that is people will feel richer and will spend more, hence, stimulate the sagging economy.

But the next run of printing will inevitably increase the commodity prices which will negate any wealth effect bought on by higher stock prices.

Here is the $64 million question:

Will you go out buy a car or a house if your stock portfolio is up by 15% but you food and transportation cost is up by $250 a month?

No way. Not when your neighbors are out of work since March and your wife’s job is on the line.

That’s why QE2 didn’t work and that’s why QE2.5 and QE3 will not work either.

But inflation will be worse all over the world and we will all suffer because of Bernanke’s reckless action.

Krugman is at it again. January 21, 2011

Posted by hslu in China, Economics, Global Affair, jobs, Nursing, Politics.
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Paul Krugman has been saying the same thing about the Renminbi for a long time. A bad economic theory from Krugman’s mouth can sound like true after he tirelessly say it a thousand times.If you ask 11 economists for their opinions, you get 12 answers. Krugman’s rant is the 12th answer here.
http://www.nytimes.com/2011/01/21/opinion/21krugman.html?_r=1&emc=tnt&tntemail1=y
I am not sure that a stronger Renminbi is good for the US unemployment picture. The US may get a few thousand jobs here and there in the exporting industries but everyone in the US will pay more at Wal-Mart for goods coming from China. Is that good for the US economy? I am not so sure.
As of now, there is no other country in the world can replace China’s manufacture capacities. No one. In 10 years maybe. But not now.
No other country has the infrastructure to produce the amount of goods that China is exporting to the rest of the world now. If the US wants to blame someone, I am telling you that it was all Bill Clinton’s fault. His pro-Chinese policy triggered a tsunami of foreign direct investments rushing into China to build plants after plants. These American companies did it not because they don’t like American union workers. It was because they liked the Chinese worker much more. They don’t take 10 days of sick leaves a year. They don’t take 30 minute coffee breaks once every a few hours. They don’t read newspapers on company time. They don’t ask for double digit raises every few years. They don’t have fat pensions. They don’t have unsustainable health insurance benefits. They don’t come late and they don’t leave early. And they got paid at 1/5 or even 1/10 of the union wage doing similar work.
Who is the guilty party here? Americans, look into the mirror. That’s who. I haven’t mention that all these Amercian companies wnat to sell something to all these Chinese workers too.
The US promotes free trade. This is free trade. Live with it, Krugman.
The US has no one to blame but itself. Krugman, wake up and face the reality. It is not Renminbi problem. the problem lies with the costs of American workers. It is structural. It is system wide. There is no use to blame the Chinese currency. The America’s workers are not as competitive as you might believe. Period.
Hmm, did I mention other American problems such as QE2, The TARP, the first Obama stimulus and second smaller stimulus disguised as pay roll tax relief? The world will face a bigger inflation problem thanks to the Fed and US Congress. Is that what the world needs? Krugman?
So, shut up! Krugman!
Don’t talk up the Renminbi to hide the real problem of the United States. You can’t use a stronger Renminbi to compensate for a less competitive American worker force. If it ain’t so, the American companies will not move their capitals to China. They would more than happy to stay in the US. No one put a gun to the heads of these companies’ CEOs. They did it willingly. They did it with the support of their board members.

China is looking after its own interest just like the US does. What Krugman is not aware of or his sheer inability to think clearly is that China is not a pure capitalism country. The central government in China can direct significant power to where the problem is  that no US agency or Obama can match its effectiveness.What Chinese government is doing now is take a moderate, step-wise approach just like Chinese have been doing for hundreds of years.
What didn’t work in the Nixon era may be the right medicine in China if it is done judicially. Everyone predicted a 6+% inflation rate in December for China. It came in at 4.8%. Did you check your numbers, Krugman?
If the Chinese government wanted to, their actions can be swift and focused. As for the US, they have to weigh the pros and cons of every policy and each one of these policies is subject to attacks whether the government like it or not. As a Democracy, by default, many policies are moderate in nature at best because special interest groups will make sure it is so.
Except the ObamaCare which Democrats got it done behind closed doors, lie to the public, phony math and illegal bribes using public money. Well, that a topic for another day.


http://www.nytimes.com/2011/01/21/opinion/21krugman.html?_r=1&emc=tnt&tntemail1=y

QE2 and 10-year Bond Yield December 13, 2010

Posted by hslu in Economics, Global Affair.
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QE2 is supposed to lower the long term interest rate which should bring the mortgage rate down as well.

Yet the 10 year Treasury Bond yield has been spiked up since Fed’s announcement.

I have said before that Bernanke is out of silver bullets and this latest Bond action shows just how out of touch with the real world Bernanke is.

Now what? QE3, anyone?

 

US in no position pressing China on Currency November 12, 2010

Posted by hslu in China, Economics, Global Affair, Obama, Politics.
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With QE2, the US is manipulating its currency with the intention to lower the value of US dollar further in the next few months in order to save its sluggish economy through export.

Isn’t this what US is accusing China of doing for the past several years? No wonder that G20 refuse to back Obama’s call to force China pushing up its currency, the Renminbi.

http://finance.yahoo.com/news/G20-refuses-to-back-US-push-apf-746192354.html?x=0&sec=topStories&pos=1&asset=&ccode=

 

Chinese has a saying that describe Obama’s action perfectly:

 

只许州官放火, 不许百姓点灯

zhi1 xu3 zhou1 guan1 fang4 huo3, bu1 xu3 bai3 xing4 dian3 deng1

While county officer can play with fire, common people are not allow to use a lantern.

What that means is Obama is trying to speak from both sides of his mouth and applying a double standard on America’s conduct on currency manipulation.

No wonder why no one in the world like the United States. The greedy Wall Street bankers gave themselves billions of year end bonuses while Americans and many people in the world are suffering the consequences of melt down of American’s financial system.

 

 

QE2 won’t work November 12, 2010

Posted by hslu in Economics, Global Affair, Gold, jobs, Politics, stocks, Taxes.
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QE2 will lower the long tern interest rate some but the excessive liquidity will not revive the US economy because the problem with US economy is not high interest rate.

It is spending the money we didn’t have over the last ten or fifteen years:  explosion of consumer credits, enormous national debt caused by federal government spending, wars, defense build-up and welfare promises, state and local governments wasted tax money on unsustainable services, greed on Wall Street, and incompetent regulators.

The transformation of US economy into a service oriented economy and the lost of high paying jobs to foreign countries exacerbated the decline of the United States.

The US consumers are waking up to the fact of a permanent decline of standard of living for the years to come and they are scared. This mind set can not be easily changed or reversed by a lower long term interest rate. In short, they will not spend as they did in the past.

American companies have cut their work forces to the bone in the name of higher productivity and corporate profit. They are sitting on tons of cash but they will not invest it in the United States because of tough environmental laws, higher wages and highest income taxes among industrial nations. Lower long term interest rate will not make them borrowing more.

The lower interest rates on the other hand has an unintended consequence: lower income for many people who rely on interest income to live their lives. In short, it reduces economic activities from these consumers.

What will QE2 do then? The excessive liquidity will drive up stock prices and real estates values in developing countries and emerging countries all over the world. It will destabilize these countries’ currencies and make them vulnerable to currency manipulation by hot money chasing higher returns. It will chase commodities and drive up inflation down the road.

Look out! This is the beginning of the end of another bubble which will hurt you and I more than the last one did to so many Americans.

 

 

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