Daily Economy Thread

[Woolfsmck 2,763]

I ain't Economy, but China's government devalued their currency on purpose, so exports would increase.  It also, hurts the U.S. because of a strengthening dollar making U.S. products more costly.  The Liberal spending policies of debt riddled economies (Greece,PuertoRico ect.) are catching up to them and they can't get the same loans they used too.  

Countries with money are less likely to loan out money .... 

 

[Economy 52,861]

Sinking currencies point to jitters about emerging economies

Aug 21, 3:18 PM (ET)

By PAUL WISEMAN and JOSHUA GOODMAN

WASHINGTON (AP) — The damage spans the globe.

Thailand's baht. Kazakhstan's tenge. South Africa's rand. Peru's nuevo sol.

In emerging markets worldwide, currencies are plunging over fears that developing economies are on the verge of a crippling fall. Success stories until recently, emerging economies are seen as casualties now — of slower growth in China, plunging prices for commodities like oil and iron ore, the prospect of higher U.S. interest rates and homegrown threats.

The damage has spilled across oceans, with the turmoil jolting investors in New York, Tokyo and Europe. Investors there worry that China and other major emerging economies will reduce their imports. They also fear a trade-disrupting currency war as some countries desperately lower their currencies' value to gain a competitive edge. A lower-priced currency makes a country's goods cheaper for foreigners.

(AP) In this Monday, June 8, 2015 file photo, Turkish Liras, Euros and U.S....
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The Dow Jones industrials plunged 400 points, or 2.4 percent, in afternoon trading Friday on top of a 358-point drop Thursday. It's down more than 6.5 percent in the past month. Tokyo's Nikkei index shed 3 percent Friday.

For all the markets' jitters, many economists say they remain confident that the U.S. economy is resilient enough to withstand a slowdown in the developing world. And Europe's economy appears to be emerging from its long slump.

Even so, the trouble in emerging markets is a surprising and unsettling reversal.

"It's remarkable just how things turned around so quickly," says Neil Shearing, an economist at Capital Economics and a former British Treasury official.

Consider Peru. Three years ago, its capital, Lima, was chosen to host an International Monetary Fund's meeting of global finance officials in what was seen as a celebration of Latin America's arrival in the economic big leagues.

But with the event six weeks away, Latin America's outlook has descended from boom to gloom. Peru's economy has steadily slowed, and its currency, the nuevo sol, has plunged 2.5 percent against the U.S. dollar in the past month.

And Peru boasts one of the region's healthiest economies. Brazil's economy is expected to shrink this year and next. Its currency, the real, is down 7 percent the past month and more than 30 percent the past two years.

It's hardly just Latin America. Kazakhstan's currency plummeted this week after the government decided to let it trade freely. The South African rand fell this week to a 14-year-low against the U.S. dollar. Turkey's lira hit a record low against the dollar this week.

Hung Tran, an executive managing director at the Institute of International Finance, expects developing countries to post 3.8 percent economic growth this year, down from 4.3 percent in 2014. The institute is on the verge of cutting that forecast further.

Analysts point to a primary culprit:

"It's all coming from China," says Masamichi Adachi, an economist with JP Morgan Chase in Tokyo. "Brazil, South Africa, many countries are commodity exporters, and the final destination is all going to China."

The Chinese economy is slowing more sharply than most people had expected from the double-digit growth rates of the mid-2000s. The world's second-biggest economy is expected to grow 7 percent this year, which would be its slowest pace since 1990.

Beijing is trying to manage a transition from rapid growth based on exports and often-wasteful spending on factories, real estate and infrastructure to slower, steadier expansion based on consumer spending.

That transition means China would need fewer raw materials — Chilean copper, Nigerian oil, Brazilian iron ore. That helps explain why China's pullback has loosed carnage in global commodity prices: The Standard & Poor's GSCI commodity index, which tracks 24 commodities prices, is down nearly 20 percent this year.

Emerging markets were already feeling the squeeze last week, when China devalued its currency, the yuan. That step ignited a semi-panic.

"The devaluation is a red flag about China's current economic situation," says Kurt Braybrook, who runs a Shanghai company that does quality control work. A falling yuan raises the risk that other countries will devalue their currencies to catch up.

Most countries can't blame China and the vagaries of the global commodities market for all their problems.

South Africa is battling labor strife. Brazil is contending with a corruption scandal at state-owned oil giant Petrobras. Turkey is struggling to form a government while its military battles the Islamic State extremist group and Kurdish separatists.

Adding to the pressure: America's Federal Reserve is expected, perhaps at its September meeting, to raise the short-term rate it controls from near zero. Investors could respond by moving even more money out of emerging markets to seek higher U.S. rates. That would lift the dollar higher and emerging market currencies even lower.

A Fed rate hike could also squeeze emerging market companies that have borrowed in U.S. dollars. Those companies would struggle to accumulate enough local currency to pay their now-more-expensive dollar-denominated debt.

Tran at the Institute for International Finance says dollar borrowing by emerging market companies surged from $700 billion in 2010 to $2 trillion through March.

The rising dollar and the hoard of dollar loans recall the 1997-1998 Asian financial crisis. Back then, a currency sell-off triggered an emerging market debt crisis that became a disaster for countries such as Indonesia and South Korea.

But the picture is less alarming now, a--lysts say. For one thing, developing countries have stockpiled foreign reserves that they can use to buy their own currencies and stop a crisis.

What's more, emerging market companies that borrowed in dollars in recent years tended to take out longer-term loans, notes Joaquin Cottani, Standard & Poor's chief economist for Latin America. During the '97-'98 crisis, companies had taken out short-term loans and couldn't refinance when the loans came due during a panic.

"Countries have learned from their experiences," says Monica de Bolle, visiting fellow at the Peterson Institute for International Economics.

 

http://apnews.myway.com/article/20150821/us--world_economy-currency_chaos-769b39e5a5.html

World’s Richest People Lose $182 Billion in Market Rout

http://www.bloomberg.com/news/articles/2015-08-21/world-s-richest-people-lose-182-billion-as-market-rout-deepens

Any idea why the currency has been dropping, @Economy 

which currency? many have fallen. which are u talking about?

[Economy 52,861]

I ain't Economy, but China's government devalued their currency on purpose, so exports would increase.  It also, hurts the U.S. because of a strengthening dollar making U.S. products more costly.  The Liberal spending policies of debt riddled economies (Greece,PuertoRico ect.) are catching up to them and they can't get the same loans they used too.  

Countries with money are less likely to loan out money .... 

 

most countries dont loan money tho. the only times that happens is when they contribute to a bailout, or when countries make a wealthfund and buy government debt as part of the assets in the fund...

 

Some Countries that bought other countries government bonds in their wealth funds include Norway (worlds largest wealth fund), Saudi Arabia, China, Russia to name a few. Although some of these have debt they owe themselves

 

Some countries lent in the form of bailout like Germany and France

 

Generally speaking countries loaning less wont affect sovereign debt much though because most government bonds are bought by ordinary investors, financial institutions, fixed-income funds etc not from other governments

[Shadow 6,697]

which currency? many have fallen. which are u talking about?

the Chinese Yuan?

The Chinese government Intervened and Moved the yuan relative to the market. Many investors and politicians overreacted and have been shouting currency war when the yuan has been tied to the U.S. Dollar and economic growth in the States over its trading partners has increased the chances of the Fed to raise its interest rate.

http://www.straitstimes.com/opinion/fears-of-currency-war-overstated

[Luc 4,776]

China still has a lot of potential though... corruption, ineffective police, oversized military, improductive working force and still a lot of potential for new infrastructure projects. They are simply changing from an export-based economy to a consumption- and debt-based economy. The China now, is India in 10-15 years and Nigeria in 30-50 years.

[Economy 52,861]

China still has a lot of potential though... corruption, ineffective police, oversized military, improductive working force and still a lot of potential for new infrastructure projects. They are simply changing from an export-based economy to a consumption- and debt-based economy. The China now, is India in 10-15 years and Nigeria in 30-50 years.

Thats a diffifult transition... Especially since its not happening naturally at a normal pace...

 

if they had a freer market, service companies would invest as Chineese consumers gradually uped consumption

 

But the Chineese economy is too planned and the Government is trying to force it in one direction...

 

while its headed in a good direction, its gonna be a bumpy and challanging transition

[Luc 4,776]

Thats a diffifult transition... Especially since its not happening naturally at a normal pace...

 

if they had a freer market, service companies would invest as Chineese consumers gradually uped consumption

 

But the Chineese economy is too planned and the Government is trying to force it in one direction...

 

while its headed in a good direction, its gonna be a bumpy and challanging transition

I don't know about having a free-er market... China already is quite a capitalist country where economic growth is more important than democracy or human rights.

[Economy 52,861]

I don't know about having a free-er market... China already is quite a capitalist country where economic growth is more important than democracy or human rights.

economic growth doesnt mean free

 

their government decides a lot. They got capitalist-communism its a weird mix

[Woolfsmck 2,763]

http://www.ft.com/cms/s/0/a75466b0-4656-11e5-b3b2-1672f710807b.html?ftcamp=traffic/partner/feed_headline/us_yahoo/auddev,traffic/partner/feed_headline/us_yahoo/auddev#axzz3jkVa80m6

European industrial groups hit by push to renewable energy

Gas Turbines for electricity are seeing little or no demand for the future in the EU due to the Green Energy push.....This will reduce demand for natural gas, but won't really affect transportation demand for oil ...

 

[Economy 52,861]

http://www.ft.com/cms/s/0/a75466b0-4656-11e5-b3b2-1672f710807b.html?ftcamp=traffic/partner/feed_headline/us_yahoo/auddev,traffic/partner/feed_headline/us_yahoo/auddev#axzz3jkVa80m6

European industrial groups hit by push to renewable energy

Gas Turbines for electricity are seeing little or no demand for the future in the EU due to the Green Energy push.....This will reduce demand for natural gas, but won't really affect transportation demand for oil ...

 

europe does always seem to be the first to jump on new trends for most things

[Economy 52,861]

Eish so my Country just officially entered recession

 

ughhh  

[Luc 4,776]

So China will fire 300000 military personnel which is a very good sign seeing as their military does nothing and would probably help Russia in a war.

[Woolfsmck 2,763]

So China will fire 300000 military personnel which is a very good sign seeing as their military does nothing and would probably help Russia in a war.

No way man.  Only thing they would do is protect their own territory ...

[Economy 52,861]

No way man.  Only thing they would do is protect their own territory ...

China i dont think is even that bad with their army...

 

North Korea and Russia who have smaller armies make bigger threats

 

China has the 2nd biggest military after the US. i think theres plenty of countries WW that would cause more trouble than China if they had the same sized militayr. Seriously China has actually been pretty tame...

 

I think the US just sees them as a rival because they are the runner up to the US as the super power so of course the US sees China in disfavor because they are catching up in many ways and are the biggest and only threat to the USA crown atm

[Economy 52,861]

http://www.reuters.com/article/2015/09/10/us-usa-oilexports-house-idUSKCN0RA1V620150910

 

The US has passed a bill to repeal the export ban that has been in place for 40 years now... It still must be voted on by the house but is expected to pass

 

It is generally agreed with the surge in US production, this export ban no longer makes sense. There is relativeely good energy security now with the US producing most of their own oil, and Canada and Mexico filling in most of the gap so very little now comes from Middle East

 

Additionally this would give American producers access to higher prices, and refineries could no longer rip off producers by buying cheaper US benchmark but selling refined products at world prices