Off Topic:

Latest from Bill Fleckenstein
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CreditProblemsAreTooBigForTheFedsToFix.aspx

Credit problems are too big for the feds to fix

Wall Street is hoping for a bailout of the reckless mortgage sector that violates the whole concept of capitalism. It won’t work, because there’s too much mess to clean up.

Gambler Mae
The logical extension of that thought process would be: Let’s go buy 100,000 shares of Google (GOOG, news, msgs), and if it doesn’t work, we’ll get Gambler Mae (the new entity created for all losses) to bail us out; or let’s go to Las Vegas and put it all on black; or any other equally absurd examples we could come up with.

One of the lingering problems of the Greenspan Fed, besides its legacy of bubble-blowing, is this idea that one should always be bailed out. However, as noted in the past, I believe that the problem is too big to bail out, and therefore it’s not going to happen.

Brad –
on top of the auto sector, US construction weakness also played a part in depressing imports from Canada – Canadian exports of wood and forest products (mostly to the US) fell. On a relative basis they made up the smallest share ever in Canada’s merchandise exports (via CIBC – data goes back to 1971).

This is all part of the increasing role of energy in Canada’s trade and also the slowly declining share of US-bound exports in Canada’s total exports (declining very slowly I know – it still exceeds 75%) But exports to non- US destinations were up about 20% in June and 27% in H1

From Asia Times,
Nothing is scarier than the China scare
http://www.atimes.com/atimes/China_Business/IH04Cb01.html

The product scares and recalls the US media seem fixated on are the ones from China. It is the faulty tires, toothpaste, pet food, seafood and toys with a China connection that are making all the news, with cover stories, editorials and television programs harping on how China’s “substandard” manufacturing methods are putting American consumers at risk, how the factory to the world is actually one big sham, and proffering ways to keep off products with any trace of China.

As a bonus, the China horror story even has a feel-good subtext – nothing can match US quality; if China makes goods cheaper than the US, now you know how: by cutting corners. That is really what this is all about – rising imports from China. It is not the Chinese-product scare; what is actually being played out is the China scare – the antiquated, mercantilist fear of imports that China’s growing economic might evokes.

Nothing is scarier than the China scare
http://www.atimes.com/atimes/China_Business/IH04Cb01.html

BEIJING – A new food scare has gripped the United States, with the US Food and Drug Administration (FDA) urging people to throw away more than 90 different products, made at a Castleberry’s Food Co plant, from chili sauce to corned-beef hash to dog food, for fears that they are causing botulism, a muscle-paralyzing disease.

Seven cases of botulism have so far been reported. Most victims consumed a hotdog chili sauce made at the company’s plant in the US state of Georgia that has been temporarily closed. The recall has been expanded to Canada as well.

Castleberry’s is owned by Bumble Bee Foods, the largest branded seafood company in North America – not in China, the evil land from where all the toxic food and lethal products in the world supposedly emanate.

But the product scares and recalls the US media seem fixated on are the ones from China. It is the faulty tires, toothpaste, pet food, seafood and toys with a China connection that are making all the news, with cover stories, editorials and television programs harping on how China’s “substandard” manufacturing methods are putting American consumers at risk, how the factory to the world is actually one big sham, and proffering ways to keep off products with any trace of China.

As a bonus, the China horror story even has a feel-good subtext – nothing can match US quality; if China makes goods cheaper than the US, now you know how: by cutting corners.

That is really what this is all about – rising imports from China. It is not the Chinese-product scare; what is actually being played out is the China scare – the antiquated, mercantilist fear of imports that China’s growing economic might evokes.

From Asia Times, product defects from US products ignored by biased US news media
http://www.atimes.com/atimes/China_Business/IH04Cb01.html

The list of product recalls in the United States in recent months is almost inexhaustible. In March, Ford Motor Co recalled 2008 Super Duty trucks made in a Kentucky plant after reports of tailpipe fires in the diesel version of the vehicles; in June, California-based United Food Group recalled 34,000 kilograms of ground-beef products after they were suspected to have been contaminated with the bacterium Escherichia coli (E coli); and in July, Sara Lee Corp began to recall dozens of its whole-wheat bread brands made at a Mississippi bakery for fears that they contained pieces of metal.

But then again, while there is no market for reason, there is a big one for fear. That is why a Utah-based health-food company has launched a new label and ad blitz promoting its products as “China-free”. This is despite the fact that FDA records show China is not even the leading source of contaminated imports to the US. India and Mexico have surpassed China in “refused food shipments” over the past year, while the leader in rejected candy imports happens to be Denmark.

they forgot california spinach…

so you’re arguing that food/product safety issues are worse in india, mexico, denmark and kentucky et al? and therefore the implication is … ? china isn’t at fault? the US should concentrate its ire elsewhere? the US should import _even more_ from china?

to help you out, the correct response isn’t necessarily to point fingers or even execute culpable regulators, but to ensure proper oversight and enforcement; ‘passing the buck’ as it were would be troubling and do _even more_ to inflame the “the China scare” that you seem to be so scared of and intent on dissuading. personally, on this point, i find you less than persuasive.

as an aside, there are many such ‘ralph naders’ in china working to curb gov’t and corporate abuses… despite your clear nationalism, nominally defending egregious practices doesn’t help your cause any (or chinese exports) if china is so desperate to be respected on the world stage it might help to act more responsibly.

my sense is that the slowdown in us imports from China is tied to the broader us slowdown, not china specific concerns. plus toys and food are actually a small fraction of total chinese exports to the us — electronics and increasingly machinery are far more important. US imports of (non-energy) goods from canada are down, and i am pretty sure that doesn’t have much to do with concerns about canada’s safety record.

moreover, it is hard to see why concerns about product quality would only impact chinese exports to the us and not chinese exports to europe. safety concerns may lead to a slowdown in china’s export growth — in some sense seomthing has to lead to a slowdown — but i don’t that is what is driving the data we are now seeing.

Why does China persist in holding so much of its national wealth in US dollars? China needs to create some ten million new jobs a year to forestall politically dangerous unemployment; Chinese leaders are acutely aware that large numbers of idle young men form a most reliable recipe for political disorder.

The products of China’s factories are mostly sold abroad, again with the us taking by far the biggest share. Virtually everybody, not just the Americans pays for Chinese exports with
dollars; many of which China retains as foreign exchange reserves, largely in the form of US government debt securities; that is, in direct financing of the US government deficit.

As its spate of high-profile acquisitions around the world demonstrates, China is certainly recycling some of what it earns from trade to buy mines, companies and oil wells abroad. But more investment flows are coming into China than are leaving it; this is what finances the factories that dot the Chinese landscape and the skyscrapers sprouting everywhere in its cities. Meanwhile, China’s current-account surplus translates into a vast build-up of dollar holdings. Whatever else China’s leaders may think about the United States, they can have no illusions that the dollars they have accumulated can ever be redeemed for anything close to their current nominal values.

The problem with the suggestion that China sells its dollar hoard is that China has become too big a player. Any attempt to shift large parts of its reserves out of the
market for us government debt risks precipitating a US bond-market crash that would carry other markets with it and thereby defeat the purpose.

That leaves China with its present strategy: keep the engines of growth humming with exports on the one hand and a constant flow of foreign investment on the other. If rapid growth goes on long enough, China also hopes that when the dollar-centred global financial
regime unravels, it will have an economy sufficiently developed to permit the yuan to takes its place among the world’s major currencies without the need for external backing that the country’s dollar reserves currently provide. That will allow it to deal with the collapse in American purchasing power when the US is finally forced to live within its means.

Guest,

It is simply sheer nonsense that the Chinese intentionally export poisoned/defective food to the United States. The Asian supermarkets in New York, Los Angeles, and San Francisco stock mostly imported Chinese food products. Most food exported to the United States is consumed by ethnic Asians here in the United States. There isn’t a higher cancer or heart disease rate among ethnic Asians living in the US than the overall population. In fact, overall cancer rates and heart disease rates are actually lower for ethnic Asians due to lower consumption of US hamburgers, hot dogs, steaks, sausage, etc.

obviously there was no intent to harm, but even unintentional negligence is still negligence; so when it is discovered it should be corrected… is it really that complicated?

“China also hopes that when the dollar-centred global financial regime unravels, it will have an economy sufficiently developed to permit the yuan to takes its place…”

interesting that’s mcculley’s ‘price of development’ and dooley, folkerts-landau and garber’s ‘collateral’ argument…

“The Chinese don’t interfere in the internal affairs of any other sovereign nation”

well, maybe not. but providing loans and investment to angola supports its existing government, and buying sudan’s oil (and investing in Sudan) supports its existing government and for that matter, buying us treasuries helped finance a lot of US intervention around the world, or at least made that policy more consistent with tax cuts, a (not bursting) housing boom and a PE fueled rising equity market. And certainly us auto parts workers feel like China’s policy of pegging its exchange rate to the dollar at a level below the market rate interferes with the normal operation of the us economy, and in a sense they are right.

china is now big enough, and rich enough, that its actions inevitably have an impact on the world –no matter what china’s intent is.

isn’t dollar hegemony all about mixing business with politics?

“…desert has virtually overtaken Minqin County, moving eight to 10 meters a year and eating up whatever spots are left of a chain of oases known as the Hexi Corridor. This once connected China’s central plains with the grasslands in Xinjiang and separated the Tengger and Badain Jaran desserts. What’s more, the arid land is making inroads in Beijing… much of the problem has been caused by efforts to milk the land for more crops to feed a growing population. Forest clearing to create more room for farmland has destroyed the precarious balance of this fragile ecosystem… government has become so concerned about the developments that it is planning to move 20 villages – 10,500 people – and replace them with freshly planted grasslands and new trees to restore the ecological balance…” http://businessweek.com/globalbiz/content/aug2007/gb20070813_847938.htm

“…Particularly disturbing was the 15.4% year-over-year increase in food prices… inflation has been the cause of great social unrest… China has already taken steps to increase food supplies, which should ease supply shocks by the end of the year…” http://businessweek.com/globalbiz/content/aug2007/gb20070813_232671.htm

All this “business and political” fuss about China vs USA is just part of the “dictates” of the “global equilibrium” Brad persistenly prescribes to meaning “no US pain no China gain” — so let’s move on because eventually “what must happen will happen” in twists and turns beyond our ordinary folks’ control — so why even bother!

One could “politically” conclude that 1) Mattell’s recall of toys made in China and 2) Democrat presidential candidates making “irresponsible and hot air” threats against US foreign trade partners (without serious backing from your average US multi-national citizens/residents) is just putting on a show of “fake and misguided patriotism”, and thus the “Devil wears Made in USA (instead of Prada)” political facade.

U.S. toy industries should seriously stop placing orders with China for “junk” plastic non-biodegradable stuff for kids to play today and throw away tomorrow in our ever-decreasing unwanted landfills.

Ponzi Q (USA the Boss?) Globalization – tell that to the innocent animals being used against their wills in US labs testing ever since the Western use of chemical warfares and the atomic experiments – also, you forgot got about the Americans suffering from asbestos toxic water from the Gas companies, exposure to Nuclear plant radiation – the US government (the Boss) wins for ultimately getting the Biggest Blame Big time). Seriously, Americans treat/value their pets “socially better” than their neighbors and foreign trade partners, period – no wonder overseas “bedbugs” are coming and staying in good old USA!

Ponzi Q (USA the Boss?) Globalization – tell that to the innocent animals being used against their wills in US labs testing…

Does pointing out hypocrisy and flaws in A make what B is doing OK? Seems to me there is a logical fallacy somewhere here.

I wasn’t joking when I said US Foreign policy and Wall Street are cess pools. This doesn’t imply that many of the old farts running the Chinese Communist party are not corrupt nasty men. It also doesn’t mean that there are no corner cuttings in Chinese business practices that make products less safe. The acknowledgment of flaws in the US does not make flaws in China go away.

I understand your (and DCs) frustration with all the rah rah American jingoists who think the good old U.S. of A. can do no wrong. But is rah rah American jingoism any worse than rah rah Chinese jingoism?

Brad posed the question why isn’t the devalued dollar bringing down the U.S. imports more. There are several reasons possible: the lagged effect (J curve)that the higher price of imports in U.S. dollars will reduce the quantity of imports in a year or two from now even more. If the demand for the imported products is VERY inelastic to price changes, then the price increase in U.S. dollars will have to be very high to reduce demand. If you want an IPOD, you will pay any almost price I guess.

The other factor is income growth in the U.S. with real incomes rising by about 1% or so in the past 12 months. The rise in real income will raise the demand for goods, imported and domestic, and thus offset the higher foreign price effect.

On the Chinese (or other foreign country) side, if the Chinese Government acts to control or reduce imports of U.S. goods (in order to protect its own producers), the lower U.S. price for U.S. exports sold in China will not reach Chinese consumers. Thus, the devalued dollar does not stimulate an even higher rise in U.S. exports.

if i may say ponzi q, you’ve acquitted yourself quite well, indeed admirably, sir. seriously, good job it’s been an honour!