US economy in negative growth

[474474]

and how much money is china printing? china has one of the highest interest rates in the world to their inflation rate. Its 6% to 1.8% inflation, so you get 4.2% interest for your money saving it in the bank instead wasting money on the stock market. America has 2% inflation right now and 0.25% interest rates.

So this means that if someone borrows from a US bank and saves in a Chinese bank, they will gain? Idk shit about economics sorry

 

[VCheng]

It is already happening. We are not India.

Just wait until the demographic tide turns between 2025 and 2035 due to the after effects of the one-child policy, leading to a rise the number of people to be supported per worker.

 

[BigDaddyWatch]

OMG! Negative growth for a quarter?! The sky must be falling! Oh the horror!

Actually, no. The US economy is the engine that pulls the world along. No worries.

Bank Of America Dumps $75 Trillion In Derivatives On U.S. Taxpayers With Federal Approval - Bank of America Corporation (NYSE:BAC) | Seeking Alpha

 

[VCheng]

Bank Of America Dumps $75 Trillion In Derivatives On U.S. Taxpayers With Federal Approval - Bank of America Corporation (NYSE:BAC) | Seeking Alpha

So what? Has the sky fallen?

 

[Chinese-Dragon]

Just wait until the demographic tide turns between 2025 and 2035 due to the after effects of the one-child policy, leading to a rise the number of people to be supported per worker.

Those 2030 and 2050 demographic predictions were based on the assumption that China would maintain the one-child policy until then, since they had no inside knowledge that the one-child policy was about to be scrapped (which has already happened).

Like I said before, that's the thing about demographic predictions, they take several decades at the very least, before they come to fruition.

But policies can be changed right now. The one-child policy was scrapped just now, several decades before any of these demographic predictions had a chance to come true, and policies can be changed again to support increased birthrates whenever necessary.

In any case, China will still have the largest amount of workers in the world, multiple times that of the entire American population. When the productivity of our workers goes up, the benefits of having such an enormous amount of workers will become evident. Look what we have already achieved with a relatively low level of per capita economic output.

 

[kbd-raaf]

Say what you will about the Chinese. But my job pretty much depends on their economic prosperity, please don't collapse, thanks.

That being said, @Chinese on these forums, the story is really not that good at the moment. Markets function mainly on sentiment and trendlines, sentiments aren't high and the trend is down.

 

[JayAtl]

Not true. The Dow Jones is over 16k, but unemployment rate is still high.

6.3% and it is lower than yours...

 

[VCheng]

Those 2030 and 2050 demographic predictions were based on the assumption that China would maintain the one-child policy until then, since they had no inside knowledge that the one-child policy was about to be scrapped (which has already happened).

Like I said before, that's the thing about demographic predictions, they take several decades at the very least, before they come to fruition.

But policies can be changed right now. The one-child policy was scrapped just now, several decades before any of these demographic predictions had a chance to come true, and policies can be changed again to support increased birthrates whenever necessary.

In any case, China will still have the largest amount of workers in the world, multiple times that of the entire American population. When the productivity of our workers goes up, the benefits of having such an enormous amount of workers will become evident. Look what we have already achieved with a relatively low level of per capita economic output.

It is not the absolute numbers, but the ratios, including retirees per worker, that matter. The one-child policy has been relaxed but the effects of all the years it was in force have yet to accrue. China cannot escape this demographic cliff.

 

[Al Bhatti]

BBC News - US economy contracted in first quarter of 2014

The US economy shifted into reverse in the first three months of 2014 shrinking by an annualised rate of 1%, official estimates have shown.

It is the worst economic performance since the first quarter of 2011.

It is also a big fall on the 2.6% rise in economic output in the final quarter of last year.

The US Commerce Department's first reading of gross domestic product (GDP) showed the economy grew at an annualised rate of just 0.1%.

The fall in output was blamed on an unusually cold and disruptive winter - one of the coldest in the US for 20 years - and a plunge in business investment.

Economists estimate the weather could have cost up to 1.5 percentage points of GDP.

However, the Commerce's Department's report did not estimate the effect of the winter weather.

Rebound

The fall was also twice as big as economists expected.

Most Wall Street analysts had forecast the economy to contract by around 0.5%.

But the Commerce Department said there was already evidence that the economy was rebounding, with data ranging from employment to manufacturing activity already pointing to a sharp acceleration in economic activity in the second quarter.

Tumbling exports, while not as severe as initially thought, combined with stronger imports in the first quarter resulted in a larger than expected trade deficit which shaved 0.95 percentage points off US economic output.

-----------------

Out of China's $4 trillion in currency reserves, about $1 trillion is invested in US treasury bonds.

This is not a good tactic for us. Lending to America does not provide high returns from the treasury bonds, and encourages them to spend beyond their means.

We should redirect our reserves into buying real tangible assets, and America should control their spending more.

The last credit crunch was bad enough, we should not be encouraging another one.

And when you listen to Bloomberg, the people there give you a very rosy picture.

 

[Al Bhatti]

May 31, 2014

How the US ended up exporting inflation
China’s was the only economy not to get burdened by this unwelcome entry

I am constantly fascinated by the whole dilemma of dealing with currencies, their values, and the effect of their appreciation or depreciation on countries and their economies.

The main concern that haunted central bankers was always on what is the right value of a country’s currency, and thereon everything else the country provides in terms of products or even services. The impact of such a delicate issue extends to every corner of the country, affecting everyone holding that currency in a bank, in an asset, or even under the mattress.

Throughout the article, this is one of the key things I will discuss, even if only partially. And now back to the million-dollar question; what is the right value of a currency?

For purposes of illustration, let’s take into consideration the US’ Quantitative Easing (QE) programme.

To many, and in the early stages of the programme, the belief was in how hard the US was trying to provide economies, especially emerging ones, with the cash most needed to end a long suffered recession.

The $85 billion a month purchase of bonds back by the Federal Reserve, directly and indirectly, was supposedly allowing breathing space for suffocating economies. Truth is, that wasn’t the case.

With interest rates close to zero in the US, attracting investments was such a tough task, especially with the much cheaper cost of production in emerging economies, and most of all in China.

On the other hand, interest rates could not be raised so that people won’t be encouraged to save but rather to spend and get the economy moving. Technically, interest rates were negative if you took inflation into account.

But if more people were being laid off and fewer people spending, others who could spend were worried of letting go of the money. With negative rates, people would rather stash their cash at home than deposit it in a bank that provides no real return and is subject to default anyway; so what can be done?

The answer was QE. If the US cannot increase rates and cap inflation, it still needed to print money that will keep pushing inflation up only if it’s circulated in the economy. There was no solution but to find a way to move this printed money out.

So came the launch of the QE programme. Emerging economies receiving dollars printed more of their currencies, which circulated in their own economies and pushed inflation up.

The decrease in a currency’s worth and the increase in prices made sure that products and services provided by the US economy were competitive to those of economies affected by the QE programme. And the US started selling again.

In other words, US exported its own inflation to get its own economy moving. As for China, and since the yuan is pegged to the dollar, this was simply unacceptable. As more dollars were received, China printed more yuan.

The catch here is that China controlled these from moving around by accumulating them and investing them abroad.

Whether through its sovereign wealth fund, SAFE, or by investing in US Treasuries, China has not only guaranteed a better future for its generations but also guarded itself from the type of inflation it doesn’t want running around freely. Especially with its export-based economy, this is crucial.

As for the US, it would rather want consumption to be domestic by diluting the dollar’s value. All in all, the US is making its exports cheaper, its local products relatively less expensive by exporting inflation, and is promoting spending and local consumption by keeping rates close to zero.

This, eventually, increases ‘Money Velocity’ — the number of times dollars exchange hands. The latter as well as the increase in money supply, with inflation being exported, made the perfect combination for growth in the US.

Since no one is questioning how much printing is taking place, and the Chinese are keeping more than 50 per cent of their holdings in the US anyway, it’s all good.

The thought I want to leave you with is this: Wouldn’t it have been better for the US to bail out its citizens rather than failed banks and financial institutions?

— The writer is a commercial consultant and a commentator on economic affairs. You can follow him on Twitter at عبدالناصر الشعالي (aj_alshaali) on Twitter

How the US ended up exporting inflation | GulfNews.com

 

[BigDaddyWatch]

So what? Has the sky fallen?

Not yet. But should Bank of America go bust it will. But in order to prevent Bank of America to go bust you have to keep interest rates at near zero. Meaning keep expanding the monetary base which in turn erodes the value of the currency, create more unsustainable debt and cause ever bigger gaps between the rich and poor.

 

[JayAtl]

===
for all the american folks who still blame it on bad weather, how is it that canada performed in q1 better, despite being hit worse?

that would mean you would have to understand the two economies, what GDP growth means over just GDP

 

[Zhukov]

I am of strong Opinnion that USA should stop meddling in Pacific Ocean. Japan Korea Australia Singapore and Taiwan are strong enough now and US dont need to baby sit them.
Let them Make a Good working Relation with china instead of being Paranoid. If you cannot stop something be part of it.
Same goes for Middle East. Let Turkey Saudi Arabia Iraq and Pakistam Make a strong Union with American assistance to handle middle east.
If US tries to Police the world like 20th century it will go bankrupt surely

 

[VCheng]

Not yet. But should Bank of America go bust it will. But in order to prevent Bank of America to go bust you have to keep interest rates at near zero. Meaning keep expanding the monetary base which in turn erodes the value of the currency, create more unsustainable debt and cause ever bigger gaps between the rich and poor.

People delight in predicting US doom that never happens. BoA is not going bust. So your dire predictions will go nowhere, just like all the others predicting the demise of the dollar and USA as a sole superpower. Keep trying. USA will keep trying harder. That is how it is done.

 

[tranquilium]

So this means that if someone borrows from a US bank and saves in a Chinese bank, they will gain? Idk shit about economics sorry

Factoring in currency appreciation? Absolutely true. In fact, this is what some currency traders did. This is actually what the brief RMB dive a month ago was about. Basically, the center bank discovered there are people trading RMB like that and they introduced an artificial dive to curb it.

Edit: To elaborate, Chinese government put in the artificial dive to curb short term trading. Long term trading is in fact encouraged, because it has a name and it is called bonds. Basically, if you take a loan from US bank and put it in a Chinese bank for a intermediate to long period of time, it is a financial investment to China. The Chinese bank will use the fund to make investment of its own and return a portion of profit to you, the investor. Short term trading is less desirable because you can't make much investment with it, but long term (six month+) can be used for a lot of different type of investments elsewhere.