Tag Archives: chinese

China Finally Adopts Market-Based Value for its Currency, But We May Not Like the Results

by AdolphJanzen164 Posted on August 11, 2015

Mother Jones

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For years the United States has been complaining that China artificially undervalues its currency, which makes their exports cheaper and gives them a trade advantage over American firms. In response, China has gradually let the renminbi rise. By 2015, it had roughly reached fair market value—though not all American politicians agreed about that.

But then the Chinese economy started going sour. Exports were down. The stock market crashed. Growth slowed. What to do? Answer: devalue the renminbi. But instead of doing it by fiat, pretend that you’re merely responding to market forces:

Every morning, Beijing sets a target for the trading of its currency against the U.S. dollar, then allows investors to buy and sell the currency for 2 percent more or less. Tuesday’s change relaxes the government’s control over setting that rate. The midpoint will now be set at the market’s closing rate for the previous day.

….Now, market forces could pressure the currency to depreciate rather than appreciate, making Chinese products comparatively cheaper….In China, the depreciation will be a boon for exporters and heavy industry, but bad news for companies that depend on imported goods. Shares of Chinese airlines plummeted on Tuesday, as analysts predicted that the higher cost of oil in U.S. dollars would weigh on their earnings.

It’s convenient to have a market-based policy as long as that produces a devaluation of the currency. But will Chinese authorities stick to this policy even when it means the renminbi will appreciate? Good question.

So what does it all mean? Here are a few obvious thoughts:

This is yet another vote of no confidence in the Chinese economy. When you put together everything that Chinese authorities have done over the past six months, I’d say they’re close to full-scale panic.
Investors are likely to push the renminbi even lower, and this is going to make life harder on anyone in China with dollar-denominated debt. This includes lots of local governments who have been financing the housing boom, which means this devaluation could hasten the housing bust everyone has been waiting for.
This will be a political issue in the US, but a tricky one. China is manipulating its currency to its own advantage—boo! hiss!—but has also adopted a policy that allows the renminbi’s value to be dictated by market forces—which is what we’ve been demanding all along. It will be interesting to see how all the Republican presidential candidates decide to respond to this.

Generally speaking, I think this should be taken as bad news. The world economy remains fragile, and if the Chinese economy is falling into recession—as the Chinese themselves seem to believe—it will affect all of us. And not in a good way. Stay tuned.

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China Finally Adopts Market-Based Value for its Currency, But We May Not Like the Results

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Highways Are Now Being Held Hostage to Lower Corporate Taxes

by MiltonLloyd Posted on July 14, 2015

Mother Jones

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I somehow missed that this was a real thing, but apparently there are finally serious moves afoot to replenish the Highway Trust Fund. Will this happen by sensibly returning the gasoline tax to its old rate? Don’t be silly. Instead we’re going to do it in least sensible way possible:

A bipartisan proposal, to be introduced soon in Congress, would tax the estimated $2 trillion in foreign profits held by U.S. corporations in overseas accounts….The tax would generate tens of billions of dollars for the federal Highway Trust Fund, which will run out of money at the end of the month. Lawmakers have been in a desperate scramble to replenish the fund, which helps pay for new roads, bridges and other transportation infrastructure.

….Supporters said the plan would reduce incentives for companies to reincorporate overseas, a controversial tax-reducing tactic known as inversion that has drawn the ire of Democrats….”These proposals would right the ship, provide a potential funding source for transportation reauthorization and allow the United States to compete on a level playing field,” Sen. Chuck Schumer said.

Hold on. We’re going to take all those overseas profits that are currently untaxed, and levy a one-time tax on them in order to fund roads and bridges? Why would Republicans and the business community support this? Here’s why:

“In a perfect world, you wouldn’t tie tax reform to the Highway Trust Fund,” said Curtis S. Dubay, a tax expert at the conservative Heritage Foundation. But lawmakers see the need to find highway funding “as a forcing mechanism to get something done” on international taxes.

A “forcing mechanism”? Please go on:

The U.S. Chamber of Commerce and National Assn. of Manufacturers have said they opposed a forced repatriation of foreign earnings simply to replenish the Highway Trust Fund.

But including it as part of a shift from the current international tax system — a move that would reduce corporate tax bills over the long term — changes the equation, said Dorothy Coleman, who handles tax policy for the manufacturers group.

….Business groups want changes to the international tax system to be made as part of a broader overhaul that includes lowering the corporate tax rate for domestic earnings as well. Senate Majority Leader Mitch McConnell (R-Ky.) has indicated that he prefers a comprehensive tax overhaul.

Roger that. The business community is willing to support a small, one-time gimmick that will cost them around $200 billion or so—and free them to repatriate all their foreign earnings and bring that money back to the US—but only if it’s tied to a large, permanent corporate tax change that will save them far more in the long run. Suddenly it all makes sense.

The devil is in the details, of course, and those won’t be available for months. If the final bill is revenue neutral on corporate taxes, maybe this is a decent short-term dodge. If it cuts corporate taxes significantly, then not so much. Stay tuned.

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Highways Are Now Being Held Hostage to Lower Corporate Taxes

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Quote of the Day: The Minimum Wage is Lame, Dude

by MaritzaDesroche Posted on July 14, 2015

Mother Jones

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From boring Midwestern governor Scott Walker:

The left claims that they’re for American workers and they’ve just got just really lame ideas — things like the minimum wage.

Well, there are some economists who would agree with him, but essentially no ordinary Americans. The minimum wage is almost as beloved as Social Security. In fact, ordinary Americans not only like the minimum wage, but about 70 percent of them think it should be raised. So Walker is definitely taking a bold stand here.

Oddly enough, as Steve Benen points out, this has become sort of a thing among Republicans lately. They’ve always opposed increases to the minimum wage, of course, but now a lot of them oppose the minimum wage itself. Where has this suddenly come from? Perhaps someone who follows the right-wing idea network can give us a rundown. I mean, sure, Milton Friedman opposed the minimum wage, but conservatives apparently abandoned anything remotely Friedmanesque during the Great Recession. So it can’t be that.

So what is it? Why has this suddenly jumped from mumblings in Heritage Foundation white papers to campaign platforms for presidential candidates?

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Quote of the Day: The Minimum Wage is Lame, Dude

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Chart of the Day: Obamacare Keeps On Working

by SelenaMaria01 Posted on July 13, 2015

Mother Jones

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I got distracted on Friday and failed to pass along the latest Gallup poll of health insurance coverage in the US. As you can see, it’s dropped once again, from 11.9 percent last quarter to 11.4 percent this quarter. In case that seems a little bloodless, that means that over a million Americans are now insured who weren’t last quarter. For the entire year, nearly 4 million people are newly insured. Since the peak just before Obamacare went into effect, 16 million Americans have gained health insurance. And if Republican-controlled states hadn’t thrown a collective temper tantrum and refused to accept Obamacare’s Medicaid expansion, the total number would be more like 20 million.

Not bad. Still a lot of work to do, but not a bad start.

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Chart of the Day: Obamacare Keeps On Working

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Greece Surrenders to Europe — For Now

by SebastiHussey Posted on July 13, 2015

Mother Jones

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Well, it appears that Greece has accepted the European deal. This means austerity as far as the eye can see, and no guarantees from Europe except that negotiations over the real agreement will begin soon. Greek opinion on the street was mixed:

Miltiades Macrygiannis, proprietor of an antiques store in Athens, Art and Craft Interiors, said he was hopeful and relieved that a so-called Grexit — a Greek exit from the eurozone — appeared to have been avoided. But he was also disgusted.

“It’s simple: We wasted five months,” Mr. Macrygiannis said. In the end, he added, the austerity measures that had to be taken appeared to be worse than what the creditors had been willing to give five months ago, when the new Greek government took office.

All true. And banks will remain closed for at least another week until Greece passes legislation implementing the preconditions just to get talks started. After that, who know? But Grexit is still a live possibility. Alexis Tsipras has chosen against it for now, but there’s no telling if he’ll remain opposed once the Europeans really start twisting the knife.

In any case, if he’s smart he’ll start up all the plans for Grexit so he’s ready to go if that’s the way things turn out. There’s not much point in keeping it secret, either. Everyone knows it’s a real option now, so he might as well have drachmas and government IOUs ready to go if the day comes. Grexit may never come, but if it does, there’s no point in making it even more chaotic than it has to be.

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Greece Surrenders to Europe — For Now

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No, Hillary Clinton Doesn’t Need a Plan For Passing Gun Control Legislation

by ShaniceGutierrez Posted on July 10, 2015

Mother Jones

Lots of political observers are surprised that Hillary Clinton is talking about guns. That’s a loser for Democrats, isn’t it? Paul Waldman isn’t so sure:

The truth is quite a bit more complicated than that — in fact, pushing for measures like expanded background checks is likely to help Clinton in the 2016 election. But if she’s going to promise to make headway on this issue, she needs to offer some plausible account of how as president she could make real progress where Barack Obama couldn’t.

Allow me to impolitely disagree. Presidential campaigns are extended exercises in affinity marketing. No presidential candidate ever has to explain how they’re going to enact legislation. The most they have to do is offer a bit of breezy blather about crossing the aisle and focusing on areas of agreement and Americans not really being as polarized as the media makes them out to be. That’s plenty.

Oh sure, there are a few thousand annoying know-it-alls like Waldman and me who are going to write blog posts about how this or that promise ain’t gonna happen because the politics are impossible. But hell, even we don’t care. We’re still going to vote for whoever we planned to vote for anyway. It’s not as if any of the other candidates are going to work miracles either.

Now, it’s true that some candidates run on a theme of competence, of “getting things done.” Scott Walker is doing it this year. Michael Dukakis did it. But I don’t think there’s any evidence that even this pale shadow of “how I’m going to get things done” has much effect on voters. They just vote for the candidate who seems to be generally on their side, or generally most reasonable, or generally good to have a beer with. The details can be left to the wonks.

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No, Hillary Clinton Doesn’t Need a Plan For Passing Gun Control Legislation

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The Shocking Truth About Wednesday’s Apocalypse Involving Wall Street, China, ISIS, and United Airlines

by NapoleonWND Posted on July 8, 2015

Mother Jones

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When the New York Stock Exchange inexplicably halted trades at about 11:30 Wednesday morning, people around the Twittersphere reacted with their typical restraint, reasoned analysis, and careful double-checking of the facts.

Or not.

After all, there were an unusual number of suspicious events today, and Twitter was swirling with paranoid conspiracy theories linking Wall Street, the grounding of United Airlines flights, ISIS, and the Chinese financial meltdown.

Initial reactions were largely variants of this one:

But the conspiracy theories—involving the Chinese, the CIA, and even ISIS—were not far behind. Some came from on high. Here’s one from US Senator Bill Nelson (D-Fla.):

He wasn’t the only one taking things in that direction:

And even after the US Department of Homeland Security said there was no indication that the NYSE situation was due to a malicious act, some people weren’t buying it:

The theory that China might be behind this series of events could be supported by data from the Norse Intelligence Network, a California-based online security company. The company offers up a real-time cyber attack map, which seemed to show at midday on Wednesday that China was the number-one attacker and the US was the number-one target:

Screenshot from the Norse Intelligence Network attack map on July 8, 2015. map.norsecorp.com

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The Shocking Truth About Wednesday’s Apocalypse Involving Wall Street, China, ISIS, and United Airlines

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China Halts IPOs in Peculiar Attempt to Prop Up Stock Market

by CorrineGrondin Posted on July 4, 2015

Mother Jones

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The latest from China, where the stock market continues to plummet:

China has decided to suspend new stock sales and establish a market-stabilization fund aimed at fighting off the worst equities selloff in years, as concerns grow among China’s leadership that the stock-market malaise could be spreading to the other parts of the world’s second-largest economy.

…Previous steps including an interest-rate cut by the central bank have failed to impress investors, many of whom have been forced to unwind their leveraged bets as stocks continue to drop.

Chief among the decisions made is to halt new initial public offerings in a bid to preserve liquidity in an increasingly volatile market, the people said. Officials also discussed the setup of a market-stabilization fund.

Another odd move that I don’t entirely understand. Do IPOs reduce market liquidity in any significant way? Put another way: Am I missing something here, or is this just another panicky move by the Chinese authorities that’s unlikely to make things better?

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China Halts IPOs in Peculiar Attempt to Prop Up Stock Market

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China Adopts an Unusual Approach to Fighting a Stock Market Crash

by JerilynFremont Posted on July 2, 2015

Mother Jones

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Hum de hum hum. Greece is in trouble. Puerto Rico too. And don’t forget China:

Chinese shares plunged Thursday, even as Beijing grasps for solutions to stem the selling, including relaxing rules on the use of borrowed funds to invest in stocks….The Shanghai Composite closed down 3.5% while the smaller Shenzhen market was down 5.6%. The ChiNext board, composed of small-cap stocks, sank 4%. Even after losing nearly a quarter of its value from a mid-June high, China’s main stock market has almost doubled in value over the past year.

….In a rare move late Wednesday, Chinese regulators set in motion draft proposals to ease restrictions on margin lending earlier than scheduled….Regulators’ sudden shift in attitude about margin trading comes after vocal warnings about its risks in recent months. In April, regulators took various steps to rein in the practice, which had allowed investors to borrow several times their investment money.

Inscrutable, those Chinese. Their stock market is crashing so they’re promoting an increase in margin trading. That’s sort of like lighting a tree on fire when it gets dark outside and all your flashlights are dead. It’ll work. For a while. But it’s really not considered best practice.

Then again, maybe there’s something I don’t understand here. All I know is that panicky measures to halt a panic don’t usually work. And the Chinese stock market still has a long way to fall. I sure hope they figure something out.

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China Adopts an Unusual Approach to Fighting a Stock Market Crash

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My $500 Pill Revealed

by Jarred2039 Posted on July 2, 2015

Mother Jones

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Have you ever wondered what a $500 pill looks like? Well, here’s your answer: it looks like pretty much any other pill.

Anyway, I’m supposed to take this for 21 days, then a week off, then another 21 days, etc. This will last a few months before we know if it’s working. If it does work, then I’ll be taking it forever (I think). So that’s $126,000 per year to keep Kevin alive. Of course, I pay only a fraction of that thanks to having excellent health insurance, and I’m sure that even Kaiser pays nowhere near that list price. Maybe half that, or a third. Still, pretty expensive!

Luckily I’m not on Obamacare. From what I hear, my case would have gone straight to a death panel, which almost certainly would have decided that my societal worth didn’t measure up to the cost of the treatment. And who could argue? I mean, blogging? Seriously?

POSTSCRIPT: I forgot to mention something in my previous health update: I feel great. Not 100 percent, mind you, but pretty good. My stomach is in fine fettle (in fact, I’m overeating these days), I’m sleeping well, and my energy level has recovered almost to normal. The long-term prognosis for the multiple myeloma is obviously still uncertain, and that’s an unhappy thing, but in the meantime at least I feel good for the first time in eight months!

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My $500 Pill Revealed

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