The Treasury Secretary has delayed a finding on whether or not the Chinese are manipulating their currency.
I understand the timing, President Hu is due to visit Washington, DC a few weeks after the report was originally due, and I understand the impetus for a delay, but my guess is that the delay will become infinite.
*But remember, the Cossacks work for the Czar.
So, they have essentially shut down their Chinese search engine and are instead redirecting traffic to their Hong Kong domain:
Google has shut down its Google.cn site and is redirecting users to Google.com.hk, where it will offer uncensored Chinese-language search services. The company will maintain a research and development organization in China as well as a sales office, it announced Monday.
“Figuring out how to make good on our promise to stop censoring search on Google.cn has been hard,” Google said in a statement. “We want as many people in the world as possible to have access to our services, including users in mainland China, yet the Chinese government has been crystal clear throughout our discussions that self-censorship is a non-negotiable legal requirement. We believe this new approach of providing uncensored search in simplified Chinese from Google.com.hk is a sensible solution to the challenges we’ve faced–it’s entirely legal and will meaningfully increase access to information for people in China.”
It’s the right thing to do, and, I think, the good long term business decision.
Obviously, the Chinese “Great Wall” firewall will still censor once you click on the links, but with Google.hk actually see the links.
Now, how about fixing your misbegotten auto-pagination “upgrade” on blogger?
Yeah, I know, It’s no longer daily. A new job does that, and it’s de rigeur on Thursday, because that’s when the unemployment data comes out.
In this case, it’s down 6k to 642K, but the 4 week moving average rose 5,000 to 475,500, and continuing claims, which I am no longer a part of were flat at 4.56 million.
Basically, dropping jobless claims don’t mean rising employment until some point below 400K a week, so don’t get your hopes up.
BTW, not getting their hopes up is what small businesses are doing right now, with the National Association of Independent businesses’ index of small business optimism falling to the 2nd lowest level ever recorded, and the Manpower Survey of hiring managers was down slightly, though their Asian numbers were somewhat improved.
In real estate, foreclosure rose by “only” 6% year over year, leading to paroxysms of prodigious positivism by the Panglossian press, but it means that foreclosures are still rising.
Meanwhile, in China, they are freaking out over their inflation levels, which have risen to a 2.7% annual rate (merciful heavens, get me the smelling salts).
Actually, if the PBC raises rates to reign in inflation, I don’t see how they could keep their peg against the dollar, because higher rates push just about any currency up.
Beijing studies severing peg to US dollar.
Truth be told, the hed is a bit alarmist: The Chinese are talking about starting to talk about allowing the Yuan to appreciate a bit:
China’s central bank chief laid the groundwork for an appreciation of the renminbi at the weekend when he described the current dollar peg as temporary, striking a more emollient tone after months of tough opposition in Beijing to a shift in exchange rate policy.
Zhou Xiaochuan, governor of the People’s Bank of China, gave the strongest hint yet from a senior official that China would abandon the unofficial dollar peg, in place since mid-2008. He said it was a “special” policy to weather the financial crisis.
“This is a part of our package of policies for dealing with the global financial crisis. Sooner or later, we will exit the policies.”
Pretty weak tea,* actually, and I think that everyone, even the PBC realizes that the current peg is unsustainable, and my guess, based on absolutely nothing, is that they are talking about talking because it’s a way to kick the can down the road.
*Pun not intended.†
†No, really, it was unintentional.
China is sending signals that they will not be buying gold that the IMF is selling:
Contrary to much speculation China may not buy the International Monetary Fund’s (IMF) remaining 191.3 tons of gold which is up for sale as it does not want to upset the market, a top industry official told China Daily yesterday.
“It is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility,” said the official from the China Gold Association, on condition of anonymity.
I still think that gold is not a place to be, because everyone is talking about how it is the place to be, which reminds me of dotcoms in 1999 and housing in 2006.
The lede today is that consumer confidence fell much more than expected, down to 46.0, when the consensus forecast was 55.0, a 10 month low.
Additionally, home prices fell in the 4th quarter, though the housing optimists are noting that the year over year drop is “only” 2½%.
When one considers the fact that the 4th quarter was juiced by tax credits, it’s worse than it looks.
Japan, on the other hand, Japan’s exports grew sharply in the 4th quarter, with a 40.9% year over year, the biggest jump since 1980, largely on increases in exports to China.
Still the dismal consumer confidence numbers put the market in a mind to doubt that there will soon be a robust recovery, which drove oil prices down, and led to a flight to safety which pushed the Yen and the dollar up.
Steve Clemons notes the following discussion that he had with a Chinese official some years back:
Several years ago, I met with the Deputy Director of the Policy Planning staff of China’s Ministry of Foreign Affairs, and I asked him what he was working on — and what China’s grand strategy was.
His reply: “We are trying to figure out how to keep you Americans distracted in small Middle Eastern countries.”
It’s pretty memorable when one can joke and be truthful at the same time.………
Yes, it’s funny, but I’m not sure if it’s funny “ha ha”, or funny “strange”.
H/t Calculated Risk
It appears that inventories are now in line with sales.
Downward trend is the result of increased efficiencies
H/t Calculated Risk
In the good news/bad news dichotomy, we see that retail sales rose ½% in January but consumer confidence fell:
January sales at U.S. retailers climbed more than anticipated, while consumer confidence unexpectedly fell this month from a two-year high, showing a recovery in household spending may be gradual.
Retail purchases increased 0.5 percent, the third gain in the past four months, Commerce Department figures showed today in Washington. The Reuters/University of Michigan’s consumer sentiment gauge dropped to 73.7 from 74.4 the prior month.
Not sure what this all means, to tell the truth.
Sometimes teasing meaning out of the data is like drinking from a fire hose.
On the other hand, the data from Europe, where disappointing GDP numbers from Italy and Germany have unexpectedly fallen in the 4th quarter, is pretty easy to understand, as is the fact that Bloomberg’s Professional Global Confidence Index, fell on concerns that deficit problems among some nations in the Euro zone will hinder recovery.
By some countries, I mean, of course, the PIIGS (Portugal, Italy, Ireland, Greece and Spain), who are largely hamstrung in their ability to deal with the crisis because of deficit requirements of, and the fixed exchange rate from, being in the Euro zone.
BTW, here’s a story that we may here more of in the next few months: there has been a surprising outflow of funds from “junk bond mutual funds:
High-yield, high-risk bond mutual funds last week had their biggest outflows since 2008, adding to signs that the junk debt market may be set for a “reversal.”
Investors withdrew $1.13 billion from mutual funds invested in high-yield debt, including exchange-traded funds, in the week ended Feb. 5, according to research firm EPFR Global. That’s the most since early in the third quarter of 2008 and reverses a $335.6 million inflow from the previous week, according to Cambridge, Massachusetts-based EPFR.
I do not know what is up (or more accurately down) here but someone out there knows something and is acting on it.
In any case, the problems in Europe, along with new Chinese actions to reign in lending by increasing bank reserve requirements, have raised concerns about the economy which driven crude oil down, and led to a flight to safety which has driven the dollar up.
China recently claimed to have successfully tested a mid-course ballistic missile defense system. (also here)
There are also murmurs of a sea based variant. (scroll down)
This raises a number of questions, most notably how the PLA defines “success”, my guess is that this means the interceptor passed within lethal distance of the target.
The technology could be hit to kill, but given the fact that the Chinese have successfully miniaturized nuclear warheads, my guess would be that it would armed with a nuclear warhead, either a sub kiloton neutron warhead, as was used in the Sprint, or a larger warhead as used on the Spartan (it was a 5 mt W71) that kills thermally, but I’m pulling these guesses out of my head, and they should be considered in no way authoritative.
Nuclear warheads make targeting easier, you do not have to get a as close, or pass off to a terminal seeker as you do in hit to kill, and they eliminate many of the problems with decoys, since they get everything within a fairly large radius, making decoys moot.
Decline in job openings since 2007
h/t Zero Hedge
The US trade deficit grew by 9.7% in November, largely on the recent run up in oil prices.
The National Federation of Independent Business’s small business optimism index fell for the 2nd straight month in December, indicating that the small business segment is still not ready to start hiring.
In central bank land, the yield on 30-year treasuries fell again, indicating an expectation that rates would remain low, while in China, the central bank raised the reserve requirement for banks by 50 basis points.
In energy, oil continues to fall on the promise of warmer weather.
In currency, the dollar rose, both on investor jitters, and on the Federal Reserve Bank of Philadelphia President being a complete moron and talking up rate hikes. (more on this later)
It seems that the Chinese are looking at using nuclear powered cargo ships to ship cheap crap to the USA.
Bad idea, and a lose, as is obvious from looking at the history of nuclear powered civilian cargo vessels, or just the numbers for the NS Savannah:
However, Savannah’s cargo space was limited to 8,500 tons of freight in 652,000 cubic feet (18,000 m³). Many of her competitors could accommodate several times as much. Her streamlined hull made loading the forward holds laborious, which became a significant disadvantage as ports became more and more automated. Her crew was a third larger than comparable oil-fired ships and received special training after completing all training requirements for conventional maritime licenses. Her operating budget included the maintenance of a separate shore organization for negotiating her port visits and a personalized shipyard facility for completing any needed repairs.
And then there is that whole Somali Pirate thing, which makes the idea of an unarmed civilian ship operating a nuclear reactor on the high seas even less attractive.
I can see al Qaeda salivating over the prospect of seizing a ship like this.
Shown here on an H-6M Badger
The Chinese Military Aviation blog (bottom of page) has reported that the PLAAF has fielded a cruise missile, the CJ-10K, which is based on the ground launched CJ-10, which in turn derived some of its technology from the Russian KH-55.
It appears to be very similar in size to the Tomawhawk and the KH-55, which is no surprise, and its range is in the 1,500-2,500 km range, which makes it roughly equivalent to the Tomahawk.
It should be noted that the H-6M Badger is significantly improved, significant avionics upgrades as well as modern turbofans replacing its thirsty turbojets, which give it a range in the 3,000-3,500 km range, which would allow the aircraft/missile combination to strike Alaska without refueling, and air to air refueling, which the Chinese are now doing routinely might allow a strike against Hawaii as well.
At about 9,000 km, a strike on the mainland US well out of range,though much of Europe would be in range.
H/t The DEW Line
Sub Quietness
Both the Federation of American Scientists (FAS), and Robert Farley at Information Dissemination make a very big deal about about the U.S. Navy’s Office of Naval Intelligence (ONI) report that notes that current Chinese SSBNs are noisier than their Soviet equivalents from 30 years ago.
The ONI report notes that the submarines are easily detected, the sortie rate for patrol missions is low, and that the range of the missiles is low, and so the FAS concludes:
The ONI report concludes that the Jin SSBN with the JL-2 SLBM gives the PLA Navy its first credible second-strike nuclear capability. The authors must mean in principle, because in a war such noisy submarines would presumably be highly vulnerable to U.S. or Japanese anti-submarine warfare forces. (The noise level of China’s most modern diesel-electric submarines is another matter; ONI says some are comparable to Russian diesel-electric submarines).
That does raise an interesting question about the Chinese SSBN program: if Chinese leaders are so concerned about the vulnerability of their nuclear deterrent, why base a significant portion of it on a few noisy platforms and send them out to sea where they can be sunk by U.S. attack submarines in a war? And if Chinese planners know that the sea-based deterrent is much more vulnerable than its land-based deterrent, why do they waste money on the SSBN program?
The answer is probably a combination of national prestige and scenarios involving India or Russia that have less capable anti-submarine forces.
And Mr. Farley concurs.
I disagree. The purpose of building a credible SSBN force is to deter the United States.
Submarines, SSNs specifically, dominate the conflict at seas, as shown by the General Belgrano’s sinking by the HMS Conqueror, but they do not create prestige as such.
Unlike surface combatants like carriers, LPDs, or other vessels carrying naval artillery, they cannot control control coastal regions effectively. Even a relatively small gunboat can interdict a coastal road for an extended period of time.
What a Submarine can do is sink all those surface combatants with relative impunity, maintain a difficult to detect 2nd strike with nuclear weapons, or launch a surprise surgical strike (“cruise missile diplomacy”).
I think that the Chinese have always taken the longer view on these sorts of issues, going back to well before the creation of the PRC, and realize that in order to a more effective submarine force, they need to advance incrementally, and learn how to build, maintain, and crew better boats over time.
They are familiar with Soviet weapons, and they know the disasters that resulted from pushing the envelope.
Additionally, their horrific history regarding Mao’s Great Leap Forward is a relatively history, and so they are taking measured steps.
Simply put, the Chinese do not feel the level of paranoia that the Soviets did regarding an attack by western forces, and as such, they are taking their time, rather than rushing new systems into service when doing so would entail a large amount of risk.
H/t Calculated Risk
H/t Calculated Risk
H/t Calculated Risk
H/t Calculated Risk
ABI, H/t Calculated Risk
The Consumer Price Index is up again, largely on rising fuel prices, with CPI up 0.3%, and down -0.2% year over year, and the “core” CPI, which strips out food and energy, is up 0.2%, up 1.7% year over year for the core rate.
This is raising concerns about inflation (stupid, but it’s the way that these folks think) because energy is still about 14% lower than it was last year, so if equilibrium in oil prices is higher than it is now we may see non trivial (over 2% annual according to the inflation hawks) inflation rates.
Meanwhile, the bad news continues along (see graph pr0n), with housing starts and applications for building permits falling unexpectedly in October. (pics 1, 2, 3, and 4)
Additionally, the Architecture Billings Index (ABI) while rising, remained below 50, indicating a continuing contraction in future commercial real estate construction. The ABI leads construction by 9-12 months, so 2010 looks bleak for non-residential building. (pic 5)
There is also the fact that rents are continuing to fall, and since the best metric of house prices is their ratio to renting, this indicates that there housing in general, not just the price of a single family dwelling are still overpriced, and have a way to fall.
Additionally, I think that home sellers are running out of buyers, as mortgage applications fell even though rates were down this week.
The inflation that I mention has spooked the bond market, driving prices down and yields up.
And some news on the weird side, monoliner insurer Ambac announced in its SEC filing that its capital levels were well in excess of regulatory requirements.
Everyone figured that they were due for a takeover by regulators…I guess that “everyone” was wrong.
We are seeing some signs of recovery in international trade, with the Baltic Dry Index, an indicator of the demand for shipping hitting a high for this year.
It appears to be driven by increased Chinese demand for raw materials, and the fact that there are large fleets of ships that have been mothballed that won’t be able to address marked demand for months.
Meanwhile, in energy, oil rose above $80/bbl on a drop in US inventories, and in currency, the dollar fell on statements by a Federal Reserve member that rates would stay low.
I’m not a gold bug, but Rolf Winkler’s graph pr0n is interesting. It could imply that gold has further up to go, or that the stock market is overvalued. Your call.
Slow news day today, with biggest news that the People’s Bank of China has modified the language it uses to describe its position on the Yuan, which implies that the currency will be allowed to appreciate over the near term.
In Australia employment increased by 24,500 in September, s not inconsiderable number for a country with a total population in the 22 million range.
Meanwhile, Japan appears to continue to be in a deflationary mode, with producer prices falling for the 10th month, down 6.7% year over year.
In currency, driven partly by the Bank of China statements, the dollar weakened to more than $1.50:€1.00, though it settled at $1.4961 when trading ended.
In either case, it appears that people are still betting on a recovering economy, as crude oil rose again today.
And for you gold bugs, as well as for the graph pr0n, gold hit a new record in trading today, $1,121.9/oz (troy).
Ambac share prices
MBIA Share price
We are Unbelievably Screwed, H/t The Big Picture
Job Turnaround? Perhaps the End of the Beginning, but Not the Beginning of the End
For a bit of Auld Lang Syne, let’s start with an update on the monoliner insurers…I’ve posted on them just once since May.
Ambac’s share price is collapsing on reports that it will file for bankruptcy, and MBIA posted a $728 million loss, which comes to about $3.50/share, and the shares are trading at about $3.69 right now….ouch.
The monoliner business model is that you create a company, get an AAA rating, and then make money by renting out that credit rating.
Among other things, it’s a way to soften the blow of the comparatively low credit ratings that states and municipalities get, and it allows for another revenue stream for the parasites on Wall Street to tap.
I think think that the entire business is essentially corrupt, and should be outlawed.
In any case, we do have news that might be a cause for optimism, with China’s industrial output and retail sales grew sharply in October, and the US Department of Labor’s Job Openings and Labor Turnover Survey rose slightly in both September and October.
On the down side are the continued fall in retail sales (see 3rd chart down), and the vacancy rate in housing is at a 44-year high.
The recent news does not seem to have effected the price of Treasurys, though which were basically flat.
In energy, we have weather, specifically the fact that Ida was pretty weak by the time that it hit oil producing areas, driving oil down, and China’s gangbuster economic report drove the US dollar down.
So, the cut a deal between the President of Honduras, and the leaders of the coup that ousted him.
It’s a fairly simple deal, a power sharing arrangement, but then the coup leaders decide that they can’t hold a vote to approve this until after the elections, meaning that they will be in complete control of the electoral process, and doubtless engaging in fraud, and the response of the Obama administration is, “Sounds good to me”:
Under fire from allies in Latin America and on Capitol Hill, the Obama administration moved Tuesday to try to salvage the American-brokered agreement that had been billed as paving the way for a peaceful end to the coup in Honduras. Instead, the accord seems to have provided the country’s de facto government with a way to stay in power until a presidential election scheduled for the end of this month.
The State Department sent Deputy Assistant Secretary of State Craig Kelly to Honduras on Tuesday for meetings with Manuel Zelaya, who was ousted from power as president more than four months ago, and with the head of the de facto government, Roberto Micheletti.
The problem here is that when bad people seize power, they like to hold onto it, and the Obama administration took a cowardly position, because they just did not want to be bothered with little things like the principle of democracy and free elections:
The deal began to unravel last week when the Congress announced it would postpone a vote on Mr. Zelaya’s return to power until after the election. In protest, Mr. Zelaya then refused to submit names for the coalition government. And the United States, breaking with its allies in Latin America, announced it would recognize the results of the coming presidential election, even if Mr. Zelaya were not reinstated.
A hint that this move on their part was a completely boneheaded move that gave succor to tyrants? This:
While the announcement was celebrated by Republicans as a “reversal” of the administration’s policy, it ignited a storm of criticism from Mr. Obama’s allies at home and across Latin America.
If you are getting cheers from the ‘Phants, you are on the wrong side of the argument.
What happened here is that it was pressure from other Latin American nations that forced the State Department to start talking about sanctions against the coup leaders, and the Treasury started talking about possible restrictions on remittances, which created an agreement.
The problem was that once the agreement was signed, signals were sent indicating that the US no longer had any interest in the matter.
This is a big deal for a number of reasons.
First, it is a reversal on the progress toward democracies in Latin America, and second it has some very real implications for US foreign policy in the region, because, unlike the US (and Canada), the rest of this hemisphere takes a very dim view on green lighting coups, because they all remember the bad old days when the overthrow of a legitimately elected government, sometimes at the request of US corporate interests, was the rule, rather than the exception.
China and Russia are both making significant efforts in the region, both in terms of securing raw materials and making military sales, and this, along with out completely boneheaded policies on Cuba, are likely to make Latin American countries much more receptive to their overtures.
Where is the White Persian Cat?
Well, it appears that some sharp-eyed satellite imagery analysts have spotted what they think is a China’s anti-satellite laser installation in Google™ Earth™ pictures.
This conclusion is actually somewhat controversial, as there are any number of non-hostile applications, such as astronomy and precision satellite tracking (which would involve a low power laser range finder) that could explain these installation
You can find larger pictures here, which include two other similar Chinese installations.
Commercial Real Estate Delinquencies
$ billion
Percentage
CRE Data H/t Realpoint (PDF) and FT Alphaville
ISM Employment Index v BLS Manufacturing Employment H/t Calculated Risk
Construction Spending
Yeah, we are in some sort of recovery, though I still think that the underlying problems, particularly as pertain to finance and real estate, have not been addressed.
The Institute for Supply Management’s Manufacturing index rose to 55.7 in October, up from September’s 52.6 and its Manufacturing Employment index rose to 53.1, the first time that this index has broken 50, showing expansion, since April 2006.
On the other side of the Pacific, we have Chinese manufacturing growing for the 8th straight month.
Real estate news appears to be improving too, with construction spending rising in September, and the NAR’s Pending Home Sales Index rising for the 8th month in a row.
This news has had the anticipated effects in currency and energy, with the dollar falling on an increased risk appetite, and oil rising in expectation of increased demand.
I came across an article in the Washington Post yesterday….No really in the paper edition, about the problems with healthcare in China.
In a rather extensive article, they show how the increasingly private healthcare system is bankrupting ordinary Chinese:
China’s health-care system is in disarray, a side effect of the market reforms that have spurred private enterprise and rapid growth since 1980. Before then, state-owned companies offered cradle-to-grave care, part of a system based on danwei, or work units, that provided health, education, pensions and other benefits. But as the economy has grown more diverse, an increasing number of Chinese have had to fend for themselves, with only a porous government insurance program to help.
While there are some problems with a shortage of medical facilities, particularly in the rural hinterlands, the problem is that people are having their lives destroyed by the costs that they must bear under an increasingly spotty system of healthcare access.
Nonetheless But further down, for reasons known only to God, reporter Steven Mufson feels compelled to bring in a complete idiot as an “expert”:
China’s State Council is eager to improve the situation but can’t decide how. The government currently fixes the prices of all medical services, and doctors are treated — and paid — like public officials. But that has contributed to a shortage of doctors as many talented Chinese choose better-paid professions.
Some experts say more private spending and investment would improve the system. Gordon G. Liu, a professor of economics at Beijing University’s Guanghua School of Management, said he would let people with means spend more money on care, which he said would increase the availability of care by giving doctors incentives to work harder and by luring more Chinese into the medical profession.
So this guy’s solution is to raise prices, when the problem is not that there aren’t enough doctors, but that it’s already too expensive, because this will have doctors clamoring to treat all those rich people farming in rural areas?
Why on earth does the reporter feel compelled to bring this in to begin with? It has nothing to do with the problem described, and it is precisely the wrong thing to do.