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Economic Tremors In The West Reach China


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HOLA441
You also have the problem that the one child policy has also created an imbalance in male/female with not enough females being born. http://www.chinadaily.com.cn/lifestyle/200...tent_812550.htm

I m quite happy to go over and do help the Chinese women get that little girl they ve always wanted :lol: No really!!! I m quite happy to play my part for humanity... :)I am not being flippant. I have had Half Thai/Chinese gf's when I lived in Asia. They rock.

Edited by VedantaTrader
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HOLA443

http://business.timesonline.co.uk/tol/busi...icle4193017.ece

Battered by soaring fertiliser prices and rioting rice farmers, the global food industry may also have to deal with a potentially catastrophic future shortage of phosphorus, scientists say.

Researchers in Australia, Europe and the United States have given warning that the element, which is essential to all living things, is at the heart of modern farming and has no synthetic alternative, is being mined, used and wasted as never before.

Massive inefficiencies in the “farm-to-fork” processing of food and the soaring appetite for meat and dairy produce across Asia is stoking demand for phosphorus faster and further than anyone had predicted. “Peak phosphorus”, say scientists, could hit the world in just 30 years. Crop-based biofuels, whose production methods and usage suck phosphorus out of the agricultural system in unprecedented volumes, have, researchers in Brazil say, made the problem many times worse. Already, India is running low on matches as factories run short of phosphorus; the Brazilian Government has spoken of a need to nationalise privately held mines that supply the fertiliser industry and Swedish scientists are busily redesigning toilets to separate and collect urine in an attempt to conserve the precious element.

Dana Cordell, a senior researcher at the Institute for Sustainable Futures at the University of Technology in Sydney, said: “Quite simply, without phosphorus we cannot produce food. At current rates, reserves will be depleted in the next 50 to 100 years.

http://www.peakoildesign.com/blog/peakengi...resource_crunch

Why is phosphorus important, you might wonder? From the Energy Bulletin article:

The current major use of phosphate is in fertilizers. Growing crops remove it and other nutrients from the soil... Most of the world's farms do not have or do not receive adequate amounts of phosphate. Feeding the world's increasing population will accelerate the rate of depletion of phosphate reserves.

and

Phosphorus may be the real bottleneck of agriculture.

Population growth was only possible because we found phosphorus deposits and cheap energy to extract, transform and transport it to farms. When we plot data of world population versus world phosphate production, we find a significant correlation.

The problem of phosphorus depletion is just one more example of the imminent crunch in resource reserves we face. I wrote about a similar concern in my Peak Salt article nearly a year ago. The difference there is that we don’t actually face a salt shortage until we face an oil shortage -- an example of a subtle but critical interaction between resources.

The race for growth is completely unsustainable, this is merely HPI on a grander scale, which will result in the same devastating economic consequences.

I m quite happy to go over and do help the Chinese women get that little girl they ve always wanted

I'm sure that when the Chinese authorities see your offer they will come knocking for your assistance :)

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HOLA444

http://www.creditwritedowns.com/2008/07/as...n-pipeline.html

In the US, the question has to be centered around consumer inflation expectations and what impact this will have on core inflation going forward. In Asia, the question is what impact will rising inflation have on interest rates and goods produced for export.

Ever since, the Berlin Wall fell and China integrated into the global economy, there has been a seemingly endless supply of cheaper labor to produce manufactured goods for the West. In fact, the global labor arbitrage that has led many Western companies to manufacture in Asia is the leading reason why the inflationary monetary policy of the US Federal Reserve did not show up in consumer prices throughout the 1990s and well into this decade.

However, with the surge in commodities prices that has come to an end. Commodity prices have exploded the budgets of many Asian and Middle Eastern countries that are running trade surpluses with the US because the governments there have subsidized oil costs for consumers. However, these governments are being hit by a double whammy due to their foreign exchange policy and the subsidies of oil.

First, many countries in Asia and in the Middle East peg their currencies to the dollar. The dollar, has been a weak currency, falling to multi-decade lows against the Canadian and Aussie Dollar as well as over 50% versus the Euro. This means that oil prices in those countries have skyrocketed that much more as the dollar has plunged. Therefore, one could rightly blame the interventionist foreign exchange policies for much of the inflationary excesses.

In addition, the oil subsidy is killing Asian governments and many have reduced the subsidy including China. Vietnam, one of the countries worst hit by inflation, just increased gasoline prices a massive 31%, quite a bit for low wage workers to handle at one time.

Moreover, oil prices have risen in all currencies. Inflation in Asia is so acute that riots over the costs of basic necessities of food and oil are sparking civil unrest. This translates into higher wages for workers and a dilemma for producers. In the past, as the inflationary pressures in this decade have increased, labor was so cheap that producers could eat some of the costs in order to maintain their markets. Now, producers are being forced to pass on costs as labor costs, production costs, and interest costs are all increasing.

All the while, interest rates across Asia are well below rates of inflation, effectively paying borrowers for the privilege of borrowing.

All of this is coming to an end very soon because it is not sustainable. The long and short of it is that Asia will pass on costs to the West. So, the disinflationary trends of the 1990s and earlier this decade is well and truly over. But, for the Asian economies themselves, one must wonder if this voltility presages a hard landing. After all, once the export markets dry up due to rising costs and recession in the West, there will be insufficient domestic demand to make up the slack.

http://www.nytimes.com/2008/04/08/business...amp;oref=slogin

BAT TRANG, Vietnam — The free ride for American consumers is ending. For two generations, Americans have imported goods produced ever more cheaply from a succession of low-wage countries — first Japan and Korea, then China, and now increasingly places like Vietnam and India.

But mounting inflation in the developing world, especially Asia, is threatening that arrangement, and not just in China, where rising energy and labor costs have already made exports to the United States more expensive, but in the lower-cost alternatives to China, too.

“Inflation is the major threat to Asian countries,” said Jong-Wha Lee, the head of the Asian Development Bank’s office of regional economic integration.

It is also a threat to Western consumers because Asian exporters, even in very poor countries, are passing their rising costs on to customers.

Developing countries have had bouts of inflation before. Indeed, some are famous for them, like Brazil, which experienced triple-digit inflation in the late 1980s and early 1990s. But two things make this time different, and together promise to send prices higher at Wal-Mart and supermarkets alike in the United States, just as the possibility of recession looms.

First, developing countries now produce nearly half of all American imports. Second, inflation in these countries is coming at the same time that many of their currencies are rising against the dollar.

That puts American consumers in a double bind, paying at least some of producers’ higher costs for making their goods, and higher prices on top of that because the dollar buys less in those countries.

Asian businessmen say they do not have a choice about charging more. “This is a tough time to do business,” said Le Hoai Vu, the sales manager for the Quang Vinh Ceramic Company here in northern Vietnam.

http://www.radioaustralia.net.au/programgu...06/s2276948.htm

Rising food and fuel prices is worrying the Asian Development Bank, which has listed inflation as a "major worry" for the region.

The ADB said inflation could undo the progress made over the past twenty years, as it exceeds the earlier-predicted 5.1 percent level. ADB Managing Director Rajat M Nag says rising fuel and food prices were the chief dangers behind inflation that affected what he calls "Asia's Good Growth Story".

Presenter: Sen Lam

Speaker: Mark Thirlwell, director of the Intenational Economy programme at the Lowy Institute in Sydney

THIRLWELL: Well I think the banks are certainly right to be warning that Asia now faces an inflation problem. If we look across the region we can see a clear pattern of rising prices, led by extremely rapid price increases for food and oil, and at the same time it's also clear that many of the region's central banks have been running very loose monetary policies with policy rates lower than the actual rate of inflation in many cases. And finally, and it's a point that the ADB itself makes, rising prices don't just threaten macro-economic stability, they've also got really important social consequences. Asia's home to many of the world's poorest people and they're particularly vulnerable to increases in the price of food and energy.

LAM: And so may we assume then that the countries most at risk are the poorer countries of for instance ASEAN?

THIRLWELL: I think that's definitely a big part of the story, I mean certainly inflation's a problem right across developing Asia at the moment. But there are big differences across the countries as well. For example if you look at the component that's been driven by rising oil prices then if you're a net oil importer, so a country like the Philippines or India or Thailand, this is a particular concern. If you're a big oil exporter like Vietnam or Malaysia you're actually getting some gains. But when you look at food prices it's the case that this is particularly politically sensitive and it's particularly sensitive for countries which have large numbers of very poor people. And again if you look across India, Indonesia, the Philippines, it's been an issue there. We've already seen for example food riots in the Philippines.

LAM: Indeed what about India, I mean it's got a mixture of both poor and increasingly quite rich society. How is it coping with inflation, how at risk is India do you think?

THIRLWELL: Well India is an economy where high inflation has always been politically very, very sensitive because of the large number of very poor people who are very vulnerable to price rises. And of course in the case of India we know that by May next year we have to have a new election, so the political class there are acutely aware of this. That partly explains I think the fact that the Indian Central Bank, the RBI has been quite aggressive now in hiking interest rates and trying to dampen down inflation, we've seen that happening. Part of the issue now that India faces is that this is complicated by a weakening exchange rate and some issues over capital flows. So there is a policy challenge there but the Indian monetary authorities are now sort of stepping up to the plate.

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HOLA445
Yeah, growth might drop back from 10-11% to their planned 8% which would take the pressure off inflation. Terrible! LOL.

amazing how arrogant people in the west still are with regards to Asia.

Amaizing how arrogant the Chinese Hans are to the Tibetans etc as well with their enforced 'One China' policy......

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HOLA446
China's imbalanced gender ratio and birth control measures enacted in and after the 1980s have resulted in young males far outnumbering young females between 24 to 34 in China.

Sadly, this appears to be the result of a culture that values boys over girls - so, many female children are aborted before birth.

The race for growth is completely unsustainable, this is merely HPI on a grander scale, which will result in the same devastating economic consequences.

The problem that Asia is facing is that much of the goods they export to the West are luxury items, and demand for such items will rapidly dry up as cash becomes scarcer.

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China isn't a land of miracles- they simply have a massive amount of keen workers who's wage expectations were pretty low to start with.

Chinese manufacturing has one attraction- cheapness- that's it.

The more money you have to spend on a product the more the "China advantage" shrinks- if you want top notch technology with precision engineering Germany and other European countries are the most attractive source.

China needs to keep creating jobs on a massive scale because of the size of their population- mass unemployment in the UK would be nothing compared to mass unemployment in China. If exports start to collapse then the government will have a big problem.

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HOLA4410
There is also two other massive problems.

1) Aging Population that will lead to massive dissaving in the yeras to come.

2) Massive amounts of Defaulting debts in Chinese Government banks.

Don't underestimate china's ability to go down the tubes.

It is all music to my ears, the bearishness on China. As a contrarian trader, investor, I always feel more comfortable when people talk like this...I m not saying China wont have something like a Depression like in the US in the 1930's, however, this is in my view Chinas century. The parallels between the US in the 1920's and China today are astonishing. In the 1920's Britain was the superpower of the world and the US was the rising giant. Today that sleeping giant is China, not so sleepy anymore actually, and the US is the superpower, which runs its polciys independently of the rest of the world just as Britain did back in the 1920's when the US adapted to Britain. There will be rough rides along the way for sure...life has never been plain sailing. Perhaps as was mentioned earlier China will have a reduction in population due to the water shortages...However, the infastructure has been laid in place, and the cities have been built. They have the most modern and best highways in the world. They are a net creditor nation, with a huge trade surplus and a currency underpined with very strong fundamentals.

When they come out of any recessions they at least have layed the infrastructure and foundations to progress...they have the basis of very sound longterm sustainable economy..

On the other hand 50% of the US economy and UK economy has relied on consumption and a paper asset economy, with huge malinvestment. The real economy has suffered badly as a consequence. Taxes are higher, we are reliant on importing from other countries, as we created a huge debt to GDP growth of 330%, we are net-importers of oil since last year, we have insufficient transport investment, our manufacturing base has been in deep decline, we have the highest levels of personal debt and have consumed transitory goods like ipods and plasma TVs, bought large cars..where the value is lost.

We extrapolated that house prices would rise forever, and so MEW'ed to the hilt, to perpetuate our consumption all the more...Our financials services make up a sub-ordinate percentage of our economy. The excesses and credit expansion boom brought has now hit the bust phase. This is a longterm contraction in that industry...which could last 20 years in my view. Even when the acute phase is over, it will be at least more than a decade before the financial services side of the economy becomes any where near growing in a meaningful way...

And we the UK citizens are the other side to that economy. Our contraction based on paper assets is collapsing as a result of the collapse of the financial side. They feed off each other...as we fall they fall and so on...The question is did we cause the downfall of the banks with our over borrowing or did they cause our downfall with their overlending? I would say they are both inter-dependent.

Unlike the Asean region which is 3.6 billion in size and add OZ to that also, Asia Pacific, which can rely on a huge capital investment and savings rate, and good sound currency when they come out of any recession, what can the West rely on as an engine of growth within the economy? Take away the sagging,bloated services side of things...and what will be the sufficient engine to propel high growth?

Edited by VedantaTrader
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HOLA4411

Whatever happens longer term is anyones guess, I am hoping that shorter term growth in china abates a bit and in india for that matter and I am hoping that they get a tighter grip on their inflation.... they will be dominant economies thats for sure, if not already, they have masses of growth to go... but for our own sakes I think we would be more comfortable short term with lower growth and lower inflation in china.

I am hopefull that they may further reduce fuel subsidies and I am hopefull that some slowdown in exports will limit oil demand.... this may well see an unwinding of the current oil price (even though its already 10% off peak)... I have already said I think oil will go back to $100 and news of slowing growth, and reducing subsidies etc are part of the picutre thats needed for that to happen. if oil goes back to $100 then I am hopefull that something worse than a mild recession will be avoidable here.

We'll see I suppose but any signs of slowing shipping activity etc which this post highleighted are postive based on my agenda.

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