US Markets and its economic-dilemma:
Wall Street today watched a blood bath in action, as stronger dollar, weak economic data spooked the investors (in New York Stock Exchange/ Nasdaq).
A strong dollar makes U.S. goods and services more expensive, and theoretically harder to sell, overseas. And U.S. companies that do business abroad make less mon
ey when their earnings are translated from other countries' currencies into dollars.
A strong dollar makes U.S. goods and services more expensive, and theoretically harder to sell, overseas. And U.S. companies that do business abroad make less mon
ey when their earnings are translated from other countries' currencies into dollars.Moreover, a strong dollar makes commodities more expensive to foreign buyers, and companies that produce the commodities make less money from them. However a strong dollar could see a rally in the Indian Technology counters tomorrow. It could also fuel a rally in the OMCs (Oil marketing companies), Infrastructure/Real estate and pure Petrochem Companies.
Now the US consumers need to be greedier or go in for more consumerism, helping their economy and the stock markets world-wide. Or else "Obama-nomics" based on some obscure socialistic concepts, will lead us to doom and gloom. Once, Mignon McLaughlin said, "Be glad that you're greedy; the national economy would collapse if you weren't."
However, what the US Treasury Secretary Timothy Geithner said during a trip to Beijing this spring was equally shocking “Purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past.” These are some of the ills of much debated "Obamanomics."
On the other hand, there’s a growing group of market professionals who see that the much-advertised Chinese economic miracle is nothing but a “Paper Dragon”. In fact, they argue that the Chinese have precariously overheated their economy, building malls, luxury stores and infrastructure for which there is almost NO demand, and that the entire system is approaching toward a total collapse. A Chinese collapse, of course, would have profound effects on the United States, limiting China’s ability to buy U.S. debt and provoking unknown political changes inside the Chinese regime.
The billionaire hedge fund investor Jim Chanos, the founder of the investment firm Kynikos Associates also holds this view. He is known as a famous short seller — an investor who scrutinizes companies looking for hidden flaws and then bets against those firms in the market. His most famous call came in 2001, when he was the one of the first person, to figure out that the accounting numbers presented in the pubic domain by Enron were pure fiction. The rest is history as the mighty Enron Ltd was blown to pieces within some months.
Here it is to be noted that Chinese economy like the Indian economy is under performing in-spite of mighty stimulus packages amounting to more than $900 billion to boost its $4.3 trillion economy. Another point which is tormenting the Chinese economy post Olympics is the dreaded word, overcapacity. For example the spare capacity in the cement sector according to a recent estimate is 340 million tonnes, which according to a research house is more than the combined consumption in India, US and Japan.
Hereto, the US has been driving the Chinese economy as China is still one of the major supplier of goods to the US. Inspite of ban in some of Chinese products, the China continues to be, US's biggest trade partners.
So, the Chinese factories ran on the US blood as this new found “Chinese-Socialism" devoured the US consumers.
The Chinese on the other hand, with their unbridled capitalistic expansion propelled by a system they still refer to as “socialism with Chinese characteristics or Chinese-Socialism,” are still thriving, though, with annual gross domestic product growth of 8.9 percent in the third quarter and a domestic consumer market just starting to flex its enormous muscles; while the US is still limping back to normalcy.
But it seems there is an oasis in the midst of desert: "The $787 billion stimulus is meeting its goal of creating jobs, even if problems with reporting prevent the government from knowing exactly how well it’s working", government watchdogs said today. In the US about $173 billion of the $787 billion package was spent as of September, 30, with $47 billion subject to the job-reporting requirements.
The rest of the money went for tax cuts and benefits such as unemployment insurance payments. “There are some signs that jobs are finally being created, both as a direct and indirect result of Recovery Act spending,” said the committee chairman, Democratic New York Representative Edolphus Towns.
Now if "OBAMANOMICS" works then the biggest beneficiary would be the US government as it is the “big-daddy” who digested the toxic assets of US’s misadventure with its economy.
It remains to be seen if the US can rise like a Phoenix from the debris of economic downturn. Also, it is felt that the US-China honeymoon will bring in goodies for the world economy inspite of all those occasional mud-throwing.
Someone said, "We had gay burglars the other night. They broke in but rearranged the furniture…..."
Thanks for reading my long article/column......
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