Economics

A forum for discussing macroeconomics
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nanningbob
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Economics

Post by nanningbob »

I wanted a place where we could debate/discuss peacefully :arrrg: economic theory. A place where we could teach/discuss economic theory and discuss alternate thoughts. I love this topic but have learned to keep it out of my threads because there is such divergence of thought. I am hoping we wont fall into one big giant cat-fight or dog-fight but it is one of those subjects which brings on really huge emotions. I know that cant be fully prevented but still to trade Forex a basic knowledge of economics is needed. In other words if you hate Keynesian economics it is tough luck because that is the economic theory used today around the world. Like it or hate it you need to understand its basics so you know why countries are using QE 1, 2 , 3 Abenomics, etc. etc. I also fear the zealous gold crowd and conspiracy crowd will kill this thread but that is the price to pay for having this discussion. We hope Steve's delete finger will have some patience. Anyway, we will try.

I was a high school history/economic/USA govt. teacher so I have some knowledge of the subject but not on the expert level. So if you disagree with me, it is not because I am ignorant or stupid. I understand the basics and just disagree with you on some things. Anyway, I wanted to discuss the following and it will be the first post for discussion. Good luck and keep is civil. :lol:
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
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nanningbob
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Re: Economics

Post by nanningbob »

Read this and if you dont understand it read it again. If you still dont understand it read it again.

The problems we face economically are more than just Conservative vs. Liberal, Socialism vs. Capitalism, etc. The problem is much more fundamental than those viewpoints. A truly great read in economics.

In a forthcoming book Thomas Piketty, an economist at the Paris School of Economics, argues along similar lines that America may be pioneering a hyper-unequal economic model in which a top 1% of capital-owners and "supermanagers" grab a growing share of national income and accumulate an increasing concentration of national wealth. The rise of the middle-class--a 20th-century innovation--was a hugely important political and social development across the world. The squeezing out of that class could generate a more antagonistic, unstable and potentially dangerous politics.
(The underlined part by me is clearly showing up in our Congress and political institutions.)

Read more: http://www.businessinsider.com/the-futu ... ave-2014-1
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
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SpiderX
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Re: Economics

Post by SpiderX »

Hi Bob,

The link is not working.
Think you didnt paste the full link.

Cheers
"Love is patient, love is kind. It does not envy, it does not boast, it is not proud. It does not dishonor others, it is not self-seeking, it is not easily angered, it keeps no record of wrongs.Love does not delight in evil but rejoices with the truth. It always protects, always trusts, always hopes, always perseveres."
-Corinthians 13:4-8
ace81
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Re: Economics

Post by ace81 »

market insight Q1, hope can help :D
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nanningbob
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Re: Economics

Post by nanningbob »

SpiderX » Sun Jan 19, 2014 1:52 pm wrote:Hi Bob,

The link is not working.
Think you didnt paste the full link.

Cheers
Thanks, I fixed the link so it should work now.
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
gustav213
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Re: Economics

Post by gustav213 »

Really excited to see where this thread will go, I majored in Economics and Political Science in college and always love a good discussion on it.
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dispell
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Re: Economics

Post by dispell »

Subbed and ready to learn :smile:
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nanningbob
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Re: Economics

Post by nanningbob »

OK this could get interesting

http://www.zerohedge.com/news/2014-01-1 ... st-default

...borrowers are facing rising pressures for loan repayments in an environment of overcapacity and unprofitable investments. Unable to generate cash to service their loans, they have to turn to the shadow-banking sector for credit and avoid default. The result is an explosive growth of the size of the shadow-banking sector (now conservatively estimated to account for 20-30 percent of GDP).

Understandably, the PBOC does not look upon the shadow banking sector favorably. Since shadow-banking sector gets its short-term liquidity mainly through interbanking loans, the PBOC thought that it could put a painful squeeze on this sector through reducing liquidity. Apparently, the PBOC underestimated the effects of its measure. Largely because Chinese borrowers tend to cross-guarantee each other’s debt, squeezing even a relatively small number of borrowers could produce a cascade of default. The reaction in the credit market was thus almost instant and frightening. Borrowers facing imminent default are willing to borrow at any rate while banks with money are unwilling to loan it out no matter how attractive the terms are.

Should this situation continue, China’s real economy would suffer a nasty shock. Chain default would produce a paralyzing effect on economic activities even though there is no run on the banks. Clearly, this is not a prospect the CCP’s top leadership relishes.
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
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SpiderX
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Re: Economics

Post by SpiderX »

Hi Bob,

would the below news be any significant ?

http://www.forbes.com/sites/gordonchang ... anuary-31/

"A WMP default, whether relating to Liansheng or Zhenfu, could devastate the Chinese banking system and the larger economy as well. In short, China’s growth since the end of 2008 has been dependent on ultra-loose credit first channeled through state banks, like ICBC and Construction Bank, and then through the WMPs, which permitted the state banks to avoid credit risk. Any disruption in the flow of cash from investors to dodgy borrowers through WMPs would rock China with sky-high interest rates or a precipitous plunge in credit, probably both. The result? The best outcome would be decades of misery, what we saw in Japan after its bubble burst in the early 1990s."

Cheers
"Love is patient, love is kind. It does not envy, it does not boast, it is not proud. It does not dishonor others, it is not self-seeking, it is not easily angered, it keeps no record of wrongs.Love does not delight in evil but rejoices with the truth. It always protects, always trusts, always hopes, always perseveres."
-Corinthians 13:4-8
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nanningbob
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Re: Economics

Post by nanningbob »

Here is a reply I had at FF explaining the present difficulties in China;

Be very careful who you are talking to. I actually live, work, and do business in China and have survived for 12 years here and made money. So I know China. You mentioned that I need to do my research on iron so I will respond to you on the iron industry.

China has a huge problem with over production/over capacity of its industries. I will take iron as the example. Comrade A is a leader of his city or region. He sees comrade B doing well and getting promotions and press in the party. He is also driving one heck of a luxury car. Comrade B is moving up. How is he doing it? Well he brought iron manufacturing to his town and became a success. So comrade A convinces his town leadership that they also should get into the iron industry. So to attract investors and business they offer up incentive package for a company to come and make iron in their town also. The company comes, jobs happen, prosperity hits the town, everything turns up roses. Comrade A moves up and is promoted within the party also. So Comrade C and D and E and so on do the same thing. Soon you have iron industries popping up all over China, promotions are being handed out, and comrades are moving up the ladder of authority in the govt. The real big boys make it to the top positions in Beijing. The problem is too much iron is being made, prices drop, profits disappear, quality suffers as each company tries to compete and make their product. Comrade A is high up in govt. now. His gravy train town is suffering from lack of orders but you cant cut back production, his future career and his town would be in jeopardy. Loans are taken out to keep the company afloat. Bigger and bigger subsidies are given out so the workers can be paid and the company can show a profit. The city cant afford the company to fail because there goes its tax base for the construction loans of improving their city. The company is bleeding big time red ink but that is covered up. One person estimated that 50% of the companies in China show a profit because of subsidies now not sales of the product. This is happening in industry after industry after industry all over China. Loans are going belly up and companies can not make their loan payments. Cities and provinces are hocked over their heads in debt and businesses are not allowed to fail by those who have profited the most politically from them. Tax revenues are in serious danger and huge local govt. debt is in danger of going belly up.

A new leader came to power last year in China and he started a clean up campaign. Thousands upon thousands of comrades have been investigated. It is not pretty. The estimate finally came down for the iron industry and the estimate is production needs to be cut by 25% to alleviate over production. Guess what that will do to the AUD? Guess which comrades get their industries protected and guess which ones will get cut? Certainly the guys in Beijing wont be cutting their gravy train to the top. What will the towns do that do get cut? Here come the layoffs, down go tax revenues, etc. etc.

Last year a very brave writer for the Guangzhou newspaper wrote a series of articles on Zoomlion. One of the biggest companies in China who have leaders who rode its coat tails to the top. He exposed the inside corruption, bribes, kickbacks, bank ties and shadow bank ties. His reward-- a 3 year jail sentence. The newspaper at first tried to back him but was later forced to write a retraction and an apology made front page news. Starting next month all workers in the news media will have to take an oath of loyalty to the party to keep their jobs. You are either with us or you are out. Interesting times.
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
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