Rebooting Expectations

By | 2017-07-17T12:21:31+00:00 January 12th, 2017|Global Market Update|

What’s happening in the global economy? JP Morgan Global Manufacturing PMI. Source: Bloomberg It’s no secret that the US stock market is approaching record levels. Business news reports seem to be obsessed with the Dow’s flirtation with the 20,000 mark – which first neared about a month ago. But far more important than Disney or IBM’s price – stock prices, after all, determine the level of the Dow Jones Industrial Average – is the status of the global economy. And the world economy has [...]

The Great Wall of Debt

By | 2017-07-17T12:21:37+00:00 November 8th, 2016|Global Market Update|

What effect does China’s debt have on its economy? Photo: Severin Stadler. Source: Wikipedia The Great Wall of China was built over the course of several centuries to protect the Chinese Empire from invasion by mostly northern nomadic tribes. It stretches about 1,500 miles, although with all the extensions and branches, there are over 20,000 miles of fortifications. In the short run, the Great Wall served to discourage raiders and helped rulers manage trade. In the long run, however, it became economically unsustainable—absorbing labor [...]

Great Expectations

By | 2017-07-17T12:21:39+00:00 October 21st, 2016|Global Market Update|

Is the market suffering from a case of mistaken identity? Public Domain. Scene from “Great Expectations.” Source: Wikipedia In Charles Dickens’ novel “Great Expectations,” his main character Pip is a poor orphan who suddenly starts to receive money from an unknown source. He thinks his mysterious benefactor is the cold and eccentric Miss Havisham. Miss Havisham is wealthy but mysterious, and she had taken Pip on as a companion for herself and her adopted daughter, Estella. In reality, though, Pip’s money was coming from [...]

Chinese Fortunes

By | 2017-07-17T12:21:41+00:00 September 30th, 2016|Global Market Update|

What’s happening in China? Forbidden City in Beijing. Photo: Saad Aktar. Source: Wikimedia Anyone who wants to understand the global economy needs to have a sense of what’s happening in China. China has the second largest economy in the world--almost 2/3rds the size of the US. Last year they grew more than the US and Europe combined. They’re essentially tied with Canada as our largest merchandise trading partner, providing 15% of our imports and exports--$300 billion worth. So what happens in China affects the [...]

The Tiger and the Dragon

By | 2017-07-17T12:22:04+00:00 April 21st, 2016|Global Market Update|

The Tiger and the Dragon Is India on-track to overtake China? Photo: Jeff Kubina. Source: Animal Photos China’s growth has slowed. We know this from innumerable reports. The reduction in aggregate demand resulting from China’s economic shift from manufacturing to services is at the heart of the bust in commodity prices. But what about India? They have over a billion people, most of whom are trying to emerge from poverty. And they have a competitive democratic system—rather than a Party-led autocracy—along with a free [...]

Chinese Dreams

By | 2017-07-17T12:22:05+00:00 April 18th, 2016|Global Market Update|

What’s going on in China? Photo: SP. Source: Pixabay Given the size of their economy, it’s an incredibly important question. The global economy totals about $78 trillion. The US is about 22% of that, Europe is 20%, and China is 13%. Together, our three economies make up 55% of the world’s commerce. So it’s crucial to understand what’s happening. We knew that China couldn’t export its way to prosperity forever. Eventually, it became limited by the size of its trading partners. So China has [...]

The Law of the Jungle?

By | 2017-07-17T12:22:06+00:00 March 30th, 2016|Global Market Update|

Croplands are monocultures. Jungles are diverse. Which is better? Photo: M. Connors. Source: Morguefile It depends on what you want. If you’re looking to get as much food as possible with the least energy input, then you want managed fields. On the other hand, if you’re looking for new types of plants that can survive the stresses and strains of nature, then you want a diverse wilderness. I thought about this while considering China’s state-managed capitalism in comparison to America’s entrepreneurial system. There is [...]

A More (Im)Perfect Union

By | 2017-07-17T12:22:07+00:00 March 15th, 2016|Global Market Update|

Are we in danger of a breakup? Illustration: Gerd Altman. Source: Pixabay There’s a currency union that’s driven the world economy for the past 25 years. It’s not the euro, important as that is. No, I’m referring to the connection between China and the US. Our two economies account for over a third of all global production – and trade between us is increasingly important. For more than 20 years, China has kept its currency tied to the dollar—appreciating the yuan modestly since 2000. [...]

The Impossible Trinity

By | 2017-07-17T12:22:11+00:00 January 22nd, 2016|Global Market Update|

The Impossible Trinity Is China attempting the impossible? Temple of Heaven. Source: Photo Everywhere This week the Chinese monetary authorities announced that they were dropping their Dollar peg. Instead, they want to tie their currency to a basket of global currencies—presumably the Euro and Yen. Good luck with that. Currency pegs work until they don’t. The Dollar peg worked for the Chinese as long as the Dollar was falling. But the greenback started rising against the Euro and the Yen in 2011, and really [...]

Gaining Perspective

By | 2017-07-17T12:22:19+00:00 December 9th, 2015|Global Market Update|

Are we all doomed? Source: NASA It’s easy to get worried about the economy. Alarmist news media tend to focus on the most negative trends. “If it bleeds, it leads” still sells papers—or page-views. And, to be fair, there’s a lot to worry about. Plunging oil prices may be just due to OPEC pumping more than expected—or they might indicate a lack of demand. Falling commodities could be due to China’s shift from a manufacturing to a service economy, or they could be part [...]