Printing and strengthening the monopoly dollar to buy things cheap from the world

 Dollar’s Resurgence Is a Headache for the Rest of the World

Surging Treasury yields help send the U.S. currency to its best quarter in a year

The dollar has bounced back with a vengeance, threatening global central bankers’ tricky task of bringing down inflation while protecting fragile economic growth.

The greenback on Monday reached its highest level of the year, bringing its gain since mid-July to 6.6%. The WSJ Dollar Index last week closed out its best quarter since last fall, when it was in the midst of a once-in-a-generation run-up. Some emerging-market currencies have been hit especially hard, with the dollar rising 11% against the Chilean peso and almost 8% against the Hungarian forint.

The dollar’s strength has been driven by surging Treasury yields. The 10-year U.S. Treasury yield reached a new 16-year high Monday of 4.682%. Investors have grown more convinced of the U.S. economy’s resilience—and that the Federal Reserve is likely to keep borrowing costs higher for longer than it would do in a typical business cycle.

Any big currency move produces both winners and losers. In the U.S., a strong dollar is politically popular and largely good for consumers because it holds down inflation by keeping import prices in check, and makes trips abroad cheaper.

For the rest of the world, however, the return of the strong dollar is a largely unwelcome development. In many countries, interest rates are at their highest in years or decades, already increasing the risk of financial stress. The combination of those higher rates, a stronger U.S. currency and elevated oil prices spells lower growth across the world and more financial vulnerability.

U.S. companies with big overseas businesses like Apple are also getting hit as the value of their overseas revenue falls in terms of the U.S. currency and their goods become more expensive for foreigners.

“The strong dollar is overstaying its welcome. It’s starting to become a problem again,” said Chris Turner, head of foreign-exchange strategy at ING.

The greenback is still by far the most widely used currency for global trade and finance, which means its fluctuations ripple far outside of the U.S. Commodities, like oil or wheat, are usually priced in dollars. And governments, companies and households around the world have borrowed trillions of dollars in the U.S. currency. When the dollar’s value rises, it gets more expensive for others to buy imports or repay their debts.

Anonymous

US manipulating strong dollar to kill emerging economies

 “The markets have consistently tried to price in rosy scenarios which were associated with a weaker dollar and they continue to be surprised that the reality isn’t quite as rosy,” said Maurice Obstfeld, former chief economist at the International Monetary Fund.

The strong dollar “is going to be negative for emerging markets. It’s going to be negative for global trade,” he said.

So far at least, the damage has been less widespread than last year, when the dollar surge led to a historic selloff in emerging-market assets and helped tip countries like Sri Lanka and Ghana into full-blown economic crises.

In recent months, currencies in Latin America and Eastern Europe have been hit hard. Central banks in Brazil, Poland and Hungary have started cutting policy rates after winning praise for their quick action to tighten monetary policy in 2021, well ahead of the Fed and other developed-market central banks. They are now under pressure to pause or slow rate-cutting plans to prevent further pressure on their currencies.

A stronger dollar is felt broadly in emerging markets. A paper co-written by Obstfeld last year showed how the shock of a sharp rise in the dollar leads to yearslong economic underperformance in less developed economies. Consumption, output, investment and government spending all come under pressure alongside the local currency.

“It’s a double whammy,” he said. “You’re being driven away from your growth target and you’re being driven away from your inflation target at the same time.”

Some global central banks are tapping into stockpiles of foreign currency to help shore up their currencies. Others are publicly threatening to do so, a tactic known as jawboning.

Japanese Finance Minister Shunichi Suzuki on Friday pledged to take action against sharp falls in the yen, which is close to 150 a dollar. That is around the level that last year spurred the

“We will take appropriate action against excessive moves without ruling out any options,” Suzuki said. “We have a strong sense of urgency.”

Both Switzerland and South Korea have sold foreign-currency reserves to bolster their currencies, the franc and the won. Analysts believe China is helping prop up the yuan, which fell to a 16-year low in onshore trading in September, by having state banks sell dollars.

Investors had largely expected the greenback to weaken this year as the Fed wound down its most aggressive campaign of interest-rate increases since the 1980s. Indeed, in the first half of the year, beaten-down currencies like the British pound and euro rebounded from 2022’s brutal declines.

But those rallies have petered out. The euro, which topped $1.10 over the summer, has fallen back toward $1.05 as the eurozone economy stagnates and worries over debt sustainability in fragile southern economies like Italy re-emerge.

Many investors still hope the dollar’s decadelong winning streak, which has left it at least 10% overvalued by many estimates, is coming to an end.

One factor could be fading American growth. U.S. consumers have been running down their $2 trillion-plus in pandemic-era savings and the resumption of student-loan payments is expected to further dent consumption. The unemployment rate, while still near historic lows, has been edging up.

U.S. growth is likely to fall in line with the rest of the world in 2024, said Luca Paolini, chief strategist at Pictet Asset Management. The dollar’s recent rally is “the last hurrah before a significant decline next year,” he said.

Anonymous

Is Singapore a smart or a dumb city?

 Since the 1970s, the manufacturing world has developed a supply chain system called Just In Time delivery. All parts would be delivered just in time and manufacturers did not have to incur cost in warehousing and paying ahead for parts that may not be used when the production volumes changed.

Now in 2023, with big data, with AI, improved communication and transportation, and all the knowledge and experience and things called smart cities, would Just In Time delivery or manufacturing be further improved? Without Just In Time delivery, there would be a lot of wastages due to over or under supply, warehousing and inefficient supply chain. Should this be a thing of the past especially in a tightly knitted city state like Singapore, with less than 6 m population and even lesser at about 3.5m in terms of citizens?

Just heard over the news, when it was proudly announced that citizens buying BTO flats only have a 3 to 4 years waiting time for delivery of their flats. With such a small population, with the monopoly in building HDB flats, with improved building technology, supply chain, automation, AIs, big data and calling Singapore a smart city, why is it so difficult to shorten the waiting time to build and deliver HDB flats to maybe less than a year, less than 6 months? 

China can build a 40 storey building in less than a month using prefab, automation and advanced building technology. I have been watching the construction of simple one storey structure, with simple support beams, something quite similar to a hawker centre, and after more than a month, only a small part of the floor was laid, and a few steel pipe pillars were erected, joined by physically welding the steel frames and beams together. It looks like it would take weeks before it is ready to install the roof. And it would take many more weeks before the structure is finally completed. And there were about 20 foreign workers on site daily. Heard of a few hundred units of residential homes being built in a month in Africa by the Chinese construction brigade?

Oops, I digressed. Is Singapore a dumb city or a smart city? What kind of building and construction technology is being used, what kind of planning and management science, what kind of trained and talented workers? 30 or 40 years ago the waiting time for HDB flats were also 3 to 4 years. Today, it is still 3 or 4 years?

What a great improvement for a smart city with so many smart foreign talents! Is building flats for a small island population so complicated to plan and build that all the AI, technology, big data etc etc are unable to cope with and unable to improve on the delivery time?

What do you think?

Pioneer, Merdeka versus Majulah and Strawberry Generations

 For the elderly, that is the Pioneer and Merdeka generations, fitting in with the living standards of the present day generation is not too difficult and still adaptable.

However, if things turn out really bad for Singapore with its manufacturing status being on a downhill trajectory, and good jobs with good pay getting scarcier, life may not be as rosy as we think going forward. That being so, it would be extremely difficult for the present younger generation to hope to fit in and cope with the living standards going downhill.

How much debts were the Pioneer and Merdeka generations facing during their lifetime? Not that serious as what we see with today's generation, owing hundreds of thousands to the Housing Board alone in buying just a HDB flat, on top of upkeeping maybe a car, and incurring credit card debts, and possibly still repaying student loans. And there are daily expenses to be factored in as well.

Sure they may still hold down a good paying job, but what if they were to lose it? There is no such thing as an 'iron rice bowl' in today's world. Realistically, most Singaporeans are spending money that they have not yet earned, in other words spending borrowed money in keeping up with the Joneses. Good for them if the gravy trains keeps delivering the gravy, but once it stops doing that, all hell will break lose. Never say this will never happen.

For the Pioneers, paying for their HDB flats then was seldom a problem, and needs no huge loans from the Housing Board, as CPF savings alone was more than enough to take care of most of that, with most already paid up fully their loans upon retirement. Sorry to say, retirement was still something that was looked forward to and attainable. But not for today's younger generation. That the Government keeps pushing forward the retirement age tells us they already knew retirement is just a dream and an unattainable goal for most people. Ok, just listen to the Government when they tell you some people just love to work and will work until they drop dead. 

Anonymous

Wheel of fortune never stop spinning

 Every country benefits with an early start, but once others catch up, and even bypass them in developments, the bragging rights will slowly be gone. Let us not look at the Europeans alone as examples, but at Japan and South Korea, the two most innovative countries in Asia. Their era of manufacturing domination is gone or going, with Japan already gone for more than thirty long years, and with absolutely zero GDP growth for decades.

South Korea is also losing out to China. But China will also suffer the same fate, given another decade or two, more so with the USA taking pot shots at China in every field of development. No one took pot shots at the 'Asian Tigers', but they also lost ground, which is a natural working of the 'Wheel of Fortune'. As Xi Jinping said - 'Snuffing out other's candles does not to make one's candle brighter'. No country can be at the top forever. No one climbed Everest and can stay at the top.

The irony is that the rise of Germany and Japan had been stonewalled and hijacked by the USA, to keep them from overtaking. These two are practically vassal states of the USA and can be ordered to stop, when the 'Emperor's Edit' is read to them. However, stopping China from progressing is not the same or as easily as Germany and Japan. Using USA's fake 'Emperor Edits' against China's centuries old and original 'Emperor's Edit' is not going to work. Real Emperors do not issue fake edicts.

I do think that Japan is going downhill very rapidly. So is Germany. The third and fourth largest economies of the world are in deep trouble. On the other hand, economies of countries like Brazil and Indonesia, with abundant natural resources are the future growth engines of the world. Russia is an example of how well countries can survive with abundant natural resources. And do not forget about the Middle Eastern countries and Africa, which are also developing fast, beyond just oil. As for those Central Asia economies, rich in natural resources, they may take much longer to put their house in order, but with help from China, who knows.

So for those countries running away like wild horses over the past few decades, their days are numbered, just depending on manufacturing, without the natural resources to back them up. They may assume and think that money will solve all problems, but just look at countries now cutting back on exports of essential commodities, and you can understand the issues going forward.

I just watched a documentary talking about some poor country's citizens (forgot which country) migrating their main diet from rice to cheaper sorghum which were plentiful. Sorghum is much more nutritious than rice, but for those not used to the taste, it may be difficult to talk about changing one's diet. 

Anonymous