The U.S.-China Currency and Trade Collision Course (Roubini)

This year, several factors have increased the likelihood that China will be branded a currency manipulator. First, the U.S. unemployment rate is at almost 10%, and 17% if you include underemployed and discouraged workers. Second, three quarters of the China trade surplus is with the United States. Third, China re-pegged about 20 months ago and shows no signs of wanting to change its currency policy. Fourth, the political pressure from Congress to get tough on China is at an all-time high: A bipartisan group of 130 representatives have signed a letter arguing that it is time to label China a currency manipulator. Meanwhile, the number of protectionist bills against China in Congress is rising. Fifth, in spite of sharply rising unemployment during the recession, the U.S. refrained from taking sharp protectionist actions. The only clear and explicit case of such protectionism was the case against imports of Chinese tires, a fairly minor trade action given the severity of the U.S. recession. In the U.S. view, China abused this restraint by maintaining the peg and increasing its global trade market share, violating the open-trading system and the WTO regime by not showing flexibility on the currency issue to attempt to rectify the trade imbalances.

The sixth and most important reason China is more likely than ever to get the manipulator stamp: The U.S. administration feels that the policy of keeping quiet on China and engaging its leaders privately has failed. The U.S. grudgingly accepted for a while that China was bound to re-peg in the middle of the economic and financial storm of 2008-09, as it was rapidly losing exports and experiencing a sharp growth slowdown. In fact, had China not pegged, the RMB might have depreciated. But by late 2009, China’s aggressive policy actions had led to a rapid resumption of economic and export growth and rising inflationary pressures that could have been contained in part via currency appreciation. Thus, one would have expected China to start—or at least start signaling—the resumption of slow appreciation of the RMB. Instead, when Barack Obama went to China late last year he was effectively told to take a hike on the currency issue. He was ridiculed by the Chinese for the U.S. fiscal and current account deficits, as well as the accumulation of public and foreign debt. So it was only after months of quiet diplomacy failed to nudge the Chinese to move that the U.S. administration’s patience ran out, and the White House and Congress became publicly vocal on the currency issue.

via Roubini Global Economics – The U.S.-China Currency and Trade Collision Course.

How I’d Hack Your Weak Passwords

nternet standards expert, CEO of web company iFusion Labs, and blogger John Pozadzides knows a thing or two about password security—and he knows exactly how he’d hack the weak passwords you use all over the internet.

Note: This isn’t intended as a guide to hacking *other people’s* weak passwords. Instead, the aim is to help you better understand the security of your own passwords and how to bolster that security.

If you invited me to try and crack your password, you know the one that you use over and over for like every web page you visit, how many guesses would it take before I got it?

via How I’d Hack Your Weak Passwords – Passwords – Lifehacker.

China’s Trade Deficit Ahead?

From Bloomberg, China’s slide toward a monthly trade deficit:

china-trade-deficit

Why is this happening? It’s a combination of cyclical and secular factors, specifically, falling China exports, as the world refuses to bury itself in debt to buy more stuff; and we also have surging domestic demand, as China’s imports pick up on stimulus-driven domestic growth, mostly in commodities and energy, but somewhat broader than that too.

The debate, of course, is whether this is  one-time thing, or something too watch in future. Most, myself included, see this is as one-off, a time when seasonality is worsened by weak global growth and surging domestic growth around stimulus and capital spending. That said, it points to the kind of inevitable rebalancing ahead, as China dials back domestic stimulus while domestic demand picks up. It also is a reminder why China is in zero hurry to let the renminbi appreciate.

via China’s Trade Deficit Ahead?.

California USA vs. Ontario Canada – Which State (Province) Is In Worse Shape? Canadian Banks vs. US Banks Comparison

State/Province Population Deficit Per Capita Deficit
Ontario 11,410,046 $21 Billion $1,840
California 36,961,664 $20 Billion $ 541

Canada did not avoid a crisis because their banks were better or smarter or used less leverage. Canada avoided a crisis because for whatever reason, their housing bubble did not yet blow sky high. However it will, and Canada’s banking crisis is yet to come.

via Mish’s Global Economic Trend Analysis: California USA vs. Ontario Canada – Which State (Province) Is In Worse Shape? Canadian Banks vs. US Banks Comparison.

It’s Official – America Now Enforces Capital Controls

It couldn’t have happened to a nicer country. On March 18, with very little pomp and circumstance, president Obama passed the most recent stimulus act, the $17.5 billion Hiring Incentives to Restore Employment Act (H.R. 2487), brilliantly goalseeked by the administration’s millionaire cronies to abbreviate as HIRE. As it was merely the latest in an endless stream of acts destined to expand the government payroll to infinity, nobody cared about it, or actually read it. Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions – Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS. And should this provision be deemed illegal by a given foreign nation’s domestic laws (think Switzerland), well the foreign financial institution is required to close the account. It’s the law. If you thought you could move your capital to the non-sequestration safety of non-US financial institutions, sorry you lose – the law now says so. Capital Controls are now here and are now fully enforced by the law.

Let’s parse through the just passed law, which has been mentioned by exactly zero mainstream media outlets.

CONTINUED HERE:
via It’s Official – America Now Enforces Capital Controls | zero hedge.

Kurt Vonnegut at the Blackboard

I want to share with you something I’ve learned. I’ll draw it on the blackboard behind me so you can follow more easily [draws a vertical line on the blackboard]. This is the G-I axis: good fortune-ill fortune. Death and terrible poverty, sickness down here—great prosperity, wonderful health up there. Your average state of affairs here in the middle [points to bottom, top, and middle of line respectively].

Vonnegut1.jpg

People love it, and it is not copyrighted. The story is “Man in Hole,” but the story needn’t be about a man or a hole. It’s: somebody gets into trouble, gets out of it again [draws line A]. It is not accidental that the line ends up higher than where it began. This is encouraging to readers.

continued here:

via Kurt Vonnegut at the Blackboard – Lapham’s Quarterly.

Pref Shares – RY.PR.R Bid at under 3% Yield

I’m not entirely sure that this is the first time it’s happened, because I don’t keep track of such things … but at the very least, it’s one of the first times this has happened!

RY.PR.R is a 6.25%+450 FixedReset, announced 2009-1-21. It is callable 2014-2-24 at par and was most recently mentioned in the volume highlights for 2010-3-22.

It traded 5,593 shares today in a range of 28.24-43 before closing at 28.31-40, 20×35.

HIMIPref™ reports that the yield to a call 2014-3-26 at par is now 2.93% (pre-tax, bond-equivalent); recall that a slight inaccuracy in HIMIPref™ conventions means that the calculated call date is maturityNoticePeriod days after the actual call date.

That’s a pretty low yield! The reset to +450bp makes it almost certain to be called at the first opportunity, but one of the words that can hurt in the investment game is “almost”!

via RY.PR.R Bid at under 3% Yield « PrefBlog.