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LinkedInMacroman reports that there is a bit of optimism in the air about China right now. Loan growth was strong in January. Steel prices have picked up a bit. The latest Chinese purchasing managers survey wasn’t as bad as the last one. The fall in the pace of contraction in activity has generated hope that China’s economy will rebound later in the year. China’s stimulus will help, as will the fact that China’s state banks are liquid and have clear instructions to lend …
Everyone looks at China through their own lens. My lens is the trade data. And there I still don’t find much basis for optimism. China’s January trade data isn’t out, but Korea’s data is — and it was awful. The sheer scale of the fall in Korean and Taiwanese exports shows up most cleanly if monthly exports are plotted over time.
A plot of the y/y change confirms that the current slowdown is sharper than past slowdowns, and given the strong growth in exports over the past several years, a bigger percentage change interacts with a bigger base to produce a far bigger absolute fall.*
I share Paul Krugman’s and Kevin Drum’s assessment of the “Buy American” provisions in the stimulus package: the impulse behind these provisions is understandable, but their likely costs exceed their likely benefits.** But I do wish that there was a bit more recognition on the part of those bankers highlighting the risks poised by protectionism of the scale of the collapse in trade that has ensued from the collapse of the financial sector. Not all risks to the flow of goods across borders emanate from Washington DC.
Back to China. Korea’s exports to China have been falling faster than Korea’s overall exports. The same is true for Taiwan.
There are two potential explanations for these sharp falls.
– a sharp fall in demand from the US and Europe, which is percolating back through Asia’s supply chain and will soon hit China’s exports.
– a sharp fall in demand inside China.
Neither strike me as positive for China.
Actually there is a third explanation. The contraction in trade finance and a one-off inventory correction (the buildup of inventories in the US — think all the cars piled up near US ports — in q4 triggered a fall in production globally) have pushed Asia’s exports down more sharply than is warranted by the fall in underlying demand. As trade finance is restored and inventories are worked off, intra-Asian and global trade will pick up again.
I certainly hope so. But right now the trade data suggests an ongoing contraction in activity in Asia. That in some sense is the risk Asia incurred by relying so heavily on exports to support their growth. The production of tradeable goods has always been cyclical. Durables in particular. Car purchases can be deferred in a downturn. In a sense, export-based Asian economies made the same bet as the European and American financial sector: both were betting on low levels of macroeconomic and financial volatility in the US and Europe.
Asia isn’t the only source of concern either. European trade is also contracting, though not quite as rapidly as intra-Asian trade. The collapse of cross-border financial intermediation likely means that oil-importing Eastern Europe won’t be able to continue to get the loans it needs to sustain large current account deficits. Oil-exporting Russia clearly has to cut back as well. That means less demand for German — and other — exports.
The net result: there is plenty of spare capacity globally. Look at the graphs accompanying Martin Wolf’s commentary on Davos. They suggest, at least to me, that deflation from insufficient demand remains the key risk facing the global economy …
* Thanks to Paul Swartz for help with the graphs. Do check out his updated graphs comparing how the currency recession compares to other post-World War II downturns. Korean and Taiwanese imports have fallen by roughly as much as exports.
I am more surprised though by the scale of the fall in exports. I would expect a fall in commodity prices to lower Korea’s imports and to increase its trade surplus. The fact that the huge fall in imports hasn’t pushed the surplus up is striking.
** There is a real issue though, as the cost (more debt) of a stimulus are born nationally while the benefits are shared globally. But the best response remains a global stimulus, where the US stimulus creates demand for other countries’ good and other countries’ stimulus creates demand for US goods. And — contrary to Martin Hutchinson — it really doesn’t matter if the source of demand is “private” consumption or “public” consumption. The key is generating some kind of demand to support activity. If that comes from public spending, find. And if Asian governments prefer spur private consumption, there are a host of ways to do so …
Bailouts of global banks pose some of the same issues, as the costs of a bailout are born by national taxpayers while some of the benefits are shared globally. A world where national governments (read national taxpayers) are the key pillar supporting demand and banks is likely to be a bit different than a world dominated by private spending and (truely) private banks.
Bank of China Vice-President Zhu Min, “Even rapid growth in Chinese consumption can’t make up for weaker spending in the U.S., the world’s No. 1 shopper”. The Chinese government announced 4 trillion yuan ($585 billion) stimulus package will likely keep China’s economy afloat, but it won’t possibly rescue the global economy.
The primary focus of the stimulus package is railway infrastructure construction that represents entirely domestic Chinese production. In railway technology, the United States lags far behind China in the development of high-speed railway electrification and Bullet train manufacturing. The new Beijing-Tianjin railway operates 300 km/hr Bullet trains between the cities reducing the previous 2 hour trip to around 40 minutes.
Interesting serial of data from P Schwarz the Federal budget is falling on a cliff and GDP contraction is smoothened by stimuli that are largely awarded to banks alleged not to lend.
OECD leading indicators (January 2009) have a strong correlation and are more sanguine on economic slowdown (the year to year strongest changes are the major 5 Asian economies and Germany) One has to agree that intra trades are slowing,and may see few improvements in the current accounts of the traditional CA deficit countries.
http://www.oecd.org/dataoecd/33/21/41968144.pdf
Brad, very well balanced arguments leave me with nothing to add or subtract. Right on the spot.
If these as such can be sustained, the world would benefit greatly with you in a much brighter and higher spot.
IMO tho the spot that you currently occupy shines brighter already than all the other ones combined.
I found this link at Macro Man’s blog page in a comment:
Gordon Brown flies Union Jack upside down during China trade negotiations.
http://www.telegraph.co.uk/news/newstopics/howaboutthat/4450514/Gordon-Brown-flies-Union-flag-upside-down-at-China-ceremony.html
My interpretation of the data is that people overestimate the degree to which China is dependent on exports. Yes the sudden drop in exports did hit the Chinese economy hard, but this was because the government had been cooling down the domestic economy over the last year.
My other suspicion is that what hit the Chinese economy hard was not so much the contraction in demand, but the contraction in credit which was a consequence of the collapse of Lehman. There is a lot of “trade finance” in China that really isn’t trade finance at all.
One other thing. Mainland China is big and diverse. Korea and Taiwan are about the size of one PRC province, so things are happening at a different scale.
Guangdong province has a population of over 100 million that is twice that of either South Korea or Taiwan, I do suspect that if you did an export graph of Guangdong, you’d see things dropping like a cliff.
I’ve been wondering with all the news about US and Euro banks in trouble we haven’t heard of banking troubles in Asia yet. Maybe Japanese and Korean banks finally got religion and refrained from doing naughty and unwise things this go around.
But recessions are always hard on capital intensive industry, and that always puts a strain on banks. For instance, Korea seems to be the world factory for HDTVs. A latest generation LCD HDTV plant is big enough to hanger eight 747s and costs upwards of $3B***. Shipbuilding can’t be in big demand right now. Consumer durables have fallen off a cliff. Same for computer hardware.
Can’t see how Japan can hang in there with the yen at 90 vs. a weak won and yuan.
Maybe we still get an Asian banking crisis in the future yet, except for all the right reasons this time?
***Disclosure: I’m in the market for a great big Samsung LCD HDTV. Maybe a new computer too. The car is still new, so that will have to wait. But it was built in the US anyway. The golf clubs are new too. The heads came from Taiwan, but were probably cast in China. Shafts are buy American True Temper steel. Fitted and assembled by an internet retailer in Florida. I spread that purchase around and much as I could.
But I’m starting to ramble, so I’ll stop now. Remember , pass on the Asian shrimp at Wal-Mart.
Brad:
I am a non-Economist. But from eyeballing the K/T import export data it seems clear that the is a change in the rate of growth about 1/02.
It mimics the “bubble” graphs seem in US housing.
Would it be possible to extrapolate the growth rate, for say 1988-2002, and extend it to the present. This might give us an idea of where these economies might eventually stabilize.
Chinese Economy rebounding on government fiscal Stimulus and orders to State-owned Chinese banks to increase lending ….
From Bloomberg,
China pledged 4 trillion yuan ($584 billion) of spending to revive economic growth in November. State-owned Chinese banks may have offered a record 1.2 trillion yuan ($175 billion) of new loans in January, the China Securities Journal said yesterday. China’s central bank has cut its key lending rate by 2.16 percentage points since September to 5.31 percent to boost lending. “Now that lending growth is beyond everybody’s expectations, the need for further cuts has weakened,” said Ma Jun, chief China economist with Deutsche Bank AG in Hong Kong. Hong Kong stocks rose for a second day after China announced new stimulus measures, stoking expectations the nation will be able to revive economic growth.
Brad,
I can say with a fair amount of assurance, all the positives observed recently in China (loan growth, better sentiment, etc.) arose from the government stimulus measures. Private sectors, esp. the export-related ones, are still bleeding on the back of plummeted demand and credit squeeze. So, the companies and industries directly benefited from all the government projects are doing better, for real. And the other side of the story is that you are right with trade sectors. It could be a long while for us to see a silver lining on that one.
One possible derivative from the good part of the story is the “hopeful” stock market. As you can see that China stock market is the top performer in Jan. If people just keep hoping and put their money where their hope is, it’s not unlikely that China’s stock market could go for a wild ride again. Chinese people do have enormous amount money parked with banks, earning pathetic interest rate, thus capital supply is never a question. It’s just what could move such funds into the stock market. And don’t underestimate the sensitivity of “hot money”. One phenomenon about both China’s stock market and property market is that rationality barely exists and price movement is a one-way lane once the velocity kicks into high gear. One thing leads to another. If stock market goes high enough, the wealth effect may revive the real estate market to a certain degree, which is the true engine for China domestic demand. The problem about domestic demand is not that people don’t have the purchasing power (yes, the economy has taken a toll on some people. But believe me the majority of middle-class is just doing fine). It’s just how you can trigger the spending action, in scale.
Is this over-simplification and too much wishful thinking? Yes. Because I completely ignored the trade part of the question. Nonetheless, it’s fun thinking. And I still believe China has one of the best chances to work out this mess with government intervention, because both the government and the people are fairly “loaded”. It also helps that China government is experienced in this regard.
It’s like pulling a rope: we know that the export is dead-meat heavy, could the fiscal stimulus win the game? I don’t know… Your thoughts?
I selfishly wish that you’d do some research on China’s domestic data so that we would be indulged with some excellent work beyond reserve/trade. Your analysis is absolutely one of the best I ever encountered in blogsphere and now if you could just expand a little:-)
By the way, CIC will publish its first annual report soon. Watch out for that one.
Cedric: I’ve been wondering with all the news about US and Euro banks in trouble we haven’t heard of banking troubles in Asia yet. Maybe Japanese and Korean banks finally got religion and refrained from doing naughty and unwise things this go around.
In the case of China, it was because the banks had better risk management than American banks, and this is in large part because Beijing saw what happened to Suharto in 1998, and figured out that a banking crisis could bring down a government (which is what happened in the US).
One curious thing is that in restructuring a banking system, China got a lot of advice from Wall Street banks, and most of it was good advice. It was one of those “do what we say, and not what we do” situations.
Something that was the case before mid last year is that “risk management” was considered an extremely low status backwater in many banks, and not the place you wanted to be if you cared about your career.
Brad:Bailouts of global banks pose some of the same issues, as the costs of a bailout are born by national taxpayers while some of the benefits are shared globally.
Again, I notice a sense of “nationalism” much more than objectivity in this statement. Consider the case study of Landsbanki, the largest Icelandic bank. When a bank goes insolvent the only two options are either to bailout or to nationalize, and Iceland nationalized Landsbanki. Landsbanki was the owner of several large investment banks, retail chains, etc in the UK. UK depositors had significant deposits in Landsbanki, especially some of the British County Councils had parked deposits in Landsbanki in the expectation of better interest rate realization.
After Landsbanki was nationalized a private firm successfully bid for Landsbanki’s UK assets, and they made an announcement that subject to regulatory approval they would take over those assets. Soon after this announcement, HM Treasury froze all of Landsbanki’s assets in the UK, while at the same time excluding Landsbanki’s subsidiaries from the freeze. Net-net HM Treasury ensured that private investment banks in the UK, that owned UK firms, were freed of their Landsbanki ownership.
The reason for this action was that if a private firm were to buy up Landsbanki’s assets from the Iceland Govt., the UK depositors would be in jeopardy and dependent on Iceland Govt. largesse to get back their deposits.
Apply the reasoning to an American bank like Citigroup. Citigroup has foreign assets in the form of branch networks, deposits, loan receivables, private wealth management accounts, etc spanning the globe, from Peru to South Korea. Imagine the effect on the foreign assets of the bank, and the effects on foreign depositors and lendees of the bank, if the US Treasury were to nationalize it.
Given the stringent banking regulations in most emerging markets, a US Treasury bailout of insolvent American banks ensures the availability of foreign depositors’ savings to offset bankruptcies of US citizens, rather than the other way round. This is simple and easy to see, but I don’t expect an ‘Air Force Eagle Economist’ to be able to acknowledge it.
Very interesting point about intra-Asian trade and really the guesswork in that. I’m continually amazed how many people don’t get the importance of aggregate demand.
“Look at the graphs accompanying Martin Wolf’s commentary on Davos. They suggest, at least to me, that deflation from insufficient demand remains the key risk facing the global economy”
I am not so sure. The graphs show a fall in production, but it is not clear whether this production – eg cars in the US – is now sustainable. If not, then effectively, there may not be much spare capacity. This is the concern I have about attempts at stimulus. I think the liquidationist view should be considered more seriously.
bluecho: . If people just keep hoping and put their money where their hope is, it’s not unlikely that China’s stock market could go for a wild ride again.
What is likely to be different this time is that unlike the last boom-bust cycle in which you had too much money chasing too few companies, you are likely to see a major expansion in the supply of companies in the stock market.
Investor: China’s stock exchanges have bottomed out, according to impartial analyses.
You never know. The impartial analysis are just price/earnings ratios, and what happens next depends on what you think earnings are going to be next year.
Investor: So if you go by this post, what you’re getting is a geo-political assessment of China’s trade policies, and not an objective assessment of China’s economy to determine the direction of China’s stock exchanges.
Stock markets are inherently subjective. Part of the problem with the Shanghai stock markets is that historically stock prices really have nothing much to do with the “objective” state of the Chinese economy. The stock market has sometimes tanked when the economy is doing well, and risen when the economy is doing poorly.
Investor: The better entrenched private market participants have their own large teams of economists to do objective analysis for them; typically that analysis isn’t available completely in public domain.
This isn’t true. Pretty much every bit of information people get in investment banks is stuff that you can google for online, and it doesn’t take much training to be a good stock analyst. A lot of people that do stock analysis in banks are basically fresh out of college, and an “analyst” in an IB is the lowest rank in the corporate hierarchy.
The bits of private information are 1) insider information for which people can’t and don’t trade on and 2) industry specific information. People take 1) very seriously and people that are doing corporate deals will not talk to people doing stock analysis without a compliance officer present. As for 2), if you want to know what the good trucking companies are, an economist won’t know. Go to your local truck stop and talk to truckers (which is what the good analysts do). Wall Street analysts *do* know what the good Wall Street banks are and aren’t, but they aren’t going to be blogging about it.
Investor: It would benefit market participants going through this blog if they were to be wary of political interpretations at this blog, even as I do say the numerical analysis is simply of the best possible quality.
I’m sure that Brad is influenced by his citizenship because he happens to be human. But by that criteria everyone is excluded. The most you can do is to get different people with different biases.
Something that is useful is to find a Canadian since they usually have some insights about the United States that you can’t get from an American.
Investor: Apply the reasoning to an American bank like Citigroup. Citigroup has foreign assets in the form of branch networks, deposits, loan receivables, private wealth management accounts, etc spanning the globe, from Peru to South Korea. Imagine the effect on the foreign assets of the bank, and the effects on foreign depositors and lendees of the bank, if the US Treasury were to nationalize it.
Except that the US is not Iceland, and the UK (and most other countries) don’t dare do to US banks what they do to Icelandic banks, because Iceland doesn’t have 12 carrier battle groups.
Investor: The truth however, is abundantly clear. When somebody has expertise in finance, they’re expected to use that to go out and make wagonloads of money. Then one or two wagonloads can be exchanged for senior level Government appointments, which will most likely be used to bring in MORE wagonloads of money.
Once you get to the level that she has gotten to, money becomes unimportant, except as a proxy for other things like power, status, respect, etc. Most people that go from Wall Street into senior level government appointments do so as a form of charity work.
The problem with people moving from industry to government is *not* secret back room deals. It’s terribly unlikely that she will would be able to do something to benefit one financial firm at the expense of others because the other financial firms would start screaming. This is probably one major reason that Obama didn’t appoint anyone that was connected with a financial firm and certainly no one from Goldman-Sachs.
The problem is that if you work in an investment bank, you start seeing the world in a certain way, and that is different from how a farmer or truck driver sees the world.
Also, if you want to make lots of money in government, you don’t become a senior government official, you become a lobbyist or consultant. People that move from industry to government generally do so for reasonably “pure” motives, because anyone with “impure” motives would find it much easier to do something else.
Investor: Do you get my drift … you could be earning wagonloads in newly upper-limited million dollar bonuses and what not, and at the same time you could be a member in these foreign policy type of setups … best of both worlds.
No you can’t. If you work for an investment bank, you aren’t going to be allowed to publicly say or do anything without having every word to through teams of lawyers. Most public policy think tanks frown on employees having major employment elsewhere.
> Also, if you want to make lots of money in government, you don’t become a senior government official, you become a lobbyist or consultant.
Not quite — you could first become a senior govt official and then become a lobbyist.
Twofish: Most people that go from Wall Street into senior level government appointments do so as a form of charity work.
When a private individual becomes a Federal Employee, if they’re really rich, they can save a lot of money in capital gains taxes by becoming a Federal employee. Paulson, one of the rich Wall Street types saved wagonloads in capital gains taxes when he got appointed as Treasury Secy. Obama has chosen not to have *Buffett* as T-Secy, probably because that by itself will entail a chunky loss to the exchequer in Buffett taxes (Buffett does his tax filings himself, and not through any accountants)
Investor: When a private individual becomes a Federal Employee, if they’re really rich, they can save a lot of money in capital gains taxes by becoming a Federal employee.
So what? The thing about people at that level is that they are generally so rich that saving a million really doesn’t mean that much to them.
Investor: Obama has chosen not to have *Buffett* as T-Secy, probably because that by itself will entail a chunky loss to the exchequer in Buffett taxes
More likely because Buffett has neither the skills, expertise, or the personality for the job. He’s not qualified for it.
The saying;
Le secret des grandes fortunes sans cause apparente est un crime oubli , parce qu’ il a t proprement fait
or simply……..
Behind every great fortune there is a great crime.
has a certain relevance to this thread and crisis.
Posting without links, links aren’t going through:
OK, earlier David Dollar was a Director of Development Policy at The World Bank. Here’s a link to David Dollar’s *earlier* views on *globalization*.
Interesting extracts:
“Economic integration occurs when countries lower barriers such as import tariffs and open themselves up to investment and trade with the rest of the world.”
“Q: What conclusions have you formed about the globalization debate?
A: Globalization is a messy process that requires adjustment and creates significant challenges and problems. But the evidence is pretty clear: integration offers powerful net benefits for developing countries. Countries just have to decide how they weigh those benefits against other concerns. Also, integration is not simply an “either-or” choice. Countries can open up to trade and direct investment while managing other aspects of their relationship with the larger world economy. “
And here’s a link to the latest from Mr. David Dollar, who is now the World Bank’s *country director* for China and Mongolia.
Excerpts:
“…In 1997, there were bottlenecks in highways, power, sea ports, and airports. It is important to recognize, however, that today the bottlenecks are different …
On the other hand, there are obvious infrastructure needs. There is not enough low-cost housing for migrants to move permanently to cities with their families; not enough schools and social services for these migrants; not enough capacity in wastewater treatment and environmental protection. The railway system is under-developed compared to highways or airports. So, there are lots of good opportunities for infrastructure investments that improve the quality of life. The challenge is to choose projects that actually address current bottlenecks.”
If you’re dumb, you can just blindly accept the argument that the US policy establishment is trying to pay its way out of the credit rigmarole by working hard and exporting more. On the other hand, anybody with common sense would want to know *why* David Dollar recommends China should set up infrastructure to keep *migrant workers* in low cost housing in cities and connect them through better railways.
Here I’ve provided only excerpts from David Dollars own writings and interview statements. If you read the second link, you can see articles quoted by David Dollar from Chinese economists which talk about (emphasis added)
“…However, such investment-driven economic model would find it difficult to prop up a sustained employment expansion. At the same time, the country’s huge amounts of social capital have no ideal fields for investment given that a higher market access standard is in place. Thus, the government should open more fields to unofficial capital and provide them convenient access to some monopolistic sectors.””
So you can see what David Dollar *really* believes China should do. In the first interview, he was open about asking for FDI liberalization in China, based on globalization needs. In the second, he *quotes* another economist recommending “open more fields to unofficial capital*; while he himself wants spending to help set up infrastructure for *migrant workers*, some 20 million of who have been fired recently.
Investor: An England born lady, who’s turned super wealthy in the I-banking business, raising money for governments, with a Germanic name, and mostly European and Russian work experience, gets appointed as a staff member through the graces of Senator John Kerry, on the Senate Foreign Relations Committee. And the ostensible purpose of this staffing is to set up nationalistic financial laws.
Anyone that has investment banking experience is probably not going to be too nationalistic. In any case, I try not to make assumptions about people based on their ethnicity or national origins. I’m not seeing why you find the appointment objectionable.
Investor: Obviously the only reason this lady has taken this job is to save a chunk of money in capital gains taxes.
Almost certainly not.
Knowing people in similar situations, the likely reason she went into public policy was that he was obvious to her that she was going to get as high as she could go in industry. Investment banks are pyramids, and so eventually you reach a point where it is obvious that you just aren’t going to get any higher and so you leave.
That was in response to comment earlier from Brad:
earlier i indicated that i supported david dollar’s suggestions for increasing consumption in china.
I’m not able to upload links, so you can google up David Dollar, plus China plus World Bank, you should get the above.
My guess is once the United States recovers from it’s depression, and the consumer starts spending China will once again flood the export market with cheap Chinese made goods to American consumers.
My thought is also China won’t gamble on appreciating it’s currency over the next 5-10 years. It certainly will not appreciate it’s currency during a severe global recession.
There is too much risk for China to appreciate it’s currency. I wonder how the west will deal with this?
I don’t blame China, it would be a big risk in the current environment for it to appreciate it’s currency.
I think the United States is put in a bad position. As soon as it becomes healthy it’s consumers will once again be flooded with Chinese goods. The U.S. really has no way out but work on balancing the equation. A confrontation with China will come at some point, it’s doubtful the U.S. will continue to accept China transform as a new emerging global player which has multi-lateral power.
The last thing in my opinion that the United States wants is for the world to have a communist superpower.
@ Twofish:
My objective is to sift out propaganda from actual facts, so that you can have a realistic expectation of future policies.
There’s been a lot of discussion about the current account imbalances having led to the credit crisis. What’s proposed is that the US, will adopt policies to improve performance of export sectors, and other nations will follow policies to re focus on local market demand. Also, balkanization of bank lending, with major banks focusing on a limited geography, is proposed as a further “financial de globalization”. There’re calls to buy local made products and services, and demands for trade protectionism, all round.
According to me, all of this is pure propaganda. None of these proposed policies are practicable and they’re not going to come about. Which is also why I think that equity markets have bottomed out and we’re looking ahead to a recovery now.
The recovery will be much faster and stronger in emerging markets, than in the developed world. The reason for this is that the recent falls in trade activity represent lower aggregate demand, and not lower profitability of trade flows. Given that emerging markets have an opportunity to expand their infrastrcuture and stimulate further economic activity locally, their recovery is now well on track.
However, trade flows will continue at lower volumes till such time the developed world economies recover. Developed world economies can only rely on new technological innovations, perhaps the final commercial success of biotechnology and nanotechnology to recover from this crisis.
Specifically for the US, the choice is between a sovereign default with new blue dollars, or black and white dollars; or else succeed in maintaining political domination over all petroleum and petroleum gas producing economies in the world to keep the USD exchange rate from ever becoming market determined.
The latter policy is the one that is being followed now. Soon the US banking system will be fixed with taxpayer borrowings. Once banks are ready to lend again, a gradual housing market stabilization will follow. Unemployment will continue to remain high, but it will gradually improve,through entrepreneurial activities. The Govt. stimulus program in the US isn’t very different from the social security dole. Instead of directly handing out the dole, the Govt. is getting a bit of non-repeatable and largely unprofitable work done in return for its spending.
Overall, the equity market has now bottomed out in emerging markets, and equity markets in the developed world will bottom out once the banking problem is finally plugged. After that equities will perform better in the developed world, but the rate of growth of developed economies and markets will be slower than that of emerging markets for 1-2 years ahead.
Martin: The last thing in my opinion that the United States wants is for the world to have a communist superpower.
DJC: The Washington Consensus specifically seeks to exclude any other nation from challenging its global hegemony. It’s not a foreign policy agenda that is likely to succeed. Among developing world nations, the US has profoundly violated the global trust placed in it and in its stewardship of the global financial and economic order. The Western powers today only account for 16% of the world’s population and a declining 30% percent of global GDP. Like it or not, the old Western dominated order will soon be history, replaced by a new multi-polar civilizational order. With soon to be the largest Asian economy under an independent Nuclear Weapons umbrella, China is re-establishing itself as the dominant East Asian power. It is fitting that the Western powers are fighting an endless war of attrition in Afghanistan, a regional conflict that is known as the graveyard of empires. As the 1 milliion man Soviet Army will attest, Afghanistan won’t ever be conquered by a foreign power.
martin: My guess is once the United States recovers from it’s depression, and the consumer starts spending China will once again flood the export market with cheap Chinese made goods to American consumers.
If the US military goofs up in a really major way in Afghanistan, countries like Russia and China will become independent of the petrodollar machinations of the US Treasury. Losing out in Central Asia means the collapse and demise of the US dollar as a major forex reserve currency. And that collapse directly leads to blue dollars.
The notion that China is willing to accept US dollars in payment for its exports due to the US “soft power” is actually laughable. China has a lot of power compared to so many South American and African countries … do any of them accept RMB in payment for their exports?
Even the UK has a great democratic system. Do any central banks hold a large percentage of GBP in their forex reserve?
In conclusion, mark my words; the only way the US can re balance its current account deficit is by defaulting, issuing a new series of currency, withdrawing from at least a certain number of its seven hundred plus military bases worldwide, reducing wasteful military and foreign aid expenditures, avoiding conflicts over oil geopolitics, and re focusing on technological innovation and entrepreneurship. There is no other way. Either the US can choose to dominate the world, and have the rest of the world supply its goods and services at throwaway prices; or the US can choose to focus on its own economic and technical strengths, to have productive and peaceful relations with other world economies.
deliberately off topic, to balance out the focus on china -
(not complaining, just providing context -)
“The dollar has nearly doubled against the Icelandic krona, which lost its value by 91 percent in 2008, bringing hotel rooms and spa packages down in price significantly. In the last year the dollar has also seen sizeable growth against the Turkish lira (30 percent), the South African rand (50 percent) not to mention major gains against existing value destinations like Mexico (25 percent), Chile, (30 percent) and India (25 percent).”
- culled from a news item advising u s citizens on holiday destinations that are value for money.
- makes me wonder if some of the recent strength of the dollar is from the money-in-the-mattress sector. i bet all of the taxi drivers in the above countries take dollars if offered.
Thanks for the BIS link on the previous post Brad.
Since discussion seems to have moved on, I will post this comment – in response to criticism of Indian Investor’s comments on the previous post – here too:
I have learned to skip over Indian Investor’s comments entirely. However, I would say that, in general, very long comments or a string of comments are a sign either that the contributor is not sufficiently selective or that they should set out their argument in detail on their own blog and just refer to it here. Frankly, some people are making the comments here tedious to read these days.
It won’t be business as usual with the Washington Consensus projecting global military power, the “real” US Economy is collapsing into a “depressionary black hole implosion”………
WASHINGTON, January 29, 2009 — Freight traffic on U.S. railroads continued to plunge downward during the third week of 2009, the Association of American Railroads (AAR) reported today.
CCarload freight totaled 267,634 cars, down 14.6 percent from the comparison week in 2008, with loadings down 22.1 percent in the East. Intermodal volume of 195,182 trailers or containers was off 7.1 percent from last year, with container volume dipping 23.9 percent. Total volume was estimated at 28.4 billion ton-miles, off 13.4 percent from 2008.
Combined North American rail volume for the three weeks of 2009 on 14 reporting U.S., Canadian and Mexican railroads totaled 1,015,857 carloads, down 17.3 percent from last year, and 738,351 trailers and containers, down 12.3 percent from last year.
@gillies, that rise happened before, Brad has a post on it titled something like “The August dollar rally”.
What led to USD rally against other currencies was the foreign currency debt in dollars of major commercial banks in ROW. Plus, USD funded carry trades were unwound. Overall you had a flight of capital from major US financial institutions, so there was demand to buy dollars in exchange for those currencies to repay the FC debt.
The situation is poised like a see saw now. As the credit crunch is easing , USD is weakening slightly against those currencies already.
If Afghanistan is lost, and meanwhile Russia succeeds with South Stream and Nord Stream, and China extends the Atyrau-Alashankou pipeline westwards to the Kashagan fields, the resulting change in the oil geopolitics will mean that several countries can afford to eschew holding USD in their forex reserve long term.
That will then mean a collapse of USD exchange rates to such an extent that the US can no longer pay for its imports, and is forced to default, just like its Southern neighbour, Mexico, when the petrodollar recycling was set up.
I just bought some Chinese tennis balls at Wal-Mart this morning. The can said they are Penn tennis balls, which goes to show how misleading product labeling can be in the US.
But that got me curious about where my golf balls come from. Checked the box and it said made in USA. Good news/bad news story is my game has progressed to the point that my golf ball consumption has declined dramatically.
Have been thinking about buying Chinese stocks someday, but the global capacity overhang makes me think this is best delayed for a considerable period of time.
Been wondering how to determine when the right time is, but I’m not real sure what sort of indicators you should watch for in China to get a sense that the bottom is safely passed.
Especially if we assume that ol’ reliable, the US consumer, is going to be down for the count for a long time, if not forever. Consider that an aging demographic may have to reverse a few decade trend in National Savings Rate (National being personal + government saving).
Investor: Losing out in Central Asia means the collapse and demise of the US dollar as a major forex reserve currency. And that collapse directly leads to blue dollars.
I doubt it. Both the Russian and Chinese economies are dependent enough on dollars that both will intervene to keep the US dollar from collapsing. Despite what DJC constantly posts, there is no major interest in China (and from what I understand Russia) in displacing the US as either a global political and military superpower, and Chinese policy over the last decade has been consistently to prop the US up rather than try to pull it down.
China’s only major conflict with the United States is over Taiwan, and Russia’s conflicts are over things in its “sphere of influence.”
Investor: The resulting change in the oil geopolitics will mean that several countries can afford to eschew holding USD in their forex reserve long term.
You seem to have bought into this petrodollar garbage. Let me just repeat something. Oil is priced in dollars. Oil is not necessarily sold in dollars. Iran buys most of its oil using euros and yen. The fact that oil is priced in dollars is because the dollar is a convenient unit of exchange.
Also China and Russia both have huge stocks of dollars so neither is going to be willing to crash the dollar and destroy the value of its stocks.
Brad Setser from the US Council of Foreign Relations denies that Petro-Dollar recycling exists for US Dollar hegemony.
From Henry Liu,
There is an economics-textbook myth that foreign-exchange rates are determined by supply and demand based on market fundamentals. World trade is now a game in which the US produces dollars and the rest of the world produces things that dollars can buy. The world’s interlinked economies no longer trade to capture a comparative advantage; they compete in exports to capture needed dollars to service dollar-denominated foreign debts and to accumulate dollar reserves to sustain the exchange value of their domestic currencies.
The phenomenon is known as US dollar hegemony, was created by the geopolitically constructed peculiarity that critical commodities, most notably oil, are denominated in dollars. Everyone accepts dollars because dollars can buy oil. The recycling of petro-dollars is the price the US has extracted from oil-producing countries for US tolerance of the oil-exporting cartel since 1973 (ie. Henry Kissinger).
The US capital-account surplus in turn finances the US trade deficit. Moreover, any asset, regardless of location, that is denominated in dollars is a US asset in essence. When oil is denominated in dollars through US state action and the dollar is a fiat currency, the US essentially owns the world’s oil for free. And the more the US prints greenbacks, the higher the price of US assets will rise. Thus a strong-dollar policy gives the US a double win.
http://www.henryckliu.com/page2.html
Twofish,
The Gulf Arab Oil reserves are de facto under the security protection of the US military. The Saudi Royal family not only recycles its oil wealth through Citicorp but owns a large equity stake in the bank. Those Arab Middle East energy reserves constitute perhaps 60-70 percent of the entire world’s energy reserves. Iran, Venezuela, and Russia which have decided to denominate their energy exports in other currencies remain in the crosshairs of the Washington elites for regime change. Central Asia is also a contested energy region between the US versus Russia and China for its energy reserves. At least under the Bush Administration, it was all about the oil!
Indian Investor: For a US Govt. that has a debt of $10 trillion, I’d like to hear a sensible plan/way to service and repay this debt over time, in case anybody really thinks there isn’t going to be an eventual default.
DJC: Fortunately for the United States, its debts are denominated almost entirely in US Dollars. Through monetary inflation printing by the Federal Reserve, the US is already defaulting on the “purchasing power” of the fiat currency. A million dollars isn’t what it use to be.
The Indians are smart to always own Gold. Yes, the Chinese are dumb to hold so many fiat US Dollars
DJC,
Canada has more oil than Saudi Arabia. Dirty and hard to extract, but oil nonetheless. The US has more BTU’s, largely in coal, but also in shale oil (maybe snake oil but necessity is the mother of invention). What Saudi Arabia has is an abundance of easily accessible oil.
@ DJC: According to the latest H41 release from the Fed, currency in circulation is $885,603 million i.e. around $886 billion. The increase in currency in circulation was $1,443 million + $74,085 million between Feb 06 2008 and Feb 05 2009. So in the last year there was an increase of 9.32% in the currency in circulation. (The last time I checked this from the previous H41 release, it was around 8% plus).
The total US debt is more than $10,000 billion and the total currency in circulation till date according to the latest H41 release from the Fed is ~ $ 886 billion.
Either I’m missing something or it isn’t practicable to repay the US Govt. debt by printing dollar bills. My guess is that some of the interest on US Treasury debt can be paid through this route for some time. But if the market realizes that the US Govt. is in a debt trap where it’s paying interest by printing dollars, that could be really bad news for the USD exchange rate and supply of Chinese goods in return for dollars.
Correction: the increase from week ended Feb 06,2008 is $74,085 million, the $1,443 million above should be removed and the re calculation done; still you get around 9% increase in dollars in the last year and the total dollars is nowhere close to the total US Govt. Debt. I’m referring to the “Public Debt” Bureau statistics for the overall debt number being more than $10 trillion.
Glen M
With $60-$70 oil prices, the US plus Canada could put OPEC out of business in North America. At that price Tar Sands are quite profitable, and coal-to-liquid synfuel is profitable.
The hooker is global warming, if we are to believe it’s CO2 that is doing it(still some controversy here.) That’s the killer for CTL, and tar sands are making Canada one of the biggest CO2 producers (they just dropped out of Kyoto, and that’s why.)
Oil shale works at those prices, and natural gas shale works at $9. Problem is massive water use and water pollution here. A lot of nasty stuff comes up when they use water to hammer deep shale deposits and crack it.
If it weren’t for those problems, we could have lots of countries longing for the good old days of petrodollars.
@Cedric/Glen: No doubt there’s plenty of oil in Canada and elsewhere to reduce the dependence on foreign oil.
Petrodollars as a system, we’re talking about all the other countries being dependent on oil from the Middle East, or elsewhere. Most countries import oil and they the oil producing countries denominate their sales in dollars. Most of the OPEC countries hold their surplus from sales of oil in dollar denominated forex reserves in their central bank.
Overall, what does this system for the USD exchange rate? The oil exporters are accumulating US dollars in their forex reserves, so there’s a very high demand for dollars compared to what’s warranted by US exports.
Now the oil proceeds are also banked with NEw York and London banks, the banks in turn lend dollars to other emerging markets. This is called petrodollar re cycling.
gillies — not just money under the mattress, or money that used to be in the banks that is now going under the mattress. but don’t forget deleveraging by big players and the withdrawal of bank credit …
rebel — i rather agree. the question is when to exercise the nuclear option and ban as opposed to taking down indivdiual comments. but my patience has limits.
DJC: Iran, Venezuela, and Russia which have decided to denominate their energy exports in other currencies remain in the crosshairs of the Washington elites for regime change.
They haven’t. Iran, Venezuela, and Russia *denominate* all of their oil exports in dollars. They will accept euros for payment, and most Iranian oil is paid for in euros or yen. That is why all this conspiracy talk is *TOTAL UTTER NONSENSE*. If you want to pay euros and yen for oil, lots of people will take it.
(I’m sorry for the all caps, but this is about the fiftieth time someone has brought it up, and I need to emphasize how *TOTAL UTTER NONSENSE* it is.)
The reason that people (including the Iranians and Russians) use dollars to denominate oil sales is that if you have oil priced in two currencies, you end up with a bookkeeping mess. If you start quoting oil prices in euros rather than dollars, then you will either wildly overquote or underquote especially if you are quoting a forward contract when you have no idea what the exchange rate is.
And US banks are have no problem dealing in Euros or Pounds or anything else.
And Henry Liu is extremely ill informed on most issues.
indian:
Ya, I know how it works. But it’s still a matter of choice and convenience. And it’s not just petrodollars. You can call it eurodollars, yollers, reserve currency, M3, whatever.
The choice is for dollars because the US historically ran it’s printing press slightly slower than the ROW. The Euro is an attempt to change that, but we will have to see if Trichet can hold up. Treasuries are considered the zero risk debt in the world.
You can say that can’t be, but I’m just pointing out why it has been so far. And try to come up with alternatives if you can. I got a money market fund itching for somewhere to go.
The convenience part is banks charge for currency conversions, so it’s nice to skip that.
So the big threat is that the US has a global sink to run the output of its printing press into. And if Treasuries look less and less risk free. This I think is what will make the world rethink BW2. But again have them put their alternatives where their mouths are.
If they do, then we in the US better have a Plan B.
Investor: For a US Govt. that has a debt of $10 trillion, I’d like to hear a sensible plan/way to service and repay this debt over time, in case anybody really thinks there isn’t going to be an eventual default.
There’s no plan to pay it off. England has had a national debt since 1694 and the US has had a national debt since 1791. As long as people are willing to lend you money, as your bills come due, and as long as you can afford the interest payments, there is no need to pay off the debt.
Investor: The total US debt is more than $10,000 billion and the total currency in circulation till date according to the latest H41 release from the Fed is ~ $ 886 billion. Either I’m missing something or it isn’t practicable to repay the US Govt. debt by printing dollar bills
You are. Congress and the Fed effectively can make that $886 billion any number it wants to. If Congress and the Fed want to print $10 quadrillion dollars, then Congress issues $10 quadrillion dollars in Treasury bonds, and the Fed buys those $10 quadrillion dollars with cash that it creates.
This also points out something else which is that when you write a check, it’s not that there is this box of money that moves between banks. There is $1.5 trillion in checking accounts + currency (M1) and $7 trillion in savings and money market funds (M2).
Just want to concur with complaints about the comments here lately. This is a marvelous weblog and at times also features really insightful comments, but lately it’s been swamped by an investor from a certain asian sub-continent. Off this post alone he’s written *2400* words – none of which were in direct response to Brad’s excellent work.
It’s been my experience on the internet that bad comments drive out the good, and to me that’s what appears to be going on here.
Twofish:More likely because Buffett has neither the skills, expertise, or the personality for the job. He’s not qualified for it.
Come on Buffett is the richest man on the planet, your don’t achieve this from being a fool – A fool and his/her money are soon parted – how a fool ever obtained money in the first place is a mystery – maybe rentier class gave the fool enough rope to hang himself/herself by encouraging the egoistic pursuit of deprecating stuff – we have been feed this rubbish in schools for to long now and all your ( not referring to anyone in person)forecasting models are coming into question now and the only way for you to hide is by denial
it is perplexing how and why mindsets are still deeply entrenched with the antiquated ideologies of nationalism and protectionism.
we are all in a new era with far greater cross boundaries interaction and trade. perhaps it is fear that drives people to recreate and/or reinforce the fast disappearing barriers. however it is a lose-lose situation should such behaviour spread and become prevalent.
creating demand for goods and services seems to be a good way for consumption to lead us out of this depression. however, we must be careful not to be blinded by this remedy as such nationalistic concoction of primepumping the economies only drive the world deeper and further into layers of debts which ultimately sinks every single one.
if you earn $1 and spend a $1.08 you will end up insolvent period it’s just a matter of time – it doesn’t matter how many carrier groups you have you have to feed them – many in history have tried this domination and failed – this same propaganda lead to many sons and daughters to their death in the name national pride – are we to lead more uneducated sons and daughters to the same fate – I think not – we need to step out of the box away from the economic teachings (bias teachings) that have failed us once again and challenge the status quo – we need to have good corporate governance in the public and private arena then we as a collective can take our medicine when due and not when we need surgery – the trade data I suspect is nothing short of a world economy in denial most data readings indicate nothing short of the volatility in an underlying trend
The comments on petrodollars is interesting. Does anyone know of a good book on the subject? I need to catch up. Thank you.
indian investor — consider yourself warned.
nate m — i am not aware of many books on the topic. but for articles on petrodollars, i like Toloui’s analysis for Pimco. My Peterson institute paper on oil and global adjustment also has some things to say on the topic, and my more recent paper on the gulf has a lot of detail on the gulf sov. funds.
Please: nuclear option!
>>Indian : In conclusion, mark my words; the >>only way the US can re balance its current >>account deficit is by defaulting
Good One Indian, I dont think any sensible econ would summarily dismiss this.
Brad and Rebel – I would plead for some levity to commeters. …constantly threatening them of a ban is only gonna make them more irritated.
Indian : Just tone down, we know you are on to something but you do have a neat way of saying it. Good job in commenting on the intricacies of plots by Western countries
Brad,
I do not want anyone banned from commenting; indeed blogs should provide a way to offer challenging ideas. Better to just delete the most offending comments.
But I would plead with commenters to consider the readers that they hope to engage. Think before submitting a long comment so that the logic is clear and, ideally, likely reactions are anticipated and answered. If you have a lot to say, use your own blog to develop key arguments that you can refer to elsewhere (cf a subroutine in a computer program). And be selective about the issues you pick up; there is no need to argue with every phrase that you do not agree with 100%, especially if all you say is “I don’t think so” (Twofish!).
There are too many blogs where the stream of nonsense, rhetoric and prejudice in the comments kills rational and informative discussion. Please don’t let this become one of them.
Brad –
Your note ** is well said, but I think it deserves much more prominence than being relegated to a footnote. You might also point out the dangers of the stimulating government overstretching its bounds and going broke. If that were to happen to the U.S., our current malaise would seem like a pleasant interlude.
Welcome to the real world:
From the WSJ:
Nations Rush to Establish New Barriers to Trade
http://online.wsj.com/article/SB123388103125654861.html?mod=testMod
The World Trade Organization is gathering nations in a special meeting Monday to try to stem the rising tide, just two weeks after saying protectionism was largely under control. On Thursday, 10 European Union commissioners headed to Moscow for talks Friday with Prime Minister Vladimir Putin and other Russian officials, where they plan to air complaints over the pace of new Russian trade barriers.
Setser seems to focus on inter-country trade data as a leading economic indicator, something I have done for over 3 years now and will continue to do going forward. I consider the U.S. trade deficit monthly $ trend to be particularly important as I have long thought the U.S. consumer to be the ‘Atlas holding the world economies up’. You can easily access charts showing the U.S. monthly and cumulative trade deficits by clicking on the Economic Research tab at http://www.stockresearchportal.com.
“My interpretation of the data is that people overestimate the degree to which China is dependent on exports. Yes the sudden drop in exports did hit the Chinese economy hard, but this was because the government had been cooling down the domestic economy over the last year.” — Twofish
New to this illuminating blog run by Dr. Setser, I’ve enjoyed your exchanges with others who post repeatedly here . . . not least with Indian Investor. That said, your claim about the role of exports in China’s GDP is widely held, it seems, in economic blogs . . . but is wrong. The underlying reason for its going amiss?
Most likely because people focus on Net Exports . . . which of course subtracts imports to arrive at the final contribution to GDP.
……
2) More concretely, here’s the breakdown by component of Chinese GDP in 2006. (Note that in 2006 and 2007, private consumption had actually been rising as a percentage of GDP there compared to earlier years.)
— Private consumption (36.4)
— Government consumption (13.7)
— Gross fixed investment (40.9)
— Exports of goods/services (39.7)
— Imports of goods/services (-31.9)
….
3) Overall, China’s savings as a percentage of GDP rose astonishingly from the already high 35-38% of GDP — common in Pacific Asia among the export-oriented economies — to an unrivaled 50% or so.
No economy that has grown so rapidly over 30 years as China’s has — not even among the other, earlier dynamos in Northeast Pacific Asia — have ever approached such a figure. It’s mind-boggling.
….
4) Consider South Korea — a country of less than 50 million people.
– Before 1965, domestic savings were equal to less than 2.0% of GDP.
– By the early and mid-1970s, they rose to 10% and then in the early 1980s to 20% as incomes rose in Korea.
— The savings rate then rose to the high 30′s%, and stayed there even as South Korea (hit hard by the 1997 currency and financial crisis of Pacific Asia) tried after 1999 to boost domestic consumption.
….
5) More to the point about China’s economy, it is riddled with enormous imbalances that have accentuated in the rapid growth of this decade.
Here’s a List of The Major Challenges
*– Very low domestic consumption, with a corresponding over-reliance on export-production and often shoddy and wasted investment.
* — Tremendous inequalities in income between social classes and across regions.
* — Connected with the previous problem, marked inequalities between coastal urban income and income in the agricultural sector, where most Chinese are still employed.
* — The lack of any effective social-security safety-net: whether for access to health services or unemployment benefits or retirement pensions. (One among many reasons for the high savings rate is the need of even poor Chinese to save for paying health-service providers.)
* — Environmental harm on a vast scale, full of health spillovers for the Chinese peoples and, come to that, others.
* — The need for a dedicated and sustained shift in public infrastructure and private construction to far safer dams, irrigation systems, roads, and buildings of all size.
* Back to agriculture. There’s a pressing need for greater attention to the poverty and backwardness still of agriculture. It is in small towns and cities and relatively unproductive farms where the great majority of Chinese still live. The reform movement began in the countryside after 1979. Since the mid- and late-1980s agriculture has become an increasingly neglected and poverty-ridden sector.
* — The creation of an effective and independent legal system, able to protect both private property of the standard sort as well as intellectual property rights like trademarks and patents. Without the latter protection, innovation by the Chinese will tend to stall. The costs of innovative R&D, plus the risks of entrepreneurial start-ups, are simply too great to absorb if the eventual profits — assuming they materialize — aren’t sufficient to cover these costs and risks.
* A legal system as well that can reign in the rampant corruption and cronyism that mar Chinese CP and bureaucratic life at all levels.
—
6) All of which leads to the crux obstacle to tackling these challenges and imbalances effectively. (The quoted materials are from a lengthy comparison between the reasons why Gorbachev’s efforts to reform the decrepit Soviet economy in the late 1980s failed — to the point that those efforts unleashed social turmoil and political polarization between old-guard CP big-wigs and bureaucrats and radicals led by Boris Yeltsin and caused the Soviet Union to crash in 1991 — and why, oppositely, post-Maoist reforms succeeded so far in China.
“The Main Obstacles to Switching from an Easy-to-Delayed Hard Reforms in China’s Economy and Hence Political System:
“Boiled down to its barebones nature, the obstacles are that a successful policy campaign for making even noticeable progress in tackling these challenges would require — note carefully — that the Communist CP leaders at the center and in the regions would have to devolve their huge power, prestige, and money-making so extensively that, in effect, they would be committing hari-kari.
“We have no example in history of a dominant elite voluntarily abdicating its vast power and privileges . . . not least in the Soviet Union of Gorbachev, that reformer not setting out to destroy the Soviet Communist Party and empire within the Soviet Union and in East Europe. And yet that is exactly what happened.
“The Chinese CP leadership is fully aware of such dangers. Worse, in the process of even half-way devolution — what with all the social tensions, protests, and conflicts that lurk all across China (not least in the 8% of the population that is non-Han Chinese and yet dominate the far-flung regions along China’s 4000 mile border) — the leaders fear upheavals that could no longer be contained by their remaining controls, whether by use of the police or military.”
Source: Click here
……
7) Note that this analysis does not claim that the CP-governed Chinese regime will fall the way Gorbachev’s Soviet Union did . . . not least because over 50% of the Soviet Union in 1990 were non-Russians living on their own territories and anxious to exit the Soviet empire the second they could and did. Whereas, by contrast, only about 8-9% of China’s huge population is non-Han Chinese . . . though they do live in crucial border-regions along China’s 4000 mile long border.
But the main point remains: no one can effectively analyze China’s economic prospects without considering the political rule of the CP and its top elites’ major interests in preserving their huge power, prestige, and orgy of money-making . . . with rampant corruption pervasive at all levels of CP and bureaucratic life.
…..
….
Michael Gordon, AKA, the buggy professor (the real one: not the bogus identity-stealer who once posted a couple of days ago when I first came to this web site)