Monday, June 21, 2010

Yuan theoretical revaluation gets the markets going

I think we need to be careful what we wish for. If the Yuan was fully revalued it would certainly help to level the playing field in global manufacturing, but there is an outside risk that 10 years from now the Yuan could become the world's reserve currency replacing the USD. That would not be a good thing for any of us...

Right now I think the talk of revaluation is mostly just talk but it has given the markets a nice shot in the arm so it will be off to the races in the AM.

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I read a quote this morning that should worry anyone in the once great Empire State -

"State economies are plunging, and are $200 billion underwater, this will lead to 2 million in state-level layoffs leading to a low-end impact; raising taxes at state level will impact the top-end."

I've said before that my concern for the North Country is that we have hitched our wagon to the gov't gravy train. Think of the proportion of NNY residents that work for some form of state, federal or local government - it's staggeringly high relative to other parts of the US. From prisons, to schools, to Ft. Drum and everything in between we could be facing some very lean times in NNY if politicians get fiscal religion.

I tend to be a fence sitter on this issue - not all government spending is bad or excessive and cutting too sharply will almost certain send us into a deep double dip recession, but the current budgetary path is unsustainable in states like NY.

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The next time your local realtor shows you a lovely 20 x 20 "island" in the might St. Lawrence priced at the low, low price of just $329k maybe you can remind them of options like this property in Illinois - $179k for 43 acre island.

If it wasn't in Illinois, I'd scoop that puppy up.

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Finally, if you don't think the oil spill is impacting tourism consider this - I'm a notorious cheapskate so I view the spill as my way to take a cheap vacation. I looked online last night and I can book a room at a 5 star (a true 5 star that rhymes with Fritz-Barlton) beachfront resort on the Gulf Coast for $150/night. Now this is normally their slow season, but when it's cheaper to stay in the nicest hotel west of Miami (that normally books for $299-$499/night) for less than the cost of a night at the Days Inn in Syracuse then you might have a problem with your tourism industry.

Cheers!

PS - As the school year draws to a close expect light posting over the summer as I put my kids through the rigors of "Dad's school".

2 comments:

The Hermit said...

Russia and China want to have the worlds reserve currency. Bernake is inflating away the old dollar. My bet is on the Canadian dollar. Eh?
What we need now is for Canada to buy our debt, ya right. :)
I would like your opinion on the "true" rate of inflation. Everything that I buy is going up in price, yet gov says no inflation. go figure.

The Hermit

The Artful Blogger said...

Reported inflation almost always feels light because it excludes the major purchase that we make daily - food and energy.

Propane and oil prices surge, prices at the pump have been over $2.80 pretty much since Katrina, many food items continue to climb in price, etc, but those are excluded due to their volatile nature (it seems as though they are only volatile when they are climbing).

The basket of goods and services used to compute CPI includes over 200 inputs including:

FOOD AND BEVERAGES

HOUSING

APPAREL

TRANSPORTATION

MEDICAL CARE

RECREATION

EDUCATION AND COMMUNICATION

You can see that a number of catagories - Recreation (TVs, electronics, etc), housing, apparel could be falling in price but since they are not daily purchases you might not notice the change as much as you notice the price of a box of Cheerios jumping to $4.49.

One thing that I think all of the government statistics miss is the declining quality of everything sold. 40 yrs ago you could buy your kid a Schwinn from Sears and many of those bikes are still in great shape today. Now if you buy a NEXT bike from Walmart it might fall apart by August. In theory, the cost of the bike has fallen dramatically in inflation adjusted terms, but if you want to buy a bike for your child of comparable quality to an old Schwinn you have to pay 3-4 times the price of a Walmart bike.

Thanks for the comment!