Trump plan to devalue dollar a gift to China - Asia Times

In a minute term, Donald Trump would generate money depreciation excellent once more.

Former US President’s aides are plotting a strategy to formally weaken the dollar to benefit producers, according to telegraphs from the former US President. As Politico accounts, for instance, Trumpworld is “actively debating ” an Argentina-like hinge at the urging of officials like Robert Lighthizer, Trump’s past international business consultant.

A trip like this might benefit China more in the long run by placing” America second.”

Buenos Aires would be in charge of the Group of Seven business if depreciation were a prosperity strategy. Turkey and Zimbabwe may become rising. As Asia’s largest economy, Indonesia may be giving China a move for its money.

The US trying to use this strategy may put more pressure on inflation and put the dollar at risk of losing its status as a reserve currency. The Federal Reserve’s monetary science might change as Trump’s plans for 60 % tax on all Chinese goods and 100 % levies on some auto goods coincide with this move.

At the moment, of course, it ’s the dollar’s relentless strength that ’s turning heads. Eastern currencies are neither at, or falling underneath, key trading levels.

The Chinese renminbi, South Korean won, American dollar, Indonesian rupiah and Malaysian ringgit all experience downward force. Authorities in the West are monitoring changes in the value of the Jewish shekel, the Polish zloty, the North American rand, and other financial units.

If Trump retakes the office and devalues the buck, things will get worse. For a self-inflicted error would give Xi Jinping one of his most important goals in ways that the Chinese president could never have imagined.

Team Xi has consistently made significant and regular progress toward replacing the dollars as the economic system’s statement since 2016.

That year, Beijing secured a spot in the International Monetary Fund ’s “special drawing-rights ” program, putting the yuan into the globe’s most exclusive currency club along with the dollar, euro, yen and pound.

According to economic messaging service SWIFT, the yuan surpassed the renminbi as the money with the fourth-largest discuss in global payments in 2023.   It furthermore overtook the buck as China ’s most used cross-border financial system, a second.

China ’s renminbi is gaining international momentum. Photo: Twitter Screengrab

Trump’s executive of a weaker money would significantly improve the method. That had significantly lower Americans ‘ confidence in US Treasury securities, which are a fundamental having for central bankers around the world, while raising borrowing costs for the country.

Washington’s present ability to defy economic gravity would also be hampered by purposeful dollar devaluation. Thanks to the dollar’s supply money status, the US enjoys any number of unique benefits.

This “exorbitant privilege, ” as 1960s French Finance Minister Valéry Giscard d’Estaing famously called it, allows Washington to live far beyond its means.

All this explains why the dollar continues to rise even as Washington ’s national debt approaches US$ 35 trillion.   The money is up 9 points. Compared to the yen, the yen has fallen to 6 %, and the euro is only at 4 %.

Certainly that President Joe Biden’s White House has n’t imperiled faith in the money. Along with ongoing debt accumulation, Team Biden’s determination to thaw portions of Russia’s forex reserves over its Ukraine war crossed a line with some international investors.

According to scholar Stephen Jen of Eurizon SLJ Asset Management, “exceptional activities ” — including restrictions imposed by the US and its supporters against Moscow — could lead to fewer countries being willing to hold foreign currency.

Billionaire Ray Dalio, chairman of Bridgewater Associates, agrees that the price of such techniques is that “there’s less of an opportunity to buy” US Treasury assets.

The International Monetary Fund threw an unusually harsh slam at American policymakers on Tuesday ( April 16 ) over continued fiscal misadventures.

The United States ‘ excellent recent performance is undoubtedly outstanding and a significant contributor to global growth, according to the IMF. “ But it reflects robust demand elements as well, including a  governmental stance  that is out of range with long-term fiscal sustainability. ”

The IMF hit Washington ’s reckless impulses, warning they risk exacerbating prices and putting at risk the longer-term macroeconomic stability of the world’s biggest business. “Something will have to offer, ” the IMF concluded.

On top of Covid-19 signal, the Trump era has rolled out huge investments in clean energy, system and various policy priorities. As debts held by the government is on track to reach$ 45, interest costs are rising. 7 trillion, or 114 % of gross domestic product ( GDP ) by 2033. That compares with 97 % at the end of 2023.

These dynamics explain why “debt debasement ” trades have been “closing in on all-time highs, ” observes Michael Hartnett, investment strategist at Bank of America.

In January, “Black Swan writer Nassim Nicholas Taleb warned of “a loan loop. In the context of growth-debt relationships, previous US Treasury Secretary Robert Rubin stated to Bloomberg that the American market is “in a horrible spot.

However, that was when the market had anticipated a year-long simplicity of up to seven. Fed Chairman Jerome Powell’s team is now on hold due to inflation changes. In March, the consumer price index rose at a worse-than-forecast  3. 5 % annual charge.

At a time when OPEC is determined to continue cutting output, Iran’s assault on Israel and the possibility of retribution are now on the rise.

Middle Eastern conflicts could cause commodities prices to rise even further.

“Since Russia’s invasion of Ukraine … the world has now moved into an inflationary boom, ” says Louis Gave, economist at Gavekal Dragonomics. Holding US bucks and US bonds may be expensive for traders in common and risky for investors from unfair nations during this inflationary growth. ”

Gave continues,” sure enough, the gold price has increased by a third since the war of Ukraine, and long-dated US bonds have decreased by a next.” This is intriguing because the two property lessons essentially marched in unison with one another for years prior to the invasion of Ukraine. However, in a way that US Treasuries have failed to perform, golden has acted as a collection diversifier in the past two years in a way that power has done. Will the events of the weekend [Iran’s bombing of Israel ] change any of this? ”

Enter Trump’s devaluation gambit. No doubt such an idea would get extreme pushback from US institutions, including the Treasury, Fed and the Department of State.

The first Trump administration argued that boosting American exports would require engineering a weaker dollar. In July 2019, Larry Kudlow, then-director of the National Economic Council, told CNBC that “just in the past week, we had a meeting with the president and the economic principles and we have ruled out any currency intervention. Money is being drawn from all over the world because of the steady, trustworthy dollar. ”

That same month, Trump lashed out at China and Europe for, in his view, playing a “big currency manipulation game ” and “pumping money into their system ” to undermine American workers.

Trump argued at the time that Washington should use the same strategy, or it should continue to be the “dummies” who sit back and watch as other nations play their games. ”

Given the concern that Trump might get his way, the dollar dropped at the time. It was plausible, considering Lighthizer had Trump’s ear, along with advisor Peter Navarro, an economist advocating protectionist policies.

All of this led to then-US finance minister Steven Mnuchin declaring:“ I am not going to advocate a weak dollar policy in my immediate capacity as the Treasury Secretary. ”

An argument can be made today that a dollar that is constantly overvalued has costs.

Economist Mohamed El-Erian, president of Queens ’ College, Cambridge, tells Bloomberg that “authorities are a little bit frozen around the world as to how do you react to a generalized dollar strengthening? How do you respond to a US interest rate increase that is generalized? ”

El-Erian adds that “unfortunately in the past, when those two things go too far, they break something elsewhere. ”

Trump might be able to bypass the dollar’s fuel tank by effectively dumping sugar in it. Any increase in borrowing costs would significantly increase Washington’s burden on creditors and result in less money for essential services. And investments aimed at increasing innovation and productivity.

If Trump has his way, the dollar’s days as the world’s reserve currency may be over. Image: Twitter / Screengrab

As China, Japan, and developing Asia battle it out to cap exchange rates, it would also lead to the biggest currency war in history. First, Tokyo, Beijing and other top foreign holders of US debt would reduce their exposure. The race to front-run dollar sales would see Asian central banks potentially dumping$ 3 trillion-plus worth of US Treasuries.

A dollar devaluation would warp incentives for the US economy as it a whole, aside from the initial financial chaos and lost respect. Again, if a weak currency were a magical policy, Japan’s GDP would n’t be nearly$ 1 trillion smaller than it was a dozen years ago.

In Japan’s case, 25 years of prioritizing a weak yen over retooling growth engines undermined competitiveness. The 12 federal governments that had been in charge of the country since 1998 had little urgency to ease bureaucracy, stifle labor markets, start a startup boom, boost productivity, and empower women. And it  took the onus off corporate CEOs to restructure, innovate and take risks.

A Trump 2 A 0 presidency could set the US on a similar path to mediocrity. It might live up to his dream by bringing the US back to 1985, a time when top-down tariffs could have a significant impact on the economy. The same was true of sharp exchange-rate shifts.

Take the events of 1985 at New York’s Plaza Hotel, which Trump once famously owned. The US bulldozed then-rival Japan and Europe in the so-called” Plaza Accord” to weaken the dollar, boost the yen, and give Washington something close to the zero-sum benefits Trump claims should be taking.

In the 40 years since, China replaced Japan as the target of Trump’s ire. When Trump complained during his 2017-2021 presidency that China was “raping ” US workers, it echoed his anti-Japan tirades of the 1980s. Additionally, there is no longer the economic system Trump wants to use for time travel.

Top economic powers could control the world’s currency markets in 1985 and decisively alter trajectories. Today, China has ample ways to navigate around Washington ’s policies, meaning if Trump wins in November and seeks to devalue the dollar it would be a policy mishap of epic proportions.

Follow William Pesek on X at @WilliamPesek

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Digital wallet "super app" to link with bank apps

Digital wallet 'super app' to link with bank apps
Julapun Amornvivat, deputy finance minister, addresses supporters of the modern pocket initiative in October of last year. ( Photo: Somchai Poomlard )

According to Deputy Finance Minister Julapun Amornvivat, the so-called” super software” intended for the 10,000-baht digital wallet plan may work in tune with existing wireless applications for businesses on customers ‘ phones.

The app, he explained, was developed in collaboration with the Ministry of Digital Economy and Society ( DES ) and the Digital Government Development Agency ( DGA ) for use in any digital-based policies. It will use an open-loop option, which allows budget users to make purchases at various stores for the sake of wider availability with easy-to-use guidelines.

According to Mr. Julapun, anyone who wants to get the budget handout is not required to open a bank account with a state-owned financial institution in order to receive the money. The” Tang Rat” game, created by the Interior Ministry and the DGA, is already in use by those who have a disability or pension to check on the payments made, according to Mr. Junlapun. On April 10, the most recent information of the 500-billion-baht electric pocket flyer policy were revealed. It is scheduled to be released in the third quarter.

Mr Julapun said earlier that the program’s income may remain obtained from three options: 152. 7 billion ringgit from the funds for the 2025 governmental year; 175 billion ringgit from the budget’s redistribution for the upcoming fiscal year; and 172. 3 billion baht in the form of a loan from the Bank for Agriculture and Agricultural Cooperatives ( BAAC ).

A product of this size, according to Saknarong Siriporn Na Ratchasima, a former BAAC expert and deputy secretary of the Thai Sang Thai Party, may cause the bank to lose both its inner resources and its ability to generate revenue.

He claimed that the BAAC may need to find a way to pay the financial burden of that continuous debt, including the 230 billion ringgit in losses caused by a rice-pledging program under the previous Yingluck Shinawatra administration.

Last year, the BAAC’s cash remained satisfactory, with enough money in its coffers to support its procedures. The bank claimed that its liquidity risk management complied with the requirements set by the Bank of Thailand ( BoT) ).

With a cash cover ratio of 15, the bank had 287 billion baht of solid assets backing cash. 7 %, which is higher than the required 8 percentage. 50 % stated by the BoT.

If the BAAC were to issue this sizable digital wallet mortgage while the old debts from the rice-pledging structure remained unresolved, its problems may burst and eventually stifle the company’s ability to assist producers, which is what the BAAC is supposed to do, according to Mr. Saknarong.

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Three takeaways from China's upbeat Q1 growth - Asia Times

China ’s first-quarter gross domestic product ( GDP ) surpassed market expectations, indicating a promising start to the year for the world’s second-largest economy.  

The National Bureau of Statistics said, “Generally speaking, the regional economy got off to a good start in the first third. . . laying a solid basis for. . . the whole year. ”

After jumping into the numbers, I see three key insights from the news.

1. ) Mixed signs persist 

The 5. Analysts initially predicted a growth rate of 4, but the GDP increase of 3 % outperformed expectations. 6 %.  

This good surprise suggests that China ’s efforts to create a manufacturing-led financial revival are gaining momentum.  

But, amid the headline-grabbing development figure, issues linger over other economic sectors, mainly financial and home.  

These industries appear to be relatively poor, which raises concerns about the viability and inclusion of China’s economic growth.  

Importantly, standing firm Fitch recently downgraded its perspective on China from negative to bad, citing the country’s rely on the troubled property market as a source of increased uncertainty.  

The disconnect between China’s GDP growth and the main weakness in some sectors calls for a thorough analysis of the country’s economic health beyond the headlines.

2. ) Stimulus doubtful in short-term 

The Q1 development level coincides with established targets set by Beijing, indicating, to my mind at least, that policymakers are likely to refrain from injecting more stimulus into the market.  

Authorities will likely rather take a more optimistic stance, closely watching the changing economic landscape and intervening only when necessary.  

This measured response reflects politicians ‘ need to strike a balance between promoting growth and addressing long-term architectural issues, such as financial security and debt sustainability.  

While some may argue for more drastic stimulus measures to increase development, policymakers are likely to continue to give stability and sustainability precedence in their choices.

3. ) Also a post-Covid rise?  

It’s important to understand China ’s Q1 GDP development within the broader tale of its post-Covid treatment.  

The nation was locked up until March-April 2023, which means that the most recent GDP figures also reflect the primary recovery from reopening rather than a sustained economic growth.  

As for, while the first-quarter figures are encouraging, they simply offer a partial view of China ’s financial path.  

When the effects of the first rise are anticipated to plain, the real test of the economy’s endurance and speed will be in the coming months, especially in Q2 and Q3.  

Investors and analysts will closely monitor these approaching figures to assess the strength and viability of China’s recovery, especially given the persistent uncertainty surrounding the world financial outlook and geopolitical tensions.

As China ’s Q1 GDP growth outperforms objectives, it provides a glimmer of hope for the state ’s economic revival. Beijing may be pleased. However, a subtle fabric of complexity lies beneath the surface of this headliner.

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Why it's China's turn now - Asia Times

In the next half of the 20th centuries, macrohistorians like Paul Kennedy, Francis Fukuyama, and Alvin Toffler created’grand stories’ to forecast changes in the coming decades. They covered various aspects of society including philosophy, technologies, religion and culture.

These models were used by macrohistorians to forecast significant historic changes in geopolitics, strength relations, and economics. Interestingly, none of them predicted that China may come as a opponent to US international preeminence.

In the late 20th centuries, fantastic stories fell out of favor. Intellectuals claimed that fantastic or meta-theories neglected the differences between civilizations. Microhistories tended to elicit a Eurocentric view of the world by never acknowledging diverse cultural ideas.

When viewed in a historic context, China’s rise as a global power is less unexpected. For much of recorded history, including the colonial time, China was the world’s largest business, rivaled only by India. The US did not take the top spot until the close of the 19th centuries.

In 2030, China is expected to regain the top position as the world’s largest economy  YouTube Screengrab: https ://www. tube. com/watch? v=4-2nqd6-ZXg

However, some researchers may have predicted the pace at which China’s modernization was quick. The West took two decades to modernize, China did it in less than 50 years. China acted as the world’s stock and a tarantula in the website of the global supply chain as a result. China had come to a halt if it were to be shut down, and the rest of the world do.

China has recently changed from a low-cost consumer goods manufacturer to a cutting-edge producer of electronics and natural tech. Robots and AI have taken the place of cheap labour. A new stock for Xiaomi, formerly a smartphone manufacturer, produces a new electric vehicles every 76 hours, or 40 per minute, without being touched by human hands.

In his international bestseller When China Rules the World: The End of the Western World and the Birth of a New Global Order, American artist Martin Jacques chronicled China’s development. The second significant change to the world’s political and cultural environment in 500 years, according to Jacques, will result from China’s future economic strength.

Jacques argued that China ’s arrival as a significant economic, social, and cultural energy is a traditional inevitability, requiring a adjustment in the American view of the world. He writes:

“There has been an notion by the American popular that there is only one way of being present, especially by adopting Western-style institutions, values, customs and beliefs, such as the rule of law, the free marketplace and political norms.

This, one might add, is a view that is normally held by people and cultures who view themselves as more developed and ‘civilized ’ than others: that those who are lower down on the evolutionary scale must become more like those who are higher up in order to advance. ”

Jaques brought up Fukuyama, who predicted that a new idealism that may embodie the American concepts of the free business and democracy would be the foundation of the post-Cold War world.

Fukuyama, in his 1992 report “The End of History”, argued that Western liberal democracy had won and that all countries in the world, including China, did eventually accept American liberal democracy.

Fukuyama did not anticipate the burgeoning crisis in Western democracies, the West’s partial deindustrialization, the rise in wealth concentrations, or Donald Trump’s election as president of “America First ” in his 1992 writing.

Trump sparked a trade war with China that his successor, Joe Biden, has gotten worse. The cost of the expensive products from China had been a boon for American consumers, but they also came with a price: the deindustrialization of major cities in the country and the loss of millions of jobs.

The trading conflict between the West and China is a repeat of the trading conflict with Japan on a larger scale. Japan decimated the Western automotive and consumer electronics industries in the 1980s. The West realized that Japan had eaten its lunch when it was too late. The Chinese are now ready to eat dinner.

Workers and Merchants

In 2001, US president Bill Clinton gave the green light for China ’s membership of the World Trade Organization ( WTO ), the American-led body that regulates global trade.

China agreed to lower tariffs on non-agricultural goods and take several steps to expand China’s financial sector, including those involving the life insurance and securities sectors.

According to the US government, China would become more politically liberal if its economy were liberalized. Fukuyama’s “End of History ” appeared to give credence to this theory. As it turned out, China liberalized economically but not politically. The Chinese government wished to maintain a tarn between government and business.

The American futurist Larry Taub, author of “The Spiritual Imperative”,   framed the conflict between China and the West in terms of Worker and Merchant, archetypes he adapted from Indian philosophy. Worker and Merchant, together with Scholar and Protector, are four generic categories that form the basis of societies.

The Indian “social-psychological” archetypes emerged after humans transitioned from nomadic, hunter-gatherer life to form communities and cities. Each archetype covers a vital role in a community – teaching, producing, trading, and protecting.

Different psychological profiles and worldviews are present in each of the four archetypes. Workers, in Taub’s model all those who work for a wage or salary, value safety, stability, and solidarity. They are followers, not leaders. Merchants value opportunity, innovation, and freedom. The main concern is generating wealth.  

The four archetypes Taub adapted from Indian philosophy

In Indian philosophy, the four archetypes are in a cyclical struggle, one trying to overcome the other. The Indians used astronomical timescales that spanned millions of years, but Taub contends that the four archetypes can account for both the present and the future.

The current conflict between the West and China is a battle between the Worker and Merchant worldview, according to Taub’s model. China ’s psychological profile most closely resembles the Worker archetype, and the West, especially the US, most closely correlates with the Merchant archetype.

Neoliberalism

According to Taub, the Industrial Revolution’s conflict between the Worker and the Merchant began in the 19th century. The Merchants were demanding better working conditions from the workers. Socialism and communism merged to bring together workers to fight for their rights.

By the 1960s, the Workers had made massive gains, among them a five-day workweek and a social safety net, including healthcare and pensions. Employee unions had developed into powerful structures that could influence government decisions.

A backlash came in the 1970s, with the emergence of neo-liberalism. This reactionary hybrid ideology advocated market-oriented reform such as deregulating capital markets, and privatization of state-owned industries. It was an anachronistic plea for a partial return to the free-for-all environment that persisted in the 19th century.

With support from Merchants, the neoliberal agenda gradually spread into politics. In the 1980s, the neo-conservatives Ronald Reagan and Margaret Thatcher embraced the neoliberal agenda, followed in the 1990s by the “leftist ” Bill Clinton and Tony Blair. They marketed neoliberalism as” The Third Way” to their ignorant supporters. ”

Soon it became clear that neoliberalism did n’t benefit the US as a nation. Millions of Americans left the middle class, and wealth concentration reached levels of the 19th century. In 1970, the US was the world’s largest creditor nation. It is currently the most debated country, while China has grown to be its most popular creditor.

The legacy of Neoliberalism

The US and China’s decision to reverse their roles suggests that traditional Western ideologies are no longer a useful tool for understanding global changes.

ideologies were created in response to social and economic changes. Communism ( like fascism ) was a Worker response to the imperialist Merchant-dominated colonial era. It resembled a liberation theology in terms of secularism.

Ironically, orthodox communism became untenable because it sidelined the Merchants. Neoliberalism fails because it restricts the worker. All of the four archetypes are necessary for a fully functioning society, as the Indian sages pointed out centuries earlier.

Reciprocity

China reintegrated the Merchants into society with the reforms led by Deng Xiaoping in the 1970s, without allowing them to break into the political system. When celebrated billionaire Jack Ma, founder of Alibaba, became too big for his boots, the government put him in his place.

China’s leaders continue to liaise only superficially to communist ideology, but the nation has entered a post-ideological era. Pragmatism has returned as a guiding principle. As Deng famously remarked, it does n’t matter if a cat is black or white, as long as it catches the mouse.

China is currently looking at its own rich cultural and social history to find a way to advance beyond political ideology.  

That does not imply that China has ever ceased to be Chinese. China remained a Confucian nation throughout the revolutionary era of communism and even through the Cultural Revolution’s ideology-driven vandalism.

Confucianism is foundational to Chinese consciousness. It is what distinguishes India from the nation. Confucianism, in turn, was based on the notion of Tao and inspired the development of a key feature of Chinese society: the notion of reciprocity.

Confucius based his social construct on the I Ching, the “bible ” of the yin-yang system. The I Ching is based on the Eight Trigrams, compounded yin-yang symbols denoting eight natural phenomena. The interaction of the Eight Trigrams in Chinese cosmology affected the natural world.

Confucius “appropriated ” the Eight Trigrams for his social construct.

Consucius enlarged the qualities of the Eight Trigrams by including the eight members of a nuclear family. This linked China ’s social structure to the yin-yang principle of nature. The children are a mix of yin and yang, the father is yang, and the mother is yin.

The yin-yang system has a hierarchical dimension, but in the social context, this hierarchy is situational. A man is yang to his wife, but yin to his boss, even if the boss is female. A woman is yin to her husband but yang to her children, both boys and girls. In a social context, let alone in an international context, determining what is yin and yang in any given situation is an art, not a science.

The Yin-Yang system operates on the principle of reciprocity. It implies that everyone has a shared vision and values. Unlike altruism, which is based on unequal relationships, reciprocity is based on mutual dependencies.

Reciprocity is a core component of Chinese society’s social fabric and interpersonal relationships, as well as social and family life. It maintains harmony within families, communities, and business life and fosters a sense of solidarity, cooperation, and teamwork.

China ’s traditional, primarily collectivist culture partly explains its rapid modernization. Chinese civil engineers pioneered industrial methods like prefabrication, standardization, and modularization. The city of Daxing, a metropolis of 84 square kilometers built in the 6th century, was completed in one year.

A new story

China learned from the West to become the world’s top industrial nation. Like Japan before, it avoided and took what it thought was valuable from the West in opposition to its values and worldview.

In barely one generation, China became an industrial superpower. It dominates 75 % of the technologies currently considered necessary for the Fourth Industrial Revolution globally.

The US has not been sure-footed in its response to the Chinese challenge. Given the influence of neoliberalism and the polarization in US politics, it would be necessary to significantly alter the government’s priorities in order to outperform China economically.

The dilemma facing the West is brought up by cultural communication expert Bill Kelly, author of” A New World Arising.” “Neoliberalism, ” according to Kelly, “led to community breakdown, the alienation of the individual, and the loss of an overriding aspiration that a majority can embrace. In terms of socially mobilizing its citizens to support government leadership, this puts the West at a significant disadvantage. ”

Neoliberalism is a remnant of colonial times and the ugly manifestation of the Merchants ‘ mindset. It tries to perpetuate Western military and financial hegemony at all costs because it is aware it ca n’t compete with China’s industrial giants. It wages foreign wars under the pretext of defending democracy and freedom in its own country, a ruse intended to divert attention from the workers.

The neoliberals should have heeded the advice of historian Paul Kennedy rather than copying Francis Fukuyama. Kennedy explained that the relative decline of great powers frequently comes from overstretching in his book” The Rise and Fall of the Great Powers.” Declining powers go beyond what their economic resources allow them to sustain with their military engagements.

The US is overstretched, has a small industrial base, and has one of its biggest trading partners, which is also one of its biggest creditors. It also has a very high level of debt. When something does, the US and its Western allies will need a new story that is contemporary with the twenty-first century.

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For a start, Washington, amend the H1-B visa process - Asia Times

With the introduction of rapidly advancing professional artificial intelligence, the US-China technology opposition is unlikely to slow down in the near future. Though no without  risk, even the most emerging Artificial applications hold significant  promise  for nations who are able to successfully expand and integrate their ability to help their national objectives.

A major factor in a state ’s ability to harness AI is its individual money. The US-China technical competition will increasingly depend on the availability of highly qualified AI-relevant work force. Which nation will have a significant first-mover edge in shaping the future of the AI-integrated world economy.

Despite the high margins of the continuous tech war, new political pacific exchanges between the two parties indicate a shared desire for peaceful conflict.

The US-China Science and Technology Agreement was  ; extended, though briefly, in early March. Less than two months earlier, a  readout  The need to prevent “veering into fight or confrontation ” in all aspects of the relationship was the subject of a late January meeting between US National Security Advisor Jake Sullivan and PRC Foreign Minister Wang Yi in Bangkok.

Further evidence of Washington and Beijing’s willingness to implement handrails on a fast-moving industry that is essential to both countries ‘ national interests is a nod to an anticipated spring 2024 reciprocal on AI. Decision-makers in both countries continue to be concerned about the perceived philosophical intensity that characterizes the tremendous power software competition, despite the slightest evidence of reconciliation between the two.

Worry about the weakened post-pandemic world economy, which, despite steadily improving, also serves as a reminder of the uphill struggle for economic growth faced global, contributes to this worry.

In a January 2024 statement, the IMF raised its  forecast  for earth GDP production in 2024 to 3. 1 %, up from 2. 9 %, largely due to the better-than-expected performance of the US and Chinese economies. Consequently, both the US and China saw improved development perspectives, with rises to 2. 1 % from 1. 5 % and 4. 6 % from 4. 2 %, respectively.

However, many significant challenges remain for Beijing and Washington – to differing degrees – as they attempt to revive and support increased growth, including but not limited to: higher inflation, high unemployment, reduced consumer spending, and lower investor confidence.

The  <a href="https://www.caixinglobal.com/2024-01-27/chinas-debt-to-gdp-ratio-climbs-to-record-2878-in-2023-102161022.html”>record  great reached by China ’s latest debt-to-GDP amount, coupled with  <a href="https://www.caixinglobal.com/2024-01-27/chinas-debt-to-gdp-ratio-climbs-to-record-2878-in-2023-102161022.html”>record  Low foreign direct investment flows are becoming increasingly alarming factors that are influencing Chinese management to get all-in on. funding in AI  and various emerging technology as a hoped-for long-term financial offset.

In light of this, it seems generally strategy-driven how quickly big economies have been willing to embrace and adapt to built-in AI systems across public and private institutions, businesses, and organizations. With a technology that sees significant advancements every few months, there is little room for postpone. To be a late user, one is left behind.

AI-Generated Image: Microsoft Bing Image Creator from Designer, January 28, 2024

Despite the limitations that exist in today’s budding models, the company utilize case has now demonstrated the viability of early adoption. In McKinsey’s 2023 Global Survey, companies that had incorporated AI were now reaping a second of their total income directly from the systems. Given the numerous ways that AI may improve business, these results are surprising. operations, such as increasing pricing and workforce capabilities, identifying previously ignored markets or niches and transforming standard predicted planning and risk mitigation, among various complicated and generally time-intensive analyses.

According to the McKinsey report, businesses that are early adopters of AI technologies have continued to hire both for traditional ( such as broad-purpose software engineers ) and for increasingly specialized ( such as generative AI prompt engineers ) positions. These businesses expressed an further assumption that they would spend a lot of money upgrading their current workforce to meet the changing needs of the sector going forward.

Through the landmark Creating Good Opportunities to Develop Semiconductors&nbsp, US policymakers have made strides toward creating a domestic AI-ready labor in addition to these initiatives taking place in the private sector. ( CHIPS) and Science Act  and  the Executive Order  on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence.  

However, to bear fruit, both private and public sector planning for integrating AI skillsets requires a crucial ingredient: time. Making a path for highly qualified, relevant foreign experts to remain in the US and contribute to the AI sector would allow for the time needed to develop local, field-relevant talent.

The US must first overhaul the aging&nbsp in order to take a significant lead in the tech market and keep it there in the near future. H1-B  Temporary visa requirements to allow highly educated and qualified foreigners to fill positions that are most important for the advancement of AI.

According to the latest  statistics   by the American Immigration Council, the Congress-approved cap of individuals able to obtain H1-B visas has remained the same since 2006: 65,000 entries, plus an additional 20,000 for graduates from US master’s and doctoral degree programs.

Beyond the strict cap, it is known that the H1-B process is extremely expensive for applicants and the businesses that will sponsor them. costs  increasing due to inflation. In October 2023, the U. S. proposed by the Department of Homeland Security and the US Citizens and Immigration Services changes  The proposed amendments do not address the harmful effect that strict caps have on U.S. citizens, but they do modernize and increase the efficiency of the H1-B process. S. national security imperatives.      

Washington has a significant advantage over Beijing because of the abundant stream of foreigners studying advanced technology-related degrees at its highly regarded elite education institutions. lacks.

Congress needs to significantly improve the entry requirements for people who want to work in the US and support its vision of global AI leadership. A crucial first step would be to increase the cap on the number of allotments. If a comprehensive overhaul of the nonimmigrant visa becomes a bipartisan issue, different caps could be placed in positions of particular national significance.  

Amending the H1-B visa process would not, of course, guarantee a permanent lead for the US over China in the wider tech competition; but it would also provide a significant benefit that would enable the US to maintain its competitive edge as it works to develop a complementary local workforce over the next ten and beyond.

T. Talibhy Anderson ( tabatha@stanford. edu is a master’s student at Stanford University studying international cyber policy, and he works as a geopolitical analyst for a cybersecurity firm. She has served as a Young Leader for the Pacific Forum since 2023.  

This article, reflecting on the workshop “Techno-Optimism, Geopolitics, and the Future of AI” convened by the Center for Global Security Research ( CGSR ) at Lawrence Livermore National Laboratory ( LLNL ) on January 17-18, 2024, was originally published by Pacific Forum. It is republished with permission.

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Iran-Israel explosion blows Asia's Fed hopes asunder - Asia Times

Somebody laughing at Lawrence Summers for predicting that the US Federal Reserve’s next walk may be a tightening, more than weakening, is quite silent now.

Next month, the previous US Treasury Secretary made a very outlandish statement. Some Fed forecasts have probably been blown to pieces in the 48 time since Iran’s missiles struck Israel.

Additionally, the Organization of Petroleum Exporting Countries syndicate continues to impose a small cap on oil production, which has led Citigroup and others to anticipate US$ 100 per barrel oil on the horizon.

Together, all this suggests world inflation is likely to heat up as the year advances, dashing sure hope that prices may have peaked.

According to Citi scientist Max Layton, “what is not priced into the current market is a possible culmination of a strong conflict between Iran and Israel,” which we anticipate could see crude prices trade up to $ 100 per chamber, depending on the nature of the activities.”

That, in turn, reduces the odds of Fed rate cuts in ways that imperil Asia’s economic outlook in 2024.

“ In a worst-case scenario, a forceful retaliation by Israel could trigger a spiral of escalation, potentially leading to an unprecedented regional conflict, ” says Jorge Leon, senior vice president at Rystad Energy. “ Under such circumstances, geopolitical premiums would increase significantly. ”

This would quickly alter Southeast Asia’s economies, China, Japan, and South Korea’s calculus.

It’s not just crude oil, but also rising prices for other important commodities, including coffee and cocoa, from precious metals to precious metals. The price increases for copper, gold, and other products are particularly alarming in the context of asset markets.

Analysts at Goldman Sachs claim in a research note that any rise in oil prices that is based on higher geopolitical risks may be slowed down by oil producers choosing to hedge their price risks and sell forward their production.

As “significant input for many industries, ” Rebecca Babin, a top energy trader at CIBC Private Wealth, thinks “rising [commodity ] prices will start to hurt growth ” in corporate profits if higher prices are not able to be passed along to consumers.

At this point, though, no one really knows what they don’t know about decisions in Jerusalem or Tehran in the days ahead.

If the Israeli government follows the White House’s advice and forgoes retaliatory action, the war may escalate, says analyst Helima Croft at RBC Capital Markets.

Although Iranian action was “much more expansive than previous reprisals, ” it was still predetermined in advance. ”

There were indications that Fed Chairman Jerome Powell’s team would n’t be cutting rates several times in 2024 even before the weekend attack, which involved more than 300 missiles and drones.

In order to predict an Iran-Israel war, US Federal Reserve Chairman Jerome Powell has new inflation factors to consider. Image: Screengrab / NDTV

In March, the consumer price index rose at a faster-than-forecast 3. 5 % annual rate. It’s difficult to see Fed officials, who previously resisted ease a week ago, agreeing to cut rates right now.

That is especially true given the low US unemployment rate of just 3. 8 %. According to Nationwide Mutual economist Kathy Bostjancic, it wo n’t be lost on the Fed that signs of full employment abound.

Those indicators include average weekly hours worked ticking up to 34. 4 from 34. 3 in February, and a 62 percent increase in labor force participation. 7 % from 62. 5 %.

Even so, the stakes would have skyrocketed should oil prices go up.

One would assume that the group would look to recoup some of this surplus capacity if prices were to significantly rise on the back of supply losses, according to Warren Patterson, ING Bank’s head of commodities strategy. Given the possibility of destroying demand, OPEC will not want to see prices go too high. ”

But, Patterson notes, “there’s still plenty of uncertainty and it all depends on how Israel now responds. ”

By ING’s numbers, Iran produces over 3 million barrels of crude oil per day, making it OPEC’s No 4 producer.  

As such, Patterson notes, supply risks abound — from stringent oil sanctions and whether Israel’s response in the days ahead hits Iran’s energy infrastructure.

In Washington, US President Joe Biden’s team could try to deploy US strategic petroleum reserves once again. Even OPEC may be concerned about the consequences of allowing unabated oil prices rise.

Not everyone worries energy prices are about to explode, though. Stephen Innes, managing partner at SPI Asset Management, says “while the drone attack has grabbed headlines, its immediate impact on global markets, particularly oil prices and inflation concerns, may be subdued. ”

Innes adds that Iran’s response was executed with great precision and a limited lethal impact, suggesting a tactical strategy meant to minimize harm rather than exacerbate tensions. As a result, the ripple effects on the oil market, a key determinant of global inflation dynamics, are expected to be somewhat muted. ”

According to Innes, the bottom line is that” the situation is still fluid and likely to dominate for some time. ”

How Israel will react to Iran’s drone strikes is uncertain. Image: X Screengrab

Regardless, fresh turmoil in the Middle East means the Fed will “adopt a more cautious approach ” when it comes to cutting rates, notes Neil Shearing, group chief economist at Capital Economics.

“We expect the first move in September, ” Shearing says. We believe that the European Central Bank and the Bank of England will both reduce in June, assuming that energy prices do n’t go up over the next month or so. ”

Shearing claims that Iran’s actions represent a “new and potentially significantly more dangerous phase in troubles in the region.” The main concern for the moment is how an increase in Gulf tensions will impact energy prices. Higher costs, he adds, “would complicate success in reducing inflation. ”

Summers is concerned about the potential impact of the upcoming Fed action on the currency to hit the monetary brakes. You must consider the possibility that the next rate change will be upward rather than downward, ” Summers told Bloomberg.

Whatever the Fed decides, it seems the “higher-for-longer ” era for US yields, one Asia entered 2024 convinced was over, will live on indefinitely. That’s dreadful news for Asia’s export-driven economies.

For China, the Fed’s delay in or complete lack of rate cuts could result in a stronger US dollar. That, in turn, could further reduce the People’s Bank of China ’s latitude to cut interest rates for fear of a falling yuan.

The PBOC might not want the exchange rate to fall, for a variety of reasons. For one, it might make it more difficult for property developers to pay off their offshore debt, increasing the likelihood of default.

Additionally, it might waste progress in boosting global confidence in the yuan. A sluggish yuan could also put Beijing on a collision course in the wake of a contentious US election on November 5.

Here, too, there’s great uncertainty about the trajectory of China ’s economy and how that, in turn, might impact Asian trade and oil prices more broadly.

According to analyst Herbert Crowther of Eurasia Group,” China’s role as the primary driver for new oil consumption globally has come under scrutiny.” The second-largest economy in the world has emerged from the pandemic with significant short-term and structural challenges that will affect its fuel needs in 2024 and beyond. ”

According to Crowther, China’s enormous and expanding construction sector and rising auto sales were the single biggest contributors to the rise in global oil demand. Beijing’s policymakers have frequently turned to infrastructure and the real estate sector to fuel rapid oil demand growth, which is largely fueled by middle distillates like diesel. ”

Meanwhile, Crowther adds, “a fast-growing middle-income population segment purchased millions of new cars every month – virtually all running on gasoline before China ’s electric vehicle boom. ”

Japan’s export-driven economy is hampered by the notion that US yields will remain significantly higher for a longer.

Japan entered 2024 with a growth rate of just 0.1 % on average. 4 % in the fourth quarter of 2023 following a 3. 3 % contraction in the July-September period. The yen ’s plunge to 1990 lows, meanwhile, has the Bank of Japan mulling rate hikes.

Uncertainty will almost certainly halt Governor Kazuo Ueda’s upcoming effort to normalize Japanese monetary policy. Ueda’s task is exacerbated by concerns that the continued high US rates may increase the risk of a policy mistake.

One worry is that medium-size US banks might come under pressure, Silicon Valley Bank-style. Another is that a persistent lack of credit may only add to the issues the commercial industry faces. property  sector, post-Covid-19, sending financial shockwaves Asia’s way.

According to Desmond Lachman, an economist at the American Enterprise Institute think tank, the Fed is paying close attention to the “slow-motion train wreck ” that is currently occurring in the commercial real estate sector as more people work from home. Office prices are currently anticipated to drop by at least 40 % from their 2022 peak level as a result of this. ”

Along with high interest rates, Lachman points out that this raises questions about how property developers will be able to roll over the$ 930 billion in property loans that have fallen this year without undergoing significant debt restructuring. ”

“ Unfortunately, it would be an understatement to say that the banking system in general, and the regional banks in particular, are not in a good position to make large loan loss provisions for their real estate lending, ” he said.

Any unrest caused by the US banking system or credit markets in general could cause particular trouble for Southeast Asia‘s export-dependent economies.

In Indonesia, Malaysia, the Philippines, Thailand and Vietnam, continued tight US central bank policies that limit China ’s ability to stimulate growth are not what regional policymakers had in mind for 2024.

It suffices to say that the Fed rate-cut-driven year that Asia envisioned is shifting to a year in which US yields will remain steady, if not even higher. Consider one of the many possible ways things could turn around for a region at the forefront of unrealized policy expectations and US rate volatility.

Follow William Pesek on X, formerly Twitter, at @WilliamPesek

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Commentary: Beyond the SEA Games, is Singapore ready to host major sporting events?

A SURE ECONOMIC WINNER FOR MAJOR GAMES Not LONGER

Consider the upcoming Summer Olympic Games. First, Budapest, Los Angeles, Paris, Rome and Hamburg were the five number city winners. But, Budapest, Rome and Hamburg gradually withdrew due to a lack of political will and regional cohesion, leaving only Los Angeles and Paris.

In an unprecedented walk, the International Olympic Council in 2017 picked the 2024 and 2028 facilities together, with Paris and Los Angeles taking goes hosting due to the lack of candidate places.

Even with significant investments in public and athletic system, the prices of hosting the Olympic Games have skyrocketed. The host places ‘ questionable economic gains add to the difficulties. The days of having a capital number city win the lottery are probably long gone.  

There are also post-Games white elephants, yet when a network area is honored for a prosperous Olympic Games. These are the purpose-built sports services that must meet stringent world-class requirements so that they are fit for world-record shows. But these features, however, have limited post-Games use, because of their size or professional character. The legendary albatross around the number city’s chest also has high maintenance costs for years to come.

Nearly all of the amenities that were constructed specifically for the 2004 Athens Olympics are now abandoned. However, there are the inherent fees to consider, such as the option costs of people saving that could have been spent on other interests.

Open finances can be burdened for years by paying off the debt left over from a big sports event. For instance, Montreal took three years to finish the debts incurred by hosting the 1976 Olympic Games, while Greece’s loan from the Olympics contributed to the legendary Greek debts and political crisis a few years afterwards.

To be sure, perhaps if Singapore were to host the 2026 Commonwealth Games, our governmental control may help us avoid having a sizable public debt. But, any cost overruns may come with a heavy political price. It raises the question of why we should actually enter this condition.

Although improvements have been made to the Commonwealth Games, the hunt for its impact continues to be its biggest weakness. Used to be viewed as a valuable sports showcase for smaller countries and territories that struggled at the Olympics, the Games were once seen as a helpful showcase for smaller nations and territories. But so far, it is still not seen as a powerful sporting event by runners, donors, and places.

Yet for Singapore, the Eastern Games ( with 12,500 players in Hangzhou last year ) is ranked higher in terms of overall fame and profitability. An individual gold at the Commonwealth Games ( about 5,000 athletes ) earns the athlete S$ 40,000 under the Singapore National Olympic Council’s current Major Games Award incentive scheme. In contrast, an athlete pockets S$ 200,000 for an Asiad gold and S$ 1 million for an Olympic gold.

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Government seeks legal counsel on loan for digital wallet handout

Government seeks legal counsel on loan for digital wallet handout
After inspecting the traffic condition on Thursday, Prime Minister Srettha Thavisin speaks to reporters about the 500- billion bass digital wallet handout scheme at the Highway Traffic Operation Center in Bangkok’s Ratchathewi district. ( Photo: Royal Thai Government )

The government may question the Council of State to check whether its program to use 172.3 billion ringgit from the Bank of Agriculture and Agricultural Cooperative to help pay for its 500-billion-baht electronic wallet handout program is legitimate.

Srettha Thavisin, the prime minister, stated that the government would consult with its constitutional department to ensure that the system adheres to the law.

When asked about the idea of developing a super app for the plan, which may need more money from taxpayers, Mr. Srettha, the finance minister, said the government may respond to requests for comment.

According to him, the government will make sure the system is run honestly and open to public investigation.

Every qualified individual is expected to receive the 10,000 baht through a” very software” created by the Ministry of Digital Economy and Society. It can be used by all financial institutions in an open-loop type.

Mr. Srettha previously predicted that the program would launch in the third fourth to bring the slow economy back to life.

Within six weeks, the Pheu Thai Party’s premier plan may allow 50 million Thais to devote 10 000 baht there.

Mr Srettha, who doubles as the finance minister, said the plan may drive GDP up by 1.2 to 1.6 percent points.

The electric pocket initiative will be funded by three options, according to assistant finance minister Julapun Amornvivat.

Under Section 28 of the State Fiscal and Financial Disciplines Act, a total of 152.7 billion baht will be withdrawn from the Bank for Agriculture and Agricultural Cooperatives ( BAAC ) budget for the 2025 fiscal year, and another 172.3 billion baht will be borrowed from the same budget as the previous year. This number will be given to 17.23 million producers.

According to Mr. Julapun, the remaining 175 billion ringgit will be used to reallocate the budget for the upcoming fiscal time.

He claimed that those who are ready may sign up for the flyer in the third quarter and use it during the final three months of the year.

However, critics have taken aim at the program to use from the BAAC. The government will pay the lender back in the future, and the BAAC will give those who are eligible first.

Jurin Laksanawisit, a member of the Democrat Party record, claimed that the BAAC loan is essentially a repetition of what took place during Pheu Thai’s rice-pledging program under the original Yingluck Shinawatra management.

” This exact replica of the rice-pledging scheme” is said. They share the exact DNA”, Mr Jurin said.

” The state will then acquire 172.3 billion from the BAAC. Combined with the more than 200 billion baht debts incurred by the corn system, the ( Pheu Thai- run governments ) will earn the BAAC about 400 billion ringgit”.

The state is unable to describe how it will repay the loan the BAAC intends to use to finance the digital wallet scheme, according to Mr. Jurin.

Nipon Poapongsakorn, a distinguished fellow at the Thailand Development Research Institute, echoed similar attitudes. He urged the government to provide information on how to repay the lender.

This strategy is meant to help candidates get political advantage before the upcoming election. Now, the market is not in a turmoil. Exports, private consumption and hospitality have improved, adding that the 500- billion- baht handout is merely a short- term measure”.

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Govt seeks legal counsel on loan for wallet handout

Govt seeks legal counsel on loan for wallet handout
After inspecting the traffic condition on Thursday, Prime Minister Srettha Thavisin speaks to reporters about the 500- billion bass digital wallet handout scheme at the Highway Traffic Operation Center in Bangkok’s Ratchathewi district. ( Photo: Royal Thai Government )

The government may question the Council of State to check the legality of its plan to use 172.3 billion ringgit from the Bank of Agriculture and Agricultural Cooperative to help pay for its 500-billion-baht digital wallet flyer program.

Srettha Thavisin, the prime minister, stated that the government would consult with its constitutional department to ensure that the system adheres to the law.

When asked about the idea of developing a super app for the scheme, which may require more money from taxpayers, Mr. Srettha said the government may respond to the request when the app is available.

He said the government will make sure the program is run in a transparent and open manner.

Every qualified individual is expected to receive the 10,000 baht through a” very software” created by the Digital Economy and Society Ministry. In an open-loop design, it can be used by all banks.

Mr. Srettha previously predicted that the program would launch in the third quarter to bring the slow economy back to life.

The Pheu Thai Party’s premier plan may allow 50 million Thais to devote 10 000 baht there in the next six weeks.

Mr Srettha, who doubles as the finance minister, said the plan may drive GDP up by 1.2 to 1.6 percent items.

The modern pocket initiative will be funded by three sources of funding, according to deputy finance secretary Julapun Amornvivat.

Under Section 28 of the State Fiscal and Financial Disciplines Act, a total of 152.7 billion baht will be taken out of the budget for the 2025 fiscal year, while another 172.3 billion baht will be borrowed from the budget for the 2025 fiscal year from the Bank for Agriculture and Agricultural Cooperatives ( BAAC ) budget. This number will be given to 17.23 million farmers.

According to Mr. Julapun, the remaining 175 billion ringgit will be used to reallocate the budget for the upcoming fiscal year.

He said those who are ready you record for the flyer in the third quarter and use it during the final three months of the year.

However, critics have taken aim at the program to use from the BAAC. The government will pay the lender in the interim, and the BAAC may give the first-time recipients.

The BAAC mortgage is essentially a repeat of what took place during Pheu Thai’s rice-pledging program under the previous Yingluck Shinawatra management, according to Jurin Laksanawisit, a member of the Democrat Party listing.

” This exact replica of the rice-pledging scheme” is said. They share the exact DNA”, Mr Jurin said.

” The state will then acquire 172.3 billion from the BAAC. Combined with the more than 200 billion baht debts incurred by the corn system, the ( Pheu Thai- run governments ) will earn the BAAC about 400 billion ringgit”.

The government is unable to explain how the BAAC will repay the loan, according to Mr. Jurin.

Nipon Poapongsakorn, a distinguished fellow at the Thailand Development Research Institute, echoed similar sentiments. He urged the government to provide information on how the bank would repay it.

This strategy is intended to gain political advantage before the upcoming election. Currently, the economy is not in a crisis. Exports, domestic consumption and tourism have improved, adding that the 500- billion- baht handout is only a short- term measure”.

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Global economy now has its own ‘Three-Body Problem’ - Asia Times

Tokyo — In recent months, Fitch Ratings researchers have been a hectic number, issuing warnings of loan landmines in the two biggest markets.

First, there was the score bank’s decision to drop the US last August, revoking Washington’s desired AAA standing. Its decision to reduce its outlook on China’s payment status is now in the news.

The Chinese yen dropped past 152 to the dollar, the lowest level in 34 times, on the same day Fitch warned about Beijing’s “more uncertain financial leads amid a shift from property-reliant progress to what the government sights as a more sustainable development model.” The currency’s path is upending business interactions outside.

Visit it the world economy’s” Three- Body Problem”. The guide here is Netflix’s fleeing strike alien invasion series. And as 2024 draws near, it’s becoming increasingly clear that the world’s economic system faces a three-troubling business dud.

The outcome is that almost everyone anticipated the year’s start to be much more chaotic for worldwide markets.

As China’s home problems festers and negative pressure spooks investors, it’s unquestionably that its challenges have garnered the highest viewing ratings. The US property market has cooled off from its peak in 2021 until January. However, worries that the biggest economy in Asia’s will experience disappointing growth are controlling decisions in trading pits all over.

Following a similar downgrade by Moody’s Investors Service in December, Fitch’s announcement lowers the outlook on China’s credit rating from firm to bad. Moody’s at the time identified risks that were related to” structurally and consistently lower medium-term economical growth” and the ongoing turbulence in the property market.

Fitch claims that its action “reflects growing risks to China’s public financing outlook as the nation contends with more questionable economic prospects as the country transitions from a property-reliant growth model to what the government views as a more lasting growth model.”

China’s expansion model is in a state of flux as President Xi Jinping’s group works to adjust vehicles. Xi’s press to produce “new quality creative forces” meant to change engines from smokestacks to&nbsp, services&nbsp, and innovation is a work in progress.

According to economist Diana Choyleva of Enodo Economics,” China’s dedication to move up the technologies value chain and to indigenize innovative technology production is not new and is fueled by both financial and geo-political considerations.” ” The latter are probably the more important”.

As the world grows more and more reliant on Chinese technology systems, Choyleva points out that “if China may establish a strong role in superior technologies, especially in terms of worldwide standard-setting, that will give it an economic and geo-political advantage.”

Fitch speculates that the property crisis may lead to China returning to its old-fashioned governmental pump-priming practices, which will cause Beijing’s regional balance sheet to explode.

Global investors are n’t quite sure where all the financial bodies are buried right now, nor do they care if they see one year out because of the lack of transparency surrounding China’s debt problems. The$ 9&nbsp, trillion&nbsp, pile of local government borrowing cars only poses big challenges.

This demonstrates the conflict that China faces between halting fiscal abuses and maintaining rise as close to 5 % as possible.

According to Lynn Song, ING Bank’s chief economist for Greater China, “long-term combination efforts might need to take a back seat to short-term stability issues, and the loan viewpoint may look worse before it looks better.” ” Failing to restore growth and confidence would weaken the ratio of debt to GDP, and it may have a similarly detrimental effect on long-term debt sustainability.”

This year, the US might be a bigger global growth spoiler. A case in point is the recent report that US consumer prices increased by 3.5 % to a 3.5 % annual rate from 3.2 % in February. It marked the&nbsp, hottest inflation&nbsp, gain in the last six months.

A US Federal Reserve rate cut is at the very least off the table for the foreseeable future. ” You can kiss a June interest rate cut goodbye”, says Greg McBride, chief financial analyst at advisory Bankrate.

The inflation-related conflict is exacerbated by Washington’s extreme political squabbling and a US-topping US$ 34 trillion. Since the last budget expired in September, republicans in control of the House of Representatives have n’t yet passed a resolution. There are numerous rumors of a potential government shutdown.

The US House of Representatives has been chaotic by lawmakers like Marjorie Taylor Greene. Photo: BBC

In November, Moody’s cited” continued political polarization” when it downgraded Washington ‘s&nbsp, credit outlook. Given that Moody’s is the only major credit rating AAA for US debt, it is a very significant moment.

According to Moody’s,” continued political polarization within US Congress” “raises the possibility that successive governments wo n’t be able to come together on a fiscal plan to slow the decline in debt affordability.”

In the event that Donald Trump retakes the US presidency following the November 5 election, these hostilities could escalate even further. Trump stoked the Fed by promising to lower interest rates, suggested default on US debt, and launched a trade war with China during his administration’s 2017-2020 tenure. Then he launched an uprising to protest his election loss in 2020.

Economists worry that Trump 2.0 will go even further afield. Already, he’s promising to slap 60 % tariffs on all Chinese goods on top of those he imposed during the Trump 1.0 era. And pledging to revoke “most favored nation” trade status.

” The most frequently asked questions among local investors ]in China ] include implications for China should Donald Trump become the next US president”, says Maggie Wei, economist at Goldman Sachs Group.

Not that current US President&nbsp, Joe Biden&nbsp, has gone easy on China. Along with keeping Trump’s tariffs in place, Biden curtailed China’s access to semiconductors and other vital technologies. He restricted the ability of multinational corporations to make investments in Xi’s economy. As such, Xi might not be happy with either election outcome.

” Whoever wins the 2024 presidential election, whether that’s Biden or Trump, I do n’t think there’ll be a difference in the way the US approaches China — whether it’s US investment, technology transfer or trade”, David Firestein, president of the George H. W. Bush Foundation for US- China Relations, tells Bloomberg.

Regardless of whether Biden or Trump wins, the political climate in the United States will be very similar to what it has been in terms of China for the next eight or nine years. When Biden came in, he essentially not only embraced Trump’s policies, but indeed largely doubled down on them”.

Add in the possibility of the Fed making a policy error. Fed Chairman Jerome Powell signaled he was not in a hurry to cut rates even before this week’s bad news for inflation, with the US unemployment rate still at 4 %.

Jerome Powell, the head of the US Federal Reserve. Image: Xinhua

Last month, Powell said:” We are prepared to maintain the current target range for the federal funds rate for longer if appropriate”. Now, it could be much longer.

According to Ronald Temple, chief market strategist at Lazard,” Three months of surprisingly strong services inflation are difficult to explain away and suggest that demand strength may be sustaining elevated US inflation, which limits the Fed’s ability to ease policy.”

According to Nationwide Mutual’s Economist Kathy Bostjancic, recent data” will undermine Fed officials ‘ confidence that inflation is on a sustainable course back to 2 % and likely delays rate cuts to September at the earliest and could push off rate reductions to next year.”

There’s growing concern, though, that extending the “higher for longer” era for US yields could backfire. Given that most US inflation is caused by supply constraints post-Covid 19, rather than by runaway demand that the Fed can control, that is especially true.

Some people worry that the risk of stress in credit markets is increased by the delay in Fed rate cuts. That could lead to more Silicon Valley Bank-like collapses in medium-sized banks and strains in the commercial property sector.

” In early 2008 Ben Bernanke’s Federal Reserve downplayed at great cost the downside risks to the economy coming from the subprime loan crisis”, says Desmond Lachman, economist at the American Enterprise Institute.

Today, Lachman adds,” Powell’s Fed seems to be making a similar mistake by downplaying the downside risks to the economy from the commercial real estate crisis and the bursting of the&nbsp, Chinese housing&nbsp, and credit market bubble. We must hoped the Fed will soon make a change of course to prevent us from an unnecessary economic downturn.

The Fed’s resistance to ease may make things more difficult for Asian central banks. Fed uncertainty will halt Governor Kazuo Ueda’s next tightening action for the Bank of Japan. This week, the yen dropped to 153.24, the lowest level since June 1990, as a result. &nbsp, Adding to the drama for Tokyo: some economists including former Treasury Secretary&nbsp, Lawrence Summers&nbsp, think the Fed’s next move will be to tighten, not ease.

The yen’s slide is putting People’s Bank of China Governor&nbsp, Pan&nbsp, Gongsheng in a tough spot. The yuan is likely to continue to fall as a result. In the event that Chinese demand declines even further in the coming months, this could impede the PBOC’s ability to reduce rates.

A weakened Chinese exchange rate poses a number of risks. It might make it harder for giant&nbsp, property developers&nbsp, to make payments on offshore debt, exacerbating China Evergrande Group- like default risks. It might waste the progress that Xi’s government has made by internationalizing the currency. In the run-up to a contentious US election, Beijing is already at a loss.

Despite this, the yen’s potential entry into a race to the bottom may make the markets pessimistic. That’s especially true as deflation festers in China, where domestic demand is struggling to increase.

” We think China’s low inflation is a symptom of its growth model built on a high rate of investment”, says economist Zichun Huang at Capital Economics. We anticipate that inflation will remain subdued in the long run in comparison to pre-pandemic norms because reducing investment dependence is still far off.

All global investors can do is hope their respective policymakers get things right as these three economic bodies, the US, China, and Japan, tend their wounds. A problem, indeed.

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