Highbrow Magazine - inflation https://www.highbrowmagazine.com/inflation en The Debt Ceiling, Monetary Policy, and Inflation https://www.highbrowmagazine.com/23973-debt-ceiling-monetary-policy-and-inflation <div class="field field-name-field-cat field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even"><a href="/news-features" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">News &amp; Features</a></div></div></div><span class="submitted-by">Submitted by tara on Tue, 05/16/2023 - 21:23</span><div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.highbrowmagazine.com/sites/default/files/styles/large/public/field/image/1debtceiling.jpg?itok=ISR1FAcw"><img typeof="foaf:Image" src="https://www.highbrowmagazine.com/sites/default/files/styles/large/public/field/image/1debtceiling.jpg?itok=ISR1FAcw" width="480" height="241" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">As the U.S. default deadline looms, Treasury <a href="https://www.cnbc.com/2023/05/08/debt-ceiling-janet-yellen-says-default-would-be-economic-catastrophe.html" style="color:#0563c1; text-decoration:underline">Secretary Janet Yellen</a> said that failing to raise the debt ceiling would be an economic catastrophe. The U.S. debt ceiling is a legal cap, set by Congress, limiting the amount that the Treasury can borrow. The reason that the debt ceiling must be raised is because the government has already outspent its available funds and needs to borrow more. Secretary Yellen and other supporters of raising the debt ceiling fear that the U.S. will not be able to meet its upcoming obligations and will, for the first time in history, default on its debts. Those opposing the raising of the debt ceiling believe that if the government would reduce waste, it would be able to function within the existing limits. Further, they point out that raising the debt ceiling perpetuates a trend of government deficit spending, adding to the national debt, which already stands <a href="https://www.pewresearch.org/short-reads/2023/02/14/facts-about-the-us-national-debt/#:~:text=Nearly%20all%20of%20that%20debt,the%20fourth%20quarter%20of%202022." style="color:#0563c1; text-decoration:underline">at $31.38 trillion</a>.</span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">When the Founding Fathers designed the U.S. government, it was determined that the three branches, executive, legislative, and judicial would all be independent of one another, but with checks and balances to prevent any of the three from seizing control. While the president makes a budget, through the Office of Management and Budget, the actual spending must be approved by Congress, through the Congressional Budget Office. Because Congress is the only branch that is directly elected by the citizenry, the Founding Fathers believed that Congress should have control over how citizens’ tax dollars were spent. </span></span></p> <p> </p> <p><img alt="" src="https://www.highbrowmagazine.com/sites/default/files/2debtceiling.jpg" style="height:434px; width:650px" typeof="foaf:Image" /></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The last time the government had <a href="https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/" style="color:#0563c1; text-decoration:underline">a budget surplus</a> was in 2001. That means that each year, since then, the government has spent more than it earned in tax revenue. The reasons for this spending are many and complex. One issue is that politicians are focused on reelection. By spending on social programs or championing spending that impacts people’s lives directly, politicians can “buy” votes. Much of this spending, however, does long-term harm, but a president will only be in office for a maximum of eight years. So, there is a tendency to “kick the can down the road” and let the new administration deal with the mess. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Congressional representatives, on the other hand, have no term limits, a policy that was meant to invoke forward thinking, as congresspersons could potentially still be in office when the misspending of the past came due. In practice, however, the lack of term limits means that they are always thinking about reelection. Consequently, no senator or representative wants to be the one who killed an existing spending program that voters had come to expect. The end result is that both the president and Congress are motivated to spend. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">In times of economic downturn, such as the 2008 financial crisis or the pandemic lockdowns, the government enacts expansionary fiscal and monetary policy to “stimulate” the economy and create jobs. These policies also create inflation and many economists argue that the growth is illusory. The pandemic-related spending and stimulus caused inflation <a href="https://www.cnbc.com/2023/01/12/heres-the-inflation-breakdown-for-december-2022-in-one-chart.html#:~:text=Pandemic%2Dera%20inflation%20peaked%20at%209.1%25%20in%20June%202022." style="color:#0563c1; text-decoration:underline">to reach 9.1%</a> in June 2022. Total spending on the pandemic was <a href="https://www.gao.gov/products/gao-23-106647" style="color:#0563c1; text-decoration:underline">roughly $4.6 trillion</a>. But just counting direct cash payments, the average American received <a href="https://www.pandemicoversight.gov/news/articles/update-three-rounds-stimulus-checks-see-how-many-went-out-and-how-much" style="color:#0563c1; text-decoration:underline">about $3,500</a>. That $3,500 was quickly absorbed by everything from groceries to gasoline going up in price. Meanwhile, $4.6 trillion dollars of newly-created money was spent, ultimately increasing the debt, expanding the money supply, and decreasing the value of the dollar. </span></span></p> <p> </p> <p><img alt="" src="https://www.highbrowmagazine.com/sites/default/files/3debtceiling.jpg" style="height:435px; width:652px" typeof="foaf:Image" /></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">To cope with the inflation, the government released the Inflation Reduction Act, which called for <a href="https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf" style="color:#0563c1; text-decoration:underline">$433 billion</a> worth of additional spending, partially supported by an increase in taxes. The idea that the government could spend itself out of crisis, including spending itself out of inflation, dates back to British economist John Maynard Keynes. Keynes rose to prominence during the early part of the 20<sup>th</sup> Century becoming a primary influence for The New Deal, as well as fiscal and monetary policy of the U.S. and other major economies. He believed that by increasing the money supply, the central authority could restore the country to full employment, and that along with full employment, would come real growth. To achieve these goals, Keynes encouraged increased government expenditure, deficit spending, and lower taxes to stimulate demand. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">During her tenure as Fed chairperson, Yellen identified the role of the Fed as focusing on monetary policy, promoting stability, and avoiding a financial crisis “that could choke off credit to <a href="https://fraser.stlouisfed.org/title/statements-speeches-janet-l-yellen-930/goals-monetary-policy-pursue-576500" style="color:#0563c1; text-decoration:underline">consumers and businesses</a>”. In addition, she defined monetary policy as “central bank actions aimed at <a href="https://fraser.stlouisfed.org/title/statements-speeches-janet-l-yellen-930/goals-monetary-policy-pursue-576500" style="color:#0563c1; text-decoration:underline">influencing interest rates</a>…to help foster a healthy economy.” These policies were evident in the aftermath of the 2008 global financial crisis. It was credit expansion and gambling on bad debts that caused the crisis. And yet, the Fed’s reaction was to slash interest rates, encouraging more borrowing and spending. More recently, after the failure of Silicon Valley Bank, the Treasury, along with the Fed and the Federal Deposit Insurance Corporation provided hundreds of billions in low-interest loans to SVB and other banks facing a liquidity crunch. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">This credit expansion was taken in spite of the fact that the failure of these banks was caused by credit expansion. Additionally, while the country is already facing high inflation, it would make sense to allow credit to dry up, and to discourage borrowing and spending. Instead, these bailouts will not only fuel the fire of the current inflation, but also cause future inflation and debt, while rewarding reckless banking policies. This will result in future bailouts, future stimulus, and continued inflation and debt. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The cutting of interest rates as well as the expansion of government spending and debt causes the boom-and-bust cycles that plague the economy. When interest rates are unnaturally low, as they were from 2008 until last year, borrowing and expansion is encouraged, creating inflation. When government spending and debt is high, even in the face of high interest rates, the result is more inflation. After the boom, a bust must come to bring the market back to reality. But the bust would be unpopular. Yellen said deflation leads to <a href="https://fraser.stlouisfed.org/title/statements-speeches-janet-l-yellen-930/goals-monetary-policy-pursue-576500" style="color:#0563c1; text-decoration:underline">economic stagnation</a>, as employers either cut jobs or wages. And so, U.S. policies tend to be inflationary, in order to soften the blow.</span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Right now, the battle to raise the debt limit is being drawn along party lines. Unfortunately, neither political party can boast greater fiscal and monetary responsibility. Both parties have been guilty of deficit spending and presidents from both parties have asked Congress to raise the debt limit in the past. The economic reality, however, is that frequently raising the debt ceiling defeats the purpose of having a debt ceiling. Instead of forcing the government to work within its budget, the government will continue to increase the national debt, and we will all pay the price in the future. </span></span></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong>Author Bio:</strong></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong><em>Antonio Graceffo, a </em>Highbrow Magazine<em> contributor, is a Ph.D. and also holds a China-MBA from Shanghai Jiaotong University. He works as an economics professor and China economics analyst, writing for various international media. Some of his books include: The Wrestler’s Dissertation, Warrior Odyssey, Beyond the Belt and Road: China’s Global Economic Expansion, and A Short Course on the Chinese Economy.</em></strong></span></span></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong>For Highbrow Magazine</strong></span></span></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong>Image Sources:</strong></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--EpicTop10 (<a href="https://www.flickr.com/photos/182229932@N07/48354004862" style="color:#0563c1; text-decoration:underline">Flickr</a>, Creative Commons)</em></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--Federal Reserve (<a href="https://commons.wikimedia.org/wiki/File:Janet_Yellen_%2823712797651%29.jpg" style="color:#0563c1; text-decoration:underline">Wikimedia</a>, Creative Commons)</em></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--Blue Diamond Gallery (<a href="https://www.thebluediamondgallery.com/financial03/i/inflation.html" style="color:#0563c1; text-decoration:underline">Creative Commons</a>)</em></span></span></p> <p> </p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/debt-ceiling" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">debt ceiling</a></div><div class="field-item odd" rel="dc:subject"><a href="/janet-yellen" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">janet yellen</a></div><div class="field-item even" rel="dc:subject"><a href="/treasury" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">the treasury</a></div><div class="field-item odd" rel="dc:subject"><a href="/congress" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">congress</a></div><div class="field-item even" rel="dc:subject"><a href="/president-biden" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">president biden</a></div><div class="field-item odd" rel="dc:subject"><a href="/inflation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">inflation</a></div><div class="field-item even" rel="dc:subject"><a href="/budget-surplus" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">budget surplus</a></div><div class="field-item odd" rel="dc:subject"><a href="/us-economy" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">u.s. economy</a></div></div></div><div class="field field-name-field-author field-type-text field-label-hidden"><div class="field-items"><div class="field-item even">Antonio Graceffo</div></div></div><div class="field field-name-field-pop field-type-list-boolean field-label-above"><div class="field-label">Popular:&nbsp;</div><div class="field-items"><div class="field-item even">not popular</div></div></div><div class="field field-name-field-bot field-type-list-boolean field-label-above"><div class="field-label">Bottom Slider:&nbsp;</div><div class="field-items"><div class="field-item even">In Slider</div></div></div> Wed, 17 May 2023 01:23:54 +0000 tara 11885 at https://www.highbrowmagazine.com https://www.highbrowmagazine.com/23973-debt-ceiling-monetary-policy-and-inflation#comments Financial Crisis in the Making: Rising Oil and the Crashing Pound https://www.highbrowmagazine.com/21727-financial-crisis-making-rising-oil-and-crashing-pound <div class="field field-name-field-cat field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even"><a href="/news-features" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">News &amp; Features</a></div></div></div><span class="submitted-by">Submitted by tara on Mon, 10/17/2022 - 16:35</span><div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.highbrowmagazine.com/sites/default/files/styles/large/public/field/image/1britishpound_pxhere.jpg?itok=OGhwv0F9"><img typeof="foaf:Image" src="https://www.highbrowmagazine.com/sites/default/files/styles/large/public/field/image/1britishpound_pxhere.jpg?itok=OGhwv0F9" width="480" height="314" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">As Europe enters winter, rising fuel prices, general inflation, and falling currency values threaten to cripple its economy. Last month’s near-crash of the British pound may be the beginning of a global economic crisis. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The U.S. dollar has hit a <a href="https://www.thedailystar.net/business/news/dollar-hits-20-year-high-fed-flags-higher-rates-longer-3105761" style="color:#0563c1; text-decoration:underline">20-year</a> high, causing other global currencies to decline to record lows. While currencies from the euro, to the Japanese yen, and the Chinese yuan, to the Turkish lira and the Mongolian tugrik are slipping, last month’s near-crash of the British pound represents the first crisis of a major, international currency, which could signal a coming global economic cataclysm. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">On September 26<sup>th</sup>, the British pound lost <a href="https://finance.yahoo.com/news/british-pound-just-crashed-5-200000904.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS5oay8&amp;guce_referrer_sig=AQAAAKxy-wCTIzfw_B43vPMf2_pN4dB1iubt5KmoJsRyDGcaMh8fWHdV7EwxneqzsIj6JzQxmsm_cT7hZt5zJ736gahJa2b-MIrQsLd9p5fM7Q-6d10tsdjzeDnJhsIpFzwtoNNyh2PMXbAyZXIrbB5Y2ROE3Wr4W0TDy6li1njj7yC5" style="color:#0563c1; text-decoration:underline">nearly 5%</a> of its value overnight, hitting a 37-year low. After months of continual devaluation, the pound is now worth 21% less than it was at the beginning of the year. The pound’s sharp decline has been blamed on the release of Britain’s new mini-budget, which included major tax cuts, energy price caps, and direct payments to citizens to help them cope with record levels of inflation. The plan called for <a href="https://www.cnbc.com/2022/09/08/uks-liz-truss-will-unleash-billions-of-pounds-to-help-with-energy-bills.html" style="color:#0563c1; text-decoration:underline">between $100 billion</a> and $200 billion of additional spending. Government cash injections during a crisis will exacerbate inflation. Increased government spending will also drive up the national debt, which is already in excess <a href="https://datacommons.org/place/country/GBR?utm_medium=explore&amp;mprop=amount&amp;popt=Debt&amp;cpv=debtor%2CGovernment&amp;hl=en" style="color:#0563c1; text-decoration:underline">of 85% of GDP</a>.  </span></span></p> <p> </p> <p><img alt="" src="https://www.highbrowmagazine.com/sites/default/files/1inflation_marco_verch-flickr.jpg" style="height:434px; width:651px" typeof="foaf:Image" /></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The announcement of this reckless spending was the final straw, sending the pound into freefall. In order to rescue the currency, the Bank of England went on the open market, using foreign currency reserves to buy up <a href="https://www.aljazeera.com/economy/2022/10/3/uks-truss-drops-controversial-plan-to-axe-top-tax-rate" style="color:#0563c1; text-decoration:underline">$73 billion</a> worth of pounds. The UK foreign currency reserves have been <a href="https://qz.com/explaining-the-uks-foreign-exchange-reserves-1849585374" style="color:#0563c1; text-decoration:underline">in steady decline</a> for the past 12 months, dropping to <a href="https://www.bankofengland.co.uk/statistics/uk-international-reserves/2022/september-2022" style="color:#0563c1; text-decoration:underline">$171 billion</a> in September. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Other countries are following suit, taking inflationary measures to try and stimulate the economy, while spending down their reserves, to support their currencies. In September, Japan spent nearly <a href="https://www.cnn.com/2022/10/05/investing/china-japan-india-asian-financial-crisis-intl-hnk" style="color:#0563c1; text-decoration:underline">$20 billion</a> to buoy the yen. India spent $75 billion saving the rupee. And Beijing is planning a major currency intervention to bring the yuan back to normalcy.</span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Turkey <a href="https://www.cnbc.com/2022/08/18/turkey-surprises-markets-with-rate-cut-despite-inflation-near-80percent-.html" style="color:#0563c1; text-decoration:underline">instituted a rate cut</a> in August, in spite of inflation, which had already <a href="https://www.reuters.com/world/middle-east/turkeys-inflation-touches-new-24-year-high-802-2022-09-05/" style="color:#0563c1; text-decoration:underline">reached 80%</a>. The highest inflation has been seen in the transportation sector, where prices <a href="https://www.reuters.com/world/middle-east/turkeys-inflation-touches-new-24-year-high-802-2022-09-05/" style="color:#0563c1; text-decoration:underline">rose 116.87%</a>. Between 2021 and 2022, the lira <a href="https://www.euronews.com/2022/10/05/everything-is-overheating-why-is-turkeys-economy-in-such-a-mess" style="color:#0563c1; text-decoration:underline">lost about 60%</a> of its value against the dollar. As soon as news of the latest rate cut was announced, the lira dropped even further against the dollar. The central bank is also removing dollars from reserves to purchase lira. Foreign currency reserves stood at a 20-year low of  <a href="https://www.reuters.com/markets/rates-bonds/turkish-cenbanks-net-fx-reserves-20-year-low-74-bln-2022-06-23/" style="color:#0563c1; text-decoration:underline">$74 billion</a>, back in June. They experienced a surge in August, upon receipt of <a href="https://www.bloomberg.com/news/articles/2022-08-11/turkey-s-foreign-reserves-get-the-biggest-boost-in-a-year" style="color:#0563c1; text-decoration:underline">money from Russia</a>. Now, the central bank is chipping away at the supply again, liquidating about $3 billion in a single week, leaving a September total of <a href="https://tradingeconomics.com/turkey/foreign-exchange-reserves" style="color:#0563c1; text-decoration:underline">$68 billion</a>. </span></span></p> <p> </p> <p><img alt="" src="https://www.highbrowmagazine.com/sites/default/files/1usdollar_pxhere.jpg" style="height:434px; width:651px" typeof="foaf:Image" /></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The euro, the second most important currency, has lost <a href="https://www.reuters.com/article/sponsored/could-the-euro-collapse" style="color:#0563c1; text-decoration:underline">16% of its value</a>, against the dollar, over the past year. The Dutch TTF, the wholesale gas benchmark for Europe is currently <a href="https://www.reuters.com/article/sponsored/could-the-euro-collapse" style="color:#0563c1; text-decoration:underline">eight times higher</a> than US domestic natural gas prices. This makes the lives of citizens more expensive, while also making it difficult for European companies to compete globally. The European Central Bank is planning <a href="https://euobserver.com/green-economy/156080" style="color:#0563c1; text-decoration:underline">$388 billion</a> in support spending to counter rising energy prices in the EU. This will increase inflation while increasing debt. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Spending down foreign currency reserves is problematic because an energy crisis is at the core of the problems faced by both Britain and Europe, but energy is priced in dollars. So, in addition to the price of oil being higher, the local currencies are lower than normal. This means that Britons and Europeans are feeling the bite more than Americans. About <a href="https://www.pbs.org/newshour/economy/the-british-pound-has-taken-a-plunge-whats-the-impact" style="color:#0563c1; text-decoration:underline">9% of the increase</a> in the cost of oil in the UK is actually attributable to a falling currency. And this applies not only to energy, but all commodities and most imported goods. Americans are experiencing food inflation, but in Britain, <a href="https://www.washingtonpost.com/world/2022/09/27/british-pound-drop-dollar-us-impact/" style="color:#0563c1; text-decoration:underline">46% of food</a> is imported.</span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Inflation in Europe hit 10%. As prices climb, European countries are trying to rein in inflation, but in many cases, the steps they are taking are either ineffective or destructive. In order to <a href="https://www.dailymail.co.uk/news/article-11287699/Belarus-dictator-Lukashenko-BANS-price-increases-immediate-effect-curb-rampaging-inflation.html" style="color:#0563c1; text-decoration:underline">fight inflation</a>, which already stands at 18%, Belarus President Lukashenko has banned price increases. Since a ban on price rises has no impact on costs, suppliers will just refuse to sell at the lower price and the country will be faced with shortages. </span></span></p> <p> </p> <p><img alt="" src="https://www.highbrowmagazine.com/sites/default/files/1stockmarket_rawpixel.jpg" style="height:434px; width:652px" typeof="foaf:Image" /></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">In Germany, where energy costs have <a href="https://www.bbc.com/news/61522123" style="color:#0563c1; text-decoration:underline">increased by 62%</a>, the government has offered citizens a $195 billion relief package, which included a price cap and direct payments. France, Italy, Spain, and the EU are all preparing caps and direct payments to citizens totaling <a href="https://www.teneo.com/european-energy-crisis-response-emergency-intervention-to-address-high-energy-prices-upcoming-measures/" style="color:#0563c1; text-decoration:underline">hundreds of billions</a> of dollars, across the Eurozone. The EU and other governments are also calling for reductions in power usage, which will ultimately result in decreased manufacturing output and job cuts. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The European private sector is also planning to take some inflationary action in the form of <a href="https://www.reuters.com/markets/europe/europe-incs-wage-hikes-alarm-investors-worries-about-recession-grow-2022-10-10/?utm_source=Sailthru&amp;utm_medium=newsletter&amp;utm_campaign=daily-briefing&amp;utm_term=10-10-2022" style="color:#0563c1; text-decoration:underline">salary increases</a> and bonuses. Unions in Italy, France, and elsewhere are calling for <a href="https://www.reuters.com/markets/europe/europe-incs-wage-hikes-alarm-investors-worries-about-recession-grow-2022-10-10/?utm_source=Sailthru&amp;utm_medium=newsletter&amp;utm_campaign=daily-briefing&amp;utm_term=10-10-2022" style="color:#0563c1; text-decoration:underline">additional raises</a>, while some of the largest employers, such as Carefour and Stellantis are already on board. Between the higher energy cost, depreciating currency, and higher price of inputs and raw materials, most companies in the Eurozone have seen their costs <a href="https://www.reuters.com/markets/europe/europe-incs-wage-hikes-alarm-investors-worries-about-recession-grow-2022-10-10/?utm_source=Sailthru&amp;utm_medium=newsletter&amp;utm_campaign=daily-briefing&amp;utm_term=10-10-2022" style="color:#0563c1; text-decoration:underline">rise by 43%</a> this year. And this was before the planned pay increases. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The higher costs are being passed on to consumers in the form of higher prices, but <a href="https://www.reuters.com/markets/europe/europe-incs-wage-hikes-alarm-investors-worries-about-recession-grow-2022-10-10/?utm_source=Sailthru&amp;utm_medium=newsletter&amp;utm_campaign=daily-briefing&amp;utm_term=10-10-2022" style="color:#0563c1; text-decoration:underline">retailers like H&amp;M</a> are warning that rising prices are already curtailing demand. Analysts at PineBridge Investments see Europe sinking into a full-on recession in the fourth quarter and possibly a general collapse, owing to a vicious cycle of inflation and rising wages. </span></span></p> <p> </p> <p><img alt="" src="https://www.highbrowmagazine.com/sites/default/files/2europeanunion_european_parliament-flickr.jpg" style="height:434px; width:651px" typeof="foaf:Image" /></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The IMF is forecasting that Germany may see a contraction of GDP, below baselines levels, of <a href="https://www.reuters.com/article/sponsored/could-the-euro-collapse" style="color:#0563c1; text-decoration:underline">1.5% in 2022</a> and 2.7% in 2023. A contraction in Germany could spread to other Eurozone countries. When it comes to adjusting fiscal and economic policy, in order to address a crisis, European governments <a href="https://www.reuters.com/article/sponsored/could-the-euro-collapse" style="color:#0563c1; text-decoration:underline">have fewer tools</a> at their disposal, than does the U.S. government, because of the common currency, the common central bank, and a host of laws and agreements, preventing countries from taking independent action. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The <a href="https://www.reuters.com/article/sponsored/could-the-euro-collapse" style="color:#0563c1; text-decoration:underline">ZEW Indicator</a> of Economic Sentiment has determined that consumer confidence across Europe is at its lowest level since the sovereign debt crisis of 2011. The trade deficit, by contrast, is at an all-time high. And the Purchasing Managers Indices (PMIs), a measure of industrial and service activity in the economy, is showing signs of a contraction.</span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The U.S. Fed has raised interest rates and is expected to raise them again, in order to bring down inflation. Meanwhile, central banks around the world are following suit. The raising of interest rates by central banks in developed countries, however, is having spillover effects in <a href="https://www.worldbank.org/en/news/press-release/2022/09/15/risk-of-global-recession-in-2023-rises-amid-simultaneous-rate-hikes" style="color:#0563c1; text-decoration:underline">developing countries</a><u>,</u> which will only become more negative and destructive as additional rate hikes are expected. These countries will find it difficult to import, difficult to pay their foreign debt, and will see their own currencies depreciate. Resource-dependent countries are also seeing a decrease in demand for their exports, as industrial activity slows in the developed world. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The U.S is in less peril than other countries, largely because the dollar is the world’s currency, and also because the U.S. is more energy and food self-sufficient than most countries. An additional benefit to the U.S. is that a rising dollar attracts foreign investment. The negative impact of a soaring greenback, however, is that American exports become expensive in other countries. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">And, at home, imports become cheaper, discouraging Americans from purchasing domestic products. It is estimated that for <a href="https://www.nbcnews.com/business/business-news/british-pound-falls-effect-economy-future-us-rcna49428" style="color:#0563c1; text-decoration:underline">each 1% increase</a> in the value of the dollar the earnings of S&amp;P 500 companies declines by about 0.5%. And while most American will not shed tears for the economic losses of big companies, each decrease in profit correlates with a reduction in the number of jobs. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong>Author Bio:</strong></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong><em>Antonio Graceffo, a </em>Highbrow Magazine<em> contributor, is a Ph.D. and also holds a China-MBA from Shanghai Jiaotong University. He works as an economics professor and China economic analyst, writing for various international media. Some of his books include: The Wrestler’s Dissertation, Warrior Odyssey, Beyond the Belt and Road: China’s Global Economic Expansion, and A Short Course on the Chinese Economy.</em></strong></span></span></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong>For Highbrow Magazine</strong></span></span></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong>Image Sources:</strong></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--</em><a href="https://pxhere.com/en/photo/1160034" style="color:#0563c1; text-decoration:underline"><em>Pxhere</em></a><em> (Creative Commons)</em></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--Marco Verch Professional Photographer (</em><a href="https://www.flickr.com/photos/30478819@N08/51628468135" style="color:#0563c1; text-decoration:underline"><em>Flickr</em></a><em>, Creative Commons)</em></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--</em><a href="https://pxhere.com/en/photo/1354491" style="color:#0563c1; text-decoration:underline"><em>Pxhere</em></a><em> (Creative Commons)                              </em></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--</em><a href="https://www.rawpixel.com/image/5916979/stock-market-free-public-domain-cc0-image" style="color:#0563c1; text-decoration:underline"><em>Rawpixel</em></a><em> (Creative Commons)</em></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--Jean Beaufort (<a href="https://www.publicdomainpictures.net/en/view-image.php?image=214616&amp;picture=new-york-stock-exchange" style="color:#0563c1; text-decoration:underline">Publicdomainpictures</a>, Creative Commons)</em></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--European Parliament (</em><a href="https://www.flickr.com/photos/european_parliament/51581146130" style="color:#0563c1; text-decoration:underline"><em>Flickr</em></a><em>, Creative Commons)</em></span></span></p> <p> </p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/british-pound" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">british pound</a></div><div class="field-item odd" rel="dc:subject"><a href="/pound-crashing" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">pound crashing</a></div><div class="field-item even" rel="dc:subject"><a href="/inflation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">inflation</a></div><div class="field-item odd" rel="dc:subject"><a href="/dollar" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">the dollar</a></div><div class="field-item even" rel="dc:subject"><a href="/european-union" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">European Union</a></div><div class="field-item odd" rel="dc:subject"><a href="/money-markets" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">money markets</a></div><div class="field-item even" rel="dc:subject"><a href="/stock-markets" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">stock markets</a></div><div class="field-item odd" rel="dc:subject"><a href="/european-central-bank" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">european central bank</a></div><div class="field-item even" rel="dc:subject"><a href="/imf" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">IMF</a></div><div class="field-item odd" rel="dc:subject"><a href="/euro-0" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">the euro</a></div><div class="field-item even" rel="dc:subject"><a href="/financial-crisis" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">financial crisis</a></div><div class="field-item odd" rel="dc:subject"><a href="/economy-0" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">the economy</a></div><div class="field-item even" rel="dc:subject"><a href="/rising-fuel-prices" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">rising fuel prices</a></div><div class="field-item odd" rel="dc:subject"><a href="/oil-prices" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">oil prices</a></div></div></div><div class="field field-name-field-author field-type-text field-label-hidden"><div class="field-items"><div class="field-item even">Antonio Graceffo</div></div></div><div class="field field-name-field-pop field-type-list-boolean field-label-above"><div class="field-label">Popular:&nbsp;</div><div class="field-items"><div class="field-item even">not popular</div></div></div><div class="field field-name-field-bot field-type-list-boolean field-label-above"><div class="field-label">Bottom Slider:&nbsp;</div><div class="field-items"><div class="field-item even">In Slider</div></div></div> Mon, 17 Oct 2022 20:35:13 +0000 tara 11395 at https://www.highbrowmagazine.com https://www.highbrowmagazine.com/21727-financial-crisis-making-rising-oil-and-crashing-pound#comments China’s Economy Teeters While Xi Tightens His Grip https://www.highbrowmagazine.com/17093-china-s-economy-teeters-while-xi-tightens-his-grip <div class="field field-name-field-cat field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even"><a href="/news-features" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">News &amp; Features</a></div></div></div><span class="submitted-by">Submitted by tara on Mon, 11/29/2021 - 10:30</span><div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.highbrowmagazine.com/sites/default/files/styles/large/public/field/image/2china_see-ming_lee-flickr.jpg?itok=XCiPa6-S"><img typeof="foaf:Image" src="https://www.highbrowmagazine.com/sites/default/files/styles/large/public/field/image/2china_see-ming_lee-flickr.jpg?itok=XCiPa6-S" width="480" height="320" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Over the past decades, the Chinese economy has been growing, at breakneck speed, largely fueled by tremendous export volumes, massive debt, and over-reliance on the real-estate sector. Now, manufacturing is suffering under ongoing coronavirus lockdowns, energy shortages, and supply-chain disruptions. The debt bubble seems about to burst, and the real-estate industry will be the first casualty, with ripples eventually being felt throughout China and the rest of the world.</span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">China’s overall manufacturing output has decreased. The manufacturing purchasing managers index (PMI), a measure of a country’s manufacturing activity, has <a href="https://www.wsj.com/articles/chinas-manufacturing-activity-contracts-for-second-straight-month-11635645642#:~:text=China's%20official%20manufacturing%20purchasing%20managers,the%20pandemic%20in%20February%202020." style="color:#0563c1; text-decoration:underline">dropped to 49.2</a>, the lowest number since the beginning of the pandemic, in February 2020. A PMI of less than 5 means that manufacturing has stopped growing. Domestic <a href="https://www.bloomberg.com/news/articles/2021-09-27/china-s-recovery-is-coming-under-pressure-from-weak-demand" style="color:#0563c1; text-decoration:underline">demand remains</a> weak. Imports <a href="https://www.businessinsider.com/china-economy-q3-slowdown-evergrande-demand-energy-crunch-investment-2021-10" style="color:#0563c1; text-decoration:underline">are slowing</a>. Debt is high, and overall, economic indicators are approaching levels not seen <a href="https://www.bloomberg.com/news/articles/2021-11-16/china-s-property-crackdown-is-dragging-economy-to-lows-of-1990" style="color:#0563c1; text-decoration:underline">since the 1990s</a>. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">China’s annual GDP growth may slow to the <a href="https://www.wsj.com/articles/chinas-economy-faces-risk-of-yearslong-real-estate-hangover-11636372801" style="color:#0563c1; text-decoration:underline">3%-to-5%</a> range, rather than the 6%-and-over range, which it is accustomed to. Additionally, Xi Jinping’s zero-tolerance Covid policy is so destructive to the general economy that some experts believe if the measures are kept in place, next year’s GDP growth could <a href="https://www.aljazeera.com/economy/2021/11/16/chinas-property-crackdown-sinks-economic-growth-to-90s-levels" style="color:#0563c1; text-decoration:underline">drop to 4%.</a></span></span></p> <p> </p> <p><img alt="" src="https://www.highbrowmagazine.com/sites/default/files/1xiping_kremlin-wikimedia_0.jpg" style="height:371px; width:600px" typeof="foaf:Image" /></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The PRC’s total public debt has climbed to <a href="https://www.bloomberg.com/news/articles/2021-10-20/china-s-debt-to-gdp-ratio-falls-for-fourth-straight-quarter" style="color:#0563c1; text-decoration:underline">263% of GDP</a>. Real-estate sector debt is estimated to be at least <a href="https://www.dw.com/en/why-chinas-property-crash-isnt-a-new-lehman-moment/a-59716702#:~:text=The%20total%20combined%20debt%20of,scary%20enough%20number%20for%20you%3F" style="color:#0563c1; text-decoration:underline">$5 trillion USD</a>. But this number does not include <a href="https://www.bloomberg.com/news/articles/2021-11-17/china-s-6-trillion-hidden-debt-gets-stress-tested-in-downturn?utm_source=google&amp;utm_medium=bd&amp;cmpId=google" style="color:#0563c1; text-decoration:underline">trillions of dollars'</a> worth of off-balance sheet lending, debt which does not appear on balance sheets.  </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Most of China’s major banks are state-owned, and regularly engage in murky practices of lending money in such a way that it does not appear on the balance sheets of local governments. Local Government Funding Vehicles (LGVF) are companies that are formed for the sole purpose of borrowing money, used to fund the purchase of land. Local governments <a href="https://www.bloomberg.com/news/articles/2021-11-17/china-s-6-trillion-hidden-debt-gets-stress-tested-in-downturn?utm_source=google&amp;utm_medium=bd&amp;cmpId=google" style="color:#0563c1; text-decoration:underline">derive 40%</a> of their income from the sale of land. Technically, the borrower is a company, an LGFV, but actually, the local government is on the hook for these loans. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">As regulators crack down, they are finding that the actual, total indebtedness of local governments is dramatically higher than previously thought. No one knows the real total of LGFV debt, but some estimates have it has high as <a href="https://www.bloomberg.com/news/articles/2021-11-17/china-s-6-trillion-hidden-debt-gets-stress-tested-in-downturn?utm_source=google&amp;utm_medium=bd&amp;cmpId=google" style="color:#0563c1; text-decoration:underline">$7.8 trillion</a> USD, or <a href="https://tradingeconomics.com/china/gdp" style="color:#0563c1; text-decoration:underline">half of China</a>’s GDP. Meanwhile, the entire real-estate sector is in decline, and local government incomes are dwindling.</span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The $5 trillion in real-estate market debt is distributed over a number of business sectors, affecting everyone from investors and homebuyers, to companies that sell or transport cement and steel. <a href="https://www.cnbc.com/2021/11/09/fed-says-chinas-real-estate-troubles-could-spill-over-to-the-us.html" style="color:#0563c1; text-decoration:underline">Widespread defaults</a> could rock the entire economy, causing a drop in Chinese stocks, an increase in unemployment, and deflation. This would result in a sharp decline in the purchase of imported goods and raw materials, which has implications for the entire world. Developing countries, in particular, are dependent on exporting raw materials to China, used in construction and manufacturing. If those two sectors fall into crisis, some of the world’s poorest countries could sink deeper into poverty. </span></span></p> <p> </p> <p><img alt="" src="https://www.highbrowmagazine.com/sites/default/files/3china_trey_ratcliffe-flickr.jpg" style="height:397px; width:600px" typeof="foaf:Image" /></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">To mitigate further debt crisis, particularly in the real-estate sector, the Chinese Communist Party is cracking down on bank-lending processes and increasing scrutiny of credit. This may or may not be a good long-term strategy to avoid a similar issue in the future. It does, however, mean that credit will become tight in the short to medium turn, which will result in an economic slump. Real-estate accounts for <a href="https://www.wsj.com/articles/chinas-economy-faces-risk-of-yearslong-real-estate-hangover-11636372801#:~:text=Real%20estate%20and%20other%20related,to%20calculations%20by%20Oxford%20Economics." style="color:#0563c1; text-decoration:underline">about 24%</a> of the economy, whereas in the U.S. and other developed countries, real estate only <a href="https://www.wsj.com/articles/chinas-economy-faces-risk-of-yearslong-real-estate-hangover-11636372801" style="color:#0563c1; text-decoration:underline">accounts for 15%</a>. The real-estate sector not being able to obtain financing will cause a sweeping economic downturn and unemployment. It will also cause a tremendous loss of savings for families. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Xi has urged the public not to speculate on the real-estate market, as this drives up home prices. He has also said that he wants to make <a href="https://www.wsj.com/articles/chinas-economy-faces-risk-of-yearslong-real-estate-hangover-11636372801" style="color:#0563c1; text-decoration:underline">housing affordable</a> for citizens, and so is intentionally causing price deflation in the real-estate market. And while this may favor new homebuyers, it means that everyone else purchased their home when it was expensive, and is now paying off debt for an asset that has depreciated in value. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">For U.S. households, real-estate makes up <a href="https://deltawealthadvisors.com/blog/what-percentage-of-net-worth-should-be-in-real-estate#:~:text=It%20is%20commonly%20agreed%20that,of%20investment%20and%20wealth%20development." style="color:#0563c1; text-decoration:underline">about 25% to 40%</a> of net worth. But in China, it is <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4589866/#:~:text=The%20largest%20component%20of%20household%20wealth%2C%20housing%20assets%20contributed%20an,total%20household%20wealth%20in%20China." style="color:#0563c1; text-decoration:underline">around 74%</a>. Even worse, homes are so expensive in China that this wealth is multigenerational. With a one-child policy, a young Chinese person may be the only child and only grandchild of a total of six adults, all of whom would contribute money to a first-time home purchase. </span></span></p> <p> </p> <p><img alt="" src="https://www.highbrowmagazine.com/sites/default/files/4china_mike_coghlan-flickr.jpg" style="height:450px; width:600px" typeof="foaf:Image" /></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">In Shanghai, China’s largest, most developed, and most fashionable city, the average salary is just <a href="https://knoema.com/atlas/China/Shanghai/Average-wage-of-Employed-Persons#:~:text=In%202019%2C%20average%20wage%20of,average%20annual%20rate%20of%209.53%25." style="color:#0563c1; text-decoration:underline">over $1,000 USD</a> per month. With a 1,000-square-foot apartment selling for <a href="https://www.forbes.com/sites/kenrapoza/2017/03/19/shanghai-housing-prices-completely-unsustainable/#:~:text=Every%20year%20China%20investors%20are,or%20around%20five%20million%20yuan." style="color:#0563c1; text-decoration:underline">$725,000 USD</a>, it is no wonder that most young people cannot afford to buy a home without the help of their family. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Additionally, due to the increased lending restrictions at banks, it may be difficult for new buyer to obtain credit to purchase homes. Already, new home starts and housing projects have <a href="https://www.aljazeera.com/economy/2021/11/16/chinas-property-crackdown-sinks-economic-growth-to-90s-levels" style="color:#0563c1; text-decoration:underline">fallen by 33%</a> year-on-year, with a 10% decline predicted for next year.</span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">Despite so many domestic issues, Beijing’s exports and <a href="https://www.bloomberg.com/news/articles/2021-11-07/china-trade-surplus-can-cushion-but-can-t-stop-economic-slowdown" style="color:#0563c1; text-decoration:underline">trade surplus</a> continue to grow. As countries begin to open and global demand steadily increases, China’s exports will cushion its economic decay, but exports may not be enough to completely stop it. Exports are expected to grow by 24% this year, but exports only <a href="https://www.bloomberg.com/news/articles/2021-11-07/china-trade-surplus-can-cushion-but-can-t-stop-economic-slowdown" style="color:#0563c1; text-decoration:underline">account for 20%</a> of the economy, not enough to offset a weakening domestic economy, and definitely not enough to mitigate the potential havoc that a real-estate and financial-sector collapse could cause.</span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">U.S. Treasury Secretary Janet Yellen said that a crisis in China’s real-estate sector <a href="https://www.cnbc.com/2021/11/09/fed-says-chinas-real-estate-troubles-could-spill-over-to-the-us.html" style="color:#0563c1; text-decoration:underline">could strain</a> the entire Chinese economy, spilling over to the U.S. This is one of the first times that the U.S. authorities have included an <a href="https://www.cnbc.com/2021/11/09/fed-says-chinas-real-estate-troubles-could-spill-over-to-the-us.html" style="color:#0563c1; text-decoration:underline">economic threat</a> from China as one of their significant policy-making factors. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The negative impacts of a collapse in China would be wide-sweeping, affecting everything from bank balance sheets, availability of capital, and consumer purchases, to employment, as well as the lifetime savings of citizens, which could evaporate overnight. </span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif">The possible impact on the developing world is that countries dependent on exporting raw materials to China will see their economies retract, causing unemployment and hardship. The impact on the U.S. will most likely be limited to those Americans and American entities that are heavily invested in China. Having said that, there are trillions of U.S. dollars, in pension funds and investment funds, invested in Chinese companies traded on U.S. exchanges. While a collapse in China probably will not affect the U.S. economy as a whole, many individuals and companies in the U.S. could suffer. </span></span></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong>Author Bio:</strong></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong>Antonio Graceffo is a Ph.D., and also holds a China-MBA from Shanghai Jiaotong University. He works as an economics professor and China economic analyst, writing for various international media. Some of his books include: <em>The Wrestler’s Dissertation, Warrior Odyssey, Beyond the Belt </em>and<em> Road: China’s Global Economic Expansion, and A Short Course on the Chinese Economy.</em></strong></span></span></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong>For Highbrow Magazine</strong></span></span></p> <p> </p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><strong>Image Sources:</strong></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--See-ming Lee (</em><a href="https://www.flickr.com/photos/48973657@N00/14469367558" style="color:#0563c1; text-decoration:underline"><em>Flickr,</em></a><em> Creative Commons)</em></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--Trey Ratcliff (</em><a href="https://www.flickr.com/photos/95572727@N00/8979118188" style="color:#0563c1; text-decoration:underline"><em>Flickr</em></a><em>, Creative Commons)</em></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--The Kremlin (</em><a href="https://commons.wikimedia.org/wiki/File:Xi_Jinping_(2017-07-07).jpg" style="color:#0563c1; text-decoration:underline"><em>Wikimedia</em></a><em>, Creative Commons)</em></span></span></p> <p><span style="font-size:18px"><span style="font-family:Times New Roman,Times,serif"><em>--Mike Coghlan (</em><a href="https://www.flickr.com/photos/mikecogh/14101788862/in/photostream/" style="color:#0563c1; text-decoration:underline"><em>Flickr</em></a><em>, Creative Commons)</em></span></span></p> <p> </p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/china" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">China</a></div><div class="field-item odd" rel="dc:subject"><a href="/xi-ping" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">xi ping</a></div><div class="field-item even" rel="dc:subject"><a href="/chinese-economy" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">chinese economy</a></div><div class="field-item odd" rel="dc:subject"><a href="/inflation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">inflation</a></div><div class="field-item even" rel="dc:subject"><a href="/gdp" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">gdp</a></div><div class="field-item odd" rel="dc:subject"><a href="/economic-collapse" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">economic collapse</a></div><div class="field-item even" rel="dc:subject"><a href="/us-economy" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">u.s. economy</a></div><div class="field-item odd" rel="dc:subject"><a href="/southeast-asia" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Southeast Asia</a></div><div class="field-item even" rel="dc:subject"><a href="/chinese-government" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">chinese government</a></div></div></div><div class="field field-name-field-author field-type-text field-label-hidden"><div class="field-items"><div class="field-item even">Antonio Graceffo</div></div></div><div class="field field-name-field-pop field-type-list-boolean field-label-above"><div class="field-label">Popular:&nbsp;</div><div class="field-items"><div class="field-item even">not popular</div></div></div><div class="field field-name-field-bot field-type-list-boolean field-label-above"><div class="field-label">Bottom Slider:&nbsp;</div><div class="field-items"><div class="field-item even">Out Slider</div></div></div> Mon, 29 Nov 2021 15:30:17 +0000 tara 10767 at https://www.highbrowmagazine.com https://www.highbrowmagazine.com/17093-china-s-economy-teeters-while-xi-tightens-his-grip#comments