The trading theme of the week is “international trade” as all of the prominent global leaders flock to Pittsburgh, Pa., for the Group of 20 meeting.
According to the Associated Press, President Barack Obama is using the opportunity to get on his soapbox and “go after the ‘reckless risk-taking’ that pushed the global economy into the worst financial crisis since the 1930s, and he is also pushing for countries to promote more balanced growth going forward.”
I’m sure the Chinese, Canadians and Indians, who had rules in place so that their banks didn’t get taken out in the latest financial crisis, will be glad to hear it.
They might even point out the hypocrisy in that statement given the fact that the U.S. budget deficit is running at $1.548 trillion this year, and will shoot up to $11 trillion over the next decade.
According to Yahoo Finance:
China, the largest foreign owner of U.S. Treasury securities, has not been shy about voicing worries that the U.S. deficits will undermine the value of its $800 billion in Treasury bonds.
The Chinese worry that the dollar, which has been sliding to its weakest levels in a year, will weaken further, making their holdings worth less. They also worry that all the U.S. debt could trigger inflation in the United States that would further undermine their investments.
The truth is the U.S. must decrease the value of the dollar in order to devalue all that debt. It is already happening. As far as inflation goes, a falling dollar and inflation are same thing; they both equal a fall in purchasing power.
Asia’s New Boom
It’s not all bad news. Asia is back on track and has been upgraded. According to MarketWatch:
The Asian Development Bank upgraded its economic growth forecast Tuesday for developing Asia, saying growth this year and next will top estimates it gave six months ago as the region proves more resilient to the global downturn than initially thought.
The forecast in the multinational lender's annual Asian Development Outlook are for growth of 3.9% this year and 6.4% next year, which is above its previous forecast in March for expansion of 3.4% this year and 6% next year.
The bank also upgraded its growth outlook for China, saying it now expects the nation's economy to expand 8.2% this year, and 8.9% next year, up from March projections for a 7% expansion this year and 8% next year.
With the teeter-totter of global trade favoring select emerging markets over the heavily indebted U.S, the greenback fell again today.
According to MarketWatch, “The dollar weakened for the first time in three days against the euro and fell to the lowest level in a year as signs that the global economy is recovering spurred investors to buy higher-yielding assets.”
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