FleaStiff
FleaStiff
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April 28th, 2011 at 2:33:13 AM permalink
Ministry of Railroads in China announced some sort of lowered speed limit on bullet trains due to possible shoddy construction and has stated the billions that Chinese banks lent to the railroads are at risk.
pacomartin
pacomartin
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April 28th, 2011 at 5:15:32 AM permalink
They dropped the top speed from 350 kph to 300 kph which is more or less the top speed in Europe.

Spain did something similar with the Madrid to Barcelona run

Quote: Wikipedia

It was originally forecast that, after reaching Barcelona in 2004, the line would run at 350 km/h (217 mph), the maximum capable speed of the new Siemens AVE trains which have replaced the Talgo Bombardier AVE S102, after the installation of level 2 of the ETCS/ERTMS, which is yet to be installed. But on the AVE's first day of operating at 300 km/h (186 mph) to Tarragona the Minister of Public Works, Magdalena Álvarez, stated that the maximum commercial operating speeds of the AVE on all lines would be 300 km/h (186 mph).



I think shoddy construction is a bit of an overstatement. Costs are considerable to run a signalling system to go that fast.
odiousgambit
odiousgambit
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April 28th, 2011 at 2:12:49 PM permalink
as usual, nothing is clear cut. The article says something about adjusting the value of currencies to make this happen. As it is, acc to wikipedia citing the world bank, in US dollars as of 2009 this is where we are with GDP:

EU 16,282,230
United States 14,657,800
People's Republic of China 5,878,257

wikipedia citing the CIA world factbook for 2010:

EU 15,900,000
United States 14,620,000
People's Republic of China 5,745,000

that's a long way to go, unreachable in the near future like 2016. To get there by adjusting currencies as per the article, well, I'd have to say it is over my head.
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!” She is, after all, stone deaf. ... Arnold Snyder
pacomartin
pacomartin
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April 28th, 2011 at 5:07:13 PM permalink
Quote: odiousgambit

The article says something about adjusting the value of currencies to make this happen. To get there by adjusting currencies as per the article, well, I'd have to say it is over my head.



Purchasing Power Parity is a complex way of saying that prices are different in every country. If you make $100,000 in the USA, then you might have the exact same lifestyle if you make $40,000 in Mexico. In theory everyone is brought to the level of the USA. That means places like Denmark and Luxembourg are cranked down, and places like China or Africa are cranked up.

The simplest way to measure PPP is the Big Mac Index, where you say that a Big Mac is basically the same goods everywhere in the world (ignoring the fact that they change the toppings to suit local taste and the price of condiments) and it gives you a quick comparison of the cost of living. The real technique is more complex and just as certain to be wrong. It doesn't matter what the price of a Big Mac is in Mexico, because it is considered expensive food by most people in rural areas and they would never order it.

Wikipedia entry for GDP by Purchasing Power Parity Method is the correct page.

What you are looking at is a comparison of GDP by nominal value of money, or using official exchange rates. Here is a quick look at the numbers for the World, EU, USA, China, India and Japan . Japan and EU go down to the USA levels because they are more expensive, and China roughly doubles, and India roughly triples to match the levels of the USA. The USA stays the same because they are the world standard.


Using nominal exchange rates
World $62,909,274
Eur. Un. $16,282,230
USA $14,657,800
China $5,878,257
Japan $5,458,872
India $1,537,966

Using purchasing power parity
World $74,264,873
Eur. Un. $15,170,419
USA $14,657,800 <---- Gap is expected to close by the year 2016
China $10,085,708 <----
Japan $4,309,432
India $4,060,392

The headlines were confusing because only a few weeks ago it was announced that China finally passed Japan (in nominal terms), and then a few weeks later there is a headline that China will pass the USA (only in PPP terms).

Using per capita figures China is between Ecuador and Albania if you use PPP , and roughly the same place if you use nominal exchange rates. It doesn't matter as much which system you use, because China, Ecuador and Albania have similar standards of living on average. But China is a huge place. What matters as much as averages is distribution.


It works the other way with developed countries.
The USA has a GDP 13.35% bigger than the Eurozone using nominal exchange rates
The USA has a GDP 26.79% bigger than the Eurozone using purchasing power parity
The reason is prices are higher in the Eurozone than in the USA.

The Eurozone is defined as that portion of the European Union which uses the Euro currency specifically (roughly 328 million people, slightly larger than the USA 311 million population). So it does not include the wealthy Nordic countries, Iceland, Switzerland, or the United Kingdom. The zone also does not include the much larger section of the world whose currency is specifically tied to the value of the Euro (like Denmark, a big portion of Africa, etc.).
HKrandom
HKrandom
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May 1st, 2011 at 5:21:08 AM permalink
The world is losing confidence in the strength of the USD and the market doesn't trust Bernake. Gold prices soared and the USD plunged after his speech and some hours later China announced it is considering buying $1 Trillion (that's twelve zeros) worth of gold. I am now kicking myself for selling my gold right after his speech (I used all my savings on a 10x margin to buy gold, I could have doubled them if I kept the gold until the price reached 1565) but it made me think that if things keep going the way they are China might drop their peg to the USD and let their currency appreciate much faster as the world keeps losing confidence in the dollar. Since the USA cannot repay their debts and all of their programs they will have to go through QE3, QE4, QE5 etc. and a few years from now there will be very few lenders willing to accept a fiat currency that keeps losing its value as a repayment. By that time China will have converted its dollar reserves into gold, oil and other things, it's currency will be very strong and it's nominal GDP will be much higher since everybody's savings will be worth so much more.
pacomartin
pacomartin
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May 1st, 2011 at 6:57:13 AM permalink
Quote: HKrandom

The world is losing confidence in the strength of the USD and the market doesn't trust Bernake. Gold prices soared and the USD plunged after his speech and some hours later China announced it is considering buying $1 Trillion (that's twelve zeros) worth of gold. I am now kicking myself for selling my gold right after his speech (I used all my savings on a 10x margin to buy gold, I could have doubled them if I kept the gold until the price reached 1565) but it made me think that if things keep going the way they are China might drop their peg to the USD and let their currency appreciate much faster as the world keeps losing confidence in the dollar. Since the USA cannot repay their debts and all of their programs they will have to go through QE3, QE4, QE5 etc. and a few years from now there will be very few lenders willing to accept a fiat currency that keeps losing its value as a repayment. By that time China will have converted its dollar reserves into gold, oil and other things, it's currency will be very strong and it's nominal GDP will be much higher since everybody's savings will be worth so much more.



I see those headlines, but I think it would be impossible to do. At present prices the gold in Fort Knox is worth $230 billion ($50 million per tonne). The official gold holdings of all the governments of the world is only $1.5 trillion (although there is more in gold mining countries and in jewelry and private holdings. At present prices all the gold ever mined in the history of human civilization is worth $5 trillion.

Either the price of gold is going to go up by a huge factor, or the headline is misleading.

The traditional argument is that if China drops their peg and weakens the dollar, then their foreign exchange holdings weaken as well. At the rate they are accumulating dollars even some of the most ambitious conversion programs will only slow their rate of accumulation, let alone stop or reverse the trend.

I do consider the year 1991 to be a milestone of sorts. Combined with the fall of the Soviet Union, the USA made the unprecedented step of printing $1 trillion in hundred dollar bills. Some of that went for replacement bills, but the trade balance was nearly zero that year for the last time.
AZDuffman
AZDuffman
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May 1st, 2011 at 7:17:28 AM permalink
Quote: pacomartin

I do consider the year 1991 to be a milestone of sorts. Combined with the fall of the Soviet Union, the USA made the unprecedented step of printing $1 trillion in hundred dollar bills. Some of that went for replacement bills, but the trade balance was nearly zero that year for the last time.



The current account balance was near zero due to all the help in financing the Gulf War. We were still importing by the boatload. The USA will not have a merchandise-trade-surplus anytime soon, the comparative price of labor here is way too high.

I agree with you 100% on that China can't buy that much gold.

The advantage we hold on China is that they are too tied to our economy for survival. It is as if they have a knife at our throat and we have a gun to their head, saying, "We do this together at the count of three. One, two......." but neither wants to get to three.
All animals are equal, but some are more equal than others
pacomartin
pacomartin
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May 1st, 2011 at 8:12:13 AM permalink
I am sorry, but that $5 trillion was based on $1000 per ounce. All the gold ever mined is probably worth $8 trillion, but over half of that is in jewelry.

Fort Knox has 4,578 metric tonnes, or roughly $230 billion in todays prices. Maybe if China agrees to give us $300b in our paper back to us, we should give it to them. They can make a big statue out of it and display it in Beijing. The statue of Liberty only weighs about 200 metric tons, and the gold is about 1/7 of the weight of the Washington Monument so they should be able to make something pretty cool out of the gold in Fort Knox. Maybe a giant panda bear. They can put it on display behind bullet proof glass and use it as propaganda explaining why they let their currency float on the world market.

It might not be worth it since such a high profile event might weaken trust in the American dollar.
Doc
Doc
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May 1st, 2011 at 9:01:24 AM permalink
Quote: AZDuffman

... The USA will not have a merchandise-trade-surplus anytime soon, the comparative price of labor here is way too high. ...


In a related thread almost a year ago, I made a post describing my opinion that it is very important for our economy to re-emphasize creation of wealth by producing actual products (products which have more intrinsic value than the resources consumed) rather than just exchanging wealth inefficiently by providing services. There was strong disagreement with my position, but I still hold to it. Some of the follow-up posts directly relate to the discussions in this thread.
AZDuffman
AZDuffman
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May 1st, 2011 at 9:47:58 AM permalink
Quote: Doc

In a related thread almost a year ago, I made a post describing my opinion that it is very important for our economy to re-emphasize creation of wealth by producing actual products (products which have more intrinsic value than the resources consumed) rather than just exchanging wealth inefficiently by providing services. There was strong disagreement with my position, but I still hold to it. Some of the follow-up posts directly relate to the discussions in this thread.



I'd like to see more things still made here, but it will not take us back to the 1950s where so many people worked in factrories. Look at steel for an example. In 2006 the USA produced more steel than at the peak of WWII. (according to my friends in the industry) But how many people work in steel? How many fewer people are needed in automobile assembly? The higher value products have been automated and the low-value ones cannot be produced at a price Americans are willing to pay.

We are sadly in an era where people want throwaway junk than the good stuff that requires care.
All animals are equal, but some are more equal than others

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