Tags: ashish | advani | Asia | US

While Asia Flourishes, US in Danger of Withering

By    |   Wednesday, 03 November 2010 09:12 AM

Election Day is finally over…

From the slew of candidates available, I am not excited about who will get to govern. I am disappointed at the choices available. What I am happy about is that this is the end of negative ads on TV. It is disheartening to watch fellow citizens tear apart each other in public.

However, democracy is a very valuable asset. It is important at our core of existence, and we should stand guard to not let it slip away.

Democracy comes at a price: the back and forth, the bickering, the gridlocks in Congress, etc. However, the alternative is much worse. Not having the right to live a free and dignified life is simply unacceptable.

The price of democracy, this time, hurts more than normal.

While America is stuck in a rut with high unemployment, slow growth, inflation (not the way the Federal Reserve counts it) and general fear and uncertainty about the future, we are observing runaway growth in Asia. We are seeing the Asian economies charging ahead. And all of this is at the cost of the American economy and the U.S. workers.

Let’s see what has occurred in the past week across Asia: Australia and India raised their internal interest rates, again. This time, both these central banks surprised the world, which had expected them to hold steady.

The consequence: Australian dollars have hit parity and are holding ground. India's rupee is gaining ground and the Reserve Bank of India is holding its yearly growth forecast at 8.5 percent with an upside bias.

Staying in India, October Manufacturer’s PMI (equivalent to our producer price index) has rebound to 57.2 versus 55.1 from last month. All major components within the number have moved upward, indicating growth.

Trade deficits have narrowed for the month of September. The deficit narrowed to $9 billion from $13 billion, which is a great improvement.

And with an excellent monsoon season having just ended, we will see a surge in Indian agriculture. So I may even guess that if growth remains strong, we could see a trade surplus in India soon.

Moving to Korea, October exports have strongly rebounded to 30 percent year-over-year growth. And the trade surplus has hit a record high of $7 billion. The exports growth was balanced well between exports to the developed G-7 nations and the Asian and developing countries. So Korea is making great inroads into global trade.

In China, the October PMI rose to 54.7 percent, compared to 53.8 percent in September and 52.9 percent in August. Growth is continuing to surge in China as we have been noticing for the past few months.

Jumping to Indonesia, while we have not seen the official growth numbers yet, the good news is that the inflation measure of CPI for October rose to 5.67 percent.

While we here in the U.S. are seeing benign inflation and almost desire and seek inflation, for Asia in general, and Indonesia in particular, this reading is very healthy.

While India struggles with inflation at around 10 percent, having 5 percent to 6 percent inflation actually works well for the Asian countries. So I give credit for the management of inflation there.

Another worrisome factor for the U.S. dollar is the rapid growth of the renminbi (the official name for the Chinese yuan) based deposits in Hong Kong.

Since the Chinese government have allowed renminbi-based deposits a few months ago, we have seen a surge of international deposits here and it is now more than 5 percent of the total Hong Kong deposits.

This is phenomenal growth for a new means of storing cash. So watch that area for some dramatic moves in the coming months and years.

There is possible Hong Kong dollar de-pegging from the U.S. dollar as a trial balloon for the eventual renminbi de-pegging, or the development of a massive Chinese debt market, which can threaten the U.S. Treasury investments from China.

So there is a lot going on in Asia. And all of this while the U.S. stagnates and wonders who should lead us next and possibly gridlock and lame duck governments for the next two years.

This could not have come at the worst time for us.

Fortunately you, my dear readers, are the enlightened ones who are taking the necessary steps to diversify outside the United States and make wise investments overseas to participate in this phenomenal, once in a life time opportunity.

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Election Day is finally over… From the slew of candidates available, I am not excited about who will get to govern. I am disappointed at the choices available. What I am happy about is that this is the end of negative ads on TV. It is disheartening to watch fellow...
Wednesday, 03 November 2010 09:12 AM
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