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https://twitter.com/adam_tooze/status/1312729933853208576

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Trinh

@Trinhnomics

Oct 14

Here is a short thread on why China fiscal policy, specifically central government support, is sorely needed & monetary support so far is not enough.

First, China got triple D problems - deflation, debt, demographic. All going badly.

Regarding deflation, it reflects an imbalanced economy where supply-side support for a long time has led to too much supply relative to demand domestically.

The easiest way to see it? China's producer price index. It's -2.8%YoY for September 2024. Meaning, producers get less money for the same stuff they make vs last year.

Okay, how is this bad? Margin compression. Your revenue is lower if you are a producer. Or DECLINING INDUSTRIAL PROFITS.

The positive side of this equation is that as they produce so much stuff that is not in demand and prices are cheap, then they can sell ABROAD (exports) for much cheaper than the competition.

A cheaper yuan (meaning depreciated) also helped. All those reasons led to China gaining global market share in manufactured goods to the chagrin of big traders like the EU, South Korea, Japan, and even the not big trader like India that has a about USD100bn of deficit w/ China.

Okay, so it's a bright spot as it gets more income than it spends (imports) so it has a trade surplus.

But that is also a source of geopolitical tensions as other countries are not happy w/ their firms going out of business as they can't compete w/ Chinese goods that are literally deflated.

So tariffs are going up, started by Trump in 2018 but frankly increasingly the EU and likely more and more...

Read 12 tweets

Trinh

@Trinhnomics

Oct 4

Great story about India rice policy. What I find interesting about this is of course the agriculture gets the most subsidy in the budget & one can say that India gives so much more to farmers and the sector than any sector by a wide margin.

That is a distortion that favors them as they are a powerful vote bank. But at the same time, the government also banned the exporting of rice when rice surged and that meant farmers couldn't make more money.

What India does with farming is very interesting. As it is a country with food surplus and the budget gives most weight to farming while most farmers remain very poor and more than 75% work for sub minimum wage.

India's central government expenditure budget. Rural development + agriculture gets so much.

There is a lot of talk about production linked incentives but it really just got 1.5bn in FY25. So that means this budget is just mostly agrarian.

Meanwhile, farmers were blocked from exporting rice, causing rice to rot. This is a policy to prevent rice price from rising, causing CPI to spike.

This is a sector worth paying attention to as most Indians live in rural areas & they matter even if farming is only 16% of GDP.

One of the reasons India deal with w/ the energy and thus the food crisis is that it is a country that has a SURPLUS in food. As in they EXPORT food.

So to make sure domestic prices & supply stay ample during GLOBAL SHORTAGES due to shocks, India curbed food exports from wheat to rice and sugar.

Meaning, India exported less & so the Philippines saw a huge increase in rice price imported (btw, good for Vietnam & Thailand obvs).

Modi reversed his non-basmati white rice introduced in July 2023 but still have export duty on parboiled rice and minimum price imposed on shipments abroad of the white variety of grain.

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Trinh

@Trinhnomics

Sep 4

The best research on India is written by the @RBI and it's called the RBI Bulletin (very similar to BOE bulletin) & it's amazing. Go to the state of the economy for charts/details on what's going on in India & then they always have essays on specific issues.

Central banks are consistently the best place to get information on a particular country. I also like the RBA website as well. Enjoy!

We can read some of these together in case you find it intimidating reading central bank language.

rbidocs.rbi.org.in/rdocs/Bulletin…

Some charts of interest from my reading.

India annual installed capacity of solar + wind + other renewables > coal, oil and gas since 2017.

India merchandise export contribution:

Positives = Electronic goods + engineering goods + pharma

Bad = petroleum, jewels/gems, rice & ceramics

Read 7 tweets

Trinh

@Trinhnomics

Sep 3

Germany is in structural decline & the path for that was waved by Angela Merkel who:
a) Allowed for mass irregular migration since 2015 that paved ways for Brexit, the far right rise in Germany and Europe
b) Appeasing Russia after its annexation of Crimea and expansion dependency on Russian gas
c) Phasing out nuclear energy.

As a result, Germany today deals with HIGHER input costs (energy is obvs) & also the political fallout of irregular migration.

Sholz of course is a worse politician than Angela Merkel but the path of its demise is paved by her.

The fact that China has pursued:
a) Expansion of coal, solar, wind, and nuclear to REDUCE INPUT COSTS
b) Subsidies in high-tech
c) Allowed for it to be competitive despite higher tariffs in Europe.

Meanwhile, Sholz asleep at the wheels. This is his reaciton: “Our country cannot and must not get used to this,” he went on. “The AfD is damaging Germany. It is weakening the economy, dividing society and ruining the country’s reputation.”

Germany doesn't understand that it cannot pursue its current path of extreme liberalism that worsens its competitiveness and destabilize its own society & expect to do well to lead Europe out of this mess.

Extreme liberalism can only exist in a vacuum or hypothesized world.

We exist in a world of limited resources. Countries like China are just better organized. Believe it or not. Sholz has no clue & will lose in 2025 but before he is gone he is still around to make a big mess.

Continuing to close the last 3 nuclear plants was a disaster.

Read 8 tweets

Trinh

@Trinhnomics

Aug 22

Statistics versus anecdotes. What do you believe? Well, if you study a Stat 101, the first thing they teach you is HOW the data is compiled & then you learn HOW to read it.

Fact: People feel that crimes are up because they know someone who is personally attacked or themselves;

Also fact: Crime stats show that crimes are down.

Can both be true? Yes, because crime stats can be manipulated by the source of crime but not including crime.

sfchronicle.com/crime/article/…

Are the Democrats the party of crime and punishment? Or are they the party of having low crime by REDEFINING what a crime is? Or even counting and prosecuting it?

The reality is that it is hard to know if the statistics are misleading because the beauty of statistics is to be impartial & to be able to aggregate and quantify your perceived reality, which is MICRO, and stats are supposed to help with MACRO & relative past/present/future.

Another example is of course the employment data that is just released by the BLS that revised downward jobs addition by almost a million jobs.

That's a lot. So you were right to think things were weaker than you thought. But you were also right to say that the labor market was strong, until they revise it downward for jobs that are interest rate sensitive.

Meaning, high real rates do impact the US.

Read 9 tweets

Trinh

@Trinhnomics

Aug 20

Pig Butchering Scam. Do you know what it is? I didn't until this Bloomberg Feature Story. USD75bn has been stolen from victims around the world & routed through crypto exchanges.

Before I go on about the story, I want to talk about this idea of Pig Butchering Scam. Basically, it works like this, usually via crypto.

You befriend a victim via social media & gain their trust & get them to invest in crypto & allow them to get "fat" or gain & finally "butcher" them by taking a larger sum and disappear.

bloomberg.com/features/2024-…

Scams are an industry. According to this Bloomberg story, there's an entire economic zone dedicated to it with an airport, casinos, resorts, basically soft & hard infrastructure.

A man called Zhao built it & gives the Laos government a 20% cut for a 99-year lease. He then leases out the infra to criminals that run online scams & also drug trafficking.

There's an entire supply chain w/ incentives, including the perpetrators, who are also victims of human trafficking.

bloomberg.com/features/2024-…

Criminals traffic scammers by offering them lucrative jobs but ended up having them being forced to work as scammers.

If they don't succeed in their targets, they get punished so high incentive to scam victims, who are usually in the US, China, etc.

There are an estimate 200,000 scammers in areas such as this who are themselves victims of human trafficking.

Read 8 tweets

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