FE502 – 1001

Chimerica

The End of Chimerica – Naiall Ferguson, Moritz Schularick

Chimerica:

• Past

  • economical order

    • China export led
    • US over-consumption

  • Attractions

    • China - proper economy forward by means of export-led growth

    • America :

      • consume more
      • save less
      • maintain low interest rates
      • stable rate of interest

  • Benefits

    • China:

      • quadruple its GDP since 2000
      • raise export by a factor of five
      • import western technology
      • Create millions of manufacturing jobs for the rural poor.

    • America:

      • Decrease in percentage of spending total income for purchase of goods. ( chinepe products are cheap)

  • Economic Size of Chimerica:

    • 13% world land surface
    • 1/4 of world population
    • 1/3 of world gross domestic product
    • 2/5 of global economic growth (in past 10 yrs)

• Crises:

  • reduction of the imbalance between spender (US) and saver (China).

Inflation

inflation ～ purchasing power of the money。

Money :

1. Commodity as Money (Gold as an example)

   • Money itself has the value.

     • People want gold, to use it in decorating, electronics, and so on.

       • This creates a demand for gold.

     • Gold is not a naturally occurring element on earth. This means that every ounce of gold came from meteorites and asteroids crashing into earth and embedding the metal in the earth’s crust. Because of this, the amount of gold on earth is finite.

   • Durable and Fungible

2. Fiat as Money ($ as an example )

   1. Tinkerbell effect

   2. There isn't a naturally occurring intrinsic demand for it.

   3. But there is and artificially occurring demand for it.

   4. Currently, all the Oil trade globally is payed with $

   5. If you owe something to US (ex. Tax? Debt?) you need to pay $

   6. If buy (import) anything from US, you will pay $

   7. You always need some way to get $ from somewhere.

      • This creates a demand for $.

   8. Also durable and fungible

      • Except that goverment completly collapses….

Tinkerbell effect

Bitcoin is more valuable ( other coins also) when more people trusts or believes that Bitcoin is valuable. (It is not has it;s value because it is really such valube in work)

CPI

Consumer price index.

A consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time. — Wikipedia

Inflation is an increase in the level of prices of the goods and services that households buy. It is measured as the rate of change of those prices. Typically, prices rise over time, but prices can also fall (a situation called deflation).

The most well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households. [1]

Interest Rate

Video Version from Napkin Finance: https://youtu.be/Xxp41Ufjk2Y

Interest rates vs inflation:

Inflation and interest rates tend to move in the same direction because interest rates are the primary tool used by the Federal Reserve, the U.S. central bank, to manage inflation. [2]

Global imbalance

[Video] Analyze This! Global Imbalances

Current Account Deficit —

• Buy more than sell (US)
• Most borrow

Current Account Surplus —

• Sell more than buy (China)
• Lend to Deficit (Able to lend)

Pandemic, War, and Global Imbalances

Current account balance, percent of GDP

Quantitative Easing

Simply means using printed fake money to get real assets.

Economic explainer: What is Quantitative Easing?

VIX

Cboe Vix Index Official Website

VIX index ~ fear gauge

VIX index indicates the defree or expected level of uncertainty in the marketplace. Typically it is 30 days measure of S&P 500.

• Forward looking
• inverse relationship to the s&p500

The price in the future 30 days later?

CCI

Consumer Confidence Index.

Investopedia Video: Consumer Confidence Index

CCI up, people wants to spend more.

Globolization

Why will future globalisation be so different, Richard Baldwin, TEDxLausanne

• Countires are specially good at some thing and bad at another thing.
• Services are harder to cross borders than goods
• Tele-migrations is becoming popular

Semi-conductor index

The PHLX Semiconductor Sector (SOX) is a Philadelphia Stock Exchange capitalization-weighted index composed of the 30 largest U.S. companies primarily involved in the design, distribution, manufacture, and sale of semiconductors.[3]