Canadians say “Hard Landing”

[mydogsarelazy]

Hello Everyone,

Here is what some Canadian Economists are saying about the US Housing situation:

http://www.theglobeandmail.com/servlet/story/RTGAM.20060817.whousing0817/BNStory/Business/home

JS

[lindismith]

Thanks for this Mydogs. Just goes to show you how everyone is somewhat dependent on the US economy. When we slow down, everyone will slow down. Our closest neighbors, and biggest volumne traders will feel it most – Canada, Mexico, China, Europe. And then their neighbors and traders will feel it. And so on, and so on.

I can’t always keep up with all the financial advice and exchange of financial ideas on this board, so forgive me if this has already been discussed on some other thread, but if foreigners knew how much debt American consumers have, and how big the RE bubble really was, wouldn’t they be pulling their money out in droves? What about our deficit? Don’t they think that’s worrisome? Do they not have an inkling of our situation? Or do they? If so, how is this manifesting?

Can someone tell me why they are still investing in us?

[powayseller]

They are investing in us because they are co-dependent. I think Germany, like China, has more exports than imports. Why would they stop selling to their biggest customer? The only one creating a problem by selling to us, as far as I know, is China. They are making their dependency worse, because they have pegged the renminbi (the name for the currency; yuan is the name of the coins and bills themselves) to the dollar.

It goes like this. China Toys gets $25mil for selling us games and stuffed animals, and takes it to the bank in China to get yuan. The bank does not want to exchange the dollars into yuan, because that would make their currency appreciate. So they print the $25 mil worth of yen, and give that to China Toys. Then the $25 mil they got from China Toys is invested in MBS, Treasury bills, etc. So the more they export, the more their economy overheats, because they are printing so much money. This is why economists say the only way that China can slow its quick growth is by letting its currency float.

What China really needs to do, is turn its citizens into consumers.

Some Chinese economists and politicians have made statements about diversifying out of dollars, and buying euros and gold.

I also wonder about their thinking, and why they would continue buying more and more Treasuries. Now they have so many Treasuries, although Japan has twice as much as China, that selling them would lower the dollar’s value enough to hurt China’s holdings. So they would need to sell them gradually. How long will they keep funding our deficit?

Roubini and Brad Setser (RGE Economics) write almost daily in their blogs about China. Roubini expects China to make a sudden 5% change in the yen. Sudden, so the markets can’t exploit an expected appreciation with currency trading. He also explains why the rest of the world will “catch a cold when the US sneezes”, i.e. a global recession is in the pipeline.

[powayseller]

In the comments for the article, a Canadian who sold a Georgia home, noted that in his visits to the southern US, he noticed 80% of the workers are migrant workers. Thus, a slowdown in construction employment wouldn’t show up in the numbers.

Actually, they would show up in the household survey, but not in the offical unemployment report.

Is it true that so many construction workers are migrant, i.e. illegal aliens from Mexico?

[Anonymous]

Thanks for link. Interesting. I’ve placed it on Housing Doom. What with SPP and Michael Ignatief of all people about to become our next prime minister we’ll likely be even closer to the US over the next decade.

[Bugs]

My brother in law is a construction superintendent for a residential project down in Spring Valley. He’s been saying for years that Spanish is more necessary on those jobsites than English.

[PerryChase]

Bugs, is your brother telling you that workers are legal or illegal?

[Author]

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