Calling all Economists

[JS80]

What are the effects on the US economy in the case of a Chinese recession (if any)?

I have been debating with my friend that there is a positive effect on the US economy - he says otherwise and put money where his mouth is and purchased a sizable position September 41 QQQQ puts.

him: you're making it sound like a bad bet... and i completely disagree with you on falling chinese economy has no effect on the us. i think you hold a minority view on that one

me: enlighten me how a falling chinese economy has any bearing on the US economy?
Chinese economy stalls, less energy demanded, oil price falls => good for US
Chinese economy stalls, less commodities demanded, commodity price falls => good for US
No effect on Chinese goods from US due to USD peg
What am I missing macro-wise?

 

[maddogchen]

macro..micro...whatever.

Chinese economy stalls, they stop buying GM cars, knife through GM's heart...US economy affected.

 

[JS80]

Originally posted by: maddogchen
macro..micro...whatever.

Chinese economy stalls, they stop buying GM cars, knife through GM's heart...US economy affected.

lol...GM Chinese revenue is what? $2/year?

 

[tfinch2]

Originally posted by: JS80

Originally posted by: maddogchen
macro..micro...whatever.

Chinese economy stalls, they stop buying GM cars, knife through GM's heart...US economy affected.

lol...GM Chinese revenue is what? $2/year?

For some GM brands, they sell more in China than in the US. Buick is an example.

 

[JS80]

Originally posted by: tfinch2

Originally posted by: JS80

Originally posted by: maddogchen
macro..micro...whatever.

Chinese economy stalls, they stop buying GM cars, knife through GM's heart...US economy affected.

lol...GM Chinese revenue is what? $2/year?

For some GM brands, they sell more in China than in the US. Buick is an example.

my point was total revenue-wise vs $12 trillion US economy it's trivial

 

[dirtboy]

How about... China will stop buying mass amounts of US currency which thus means interest rates rise that are artificially low right now. Rising rates lead to a recession, which will lead to a downward cycle in the stock market and the further collapse of the real estate market that is hanging on right now by a thread. A decrease in spending during the recession will cause employers to reduce spending, freeze hiring and increase layoffs. All which will cause the stock market to further decline and your roommate to profit.

It's not a clear thought, but you can get my point if you try.

 

[D1gger]

Balance of trade with China vs the US

US imports from China $287billion
US exports to China $55billion

I believe there will be a psychological effect as many people and business leaders see the growing Chinese market as a tremendous opportunity for growth. If the Chinese market doesn't grow as predicted, some US companies business strategies may not be worth a pinch of crap.

 

[gsellis]

If it relates to today, I suspect that this is just a market correction fueled by Wall St. style idiots. China's new market was mostlikely over bid. Kind of like Google stock because it was 'hot'.

 

[UncleWai]

You forgot one thing. US themselves are not doing so hot these days.

 

[JS80]

Originally posted by: dirtboy
How about... China will stop buying mass amounts of US currency which thus means interest rates rise that are artificially low right now. Rising rates lead to a recession, which will lead to a downward cycle in the stock market and the further collapse of the real estate market that is hanging on right now by a thread. A decrease in spending during the recession will cause employers to reduce spending, freeze hiring and increase layoffs. All which will cause the stock market to further decline and your roommate to profit.

It's not a clear thought, but you can get my point if you try.

China buys US currency? I think you mean US Treasuries. If we keep constant our imports of Chinese goods and send them US dollars, aren't they going to purchase US Treasuries or US goods? After all US dollars are only good in the US.

 

[simms]

Originally posted by: JS80

Originally posted by: dirtboy
How about... China will stop buying mass amounts of US currency which thus means interest rates rise that are artificially low right now. Rising rates lead to a recession, which will lead to a downward cycle in the stock market and the further collapse of the real estate market that is hanging on right now by a thread. A decrease in spending during the recession will cause employers to reduce spending, freeze hiring and increase layoffs. All which will cause the stock market to further decline and your roommate to profit.

It's not a clear thought, but you can get my point if you try.

China buys US currency? I think you mean US Treasuries. If we keep constant our imports of Chinese goods and send them US dollars, aren't they going to purchase US Treasuries or US goods? After all US dollars are only good in the US.

😕

 

[Queasy]

Originally posted by: UncleWai
You forgot one thing. US themselves are not doing so hot these days.

US is doing quite well actually. Growth has been at a steady 3-4% for several quarters now. Unemployment is at historic lows. Not all is rosy with looming Baby Boomer retirements and troubles with the car industry but the economy is growing well overall.

I think the biggest hurt for US companies with China is can they continue to grow if the Chinese market goes into recession and pulls the rest of Asia down with it. There are a lot of companies banking on a growing Asian market (mine being one of them) for their products and services.

 

[iversonyin]

Remember the Asian Currency Crisis in '98? Top that off with LTCM blow up. And we had the best year in our stock market following that.

 

[preslove]

Originally posted by: Queasy

Originally posted by: UncleWai
You forgot one thing. US themselves are not doing so hot these days.

US is doing quite well actually. Growth has been at a steady 3-4% for several quarters now. Unemployment is at historic lows. Not all is rosy with looming Baby Boomer retirements and troubles with the car industry but the economy is growing well overall.

I think the biggest hurt for US companies with China is can they continue to grow if the Chinese market goes into recession and pulls the rest of Asia down with it. There are a lot of companies banking on a growing Asian market (mine being one of them) for their products and services.

Good point. Does anyone have stats on the growth of US exports to china and/or the rest of asia over the last few years?

Edit: I guess, if a lot of us companies have been focusing on selling products and services to China & if investors bid up their stocks because of this move to expand into the growing chinese market, then china bottoming out could have a more significant impact on us than expected. *shrug* who knows.

 

[JS80]

Originally posted by: simms

Originally posted by: JS80

Originally posted by: dirtboy
How about... China will stop buying mass amounts of US currency which thus means interest rates rise that are artificially low right now. Rising rates lead to a recession, which will lead to a downward cycle in the stock market and the further collapse of the real estate market that is hanging on right now by a thread. A decrease in spending during the recession will cause employers to reduce spending, freeze hiring and increase layoffs. All which will cause the stock market to further decline and your roommate to profit.

It's not a clear thought, but you can get my point if you try.

China buys US currency? I think you mean US Treasuries. If we keep constant our imports of Chinese goods and send them US dollars, aren't they going to purchase US Treasuries or US goods? After all US dollars are only good in the US.

😕

They accept US dollars in France?

 

[QurazyQuisp]

Originally posted by: JS80

Originally posted by: simms

Originally posted by: JS80

Originally posted by: dirtboy
How about... China will stop buying mass amounts of US currency which thus means interest rates rise that are artificially low right now. Rising rates lead to a recession, which will lead to a downward cycle in the stock market and the further collapse of the real estate market that is hanging on right now by a thread. A decrease in spending during the recession will cause employers to reduce spending, freeze hiring and increase layoffs. All which will cause the stock market to further decline and your roommate to profit.

It's not a clear thought, but you can get my point if you try.

China buys US currency? I think you mean US Treasuries. If we keep constant our imports of Chinese goods and send them US dollars, aren't they going to purchase US Treasuries or US goods? After all US dollars are only good in the US.

😕

They accept US dollars in France?

The US dollar is highly regarded as the world wide currency of choice. There are several countries (especially in central america) that use US dollars because of the high variability of their local currency's worth.

On top of that, many country to country trades are made in US dollars.

 

[JS80]

Originally posted by: QurazyQuisp

Originally posted by: JS80

Originally posted by: simms

Originally posted by: JS80

Originally posted by: dirtboy
How about... China will stop buying mass amounts of US currency which thus means interest rates rise that are artificially low right now. Rising rates lead to a recession, which will lead to a downward cycle in the stock market and the further collapse of the real estate market that is hanging on right now by a thread. A decrease in spending during the recession will cause employers to reduce spending, freeze hiring and increase layoffs. All which will cause the stock market to further decline and your roommate to profit.

It's not a clear thought, but you can get my point if you try.

China buys US currency? I think you mean US Treasuries. If we keep constant our imports of Chinese goods and send them US dollars, aren't they going to purchase US Treasuries or US goods? After all US dollars are only good in the US.

😕

They accept US dollars in France?

The US dollar is highly regarded as the world wide currency of choice. There are several countries (especially in central america) that use US dollars because of the high variability of their local currency's worth.

On top of that, many country to country trades are made in US dollars.

:roll:

 

[shortspanishguy]

Originally posted by: JS80

Originally posted by: QurazyQuisp

Originally posted by: JS80

Originally posted by: simms

Originally posted by: JS80

Originally posted by: dirtboy
How about... China will stop buying mass amounts of US currency which thus means interest rates rise that are artificially low right now. Rising rates lead to a recession, which will lead to a downward cycle in the stock market and the further collapse of the real estate market that is hanging on right now by a thread. A decrease in spending during the recession will cause employers to reduce spending, freeze hiring and increase layoffs. All which will cause the stock market to further decline and your roommate to profit.

It's not a clear thought, but you can get my point if you try.

China buys US currency? I think you mean US Treasuries. If we keep constant our imports of Chinese goods and send them US dollars, aren't they going to purchase US Treasuries or US goods? After all US dollars are only good in the US.

😕

They accept US dollars in France?

The US dollar is highly regarded as the world wide currency of choice. There are several countries (especially in central america) that use US dollars because of the high variability of their local currency's worth.

On top of that, many country to country trades are made in US dollars.

:roll:

Ecuador uses the dollar exclusively. Am I missing something here?

 

[JS80]

Originally posted by: shortspanishguy

Originally posted by: JS80

Originally posted by: QurazyQuisp

Originally posted by: JS80

Originally posted by: simms

Originally posted by: JS80

Originally posted by: dirtboy
How about... China will stop buying mass amounts of US currency which thus means interest rates rise that are artificially low right now. Rising rates lead to a recession, which will lead to a downward cycle in the stock market and the further collapse of the real estate market that is hanging on right now by a thread. A decrease in spending during the recession will cause employers to reduce spending, freeze hiring and increase layoffs. All which will cause the stock market to further decline and your roommate to profit.

It's not a clear thought, but you can get my point if you try.

China buys US currency? I think you mean US Treasuries. If we keep constant our imports of Chinese goods and send them US dollars, aren't they going to purchase US Treasuries or US goods? After all US dollars are only good in the US.

😕

They accept US dollars in France?

The US dollar is highly regarded as the world wide currency of choice. There are several countries (especially in central america) that use US dollars because of the high variability of their local currency's worth.

On top of that, many country to country trades are made in US dollars.

:roll:

Ecuador uses the dollar exclusively. Am I missing something here?

Countries like these are outliers that use the USD because their own currency does not function and have no effect on the global markets. He clearly does not understand global trade theory and is missing the whole point.

 

[DaWhim]

economics is called dismal science for a reason.

keep on arguing.

 

[JS80]

Originally posted by: DaWhim
economics is called dismal science for a reason.

keep on arguing.

there is a "right" answer dam yu!

 

[hdeck]

like anything with economics, there will be positive and negative effects, and the end net value can't be precisely determined until such an event actual occurred, and we could see the real world repercussions.

you shouldn't, however, completely negate the hundreds of billions in exports the us would lose if the chinese economy went into recession.

 

[gsellis]

Originally posted by: UncleWai
You forgot one thing. US themselves are not doing so hot these days.

Quit listening to the journalism majors. They were not good enough to major in psych like the rest of the folks at McDonalds.

 

[bobdelt]

Originally posted by: gsellis
If it relates to today, I suspect that this is just a market correction fueled by Wall St. style idiots. China's new market was mostlikely over bid. Kind of like Google stock because it was 'hot'.

Google stock is not over bid. Please explain without using the nominal price of the share, but market cap instead.

 

[bobdelt]

Originally posted by: UncleWai
You forgot one thing. US themselves are not doing so hot these days.

What? Explain! The US is doing quite well actually.