Tale of Two Countries
Tale of Two Countries
Green shoots of a Manufacturing Recovery & other Musings
The US and China are exhibiting green shoots of a manufacturing recovery. But the US isn’t particularly happy with how China is growing its manufacturing capacity, so this week they sent their most powerful weapon to China: the one and only Tamagotchi Yellen…
Biden to Xi: “I just called … to say … I swap you!!!”
In preparation for Yellen’s visit, Biden and Xi held a call together. Since I couldn’t eavesdrop in that conversation, I made one up:
Biden: “Hey Xi”
Xi: “Hey Joe … where you goin’ with that gun in your hand … I kid bro I kid … I just love Hendrix. What’s up?”
Biden: “You have a problem. While I have the BEST performing STOCK market, you have the WORST performing Stock market. Since Covid, the S&P is +58% whereas the HSI is -41%!”
Xi: “Stop reminding me that my Stock Market sucks. What’s your point?”
Biden: “Well, I have a problem too. I have the WORST performing BOND market and you have the BEST performing BOND market. Since 2021, the Chinese 30-year bond is +20% whereas the US 30-year bond is down 35%!!”
Xi: “Well Joe, that Tamagotchi Yellen of yours is on the loose, printing $5 billion of paper a day. What did you expect?”
Biden: “So here’s the thing. Your equity market sucks. My bond market sucks. You need buyers for your VIE ADR structures, I need buyers for my US Treasuries. Why don’t we swap some of each?”
Xi: “Hey Joe … that’s not a bad idea. I buy some of your paper, you buy some of my paper. It’s all paper anyway! You Americans are so innovative!”
<hangs up>
This is obviously a completely made-up conversation, but one that should probably take place because it solves a major problem of supply and demand for 2 Major Asset Classes:
US DEBT: Who will buy $2 TRILLION of US Treasuries PER YEAR when we know there is no end in sight for this Fiscal Insanity?
CHINA PAPER: Who will buy Chinese paper assets when China helps Russia and Xi has Taiwan on his sights, creating a Fear of Getting Gazpromed (FOGG™) for Investors?
Anyway. The real reason Yellen is visiting China is to a) flag concerns about industrial overcapacity in China fuelled by government subsidies, b) eat some more mushrooms.
There is something interesting going on here, with these 2 Super-Powers experiencing a manufacturing recovery: