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Tuesday, 10 January 2023

Covid19 - USA is a basket case

 


https://www.worldometers.info/coronavirus/country/us/

 

 https://www.worldometers.info/coronavirus/country/china/


China has kept the Covid virus away from its people for 3 years with a stringent lockdown. The Chinese people could move around inside China free from the virus, like living in a cocoon. While the Americans were suffering from more than 100m infections, probably double that as the numbers are unreliable knowing congenital American liars, and more than 1m deaths, again could be higher, China only had a couple of hundred thousand infections and about 5,000 deaths.

The Americans were envious and angry that their mismanagement and quarrelsome domestic politics have turned them into an international basket case, a nation with the most infection and most deaths while the Chinese were saved from this pandemic. So they went all out to smear the Chinese lockdown as violation of human rights. According to American so called human rights, freedom to do as everyone pleases is more important than protecting lives. The Chinese human rights chose to protect and save the lives of their people. China thus was repeatedly attacked by the Americans and demanding that the lockdown be removed to let the Chinese people move around freely like the Americans and infecting everyone like the Americans. If China would to listen to the Americans, the infection in China could be more than 300m or 400m and death could be several millions.

China avoided this disaster. The Chinese people were saved.

After 3 years of mutation, the virus has reached a stage as scientifically expected, to be be less virulent and less deadly. It is gradually turning into the common flu. Infections could be high but no longer as deadly as the beginning. China now decided to loosen the control measures which should make the Americans happy as that was what they were demaning. But no, the Americans are angry again, politicising the issue by raising barriers of entry to basket USA. 

When the loosening was first announced, many countries announced that they would not increase monitoring measures as they know that this was unnecessary. When China opens up, the Chinese would be exposed and infected by all the virus mutations from the rest of the world, especially from basket case America. When the Chinese visit these countries, visit basket America, the worse would be bringing back the same virus that these countries spread to them, and the same virus that these countries are living with. No big deal. 

But the Americans spread another lie, that the Chinese would bring in new mutations. What a joke. And silly American cronies and stooge countries also parroted this new anti China narrative as expected. Within a couple of weeks, all the American cronies and stooges, those that found no need to add new measures to check on Chinese visitors changed their position, under the coercion of the Americans of course. They have yet to say that they were coerced by the Chinese like they used to say in the past. When the Americans were the ones that were twisting their arms to make them do the American bidding, they would turn around to accuse the Chinese for doing it. These are they typical response from American cronies and stooges.

So, the world's number one basket Covid country is raising barriers to keep the world's lowest infected country, China, to stop the Chinese to visit them. What a joke! And the best part, all the retail business of these countries, especially those that are hoping for the high spending Chinese to bring in the tourist dollars, would be kept hanging up dry. The same scenario is repeating like forbidding the oil hungry Europeans from buying cheap Russia oil and gas, forbidding American chip manufacturers from selling their chips to the biggest buyer, China, left them all hungry and broke.

China should please the Americans and their cronies and stooges by banning their people from visiting these silly countries and basket America. There are many friendly countries and interesting places to go to and spend their cash.

What else can be more silly than a basket country like America, pretending to be afraid of being infected by Chinese coming out from a clean cocoon, afraid to be infected by the Chinese when the whole Ameican population is already infected?

Keep living with your lies and delusion, basket case America. The Covid virus is in your blood, inside every American due to your freedom to travel, for the virus as well. 

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Hu Says: China opened its border on Sun, and the dynamic zero-COVID policy which protected the Chinese people for three years has passed into history. China will return to the world as an engine of global economic growth with new economic and political influence.

 

GT on the spot: Influx of Chinese visitors to drive global tourism ...

After China lifted most of its entry restrictions on Sunday, many Chinese people have rushed to make travel plans and ...

 

​In recent weeks, the Western media's coverage of China has been dominated by news of it refining its COVID-19 policies. Expectedly, it turned into a China-bashing carnival. Some said the country has lost its fight against the pandemic, others said it's a failure of China's political system, while boasting of the superiority of "democracy". How do we make sense of China's e

 

More overseas trips expected as downgraded COVID management comes into effect Chinese travelers are expected to make more overseas trips as the downgrading management of COVID-19 officially took effect on Sunday, when the inbound quarantine for international arrivals is canceled while outbound travel of Chinese citizens will also be resumed in an orderly 
 
 
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Interest and inflation rates, how high is high?

 

CLICK TO ENLARGE

AS we welcome 2023, one of the central themes this year will be how high will interest rates rise after the relentless pursuit taken by global central banks in fighting inflation with persistent and measured rate hikes in 2022.

As can be seen from Chart 1, from the 75 basis points (bps) hike by the Bank of Thailand to the 425 bps hike by the US Federal Reserve (Fed), the year 2022 has certainly been a busy year for central banks.

Central banks had no choice but to raise rates to fend off inflationary pressure that has been persistent throughout the year, although there have been some signs of easing lately.

Not to be left behind, even the Bank of Japan, while not lifting key benchmark rate, allowed its 10-year Japanese government bonds to move 50 bps from its 0% target, instead of 25 bps earlier.

It is a move that is seen recognising that inflation is finally biting the Japanese too.

CLICK TO ENLARGE 

CLICK TO ENLARGE

 Chart 2 shows that based on November 2022 statistics, the depositors are at the losing end as the 12-month deposit rate was 132 bps lower than the monthly inflation print of 4%.

Can inflation be tamed?

Reading inflationary pressures and forecasting where it is going is not an easy task especially when inflation prints itself is a combination of many factors and not just commodity prices and supply chain disruption that has been the core issues among central banks the past year. Although the global economic momentum has eased, global aggregate demand is still rising and much higher than it was before the pandemic.

Hence, there has been not only a persistent rise in consumer demand but one that is not matched by consistent supply provided in the marketplace, resulting in a hike in aggregate prices.

In theory, inflation is tamed by using monetary tightening measures as it is believed that by raising interest rates, consumers and businesses will be impacted by higher borrowing costs, resulting in lower consumption as well as a slower pace of investments, which in turn will reduce aggregate demand.

Nevertheless, rate hikes have also other consequential impacts on the economy in the form of a weaker or a stronger currency, depending on the relative increase in domestic rates vis-à-vis the comparative increase in other corresponding currencies.

For example, for the United States, the relentless increase by the Fed has caused a significant rally in the US Dollar Index, which rose to a high of US$114 (RM501) last year, up almost 20%, before easing to close the year at US$103 (RM454), down 9.3% from its peak, but still higher by more than 8%.

The surge in the dollar made US imports cheaper from the rest of the world, in particular those from China, even cheaper, which allows the US retail prices at the store to be relatively lower than they used to be before the rally in the dollar.

In essence, while the surge in US interest rates has reduced disposable income due to higher borrowing costs, which in turn lowered consumer demand, it has also caused imported end product prices to be relatively cheaper than before, allowing aggregate prices to be lower as well.

This suggests that US consumer products are in for a double-whammy in terms of prices as aggregate demand has been reduced due to lower disposable income and at the same time for products that are imported, prices too have eased due to the strength of the greenback.

For an economist, this is good news as the intended outcome will likely be achieved in taming inflationary pressure due to persistent hikes in interest rates. A look at inflation prints from the peaks in 2022, both the core Consumer Price Index (CPI) and the Personal Consumption Expenditures index (PCE) have eased, falling by 67 bps and 62 bps from the highs and were last seen at 6% and 4.7% respectively.

Are we there yet?

After a 425 bps hike, the Fed’s message in the minutes of the Federal Open Market Committee (FOMC) released this week was an important one as it guided the market to expect higher rates going into 2023 but at the same time also signalled that the war against inflation is far from over and the Fed will continue to raise rates until it can achieve its targeted inflation print.

Compared with its September forecast of 4.6%, the Fed has now raised its median Fed Fund Rate (FFR) for 2023 to 5.1%, an increase of 50 bps while at the same time, the Fed also expects median FFR to drop by 100 bps each in 2024 and 2025 to 4.1% and 3.1% from earlier projected rate of 3.9% and 2.9% respectively.

Core PCE inflation, which is the Fed’s benchmark rate for inflationary pressure, is now expected to hit a median rate of 4.8% in 2022 before easing to 3.5% and 2.5% in 2023 and 2024 respectively.

By all means, the Fed is forecasting that inflation will be tamed in time to come. Hence, in all likelihood, we have seen the peak in inflationary pressure but perhaps we will be in for a higher US rate for longer before we see the Fed’s pivot.

Contrary to market expectations, the FOMC minutes this week revealed that the Fed is not expected to cut rates in 2023.

As for the market, based on Fed Fund Futures the Fed is expected to raise the FFR by 25 bps each over the next three meetings to reach 5.00% and 5.25%, followed by two rate cuts of 25 bps each in the second half of 2023, bringing the FFR back to 4.5% and 4.75% at the end of 2023.

Bank Negara to stand pat?

Compared to many central banks in the region or globally, Bank Negara move to raise the benchmark Overnight Policy Rate (OPR) by 100 bps last year is seen as rather muted.

Based on the year-to-date core CPI of 2.9% up to November 2022, the inflationary pressure experienced by Malaysia remained within Bank Negara’s forecast of between 2% and 3% for the year and going into 2023, core inflation prints will remain elevated at the beginning of the year but may ease later on, especially with the current government’s efforts in reducing the cost of living.

Given that scenario and the likelihood that the Fed and other regional central banks too are almost done raising rates, Bank Negara may stand pat and leave the OPR unchanged for 2023 at 2.75%. After all, a higher rate of between 25 bps to 50 bps as predicted by many broking firms will only result in higher borrowing costs for consumers and businesses, a move that will likely accelerate the pace of economic slowdown in 2023. By leaving the OPR unchanged, Bank Negara is signalling that it is done with raising rates and the current rate remains commodative and supportive of economic growth.

Positive real returns?

One of the arguments for higher interest rates is whether depositors are getting positive real returns, which is the difference between fixed deposit rates and inflation prints.

Chart 2 shows that based on November 2022 statistics, the depositors are at the losing end as the 12-month deposit rate was 132 bps lower than the monthly inflation print of 4%.

However, interestingly, as the market is anticipating rate hikes of 25 bps in the January 2023 Monetary Policy Committee meeting and another hike in March 2023, 12-month fixed deposit rates of many banks have passed the 3% mark and depositors could even easily enjoy rates up to 4% as promotional activities to attract fresh deposits have intensified over the past month. With that, depositors are already getting returns close to the headline monthly inflation prints.

In conclusion, while it makes sense for Bank Negara to stand pat and not raise rates in its first two meetings this year as widely expected, the market has already priced in the scenario that the central bank is ready to raise rates by 50 bps to take the benchmark OPR to 3.25%, the level last seen in March 2019, almost four years ago.

Pankaj C Kumar   Pankaj C. Kumar is a long-time investment analyst. The views expressed here are the writer’s own.

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