What Google's Move Means for Metals Markets, Trade and Currency Manipulation

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I have to admit that I haven’t read one article on this whole Google showdown in China. I’m assuming we all agree it’s a showdown of sorts. But an article with a headline like this one “Why America and China Will Clash, just grabbed my attention. Whether one buys steel or aluminum, a zinc die-casting or a finished part from China, the relationship between the two countries forms the backbone of many of our posts (not to mention many of your businesses) and some of our behind-the-scenes research. You may have noticed I haven’t penned too many metals-only pieces these past few days, (with the exception of a molybdenum article I wrote last week). That’s because we have been spending our days writing our market forecasts and price predictions for the various metals many of you buy.

We look at dozens of reports, attend conferences, speak to contacts, conduct primary research, survey buying organizations, run spreadsheet models etc- all in an attempt to get our arms around metals markets and the myriad road signs for the metals covered on MetalMiner. And in nearly all of our research, we attempted to assess the Chinese economy analytically looking at risk, growth scenarios, projections, macro economic indicators etc. But this Google story suggested a far riskier scenario, one in which few if any of us have likely considered. In the Financial Times article, the author, Gideon Rachman suggests, “that the assumptions on which US policy to China have been based since the Tiananmen massacre of 1989 could be plain wrong.

The author goes on to suggest that the case against China will likely be made by labor activists, security hawks and politicians. But we see it also coming from various business sectors. The article goes on to suggest that President Obama may toughen up its China stance with, “an official decision to label China a “currency manipulator. Increasingly we have written about the case against China in the area of exchange rate setting. But make no mistake about it. The United States is caught in a classic Catch-22. We have this debt because we import more than we export (and we have for years now). Those dollars that flowed into China are funding our current stimulus and rescue plans. According to a webinar I recently attended, by 2015 over 34% of our GDP will go toward debt service. Our growth in recent years has been fueled by deficit spending.

I admire Google for pulling out of China. Now what we the masses do, and what we’ll do if the relationship turns icy, well, that’s an entirely different matter.

–Lisa Reisman

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