Scenes from the Strategic Economic Dialogue

The Scene:

The Presidential Salon in an undisclosed government palace, Beijing

Dramatis personae:

Hu Jintao, President of the People's Republic of China

Wen Jinbao, Premier of the People's Republic of China

Hank Paulson, US Treasury Secretary


Hu: Welcome, Secretary Paulson, to Beijing for our end of year strategic economic dialogue.

Hank: Thank you, Mr. President.

Wen: We know you have a lot on your plate at the moment.

Hank: Yes, these dumplings are delicious! (Eats three dumplings noisily.)

Hu: So what would you like to talk about first? How many Treasuries we're going to be buying over the next few years?

Hank: No, why don't you start by telling me when you're going to allow the renminbi to appreciate against against the dollar.

Wen: I'm sorry, I can't tell you that.

Hank: Who is going to then?

Hu: Not necessarily. No decision has been taken.

Hank: Excuse me?

Hu: We have not reached a decision yet.

Hank: But Mr. President, when will that happen?

Hu: I am the president, and it will happen when I decide it will.

Hank: I was speaking to you sir. But can you tell me when?

Wen: No, you need to ask Hu.

Hank: But the president already told me it was his decision. I need to know when!

Wen: Really, sir. The president is sitting right here. Why ask me when you can ask him?

Hank: I did ask him. Who asked you to pipe up, Mr. Premier?

Hu: No I didn't.

Hank: Excuse me?

Wen: Listen, Mr. Secretary. The renminbi has appreciated sharply against other currencies in the last few months. Who knows when it will start appreciating against the dollar again?

Hank: That's why I'm asking him! Mr. President, will you let USD/RMB fall any time soon?

Hu: When the time is ripe for the renminbi to strengthen.

Hank: Thank you for your help and understanding, Mr. President! (Pulls out iphone surreptitiously.) Hey George, I think the Chinese are finally ready to play ball on the currency, so that's one less thing we have to worry about.

(Hu and Wen exchange glances and snigger behind their hands.)

There's nothing wrong with a bit of vintage Abbot and Costello on unenjoyment day. At this point, there's not much more to say about the data itself; Macro Man retains the view that the data will be crap, but perhaps not as crap as priced. Sadly, no obvious trade has surfaced on that front, though he likes selling the front end of Europe after comments from Mersch suggesting that further ECB cuts will be even more grudging than those already observed.

That Ben Bernanake now seems intent on not only putting conditions in place for an eventual recovery, but also to put an immediate floor under house prices is a worrisome development, but frankly Macro Man is too tired to tackle that one without a weekend's worth of rest.
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December 5, 2008 at 2:30 PM ×

(via Jesse; sorry if too long or OT)

Jonathan Swift

The bold encroachers on the deep
Gain by degrees huge tracts of land,
Till Neptune, with one general sweep,
Turns all again to barren strand.

The multitude's capricious pranks
Are said to represent the seas,
Breaking the bankers and the banks,
Resume their own whene'er they please.

Money, the life-blood of the nation,
Corrupts and stagnates in the veins,
Unless a proper circulation
Its motion and its heat maintains.

Because 'tis lordly not to pay,
Quakers and aldermen in state,
Like peers, have levees every day
Of duns attending at their gate.

We want our money on the nail;
The banker's ruin'd if he pays:
They seem to act an ancient tale;
The birds are met to strip the jays.

"Riches," the wisest monarch sings,
"Make pinions for themselves to fly;" [1]
They fly like bats on parchment wings,
And geese their silver plumes supply.

No money left for squandering heirs!
Bills turn the lenders into debtors:
The wish of Nero now is theirs, [2]
"That they had never known their letters.

"Conceive the works of midnight hags,
Tormenting fools behind their backs:
Thus bankers, o'er their bills and bags,
Sit squeezing images of wax.

Conceive the whole enchantment broke;
The witches left in open air,
With power no more than other folk,
Exposed with all their magic ware.

So powerful are a banker's bills,
Where creditors demand their due;
They break up counters, doors, and tills,
And leave the empty chests in view.

Thus when an earthquake lets in light
Upon the god of gold and hell,
Unable to endure the sight,
He hides within his darkest cell.

As when a conjurer takes a lease
From Satan for a term of years,
The tenant's in a dismal case,
Whene'er the bloody bond appears.

A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
'Tis like the writing on the wall. [3]

How will the caitiff wretch be scared,
When first he finds himself awake
At the last trumpet, unprepared,
And all his grand account to make!

For in that universal call,
Few bankers will to heaven be mounters;
They'll cry, "Ye shops, upon us fall!
Conceal and cover us, ye counters!

"When other hands the scales shall hold,
And they, in men's and angels' sight
Produced with all their bills and gold,
"Weigh'd in the balance and found light!"

1. Proverbs 23:5

2. Nero, signing the death sentence of a condemned criminal, exclaimed:
"Quam vellem nescire litteras!" ("How I wish I'd never learned to write!") Suetonius, 10;

3. Daniel 5:25 מנא ,מנא, תקל, ופרסין (Mene, Mene, Tekel u'Pharsin)

December 5, 2008 at 2:32 PM ×

eerily quiet here... interesting price action in market... or should is say what is interesting is the lack of bond market reaction to the US economy having shed 1.2 million jobs in a quarter.

December 5, 2008 at 2:45 PM ×

Exactly, very quiet on this board last few days despite a bombardment of bad news?!

what gives?...

perhaps calm before storm next week when the market starts pricing earnings freeze.


December 5, 2008 at 2:49 PM ×

XHB homebubblers have rolled since the mortgage data came out and were green off open today


Macro Man
December 5, 2008 at 2:53 PM ×

Chaps, I think both the market and this space have been quiet because some people have just had enough for the year and have disengaged. I have done five trades all week, and two of them have been tony 'mopping up' jobs, so don't really count.

December 5, 2008 at 2:58 PM ×

Wen: It's our currency it's your problem round eyes.

December 5, 2008 at 3:28 PM ×

u see Frank and Dodd talking about not giving our the rest of the tarp money to paulson--how stupid--cause you can bet if paulson is asking for it it was need 3 weeks earlier

December 5, 2008 at 3:55 PM ×

on the NFP vs unemp chart, really appears as if unemployment lags non-farm payrolls by around a year....but cant think why that would be? anyone any clever suggestions or am i seeing things?

December 5, 2008 at 5:04 PM ×

I guess the bond market's already almost priced in a depression. Sovereign CDS have also balloned out alarmingly, so how low can bond yields go unless deflation expectations get a bit more torrid. Oil's been a bit slippery, though. Tanked even. Still don't like equities: valuations for corporate debt imply off-the-scale defaults,
whereas equities only moderately cheap by historic standards. they were just damn expensive before. How many times in a decade do they have to get savaged before equity investors get the hint? Strikes me valuations could go a lot lower. As you say, though, everyone's a bit punch drunk after the falls we've already seen this year...

December 7, 2008 at 1:04 AM ×

Wouldn't it be easier if they spelled it "remnimbi"?

Here's a great screenplay - Jerry Maguire:


The great continent through mist and swirling skies.
(Satellites and other pieces of skycasting equipment float by.)

That's better. That's america. See, America still sets the tone for the world...

You can see the film as you read.

And how's about the irony as that world-view falls apart!