Chinese Exports Down, Consumer Spending Up?

The economic data is getting weirder and weirder. China devalued the renminbi because its exports had plummeted about 8 percent, and now we hear consumer spending in America was up 3.1 percent in the second quarter.

Have U.S. consumers suddenly stopped buying Chinese products? I don't think so. For that reason I'm very suspect of these numbers.

Once answer could be consumers slowed down spending during one part of the quarter, which could have skewed the export numbers of China for last month.

Other than that, it's very strange if we find out that wasn't the case, and somehow consumer spending exceeded expectations by a lot, but they decided to spend on goods from America or other countries. Since that hasn't happened in years, as far as what would essentially boycotting Chinese products, it's very difficult to believe these numbers are reflective of real consumer spending.

Again, the only scenario I can think of is if Americans really spend big in the first two months of the quarter, and then cut back. Otherwise, something stinks in these numbers. 

Too Early For Yuan to Replace U.S. Dollar

There has been a lot of speculation concerning the goal and strategy of China concerning the place of the yuan or renminbi on the world economic stage.

I have no doubt the Chinese have a goal of becoming the leading reserve currency in the world, but if that ends up being a reality, it's going to be many years from now.

The idea that China is attempting to bypass the existing currency market and working to build an alternative to it is actually the exact opposite of what it really wants to do, which is to become a larger player in the current global economy.

For now, the yuan isn't close to being ready to be a currency leader, as China needs to take a number of steps before it's going to be considered a means of paying for major transactions on a global basis.

China's first step will be to push to be accepted as a reserve currency at the International Monetary Fund. In October the IMF will convene to review, among other things, whether or not to include the yuan in Special Drawing Rights group of reserve currencies. This review only occurs twice over a 10-year period, so it's important for China to get this done; which I think it is likely to accomplish.

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Bank of America (NYSE:BAC) Says Renminbi at Fair Value

Contrary to the assertions from some politicians and academics in America, Bank of America's (NYSE:BAC) T.J. Bond, chief Asia economist at Bank of America, said he sees the renminbi at "close to fair value."

Bond said, “We don’t agree with what academics and politicians in the United States are saying, that the renminbi is significantly undervalued.”

The renminbi is just another name for the yuan, the Chinese currency.

“For the first time in many years, we actually think Asian currencies are roughly fairly valued,” Bond added. “Given the strength of the story: strong growth, rising inflation, we think Asian currencies will continue to appreciate, but as they’ve reached fair values, we don’t actually expect much appreciation against the U.S. dollar.”

That assessment could be wrong based on the additional $600 million in so-called quantitative easing being implemented by the Federal Reserve, which will continue to debase the U.S. dollar

Jim Rogers Says Producers are New Money Centers

Talking recently at the Reuters 2011 Investment Outlook Summit in New York, Jim Rogers continued his mantra of high gold and commodity prices, along with the probability financial centers like London and New York will shrink in influence, and countries with strong commodity and/or raw material resources and focus will flourish.

Rogers maintains his prediction of gold rising above $2,000 an ounce and the Chinese renminbi becoming the strongest currency in the world.

"The city of London and Wall Street are not going to be great places to be in the next two or three decades. It's going to be the people who produce real goods," said Rogers.

"Throughout history we've had long periods when the financial centers were in charge," he added. "But we've also had long periods when people who produced real goods were in charge - the farmers and the miners."

Those in the media interviewing Rogers always smile at Rogers when he mentions raw materials, and especially farming, as a major force going forward, thinking he's joking with them when in reality he's totally serious.

Rogers cited Canada as a place to invest and which will continue to grow strong. He didn't mention them this time around, but Brazil is another obvious country which will strongly benefit from commodities, along with Australia, if they don't impose draconian taxes and regulations on miners.

The U.S. could also become important in the area of natural gas, especially as exporters, but they'll have to build out their infrastructure in order to take advantage of the soaring demand for natural gas.

US Dollar, Economic Influence, Waning on Global Stage

The rebuke and rejection of the request by the U.S. to pressure China to into increasing the value of the renminbi by the G-20 underscores the declining economic influence of America in the world, as well as the U.S. dollar, which has become a disaster.

Not only was the idea of pressuring China on their currency rejected, but the U.S. and the disastrous Federal Reserve were castigated by economic powerhouses like China, Germany, Brazil, France and Korea for their policy of acquiring U.S. government debt and flooding the world with U.S. dollars.

Even with all of that being true, it's interesting to see European countries hit out at the U.S. when Europe is still a disaster as far as sovereign debt goes, although Germany and France are healthy in that regard.

It's the unwillingness of the Obama administration to introduce austerity measures like most countries in Europe have that is outrageous to most, who have said the U.S. must stop the economic strategy of growth through going into deeper debt.

Europe has already proven these socialist plans don't work, and even though there will be a lot more pain to go through in Europe, the pain is coming from taking the right steps, not from misguided policies.

Many laugh at the foolishness in Europe from their coddled classes who have become "kept" by the governments, but how far is the U.S. behind that scenario, as the inability to pay for reckless promises by the U.S. government over the decades is coming home to roost.

As far as the trade surplus that always comes up in difficult economic times, American consumers have made the decision to buy quality and inexpensive products from China and other countries. This same nonsense was brought up when Mexico was producing many of the goods Americans bought.

That has to do with the overpaid American workers, especially those in unions who can't compete with their counterparts in other areas of the world. Until those problems are addressed, America will have this problem no matter which country is the latest to enter the manufacturing sector.

The Obama administration, as have most previous administrations, give lip service to this to play to their base, but the cat has been long out of the manufacturing bag, and there's no bringing back what has been a past that is no longer relevant.

America's economic day is over. They've allowed the Federal Reserve to destroy the value of the U.S. dollar and create a class of consumers based on debt consumption, which had been driving the global economy. That day is now past, and will never return to levels before the economic crisis hit.

The only reason the U.S. dollar even remains the reserve currency of the world is no one else really wants to allow their currency to replace it, as it would drastically reduce the flexibility they now enjoy.

If a country like China eventually were to allow their currency to become the reserve currency, it would only be done for national pride and not for any benefit to themselves. I wonder if they'll end up getting suckered into that?

Some nations in the East have already been making transactions without the U.S. dollar being part of it, and calls for a variety of different ways of going forward have already been suggested, including possibly a basket of currencies, or even returning to some type of gold or commodity standard currency could be based upon.

For the U.S., they need to drop their being the policeman of the world, drop being a nanny state, and get their hands out of the free market. Until that happens, the country will continue to spiral downward economically itself, and in its economic influence around the world.

Golden Star (AMEX:GSS) Eldorado (NYSE:EGO) Royal Gold (Nasdaq:RGLD) Allied Nevada (AMEX:ANV) All Fall on Weak Gold Prices

Golden Star Resources (AMEX:GSS) Eldorado Gold Corporation (NYSE:EGO) Royal Gold (Nasdaq:RGLD) Allied Nevada Gold (AMEX:ANV), along with the majority of the rest of the gold sector, have all fallen today as gold prices got hammered from the news the consumer price index in China came in higher than expected, reaching 4.4 percent.

Those traders and speculators holding long gold positions sold off their holdings in order to cover their margins, generating the plunge in the price of gold.

The worry is China may implement higher interest rates, pushing the price of gold down. That's a nod toward the increasing importance of the renminbi, or yuan, as a global currency.

It also shows investors are jittery as conflicting economic data and outlooks have them very unsure as to the direction things are going to go. That will still favor gold in the long term, and gold investors are more than happy to see gold prices fall so they can snatch up more of the yellow metal.

For Golden Star, they were trading at $4.55, dropping $0.17, or 3.60 percent as of 1:42 PM EST. Royal Gold was at $51.78, losing $0.84, or 1.60 percent. Allied Nevada Gold was at $27.31, falling $0.69, or 2.46 percent. Eldorado Gold Corporation was trading at $17.67, dropping $0.07, or 0.39 percent, slightly rebounding as the trading day goes on.

Freeport-McMoRan (NYSE:FCX) Surges on Yuan News

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), along with a number of raw materials companies has been rising in price today as hopes the appreciation of the yuan against the U.S. dollar will help commodity companies going forward, after the announcement the Chinese will float their currency more against the greenback.

Shares of Freeport stood at $68.96, gaining $3.06, or 4.64%, as of 1:25 PM EDT.

One major problem many haven't considered yet, is the yuan, or renminbi, isn't assured of appreciating, and all the hand clapping and backslapping may be premature if the Chinese currency depreciates in value instead, which wouldn't be a stretch to consider at all.

Either way, the market is assuming the yuan will appreciate, and mining companies and commodity producers are benefiting from that assumption at this time.

No matter what happens though, it'll unfold over a period of time and not in the short term, which will be more sustainable whichever way things go.