Foreign economies impact U.S. stock market

Problems in foreign economies can impact the U.S. stock market negatively. One example is the European debt crisis of 2010, which caused the indexes to decline even though the U.S. was recovering from the 2008 financial crisis and 2009 recession.

The WSJ and NY Times both have stories today about economic problems in China and Russia.

China Slashes Rates, Suspends Youth Jobless Data as Economy Signals Sharper Downturn

Retail sales, factory output miss expectations as overall urban unemployment rises

By Jason Douglas, The Wall Street Journal, Updated Aug. 15, 2023

China’s central bank unexpectedly cut a range of key interest rates, an emergency move to reignite growth after new data showed the economy slid deeper into distress last month…

For the first time since February, China’s headline measure of unemployment rose, climbing to 5.3%.

The jobless rate for people ages 16-24, meanwhile, had marched steadily higher for six consecutive months to hit a series of record highs, culminating in a reading of 21.3% in June. …

The risk for the global economy is that a prolonged spell of soggy demand in China holds back growth elsewhere in the world by blunting exports of iron ore, crude oil, factory equipment and luxury goods… [end quote]

What China Isn’t Telling the World About Its Economy

Beijing stopped releasing youth unemployment figures in its latest attempt to play down negative trends as growth stalls, and global concerns grow.
By Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Lauren Hirsch and Ephrat Livni, The New York Times, Aug. 15, 2023

China’s economy, the world’s second biggest, is in a prolonged slump. Retail sales and industrial production both missed forecasts in July, Tuesday’s data showed. China’s central bank cut a benchmark lending rate on Tuesday, but that was a far cry from the big-bang stimulus measures investors have been hoping for since the country fell into deflation last month.

That poses a challenge for global growth. The I.M.F. has previously forecast that China would account for 35 percent of global growth this year, but that’s looking less likely. The slowdown is hitting everything from commodities to construction, and some big U.S. companies that operate in China don’t expect a rapid turnaround…

Steve Tsang, director of the SOAS China Institute in London, said, “A strong, rich and powerful China under Xi wants to change the world order. A strongman in charge of such a state that is getting weak, poor and unstable will do whatever it takes to stay in power, regardless of its consequences for the rest of the world." … [end quote]

While China is cutting rates, Russia is raising them.

Russia Launches Emergency Rate Increase to Stem Economic Turmoil

Ruble’s recent slide reflects growing uncertainties as Russia battles inflation, sanctions, labor shortages

By Georgi Kantchev and Chelsey Dulaney, The Wall Street Journal, Updated Aug. 15, 2023

Russia’s central bank jacked up its key interest rate at an emergency meeting to stem a sharp selloff in the ruble and resurgent inflation, a response to the mounting financial costs of Moscow’s war in Ukraine.

The bank on Tuesday raised the rate to 12% from 8.5%, a day after the currency temporarily fell past 100 to the U.S. dollar for the first time since the weeks after Russia invaded Ukraine…

Russia is caught between fast-rising inflation and a government that needs to borrow and spend to keep up the war effort in Ukraine, a toxic mix for the economy. It also faces the mounting impact of sanctions and a drastic labor shortage.

Russia’s macroeconomic stability is “now in a more vulnerable position than at any point since the early stages of the war…” [end quote]

China and Russia impact the U.S. on economic, Macroeconomic and geopolitical levels.

China is a large owner of U.S. Treasury debt. They have been gradually rolling off their holdings, much like the Federal Reserve is doing – Quantitative Tightening. This will tend to increase long-term Treasury yields.

China’s low-priced exports to the U.S. have held down inflation for many years. Anything that interrupts this trend will impact inflation.

The slowing of the Chinese economy will reduce sales of U.S. companies that do business in China. These companies’ stock prices will fall as a result.

Due to our intertwined economies and also the threat to Taiwan, China is a bigger danger than Russia. But Russia’s invasion of Ukraine has already cost the U.S. a lot of money and probably will in the future. Hopefully, neither of these conflicts will lead to nuclear war.

I just finished reading Peter Turchin’s latest book, “End Times.” It’s not as good as his previous books but it reiterates the important factors leading to social destabilization and potentially revolution. These factors are growing income inequality, elite overproduction and geopolitical threats.

China’s high youth unemployment rate is a red flag. It’s classic elite overproduction. It’s impossible to say at this time whether and when these frustrated young people will protest, potentially destabilizing China.

The U.S. - focused Control Panel has a benign appearance this week. The markets think that the Federal Reserve will guide our economy to a soft landing. But we need to be aware that foreign events may become significant. Everything is priced for perfection. Stocks are in a bubble.



It’s really quite bad. China, to prevent such protest, may put them to work … as warriors in the Taiwan takeover.

I have been thinking of the hypocrisy that these countries sort of cant handle instability.

To beat my drum, we have had that potential for instability from 1981 to 2020. Time for others to take one for team capitalism. Time for us to profit.

Seems the obvious solution, as long as Xi and Putin are so kissy face, is for Xi to ship the surplus workers to Russia. Both country’s labor problems are solved.


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China will swallow Russia but we wait for when.

@steve203 thanks for the laugh!

My suggestion wasn’t actually intended as a joke. One dictator is drafting everyone in sight to fight his war, so has a civilian worker shortage, and the other dictator needs to find something for the unemployed young men to do.


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@steve203 I’m well aware that you put your finger on a possible win-win situation for these Asian neighbors. I laughed with irony because the actual execution of the plan, if it follows the history of the countries, would be horrible for the workers. Both Russia and China have centuries-long histories of slave labor and worker maltreatment.

Let’s do a thought experiment. Let’s say that Russia and China were to act contrary to their own history and totalitarian leadership and actually establish a free labor market. Let’s say that Russian companies that need labor were allowed to advertise in China and that Chinese workers were allowed to apply for the jobs and emigrate (temporarily or permanently) to work at them for mutual benefit. (Similar to workers relocating to the U.S. for job opportunities, which happens by the millions. The State Department estimates 44 million immigrants living in the U.S. but I think that counts only legal immigrants, not illegal.)

Can you imagine this actually happening – a free Russia-China labor market? If such a thing were to develop, how many Chinese would voluntarily go to Russia?

Russia actually does have some net immigration, at least until 2021 (+430,000). That doesn’t count the emigration by thousands of educated Russians after the Ukraine invasion in 2022 -2023.

Chinese workers have a long history of voluntary migration to find better opportunities. But Russia? That wouldn’t necessarily be at the top of the “opportunities” list.


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That is what #43 proposed for a USian “guest worker” program. The EU has had a guest worker program for decades. I remember reading an article some 50 years ago, that most of the assembly line workers at BMW in Munich were Turks.

An opportunity in Russia, vs no opportunity in China? With both the Chinese and Russian governments working to ease the move? Workers already set up with housing and a job when they arrive? A Chinese staffed “welcome wagon” to help them get settled?

It isn’t that hard. Other countries have been doing it. All TPTB need to focus on, is getting the job done, to solve their own problems.



@steve203 they ought to hire you. You know exactly what to do!

If Russia and China actually do this I will be the most surprised girl in the room.

As for a “guest worker” program in the U.S. – I thought that was a great idea. Disappointed that Congress shot it down.


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43’s proposal got shot at from both sides: bringing in 500,000 workers per year would “take jobs from Americans”.

The other downside was that it amounted to forced labor. A worker was only allowed to be in the US for a fixed number of years, and work the entire time for the one company that recruited him in Mexico. The “guest worker” was not allowed to seek a better job elsewhere. The moment he left his original employer, he would be immediately deported.

Of course, the Russians and Chinese are used to being forced, so the “indentured servant” aspects of 43’s proposal would not pose a problem for them.

I am sure that Xi would rather export manufactured products to Russia, rather than send workers to operate Russian factories. I posted an article some months ago about how Chinese auto exports to Russia are soaring, because the foreign owned auto plants in Russia have been closed due to the sanctions. There are plenty of other jobs that Chinese could fill in Russia: any sort of service work, farm labor, oil and gas field/refinery work, to name a few.

I’m not writing to the Chinese embassy to make that suggestion however. Don’t want the FBI after me. :slight_smile:



Putin would never allow it. Too many (high probabilities) risks the workers would be required to take over wherever they were located. Thus, they would require the Russian military to be located nearby in order to prevent such a situation. South China Sea is a prototype.

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It is like asking Kim Un are you really worried about America? Or is China not really your friend?