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The Think Tank 1010am, China's Financial Issues

Jan 5, 2016|

China is having financial problems and they’re bad enough to cause a meltdown of the American stock exchange.  Is the drop of 300 points just a blip or bad prediction for the New Year? This hours guest: Mehmet Dicle - Assistant Professor of Finance @ Loyola University Scott Sumner - Mercatus Center's Chair of Monetary Policy

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Automatically Generated Transcript (may not be 100% accurate)

Welcome back busy doing the think tank. Could. How bold a live news conference. With President Obama. In a moment in the use the real words of shows. The president reportedly grown run congress again to Saddam ordered to expand background checks on gun sales. And who wouldn't when I was about to play like do bird. Maybe the majority of you know what is understand there is I'm I'm who's totally and where. When when you look at the depths. By. Gone it's in this country every year. And I think we focus on the mansion. Leaves them using soon. But when you look at the numbers. Over two thirds of the depths or shorts. And we don't talk much about that. Sure we're gonna get a bold of those come at 12 o'clock or maybe sooner. Abroad as continuing tests in that column in the missiles. That same time we were gonna do something about it we've protests. We were gonna create sanctions would go and threaten our nuclear agreement. We in the hopes we were gonna do something in the hours later President Obama comes out and says. Where would give you delays that. William and wrong and sort of sorting your radio or horrible ward. And there's always the concern that they've become real war two women don't tunes from. Billy's certain experts. In that situation which could open all. To unload stock the stock market. It yesterday and oops are do homework early in the morning. Paula Abdul Abdullah dropped 400 points a lot of concern over China's market economies slow him. The government side and you weaken the currency yeah support for propping up the market seems to be dues hearing. And it affected the world and and it at the close of the market. I think we've made a book about possible losses. In the world what could mark the we have noted. So let's talk about where we are now in this surgery uses buddhists. It's serious at all. Helpers who then remembered dies sold system proposed troop and aunt Lulu Liu Robertson. Propelled to welcome the short preacher to. Good morning problem now is just do lip or it's your. Well the Chinese market in an important market and actually and go on court six month. The effect of Chinese market affecting the other arguments rural markets as we go to the six months. Arm bitten by the way to protect and more of Chinese economy slowed as it is actually. It was intentional. Pitches. China was gloom and and down because they've grown to there were some concerns. Yes they sure do you know climate changing air pollution. And then go which means petition and so on and so were so China won a little bit one to do its. Eight EB. That controlled lot. That you did it and now let it cool to be. Bird then people bought it will be in their forward that's why the panic. Arm yet in the market and Portland cheap points and actually closed up and who understand what it looked in the first time. Actually network like you know what very similar. And impediments that number I would because the charter and bull number perfect recovered. And if you. Invests over worldwide. Scene of the government weakening currencies slowing down the economy. Borden board about it that they saw yesterday. And Wednesday. So all of his Cutler knew what was being done and I'm sorry you. Aren't. Said that we knew who took concrete was slowing the economy. We're going to record about 10% a year and it slowed and slowed down about it for a year. In order. But now they haven't yet made the right now under export all that growth and build holding it should not the temper and he used to be put a lot. But but the question is if we knew that that slowed down was being implement. God what did they see yesterday. That panic. Although I don't think yesterday it was a lot of China had been to one of the reasons that triggered market a bit. Are you tired you know a lot of things go our set greens are. A personal in the dog doesn't go with a you know 67 years and it opened that you aren't really hit speed increase and it was very bullish. And run a good bet that bullish lung and broken and now it's trying to interstate stagnant. About 171000. So you know I've been caught in the premiere at flash crash. Which recovered nicely but it usually takes time. To turn bearish and therefore. You know it just looks from different reasons to agree to you know lose a few other points that day. Mean if China does have a lot of those hidden in the art our our personal. We also have oil crack in the thirty partners six crawler and their concern but the big concerts and they because. Equipment and Russia because of that is needed it more new competitors as US. Or it also could be. The general economy is slowing and it will he's going into recession. If China that also levels the demand of are we expect increased interest rate right before Christmas so we don't have it and Nellie. And because we didn't enter in the beginning of the year it is it seems to be technically able. So there will be one of the reasons arm behind Boller almost. In a ten year low and yet look at you know one point 071 point six. Chip it exports and on a couple of weeks you can see our new earning. Our data for annual period. And there all the others are concerned about that's for the market. And should be looking for reasons that bell. Oh yeah they've been look at international practice and all of respond US markets that time. Not that concerned that time you realize that sparked it you know. So you do that and you read in many as I looked at and pitching on our football and they seem to be. I mean. Are you talked about your card lottery yeah I don't know that much attention. It is due date. You know it'd be issues between news but in just as great or you know. Should you do late or choose a week and so. The big deal between US and Europe. And you'll be up to war and therefore I don't think what we need to market. Bartlett in Integra now when we come back. You mentioned her role in Saudi Arabia and rating glad society brawl on right now to balance its budget for this year. You'd crude oil price of seventy dollars a barrel. Saudi Arabia needs 95 dollars and are all Russian needs a hundred dollars about Earl will reload the stock market. If these figures are bright. How Kim there'll flag Kabul budget and what they need to keep going not affect the market this year. Coming right back questions comments we've got the experts think about. Stocks thing good about the middle aged usage or one league itself when you double up. And they ruled liberal one from reviewed on Joseph will become of the stock market when ever been in big drop in panic. A couple of days usually very in the Tuesday. The word is what it was a draw because of its own suits and so a big thing and apparently of natural look and that what was. 400 plots Ford dropped yesterday morning made up march part of that I'm in today. Understand what's happening worldwide. Like you're not to have professor of finance and oil you know aboriginal amendment I shall a professor. I'm going back to wrong and in the Saudi Arabia. Saudi Arabia. Will moment that most people. Killed via and Shiite cleric. And brawn. Effective solidly ambiance embassies solidly wade brain. Severed relationship. With the wrong and what my question loses those that can that. Affect the market and want to put troops as bright we broke. A revolution I do little homework huge cuts to balance the budget for the new school year wrong and needs seven dollars a barrel for. Salaries 95. Brought a hundred dollars. And Saudi Arabia reportedly Joseph forum having. Oil prices Lance year loss 20% of their budget. Can tend that gore wore on without affecting the market this year. I mean richt a couple of things number one unit beat each unit Iran and direct dual it's such an important deal. And and there are consequences sword politically and ultimately if you run of groans. Are you are has untapped oil and and therefore our partner upload more. So you know none of these countries would want to achieve apple cart world over show. Don't have you know all the reasons to glow to picture dispute between Europe and so muted I think that the conflict and that they get my personal thought is that it's. Opteron and ends Saturday carpet indeed it was little tricks to make sure that you've been in your tenure as both true. Armed. Unit also. I mean this this deal you know. Happening between Iran and and so he knew about 14100 usual. So he's not like it news today Linksys. I think. That we are at war. You know in Egypt and yet my virtual. Our border that the no I think I'd be in media that everybody makes it look like out there and go bankrupt if it all practical or backup. It is true that putter. And he actually. Our arteries get don't say Iran has certainly as well be issues that actually yeah I read you that maybe there. But the bigger corporate and technical part but it's low or virtual are. Wouldn't that Slattery yet it just means that they you know about the budget. Well what will you do will be just go rest and not intended. Target date is never had been. So big that it happened there and senator Bartlett. They get the gold content there and they're footage more than one trillion dollars in Goldberg is that apple has written. Doubt about it didn't have it in debt. And it rolled down so that you collections. Still there and did you you know prepping their next. So this lol oiled it is not really hurting. The balance as you know it in the ancient actually gone. An audience at my personal pockets that are. Yeah it hurt the bid to balance will be actually on. How to record it'd be bid do we 00. Is these are indeed open world. You know slogan how ever. I don't think about it like that if people and getting ready money. You're in money it safest place. On the old countries in the world which one of the great. We can appoint so it's my personal expectation that the market technical. Then there are big and I think part. I'll hazard. There on our Google. That it might hurt. Indeed well I mean. And I detection regions about its eye on oil being very strong. Actually the in our own oil and big charted the dollar fingers. Of the large groups are being such would be. And Japan it's all having a technical section pairings. And European Union now able to recover. True bear quirky meeting that in good working arm Buell. We also. Oh it next year we gonna have our England are pending or threatened to get that you'd gain in practical use. Yeah running to trim and can. Are things like and also I think the bull market has really think that the and it could be a partner. The people money and indeed they need to put money. So it looks like big reason one of the reasons the dollar strong decline. Or there that you US that it happened. Golden. Yeah sitting board is economic and in a matter of Chico and lump that at that level for more than a year now. So well late bid by gold. You know he's been fluctuating sort of accurate anymore and there. Is being. So you're in the war you know Arctic. And connecting it actually show that unit. That I write in their life wanna be there are two dollars so strong. One bedroom and did. That segment of the more kids collapsing. What are. What do you mean you mean depression you mean stock market itself. No see I think again if the world economy which section. Broad market correction. I think you let me in the end I I think that people are gonna start and that we knew that market may actually ball. I mean again you know right now the your interest rates almost here interest rates even in the interest rate increase. I'm so they bring money is that popping the economy that economy seems to be growing. Are at an election years you know even the Democrat cabinet actually an election year. So. I don't think US. If significant concern at the well I think it's more natural. That number I admit warned that fit and not increase interest rates because it would be to their country credit crunch. Our Third World country borrowing money in your interest rates on. Maternity unit that's been bought out ever. Not being as suitable all that. In countries that did not expect it should be need to borrow even more to enact that that. But when every everything I've heard from our experts who lives five years. It is is it's one world economy everything is. In the connected. There are bigger battery is no market. That's due insulated from the abrupt. So the rest of the world market collapsed now I'll wizard that I'll words might stay Paris anymore and don't. So go back the initial public beauty bowl ring in. And US and once it is places where people put their money. Other US and a vote and I'm saying eventually on that in the world economy recovered. Well should. Other unit during this period short term next year maybe two years. I'm not certain if US is gonna be thinking with the rest of the Euro. Others that that in turn in your children. I mean again that's my personal. In from. In some time. Brooke through thank you so much probably forego it left. It may get Torino. To blow bishop an apple and call it pork added that Clinton. That you brought to purge it. Think he's our. And I that was introducing a little bit more than I expected find out there. We've got drummed expert former kingdom sooners come up directs. Expert on monetary policy. We'll ask him what we do heard from the professor. And also talk about the Chinese market. It's Saudi Arabia Iran brush stroke wars. What are all that it's doing to the market now what that might do in the future. Think you viewed appear hurt and then the pro printer does say that he has personal opinion obviously injured one person. But he says Leo First Financial expert I've heard him him well since a bit on the air that says. Sees the possibility. Of vote were local markets. A voyage we could remained where we are now or get better what do you think two's to 0187. Usually. I don't do it for New York bearish Euro on a drop in the stock market because. What over learned over the years. Even when you have big dropped in the catalog of bugs Hillary headline. The very legs they are connected bounces back corporate leave within weaken it becomes very big thing. But youngster who we have to. I think it was like. 300 point drop in the Dow waited. Three under bill and for water wrote landslide agrees in the sixth worst starts in 1927. When we come through video. Standard in port six words start to a year absence 1927. By the end of the day most of that it bounced back in an odd thing well. Not true what more can do that if you experts to. We looked at the headlines when they talked about your one point Walter drew. China's stock market interventions postpone the grim reality. And what happened yep W raised nearly all of 2000 opinions gained. But there was part of the story that I didn't Byron mentioned Awad. And that. Rolling antagonism. Between Saudi Arabia and raw and and the possibility. Of vote more planes in the mid leads with the ultimate get the experts ago but renders them this. Elected not to get Scott's under McCain considered chairman of monetary policies Scott thank you so much for the talk. Or premiere experts I'd tell us what she's solid Q what UC today. Any group brings important certain errors it's all part of this talk. Well I think there's some things that are just. Transitory than you can kind of overlooked China has. Special characteristic of the government heavily intervening in the stock market and it made some changes since scared investors. Yesterday at the beginning of the year. Com I think the bigger issue. Is not just China but throws the world economy and China's big part of it itself. To the extent the US stock market would be effective that it would be it does aside at the slowdown in the global economy so I think that's what investors were at least a little bit worried about yesterday. And I think that's the reason why he's in the whole oil originally ruled on most skiers. In the Middle East inserted drop back because that they are still worried about a weak economy and that's putting downward pressure on commodity prices he. I just says the U repent repent and that he university. In talking about this just just dropped his own personal opinion and that. The saudis saw it in the future a collapse of world markets blood. I had the United States saying as we or possibly been opening. Because if there was a client people of god put the money somewhere in the US market so we'll bounce market where your thoughts. I can assemble more optimistic about the world marketplace I think places like China. Are probably going to be doing better than some of them are scarce towards which suggests. And definitely there economy slowed somewhat but it's it's still growing at a pretty good piece. In I think it's still a lot of growth out of it. But there are a lot of countries out there that are hurting. Brazil was doing very portly and a lot of these are two really bad. Government policies. And that and and so you have to look at our country by country basis but I really think the big economies the US. Europe Japan will probably continue to grow a little bit this year and I don't see any major global terms. Oh and I'd are no good very drew countries had balanced budgets. Of whether we're XUL homework landslide Roland. Just to balance or butchered Colombian born near or at war. Keep their foreign currency exchange reserves. Leads seven dollars ago. Salary review needs money five Russian needs a hundred dollars a barrel. And the last few Euro loan. Saudi Arabia from dropping oil prized and she lost 20% of its budget. Understand the big can survive without bulging balancing the budget. Oh when they indeed that much of an uptick in oil well dug then that eventually come home to roots. Well yeah I think that ultimately has to tighten the belt but I'm you know I'm a little bit skeptical ovals reports Tom. Period where I look at it and we can go back out. Doubt longer ignore history and the oil was a little lower. In in part of the ninety's and early 2000 period. It wasn't unusual oil it's forty dollars a barrel. Seoul. I just. Light feeling that they had recently gotten used to much higher prices and maybe built it and they're budget and spent a lot more at the government level. But. That oil price is not sustainable market not they're gonna just have to go back to lifestyle they had when oil was. I think forty dollars a barrel and yup definitely means a content living standards. Part arm. You know he's an all these countries seems they're very significant in the oil market but they're not insignificant. In the global economy in terms of things like consumption. Saudi Arabia don't have a big population. Even Russia not that big internal market compared to the US search of the eurozone. Seoul you know I definitely see hard times in the oil exporters but I'm not sure that's enough to drag down the global economy. Him buying QB who broke couple more minutes to a lead to incorporate come in bright back. Thing about stock market thing good about the Middle East and then move you have a particular thing about the price of boil comment. About stock market pretty little drop early in the morning good it was. So. Report. Did in the number of bin that your moves to the conservatives are broad economy's slowing in China and also little blood related to it are so good to enrollment Saudi Arabia. Federal suit the particular who have Scott Sumner whether it caters surrendered share of monetary policy. Scott. And I am not sure I know that I have to put but analysts say Saudi Arabia brawl on Middle East countries. Have F kept there warring factions together with the in their country. Via a hundred dollar barrel oil seven and over a rule oil. Now blended real low home. They eat they might influence that he uses for eBay and they might have reduced. What they give to their populists or. Reduce the light solved whatever. And and I've often wondered moral follow up and said I've been poor and I've been cymbal I've well to do and it's easier to go from being poor twosome well to do them the of the way you rattle and if those populations. That have gotten used to subsidies. Like coach with Social Security. Medicare. Obamacare. If those things get produce an already volatile. Shield soon the environment. Don't dumb that it'll. Like impossible that the diplomat being strong in that region and therefore affecting the market were one. To admit. And you know I think that the good point. But you know. The Arafat probably not the best person to ask that question I don't have a consensus of whole stable well you know ultimately is in Saudi Arabia on. But you know that you're right I think they're going down in standard of living of the lot tougher once you've you party tasted a higher standard of living. Our home. And you know we do you know others as the Sunni issue. Split in the Middle East which is creating problems and want to places like Iraq and Syria well it could. I guess I believe a lot of issues with that the oil producing regions of Saudi Arabia but again I'm not an expert enough to. To really say now likely political instability there. So you're you're never gonna make a review of cultural should just let happen yet collected lower everything that they're not gonna make it. I have a very very even stranger who questioned and that problem for your book for a allusion. To captaincy of the movie called the big short. No I haven't. Has since been reps or again I just like figured a little bit of an idea that bump. I mean I don't have any idea home into buildings to add to reach a new book by Hollywood. But it was just a regular guy it was horrifying. Looking a blog called the 2000 league clout with the real estate market and at the end of the movies they say. That nobody would prove to nobody was named or very few were in and and that the whole thing you've begun again and Lance sizable numbers don't homework. A broad a speech by a Federal Reserve vice chairman. Federal served by trump in Central Bank he says. Central Bank may lack some key tools to prevent another major financial crisis. And what he said was. They need some them 222. Picks monetary policy. Too restrained financial. Excesses. And pointed in particular to the real estate market. BL considerable last financial crisis. At least federal already. Other countries or curbing their boring power when it comes from real estate boom we're doing the exact opposite. Do you see that do you think that was one of the main factors in 2008. And if so do you see it happening and get. Well like I mean I think there's two issues here one is along the real estate sector and then and he's right we have a lot of problems that are that we haven't tricks. Germany and Italy addressed some of them in the big issues. Well the last crash like the role Fannie Mae and Freddie Mac. Which really got out of hand and together dominating the mortgage market. I think that's to the politics of a lot of powerful special interest groups that that benefit from that system and nobody wants to. Make it more certain market. Have more market discipline. Well there's a lot of government backstop to make. Lenders overconfident. And that's a problem. I happen to believe the Federal Reserve. Didn't do a good job in 2008 in terms of monetary policy that that's a whole other area in I did I just looked at the teacher talking about instantly future. And I have some reservations about that on a technical point I think the Fed needs to change the way it does monetary policy because. I do not believe that this recession we've been through was just real estate it will it was. Of more general failure monetary policy that caused the entire economy fell sharply down. All got a lot of nerve and it's been agreed education. Promise you you'll come back again in a later date. I'll keep the questions in the normal. Thank you very much I appreciated the call. Our government right Baghdad but a bill brigades but he immoral plied the re year. Don't know what it is correct or not quite frankly I didn't hurt rapid report begun Texas. Just letting you know the cause we boldly and sell down open their 48 minute wait 4848. Miserably. For mild twelve mile not all been delayed port. Traffic is backed up 34. Months. Called solo. Oh with a buy rum listeners. The historically. There they direct correlation between US recession and high. Oracle products. Every US recession Paula oil prices not opt for low prices and airport. There will be you know you're a recession and time to diesel oil prices. Add if that's true I did not know it. Whoever wrote that students in the connection work and read that word show. And for those of the view and listen we have when you were from culture expert and then. What did talk to both currents it's marketed in in mid compensation dropped his bully shrewdly used. That the world market so Michael. In the in the foreseeable future. But the humans it would probably you've remained the same or even improve because in the sinking boat. We would be BF's. Lead to try it is the applaud. And the question would be oh won't we he could steal plume under blue shirt and bought the pin and blood. The first time I've heard it on the show which means it's. Men are big crew may be true but certainly interest and dumping the ball on. Come and actually think they'll go wrong and Saudi Arabia's they would.