Tuesday, May 30, 2017

Credit Downgrade

A country can’t continue to spend its reserves indefinitely without facing the financial consequences, and China last week got a credit downgrade that by most accounts was long overdue. This raises the cost of borrowing overseas — hardly an issue for the Chinese government itself, but it may prompt banks and shadow banks to do more of their borrowing within China. That is a good thing in some ways, but it makes the Chinese financial system more top-heavy than it was already, increasing the risk of a rapid collapse after any of various kinds of failures that might occur in the future.

Friday, May 12, 2017

Polypropylene Prices

The bulk prices of polypropylene and polyethylene provide one way to measure the demand for manufactured goods. Polymer prices are also affected by oil prices and by improvements in product designs that require less plastic in a finished product or improve manufacturing yields so that fewer materials are thrown away. Nevertheless, the long-term decline in prices, with bulk polypropylene hovering around $1 per kilogram, shows a persistent softness in demand for manufactured goods.