Evelyn Reynolds

Countries should strike up more economic alliances than security and defense ones, as those could make the world “more dangerous,” the president of the Center for China and Globalization said on Tuesday.
“I hope that the U.S. now has settled this midterm, we can get towards economic, global alliances rather than have a lot of security, military, defense alliances which will make us more and more dangerous,” Henry Wang said at the SALT iConnections conference in Singapore.
Echoing Wang’s point, Nicolas Aguzin, CEO of the Hong Kong stock exchange HKEX, said on the same panel that the globalization of trade has created many benefits, including bringing the East and West closer to each other.

Countries should strike up more economic alliances than security and defense ones, as those could make the world “more dangerous,” the president of the Center for China and Globalization said on Tuesday.
Doing that would also circumvent a slide toward deglobalization, which could hold back economic development across the world. The U.S. for example, could consider joining — or “re-joining” — the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Henry Wang said at the SALT iConnections conference in Singapore.

“The U.S. is the vibe of globalization and [has] always taken the lead on globalization,” Wang said. 
“It was a pity to see the U.S. pulling out of the [Trans-Pacific Partnership, which] … set higher standards for global trade, including the digital economy, and also the liberalization of trade and facilitation of investments.”
Wang added that there should be more economic alliances and fewer security ones such as the AUKUS, Five Eyes and the Quadrilateral Security Dialogue, an informal strategic alliance.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership is a multilateral trade deal signed in 2018 that was formed after the United States, under the Trump administration, withdrew from the Trans-Pacific Partnership.
Claudio Reyes | Afp | Getty Images

“I hope that the U.S. now has settled this midterm, we can get towards economic, global alliances rather than have a lot of security, military, defense alliances which will make us more and more dangerous,” Wang said.
The CPTPP was formerly known as the TPP, which was part of the United States’ economic and strategic pivot to Asia.

Former U.S. President Donald Trump pulled the U.S. out of the trade pact in 2017, after it drew criticism from the protectionist end of the U.S. political spectrum. 
The TPP has since evolved into the CPTPP after other members of the pact forged on with it. It is now one of the biggest trade blocs in the world, attracting applicants such as China. 
The U.S. has not indicated any desire to rejoin the CPTPP. Instead, it launched its own separate non-trade relationship network with Asia-Pacific, the Indo-Pacific Economic Framework.
Echoing Wang’s point, Nicolas Aguzin, CEO of the Hong Kong stock exchange HKEX, said on the same panel that the globalization of trade has created many benefits, including bringing the East and West closer to each other.
“I mean, it had kept prices very low around the world in a lot of areas; we had productivity,” he said, adding that he doubts deglobalization would become a reality, in light of the complex interconnectedness of global supply chains. 

With new powers emerging, tensions are bound to arise at this juncture of globalization, Aguzin said.
“Asia, as a region, over the next 10 years, we represent about half of the output of the world. I mean you’re going to have some rocky moments, because it’s a big shift. There’s a big shift of power and influence from West to East,” he said.

‘Olympic-style’ competition

Economic alliances and healthy “Olympic-style” competition between the U.S. and China would therefore be better than confrontation, Wang added.
Wang said notes from the Chinese Communist Party meeting in Beijing indicate that Chinese policymakers are keen on “opening up,” which suggests Beijing still has appetite to promote trade and multilateralism.
The appointment of new Cabinet members from developed areas in China, such as Guangdong and Jiangsu, suggests Beijing has its eyes on more development, private businesses and investments from multinational companies, according to Wang.

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Households increased debt at the fastest pace in 15 years due to hefty increases in credit card usage and mortgage balances.
The credit card balance collectively rose more than 15% from the same period in 2021, the largest annual jump in more than 20 years, according to the New York Fed.
The increase stems from “a combination of robust consumer demand and higher prices,” a Fed official said.

Luis Alvarez | Digitalvision | Getty Images

Households increased debt during the third quarter at the fastest pace in 15 years due to hefty increases in credit card usage and mortgage balances, the Federal Reserve reported Tuesday.
Total debt jumped by $351 billion for the July-to-September period, the largest nominal quarterly increase since 2007, bringing the collective household IOU in the U.S. to a fresh record $16.5 trillion. That’s an increase of 2.2% from the previous quarter and 8.3% from a year ago.

The increase follows a $310 billion jump in the second quarter and represents a $1.27 trillion annual increase.
Debt has surged over the past year due to inflation running near its highest pace in more than 40 years and amid rising interest rates and strong consumer demand.

The biggest contributors to that debt load came from mortgage balances, which rose $1 trillion from a year ago to $11.7 trillion, and credit card debt, which climbed to $930 billion.
The credit card balance collectively rose more than 15% from the same period in 2021, the largest annual jump in more than 20 years, according to the New York Fed, which released the report. The increase “towers over the last eighteen years of data,” a group of Fed researchers said in a blog post on the central bank site.
“Credit card, mortgage, and auto loan balances continued to increase in the third quarter of 2022 reflecting a combination of robust consumer demand and higher prices,” said Donghoon Lee, economic research advisor at the New York Fed. “However, new mortgage originations have slowed to pre-pandemic levels amid rising interest rates.”

New York Fed researchers attributed the credit card growth to “very robust” consumption, rising prices and consumers using substantial levels of savings that remain on accounts.
Along with the rise in balances has come an increase in delinquencies.
However, while “delinquency rates are rising, they remain low by historical standards and suggest consumers are managing their finances through the period of increasing prices,” the researchers wrote.
Elsewhere in the report, the Fed said auto loan balances edged higher to $1.52 trillion while student loan debt nudged lower to $1.57 trillion. Student loan debt is the lowest since the second quarter of 2021 amid an extended period of forbearance and the Biden administration’s efforts to forgive some education loan debt.
Auto loan debt, while posting only a slight increase on a quarterly basis, is up 5.6% from a year ago.
Mortgage balances continued to grind higher amid a sharp increase in interest rates that has seen 30-year mortgages loan rates hover around 7%. Total debt climbed even though originations fell sharply, dropping nearly 17% to $633 billion.
Foreclosures remained low even as a pandemic-related moratorium expired. Student loan delinquent rates remained around 4%.

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The producer price index rose 0.2% in October, below the 0.4% estimate.
A significant contributor to the slowdown in wholesale inflation was a 0.1% decline in services, the first outright decline in that measure since November 2020.
On a year-over-year basis, PPI rose 8% compared to an 8.4% increase in September.
In other economic news, the Empire State Manufacturing Survey for November registered a reading of 4.5%, much better than the estimate for a -6% reading.

Wholesale prices increased less than expected in October, adding to hopes that inflation is on the wane, the Bureau of Labor Statistics reported Tuesday.
The produce price index, a measure of the prices that companies get for finished goods in the marketplace, rose 0.2% for the month, against the Dow Jones estimates for a 0.4% increase.

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Goldman Sachs expects inflation to ‘fall significantly’ in 2023

Stock futures tied to the Dow Jones Industrial Average were up more than 400 points shortly after the release, reflecting market anticipation that cost of living increases not seen since the early 1980s were easing if not receding. However, market gains tapered through the day, with the Dow up just over 100 points late in the session.
On a year-over-year basis, PPI rose 8% compared to an 8.4% increase in September and off the all-time peak of 11.7% hit in March. The monthly increase equaled September’s gain of 0.2%.
Excluding food, energy and trade services, the index also rose 0.2% on the month and 5.4% on the year. Excluding just food and energy, the index was flat on the month and up 6.7% on the year.
“The PPI read certainly adds more fuel to the fire for those who feel we may finally be on a downward inflation trend,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office.
One significant contributor to the slowdown in inflation was a 0.1% decline in the services component of the index. That marked the first outright decline in that measure since November 2020. Final demand prices for goods rose 0.6%, the biggest gain since June an traceable primarily to the rebound in energy, which saw a 5.7% jump in gasoline.

The deceleration came despite a 2.7% increase in energy costs and a 0.5% increase in food.
Inflation has soared during the pandemic era as supply chains could not keep with overheated demand for long-lasting big-ticket items, particularly those dependent on semiconductors. Economists generally expect that inflation has at least plateaued, though there are plenty of risks on the horizon, including a potential rail strike that could apply new pressure to supply chains.
The producer index is generally considered a good leading indicator for inflation as it gauges pipeline prices that eventually work their way into the marketplace. PPI differs from the more widely followed consumer price index as the former measures the prices that producers receive at the wholesale level while CPI reflects what consumers actually pay.
Hopes that inflation is at least slowing spiked last week when the CPI showed a monthly gain of 0.4%, lower than the 0.6% estimate. The 7.7% annual gain was a deceleration from a 41-year peak of 9% in June. Markets also soared following Thursday’s CPI release.
Federal Reserve officials have been raising interest rates in hopes of bringing down inflation. The central bank has hiked its benchmark borrowing rate six times year for a total of 3.75 percentage points, its highest level in 14 years.
Markets on Tuesday afternoon were pricing in about an 80% chance that the Fed would downshift in rate hikes in December, with a 0.5 percentage point increase after four straight 0.75 percentage point moves.
Vice Chair Lael Brainard said Monday she expects the pace of hikes soon will slow, through rates are likely to still go higher. She said the Fed can move to a more “deliberate” posture as it watches the impact of its rate hikes.
In other economic news Tuesday, the New York Fed’s Empire State Manufacturing Survey for November registered a reading of 4.5%, an increase of 14 percentage points on a monthly basis and much better than the estimate for a -6% reading. The index measures the difference between companies reporting expansion vs. contraction.
However, both the prices paid and received components saw increases, rising 1.9 points and 4.3 points respectively.

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