By Claus Vistesen (from his personal blog Alpha.Sources)

I am not sure I buy the story that if China allowed its currency to appreciate all the world’s problems would be brushed away in one clean stroke. But I concur that the appreciation of China’s currency and indeed that of many of the big emerging markets primarily against the USD would certainly help. This is especially the case now that China (and the rest of the EM edifice) are sitting on a mounting inflation problem.

Dave Altig from the Atlanta Fed delivers a nice argument

(…) if printing money does not buy you control over real stuff, it is very definitely a factor in controlling the nominal exchange rate—a measure of the value in trade of currency for currency. And there, I believe, is the crux of the problem. To keep the nominal exchange rate from rising, the People’s Bank of China in effect prints yuan and buys dollars. Though this has limited impact on any real fundamentals, it is the source material for inflation. In fact, if a monetarist heart beats within you, the picture of the recent Chinese inflation experience will surely warm it.

I have long believed that one part of the problem here is the unique focus on China where the real focus should be on much broader based global currency alignment in which a basket of emerging market currencies appreciate against the G3 as a whole. This would then serve to rebalance global aggregate demand most efficiently.

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As an economist there are many things to feel negative about at the moment and I would honestly admit that also I must sometimes struggle not to descend into the bottomless pit of eternal doom and gloom. In that vein, I was refreshed by the Economist’s recent look at 3D printing which basically covers a whole new and growing area of manufacturing (of everything imaginable) in 3D much the same way as printing a piece of paper.

THE industrial revolution of the late 18th century made possible the mass production of goods, thereby creating economies of scale which changed the economy—and society—in ways that nobody could have imagined at the time. Now a new manufacturing technology has emerged which does the opposite. Three-dimensional printing makes it as cheap to create single items as it is to produce thousands and thus undermines economies of scale. It may have as profound an impact on the world as the coming of the factory did.

It works like this. First you call up a blueprint on your computer screen and tinker with its shape and colour where necessary. Then you press print. A machine nearby whirrs into life and builds up the object gradually, either by depositing material from a nozzle, or by selectively solidifying a thin layer of plastic or metal dust using tiny drops of glue or a tightly focused beam. Products are thus built up by progressively adding material, one layer at a time: hence the technology’s other name, additive manufacturing. Eventually the object in question—a spare part for your car, a lampshade, a violin—pops out. The beauty of the technology is that it does not need to happen in a factory. Small items can be made by a machine like a desktop printer, in the corner of an office, a shop or even a house big items—bicycle frames, panels for cars, aircraft parts—need a larger machine, and a bit more space.

Needless to say that this holds the potential to completely revamp manufacturing processes and re-define the nature of scale economies. However, apart from the potential to re-navigate the face of the already established manufacturing industry two things stand out to me.

First, the notion of 3D printing brings the world of science fiction closer by leaps and bounds. Forget about printing a cup at home if you break one in the kitchen. Think about 3D printing in conjunction with the emerging technology of manufacturing organs and other organic material. Then think about the promise of needing to use much less raw material and you are only a small step away from Picard pushing a button in Star Trek and invoking a meal or, of course, the irresistible scene in the Fifth Element in which   an obviously hungry Leeloo creates a nice juicy chicken in a split second using, presumably, a small capsule containing the condensed raw material to create such a meal. Clearly, such things would easily be possible in a 3D printing setting. And, indeed, once transferred into a setting of " organic material" , the possibilities are mind blowing.

Second, I am in awe about the potential this holds for home and small scale manufacturing in connection with an open source environment. Obviously as the Economist points out, the flip side to this is that companies will need to come up with new ways to protect source codes (or blue prints) to their products since this would be the main source of their intellectual property. Yet, the heretic in me marvels on the potential of this coupled with some nifty reverse engineering. Imagine a complex product such as a Porsche 911. What if you could reverse engineer it, supply the material, and then feed the blue print into your generic manufacturing scale printer and presto, you would be the maker of luxury German (or Danish) sports cars. Clearly, how companies serve to protect themselves from exactly this kind of abuse is crucial to the success of 3D printing. But then again, one could easily imagine companies selling blueprints online to simpler products which consumers could then produce at home.

In short, if you want a positive view of the future, look no further.

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Finally and perhaps because it spoke kindly to be prejudices in relation to the ongoing climate change debate, I really liked Leon Neyfakh’s review of a new book by Colby College historian of science James Rodger called “Fixing the Sky: The Checkered History of Weather and Climate Control,”

One can’t help but feel a little embarrassed on behalf of the species, to have been involved in all this fuss over something as trivial as the weather. Is the human race not mighty? How are we still allowing ourselves, in the year 2011, to be reduced to such indignities by a bunch of soggy clouds?

It is not for lack of trying. It’s just that over the last 200 years, the clouds have proven an improbably resilient adversary, and the weather in general has resisted numerous well-funded — and often quite imaginative — attempts at manipulation by meteorologists, physicists, and assorted hobbyists. Some have tried to make it rain, while others have tried to make it stop. Balloons full of explosives have been sent into the sky, and large quantities of electrically charged sand have been dropped from airplanes. One enduring scheme is to disrupt and weaken hurricanes by spreading oil on the surface of the ocean. Another is to drive away rain by shooting clouds with silver iodide or dry ice, a practice that was famously implemented at the 2008 Olympics in Beijing and is frequently employed by farmers throughout the United States.

And of course, the last paragraph strikes a special chord with me

The good news for practitioners of weather control is that amid all this complexity, they can convince themselves and others that they deserve credit for weather patterns they have probably had no role whatsoever in conjuring. The bad news for anyone who’d like to prevent the next 2-foot snow dump — or the next 2 degrees of global warming — is that there’s just no way to know. As Fleming’s account of the last 200 years suggests, it may be possible to achieve a certain amount by intervention. But it’s a long way from anything you could call control. Those who insist on continuing to shake their fists at the sky should make sure they have some warm gloves.

Makes sense to me.

Asian Markets End Mixed - * Tonite, no US market.

(RTTNews) - Asian stock markets closed on a mixed note Monday as escalating tensions in the Middle East and North Africa encouraged investors to book some profits after a rally last week. Improving demand for safe haven investments helped the Japanese yen gain slightly and the dollar strengthened against most of its major counterparts on concerns that unrest in the Middle East and inflationary pressures could hamper the global economic recovery.

With instability in the Middle East raising concerns of supply disruption, crude prices rose over 2 percent above $88 a barrel in late Singapore trading.

China's Shanghai Composite index gained 1.14 percent to end at a more than three-month high, led by oil refiners and steel companies. However, analysts said the central bank's decision on Friday to raise banks' reserve requirement ratio by 0.5 percentage point, will curb further upside in the market.

Japan's benchmark Nikkei posted a modest 0.14 percent gain, extending its gains for a sixth consecutive session, as investors shrugged off China's latest rate hike and bought energy stocks such as Inpex and Showa Shell amid instability in the Middle East.

A stronger yen earlier in the session triggered some profit taking in technology stocks such as Advantest and Tokyo Electron ,which ended down between 0.4 percent and 2 percent.

After a sharp fall in the previous session, India's benchmark Sensex rose 1.25 percent to close near the day's high on Monday, thanks to some brisk buying in the afternoon in IT, consumer durable, oil/gas, banking and metal stocks.

The key benchmarks in South Korea, Hong Kong, and Singapore and Australia ended down between 0.39 percent and 0.70 percent. The U.S. markets are shut on Monday for the Presidents Day Holiday.

On the macroeconomic front, Hong Kong's unemployment rate for the period between November 2010 and January 2011 dropped to 3.8 percent on a seasonally adjusted basis, the lowest since August-October 2008, the Census and Statistics Department said Monday.

Elsewhere, the Japanese government upgraded its view of the economy for the second consecutive month, saying that exports and production had lifted growth following a temporary lull. " The Japanese economy is showing movements towards a pickup and emerging from a recent pause in activity," the Cabinet Office said in its latest monthly report on Monday.

Bad News For The PIIGS: Angela Merkel's Party Gets Crushed In Regional Elections

Obviously the bailouts of Europe have not been popular among the Germans, and it seems Angela Merkel's party, the Christian Democrats, are suffering the consequences.

They were, apparently, crushed in regional elections. NYT reports that the CDU took 21% of the vote in Hamburg, down from 42% last time around.

Bear in mind that this was just a regional election -- like a state election in the US -- and the CDU insists that it's only a local matter, not reflective of any national or international issues. That seems somewhat doubtful.

Meanwhile, the Euro has begun the week higher, so at the moment this doesn't appear to be causing ripples.

Brand New Survey Says Chinese Manufacturing Momentum Slowed To Is Lowest Level In 7 Months

Image: Jakob Montrasio on flickr

Next week comes the latest reading of China's PMI -- the survey of manufacturers -- but today HSBC has rolled out a new survey, its " Flash" PMI to give an advance reading on the number.

 

And it was pretty mediocre.

It fell from over 54 in January to 51.5 for February. That still means more companies saw expansion than didn't, but it would represent the lowest month in 7 months.

Of course, we'll have to wait until next month to see how this fits with the official PMI.

World shares mixed amid worries about Middle East

By PAMELA SAMPSON
AP Business Writer

(AP:BANGKOK) World stock markets were mixed Monday, with investor on edge as political unrest in the Arab world spread to OPEC member Libya while oil stocks helped some benchmarks advance.

Crude prices jumped above $88 a barrel amid investor concern that the violent protests rocking Libya could disrupt its oil supplies. In currencies, the dollar weakened against the yen and the euro.

European bourses slumped, then rebounded, in early trading. Britain's FTSE 100 rose 0.4 percent to 6,104.37. Germany's DAX was up 0.1 percent to 7,435.90 while the CAC-40 in Paris fell 0.1 percent to 4,153.15. Markets in the U.S. are closed for a holiday.

Japan's Nikkei 225 stock average rose 0.1 percent to 10,857.53 with the index enjoying a six-day winning streak to close at a 10-month high. Inpex, Japan's largest energy explorer, gained 1.7 percent _ in line with higher oil prices and investors leaning toward commodities over equities during times of uncertainty.

Sentiment was tempered, though, by a move Friday by China to control inflation. Beijing ordered its banks to hold back more money as reserves, raising the required level by 0.5 percent of deposits. Reserves vary by institution but are about 20 percent for China's biggest state-owned lenders.

Hong Kong's Hang Seng index lost 0.4 percent to 23,508.62, although oil companies helped stem losses. State-owned oil company CNOOC Ltd. rose 1.7 percent and PetroChina Ltd., China's biggest oil and gas producer, was up 0.9 percent.

South Korea's Kospi fell 0.4 percent to 2,005.30 and Australia's S& P/ASX 200 shed 0.7 percent to 4,900.

Benchmarks in Taiwan, Singapore and New Zealand also retreated.

Shares of Australian resource companies, which rely heavily on growing Chinese demand, slumped in response to China's latest reserve requirement hike. BHP Billiton Ltd. fell 1.5 percent. Rival Rio Tinto Ltd. lost 1.7 percent. Japanese stocks also sensitive to Chinese demand dropped, including Komatsu Ltd., a maker of construction equipment, by 0.4 percent, and Hitachi Construction, down 0.9 percent.

But mainland Chinese shares shrugged off the central bank's move, buoyed by gains in heavyweight oil company shares following an increase in Chinese fuel prices over the weekend. The benchmark Shanghai Composite Index gained 1.1 percent to 2,932.25. The Shenzhen Composite Index gained 1.9 percent to 1,297.66.

A vow by a top leader, Wang Qishan, to build up China's already thriving tourism industry drove a rally in travel shares. Travel operator Emeishan Tourism Co. hit the upside daily limit of 10 percent.

" The plan is a way of stimulating domestic demand and promoting economic growth," said Peng Yunliang, an analyst at Shanghai Securities.

While analysts kept an eye on Mideast unrest, they noted that Asian markets had performed well recently and were perhaps due for some profit-taking.

" I think the focus is on the nervousness in the Middle East with the potential disruption to oil supplies. The markets have been pretty volatile in the past few weeks because of this added geopolitical uncertainty, but Asian equities had a pretty good bounce last week, so maybe this is a little correction to that," said David Cohen, economist at Action Economics in Singapore.

On Sunday, Moammar Gadhafi's son went on state television in Libya to proclaim that his father remained in charge with the army's backing. Seif al-Islam Gadhafi, in the regime's first comments on the six days of anti-government demonstrations, also warned protesters that they risked igniting a civil war in which Libya's oil wealth " will be burned."

Libya's response has been the harshest of any Arab country that has been wracked by the protests that toppled long-serving leaders in neighboring Tunisia and Egypt. The instability has pushed oil prices higher amid worries of supply disruptions.

Markets in the U.S. will be closed Monday for the President's Day holiday. Germany's Ifo institute was to release its monthly index of business confidence, a closely watched indicator for Europe's biggest economy.

In currencies, the dollar was down to 83.14 yen from 83.16 yen late Friday. The euro rose to $1.3696 from $1.3690.

Benchmark crude for March delivery was up $2.17 at $88.37 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 16 cents to settle at $86.20 on Friday.

___

AP researcher Fu Ting contributed from Shanghai.

China e-commerce site Alibaba reports fraud probe

(AP:SHANGHAI) Chinese e-commerce supplier giant Alibaba says two of its top executives are resigning to take responsibility after a probe discovered more 2,326 suppliers had defrauded online customers.

Alibaba said in a notice Monday to the Hong Kong Stock Exchange that its chief executive and chief operating officers, who were not implicated by the investigation, were resigning to take responsibility for the company's " breakdown in integrity."

The company said 100 sales representatives allegedly involved in defrauding customers were fired, but that no higher-level managers were suspected of wrongdoing.

Steve Jobs Seen at Dinner with Obama

The White House on Friday released a photo showing Apple CEO Steve Jobs, who according to persistent rumors has six weeks to live, at a dinner for IT executives hosted by U.S. President Barack Obama.

The picture of the event held in Woodside, California on Thursday, shows a frail-looking Jobs from behind in his trademark black turtleneck next to the president and raising his glass for a toast along with other business leaders.

U.S. President Barack Obama (second right) joins a toast with IT business leaders at a dinner in Woodside, California on Saturday. Apple  chief executive Steve Jobs, on medical leave from the company he co-founded, is seen in red circle next to the president. On Obama's right is Facebook founder Mark Zuckerberg. /Reuters-Yonhap