The financial news this morning (in the UK) is that China has devalued again (first time yesyerday).
As China supplies so many of our goods - not least model railways! - I wonder if those colleagues with experience in financial matters could comment on the implications (if any) for consumers.
My limited understanding is that the devaluation is aimed at boosting the economy by stimulating growth, in particular exports.
My Qs is, does this have any effect on the price of our imports?
Thanks
Adrian
I somehow doubt any savings made in manufacturing costs through currency devaluation will be passed on to the end consumer in any tangible way. Hopefully it will reduce the inflationary tendencies in model railway pricing in the medium term at least...
In my experience as a supplier to the Australian market, the big retailers used to demand an immediate reduction in their buy in price from the importer. However, this decrease rarely made it through to the consumer. The justification being that the retailer had "high overheads" and needed the extra margin to support growth and shareholder confidence. However, when the exchange went the other way, the major retailers used to refuse to accept any increases from the importer, arguing that they were not in any position to impose increases on the "poor, buying public".
Of course, this was only with the major retailers, the Aus versions of B&Q, Tesco etc. It may be different in our miNiature world, but somehow I doubt it.
Cheers, Bill
i think its only 4% - so no massive price cuts!
http://www.theguardian.com/business/2015/aug/12/china-yuan-slips-again-after-devaluation (http://www.theguardian.com/business/2015/aug/12/china-yuan-slips-again-after-devaluation)
the £ is strong against the €, so go Continental!
Are most deals with Chinese companies negotiated in hard currencies , if this is the case will the devaluation make any immediate difference?
Probably many companies have 'hedged' their currencies i.e. bought ahead at a rate they consider favourable so I really can't see us getting any benefit :(
Really?
Us ordinary punters getting no benefit from the global crooked banking world?
(hollow laugh)
I asked myself the same question this morning. Whatever the size of devaluation the effect will no doubt be the normal one way ratchet which applies elsewhere. The prices to us will usually rise (by more than a revaluation?) if the pressure is upward. And never down by the full extent of devaluation, if at all. In other words any benefits are lost in the supply chain and extra costs passed on to the final consumer. Or am I being, perhaps, just a little cynical?!
Quote from: Portpatrick on August 12, 2015, 01:38:41 PM
...Or am I being, perhaps, just a little cynical?!
You say potato, I say tomato,
You say cynical, I say 'quite likely!'
Let's call the whole thing off.....
Sorry, Sinatra I ain't!
I think, within the context of the General Discussion section ie quite separate from our modelling interests, it is legitimate to review current world affairs.
My OP was a genuine enquiry about the Chinese economy and my purpose was to seek the views of those in our community who have wider experience than me on global financial matters.
I apologise if I have misinterpreted the drift of your response to the earlier contributor - I just feel that the nature of the Qs invited contributions whatever the views of those posting and this is what Portpatrick did.
Best regards
Adrian
If you have read Zogbert's other posts you would know he is probably being flippant, not trying to put Portpatric down.
Thanks Steve, I appreciate the tip -I wasn't sure, hence I did offer my apologies if I misunderstood what had been said.
Eternal trap of emails etc, I guess
Best
Adrian
For the record, I was certainly in no way upset by Zogbert's comment. Perish the thought!
I saw it as in similar vane to my own rather cynical - or was it worldly wise - comment, in the light of 40 years as a trainee then qualified management accountant, preceded by 2 years preparing for A level Economics! (No I have no university degree). Not to mention years of seeing, for example, how petrol and domestic utility costs go quickly up and hardly ever down in response to outside influences. I would of course be delighted if there was an obvious downward influence on the Sterling price of our models, but I am not holding my breath. Not least too many other factors at play - such as the upward pressure on Chinese labour costs, the probability that Dapol and Bachman will have forward rates for their Yuan.
On a different note, it could be that China in its reasonable desire to increase the living standards of its own hard working population could price itself out of the business. Could the economics and business model move in favour of moving the whole thing either back to the UK, or to another country? Decades ago, my late father - an electrical engineer by profession - had an idle thought that if we all earn the same we cannot afford to employ each other. Simplistic but a kernel of truth in that.
That's the problem with posting random so-called "witty" remarks in an otherwise serious thread - if you don't include a smiley to let people know you're joking it can come across as being very flippant and dismissive ;)
Paul
Seems I have upset more than one person with my parody of a popular song. For that I apologise. I don't think, in the nature of my post, that a 'smiley' would have made much difference to what is being seen as a 'so-called "witty" remark'... Despite that, my apology stands with no reservations.
I think it may well be time for me to cut right back on my flippant and so called witty remarks.....
Regards, Allan..... :-X :-[
Quote from: Zogbert Splod on August 12, 2015, 09:16:03 PM
I think it may well be time for me to cut right back on my flippant and so called witty remarks.....
Regards, Allan..... :-X :-[
Don't!!! :no: :no: Your 'flippant' remarks usually bring a smile to my face. Having read a lot of your posts, I think I have a similar sense of humour to you ;) (And I am not being flippant when I say that (with a smiley) :)). David.
Being an eternal optimist I would like to think we may see some benefit but I doubt it. Isn't Bachmann Chinese owned? The Chinese government wants to increase salaries by 20% annually for the next few years so I think more devaluation is to come.
Connected with this is that I think now many offerings are way overpriced. Many people, myself included cannot afford to pay some of the prices asked. I know that models produced today are well detailed but with aging eyesight the fine detail is lost on me.
I agree the detail on modern stock is fantastic but a lot is unnecessary for instance all the underfloor stuff in the middle of a chassis after all when it's running you cannot possibly see it ,I say get the roofs right and your halfway to a decent model .how come the Pendolino is such a good price for a full rake with two power cars and all the coaches when a single loco now is about £150 or more, if you think about it we are getting the coaches free.
Let's get the quality and reliability sorted before all this fancy detailing its no good looking fantastic if it doesn't run well or it fails just after the running in period and just out of warranty.
Bob
I tend to agree... good running is the important factor. I have posted before about how I've broken off some of the fine detail just taking the model out of the packing for it's first excursion!
Performance is paramount. :thumbsup:
Getting off-topic here, detail has nothing to do with the original question about revaluation affecting prices ;)
The "moaning about detail" thread is here (http://www.ngaugeforum.co.uk/SMFN/index.php?topic=22906.0) :thumbsup:
Paul
Quite correct, Paul... I'm on phone and replied without looking at the name of the thread. Sorry! :-[
George
:sorrysign: Paul it's my fault I consider myself suitably chastised I'll try harder not to post in the wrong thread again I promise .
Bob
No Zog! I for one enjoy your witticisms
Oh the tangled webs we do weave :) !
Where am I going wrong with the following :
It is only 4%, or have they done some more devaluing since I last looked ?
Not a lot to get worked up about is it ?
Worse - it is only 4% of the Chinese side costs. What proportion of the cost to us is represented by that Chinese cost ?
Not a lot going by the cost of things sourced in China (and/or Hong Kong) on ebay compared to something from , , ummm, well I was about to say USA but infact just about anywhere else in the real world.
I blame the middle men and those in the Treasury & IR & subcontractors charged with collecting of taxation without (effective) representation, anyone for a cup of tea ?
>> whoosh >>>
Interesting topic this. I'll throw in my two cents worth, but please bear in mind it's many years since I was in an Econ lecture auditorium. I'd be very interested if anybody out there could build on this, or even correct me if I'm wrong.
Ok, here we go ...
First of all (before we talk about currencies), let's consider which two fundamental forces determine price. These two forces are SUPPLY and DEMAND. In graphical terms, where the supply curve and the demand curve meet, we get what is called an EQUILIBRIUM price.
Look at the SUPPLY and DEMAND curves (they're not actually curves but straight lines) in the graph below. Forget the red curve SUPPLY 1 for a moment. You can see that where the SUPPLY and DEMAND curves cross eachother, we get an equilibrium price P) on the left hand axis, and a quantity demanded (D) on the bottom axis.
[smg id=28140 type=preview align=center caption="image"]
So, what does an effect of a currency devaluation have on the above graph (in simplistic terms)? A currency devaluation, in effect making the product cheaper to produce, shifts the SUPPLY curve to the right, to give SUPPLY 1 ( the red supply curve). Thinking about it in plain speak, if we're only interested in buying one loco, that loco has now become cheaper to buy at a price that is both agreeable to the buyer and the seller. However, it also has the effect of INCREASING DEMAND.
Price has gone down from P to P1 on the left hand axis, and demand has increased from D to D1 on the bottom axis.
So, by how much does price decrease and by how much does demand increase? A major factor determining this is DEMAND ELASTICITY. This is a propensity to buy something (demand) given a change in price. Think of it as an elastic band. A very elastic band stretches far, a very I elastic band will not stretch very much.
And so it goes, in a case where demand is very elastic, demand will change dramatically given a change in price. Where demand is very inelastic, demand will not change much given a change in price. Where N Gauge locos sit, who knows?
Examples of ELASTIC demand might be a coffee in the morning on your commute to work. If it goes up in price you might decide to only have one per week, instead of five, or perhaps have one at home before you leave. Another example might be going to the cinema. If it goes up in price you might decide to just stay home instead and watch Auntie (the BBC for you antipodes) instead.
Examples of INELASTIC demand would be things such as food and utilities. We need these to live, and will cut back on pretty much everything else before we cut back on these. This would tie in with Portpatrick's observation above of how we rarely perceive domestic utility and petrol costs to go down (well petrol has indeed fallen), since our demand elasticity for these goods is very INELASTIC. Hence markets such as these require government regulation and intervention.
So, why are we going on and on about demand elasticity? Well, we wanted to explore by how much prices might change. Look now at the graph below, with two green demand curves. The solid green demand curve represents and elastic product and is flat. The dotted demand curve represents an inelastic product and is steep.
[smg id=28141 type=preview align=center caption="image"]
If we considered demand for n gauge locos to be elastic (solid green, flat demand curve), we would see that the currency devaluation would have a large effect on demand, with quantity demanded moving from D all the way across to D (ELASTIC) on the bottom axis. Price would not drop by much, from P to P (ELASTIC) on the left axis. This makes sense when you think about it - a small change in price causes a large change in demand, since we are price sensitive.
If we considered demand for n gauge locos to be inelastic (dotted green, steep demand curve), we would see that the currency devaluation would have a small effect on demand, with quantity demanded moving from D only to D (INELASTIC) on the bottom axis. Price would drop by a larger amount, from P to P (INELASTIC) on the left axis. This also makes sense when you think about it - a large change is price causes not much of a change in demand, since we are price insensitive.
The astute might have noticed that the above two paragraphs are worded almost the same, except they are the opposite of each other.
So, in conclusion, by how much devaluation changes the demand of a product, depends very much upon our elasticity (sensitivity to price) of that product.
Additionally, the above is applicable for competitive markets, where producers can enter and exit the market at will. Obviously this is not the case with Graham Farish, since there is only ONE Graham Farish. It wouldn't hold for a single manufacturer, such as Graham Farish, since they have the ability to restrict supply, and hence stop the shift in the supply curve to the right, from SUPPLY to SUPPLY 1 (red curve). In a competitive market, with many manufacturers, however, the theory should work.
The point above about a manufacturer being able to restrict supply (stopping the shift of the supply curve to the right) goes some way to explaining why companies invest in branding. By branding their products, whether it be Graham Farish, BMW, PG Tips, or whatever, they are trying to convince consumers that THEY are the market, that their are no substitutes for their product, and hence they can manipulate the laws of supply and demand discussed above.
Would be interested to be corrected on any of the above. There are other factors involved and I don't believe we'll see a significant price drop from Graham Farish and the like. We'd have to consider the whole mix - taxation, wage pressures, companies' perceptions of the durability of the devaluation etc. etc. However, if we wanted to consider the effects of a devaluation in isolation, then I believe the above should hold.
Best
Dan
My brain hurts. ;) :)
Can someone translate that into English, please, and preferably using 1-syllable words ???
Quote from: MikeDunn on August 14, 2015, 08:02:03 PM
Can someone translate that into English, please, and preferably using 1-syllable words ???
I well remember my Economics Lecturer from years ago succinctly describing the subject as "common sense made difficult" and that has stuck with me ever since!
Roy
In as few words as possible
Luxuries like Model Railways (if that is what they are) wont drop in price much.
Quote from: MikeDunn on August 14, 2015, 08:02:03 PM
Can someone translate that into English, please, and preferably using 1-syllable words ???
Easy, the answer to the original question is "NO" ;)
Paul
Simple & 1-syllable - :thumbsup:
Quote from: Roy L S on August 14, 2015, 08:09:36 PM
Quote from: MikeDunn on August 14, 2015, 08:02:03 PM
Can someone translate that into English, please, and preferably using 1-syllable words ???
I well remember my Economics Lecturer from years ago succinctly describing the subject as "common sense made difficult" and that has stuck with me ever since!
Roy
Reminds me of the arguement as to whether economics is a science or not.
Interesting thought as to whether prices would ever go down. I wonder if they dropped in Japan with the years and years of deflation they've had.
That said, with all the money printing in the West, I also suspect the answer (for new models at least) is no.
Sorry if the above was dry - just an attempt to answer the question. Ask me about something else, such as wiring up a layout, and I most probably wouldn't have a clue! ;D
Dan
As the Chinese Yuan was devalued twice, does this mean that Dan needs some different coloured pens and more paper ??? :smiley-laughing:
Quote from: dannyboy on August 14, 2015, 10:56:46 PM
As the Chinese Yuan was devalued twice, does this mean that Dan needs some different coloured pens and more paper ??? :smiley-laughing:
:laughabovepost:
or maybe two more dimensions,
orthogonal to his first two. :laugh:
Dan, what happens if the increment/decrement is infinitesimally small compared to the final integral.
Quote from: MalcolmAL on August 14, 2015, 11:30:11 PM
orthogonal to his first two. :laugh:
Dan, what happens if the increment/decrement is infinitesimally small compared to the final integral.
If he is orthogonal enough, he will just end up back at square 1 :)
Quote from: dannyboy on August 14, 2015, 11:34:03 PM
If he is orthogonal enough, he will just end up back at square 1 :)
wouldnt that be square root(-1) if he was in his 4th dimension ? :laugh3:
:laughabovepost: I think we are just going round in circles here :smiley-laughing: Getting back to the OP, if there are any small savings to be made, I do not think they will get down the line as far as us buyers :no: - could be just my cynical side coming out. :) David.
Quote from: DesertHound on August 14, 2015, 09:05:19 PM
Quote from: Roy L S on August 14, 2015, 08:09:36 PM
Quote from: MikeDunn on August 14, 2015, 08:02:03 PM
Can someone translate that into English, please, and preferably using 1-syllable words ???
I well remember my Economics Lecturer from years ago succinctly describing the subject as "common sense made difficult" and that has stuck with me ever since!
Roy
Reminds me of the arguement as to whether economics is a science or not.
Interesting thought as to whether prices would ever go down. I wonder if they dropped in Japan with the years and years of deflation they've had.
"Crawled sideways" would be a better description. I haven't measured it scientifically, but in general prices seem more-or-less the same as when I was first here as a student some 20-odd years ago. Many were even identical until last year, when consumption tax went up from 5% to 8%. Some prices do fluctuate of course, such as petrol and domestic produce. The availability of cheap Chinese imports has driven down the prices of a lot of consumer goods. Model railways remain astounding value for money, though MicroAce seems to be gambling on price elasticity among its consumers and has jacked up prices eyewateringly recently (almost to British levels).
Quote from: dannyboy on August 14, 2015, 11:52:31 PM
:laughabovepost: I think we are just going round in circles here :smiley-laughing: Getting back to the OP, if there are any small savings to be made, I do not think they will get down the line as far as us buyers :no: - could be just my cynical side coming out. :) David.
Nah, I think that's the general conclusion. The only way we'd see any tangible reduction would be with a much greater devaluation, say 30~50%.
Quote from: MalcolmAL on August 14, 2015, 11:30:11 PM
Quote from: dannyboy on August 14, 2015, 10:56:46 PM
As the Chinese Yuan was devalued twice, does this mean that Dan needs some different coloured pens and more paper ??? :smiley-laughing:
:laughabovepost:
or maybe two more dimensions,
orthogonal to his first two. :laugh:
Dan, what happens if the increment/decrement is infinitesimally small compared to the final integral.
Then I think we need to call Carol Vorderman :laugh:
Oooooh .... You lot are a mischievous bunch, what with coloured pen remarks and orthogonal goings on. I know you're just trying to get me back with words I don't understand :beers:
Good topic though. I'll happily throw the text book out of the window though and say prices ain't going down.
Dan
Quote from: DesertHound on August 15, 2015, 11:46:31 AM
call Carol Vorderman
,
a mischievous bunch,
,
and say prices ain't going down.
:thumbsup: :laughabovepost: :beers:
,
that's a good idea
,
incorrigible, is another word that comes to mind :)
,
your not wrong there !
DesDan&everyone, good thread, and good bit of fun, thanks.