Skip to comments.CHINA FLOATS, AMERICA SINKS
Posted on 07/22/2005 9:00:48 PM PDT by hedgetrimmer
In case you haven't the least idea what the heck it means for China to "float" its currency, let me put it in the language we economists use: China's float don't mean squat. Yet our President, a guy whose marks in Economics 101 are too embarrassing to publish here, ran out to hail the fact that buying Chinese money will now cost more dollars.
The White House line to the media, swallowed whole, is that by making Chinese money (yuan) more expensive to buy with dollars, Americans will buy fewer computers and toys from China--and US employment will rise.
This will happen when we find Saddam's Weapons of Mass Destruction.
Economics Lesson #1: You can't change the value of goods by changing the value of the currency on the price tag. As my comrade Art Laffer wrote me, "If cheap currency makes your products more competitive, all automobiles would be made in Russia." Driven a Lada lately?
Economics Lesson #2: Don't take economics lessons from George Bush. Or Milton Friedman. Or Thomas Friedman. What that means, class, is don't believe the big, hot pile of hype that China's zooming economy is the result of that Red nation's adopting free market economic policies.
If China is now a capitalist free-market state, then I'm Mariah Carey. China's economy has soared because it stubbornly refused the Free--and Friedman-Market mumbo-jumbo that government should stop controlling, owning and regulating the industry.
China's announcement that it would raise the cost of the yuan covered over a more important notice: China would bar foreign control of its steel sector. China's leaders have built a powerhouse steel industry larger than ours by directing the funding, output, location and ownership of all factories. And rather than "freeing" the industry through opening their borders to foreign competition, the Chinese, for steel and every other product, have shut their borders tight to foreigners except as it suits Chinas own industries.
China won't join NAFTA or CAFTA or any of those free-trade clubs. In China, Chinese industry comes first. And it's still, Mssrs. Friedman, the Peoples republic. Those Wal-Mart fashion designs called, chillingly, "New Order," are made in factories owned by the PLA, the Chinese Peoples' Liberation Army.
China's government, by rejecting free-market fundamentalism, can easily conquer American markets, where protection is now deemed passé. And that is why the yuan has kicked the dollar's butt.
In an interview just before he won the Nobel Prize in economics, Joe Stiglitz explained to me that China's huge financial surge--a stunning 9.5% jump in GDP this year--began with the government's funding and nurturing rural cooperatives, fledgling agricultural and industry protected behind high, high trade barriers.
It is true that China's growth got a boost from ending the bloodsoaked self-flagellating madness of Mao's Cultural Revolution. And China, when it chooses, makes use of markets and market pricing to distribute resources. The truth is, Chinese markets are as free as my kids: they can do whatever they want unless I say they can't.
Yes, China is adopting elements of "capitalism." And that's the ugly part: real estate speculation in Shanghai making millionaires of Communist party boss relatives and bank shenanigans worthy of a Neil Bush.
It is not the Guangdong skyscrapers and speculative bubble which allows China to sell us $162 billion more goods a year than we sell them. It is that China's government, by rejecting free-market fundamentalism, can easily conquer American markets, where protection is now deemed passé.
And that is why the yuan has kicked the dollar's butt.
Americas only response is to have Alan Greenspan push up real interest rates so we can buy back our own dollars the Chinese won in the export game. The domestic result: US wages drifting down to Mexican maquiladora levels.
Am I praising China? Forget about it. This is one evil dictatorship which jails union organizers and beats, shackles and tortures those who don't kowtow to the wishes of Chairman Rob--Wal-Mart chief Robson Walton. (Funny how Mr. Bush never mentions the D-word, Democracy, to our Chinese suppliers.)
Free trade and China have no place in the same sentence, unless you are talking about what China DOESN'T have.
Fair enough. Just to give us an idea, how do they compare to yours?
This article was posted for discussion purposes. The opinion of the author is not necessarily my own.
Where I stopped reading this biased crap.
Although I do have a healthy disdain for communism.
So Mr. Palast your smarter than all of the Presidents economic advisers I suppose...
Thought you were a troll until I checked your membership date.... I don't care, I still think you are a troll.
WMT trading at $49.54.
China is currently our third largest creditor. This is a fact that many on both sides of the free trade issue often fail to mention. That is to say, it's always a good policy not to through a brick through the window of the bank that holds you mortgage.
One quick background check on Mr. Palast & the Baltimore Chronicle was all I needed....lovely friends he keeps...Asner, Baldwin, ....nuf said....
You should have stated in your initial comments what you agreed with and what you didn't. I once posted a sarcastic comment without the word sarcasm and I was almost kicked off.
My comment was directed towards the author.
So this dumb-donkey who wrote this article thinks it is far better for the government to control the economy? A liitle fascist or communist huh? I will bet you that if they could, the Chinese workers would lovre to have some American workers rights. Oh yes the mighty Chinese sweatshops make the ones here in the US look like pre-school. What a load of BS!
Such a well spoken, refined economist, who wouldn't listen to what he has to say. This is sounds the kind of guy you can really trust.
Ya, I know they are threatening Taiwan, but they know if we go to war, both our and the Chinese economies will collapse.
I did say that China and "free trade" have no place in the same sentence. China is far from a market economy, and its best for America, IMO, to keep that in mind when we are making policy and trade agreements with China.
The author of this article has a very outdated understanding of China. China is far more complex than how he thinks it is. In the June 2005 (Vol 15, No 06)of China Economic Review, there is a great article titled "Taking measure of the Yuan". It is on page 20. I urge anyone interested in the full issues related to China to read this article.
I stopped reading when I got to the name "Greg Palast". I don't care what any lib god of the minute has to say.
Hu Jintao: All your bonds are belong to us! George Bush: Suckerrrrrrrr!
I'm not certain they even have to go to war with us at this point. If they stop financing our debt, then our economy takes a mighty hit.
Here is what they are saying in Bangladesh (again, this is for comment and discussion):
While China's regime is clearly authoritarian, so is Saudi Arabia's The latter is governed by a repressive feudal monarchy with an appalling human rights record. It is linked to the export of terrorism. It is linked to the export of terrorism. It is so far from being a free market economy that it has still not qualified to join the World Trade Organisation (WTO). Yet Washington not only tolerates Saudi leaders, it cossets them.
The US needs to keep the Saudi regime sweet because of its oil. But to assume, as American China-bashers implicitly do, that the US does not need China and can bend it to its own will is self-delusion. The two countries are deeply interdependent. China's need for US exports and inward investment is mirrored by is importance as a prime source of funding for the US budget and current account deficits. To rage about China's designs on a medium-sized energy company, while relying on it to pay for the upkeep of federal government -- including its defence programmes -- verges on the surreal.
Why? Unless there is some kind of call feature in your mortgage, the bank can't do squat, except ask you to buy another window. Once the loan has been made, you've got what you want and they sweat, wondering if you are going to pay them back. Then it is the lender's turn to be worried about what the borrower does for the next ___ years.
Ask your self two questions: Do you wonder more about your credit card balance or your investment account balance(s)?
If your stock or bond tanks, does the issuer of your investment call you and beg you not to sell it, like your credit card card company calls you looking for its payment if you miss a month?
In many ways, the borrower is sitting in the driver's seat -- after they get the loan.
"I don't care, I still think you are a troll."
Shooot...trolls is nuthin...
Wait til you meet up wid dem pod people...watch out buddy!
Okay, wrong analogy. Let me put it another way -- if they don't show up to the party and buy our bonds, then we have to increase interest rates. In order to finance those increased interest rates, the rates to bank have to increase. When interest rates start edging above seven percent for a mortgage, the you may see a collapse in housing prices.
And yes, I know the old saying, owe the bank $10,000 and they own you. Owe them $10 million and you own them.
China, however, is a special case. The leaders really don't have to answer to anyone.
On Thursday, the U.S.-China Economic and Security Review Commission, a congressionally mandated watchdog panel, met on Capitol Hill to review China's diplomatic, economic and military objectives. Witnesses warned that China's efforts to nail down oil reserves are likely to rankle Americans.
Since 1993, "China has traversed the globe in a relentless quest for energy sources to fuel its booming economy," said Gal(cq) Luft, executive director of the Institute for the Analysis of Global Security. He said China will continue to engage in "aggressive competition" for oil.
Many lawmakers fear that China is seeking oil so that it can fuel the rapid growth that would pay for a military buildup.
Earlier this week in its annual report on Chinese military power, the Defense Department said China's rapidly modernizing military may pose a threat to the region surrounding it. The summary said the Chinese People's Liberation Army seems to be making "preparations to fight and win short-duration, high-intensity conflicts along China's periphery."
Luft noted that as a result of China entering into an energy deal with Iran last October, it blocked a U.S. attempt to refer Iran's nuclear program to the United Nations Security Council. That showed "China is interested in a militarily strong, even nuclear, Iran that could challenge U.S. domination of the Persian Gulf," he said.
...then Americans will only be able to afford Chinese made junk.
For many, many Americans only being able to afford chinese made junk is the current reality. I've seen many threads posted on this board praising wal-mart because it allowed them to raise kids, i.e. buy clothing, etc.
The borrower must pay interest. The lender receives interest. I think the lender is better off as long as the borrower can not declare bankruptcy, and the US govt. can not do that for if they did the consequences would be terrible for china and the US.
From the sublime to the ridiculous.
WTAO = WTO
Read up on the steel industry consolidation. Reads like they're pulling the plug on the rampant speculators, but swinging the pendulum way over to the command and control side of things.
We're Doomed! Doomed, I tell you!
If you were being serious...You are a hopelessly brainwashed, overly sensitive, hysterical douche.
Oooh, Oooh!! I don't like what someone says about my Lord and Savior, Jesus W. Bush!!! I can't intelligently answer the article because I have no working mind of my own, so I'm going to look up this guy's information and see if he is a Democrat troll!!!
If you were being sarcastic, I apologize. But this kind of idiocy aggravates me to no end.
Liberals Dream "America Fails"
China floats 5% of their Yuan and the Libs Rejoice!
We should only have free trade with free and developed nations.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.