Posted on 03/22/2008 9:41:31 PM PDT by manilaman
The Dollar is devaluing because of the twin deficits, not some war plan.
I’d like to think the weak dollar was part of some secret strategery on the part of the Bush adminstration, but frankly I doubt it. I just don’t think anybody there is thinking about the long term, nationalistic interest of the USA.
Yes, trashing our own economy makes so much more sense as a strategy than tougher trade agreements.
The world's greatest creditor nation - Japan. The world's greatest debtor - you guessed it the US.
Bush's steadfastness with the Iraqi war proves the above statement isn't true.
With China as part of the WTO (and formerly, most favored status), “tougher trade agreements” are impossible to implement.
You go to war with the economic tools you have, not with the ones you wish you had.
Congress has been threatening tariffs for a couple years now and nothing has come of it.
Rove is a GENIUS!!!!
Congress is impotent. And with all the ChiCom money flowing to the Clintons over the years, if she winds up stealing the nomination, you can be sure we’ll be sending our military secrets to China in addition to our dollars!
Congress is impotent
Actually, that’s not true, either. They just passed the toy safety bill that will put a serious dent in Chinese production.
Bottomline — the whole current economic mess, including subprime mortgages, weird Wall Street financial instruments, highly-leveraged hedge funds, etc. is are not part of some grand, long term design to wage war economic war against China.
I should have included the word “economic” in my statement. That was what this article is about, so that’s what I was referring to.
I can’t really pass judgment on the policy if it in fact really exists. All I know is that debasing your currency is a very dicey matter that requires the utmost in caution. I am reminded of the mental patient holding a gun to his head and waring the staff, “Come close and I’ll shoot.” However, on the other hand, the must still have some value. If we do the McDonald’s comparison test of how much a big mac costs in the US and the EU, we find that for the same burger the cost is over double in the EU. Therefore the disparity in values indicates that the dollar is trading at way too depressed a level vis a vis the Euro. Next, the weak dollar is absolutely killing manufacturing in the EU. BMW is shifting major production over here and you can expect many other Euro manufacturers to follow their lead. Airbust is really screwed since all of their planes are sold in dollars.
Got it.
I’ve been of the opinion from the first month that the dollar fell, way back when, that this is part of a long term strategy.
Don’t have any proof beyond what is mentioned in this article though, and he doesn’t have any real proof either, just assertions.
During the boom time, this works as a leverage China can use to push around U.S. However, when the bad time hits, this leverage turns against China. China would fall harder and farther. These days, China even manage to dabble on financial speculation even with their short history of market economy. They feel they reached the top and nobody can touch them. However, their confidence is illusionary. They have even shakier economic system, with less talent to cope with potential crisis. They are now hooked into volatile financial system. This makes things only worse.
The devaluation of dollar now is not directed against China. It might have been true last year. The devaluation is now the necessity if Fed wants to entertain any hope of salvaging financial system. China made tons of money from U.S. spending binge bankrolled by ridiculously big asset bubble, propped up by foreign capital inflow to U.S. financial market. Now that asset bubble is popping and consumption is going south, the dollar is tanking, and investors are flocking to commodities raising their price sky high. However, principal driver of commodity price-hike is vastly increased demand from China and India.
These events are not orchestrated by U.S. to hurt China. U.S. is just trying to dig out of the looming catastrophe. China got caught just as any other countries in the world. However, China is more vulnerable than others because of the way their economy and society work.
China has been the biggest beneficiary of U.S. push for globalism. Now that U.S. economy is going down, it could suffer from the biggest fallout, if you factor in social/political damage as well as economic loss.
This development is structural. It is preordained by the way two economies have been interacting.
bump
This also has the effect of making all that American debt the Chinese bought up.... worth a whole lot less than what they thought it was...
I thought that is was the other way around...
All of this is a problem... how?
1: IMHO, the dollar has been overvalued since the 90s.
2: The European industries sold arms to our enemies in the ME. Why should I feel sad for them getting the shaft? As far as I am concerned, those that sold arms to Iraq after Desert Storm (French and German companies) need to go bankrupt.
3: Remember all that foreign outsourcing people were complaining about? Well, it no longer makes sense, so the jobs are coming back.
Say wha? The Chinese will just be more careful about the lead paint for a while until the dust clears. The serious dent is coming from manufacturers deciding to keep more work in the US. It will take years though. A lot of capacity as well as know-how has been lost in the past 30 years. Many of the most industrious recent college grads head for investment banking or law firms. Its going to take a long while before actually making stuff regains cache with the younger set.
I dont claim that subprime mortgages, weird Wall Street financial instruments or highly-leveraged hedge funds are part of some grand plan. I would say they are the result of government policies that encouraged an ownership society that President Bush has mentioned quite often. Qualifying people who were previously unqualified to own homes requires some financial trickery and having the government back up those mortgages (Fannie and Freddie) involves issues of moral hazard for us the taxpayers. There is also a correlation between defaults and areas of high concentration of illegal aliens. Again, not a grand plan to batter China but certainly a result of inaction of the federal government.
The economic mess is only really a mess on Wall Street. Im not saying high gas prices dont hurt, but I still see lots and lots of V8 SUVs driving to the mall. Its a sad fact (for me who as an engineer, who appreciates efficiency) that the average gas mileage for passenger vehicles is lower now than 20 years ago. As a percent of income, gas prices are not as damaging to the family pocketbook as they were in the 80s. When that happens, well know pain.
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.