tag:blogger.com,1999:blog-4923505780935445004.post4271458070256846176..comments2023-09-04T02:21:54.263-07:00Comments on ndk's notepad: Pondering Sino-American Economic Tensionndkhttp://www.blogger.com/profile/03422548769889947053noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-4923505780935445004.post-45432785172082180582019-12-15T17:25:14.120-08:002019-12-15T17:25:14.120-08:00I want to share a testimony on how Le_Meridian fun...I want to share a testimony on how Le_Meridian funding service helped me with loan of 2,000,000.00 USD to finance my marijuana farm project , I'm very grateful and i promised to share this legit funding company to anyone looking for way to expand his or her business project.the company is UK/USA funding company. Anyone seeking for finance support should contact them on lfdsloans@outlook.com Or lfdsloans@lemeridianfds.com Mr Benjamin is also on whatsapp 1-989-394-3740 to make things easy for any applicant. Oleghttps://www.blogger.com/profile/14603615049606829323noreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-79910761584622667522009-01-28T14:05:00.000-08:002009-01-28T14:05:00.000-08:00Does China have liabilities to other countries den...<I>Does China have liabilities to other countries denominated in yuan? If not, why would an increase in the yuan's value lead to China's bankruptcy?</I><BR/><BR/>They probably do, but in trivial amounts. It's not China being bankrupt; it's the PBoC. The PBoC holds almost exclusively foreign exchange reserves as its assets, and it has only RMB liabilities. It would have to be recapitalized immediately. The nation itself would be okay, but it would suffer a large capital loss, a little embarrassment, and an outraged populace.<BR/><BR/><I>I see that the Maverecon guy (Buiter) is mad at Geithner for saying that China manipulates its currency. Isn't that like being mad at the sun for being hot? I mean China does manipulate its currency, right?</I><BR/><BR/>He does grant the truism, of course. It's more a question of whether anything productive can come from declaring China a currency manipulator, or whether anything useful comes from forcing nominal revaluation.<BR/><BR/><I>Every fixed or managed nominal exchange rate is, by definition, ‘manipulated’. But only the most bone-headed of ultra-Keynesians believes that a country can influence its effective real exchange rate in a lasting manner by managing/manipulating its effective nominal exchange rate, let alone some bilateral nominal exchange rate.</I><BR/><BR/>He also gets at the heart of the point I was trying to make when Yves first said it was okay for the US to have domestic inflation because China had had significant inflation:<BR/><BR/><I>So China is undertaking actions to remedy its own external imbalances and global imbalances. The US is proposing measures to increase its external imbalances and aggravate global imbalances.</I><BR/><BR/>With the exception of imposing useful trade policy, I basically agree. China has played very nicely and cooperatively so far, and I think the world owes them a debt of gratitude for that.ndkhttps://www.blogger.com/profile/03422548769889947053noreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-90189872478782698542009-01-28T06:36:00.000-08:002009-01-28T06:36:00.000-08:00Does China have liabilities to other countries den...Does China have liabilities to other countries denominated in yuan? If not, why would an increase in the yuan's value lead to China's bankruptcy?<BR/><BR/>I see that the Maverecon guy (Buiter) is mad at Geithner for saying that China manipulates its currency. Isn't that like being mad at the sun for being hot? I mean China does manipulate its currency, right?Detroit Danhttps://www.blogger.com/profile/03718490473585220856noreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-60279293160923460062009-01-27T12:19:00.000-08:002009-01-27T12:19:00.000-08:00NDK,Luddite or not, the fantasy of a intelligence ...NDK,<BR/><BR/>Luddite or not, the fantasy of a intelligence economy is a pipedream of the upper west side ulemma. Contrast that with the Caddyshack line made famous by none other than the Judge: "the world needs ditch diggers too." <BR/><BR/><BR/>I come back to the FT article today on countries turning to barter of all things. Is this not the ultimate repudiation of fiat? The whole idea of using different crosses obscures the greater truth, which is that any benchmark imposes discipline, which is inconsistent with the free hand of government. Read any commentary on the gold standard (correlated to the time line of crisis) and it would appeear to put the lie to the chokehold. In place of suffucation we get waterboarded with liquidity. What's really changed? The $ / Yuan debate seems to rest on the idea that the current exchange mechanism - $/debt standard - is the one that will be enduring. I am unconvinced of the durability. The move by China to the short end of the curve and away from agencies is a flashing yellow. I am numb enough to think this crisis will eventually abate and unreasonable enough to belive that the rest of the wiorld will not outsource its resources/savings to fund the profilgacy of the US, which after all rests on sustaining the outsourced undeclass - otherwise the model breaks down. <BR/><BR/><BR/>Perhaps we should stop talking about the Yuan and start to talk about the Saudis and the GCC currency union circ 2010? The last pillar of the dollar is the commodity benchmark> the US-Saudi axis took a hit with the Royal Kingdom firing a warning shot in the FT yesterday. (http://www.ft.com/cms/s/0/d68c910a-eb0e-11dd-bb6e-0000779fd2ac.html) - sorry don't know how to embed link. <BR/><BR/>The anwser lies in reviving some form of Bretton Woods (not Bretton Woods II). And for those who truly belive in the US intellectual superiority and intelligence economy, such a move should be welcome. Would it not put the lie to the manipulation meme...<BR/><BR/>...perhaps the real fear is exactly that.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-44536209035973484162009-01-27T07:49:00.000-08:002009-01-27T07:49:00.000-08:00I would rather my job be replaced by a machine tha...<I>I would rather my job be replaced by a machine than that I did a job that could be better done by a machine.</I><BR/><BR/>I'm with you there in the longer run, Steel Phoenix, but I think concerns about finding good employment for displaced people are quite legitimate. I don't see a stimulus package as any kind of answer.<BR/><BR/><I>Doesn't China have capital controls in place that could be loosened, helping to undermine the peg? This would require cooperation, but the rest of the world has enough leverage. Plus, China would benefit with the yuan becoming a reserve currency.</I><BR/><BR/>Yes, they do, but you might go back to reread China's policy comments. At the very least, such a move would bankrupt the PBoC, which holds dollars as assets and yuan as liabilities.<BR/><BR/>It would also make employment of their numerous unhappy college graduates much more challenging. I don't think China's interested in having the reserve currency right now, so much as they're interested in development of domestic capital and employment.<BR/><BR/>While it's a good long-term change, the current regime has legitimate concerns that it wouldn't be easy to make it from here to that longer term.ndkhttps://www.blogger.com/profile/03422548769889947053noreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-27632269125641891472009-01-27T04:42:00.000-08:002009-01-27T04:42:00.000-08:00I agree that the peg causes innumerable problems, ...<I><BR/>I agree that the peg causes innumerable problems, Dan, but how can the world foil it without China's help, besides imposing serious trade restrictions that might well backfire as well? <BR/></I> [ndk]<BR/><BR/>The alternative to a win-win agreement is a lose-lose trade war. China will want to avoid that, so they will have an incentive to cooperate in solving the world's problems. <BR/><BR/>Doesn't China have capital controls in place that could be loosened, helping to undermine the peg? This would require cooperation, but the rest of the world has enough leverage. Plus, China would benefit with the yuan becoming a reserve currency.<BR/><BR/>The situation seems pretty desperate around the world, from Spain to Shanghai and in between, so there will be tremendous pressure for change.Detroit Danhttps://www.blogger.com/profile/03718490473585220856noreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-70717243875050872342009-01-26T23:19:00.000-08:002009-01-26T23:19:00.000-08:00I still don't see how tech being a labor saver is ...I still don't see how tech being a labor saver is a problem. The ditch diggers don't want their jobs back from the backhoes, and with China having a greater labor advantage than tech advantage, we can once again play to our strengths. My general desire for progress makes me want to automate as much as possible so people can move up to bigger and better pursuits. I would rather my job be replaced by a machine than that I did a job that could be better done by a machine.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-3946870539015089652009-01-26T23:08:00.000-08:002009-01-26T23:08:00.000-08:00Revalue the CNY upward, of course. Pardon me. :DRevalue the CNY upward, of course. Pardon me. :Dndkhttps://www.blogger.com/profile/03422548769889947053noreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-65337057800510906472009-01-26T23:03:00.000-08:002009-01-26T23:03:00.000-08:00I felt like we were at a crossroads not so long ag...<I>I felt like we were at a crossroads not so long ago. China was becoming a threat to its neighbors and we brought them into the global market rather than trying to further sanction them. I think it was a good decision even if it causes us some economic hardship in some ways. I think it would be a shame to reduce their desire to trade via tariff.</I><BR/><BR/>This has become a contentious position to hold, Steel Phoenix, and I'm not entirely sure why. China has offered extraordinary quantities of labor and investment at cheap prices, and with appropriate policies in place that should be a great advantage to both countries rather than a uniform detriment.<BR/><BR/><I>If deflation is defined as the contraction of the money supply, and our money supply is a fiat currency which has a value relative to its purchasing power parity with foreign currencies, could we essentially have deflation due solely to the expansion of foreign money supplies, even when our own is expanding?</I><BR/><BR/>More rapid expansion of foreign money supplies in the presence of pegs or effective pegs -- IF reflected in inflation, and that's an enormously important and iffy IF -- would tend to weaken the dollar. We could deflate at 15% while China deflated at 5%, for example, and with the current exchange rate it might work out okay. With the current debt loads in the US, it would not work out okay.<BR/><BR/>In general, I think the connection between money supply and inflation is extremely tenuous at best.<BR/><BR/><I>I don't have a great grasp on what exactly our debts to China entail. Would it be both possible and in our best interests in this pseudo-deflation to print money and pay off our debts?</I><BR/><BR/>Sorta, but probably not, as I'll detail in a follow-up post in response to earlier comments about debt-to-GDP ratios. When you're in a deflationary environment, the difference between money and short-term debt becomes vanishingly small. At some point where the incentive to lend and leverage money returns, that difference becomes extraordinarily large, but we're not there yet.<BR/><BR/><I>I would argue that this statement ignores the numbers - The US has a workforce of 100M or so vs. the billions in India and China. Technology is in and of itself labor saving. That is a problem.</I><BR/><BR/>I too wonder whether the Luddites will yet have their day, S.<BR/><BR/><I>NDK in your last post you runinated over what the US wanted -- stronger against Euro/commodities and weaker againt yen/Yuan. This post is inconsistent. And yet I agree fully. I mentioned in that post that by strengthening the dollar against commodities - in whhcih they are priced - would sour China to buy and hence create a kind of bilateral agreemeent to impoverish Europe.</I><BR/><BR/>I don't see how the posts are entirely inconsistent, so much as I didn't discuss it here. That's because I see no way for the US to forcibly revalue the CNY downward, as mentioned in the section on capital controls. Maybe I lack imagination, but I don't think it's possible. Do you have some creative ideas?<BR/><BR/><I>Just becuase we don;t see smoot re-enacted doesn;t mean the same thing isn't happening. It is.</I><BR/><BR/>This is a very good point. Protection of domestic industry can be done in a thousand ways.<BR/><BR/><I>question -- what exactly do the export restrictions cover?</I><BR/><BR/>Mostly <A HREF="http://www.america.gov/st/washfile-english/2006/July/20060707121159berehellek2.431887e-02.html" REL="nofollow">goods and technologies that could have military applications</A>, babar. They're something of a joke with how leaky knowledge is today, but they're still in place.<BR/><BR/><I>Anyway, the point seems to be that the U.S. and China will not be able to bilaterally continue the game. Europe is too influential to let that happen. Multi-lateralism is desperately needed, if only as a face-saving way for the U.S. and China to get themselves extricated from the current deadly embrace...</I><BR/><BR/>I agree with this, Dan, but the OPEC problem is very important here. Every nation has every incentive to cheat on its exports and sell as much to the world as it can. I can't fathom cooperation on that scale in today's environment.<BR/><BR/><I>Why is technology being a labor saver a problem if aggregate demand is not stalled?</I><BR/><BR/>Technology might reduce the value of many forms of labor, in effect making capital more valuable and people less so. It's more revolutionary technologies that are disruptive than mundane progress, and I consider the Internet to be quite revolutionary. It's hosed a ton of business models.<BR/><BR/><I>I've heard people coming home to the U.S. from Japan say it is like going from the Jetsons to the Flintstones. If that tiny island can do it, why can't we?</I><BR/><BR/>I spent some time working in Tokyo. For some goods and services, I'd agree totally; for others, I'd say the situation is reversed. Japan didn't feel nearly as progressive as I'd imagined. This is though, of course, all subjective nonsense.<BR/><BR/><I>China will protest, but the rest of the world (esp Europe) will not go along with a continuance of the status quo.</I><BR/><BR/>I agree that the peg causes innumerable problems, Dan, but how can the world foil it without China's help, besides imposing serious trade restrictions that might well backfire as well?ndkhttps://www.blogger.com/profile/03422548769889947053noreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-14362326881859160312009-01-26T16:07:00.000-08:002009-01-26T16:07:00.000-08:00So to follow up on my last point (that multilatera...So to follow up on my last point (that multilateralism is required), the end of the peg will be mandated by the rest of the world. China will protest, but the rest of the world (esp Europe) will not go along with a continuance of the status quo. The U.S. will go along with the mandate that China remove the peg since we recognize that Chinese currency manipulation is part of the root cause of our economic malaise...Detroit Danhttps://www.blogger.com/profile/03718490473585220856noreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-19844435952363908272009-01-26T15:59:00.000-08:002009-01-26T15:59:00.000-08:00S: I assume you are saying that the greater size o...S: I assume you are saying that the greater size of China allows them more anticompetitive force. If this is true, then we will lose with protectionism as well, since we can never outproduce or outsubsidize them. We will have raced into socialism only to fail at the end.<BR/><BR/>Why is technology being a labor saver a problem if aggregate demand is not stalled?<BR/><BR/>I've heard people coming home to the U.S. from Japan say it is like going from the Jetsons to the Flintstones. If that tiny island can do it, why can't we?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-87744581818761534682009-01-26T10:35:00.000-08:002009-01-26T10:35:00.000-08:00Thanks for the post, and thanks to S for some inte...Thanks for the post, and thanks to S for some interesting observations with which I agree. <BR/><BR/>S, what do you mean in your last sentence, "the collective lie that aggregate demand is 'stalled'"? Do you mean that the global economic problem is surplus supply, not stalled demand?<BR/><BR/>Anyway, the point seems to be that the U.S. and China will not be able to bilaterally continue the game. Europe is too influential to let that happen. Multi-lateralism is desperately needed, if only as a face-saving way for the U.S. and China to get themselves extricated from the current deadly embrace...Detroit Danhttps://www.blogger.com/profile/03718490473585220856noreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-39296191913768001342009-01-26T08:53:00.000-08:002009-01-26T08:53:00.000-08:00question -- what exactly do the export restriction...question -- what exactly do the export restrictions cover?babar ganeshhttps://www.blogger.com/profile/01898299856773302141noreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-8058532784076793992009-01-26T08:30:00.000-08:002009-01-26T08:30:00.000-08:00"A nation that is working to its strengths shouldn..."A nation that is working to its strengths shouldn't need to prop up its industry, and a propped up industry is a lazy, uncompetitive industry"<BR/><BR/>I would argue that this statement ignores the numbers - The US has a workforce of 100M or so vs. the billions in India and China. Technology is in and of itself labor saving. That is a problem. <BR/><BR/>NDK in your last post you runinated over what the US wanted -- stronger against Euro/commodities and weaker againt yen/Yuan. This post is inconsistent. And yet I agree fully. I mentioned in that post that by strengthening the dollar against commodities - in whhcih they are priced - would sour China to buy and hence create a kind of bilateral agreemeent to impoverish Europe. <BR/><BR/>The US is attempting to hold out as long as possible with a strategy of outlasting the rest. I think Washington is dragged to the table by the collective rest and forced to accept a battlefield demotion - of at least the dollar. <BR/><BR/>Kedrosky had in intersting post up this weekend opn something I have been thinking a lot about over the past month. That is the race to protect in ways other than tarriff. Swiss last week annoucned race to protect CHF appreciation. Singapore cut its corporate tax rate. Japan and South Korea are committred to spending to maintain a leadership in Green enterprice technologies. Euroep is backing the auto, airline other. The US is backing everything. Everyone is printing money to prevent the cleanse. Just becuase we don;t see smoot re-enacted doesn;t mean the same thing isn't happening. It is.<BR/><BR/>The tarp covering this reality is the collective lie that aggregate demand is "stalled." History as they say is a lie commonly agreed. Lies have a strange way of coming back to bite you in the assAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4923505780935445004.post-50024991126508221892009-01-25T22:12:00.000-08:002009-01-25T22:12:00.000-08:00It is nice to see someone bringing up the thought ...It is nice to see someone bringing up the thought that we don't want China to fail. I felt like we were at a crossroads not so long ago. China was becoming a threat to its neighbors and we brought them into the global market rather than trying to further sanction them. I think it was a good decision even if it causes us some economic hardship in some ways. I think it would be a shame to reduce their desire to trade via tariff.<BR/><BR/>I've been mulling and posting some crazy economic thoughts lately, and you are fast becoming my favorite economic blog, so please forgive me if I veer into the fringes a bit with my comments/questions. You know this stuff a lot better than I do.<BR/><BR/>If deflation is defined as the contraction of the money supply, and our money supply is a fiat currency which has a value relative to its purchasing power parity with foreign currencies, could we essentially have deflation due solely to the expansion of foreign money supplies, even when our own is expanding? I know you covered the subject of unilateral inflation the other day, I just wanted to make sure I had it straight in my head.<BR/><BR/>I'm really not a fan of subsidies and tariffs. They are nearly the same thing, really, as are bailouts. A nation that is working to its strengths shouldn't need to prop up its industry, and a propped up industry is a lazy, uncompetitive industry.<BR/><BR/>I don't have a great grasp on what exactly our debts to China entail. Would it be both possible and in our best interests in this pseudo-deflation to print money and pay off our debts?Anonymousnoreply@blogger.com