China is Annoyed

Sorry malorn, but as a sailor I have to point out that it's "tack" not "tact". Yeah the heavy export countries are gonna be under the cosh for a while. It's going to be an interesting ride.

 

I'm all for lessening imports from China and dependence on foreign ownership of US debt, but it will affect credit and interest rates in the US. You all may also be interested in these stories:

China Losing Taste for Debt From U.S.

China’s Route Forward

China Jittery About Obama Amid Signs of Harder Line

 

I think the header is kinda misleading.

Read that link and I interpret the article differently.

Simply put: Anyone would be "annoyed" when someone, who can't managed his own finances, goes looking for scapegoat for his problems that was his own making.

 

They might also be annoyed that their investments in America disppeared faster than the speed of light. They got a quick study of the underbelly of capitalism. It almost wants you to consider communism...well almost.

 

This is not new news. China has been accused for decades of pegging their currency with the US Dollar. Many economists have estimated that if the Yuan were to actually "float" on the free market it would rise 40% or so against the US Dollar.

Of course, two things would happen. Chinese (read Walmart) goods would become more expensive, but conversely US manufacturing would boon bringing unemployment to normal levels.

But we can expect that to never happen as it would not be in the best interests for China (unemployment, inflation, more wealth for its people which undermines the absolute power of the government over the populace) and Walmart would never allow US politicians to actually press for a non pegged Yuan to Dollar.

Rick
#4 2006

 

What may become a problem when their factories shut down and no longer exports parts for American assembled or manufactured products here, factories employing American citizens will be shut down as well.

Unfortunately its too late to separate the rest of the world because what comes around goes around and everyone will be affected. We're all in the same downward spiral. Hopefully American manufacturing will come back making superior quality products like in the sixties. Since many of the components are foreign sourced it can't be called all American.

 

How does China control the exchange rate of the Dollar to Yuan?

 

I know that they do, but I know nothing about currency trading or what makes one currency worth more than another. Anyone... chogan, where are you?

 

Like anything else under an authoritarian regime, they mandate it. The government monopolizes currency transactions, so nothing trades except at the established rate. Of course there could be a black market, but who would want to risk that in a country like China.

 

Well, this financial crisis is all about trade deficits and surpluses in global trade. Americans and most of the west were all having long term deficits in trade with east and this deficits were propelled by out of control bank loans. Even western governments have amassed large budget deficits all due to absolutely no responsibility that all loans need to be repaid sooner than later and that issuing 500 year bonds will make things only worse.

So basically solution for USA and most of the West is devaluing its own currencies compared to East ones. Of course many things will crumble, like overspending governments, and corporations who have outsourced everything but its overpaid management to East. Also all fictional parts of the economy, like most of the financial industry in the West will collapse. But jobs lost there can be replaced by good old industrial production jobs going back West.

So fo West solution is financial responsibility and making both budget and trade deficits into surpluses, while for East, solution is to increase their internal spending to offset productions surpluses, which can not be anymore sold in the West.

So everything is basically about keeping things in balance. In all parts of the world. You should not indefinitely spend more than you earn and you should not expect to indefinitely credit other party without this party being able to repay. If you do not obey this very simple rules, sooner than later, things will start to break apart. You can delay, but it will make things only worse.

And this crisis is way worse than it supposed to be, not because of evil communist Chinese, but because of lies of Western Banks and governments, who have known, that this system of deficits is unsustainable, yet they did not do anything to correct it. G.W. Bush and many other Western politicians made things only worse. Because it was easier to take loans and spend the money than to work hard and make the money.

 

I am tying to understand the actual implementation. China has trade with Korea, Japan, Europe, etc. Controlling the exchange rate would require lots of effort and work. There is also a big downside to forcing an imbalance. (Example, China forced the price of gas to be low inside China to support internal economic growth, that worked till they bankrupted the oil refineries and destroyed the attempted stock market for that company....then they had to raise gas prices.)

 

All that "cheap" credit over the past 15-20 years is now coming back to haunt us. It's like a person who is broke and in debt, giving them another credit card with a $100,000 limit.

Those days are done with. Things are going to get ugly when hillbilly's realize they can't go back to having a nice, new house and a nice, new pickup with a lift kit

 

They were both ignorant and dishonest. Because it was easy to be so and because they kept the masses happy that way.

People do not like, when politicians say hard things need to be done. They like words like be happy, spend the money, enjoy your life. Until this unsustainable system breaks apart.

So people are guilty too. Because they were not using their brains enough. As on the bottom line, everything in economy is basically very simple.

 

"People do not like, when politicians say hard things need to be done. They like words like be happy, spend the money, enjoy your life. Until this unsustainable system breaks apart."

That's kind of what's happening here in California. There simply isn't enough money; and when changes are being sought or suggested, someone is quick to jump on a pulpit and say 'That's illegal'. I'm referring to Schwarzenegger's plan to furlough people instead of laying off.

Personally? If my job might be on the line, I'd rather lose 10% than 100%. Why don't they put that to a vote amongst the employees and see what the majority say before they blatantly lay people off.