Posted on 05/21/2005 6:39:40 AM PDT by TigerLikesRooster
US Federal Reserve (Fed) Chairman Alan Greenspan said on Friday that the soaring trade deficits probably would not be helped by China revamping its currency system.
Answering questions following a speech he delivered to the Economic Club of New York, Greenspan said that a move by China to revalue its currency "probably quite unlikely" to reduce the US overall trade balance.
Greenspan said that that is because US companies are likely to turn to other countries, such as Thailand or Malaysia for goods, rather than US producers.
"So essentially what we will find is we're importing from a different area, but we will be importing the same goods," Greenspan said.
He also said that letting the Chinese currency move higher against the dollar would increase prices American shoppers pay for Chinese goods in the United States.
"The effect will be a rise in domestic price in the United States," he said.
The United States' trade deficit soared to a record high of 617billion dollars last year. The US government has been pressing China to stop linking its currency to the US dollar and instead move to a more flexible currency system in a bid to cut US trade deficit.
Chinese Premier Wen Jiabao said last Monday that China regards the reform of the exchange rate of Renminbi (RMB) as an issue of sovereignty and will never yield to any external pressure to change it.
Source: Xinhua
Ping!
We seem to be doing a lot of things that are helpful to other countries, and harmful to ourselves. Is this nation on a self destruct???
Some people are the residents of U.S., but the citizens of the world.:-)
Didn't anyone from the administration seek Greenspan's counsel before starting to jawbone China? Say what you will about him, Greenspan's a genius and knows a thing or two about financial markets.
Greenspan should be put to pasture.
Geniuses aren't always right. But one need only listen to him speak to understand that he is indeed a genius.
But wait! Clinton said that is we lower tarriffs with China that the American economy would benefit.
The only company that benefits is Wal-Mart. Wasn't Hillary Clinton used to be a Wal-Mart lawyer?
China not "floating" its currency is throwing the economy of China into recession. This may or may not be a good thing for the US. Prices are rapidly rising in China and businesses are not doing so well due to the fiat peg of the money. It has speeded up the inevitible failure of the Chinese banks as they are less able to disguise the tremendous volume of non-performing loans to government enterprises. China will lose ability to actually threaten Taiwan and the rest of East Asia but the government will probably clamp down once again on the liberties it has heretofore allowed.
Well, then let them go live somewhere else.
Any economic pressure from the most powerful government on the planet (ours) will have results different and probably inimical to what is intended. The government cannot do anything useful economically except remove restrictions on trade, i.e., get out of the way. The government does not receive and cannot read economic signals and always responds wrongly to conditions. It reads and reacts to political signals which generally run contrary to economic reality.
Why isn't anyone jawboning about Japan spending billions to keep the Yen from rising? Why is it only China that gets press? Japan has spent much more "managing" it's currency. There is more to this than meets the eye, IMO.
I am not aware of any retail chain of any size that does not directly import goods from China and the ones that cannot do so directly get these goods via wholesalers.
In fact every American shopper benefits from lower prices and I can't see where lower prices hurts America.
Yeah, people are magically going mad at the end of century. Clinton, Greenspan, Fed, Abbey Joseph Cohen, and Goldman Sachs are totally innocent. They just all fell under the powerful spell of 'fin de siecle!'
Now finance turned into mysticism.:-)
History, not prediction.
And here I thought maybe it was that they read too much Hagel their sophmore years...or maybe too little.
Greenspan is the best or one of the best economic gurus this nation has ever had in its government. Alas, the very concept of economic guru is destructive of economic efficiency. No matter how good an economist the man is, as a government man he is on the wrong platform to read economic signals. He cannot even see them. He can only read and react to political signals which means the laws and regulations and economic measures are always responding poorly to situations that have already changed when the measures are crafted and implemented. They then reinforce or introduce inefficiencies and misdirections that cause a new "crisis."
I know they have been pushing it down. To be fair, Japanese currency rose a lot over the years. They have their faults, but China is rather blatant, and they are not even on the same side.
The country which intends to wage asymmetric warfare on U.S. should be watched more carefully.
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