Posted on 10/11/2011 3:50:42 PM PDT by traumer
The Senate has voted to punish China for keeping its currency undervalued against the dollar. Many see China's currency policy as a big factor in the flood of Chinese imports that has led to American factories shutting down and workers getting laid off.
The 63-35 vote Tuesday evening shows the growing anger over the U.S. trade relation with China. The Asian nation built up a $273 billion surplus last year bolstered by monetary policy that makes its exports cheaper and American sales to China more expensive.
But the bill to punish China is likely to hit a dead end in the House. House Republican leaders agree with many business groups that unilateral action against China could spark a trade war. The Obama administration has indicated a preference for diplomatic persuasion.
(Excerpt) Read more at foxnews.com ...
Bwahahahahahahahahahahahahahahahahaha . . . . . . . !!!!!
So, the Congress is going to “punish” the people who hold all our debt!!
What are they going to do - default by not making a payment for a couple of months????
More show over substance politics!!!
Meanwhile, the American citizen, sits back and watches the Obama Senate “leadership” all holding hands getting ready to jump off the cliff together. Most likely, the House will prevent a full-blown shark jump and save the USA from a costly trade war. The good part is that the ChiComs are not stupid, and they know exactly who helped to engineer and approve this move — regardless of any positive reasoning. That will not matter to the ChiComs.
On balance, this could be some “sabre-rattling” financial politics too, so who knows. Remember that Obama said that America has “much to learn of the ChiComs...” (quote-unquote).
POS moron.
'hack
Not another feather beating, oh damn.
It makes no difference. 45 minutes after they pass this bill, they’re going to want to pass it again.
I hate to do this but we have no choice but to give the honest truth, that even China can use.
If the charge is that China has manipulated its currency, then what is it that the U.S. Federal Reserve has done?
Now, it may be true that both nations’ central banks have acted in a way that the central bankers see as best for their respective countries, but quite frankly I think the U.S. Federal Reserve has acted NOT in our best interest.
Whose people think their central bank has been acting in their best interest, whose think not? I think the Chinese would “win” that poll.
Before we go accusing the Chinese of anything, we should get a different set of people at the head of our central bank, at every policy body/position it has.
It is plain as day the FED policy has been to devalue the dollar.
Just a week ago or so, oil was at $80 a barrel.
What was the price at the gas station?
Was it the same as it was when oil was at $80 in 2008?
Bet not.
The whole game now is the race to the bottom. No one wants a strong currency, because they all want to print to oblivion. Even the Swiss are in on the act.
Those fools in the Senate don’t represent anyone but their campaign funders anymore.
What trade war?
What are the ChiComs going to do, exactly?
What people fail to realize is that the ChiComs have almost no cards to play in this pissing match..
OK, so they don’t buy our paper. That’s better for the US, especially in the long term. They’ve been helping our Congress spend us into poverty by being a buyer of US Treasury paper in such huge quantities. So interest rates go up. It isn’t as tho the economy took off like a bat out of hell when rates went down, so I doubt that rates increasing will do much except help the beleaguered savers and investors. Rates going up will start to constrain the US Congress’ appetite for deficit spending. I’m trying to see how this is a bad thing... and I”m failing at it.
Or are the ChiComs going to quit buying American foodstuffs? No big deal. There’s a line that’s getting longer all the time to buy these things.
Quite frankly, the PRC has very few cards in this play.
Something real should have been done about the uneven trade playing field w/ China a long time ago. Further why would we trade with a communist dictatorship anyway? We _fought_ a cold war for decades with such a country; what changed?
Oh, a very large un-commercialized population, leading monied interests to a money making mission. Banksters are the ones who made the most of it. It doesn’t hurt them to re-build all of USA industry in China. Duh.
What the PRC has done is maintain a PEG. if the dollar goes down, the yuan goes down in proportion.
Now, the PRC will protest that they’ve started to “loosen” the peg. This is a nice bit of political hand-waving, but it distracts from the central issue that the FX markets believe that if the yuan were traded on the open markets just as dollars, Euros, et al are, then the yuan would be double in value against the USD from where it is. Instead of being about 6 yuan to the dollar, it would be down in the range of about 3 yuan to the dollar.
I’ve been wondering why we have supposedly “conservative” politicians steppin’ and fetchin’ for the Chinese communists for the last 15 years on the trade issue.
The only good communist is a dead communist. We have an embargo on Cuba after all these years because we believed that commies were evil scum (and they are, the pile of bodies in their wake leaves no doubt of that), but when it comes to the single most ruthless, bloodthirsty bunch of commies out of the whole bunch of them, we a) put up with their crap, and b) call it “free trade?”
WTF?
First, while the "weak" yuan makes it easier for China's exports to be competitive, it hurts when they have to import raw materials or components.
Second, China doesn't really manufacture all that much. A lot of Chinese exports are assembled from components imported from elsewhere. The weak yuan hurts them there as well.
Third, Chinese workers get paid in the weak yuan. Their purchasing power is lower than it should be, if the yuan were traded like the dollar or the Euro are.
Fourth, American consumers benefit from the fact that Chinese exports are "cheap."
Fifth, one Smoot-Hawley tariff was enough. We don't need to revisit that self-inflicted catastrophe.
That all might be well and good.
The fact is that the U.S. Dollar is not merely a subject of the market exchange rates, it is as much or more a subject of the Federal Reserve’s printing presses, movement of what “capital” it has, interest rate setting and other factors.
They are all part of the Federal Reserve’s tool kits to manipulate what the acceptable market outcome of the value of the dollar will be.
As far as the Fed and “currency markets” and “currency exchange rates” goes, the Fed has as much ability to manipulate the “market” as the market does to push the Fed into using some other tool in its tool kit when the “market” is not producing a goal the Fed is looking for.
We say one method is “fair” and another “not”.
We say potAtoe and they say potahtoe.
We can not win a global argument against “manipulation” if we are not going to reign in the actual manipulation the Fed does.
The Chinese just go about it directly, and leave less room for currency speculators - western international banks - to profit from the changes in the “market” values of currencies.
On January 1, 1994, the PRC devalued their currency by 50% in one stroke.
Whatever steps the Fed has taken in manipulation of the US dollar, nothing they have done is as dramatic and market-rigging as what the Chinese have done. 50% devaluation overnight, followed by a peg. The Chinese are in a different league of currency manipulation than any other nation on the earth.
There is no “argument” when you’re dealing with communists. Either you’re in it to win, or you’re not.
LOL... I got it.
I believe the “50%” figure, AS OF “1994” was not a “one time” event but reflected a near-end-point of devaluation of the Yuan that began in the early 1980s when China’s world economic position was weaker, and continued to approximately 1994, while it was building its “private sector” industrial and export industries.
A number of world currency professionals believe on a “purchasing power parity” basis the Yuan might be 37% “undervalued” today; while others believe that it has risen, against the dollar by about 20% since 2005. Which only suggests that China has been “pegging” the Yuan higher, with respect to the dollar, with a number of adjustments it has made since at least 2003, but at a pace too slow to satisfy anyone who believes it is still too undervalued. (As I do, by the way).
And still, China is only one of many “developing” countries that use fixed or ‘managed floating’ rate monetary systems; and almost all of which are believed to have currencies set at values that are lower than (devalued) from what their trade-weighted purchasing power parity would likely value them at, if they were floated. China is singled out because of the level of its “trade surplus” with the U.S. Without that trade surplus, the Chinese currency could be as equally “out of whack” as some believe it is today, but it would not be getting the attention it is getting.
In spite of the trade surplus China has with its export/import trade with the U.S., the populist idea that its currency value (1)has singularly caused that and (2)taken U.S. manufacturing jobs is a misconception; a misconception about how strongly the “currency value” issue alone is responsible for the trade balance issue.
From 1994 to 2006 alone, when Chinese industrial output was skyrocketing, U.S. manufacturing output grew by 50% (a good 4% a year). Why? The majority of new Chinese imports during the period was not gained at the expense of U.S. manufacturers as much as it was at other previously “low cost” foreign manufacturing venues in Asia, East Asia and the Middle East.
For instance: The populist U.S. attitude would have it that when an Apple iPhone (”made in China”) is sold in the U.S., that the bulk of the profit is received by (and in China). Not true. Components for the iPhone are made in (sold/obtained from) about 17 countries before final assembly in China; and for which the Chinese company receives the agreed-on contract price for the final products’ assembly. The resale price, in the U.S. and most world markets is several hundred percent over the unit wholesale cost Apple paid for the product. Ergo, most of the profit goes to Apple, and into its accounts where the product is sold - not “to China”. The bulk of name brand “high end” electronics sold in the U.S. and “made in China” have similar manufacturing and profit scenarios, in which the domicile of the name brand, be it U.S., Japan, Korea, Germany, etc. is where most of the profit is received.
While some U.S. manufacturers have difficulties competing with almost all foreign “lower cost’ manufacturing venues, including China, other U.S. manufacturers have maintained global market share due to lower costs on parts and materials they import to the U.S. from China and elsewhere, for their U.S. domestic-produced products.
For example: A small U.S. bicycle manufacturer was forced to move production from the U.S. to Asia after GWBush agreed to higher import tariffs on raw tubular steal from Asia, raising his domestic production costs to an uncompetitive position. A few domestic steal production jobs were “saved” while 100% of his production jobs went to Asia. I remember reading how hundreds of small and medium U.S. manufacturers across the “rust belt” were similarly affected by GWBush’s election-year attempt (Dec 2003, ahead of 2004 campaign) to use the protectionist measure against “cheap steel imports”.
“Cheaper imports” is not a zero-sum process.
In the end, Chinese “currency manipulation” will (and already is) going to cause China difficulties, in the form of inflation that it is importing via its “undervalued” currency. China is trying to keep a lid on this, but the longer it keeps its currency out of a more generally “floating rate” position, the bigger inflation build up, the more it must work to contain it and greater the revaluation it will eventually have to make.
Much as the U.S. might have to do once we can get the Fed to stop manipulating the dollar with its printing presses.
Full disclosure: Am I defending the Chinese position? No. But I do understand it. I also understand it is a problem; it does gives Chinese exporters a trade advantage; it is less of an disadvantage to U.S. domestic manufacturing than it seems; “fixing it” (an upward revaluation of the Yuan) will not create an automatic and equal downward result in China’s import/export trade surplus with the U.S.; “fixing it” will not result in an automatic and equal uptick in U.S. domestic manufacturing either (some would simply move from China to other “low cost” manufacturers elsewhere); and it is causing a building problem for China (inflation) that WILL, whether China likes it or not, require an upward revaluation of the Yuan, at some point, for China’s own good.
Meanwhile I’d like to see us “fix” our own house, with respect to how our own currency is manipulated - “managed” - for those of you too sensitive towards that word.
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