Posted on 11/24/2004 9:03:01 AM PST by snowsislander
Beijing — In Chinese street slang, they are known as the “yellow bulls” — the underground traders who lurk outside the banks in aggressive pursuit of currency deals. But despite their business zeal, there is one commodity they are unwilling to buy on the street these days: U.S. dollars.
“Everyone is converting their dollars to Chinese yuan,” one black-market trader confided as he stood outside a bank in Beijing Tuesday.
“Our business is getting more and more difficult,” he said. “It's hard to find anyone buying U.S. dollars any more. The value of the yuan is definitely going to increase.”
Which is one of the effects of having postponed the natural fix for a trade deficit for too long already. I never said that it was going to be easy or painless.
One other thing we can do is switch to a national retail sales tax. Our current corporate income tax system taxes exports and domestic production but doesn't tax imports. Many of our competitors remove their VAT at the border so their exports are untaxed but charge the VAT on imported items. A NRST would still tax production for internal use, but would tax imports at the same rate and remove the tax on exports which would remove one of the competitive disadvantages we have put on ourselves.
The Dollar is very possibly going to crash, and that has very little to do with Bush. It is a very serious and very real problem however. You shouldn't just dismiss such things quite so readily.
Slick ploy by the Chinese Government to swap those coolie petty crooks toilet paper for their ill gotten US dollars.
All these many decades of living under communism and these dummies are still beguiled.
how so? could you elaborate?
Yes the trade deficit is the problem pushing the dollar down, but a falling dollar really isn't the cure you want. Cutting the deficit as quickly as you possibly can, encouraging household savings as much as is manageable, and trying to reduce the rampant consumerism are your best options. Those all take a lot of time though.
If the dollar falls too far, it becomes a bad currency to be caught holding. You don't trade equities in currencies that you don't want to be caught holding - the risks are too high. So oil and gold could find themselves traded in Euros. The fact that the US is the de facto global currency is a very major prop holding up its value: there is high demand for US dollars because everyone trades in it. Lose that and the dollar could find itself in free fall rather than just a slide.
You really don't want to know what happens when you're currency goes into free fall, but Argentina provides a fairly good recent example.
THe sky's falling! The sky's falling!
Lucky for us that you showed up three days ago to guide us through these troubled times.
Would you suggest that we convert half our US dollars to Chinese currancy just to be on the safe side, or every cent we own?
The US does run a trade surplus in services but not goods. A lot of US exports are services. The concern is that despite the slowly falling dollar over the last year, the services surplus has been falling instead of rising.
I caught a sound bite on CNBC this morning on videotape wherein they were saying that they picked up a kind of interesting "take" on this situation from money managers / investors overseas. They were quite gleeful that the weak dollar was giving them an opportunity to buy US stocks at a discount.
The talking heads made the observation that many US companies were licking their chops over how many products (like I-Pods) they were going to be able to sell overseas during this Christmas season. Hahahaha
7 posted on 11/24/2004 12:49:52 PM EST by Matchett-PI
http://www.freerepublic.com/focus/news/1287685/posts?page=7#7
So the only solution is to encourage domestic consumption (Pro-growth policies), the dollar fall, other countries specially the euros to buy more of our stuff. The possibility of a free-fall is very small, were sucking in 4 billion dollars a day even as our currency weakens.
From what I've seen there are plenty of other people here saying the same things I am.
Currency speculation is a gamble, I'm just trying to point out what the losing side of the bet could be.
As to buying yuan - that would be rather foolish. The Chinese economy (at 8% growth) is seriosuly overheated and heavily reliant on the US (which accounts for 20% of their exports). If the US suffers, China will burst.
Good job indeed. Except for the fact that if China lets the renminbi float, it will appreciate in value (that's what these traders are betting-on, anyway). In which case, you and Willie are completely wrong
With that 100K cash you will be able to buy 102K Japanese goods... Your net worth has increased.
The rising dollar made you richer in the rising sun ...
"If I have 100k cash (I don't) and the dollar falls 5% over a week or month I then have 95k in real dollars."
What's a "real" dollar anyway ?
That was a bad example, the depreciation only happens when buying foreign goods.
Now that's a shock. I thought the U.S. is the largest exporter in the world. LOL
"Currency in free fall" is quite a bit different than some relatively small & normal fluctuations.
I hope the dollar remains somewhat weak (yes, weak, not crashing, free-falling, hair-on-fire-, the-sky-is-falling) through the important Christmas shopping season. More U.S. goods will be sold domestically AND globally. Markets will go up due to that AND foreign investment (good deal for them with growth plus $ increase), some SMALL inflationary forces (which are healthy) will be kept under control by the continued tightening by the Fed.
See... I got some real good rosy glasses!
That sounds like a development, known as "A Mexican standoff."
Back a few days showed 103.0, then 103.1 today showed 103.2 so by our friends standards he is now richer ...
http://www.xe.com/cus/
Just showing how foolish is is to pick a random currency and figure your "net worth" in it ... The Euro was at 89 at one time, the Yen was at 83, has his lifestyle changed by 30% ?
"Mighty greenback now China's ‘money to burn'"
Cool ... Let'um light it up ... then we've got their VCRs for FREE !
We are, and we luckily have a large services export component that Japan and China do not have. Counting both goods and services, our exports were indeed a strong $1.02 trillion for 2003.
However we only exported $713 billion of goods in 2003. Japan only managed about $500 billion for 2003 (depends on which exchange rate you want to use; if you use today's 102 range, that would be about $530 billion.) However, China did $309 billion in exports in the first six months of this year alone which annualizes to $618 billion -- greater than Japan -- and it is showing an explosive growth rate.
Whether China passes us next year in goods shipped, or whether it takes a few more years, the future is always just a guess, but unless something changes, China will soon pass us in exporting goods.
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