Posted on 11/15/2009 12:42:40 PM PST by bruinbirdman
Far from taking over as the engine of growth from an exhausted West, China is making matters worse. Its "beggar-thy-neighbour" policies continue to play havoc with global trade and risk tipping the world into a second leg of the Great Recession.
"The inherent problems of the international economic system have not been fully addressed," said China's president Hu Jintao. Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.
While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. "I'm more worried about deflation," he said.
By holding the yuan to 6.83 to the dollar to boost exports, Beijing is dumping its unemployment abroad – "stealing American jobs", says Nobel laureate Paul Krugman. As long as China does it, other tigers must do it too.
Western capitalists are complicit, of course. They rent cheap workers and cheap plant in Guangdong, then lobby Capitol Hill to prevent Congress doing anything about it. This is labour arbitrage.
At some point, American workers will rebel. US unemployment is already 17.5pc under the broad "U6" gauge followed by Barack Obama. Realty Track said that 332,000 properties were foreclosed in October alone. More Americans have lost their homes this year than during the entire decade of the Great Depression. A backlog of 7m homes is awaiting likely seizure by lenders. If you are not paying attention to this political time-bomb, perhaps you should.
President Obama said before going to China this week that Asia can no longer live by shipping goods to Americans already in debt to their ears. "We have reached one of those rare inflection points in history
(Excerpt) Read more at telegraph.co.uk ...
They buy weapons from us because they cannot afford to RD their own. They buy from us because we are reasonably a reliable ally that will not cut their weapons off or attack them in the future. China is not a reliable ally, but a strategic competitor. Turning over all our steel manufacturing, rechargeable battery manufacturing, component electronics manufacturing, etc, etc, etc is bad enough. Just for your edification, this last war with Iraq the US literally ran out of ammo because we had only one factory that made military grade ammo. Luckily we brought from Taiwan and South Korea to make up for the temporary shortfalls. This is just fighting insurgents and getting National Guard units up to standard. Imagine if Iran decided to attack our stretched out forces in Iraq. Manufacturing is not just about the bottom line, it is also about strategic needs and contingencies. War is too important to be left to the politicians ...... and businessmen.
It can not, and will not, be able to last long.
“To cure the British disease with socialism was like trying to cure leukaemia with leeches.”
http://www.boycottliberalism.com/Margaret-Thatcher-Quotes.htm
Boy O Boy, my old poker playing buddies said last night (again) that we won't get out of this depression peacefully.
Prepare Now!
Actually, it's worked fabulously. What hasn't worked is deficit spending of trillions of dollars by our Government, and ever-increasing Government intrusion into the marketplace.
We are not the only source.
They buy from us because we are reasonably a reliable ally that will not cut their weapons off or attack them in the future.
We do flip on our allies from time to time. Ever hear of Serbia? They were the eastern block government in our pocket throughout the cold war. Ever hear of Panama?
Substitute the word supplier for the word ally in your argument and you will be closer to the truth. But that puts us in essentially the same position in the weapons market as China's occupies with respect to consumer goods - reliable cheap supplier of quality goods.
China is not a reliable ally, but a strategic competitor.
Then we had better hurry up and get rid of our trade barriers so the dead weight in our manufacturing sector can be cleared out. If we are going to be strategic competitors then we had better start competing instead of whining about how free trade (which is really just code for progress) is driving wages down.
Turning over all our steel manufacturing, rechargeable battery manufacturing, component electronics manufacturing, etc, etc, etc is bad enough. Just for your edification, this last war with Iraq the US literally ran out of ammo because we had only one factory that made military grade ammo.
It is our protectionism, our unions, our regulations, our taxes, and our trial bar that drive manufacturing away. The American steel industry is one of the most heavily protected industries on Earth and has enjoyed protection since the republic was founded (one of Hamilton's pet projects). Yet for some reason American steel can't compete with foreign steel. The reason is because protectionism makes industries weak.
Manufacturing is not just about the bottom line,
Yes it is.
...it is also about strategic needs and contingencies.
That's politics. Manufacturing is about trade. Just tend to the bottom line and everything else will follow - if it's really worth having.
War is too important to be left to the politicians ...... and businessmen.
Trade is too important to be left to politicians and generals.
BTW when has war ever not been the province of politicians? And why would the solution be to get rid of trade? Why not just get rid of the politicians?
Rather, we should see: "How the President can best achieve the socialist dream in the United States of America."
yitbos
When it is cheaper to mine the ore here, ship it to China, refine/cast it in China, and then ship it back here - with the tariffs incurred - you know that US steel workers are simply getting paid too much. US steel unions killed the US steel industry, much like the UAW killed GM, Chrysler, and are trying to kill Ford.
rechargeable battery manufacturing
You can thank the EPA and the US Federal Government for that. The requirements for production are so stringent that it simply is not possible to build them here, regardless of cost. So they're made elsewhere.
this last war with Iraq the US literally ran out of ammo because we had only one factory that made military grade ammo
Yes, because the corrupt leaders in Congress choose to spend trillions on worthless health care bills, hundreds of billions on giveaway mortgages and benefits, the war on poverty, etc. rather than maintain our own military supply depots.
These problems aren't from free trade; they're from misplaced priorities. In the case of steel, the priorities of the unions and the workers are like the UAW - squeeze the companies until they're dead, never compromise. In the case of batteries, the fear that anything may hurt you at any time means the industry is shut down. And our leaders would rather pay $100+ million a mile for light rail to nowhere than spend the money for munitions that "would never be used".
Barney Frank is legislating to turn defaulted mortgages into rent-to-own.
The socialists in the legislature have rather successfully turned homeownership into an individual right. (The government has nationalized the mortgage industry)
When this happens, the courts will force the government to fund the grand industry of homebuilding/ownership.
Some would say this is a collaboration of industry and government (both parties)
yitbos
No one forced the American car companies to keep making cars in Detroit. They could of moved their factories to Texas and not only destroyed the unions, saved money from no state income tax, and probably could of gotten local governments to waive all associated property taxes, which is quite common for large companies in Texas to get deals like that.
No, us borrowing money from china like there’s no tomorrow is the real threat.
But that would have been evil, capitalistic, and against the Common Man! We can't have that, it's un-American...
You're right, they should have moved decades ago; by the 1980s it was too late, the damage was done, the die cast, the path chosen, etc. I'm surprised they lasted as long as they did...
And we better hope so! The peg is probably the only thing keeping the USD as strong as it is. If the peg goes away, the RMB will appreciated 20-30% against the EUR, GBP, JPY, etc. And the USD will drop by 50%...
A peg right now is the best thing for the USD, and hopefully it lasts long enough that the GOP can wrest control of one chamber (or, ideally both chambers) of Congress from the Slavery Party and bring some fiscal responsibility back to the process.
The Chinese domestic economy has appeared grand for some years, on GDP annual growth statistics, but has not yet paid the inflationary price with which that growth was produced.
China cannot place the burden of a necessary currency-value adjustment off entirely on the U.S., no matter what it does, and even if it tries.
By design or by default that adjustment will entail a Chinese currency that is higher in value - world financial market value - than it is today, and a U.S. dollar that is equal to less than it is today, in Chinese currency terms.
The portion of the U.S. GDP derived from exports to China is minuscule compared to the portion of China's GDP tabulated in exports to the U.S.
The adjustment must take place, sooner or later. When it occurs, the Chinese economy will have to absorb a big decrease in market value of exports to the U.S., greater competition in that area from other Asian competitors as well as U.S. manufacturers whose products will have an opportunity to withstand some pressures against imports and even expand their exports. The longer it is before that adjustment takes place, the larger will be in the impact in China, domestically.
Yes, I know, the article is talking about "deflation" vis-a-vis China. And what is a very high rate of "deflation", but the bursting of a prior inflated cycle. China imported inflationary pressures from our cheapened currency. The longer they wait to raise their own currency's value, so as to reduce the inflationary pressure our over-leveraged purchasing has created, the greater (over a shorter time) will be the deflation - the needed deflation - to unwind the inflation they have been absorbing.
Greatly reducing the size of the role of the U.S. consumer to the Chinese economy will not only be a good thing for U.S. workers, but an increasingly necessary thing as well for China over time.
Our money is PAPER.
FDR severed the link with gold in 1933.
LBJ severed the link with silver in 1965.
Debasement of the currency is as old as the Roman Republic.
Our Founding Fathers warned us about this as they had the odorous example of the Bank of England (founded 1694) foremost in their minds at the time of the American Revolution.
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