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Treasury Says G7 Meeting To Address "Substantially Undervalued" Chinese Currency, Greece Situation
- SR TSY OFF'L: CHINA FX POL TO BE ON AGENDA AT G7 MEETING
- SR TSY OFF'L: CHINA CURRENCY 'SUBSTANTIALLY UNDERVALUED'
- SR TSY OFF'L: CHINA CURRENCY ISSUE ON 'EVERYBODY'S MIND'
- SR TSY OFF'L: CHINA FX NEEDS MORE FLEXIBILITY
- SR TSY OFF'L: ISSUE OF GREECE WILL BE TOUCHED ON AT G7
- SR TSY OFF'L: G7 MEETING TO BE MORE INFORMAL, NO COMMUNIQUE
- SR TSY OFF'L: ADMIN LEADING INTL COMM'TY W/IDEAS ON FIN REFORM
- SR TSY OFF'L: TO ALSO DISCUSS BANK FEE, REFORMS AT G7 MEETING
- SR TSY OFF'L: BELIEVE U.S. IDEAS ON FINCL REFORM HAVE MERIT
- SR TSY OFF'L: COUNTRIES W/SURPLUSES NEED MORE DOM CONSUMPTION
- SR TSY OFF'L:TSY SEC TO UNDERSCORE U.S AIM TO FIX PUB FINANCES
- SR TSY OFF'L: PATTERN OF GLOBAL DEMAND TO BE DISCUSSED AT G7
- SR TSY OFF'L: POLICY STIMULUS SHOULD REMAIN IN PLACE OVER 2010
- SR TSY OFFL: SUPPORTIVE OF ACTIONS BY GREECE, EU COMMISSION
- SR TSY OFF'L: G7 ECON POLICIES REMAIN PROPERLY ACCOMODATIVE
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Long live the yuan. Fcking disgusting
circling the drain. Altman had it correct this am: currency crisis when not if.
Oh yeah. Let's just go picking more fights with the folks we're renting the US from. Google, IP privacy, Taiwan, T bonds, inflation, dollar, the D Lama, rare earth metals. Makes all the sense in the world to agitate 'em some more.
Bluff?
Best defense is a good offense?
The best way to get away with something is to act like you're supposed to be doing it?
They've been doing this to the US population for decades and getting away with it.
Bluff? I think the phrase is, "It's better to ask forgivness, than permission".
Actually I think it goes something along the lines of "It's better to beg for forgiveness than to ask for permission" but you had the right idea. :>)
there are many things you can accomplish while on your knees
It all depends on if you're facing the problem head on or if you backed into it while crawling on all fours, doesn't it?
:>)
Either way, you're the catcher not the pitcher.
+1
I hope we at least get a happy meal first.
sure, it's all fast food...and just as nutritious
This is the type of intellectual exchange that keeps me coming back to the hedge!!!! ; )
knukels, see what you started? It's all your fault, man!
.
Not when you can't get the forgiveness.
because the current/last period of giving in on just about everything has worked so well?
maybe you dont remember, but the same issue was in play with Japan before they slapped a bunch of tariffs on for an undervalued currency. There was a bunch of doom scenario crap while they were talking about doing it. End result was that in a period of months after doing it they revalued and the Rising Sun was done. Same will happen to China at some point. Regardless of what people think, they need us more than we need them. Prices would rise here, but regime change would happen over there.
[regime change]
+1
Wouldn't want to be in China outside 4 months after they drop the peg to the dallah. Me nor my dallah.
Currency War > Trade War > World War
just like last time
You really think they're still buying? If the were, I doubt they would be squawking at the Chinese.
Gee, what would Bernanke do if the Dollar was undervalued? "Fire'em them printers! Timmay, sell me some of those delicious bonds"
Why the hell would I want a higher renminbi?!?!? Right now the peg is helping prop up the dollar. For all intents and purposes they are using dollars so Zimbabwe Ben can wreak havoc on them with his printing press and they get to share in the burden. If the renminbi free floats that just another major nail in the coffin of the dollar. We should be begging them not to revalue or free float! If anything we should be treating them with respect since they make all our goods, and own a lot of our dollars/debt.
They want a higher RNB so they can print USD like crazy.
When all you have is a hammer...
...all your problems start looking like thumbs.
Why is everyone picking on China? After all, if you don't like currencies that are pegged to the dollar, then why wouldn't you also complain about Saudi currency? Do you think SAR is overvalued relative to the dollar? Oh, or maybe it is not just about currency.
The issue isnt that it is pegged, but that the peg is set too low for the yuan. So regardless of where the dollar goes the yuan still enjoys its (unfair) competitive advantage
The unfair advantage belongs to the US companies who outsource their slave labor to China, bring back cheap products here and make the fat margin. The Walton family couldn't be billionaires without 100 million bent Chinese backs.
Currency imbalance is because the Chinese have a high savings rate. (The same is true for the Saudi.) The Dollar is a reserve currency. So, blaming the Yuan for being undervalued is blaming the Chinese for being thrifty.
While America can't force the Chinese to save less, America can certainly give up the reserve currency status for the Dollar. It's not hard to move to using a global currency like SDR for reserves or to use commodities like gold for reserves.
Capitalism require capital. Capital require savings. Savings require thriftiness. The irony of blaming China for embracing capitalism is lost on most people.
Also, a high currency draws in talented workers at the expense of losing exports while a low currency pushes more exports at the expense of losing talented workers. Just watch those physicists, engineers, doctors, etc. flow to another country when the currency crisis took hold.
Currency imbalance is because the Chinese have a high savings rate.
I dont believe so. China has a high savings rate as their is no/little social safety net (UI, food stamps, welfare, social security) etc... The currency imbalance is not due to the citizens, its the govt.
From Congressional Research Service (www.crs.gov): www.fas.org/sgp/crs/row/RS21625.pdf
Some Members of Congress charge that China’s policy of accumulating foreign reserves
(especially U.S. dollars) to influence the value of its currency constitutes a form of currency
manipulation intended to make its exports cheaper and imports into China more expensive than
they would be under free market conditions. They further contend that this policy has caused a
surge in the U.S. trade deficit with China in recent years and has been a major factor in the loss of
U.S. manufacturing jobs. Although China made modest reforms to its currency policy in 2005,
resulting in a gradual appreciation of its currency (about 19% through December 1, 2009), some
Members contend the reforms have not gone far enough and have warned of potential punitive
legislative action...
and from the BOE (Bank of England) http://www.bankofengland.co.uk/education/targettwopointzero/inflation/ratesAffectInflation.htm:A particular influence on prices comes through the exchange rate. A rise in interest rates relative to those in other countries will tend to result in an increase in the amount of funds flowing into the UK, as investors are attracted to the higher sterling rates of interest. This will tend to result in an appreciation of the exchange rate against other currencies. In practice, the exchange rate will be influenced both by expectations about future interest rates and any unexpected changes in interest rates. That is because if investors expect interest rates to rise, they may increase the amount they invest in a currency before interest rates actually rise. So there is never a simple relationship between changes in interest rates and exchange rates.
Other things being equal, an increase in the value of the pound will reduce the price of imports and, because many imported goods are included in the CPI, this will have a direct influence on inflation. In addition, a higher pound will tend to reduce the demand abroad for UK goods and services. Any fall in export demand will, in turn, reduce output, as will any shift of domestic spending to imported goods. A reduction in interest rates will tend to have the opposite effect.
by pegging its currency, they have continued to have the same export advantage to the US as before in contravention to a free market which would normally rebalance the trade deficit by increasing the price of Chinas good in the US and decreasing the price of the US goods in China.
So as Saudi Riyal, not only it is pegged, but it is most likely significantly undervalued vis-a-vis dollar. Yet, no one is complaining about SAR being undervalued and Saudi Monarchy being a currency manipulator. The real difference is that Saudis are playing along, while Chinese are not and advantage in trade thanks to the low yuan is only a part of the real story (americans aren't that crazy about competing with China in producing low cost consumer goods, are they?).
Yes, it is. But an important point is that in this case the US wants to keep using the dollar with the Saudis and we encourage it publicly and through back channels as well. The reason its different is that the size of the economies are not even close (china vs saudi) - I have never heard of jobs going to Saudis instead of CA, or OH, etc... Also, the main reason and the biggest is that oil is still priced in dollars. Thats a peg you wont ever hear the US bitch about as it allows us to get oil for cheap while we continually debase the dollar. If that peg were to go away, get ready for much higher oil price unless they debased their currency by an equal amount as the dollar. And if they left the dollar it would already be because we are deflating too much so thats not really a likely scenario.
So, the currency by itself is not an issue. Neither it is outsourced jobs or trade, those things are only used to pressure China on some other issue that is vital (or maybe number of them).
Same argument works for RMB. Low inflation rates for the last 10 years in the US are largely attributed to both of those pegs, and there's no big difference in terms of how both of them allow low inflation rates inside the US despite the unending expansion of the monetary supply. Both countries were huge net-exporters, both of them kept the peg (and currency undervalued), both of them imported inflation and both of them were funnelling money back to the US by buying the US debt.
And no, it is not the jobs that are a real concern, if they were, this problem should've been solved about 10 years ago or even earlier (or rather shouldn't have even been created in the first place): http://video.google.com/videoplay?docid=5064665078176641728 (skip to 17:00 for a comment from Clinton advisor, otherwise watch the whole show).
This is PURE bluff - plain and simple.
The Chinese currency is going to CRASH - because investment and trade inflows are drying up.
Look for a skyrocketing US Dollar and US asset markets to return - QUICKLY - to pre-1980 levels.
This will allow the banks to buy up all the assets from a ruined people at pennies on the dollar.
Someone else said this will somehow happen through devaulation after they forcelose on all the properties to clear the debt, but you are proposing appreciation, how will they clear this debt in this case? All the bad debt will kill them no?
First one, then the other, in the order of their choosing, so as to maximise their gain based on then-existing conditions. Repeat if/as necessary. This is the best reason, and the most easily understood, why we should avoid leverage, get out of debt, and get our assets as far from the world of finance as possible. When our assets are "in the system" they are available to be stolen.
First, they dropped the bottom out of the market already. I will say I think a proper valuation is DJ at par with Gold, so that is where I see things going. DJ $1000 is not out of the question either, but I think with BS Bernanke back, I see the US already in a hyper inflationary state. Second, the banksters continue to fluctuate the market violently, and with this increased volatility it makes for a lot of buying opportunities. And this is the argument right? That they want new buying opportunities? Like Nathan Rothschild did by announcing a loss at Waterloo? Well, I think they did that already. Personally, I think we are over thinking this. The Doelarr is more bloated and weaker than the Yuan, even if the Yuan is frail. The lesser of two evils shouldn't cause a massive reflation trade in the DOE'LARR.
+ 610
I read an article from Reg on this. A very intriguing theory...
madcow is on the money I think
I do not think the yuan will get stronger
China ia the worlds biggest bubble looking for a pin
and i don't think it will take long to find one
When kung fu master china unpegs, it will send the doelarr reeling. 10%-15% in a matter of weeks. Bank holiday at the same time? Probably.
Economist professors all over will celebrate this moment, as now our currency will be appropriately priced as to increase exports.
I will ask, "What exports?"
http://abcnews.go.com/Business/wireStory?id=9738214
i may be rusty but they peg the yuan to the dollar. if its undervalued that means they are net sellers of yuan in turn net purchasers of dollars meaning every month they have to buymore dollars. as we all know they have to put those dollars somwhere right ? T's... now if this scenario of letting the yuan float plays out wouldn't they not need so many t's b/c they would have less dollars...
please explain where i have gone awry ?
when a treasury is purchased its not like its redeemable only by the person that purchased it. China can buy all the treasuries needed to do that and still sell them on the open market later to go buy mines and other resource/energy stuff. Look at their total holdings - hasnt gone up, yet they still buy them. They're using something to buy all these miners and oil in the last year. And I doubt its Renimbi denominated.
2 dimensional reactions in a 3 dimentional world.
Does the adversarial "justice" system preclude/exclude/negate thinking along co-operative lines?
Your initial stance determines how far you leap, and where you land.
The Rubic Cube of global "Money" is breathtaking to behold.
ps The "Cube" trilogy is good video:)
40muleteam borax
Riiiight! China's response: FU round eye!
How do you debate the Yuan when there is no one to take the other side of the debate?
China's not a member of the G7.