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Webcast Of Ways And Means Hearing On The Chinese Exchange Rate
Direct from the House Ways and Means Committee, watch a critical hearing discussing the Chinese exchange rate, which presumably is wildly overvalued. Keep in mind China is about to announce a record trade deficit, meaning the basic premise of this hearing (Paul Krugman's ridiculous musings) is very likely moot.
FOCUS OF THE HEARING:
Economists generally agree that the Chinese currency (the renminbi – “RMB” – or “yuan”) is substantially undervalued as a result of market intervention by the Government of the People’s Republic of China. This policy artificially raises the price of imports into China and suppresses the price of exports from China. The purpose of this hearing is to consider: (1) the immediate and long-term impact of China’s exchange rate policy on the U.S. and global economic recoveries and, more specifically, on U.S. job creation; and (2) steps that could be taken to address the issue.
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thanks for the heads up n link, TD.
this ought be perversely amusing for a few minutes before inducing nausea ... am almost at a loss for analogue, maybe watching eunuch porn ?
Seriously, can we make a drinking game out of this? This particular subject matter presents unique opportunities for Congress members to display mind-blowing ignorance and cluelessness. Is Maxine Waters on this committee? Can we bring Joe Kennedy out of retirement to throw out the first pitch?
Another do nothing dog and pony show. Why don't we admit China as the 51st state and make Sarah Palin governor?
Is the timing of China's record trade deficit a coincidence? With its massive forex hoard, China has the ability to ramp up imports by stockpiling commodities whenever it wants to. I suspect that the recent swing in China's trade account from surplus to deficit was premeditated. If so, it was a shrewd move.
The pot calling the kettle black.
Yeah let's stimulate those that haven't already been nationalized!
Why would anyone assume that China accurately reports any economic data?
Why would anyone assume that any nation accurately reports and economic data?
They don't; they all know better and are lying through their teeth. The sole reason for Paul Krugman's ignorant little jihad against China is to ignite a trade war so it can be used as an excuse for the domestic situation.
The Federal Reserve knows a big turnaround is coming and needs to be able to point the finger at someone else ... what better way to accuse China of currency manipulation and invoke a series of retaliatory moves on both sides that can then be blamed for the next major downturn?
After all, if the economy entered the second dip of a double-dip recession on its own, Obama would have to actually take most of the blame for that ... and a guy like Krugman couldn't possibly let that happen.
Great analysis of the situation! Nothing like a little scapegoating to get the serfs mind of their troubles!
Tranny porn bitches. That's where it's at, per the SEC.
The anti-China campaign(charade) continues. Don't forget they are communists too.
Actually, I agree with Krugman - TD, ad-homs don't become you, if you disagree with Krugman you need to support your argument.
China sells yuan and buys dollars to keep the yuan low and build up a dollar horde. Then they use the dollar horde to buy raw materials and sell them for a loss inside their country. This is the equivalent to putting a big tariff on imported manufactured goods, and subsidising commodities. China is raping the US tax payer, and a tariff on Chinese goods makes sense.
The U.S. would never play games like that. The government is raping the taxpayer at a far greater rate than any Chinese manipulation. Do you need proof of this?
Two wrongs don't make a right. We need Chinese tariffs, and we need to put the Paulson/Geithner/Half of Goldman/Half of AIG all in jail.
How did the Chinese get in the position to export to the U.S. no holds barred?
They bought huge amounts of treasuries, FNM, ect.. which supported the government budget of the U.S. . Now the U.S. wants to implement tarriffs after the fact. Where was this reasoning when they were allowed to export anything and everything? On top of being communist, human rights violations ect.. we still allowed everything. Hypocritical to say the least.
I think TD has provided arguments previously, they can be found in other posts.
Anyway - the argument is that Krugman et al are going about this the wrong way, not that the trade is not imbalanced due to the dollar peg. They are correct that the peg has to go someday, but I don't think a trade war and protectionism is going to help. Indeed the first steps to take involve fixing our (US's) own problems, rather than focusing on China's. Problems such as a nonstop money supply, and business-unfriendly regulations. I'm not saying I think we can directly compete with a command labor force of 19 billion, but I think we can be better than we are right now, without the debilitating measures of protectionism.
It does not cancel out the fact that no country in the world with such a huge share of economy as the China has abused so called "export oriented growth model" (suggest looking it up) for so long and in such a blatant manner. Exemption would be England during the era of mercantilism, where they forced their colonies to buy their finished goods while importing certain raw materials at dirt cheap prices.
The Chinese position is not really a position of a party that supports "Free Global Trade." They did promise to change their stance during the WTO talks but did little to fulfill their promise.
By the way if you are sitting high in the world of finance, you are the tiny part of population of this country that does benefit. The rest, just take a look at the social mobility or purchasing power of an average American in the last twenty years, take a look at our saving rate, trade balance and other data. Run a correlation with the related numbers from the China and tell me with a pure, unbiased by the groupthink long term views that the data supports the "nice" stance on the trade with China.
I view it in a much simpler way. Over the last 50 years we all decided that all WORLD trade in any way and and form is beneficial to all. Such a view became an absolute fact, dogma and group think in a way. However when analysed closely, there are certain cases where the trade becomes beneficial mostly to one side, while the other side loses. Despite such a possibility and facts indicating it might be true, the group-think will continue the old course. They will continue to focus only on the data that self justifies their beliefs until it is too late to fix the equation and too obvious that they were wrong.
What you are proposing is too just close our eyes on the Chinese intervention into the currency market and their protectionism of their own industries on all other levels, through subsidized loans, not enforcing the proprietary laws and requirements of anyone who wants to sell locally to buy local components or open up local production.
The question in the end, do they manipulate the trade or not? Are they fully committed to their WTO entry obligations, now years after getting an entry into the WTO?
If the answer is NO, there is no need to wait.
It is true that there are number of economies that have the fixed rate policy, however none are as large as the Chinese economy and none have such a large impact on the world balance of trade.
We, US have been waiting for them to play fairly for over twenty years, twenty years is more than enough. The longer we wait, the longer we keep losing. And as the word trade, it is always beneficial ONLY when both parties involved are playing fairly and are on the same stance when it comes to labor, environment and similar regulations.
As of Paul K., while he does have a blue line bias to rise the issue, rising such an issue and having been trained as an economist takes some real BALLS because such a view goes against mainstream view within the economics. Now, the fact that it goes against the mainstream, does not automatically makes it wrong. The best way to view or analyse this particular situation is through the game theory rather than through the classical economic frame, and the game theory would show that some of the payouts for one of the players - us are losing payouts in the long run.
It is possible that while having cheap export in certain industries, out benefits in the long run will be lower than out costs. In particular benefits of of us consumers having dirt cheap high tech goods are lower than the benefits of having a bit more expensive goods but made by the local industries, while employing LOCAL talent. To sum it up, when it comes to having cheap exports in the low end of production will benefit us in the short and long term, having the cheap exports due to subsidies and zero environmental & related regulations in the high end industries will hurt us much more than benefit us in the long run. If Chinese will continue dumping their exports & having an exchange rate that is fixed in the long term is nothing but dumping, we will lose more in terms of sum of benefits by having those industries but paying higher cost than we will gain, mostly as consumers from the trade with China.
While the world trade between fair partners on the same economic level of development is NONE ZERO sum game, the game between one partner that always plays unfairly becomes a ZERO sum game. Which means that ultimately one side - us will lose much more than it gains in the long run.
p.s. Most business leaders who oppose idea of forcing the Chinese to making their currency flexible are doing so just because it goes along with their long standing views and not necessary because they took into the consideration all of the related data and other implications. You could look at out social mobility data or inflation adjusted earning power of an average American in the last twenty years, and you will see that the trade with them made us a loser and seized to be a none zero sum game.
p.s.s. The whole situation calls for the related zero hedge poll and debate !
Like giving someone the keys to your house and saying rob me. Then later trying to bring them up on charges.
Way more true than the bullshit spouted by the Ways and Means Committee. At least you now know why there is high unemployment in the US.
For Christ sakes, try to keep on point people. I for one agree with Comrade de Chaos. By the definition of the trade agreements the Chinese signed up to, they manipulated their currency relative to the U.S. dollar; and, yes, it is undervalued on a puchasing power parity basis (i.e., on a real not purely nominal basis). The short answer is, and as Peter Schiff keeps saying, the U.S. needs to produce more and China export less, especially to the U.S. Therefore, no matter how we might feel about the U.S. Congress, they might as well do this now rather than later. There is no 'free trade' with China, not even close. Unemployment alone will move this issue forward, as the unemployed vote, and Krugman (as much as I dislike him, largely for his theories that allowed and encouraged this to happen in the first place) that blind Keynesian squirrel/Democratic party hack may have finally found a nut to push forward (again, more by accident than intent, i.e., based on his Nobel winning theory he largely contradicts himself).
I gotta think about this a while. This is complicated for my simple brain, kinda like the inflation vs deflation argument.
As Walmart rises, America falls.
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