Taking on China, by Paul Krugman, Commentary, NY Times: Tensions are rising over Chinese economic policy, and rightly so: China’s policy of keeping its currency, the renminbi, undervalued has become a significant drag on global economic recovery. Something must be done. ...
Today, China is adding more than $30 billion a month to its $2.4 trillion hoard of reserves. ... This is the most distortionary exchange rate policy any major nation has ever followed.
And it’s a policy that seriously damages the rest of the world. Most of the world’s large economies are stuck in a liquidity trap — deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can’t offset.
So how should we respond? First of all, the U.S. Treasury Department must stop fudging and obfuscating.
Twice a year, by law, Treasury must issue a report identifying nations that “manipulate the rate of exchange between their currency and the United States dollar...” ... Treasury has been ... unwilling to take action on the renminbi... Instead, it has spent the past six or seven years pretending not to see the obvious.
Will the next report, due April 15, continue this tradition? Stay tuned.
If Treasury does find Chinese currency manipulation,... we have to get past a common misunderstanding ... that the Chinese have us over a barrel because we don’t dare provoke China into dumping its dollar assets.
What you have to ask is, What would happen if China tried to sell a large share of its U.S. assets? Would interest rates soar? Short-term U.S. interest rates wouldn’t change: they’re being kept near zero by the Fed... Long-term rates might rise slightly, but ... the Fed could offset any interest-rate impact of a Chinese pullback by expanding its own purchases of long-term bonds.
It’s true that if China dumped its U.S. assets the value of the dollar would fall against other major currencies... But that would be a good thing ... since it would make our goods more competitive and reduce our trade deficit. On the other hand, it would be a bad thing for China, which would suffer large losses on its dollar holdings. In short, right now America has China over a barrel, not the other way around.
So we have no reason to fear China. But what should we do?
Some still argue that we must reason gently with China, not confront it. But we’ve been reasoning with China for years ... and gotten nowhere: on Sunday Wen Jiabao, the Chinese prime minister, declared — absurdly — that his nation’s currency is not undervalued. ... And Mr. Wen accused other nations of doing what China actually does, seeking to weaken their currencies “just for the purposes of increasing their own exports.”
But if sweet reason won’t work, what’s the alternative? In 1971 the United States dealt with a similar but much less severe problem of foreign undervaluation by imposing a temporary 10 percent surcharge on imports, which was removed a few months later after Germany, Japan and other nations raised the dollar value of their currencies. At this point, it’s hard to see China changing its policies unless faced with the threat of similar action — except that this time the surcharge would have to be much larger, say 25 percent.
I don’t propose this turn to policy hardball lightly. But Chinese currency policy is adding materially to the world’s economic problems at a time when those problems are already very severe. It’s time to take a stand.

Posted by Mark Thoma on Monday, March 15, 2010 at 12:09 AM in China, Economics, International Finance, Policy Save to del.icio.us Tweet This Permalink Comments (209)

Comments
You can follow this conversation by subscribing to the comment feed for this post.

wjd123 said...
Hurrah for Krugman! It too bad that for every article like this there are 10 articles using fear tactics to keep change from happening.

Here is an example of pumping up the fear in the New York Times today from an article by Keith Brandsher entitled "China Uses Global Trade Rules to Its Advantage."

"China is the biggest buyer of Treasury bonds at a time when the United States has record budget deficits and needs China to keep buying those bonds to finance American debt. But the Treasury also faces an April 15 deadline for whether or not to list China as a country that manipulates the value of its currency....

"Two closely related scourges played a central role in the collapse of world trade in the 1930s: protectionism and beggar-thy-neighbor currency devaluations. World leaders set up two institutions after World War II, now known as the W.T.O. and the I.M.F., to reduce the risk of another Great Depression." Keith Brandsher

Reply Mar 14, 2010 at 10:03 PM

paine said in reply to wjd123...
"for every article like this there are 10 articles using fear tactics to keep change from happening"
yes

as with fiscal deficits

the majority opinion as reflected
in the corporate owned MSM
is pro domestic no charge open door trade policy

--by coincidence--precisely the MNC perfered policy
despite the unfair nature of competition
given our over valued dollar vis a vis certain strategic currencies abroad

Reply Mar 15, 2010 at 08:39 AM

Squidward said...
An "Obama Shock" would raise the price of anything with made in China on the label by 25%. Good for exports and any shopkeeper in small town America that has to compete with Wal-mart. We probably should take a look at revisiting Bretton woods while we are at it. The Euro is still susceptible.

Reply Mar 14, 2010 at 10:04 PM

wjd123 said...
"And Mr. Wen accused other nations of doing what China actually does, seeking to weaken their currencies “just for the purposes of increasing their own exports.”--Paul Krugman

Mr. Wen must have learned that tactic from the Republican Party.

Reply Mar 14, 2010 at 10:07 PM

Hal said in reply to wjd123...
America is not a friend to China and China is unlikely to take advice from a non-friend, nor can we force it to do so. Irritating China further is not good policy for Washington to pursue.

Reply Mar 14, 2010 at 10:43 PM

lark said in reply to Hal...
China the country is like the Chinese drivers in Chinese traffic, no one is willing to give an inch. China won't take advice, period.

As for irritating China, too bad. It's time for the USA to act in the interests of Americans, not Wal-Mart.

Reply Mar 14, 2010 at 11:34 PM

Hal said in reply to wjd123...
The US will find China an unmoveable object on this issue, especially if it adopts a policy of confrontation. The US has more than enough frustrations to deal with (refractory unemployment, Afghan war going nowhere, Middle East peace process going nowhere, health care reform going nowhere) why should it seek more that simply reveal its impotence?

Reply Mar 14, 2010 at 10:50 PM

lark said in reply to Hal...
oh, bogus.

What the USA needs to do is declare China a currency manipulator and slap on the tariffs. Then wait while our terrible unemployment is alleviated by something called import substitution.

As for your other issues, they are distractions to the fundamental concerns of jobs, trade, currency, and China.

Reply Mar 14, 2010 at 11:32 PM

paine said in reply to Hal...
hal 9000

your trade algorithm is faulty shallow and nasty

our own industrial wage class has welfare considerations it
ought to register at the congressional elections this fall
and the broader wage class in services and even construction ought to realize the de industrialization of north amerika
has effected their wage trends too ...signifigantly and for 30 years at least

i venture
far more severly and broadly
then illegal immigration

Reply Mar 15, 2010 at 08:51 AM

paine said in reply to Hal...
"refractory unemployment"
ironic blooper using that one eh ??

note this glaringly obvious point
lark throws at u
". our terrible unemployment (can be)..
alleviated
by something called
import substitution"!!!!!!

Reply Mar 15, 2010 at 08:59 AM

paine said in reply to Hal...
"why should it seek more that simply reveal its impotence"
if the it here is narrowed to the obummer admin
why they can't hide behind the senate on this one
the potus as i suggest can take unilateral action on this front
trader in chief powers i guess

Reply Mar 15, 2010 at 09:01 AM

jm said...
The Chinese leadership are riding a tiger. The employment consequences of the export manufacturing subsidy reduction to which a revaluation would equate, and the realization of the losses currently hidden by the misvaluation*, would be such that they would probably be forced to create an international crisis -- probably by launching an invasion of Taiwan -- to distract their citizenry.

*The Chinese lost money on the dollars they bought at their pegged exchange rate the moment they bought them. All that remains is the accounting recognition of the fact that they paid out more than 16 trillion yuan for currency worth five trillion yuan at best.

Reply Mar 14, 2010 at 10:25 PM

paine said in reply to jm...
"The Chinese leadership are riding a tiger"
nonsense they used keynesian methods
last year to brace up employment during the global trade contraction
they can use them again here

we needed fear a wave of neighbor beggaring so long as the lead trading nations pursue
full employment effective demand management
of course we aren't here
at least in part because it would exacerbate
our trade gap

ahh the coils within coils here

Reply Mar 15, 2010 at 09:04 AM

Anon said...
Buy renminbi, by hook or crook. They are little small pieces of paper and used somewhat for Asian and Brazilian trade, so they are available. If China tries to keep them in the country, then raise the offer. Chinese holders of renminbi inside the border will find some way to smuggle them out.

Reply Mar 14, 2010 at 11:08 PM

paine said in reply to Anon...
"Buy renminbi,...they are available"
the yuan is not in plentiful enough supply
on the open market to make a sustainable diffrence

Reply Mar 15, 2010 at 09:06 AM

purple said...
I love the smell of trade war in the morning...

Reply Mar 15, 2010 at 02:06 AM

purple said...
China's government was very smart to accept little 'pieces of paper' from the US in exchange for manufactured products.

Reply Mar 15, 2010 at 02:13 AM

wjd123 said...
China will pursue its own interests; we should pursue ours.

How many times did Treasury Secretary Henry Paulson make trips to China to jawbone government officials about appreciating the renminbi. It's time to act in our own interests. Krugman has cleared the way by pointing out that it is we who have China over a barrel.

There are people who do not want to force a policy change and will resort to one fear tactic after another to keep change from happening.

Saying that China will make war on Taiwan to distract its people smacks of fear tactics.

China might not be co-operative with our foreign policy, but I can't see where it has ever been co-operative. If it has been, it must be a diplomatic secret.

A better way of looking at China when it comes to foreign policy is instead of following its usual our-interests-first-and-the-rest-of-the-world-be-damed policies it will really go out of its way to become obnocious.

The bottom line is Chinese government will do what is in its interest. Give its government a choice between a 25% tariff or appreciating their renminbi and let it decide where its interests lie.

They are beggering their neighbors and screwing with the recovery of the rest of the world. Enough jawboning, it doesn't work.

One last thing make sure China does appreciate the renminbi before removing the "surcharge"; I'm tired of its delay tactics.

Personally I would like to see permanent tariffs and a repatriation of our industrial base from any country that doesn't recognize the free association of labor.

China could do worse than appreciating the renminbi in exchange for the lifting of a 25% surcharge.

Reply Mar 15, 2010 at 02:39 AM

TC said in reply to wjd123...
How much is US's incesant pritning of money to devalue its currency a free trade practice?

Reply Mar 15, 2010 at 03:39 AM

wjd123 said in reply to wjd123...
That should read "even more obnoxious."

Reply Mar 15, 2010 at 03:45 AM

paine said in reply to wjd123...
you blame china i blame
wall street and the over seas fleet of the MNCs
their "corporation battleship row "
far from getting peral harbored here
is in fact
" in the lead zero "

Reply Mar 15, 2010 at 09:09 AM

wjd123 said in reply to paine...
paine,

No, I'm not going to excuse the Chinese government. But don't saddle me with not blaming corporations.

I'm a guy who for the last four years has made it his New Year's resolution to do evil to corporations.

China is offering them a deal they can't refuse and multinational corporations worked hard to pave the way to the deal.

This article is a jackhammer.

Reply Mar 15, 2010 at 04:21 PM

TC said...
PK is asking China to send hundreds of millions Chinese back to poverty so that American economy shows higher growth and hopefully more jobs. I understand there are many other countries with huge surplus with US(like Japan, Germany). Why the US is not acting on those countries.

Reply Mar 15, 2010 at 03:28 AM

paine said in reply to TC...
crap

read keynes and tell me where he sez

use these methods universally
where credit conditios allow ...err except china circa 2010

Reply Mar 15, 2010 at 09:10 AM

TC said in reply to paine...
I know for a fact that economics is crap. The consequences of many Chinese businesses collapsing due to Yuan appreciation is as real as US's claim that US$ is over value against Yuan and US is losing due to this.

Reply Mar 15, 2010 at 12:16 PM

wjd123 said in reply to TC...
China wants to be a member of the world economy. And they are big boys now. They don't need to be nursed along anymore. If they what to save their workers jobs and create new ones they can raise demand at home instead of beggering other countries for their jobs.

I don't care if China wants to change policy or not; I want us to change our policy.

Reply Mar 15, 2010 at 02:09 PM

ken said in reply to TC...
"I understand there are many other countries with huge surplus with US(like Japan, Germany). Why the US is not acting on those countries."

ther euro has risen in value vs the dollar from close to partity .73/dollar.

China does not allow this.

strange thing though. If a country were to deflate the value of its cuurency then wouldnt its price for raw materials rise?

I suppose the chinese could get around this by printing yuan and buying dollars and using those dollars for import raw material transactions.

Reply Mar 16, 2010 at 11:49 AM

TC said...
"I don’t propose this turn to policy hardball lightly. But Chinese currency policy is adding materially to the world’s economic problems at a time when those problems are already very severe. It’s time to take a stand"

Is this economics or politics?

Reply Mar 15, 2010 at 03:29 AM

Anonymous said in reply to TC...
"Is this economics or politics?"

Do you really think there is a difference, esp. at this level?

Reply Mar 15, 2010 at 06:13 AM

TC said in reply to Anonymous...
It is important in the sense that Economics is a field of study, a supposed science of some sort. It is therefore important that its laws, theories and findings are objective, not subjective, firm and not susceptible of being changed back and forth due to political interpretaions. To me one reason that Economics is a dismal science is mainly because economicist try to be politicians as well and make Economics politics.

Reply Mar 15, 2010 at 07:09 AM

paine said in reply to TC...
solemn gibberish tc

politics is concentrated economics

Reply Mar 15, 2010 at 09:14 AM

Curt Doolittle said in reply to paine...
In furtherance...

If any political argument is not an economic one, then what else is the purpose of political argument, and by what means does one construct his position? All political argument is over the utility of property, and the redistribution of costs, risks and rewards. Without argument what is the purpose of politics?

Reply Mar 16, 2010 at 05:49 AM

TC said...
"It’s true that if China dumped its U.S. assets the value of the dollar would fall against other major currencies... But that would be a good thing ... since it would make our goods more competitive and reduce our trade deficit."

PK wants China to manupulate the US currency for US?

"On the other hand, it would be a bad thing for China, which would suffer large losses on its dollar holdings. In short, right now America has China over a barrel, not the other way around."

I am sure China have means to hedge before their actions.

Reply Mar 15, 2010 at 03:33 AM

paine said in reply to TC...
"China has means to hedge before their actions"
more gibberish
hedge ??
how ??

they have too big a position
if they sneeze the dollar gets the cold

Reply Mar 15, 2010 at 09:17 AM

TC said in reply to paine...
The daily global forex market is 3-4 thrillions dollars, not a problem to absorb China's positions, provided some skill is applied.

Reply Mar 15, 2010 at 12:19 PM

paine said in reply to TC...
this either betrays ignorance or a cut outs
clever prompts

first you ignore the effective demand tools the prc already uses to counter export drops
now you claim china can hedge its losses if the dollar falls
first of course the han's can stay in very short notes
but beyond that
only if interest rates on these notes
will rise enough to compensate the forex drop
and the fed can prevent that easily
if you have a further counter please educate me
and expose your prompters stanic sophistication

what motivates you tc ???
you're not anne here

are you a commentor cut out
for some outfit
tell us who pays you
or who orders you ??

Reply Mar 16, 2010 at 07:08 AM

TC said in reply to paine...
Let's say I am in financial industry and know a thing or two about the industry.

Reply Mar 16, 2010 at 07:35 AM

ken said in reply to TC...
so how? take a loan out in dollars through some state agency and buya commodity of some sort. then dump your holdings and pay back the loan.

seems to me someone would be the wiser no matter what they did.

Reply Mar 16, 2010 at 01:20 PM

Nicolas said...
A big country bullying its trade partners. I wonder who they learned that from?

Reply Mar 15, 2010 at 03:34 AM

paine said in reply to Nicolas...
nicolas stop focusing ala pk on the chinese
its our own home grown MNCs that dictate this suicidal industrial trade policy of ours
they make the huge profits here

Reply Mar 15, 2010 at 09:19 AM

Noah said...
http://www.msnbc.msn.com/id/35868432/ns/world_news-washington_post/

Reply Mar 15, 2010 at 04:25 AM

bakho said...
The US also needs to get oil imports under control by substituting domestic labor for oil. We need to put our unemployed to work building an oil alternative infrastructure.

Reply Mar 15, 2010 at 04:26 AM

paine said in reply to bakho...
exactly

Reply Mar 15, 2010 at 09:19 AM

Fred C. Dobbs said...
If only China & US weren't joined at the hip,
economically, PK's complaint might be more compelling.

NYT - March 14, 2010
Chinese Leader Defends Currency and Policies
By MICHAEL WINES
http://www.nytimes.com/2010/03/15/world/asia/15china.html
BEIJING — Prime Minister Wen Jiabao sharply defended China’s currency and trade policies on Sunday against what he called foreign “finger pointing,” charging instead that developed countries seek to force unfair changes in those policies “just for the purposes of increasing their own exports.”

Mr. Wen’s remarks, which echoed a rebuke on Thursday by one of China’s central bankers, were perhaps the sharpest yet in a brewing disagreement between the Chinese and American governments over their economic positions.

In a news conference that lasted more than two hours at the close of China’s annual legislative session, Mr. Wen repeated that China would keep its currency, the renminbi, “basically stable” despite calls by the United States and other developed nations to let its value increase.

He also repeated the concerns he voiced a year ago, at China’s past legislative session, that the United States was failing to rebuild its own economy and maintain the value of the dollar, which has fluctuated since the global economic crisis began in late 2008. Protecting the dollar is a matter of “national credibility,” Mr. Wen said.

“Any fluctuation in the value of the U.S. currency is a big concern for us,” he said. “I hope the United States will take concrete steps to reassure investors. It is not only in the interests of the investors but also the United States itself.” ...

(Obviously, what we CAN do is borrow more from Japan, less from China. That'll show 'em.)

Reply Mar 15, 2010 at 04:29 AM

paine said in reply to Fred C. Dobbs...
joined at the corporate hip not my hip or 90 of america's hip

sure we'd face an import price sunami --maybe --
so what its a trade off we could handle easily
with a decent emergency income transfusion system

think about the cap and trade set up

the surcharge captures for the public purse
a maximizable share of this imported inflation
these funds like with any warrent system
can be distributed back to us per capita

Reply Mar 15, 2010 at 09:24 AM

Fred C. Dobbs said in reply to paine...
Maybe '90(%?) of america' can do a
tea party campaign vis-à-vis China!

Reply Mar 15, 2010 at 10:45 AM

cfaman said...
"But if sweet reason won’t work, what’s the alternative?"

How about attacking our corporate princes who demand Chinese labor arbitrage opportunities from the government of the USA?

Would they have build the world-class manufacturing without our policies that supported our manufacturer's export of manufacturing capital assets? Our guys made the initial investment over there. Our guys reap the labor arb spread. Our guys fund the lobbies in Congress.

Maybe we can protect our way out of it a little, but the Princes, what to do about them?

Reply Mar 15, 2010 at 05:46 AM

paine said in reply to cfaman...
"How about attacking our corporate princes "

bravo

" Our guys made the initial investment over there. Our guys reap the labor arb spread. Our guys fund the lobbies in Congress."

super bravo

Reply Mar 15, 2010 at 09:26 AM

Cynthia said...
"It’s true that if China dumped its U.S. assets the value of the dollar would fall against other major currencies... But that would be a good thing ... since it would make our goods more competitive and reduce our trade deficit."

But it's kinda hard for our goods to be competitive in the global economy when we no longer make any goods to sell to the world. So, if China dumps its U.S. assets, causing the value of the dollar to fall against other major currencies, this really isn't such a good thing for us once you factor in the fact that our manufacturing base has deteriorated to the point that about the only goods we manufacture anymore are military and financial weapons of mass destruction.

Reply Mar 15, 2010 at 06:11 AM

bakho said in reply to Cynthia...
The US is the largest manufacturer in the world. We make and market lots of stuff that other countries buy. Get a clue.

Reply Mar 15, 2010 at 06:24 AM

Cynthia said in reply to bakho...
It may be true that the US is still the largest manufacturer in the world. But the number of American workers that US manufacturers are employing to manufacture their goods is on a steep decline.

Reply Mar 15, 2010 at 06:43 AM

paine said in reply to Cynthia...
the sectors employment is shrinking because the machines make the machines now
and our sector is not adding machines in the first place
trigger a serious policy sustained import substitution boom
and watch the mushrooms emerge

Reply Mar 15, 2010 at 09:30 AM

TC said in reply to bakho...
If China revalues its Yuan against US$, then US products are just cheaper for China but not against the rest of the world. Further, China is not allowed by the US to buy a lot of high tech military stuff from US. How much would a Yuan appreciation will help US? vs the pitfalls of trade confrontation with China and risks of the world and US economic recovery reversed.

Reply Mar 15, 2010 at 06:56 AM

paine said in reply to TC...
more half truths and peppery gibberish

the us is concerned about the under priced imports of all trading partners
china just is the 800 pound panda here

yes the policy i'd advocate would slow down the expasion of international trade
but so what

more important i 'm sure for global expansion itself
however is cross border technology transfer and human capital mobility

i like labor mobility because the people actually doing the producing
get to capture more of the gain from relocating themselves then letting their corporate bosses export their products

china allows our MNCs to make huge profits
off exploiting its domestic labor force
in part because
nationally china by this sacrifice of value produced gains far more back:

a worlfd class production capability
and a modern job force

Reply Mar 15, 2010 at 09:40 AM

TC said in reply to paine...
Has any economist, Krugman included, for once ever spells out clearly and objectively, if this is possible, what is the definition or rules of what constitute manupulation of currency and should try enshrine these definition/rules in some international organisation such as WTO so that the rules apply to every country and not subject to politician shifting goal posts as and when expedient for their purposes.

Reply Mar 15, 2010 at 12:27 PM

wjd123 said in reply to bakho...
bakho,

We might be the biggest manufacturer in the world, but we have little excess capacity when it comes to durable good. The excess capacity is in China. So to ask just what are these exports that are going to pull us out of recession is a very fine question indeed. Even if we got the orders, just how many new airplanes could we crank out.

Hold on, I'm going to search my house for that allusive product that says made in the USA. I found four: a stove, a refrigerater, a washer and a dryer. However I bought them years ago and none of those brands, alas, are made in the USA anymore. I would like to be able to stimulate our economy when I replace them, but it's getting harder and harder.

That's one of the reasons why I'm for repatriation of our industrial base. Appreciating the renminbi is a start.

Reply Mar 15, 2010 at 02:59 PM

Patricia Shannon said in reply to bakho...
Like what?

Reply Mar 15, 2010 at 06:21 PM

Patricia Shannon said in reply to Patricia Shannon...
To clarify, what goods are made in the U.S.
And which are sold in large amounts overseas?

Reply Mar 15, 2010 at 06:23 PM

paine said in reply to Cynthia...
cynthia
you are overly pessimistic
if uncle does the lending ala WWII
we can rebuild our basic production platform
fast and furious
in fact its just the tonic we need

the moral equivalent of war

Reply Mar 15, 2010 at 09:28 AM

TC said in reply to paine...
What is free trade, if there is still such a thing? What happens to globalisation the world pushed so hard for? :P

Reply Mar 15, 2010 at 12:29 PM

Cynthia said in reply to paine...
paine,

I seriously doubt that we have powerful lobbyists in Washington who will push for a production platform. And even if they will push for a production platform, they'll push for it overseas, not here at home. Which is why it's hard for me not to be overly pessimistic about this.

Reply Mar 16, 2010 at 06:00 AM

paine said in reply to Cynthia...
alas
you speak of real politik here
not macro economic possibility
and you speak with correct sight lines indeed
but we must struggle on
lift the eyes of the jobblers to their context the source of their misery and the means of their resurection

Reply Mar 16, 2010 at 07:12 AM

Cynthia said in reply to paine...
Spoken like a true Marxist, paine! But please don't take this as an insult, as I wouldn't either. I don't know about you, but I've been accused on numerous occasions of being such a flaming Marxist who'd make even Karl Marx green with envy. I find this particularly strange given that I've never read a word from the Communist Manifesto. But do keep in mind that I'm not well-read like most of you here.

Reply Mar 16, 2010 at 09:02 AM

John V said...
OTOH, China's current policy keeps its exports into the U.S...and elsewhere...very cheap. So, consumers see savings at the register on the goods they buy.

Reply Mar 15, 2010 at 06:30 AM

ken melvin said in reply to John V...
Trivial.

Reply Mar 15, 2010 at 06:37 AM

paine said in reply to ken melvin...
not trivial
if real wages rise
but if the real wage gain by lower prices is off set by a lower aggragate nominal wage structure
lower rates of domestic investment in production facilities
lower exports
and higher cumulative levels of unemployment ...

numbers plugged into
all the relevent parameters

put a devil in control of the dash board operating dials of this model
and the results can go magic trick
real fast

Reply Mar 15, 2010 at 09:46 AM

John V said in reply to ken melvin...
Trial??

Do you not see the irony in your "compassion"??

I see often how you argue the plight of the poor and middle class and then you call the relative affordability of everyday goods "trivial". That's rich.

Weekly shopping can be expensive enough as it is. So padding another 20-30 bucks a week....or more... on that final receipt is trivial? How about even more for larger families?

Reply Mar 15, 2010 at 06:33 PM

TC said...
Premier Wen says China will keep yuan "basically stable"

"A country's exchange rate policy and its exchange rates should be decided by its national economic situation," Wen said while meeting the press after the annual parliament session

He said a stable yuan has played an important role in facilitating the recovery of the global economy from the worst financial crisis in decades

China began its currency reform to unpeg the yuan against the U.S. dollar in July 2005, the yuan has appreciated 21 percent against the U.S. dollar, or 16 percent in real terms, Wen said.

We did not depreciate the RMB from July 2008 to February 2009 when the global economy was in extreme trouble, but it appreciated in real terms by 14.5 percent," he told hundreds of domestic and foreign journalists.

During this period, Wen said, China's exports fell by 16 percent but imports only dropped 11 percent and its trade surplus decreased 102 billion U.S. dollars.

China has counted exports from 37 countries to it last year, of which 16 countries witnessed increases, he said.

"Taking Germany as an example, its exports to China hit a record high to 76 billion euros last year," Wen said, "The United States saw its total exports down by 17 percent, while its exports to China fell by only 0.22 percent."

The total exports from European Union plummeted by 20.3 percent in 2009, compared with a 15.3 percent decline in exports to China, Wen said.

China has become a major market for exports from its neighboring countries, including Japan and the Republic of Korea (ROK), as well as Europe and the United States, he said.

China, which overtook Germany as the world's biggest exporter at the end of 2009, is under increasing criticism for devaluating the renminbi, or its currency yuan, to earn price advantages.

On March 11, U.S. President Barack Obama pressed China to embrace a "market-oriented" exchange rate for yuan, saying the move is "an essential contribution to that global rebalancing effort."

The Chinese government, however, has reiterated in many occasions that China will keep its currency basically stable.

"I think that Chinese yuan is not undervalued," Wen stressed Sunday.

He also promised that China will strive to make balanced international payment and launch new measures to increase imports.

"We sent purchasing groups to the European Union and the United States when the world was stranded in the most difficult period of time (in the global financial crisis)," he said.

Wen pointed out that protectionism worsens as the global financial crisis deepens.

"Some countries' moves to shore up exports are understandable. But what I can not understand is they devaluate their own currencies while on the contrary pushing for the appreciation of other currencies. I think it is protectionism," he said.

"I am a staunch supporter of free trade, since it will not only promote world economic growth, but also improve people's livelihoods," Wen said.

Reply Mar 15, 2010 at 06:31 AM

paine said in reply to TC...
tc u and hal 9000
oughta date

Reply Mar 15, 2010 at 09:46 AM

TC said in reply to paine...
The report is about China's perspective about the Yuan issues. I don't think they are illogical or unreasonable. world should set clear rules that apply to every country and keep shifting goal posts.

Reply Mar 15, 2010 at 12:34 PM

paine said in reply to TC...
the rule should be
a trader has a right to adjust import prices by a ppp tariff system

the volume of cross border/zone trade
in the long run using fair trade rules
will exceed
the volume
using arbitrary open and shut regimes

Reply Mar 16, 2010 at 07:15 AM

anne said...
http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=03&year=2010&base_name=krugman_on_china_and_the_dolla

March 15, 2010

Krugman on China and the Dollar

Paul Krugman is absolutely right * in describing the economic relationship between the U.S. and China; the United States has nothing to fear from a decision by China to stop buying U.S. government debt. However, the discussion of the U.S-China relationship may not be quite right.

Krugman has the United States meekly asking China to raise the value of the yuan since 2003, with little effect. This certainly has been the public position of both the Bush and Obama administrations. However, negotiations don't take place in public.

When the United States negotiates with China, there are many items on its list. Both the Bush and Obama administrations have pressed China about increased protection for U.S. patents and copyrights. They have pressed China for increased assess for U.S. films and openings for the entertainment industry more generally. They also want to open the Chinese market to Citigroup, Goldman Sachs and other big financial firms.

No one ever expects to get everything on their list in negotiations. Suppose China promises better protection for Disney and Microsoft and more access for Citi and Goldman, but not much movement on the yuan. China feels it has been responsive to the U.S. position, after all it made major concessions in areas that are important to the United States.

We don't know what actually happens behind closes doors, but it is safe to assume that the U.S. negotiators do not pound the table and say: "we don't care about Mickey Mouse [Disney] and Goldman, we want to see the yuan rise against the dollar." If this is not what happens, then the blame lies as much with the U.S. as with China.

* http://www.nytimes.com/2010/03/15/opinion/15krugman.html

--Dean Baker

Reply Mar 15, 2010 at 06:38 AM

paine said in reply to anne...
dean the sly boots here
does a nice job of outlining the corporate priority list
that leaves all this standing
and he doesn't even have to mention
the gains from trade captured by these MNCs
thru the forex tilt itself

of course its more straight forward to notice that
i think
ie
the big corporations are big winners here bigger then if they got china to reval
there fore they aren't interested in reval anyway
only in threatening to react protectively
to get more

end of argument

yes get gets stated as if its swap talk
threats
"want in on our huge domestic market and our advanced technology"
then open your domestic hi fi market and consumer market
and job market and ...oh ya
protect our intellectual monopoly "

Reply Mar 15, 2010 at 09:53 AM

TC said...
China has spent a globally second largest stimulus package to help prevent the world economy from depression and helps in making the global weak economic recovery possible. The world economy as well as US and many countries's economy are hardly out of the wood yet. Whether it is justified or not, I think the timing of confronting China now seems ill-advised. A confrontation will drag everyone now back to recession or worst depression. The question of who would come off better is secondary.

Reply Mar 15, 2010 at 06:40 AM

OhNoNotAgain said in reply to TC...
Fear tactic.

You known darn well who would come off better - the American worker.

Reply Mar 15, 2010 at 06:59 AM

TC said in reply to OhNoNotAgain...
In the aftermath of the economic crisis, world leaders flied around the globe to peace together a conordinated efforts to resuscitate the global economy. If the global economy wasn't important, why the world leaders bothered in the first place?

Reply Mar 15, 2010 at 07:19 AM

paine said in reply to TC...
tc cut the vaguebull shit
you come off like a plant

Reply Mar 15, 2010 at 09:59 AM

paine said in reply to TC...
the only way china's macro policy helps the rest of the world is if it drastically reduces its trade surplus
either by inducing more imports or reducing its dependence on exports

Reply Mar 15, 2010 at 09:58 AM

TC said in reply to paine...
I believe this is not what is in Hanks and Tim G's brief to all important global economic leaders in their frenzy to contain the sub-prime fall-outs. Unless, of course, it is time to change the plan, with proper coordination.

Reply Mar 15, 2010 at 12:40 PM

TC said in reply to paine...
If US had problem receiving cheap stuff from China because this creates trade deficit for US, I don't think China has problems if US wants to sell them cheap planes, machines, ships, submarines,..., in this way, US trade deficit could come down and China's surplus could go away...a win-win situation.

Reply Mar 16, 2010 at 07:44 AM

beezer said...
I agree with Krugman that China's export policy has been predatory. Restrictions abound both regarding its currency and regarding foreign investment in their own country.

The biggest concern may not be currency chaos and interest rate volatility, but protecting American corporate investments in China. China could, if pushed hard enough, close down or takeover those investments.

Personally, I don't really care what China does, short of starting a war.

The foundational problem is that our government has had, and continues to have, a trade policy that encourages foreign investment rather than domestic investment. We need to rebalance our policies.

We also need to understand that if the Chinese currency is undervalued, then many other countries will support American pushback. It's not just America that's being wounded by the Chinese export policies.

Reply Mar 15, 2010 at 06:49 AM

beezer said...
And while we're at it, we should revisit our agriculture policies, including the predatory activities of firms like Monsanto.

Monsanto is pushing farmers around all over the world and its genetically modified seeds are the tip of the spear. Much of the rest of the world outlaws genetically modified foods and the ill will being produced by Monsanto, among others in the industrial ag business, is severe.

Monsanto has already pretty much destroyed our own food diversity (with the help of American courts and government subsidies for corn/tariffs on sugar imports). Now it is in the process of trying to duplicate its success here around the world.

Don't look for much help from the Agriculture Dept. either. Obama appointed Tom Vilsack, a former Monsanto employee, Secretary of Agriculture. And another Monsanto employee, Michael Taylor, to the FDA.

Reply Mar 15, 2010 at 06:58 AM

wjd123 said in reply to beezer...
beezer,

Our pigs taste like cardboard, and our corn is no longer sweet.

Reply Mar 15, 2010 at 04:57 PM

Winslow R. said...
Krugman is taking the wrong approach on so many levels with this one.

It would be much better to use China Inc. to solarize the world. We need visionaries right now that know how to use the excess labor available to make the world a better place. Krugman's gold based vision fails this time. As Dean Baker points out, the visionaries vision is to open China's financial sector. As of this morning T Rowe Price joins the crowd.

Giving out 0% loans could/will continue a long time, but it is not enough. The 'bubble' never had to pop. The 'excess' allocation of resources into housing doesn't need to be wasted. It is a crime to bulldoze Detroit when there are billions of people around the globe that are homeless.

Reply Mar 15, 2010 at 07:36 AM

julio said in reply to Winslow R....
Keep posting! You always provide a welcome and needed viewpoint.

Reply Mar 15, 2010 at 08:54 AM

paine said in reply to Winslow R....
winslow
true cosmopolite
f the local job class
we need bright cool ...air
honest
not very good politics
to win lies must be told
true motives behind positions disguised

thank god winny speaks from the soul not the bottom line

"Krugman's gold based vision "

how ironic he would never want to believe
he's not fully liberated from 200 years old memes
that reflected 300 year old realities

ahh pk " prisoner of unexamined pre fab memes
that are still in place and still aspects of his total working mind set "

Reply Mar 15, 2010 at 10:05 AM

anne said...
http://krugman.blogs.nytimes.com/2010/03/15/chinas-water-pistol/

March 15, 2010

China’s Water Pistol
By Paul Krugman

Dean Baker * gets upset by this line in today’s very useful Keith Bradsher article: **

"China is the biggest buyer of Treasury bonds at a time when the United States has record budget deficits and needs China to keep buying those bonds to finance American debt."

As I said, this was a very good article about China; the debt line was probably inserted because it’s considered obligatory to say this in any article about US-China relations. As it happens, however, while it’s part of what everyone knows, it’s also completely false.

Why don’t people get this? Part of the answer is that it’s really hard for non-economists — and many economists, too! — to wrap their minds around the Alice-through-the-looking-glass nature of economics when you’re in a liquidity trap. Even if they’ve heard of the paradox of thrift, they don’t get the extent to which we’re living in a world where more savings — including savings supplied to your economy from outside — are a bad thing.

Also, and I think harder to forgive, is the way many commentators seem oblivious to how we got here. Yes, we have large budget deficits — but those deficits have arisen mainly as the flip side of a collapse in private spending and borrowing. Here’s what net borrowing by the US private and public sectors looks like in the Fed’s flow of funds report:

[Private and public net borrowing, 2003-2009]

The US private sector has gone from being a huge net borrower to being a net lender; meanwhile, government borrowing has surged, but not enough to offset the private plunge. As a nation, our dependence on foreign loans is way down; the surging deficit is, in effect, being domestically financed.

The bottom line in all this is that we don’t need the Chinese to keep interest rates down. If they decide to pull back, what they’re basically doing is selling dollars and buying other currencies — and that’s actually an expansionary policy for the United States, just as selling shekels and buying other currencies was an expansionary policy for Israel (it doesn’t matter who does it!).

As Dean nicely puts it, “China has an unloaded water pistol pointed at our heads.” Actually, it’s even better: China can, if it chooses, throw some cold water on us — but it’s a hot day, and we would actually enjoy it.

* http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=03&year=2010&base_name=nyt_spreads_nonsense_on_china

** http://www.nytimes.com/2010/03/15/business/global/15yuan.html

Reply Mar 15, 2010 at 07:42 AM

Fred C. Dobbs said in reply to anne...
Here's your 'empty water pistol':

MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES
(in billions of dollars)
Country..............Jan 2010
China, Mainland......889.0
Japan................765.4
Oil Exporters........218.4
United Kingdom.......206.0
Brazil...............169.1
Hong Kong............146.6
(and so on)

http://www.ustreas.gov/tic/mfh.txt

Reply Mar 15, 2010 at 01:47 PM

Fred C. Dobbs said in reply to anne...
'The US private sector has gone from being a huge net borrower to being a net lender; meanwhile, government borrowing has surged, but not enough to offset the private plunge. As a nation, our dependence on foreign loans is way down; the surging deficit is, in effect, being domestically financed.'

It seems we're not 'consuming'. Instead were lending to the government. I did not know that.
(Nor do I necessarily believe it.) PK's point may be that 'new' borrowing by China, Japan, et al is down, so they have less leverage over US. Maybe so. This is in keeping with the notion that when you (US) owe your bank (them) bazillions, this becomes *their* problem, not *our* problem. Maybe so, also.

Reply Mar 15, 2010 at 02:02 PM

anne said...
http://www.nytimes.com/2010/03/15/business/global/15yuan.html

March 14, 2010

China Uses Rules on Global Trade to Its Advantage
By KEITH BRADSHER

HONG KONG — With China’s exports soaring, even as other major economies struggle to recover from the recession, evidence is mounting that Beijing is skillfully using inconsistencies in international trade rules to spur its own economy at the expense of others, including the United States.

Seeking to maintain its export dominance, China is engaged in a two-pronged effort: fighting protectionism among its trade partners and holding down the value of its currency.

China vigorously defends its economic policies. On Sunday, Premier Wen Jiabao criticized international pressure on China to let the currency appreciate, calling it “finger pointing.” He said that the renminbi, China’s currency, would be kept “basically stable.”

To maximize its advantage, Beijing is exploiting a fundamental difference between two major international bodies: the World Trade Organization, which wields strict, enforceable penalties for countries that impede trade, and the International Monetary Fund, which acts as a kind of watchdog for global economic policy but has no power over countries like China that do not borrow money from it.

China had a $198 billion trade surplus with the rest of the world last year, with its exports to the United States outpacing imports by more than four to one. Despite that, in the last 12 months, Beijing has filed more cases with the W.T.O.’s powerful trade tribunals in Geneva than any other country complaining about another’s trade practices.

In addition, Beijing has worked to suppress a series of I.M.F. reports since 2007 documenting how the country has substantially undervalued its currency, the renminbi, said three people with detailed knowledge of China’s actions.

China buys dollars and other foreign currencies — worth several hundred billion dollars a year — by selling more of its own currency, which then depresses its value. That intervention helped Chinese exports to surge 46 percent in February compared with a year earlier.

Many prominent academic economists see a basic contradiction in the global system of oversight on trade and currency.

“Many of us would like to see the W.T.O.-style commitments — with people’s feet being held to the fire — at other international agencies, like the I.M.F.,” said Jagdish Bhagwati, a Columbia University economist.

Western countries hoped last year to bring international pressure to bear on China, after years of complaining that Beijing keeps the renminbi artificially low.

An undervalued currency keeps a country’s exports inexpensive in foreign markets while making imports expensive. That makes a trade surplus more likely, reducing unemployment for that country while increasing unemployment in its trading partners.

Last September, President Obama, President Hu Jintao of China and other leaders of the Group of 20 industrialized and developing countries agreed in Pittsburgh that all the G-20 countries would begin sharing their economic plans by November. The goal was to coordinate their exits from stimulus programs and prevent the world from lurching from recession straight into inflation.

The G-20 leaders agreed that the I.M.F. would act as intermediary.

But two people familiar with China’s response said that the Chinese government missed the November deadline and then submitted a vague document containing mostly historical data. These people said that China feared giving ammunition to critics of its currency policies at the monetary fund and beyond. Both people asked for anonymity because of China’s attitudes about its economic policies.

If China is found to be manipulating its currency, it could be a political and economic challenge for the Obama administration. President Obama called on Thursday for China to introduce “a more market-oriented exchange rate.” China’s defiant response keeps the administration in a difficult position.

China is the biggest buyer of Treasury bonds at a time when the United States has record budget deficits and needs China to keep buying those bonds to finance American debt....

Reply Mar 15, 2010 at 07:44 AM

kthomas said...
OK, where the heck is Ms Anne?

Why is she not here setting the record straight?!

Reply Mar 15, 2010 at 07:44 AM

Winslow R. said...
China is pointing the water pistol and demanding we print unlimited paper dollars in exchange for a near unlimted supply of solar cells.

And we would deny them what they want?

http://community.nytimes.com/comments/krugman.blogs.nytimes.com/2010/03/15/chinas-water-pistol/?permid=14#comment14

Reply Mar 15, 2010 at 08:02 AM

Rusty Rustbelt said...
The empty U.S. factories are going to remain empty. It is too late to close the barn door, the horses have run away.

Reply Mar 15, 2010 at 08:13 AM

paine said in reply to Rusty Rustbelt...
no rusty no

we can reindustrialize in 10 years with the correct set of macro policies
just make me tyrant and i'll show ya

you can keep the books

Reply Mar 15, 2010 at 11:31 AM

Winslow R. said...
Has anyone thought this through?

Policy makers could simply issue a $20,000 credit for anyone that installs a 3 kw rooftop system.

The Chinese would happily oblige and supply the cells in exchange for the credit. Geez we'd solve U.S. unemployment and get an oil independent nation to boot.

C'mon Krugman, you can do better.

Reply Mar 15, 2010 at 08:14 AM

don said in reply to Winslow R....
"Has anyone thought this through?"
Apparently not.

Reply Mar 15, 2010 at 10:26 AM

TC said in reply to Winslow R....
Not an issue! Whatever the problem later, Krugman has the genius to frame it on China.

Reply Mar 15, 2010 at 12:47 PM

Darren said...
"Geez we'd solve U.S. unemployment and get an oil independent nation to boot."

Your solar rooftop system is going to run your car?

have you thought about the costs of raw materials for panels as demand increases by a factor of one million or so?

Reply Mar 15, 2010 at 08:24 AM

Winslow R. said in reply to Darren...
Solar cell manufactures are heading towards bankruptcy due to a lack of demand.

Reply Mar 15, 2010 at 08:38 AM

paine said in reply to Darren...
darren what's up
just can't believe technically we can pull it off
or just don't want to do it
or just know it won't happen so might as well call it impossible or too costly

Reply Mar 15, 2010 at 11:33 AM

kthomas said...
OK, where the heck is Ms Anne?

Why is she not here setting the record straight?!

Reply Mar 15, 2010 at 07:44 AM

Winslow R. said...
China is pointing the water pistol and demanding we print unlimited paper dollars in exchange for a near unlimted supply of solar cells.

And we would deny them what they want?

http://community.nytimes.com/comments/krugman.blogs.nytimes.com/2010/03/15/chinas-water-pistol/?permid=14#comment14

Reply Mar 15, 2010 at 08:02 AM

Rusty Rustbelt said...
The empty U.S. factories are going to remain empty. It is too late to close the barn door, the horses have run away.

Reply Mar 15, 2010 at 08:13 AM

paine said in reply to Rusty Rustbelt...
no rusty no

we can reindustrialize in 10 years with the correct set of macro policies
just make me tyrant and i'll show ya

you can keep the books

Reply Mar 15, 2010 at 11:31 AM

Winslow R. said...
Has anyone thought this through?

Policy makers could simply issue a $20,000 credit for anyone that installs a 3 kw rooftop system.

The Chinese would happily oblige and supply the cells in exchange for the credit. Geez we'd solve U.S. unemployment and get an oil independent nation to boot.

C'mon Krugman, you can do better.

Reply Mar 15, 2010 at 08:14 AM

don said in reply to Winslow R....
"Has anyone thought this through?"
Apparently not.

Reply Mar 15, 2010 at 10:26 AM

TC said in reply to Winslow R....
Not an issue! Whatever the problem later, Krugman has the genius to frame it on China.

Reply Mar 15, 2010 at 12:47 PM

Darren said...
"Geez we'd solve U.S. unemployment and get an oil independent nation to boot."

Your solar rooftop system is going to run your car?

have you thought about the costs of raw materials for panels as demand increases by a factor of one million or so?

Reply Mar 15, 2010 at 08:24 AM

Winslow R. said in reply to Darren...
Solar cell manufactures are heading towards bankruptcy due to a lack of demand.

Reply Mar 15, 2010 at 08:38 AM

paine said in reply to Darren...
darren what's up
just can't believe technically we can pull it off
or just don't want to do it
or just know it won't happen so might as well call it impossible or too costly

Reply Mar 15, 2010 at 11:33 AM

Curt Doolittle said in reply to paine...

It takes vastly more energy to create a solar cell than it can ever produce. Furthermore, you can refine the energy producing material indefinitely, and store the expended product fused in glass, rendering it immobile.

The only viable replacement for petroleum products is nuclear energy. Everything else, as far as we can tell from the potential of these technologies is vastly insufficient.

Fanciful answers are fanciful answers, especially when productivity rests on a) property rights b) non-corruption c) education in material skills, d) energy. Cheap power is as important as education and rule of law.

Reply Mar 16, 2010 at 08:10 AM

Curt Doolittle said in reply to Curt Doolittle...

It takes vastly more energy to create a solar cell than it can ever produce. Solar is a marginal technology and always will be. Especially when energy demand is very high in cold and dark locations.

The only viable replacement for petroleum products is nuclear energy. Furthermore, you can refine the energy producing material indefinitely, and store the expended product fused in glass, rendering it immobile. Everything else, as far as we can tell from the potential of these technologies is vastly insufficient.

Fanciful answers are fanciful answers, especially when productivity rests on a) property rights b) non-corruption c) education in material skills, d) energy. Cheap power is as important as education and rule of law.

Reply Mar 16, 2010 at 08:13 AM

Winslow R. said...
"Your solar rooftop system is going to run your car?"

Heard of the Volt?

"have you thought about the costs of raw materials for panels as demand increases by a factor of one million or so?"

Is that a problem when we have a lack of aggregate demand?

Reply Mar 15, 2010 at 08:32 AM

paine said...
the paul krugman here
is the paul krugman i suggest we follow closely

the surcharge club used by that bold renegade dick nixon
is precisely what we need
perhaps generalized to apply to any and all products
originating from undervalued currency zones by value added share to be fair
and also to be fair attach a subsidy to all over valued currency zone originated products by value added too

this system could use ppp tables certified by some international body instead of the treasury department
again to be scrupulously fair

i point out across the board surcharges
have only one organized source of opposition
our multi national corporations
of course that has proved to suffice
all aline the MNCs have effectively stymie
congressional and executive action

interestingly the potus seems to have the authority to take emergency temporary action here
so blame obama not the hill

Reply Mar 15, 2010 at 08:33 AM

anne said...
http://www.measuringworth.org/datasets/exchangeglobal/result.php?year_source=1980&year_result=2008&countryE%5B%5D=China

Price of an American Dollar in Chinese Yuan, 2000-2010

Chinese Yuan

2000 ( 8.28)
2001 ( 8.28) Bush
2002 ( 8.28)
2003 ( 8.28)
2004 ( 8.28)

2005 ( 8.19)
2006 ( 7.97)
2007 ( 7.61)
2008 ( 6.95)
2009 ( 6.83) Obama

March 15

2010 ( 6.83)

Reply Mar 15, 2010 at 08:43 AM

Peter K. said in reply to anne...
"U.S. goods and services trade with China totaled $410 billion in 2007 (latest data available). Exports totaled $79 billion; Imports totaled $330 billion. The U.S. goods and services trade deficit with China was $251 billion in 2007.

China is currently our 2nd largest goods trading partner with $407.5 billion in total (two ways) goods trade during 2008. Goods exports totaled $69.7 billion; Goods imports totaled $337.8 billion. The U.S. goods trade deficit with China was $268.0 billion in 2008.

Trade in services with China (exports and imports) totaled $23.0 billion in 2007 (latest data available). Services exports were $14.2 billion; Services imports were $8.8 billion. The U.S. services trade surplus with China was $5.4 billion in 2007."

U.S. goods and services trade with India totaled $66 billion in 2008. Exports totaled $28.2 billion; Imports totaled $37.8 billion. The U.S. goods and services trade deficit with India was $9.6 billion in 2008.

India is currently our 18th largest goods trading partner with $43.4 billion in total (two ways) goods trade during 2008. Goods exports totaled $17.7 billion; Goods imports totaled $25.7 billion. The U.S. goods trade deficit with India was $8.0 billion in 2008.

Trade in services with India (exports and imports) totaled $22.6 billion in 2008. Services exports were $10.5 billion; Services imports were $12.1 billion. The U.S. services trade deficit with India was $1.6 billion in 2008.

As someone else pointed out, India doesn't manipulate its currency in order to pursue a beggar-thy-neighbor trade policy.

Why the antipathy towards India? Why the sympathy towards China? Is it their history as a colonized and exploited nation?

Two wrongs don't make a right, Anne.

Reply Mar 16, 2010 at 07:51 AM

anne said...
http://www.measuringworth.org/datasets/exchangeglobal/result.php?year_source=1970&year_result=2008&countryE%5B%5D=India

Price of an American Dollar in Indian Rupees, 2000-2010

Indian Rupees

2000 ( 45.0)
2001 ( 47.2) Bush
2002 ( 48.6)
2003 ( 46.6)
2004 ( 45.3)

2005 ( 44.0)
2006 ( 45.2)
2007 ( 41.2)
2008 ( 43.4)
2009 ( 48.3) Obama

March 15

2010 ( 45.6)

Heck, we can at least couple India with China but never seem to.

Reply Mar 15, 2010 at 08:46 AM

Hal said...
If China got really angry it could do a number of things, such as send sophisticated arms to the Taliban and work to drive the US out of its back yard, support Iran with more weaponry and refuse sanctions, step up pressure on Japan to get US troops out of Japanese territory, start using some of its dollar assets to buy up large block of international companies via surrogates, etc. China has the cash; the US doesn't.

Reply Mar 15, 2010 at 08:57 AM

paine said in reply to Hal...
hal 9000

that fruit salad
you are offereing
is part rotten part so what
and half fake
oh and completely off base

Reply Mar 15, 2010 at 11:35 AM

TC said in reply to Hal...
I don't think China would resort to such unwise actions. Further, it is just Yuan value issue. I don't think it is that serious.

Reply Mar 15, 2010 at 12:51 PM

Curt Doolittle said in reply to Hal...
Read Stratfor's analysis of China.

I would be perilously simple to contain China, and cause internal strife there. The Chinese know this. They act accordingly. They have one mission, which is to maintain One China while converting from poverty to prosperity. Previous attempts have failed. Mao was willing to doom China to long poverty to maintain a One China. He raised a western army to defeat eastern prosperity. China's problem is that one billion people live in a very narrow strip of land on the eastern edge of the country.

China has perhaps the highest quality executive management of any country. It also, as an empire which uses it's empire of oppression to form a defensive barrier against the north, south and west, and it has a terrible problem of endemic poverty and an ancient tension between coastal trading wealth - a coastal merchant class, and the interior of ignorance and poverty.

While chinese governors desire access to global resources, and certainly aspire to be global players, they are self centered in a way that western countries cannot comprehend, and they have a terrible powder keg of internal potential for conflict. They do not play a game where they lead with the promise of the best for all. They simply play to lead.

Their problem is that Ling Po will not be happy going back to the farm. The farmers who have promise of ending poverty will not be happy if the process reverses.

While the world complains about US hegemony, we have no reason to think Chinese administration would be better. They are a petty people with a viscous nature, and an enormous chip on their shoulders. And a social mythos that like Islam, proposes that they are the greatest people, but evidence that confronts them every day, seems to prove otherwise.

But then all civilizations have such mythic aspirations, or they would not be civilizations. That mythos is what defines a civilization.

I wrote in 2004 that at the moral level, our civilziation was getting cheap material goodies and increasing home ownership so that we could finance the rise of China and India out of ignorance and poverty, and that we would simply inflate our way out of the debt obligation. In moral terms, this seems a fair bargain. In the ongoing war of capitalism, it was perhaps simply another expense of converting the world from ignorance and poverty to knowledge and prosperity. We may lose our hegemony in the end, but having accomplished the moral purpose of that hegemony, it seems a worthwhile endeavor for a civilization.

Capitalism is beneficial in training civilizations not just individuals, to work in common interest by way of selfish motivations. And that is what Smith told us it would be. This 500 year old change is the greatest innovation in human cooperation since the development of farming gave us cities, writing, counting, and a division of labor. We don't have to like converting any more than the tribesmen liked it. But we vote for it with our actions every time.

Reply Mar 16, 2010 at 08:42 AM

Peter K. said...
Hal:

"If China got really angry it could do a number of things, such as send sophisticated arms to the Taliban and work to drive the US out of its back yard, support Iran with more weaponry and refuse sanctions, step up pressure on Japan to get US troops out of Japanese territory, start using some of its dollar assets to buy up large block of international companies via surrogates, etc. China has the cash; the US doesn't."

China doesn't have the consumer market. The US and China are in a symbiotic relationship. If China got angry and acted on it thereby hurting the US, who would buy their goods? If China does get a consumer market, I doubt the Chinese Communist dictatorship will survive.

People like Hal are either 1) extreme lefties who weren't hugged as children and hate the US or 2) rightwingers who hate Obama and hate the fact the government taxes them. I'd guess HAL is #2.

Reply Mar 15, 2010 at 09:22 AM

Hal said in reply to Peter K....
You mean if we had to get out of Afghanistan we couldn't buy Chinese goods? If Iran got nukes, we couldn't buy Chinese goods? I don't get the connection. It is always foolish to speculate about people you don't know. I am an Obama supporter rather disappointed in his caving into Wall Street and would be happy to pay more taxes as long as others do so too. You got me all wrong.

Reply Mar 15, 2010 at 11:24 AM

Peter K. said...
Anne:

"Heck, we can at least couple India with China but never seem to."

What's the trade deficit with India? Also India is a democracy while China isn't. Seems kind of basic.

Reply Mar 15, 2010 at 09:25 AM

paine said in reply to Peter K....
"India is a democracy while China isn't"
what in hell difference does that make
on trade policy or forex fiddling

anne's dead right
and the key is this

focus on china now like we focused on japan in the 80's and we'll allow the MNCs to set up