America has China over a barrel, not the other way around.

This approach has not worked for decades on any issue, China's leadership remains as recalcitrant and irresponsible as ever, and gets worse with each passing day.

I may have to sell all of my Chinese holdings - it's getting to be too much.

 

Please calm down.

I am not saying US has to buy cheap goods from China. In fact, as I said already, I believe a stronger yuan is better for Chinese people in China. While those exporting oriented manufacture will suffer, inflation and crazy real estate market can cool down without crashing. A large country with 1.3 billion people can not go on to reach developed country status relay too heavily on exports. But this idea won't be welcomed by Chinese government, especially local officials, because they are GDP number oriented, and their political future hang on 2 things - stability and GDP number.

No, US does not have the obligation to buy goods from China. People like you maybe are willing to pay higher price for similar goods from other countries. Lots of Americans are not willing to. In this all rating/voting oriented political system, politicians will react to votes. So far, it's been safe to cry for "artificially lowered RMB" and enjoy cheap goods from China. I don't know what's going to happen if that cheap goods are no longer available, and I look forward to the actual result. But one thing is pretty clear, it's not going to be all good for America, and it won't be all bad for China.

BTW, US chose to buy cheap good from China, and it is NOT a gift to Chinese people. It's a business decision based on price, quality, productivity, and political risks, based on thorough and balanced research, and proven over the time. This was actually not a political show.

 

Manufacturing for cheaper variety goods will shift to S. Asian countries like Thailand, Vietnam, or Malaysia.

There are a lot of export driven countries other than China that are pursuing a weak domestic currency while subsidizing American debt to maintain that imbalance. It's not too evident that a stronger RMB will lesson the US's consumer's hunger for cheap imports in the long run.

 

It's really easy to say than to do. Do you think US government prefers to deal with Thailand/Vietnam/Malaysia combined or Red China? If US can use other countries to fill the void in both quantity and quality of Chinese cheap goods, will US still want to "engage to help China move towards democracy" or just treat it as Cuba and N. Korea? Like I said, it's a business decision based on clear minded analysis.

Over the long run, I believe it's good for Chinese people to move away from those cheap exports, making one dollar off a pair Nike shoes, while Nike booking 50 bucks of profit. But in the short run, something that dramatic (25%/30% change in exchange rate), is possible to cause social unrest in China, and it's very likely that current US congress won't get re-elected.

Just my 2 cents.

 

Tarriffs baby !

DD

 

Yes, absolutely. Not to mention the fact that those countries are the ones that are getting hurt the worst by Chinese currency manipulation.

 

Yeah right, Chinese magically crushed their currency system, and caused South-East Asia financial tsunami via their deep hidden proxies in the great America. China also secretly spread the virus called "Sub-prime" to the world via their proxies in America. LOL.

Didn't you just talk about government irresponsibility? You seem to be contradicting with your president and other government officials. Just a year ago, world leaders including Obama were singing praise for PRC's effort to help stabilize global economy. Of course, now that US stock market has bounced 60% back from its 2009 March low, all of the sudden the tone is different. Let's all hope it's not a W-shape recession, but flip-flop is probably your forte. How typical!

 

You are diverting the issue - when China keeps its currency artificially low with the dollar peg, the plain and simple fact is that it's equally export-focused neighbors, who don't peg to the dollar, are hurt by it. This is a simple function of intutive economic theory, and in practice this has what has happened:

http://www.nytimes.com/2009/12/10/world/asia/10jakarta.html

I'm referring to China's irresponsibility with respect to political issues. I tend to believe Chanos though and took it to heart today, investing in some UHPIX. We'll see.

 

Your premise was wrong by assuming Vietnam's products can compete with Chinese if PRC doesn't do the dollar peg, and win. Remember, labor cost not to mention facility real estate cost is actually lower in Vietnam, even if you apply a 25% surcharge on RMB, for argument's sake. Sure, the RMB dollar peg has its impact, but to credit or fault everything on that, is just plain ignorance.

Since when helping stabilize global economy during its crisis is NOT political issue? But anyways, good luck with your UHPIX, I never touch those ultra short crap. Hey, it's your money, hope you do what you say. I see Chinese A share going sideways around 3000 for quite some time.

 

Dude I wand my cheap LCD's.

 

Yes, that's what I am thinking. You may argue that he has a political intent, but I may also argue that his arguments are motivated by pure economics.

 

Thats just awesome. Mud house statistics to assert a country's economic flexibility.

 

Lol, people actully arguing about a 25% tariff like it's going to happen.

On a side note, China recently sold a decent chunk of US debt, steps to diversify? US China relationship is a lot more than exchange rates, many other things are inplay like Iran.

 

China has us by the balls

- Everyone in America

 

Exactly.

That's why to the contrary what many believe Krugman talks pure economics, which is why it ain't going to happen, IMHO.

 

The problem with UHPIX is you have to know the market will tank in the next few days. Since it's based on daily performance, volatility destroys your gains even if Chinese market tanks. If the Chinese market moves sideways with volatility for a month before tanking, it's a loss.

 

the Quantum fund was a hedge fund founded by Nobel Prize winners in finance and economics. The fund is now defunct.

 

They can be built in Mexico...

DD

 

Long marginally technical response here:

http://krugman.blogs.nytimes.com/20...pessimism-and-the-renminbi-wonkish/#more-7929

 

Then why are they not built there?