http://finance.yahoo.com/tech-ticker/g20-to-tim-geithner-%27you%27re-joking-...-right%27-535534.html?tickers=^DJI,^GSPC,GLD,UUP,UDN,FXI,TBT&sec=topStories&pos=1&asset=&ccode= The stock market was relatively calm Friday morning but market players are on edge ahead of this weekend's G20 summit in Seoul. With the world's economic powers seemingly in a race to have a weaker currency than their trading partners, the threat of a currency war hangs over the conference. Ahead of the confab, Treasury Secretary Tim Geithner sent a letter requesting the G20 "commit refrain from exchange rate policies designed to achieve competitive advantage by either weakening their currency or preventing appreciation of undervalued currency." China's currency manipulation was the primary target of Geithner's request, as was his proposal that G20 nations adopt specific targets to reduce trade gaps between specific countries. The problem is U.S. policy appears designed to weaken the dollar without regard for our trade deficit, so Geithner seems, at best, disingenuous and, at worst, hypocritical. Furthermore, S&P 500 companies are benefiting from a weak dollar, as Henry and I discuss in the accompanying clip. The dollar's weakness makes it easier for U.S. multinationals to sell their goods abroad, a primary reason the stock market is hovering near its highest levels since Lehman Brother's bankruptcy in September 2008. For better or worse, the big threat to the bulls today is the communiqué coming out of the G20 meeting might help shore up the dollar, a big reason gold has fallen from its recent peak this week. http://finance.yahoo.com/news/US-pl...tml?x=0&sec=topStories&pos=main&asset=&ccode= U.S. plan for trade targets runs into G20 headwinds By Daniel Flynn and Louise Egan GYEONGJU, South Korea (Reuters) - The United States struggled on Friday to win backing for its proposal of setting numerical targets for external imbalances as a way of pressing surplus countries such as China to let their exchange rates rise. In a letter to fellow finance ministers of the Group of 20 leading economies, U.S. Treasury Secretary Timothy Geithner said countries should implement policies to reduce their current account imbalances below a specified share of national output. Diplomats said the Treasury chief was proposing to limit surpluses and deficits on the current account -- the broadest measure of trade in goods and services -- to 4 percent of gross domestic product. But Geithner's proposal met a cool reception on the first day of a two-day meeting meant to smooth the path for a G20 summit in Seoul on November 11-12. German Economy Minister Rainer Bruederle warned of falling back into "planned economy thinking," while Russian Deputy Finance Minister Dmitry Pankin said the draft communique to be issued on Saturday would stay clear of numerical targets. "The communique is very politically correct. There's nothing sharp in it," Pankin said. "In the long term the focus should be on the exchange rates reflecting market conditions. Excessive state interference in currencies should be avoided." DOUBTS ABOUND Japanese Finance Minister Yoshihiko Noda also voiced skepticism about Geithner's proposal. "We said that we doubt whether rigid numerical targets should be set. But when checking the progress in rectifying imbalances, that might be an idea," he told reporters. The criticism underscored the difficulties facing the G20 as it strives to put the world economy on a more stable footing and defuse currency tensions that economists fear could trigger trade wars. While the G20 won praise for coordination of stimulus packages during the global financial crisis, its unity has been tested by low growth in rich countries and various attempts by emerging market economies to preserve their export competitiveness by holding down their exchange rates. Saudi Arabia, Germany and Russia are the G20 members with the biggest current account surpluses, but China is the chief culprit in Washington's eyes -- and the unspoken target of Geithner's letter -- because of its massive currency market intervention to keep a lid on the yuan. Beijing has amassed $2.65 trillion in official currency reserves as a consequence and has prompted the U.S. House of Representatives to pass a bill threatening retaliation unless China lets its currency off the leash to reduce its huge trade surplus with the United States. G20 countries, Geithner said, "should commit to refrain from exchange rate policies designed to achieve competitive advantage by either weakening their currency or preventing the appreciation of an undervalued currency." LOOKING FOR CONSENSUS Not everyone rejected the U.S. gambit out of hand. "At a time when people are talking about currency wars, the merit of Geithner's proposal is that it shifts the discussion back to the macroeconomic framework," a French official said. Jim Flaherty, Canada's finance minister, said setting numerical targets was a step in the right direction. "There's a desire to reach consensus, to be collaborative, to move in the direction of an action plan that we can present to our leaders so that they can adopt it when they meet here in a couple weeks," he said. Far from being willing to bow to U.S. pressure, many emerging market policymakers blame lax U.S. policies for the global financial crisis. They also fear Washington is prepared to debase the dollar by flooding the banking system with cash to try to breathe life into the stuttering U.S. economy. Expectations that the Federal Reserve will crank up the dollar printing presses has sent a tide of money pouring into emerging markets, boosting their currencies and asset prices and complicating the conduct of fiscal and monetary policy. Brazil and Thailand have responded by introducing controls on capital inflows, while other central banks have stepped up currency intervention to hold down their exchange rates "We must demonstrate that we can, in the immediate term, cooperate to avert what many are now terming a currency war. We must find a solution to this by the Seoul summit, if not by the end of our meeting," Indian Finance Minister Pranab Mukherjee said.
This is pretty stupid of you to write. Are you honestly arguing that countries that are fighting inflation, and countries that are combating deflation, should employ a similar monetary strategy? Le Sigh...all those years aspiring to own your own business, maybe you could pick up a textbook or 2, just a hint.
Oh please. What he is saying is right. The US is AGAIN trying to tell the rest of the world what to do. To ITS OWN benefit. So yeah, it comes as no surprise if the rest of the world tells the US to F O. Not everyone marches to the beat of the American drum.
When it comes to getting hurt by Chinese trade policy, most of the world does march to the US drum - because China is hurting most of the world with its trade policy (and its own citizens as well...ironically). This is not a difficult equation to figure out though it's not hard to see why you aren't able to. P.S. sorry about your loss in the WTO yesterday. Sad face.
Come on. Your argument style reminds me of those FQ (Angry Young man) in China, worst posters on the internet.
I'm a bit of a noob on this topic so please be patient =) To begin, wasn't Japan able to devalue their currency pretty radically to influence trade without any long term ramifications? How was this even possible? As a simplistic analogy, to me it looks like this. I have a country X with currency Y that has no tangible asset linked to it. Currently there is a 100 Y floating in the system. Each of my major export Z costs 1 Y to produce and I want to sell them to another country, but it doesn't seem like a good deal to the other country. I decide to print 900 more Y, thus devaluing the currency to around 10% of its original value. Now theoretically, nothing has changed. Just whoever was holding Y currency is now able to purchase less with Y. How does this affect a trade deficit? Is it because when printing the surplus Y, it's not an immediate shift to equilibrium? Is it similar to a stock splitting; are markets similarly influenced in the supply/demand curve for currency?
Most of the world is getting hurt by Chinese trade policy? You must be smoking some great stuff :grin: Didn't the rest of the world call China the CURRENT ENGINE of the world economy and growth? Didn't Soros, Stiglitz, Roach, ministers of Europe, the ministers of Asean say that the Chinese is currently holding up the world economy... nay, rescued it? Oh wait, you're still smarting over the fact that the US is no longer the world's engine of growth. You're still smarting over the fact that US bankers, CEOs and politicians (Ivy League trained folks) blew a huge huge HUGE hole in the US economy. You're still smarting that the US has a 9.5% unemployment rate. You're still smarting that 1 in every 4 American homeowners has their homes underwater. You're still smarting that the US is 10 trillion in federal national DEBT. You're still smarting that the US is the laughing stock of the world when it comes to "national fiscal management". What is that? You want us to learn from your 1 quadrillion in toxic derivatives policy? And you're still smarting that the Chinese Commie government were smart enough, capable enough, precise enough to apply the right stimulus to their country. Hey, admit it, you're jealous of their 10% growth, and constant astute economic management, which is now leading China to an economic soft landing after quarters of STRONG GROWTH. And most importantly, you're jealous that the Pew Report, a Western polling organization, found that 85% of the Chinese are happy with their Commie government, compared to 23% of Americans, who are happy with their democratically elected government I bet you're so jealous of the Commies that you wish it were Hu and Wen who were leading YOUR COUNTRY. At least they wouldn't have led the US into an economic iceberg Its OK Sam Fisher... we all get jealous, I understand. I mean, I got jealous of Americans earning so much money and living in such big houses, but then when I found out they had too much debt, 0 savings and the value of their houses were underwater, I didn't get jealous anymore.... :grin: P.S. The US still might lose on the WTO case yet. It isn't fully over P.P.S. China isn't my country. But hey, if they want to pay me for spreading their "propaganda", I don't mind....
I kind of stopped reading your post right here. It has to do with China keeping its currency artificially low, which does nothing but hurt countries like Thailand, Vietnam etc - that's why those countries have been complaining about it and busy forging alliances with the US. None of this is remotely new or difficult to discern, has been widely reported ior years, and the fact that it is novel and has to be explained to you indicates that you don't seem to know much about this area. I mean when you have you and snowmountain telling me that Japan would intervene on China's behalf to support a weak yuan (when they have been quite literally doing the opposite for the last month and fighting deflation) kind of makes this into a beating up on kindergartners exercise. Boring.
Thailand: http://www.atimes.com/atimes/Southeast_Asia/LJ22Ae01.html http://www.bangkokpost.com/news/security/202983/marine-manoeuvres http://news.xinhuanet.com/english2010/china/2010-10/20/c_13567246.htm Vietnam: http://english.vovnews.vn/Home/Vietnams-leaders-salute-Chinas-Independence-Day/20109/120038.vov http://news.xinhuanet.com/english2010/china/2010-10/10/c_13550468.htm http://news.xinhuanet.com/english2010/china/2010-10/11/c_13551869.htm http://english.vovnews.vn/Home/ChinaASEAN-Expo-opens/201010/120600.vov ASEAN: http://www.livetradingnews.com/asean-looks-to-china-for-growth-25503.htm http://www.china-briefing.com/news/2010/10/21/china%E2%80%93asean-trade-leaps-47.html I think relations between China and Thailand, Vietnam and ASEAN are doing alright. I certainly do not see any news of them saying that they look to the US as an engine of world economic growth in the immediate future. Anyway, continue sticking your head in the sand, Sam Fisher. I tire of arguing with a foreign policy ignorant like you.
I have one for you. http://www.bbc.co.uk/news/world-us-canada-11437758 The fact is that the world would love to have a stable, rich China. When the CCP allows the currency to appreciate so that China can buy goods from advanced economies like the US, Eurozone and Japan, the Chinese people will be better off.
What happens when the demand for their no longer super cheap goods drops? Will they still be better off?
The Germans seem to have no problems exporting to China despite the high value of the euro. http://www.washingtonpost.com/wp-dyn/content/article/2010/09/17/AR2010091707072.html You know, the US could have exported hell of a lot more things to China, but your politicians are just too damn paranoid. China does not need low cost, low tech stuff. They can out manufacture and out tech and out cost you in that area. You know it, I know it, my business partners know it, everyone knows it. Even in Malaysia, where I am from, we have a principle - don't bother competing with the Chinese on low-end manufacturing. They will blow you out of the water. Just contract the manufacturing to a reliable Chinese partner, and concentrate on other parts of the value add chain, like the branding, marketing and services. Similarly, there is no way Western countries can compete head to head with China in this sector, and they shouldn't. What the Chinese cannot do (yet) is high-end, high-tech manufacturing. They want these products, equipment and technology. That's what they have been telling the US all along. They would love to buy US stuff. They sent so many trade missions to the US, but the US keep refusing to sell their high-tech products and equipment to them because of their (US) paranoia over possible "dual usage" of these stuff (i.e. military application possibilities). So the Chinese just shrug and buy from the Germans, the Koreans and the Japanese. Check out whether these countries have a deficit or a surplus with China. What I see is a US policy of trying to have its cake and eat it too. And this is a policy the world would not be able to tolerate. Where in the past, the US, as the sole economic superpower, was able to do a lot of dictating and directing to the smaller countries in the world, the rise of China now gives these countries an "alternative", and it allows them to play off China and the US against one another. I believe that the rise of China actually gives the biggest benefit to the smaller countries in the world. My country was saved in the Asian Financial Crisis because China, which could have devalued its currency in response to the crisis, actually kept its currency overvalued relative to the Asian currencies. That gave us some breathing space and allowed us to recover. http://en.wikipedia.org/wiki/1997_Asian_Financial_Crisis People in the world are not so stupid that they cannot see the truth for what it is....
Germans are fools. They are giving the Chinese all their technology. They will just steal it and make the Germans irrelevant. U.S. companies know that China doesn't respect patents. http://www.guardian.co.uk/world/2009/jul/22/germany-china-industrial-espionage with Germany basically giving the Chinese their cars, high-tech gear, and knowhow...soon the Chinese will be making technologies competitive to Germany companies and put them out of business. German companies are putting a quick buck ahead of smart long term thinking. The chinese don't play fair. That's fine because no one else really do either, but the rest of the world better wake up because unlike other countries, the Chinese gov't acts as one. It can make decisions between industries to get the best advantage. Western countries don't have that luxury....individual companies are in it for themselves. You don't see that kind of big picture strategic decision making. China may kill one of it's industries to benefit another. It's truly impressive how China is operating I must admit. You have to hand it to her leadership - they are going to be the worlds most powerful economy, and even Europe and the U.S. will bend down towards her because she will hold all the marbles and be able to bully anyone. The rare earths issue is just a small demonstration of the power of having the gov't and industry act as one. Perfect decision making. No western country can ever achieve that.
If it is so easy for the Chinese to steal technology, know-how, and ignore patents, the Chinese could have crushed the German car industry long long time ago. BMW, Daimler, Volkswagen / Audi / Porsche, all would have been wiped out simply by the Chinese producing a direct copy or equivalent to their cars. Yet, I have not seen a single Chinese copy or competitive equivalent to the German cars. Nothing as well, to compete against other Continental cars like Peugeot, Jaguar (now Indian owned), Volvo (now Chinese owned), Japanese cars like Toyota, Honda, Nissan, heck, even Korean cars like Hyundai. It is because the technologies and components of these products are so complex and high-spec, that the Chinese cannot copy them in time to come out with a low-cost competing model before they are out of date. Heck, even copying the metallurgical properties of such high-end cars is beyond China's reach currently. You only see the Chinese competing in small cars. Against Ford, GM and Chrysler. (Whose big cars, BTW, are doing very well in China). And nevermind about cars. What about machine equipment and technologies? Or products that require individual and bespoke designing? The Germans have never lost their lead in machine equipment and technologies, not even when competing against Japanese and Korean "copycats" in the 1970s - 1980s or when going head to head with rival Continental and American producers. Today, whenever my company seeks a production line designer and producer, our first port of call is ALWAYS Germany. The people we deal with in China tell us the same too. And they admit they it will be decades before they are able to compete with the Germans in this field (but they are striving damn hard nonetheless, why do you think they produce so many engineers and pump so much money into R&D...). Do you know what is a US company that is making good money in China? Caterpillar. They make products that the Chinese want and that Chinese companies cannot compete against. I have talked to construction company bosses who state that, even though paying for a Caterpillar machine might be 3 times more than what they could have paid for an indigenous product, the higher quality, better reliability and much longer lasting Caterpillar machines make their investment more worthwhile. And again, they admit it will be a long long time before there is any Chinese machine producer reaching the standards of Caterpillar or Komatsu. That's why there is such a thing in economics called "barriers to entry". Yeah, you can take a whole machine apart, and reverse engineer it. But to try copying it? Good luck. One last example I will give. One of the companies I deal with in China informed me that they were able to make an exact copy of the Iphone 4. They copied all the components, the make-up, the design, etc. of the Iphone 4. But..... their copy was only able to perform to 1/3rd of the Iphone 4's capabilities. My business partner, who is a top graduate in Electrical and Electronic Engineering from a top British university told me that it would be almost impossible for the Chinese (or any competitor for that matter) to copy the internal architecture of the Iphone 4, since its layout and circuitry is so complex and hard to fathom. It is this complexity that gives the Iphone 4 its performance, and sets a ridiculous barrier to entry for its competitors. That's the power of US brains at work. The power of US industry and engineering and design. This is the USA's competitive advantage. And you know what.... your politicians are killing off your competitive advantages and letting the Chinese catch up. And in refusing to trade with the Chinese on the mistaken assumption that they can easily copy your technologies, you merely increase your trade deficits. *shrug*
Back to Tim Geithner's proposal. Here is the subject of debate in the letter he sent to other G20 ministers It is so anti free trade, and has protectionism written all over it. It's one thing to fight on exchange rates, which has some merits. It's totally another to hard cap one country's trade surplus irregardless. Even though, on the face the proposal looks at reasonable, i.e. in the name of boosting global demand, this hard limit can have percussions beyond that. I can understand unfair competitive advantage through undervalued currency, but this can curb one's trade even if the country is efficient in making certain things. Booo Oh, you see the exceptions he proposed? Self serving a little, huh?
Ok, looks like the proposed hard cap is 4% which is not far away from what China is running right now 4.7%. Tim Gytherner if off to China already. I guess the devil is in the detail. The big boys set the rule. Sorry, theBoneLoser :grin:
The U.s. has no problem selling finished products to China...but china won't allow it unless the U.S. gives China it's patents and shares the technology, and builds the products in china. The U.S. refuses to do this. China blocks genuine U.S. goods from it's markets while allowing pirated versions to sell freely. That's merchantability. China is practicing a defacto trade war against us and only allowing things in if we hand over the technology as well. We aren't dumb like the Germans are. We won't give up our technology. China can use this rare earths to try to dominate high tech industries and force u.s. companies to base production in China, where China can then learn all the secrets and take over those industries as well. No. Here are all the ways China is practicing a trade war already - not including the monetary policy that makes u.s. goods 40% artificially higher: http://www.idealtaxes.com/post3097.shtml We need to stand up to China and stop letting corporate business interests here make our politicies serve the Chinese before Americans. We're getting abused here and Americans need to wake up and realize that the cheap goods we get from China are a double edged sword. I say fight fire with fire and start the trade war now. It will be a boast to employment here as sales of domestic goods go up. If China opens up it's markets fairly then great, we can all get along. But until then, I say we hit China imports into the U.S. hard with a 40% tax across the board, just like they are doing to our exports.
Go ahead and keep the American blinders on. You seem to completely ignore how our policies effect international trade. Our monetary policy is essentially protectionist. I'll never understand how people can be ignorant to the fact that money should be controlled by the people who use it, not at the whims of governments who always use that power for the benefit of internationally competing powerful business interests. Hence, all governments working to protect those interests at our loss. And that isn't even to mention the effects of our monetary policy on domestic markets. Of course, when you're taught to believe that economic fluctuations can be combated by allowing the government to rob us as a means of preventing our productive capacity from adjusting to actual demand, you'd ignorantly believe anything that these pseudo-economists say, despite the harm their policies have on the common man. Consumers are the heart of an economy. Forcing them to spend what they don't have is no remedy.
I'm going to save myself the trouble of reading a bunch of random Xinhua links and the trouble of arguing with somebody who thinks that low wage export heavy countries whose economies are hurt by the artificially low yuan are actually happy about it. I suggest intro to international trade. Stiglitz has a section on it in his text probably, though Krugman's is probably better since it's his specialty.
