Wow!! Krugman on China: "Rare & Dangerous"

Considering that the Republicans could very well take over our legislature this year, and has dominated the White House for the past 30 years, isn't this the very definition of kettle calling pot black?

 

Don't even bother, dear comrade Decard will never look into the mirror at himself, because it's exactly a vitual reality. He would probably reply like this: That's a bizzaro world constructed from the sole mind of myself, the rightest person in the whole universe, OMG. And there is no way I'm gonna take it seriously, it's just wrong, LOL.

 

who wants China's economy to collapse? Geez, you guys are a piece of work. You really run with your imagination there - that';s why there can be no debate, because it's all about making CHina collapse for you, and you can't see it's just about both sides thriving.

If someone disagrees with you, they must hate China!

 

Check this out. The secret American war plan :grin:

http://www.nationalpost.com/news/features/China/3743695/story.html

The war on China

Steve H. Hanke, Financial Post · Friday, Oct. 29, 2010

In early October, Chinese Premier Wen Jiabao addressed European leaders in Brussels. Ominous talk of currency wars dominated the proceedings. And why not? After all, America -- and a growing coalition of forces -- has mounted a massive attack on China. And the American-led coalition's weapon of choice is the yuan-U.S. dollar exchange rate. According to America's war "plan," a maxi appreciation of the RMB against the greenback will generate economic instability in China. This will reign in the hegemony.

Premier Wen had good reasons to be worried and to warn the assembled in Brussels that a maxi yuan appreciation would destabilize China and be "a disaster for the world."

The rhetoric coming from Washington fails to mention weapons and war plans. Instead, the airwaves are filled with a never-ending stream of nonsense about how a maxi yuan appreciation is designed to help the Chinese and to make the world safe from global imbalances. Not surprisingly, Washington's line bears no relation to the facts -- not even the relationship that is implied by an ordinary lie.

This isn't the first time America has used currency as a secret weapon to destabilize China. In the early 1930s, China was still on the silver standard and the United States was not. Accordingly, the Chinese yuan-U. S. dollar exchange rate was determined by the U.S. dollar price of silver.

During his first term, President Franklin D. Roosevelt delivered on his Chinese currency stabilization "plan." It was wrapped in the guise of doing something to help U.S. silver producers and, of course, the Chinese.

Using the authority granted by the Thomas Amendment of 1933 and the Silver Purchase Act of 1934, the Roosevelt administration bought silver. This, in addition to bullish rumours about U.S. silver policies, helped push the price of silver up by 128% (calculated as an annual average) in the 1932-35 period.

Bizarre arguments contributed mightily to the agitation for high silver prices. One centred on the fact that China was on the silver standard. Silver interests asserted that higher silver prices -- which would bring with them an appreciation of the yuan against the U.S. dollar--would benefit the Chinese by increasing their purchasing power.

As a special committee of the U.S. Senate reported in 1932: "Silver is the measure of their wealth and purchasing power; it serves as a reserve, their bank account. This is wealth that enables such peoples to purchase our exports."

Things didn't work as Washington advertised. It worked as "planned," however. As the U.S. dollar price of silver shot up, the yuan appreciated against the dollar. In consequence, China was thrown into the jaws of the Great Depression. In the 1932-34 period, China's gross domestic product fell by 26% and wholesale prices in the capital city, Nanjing, fell by 20%.

In an attempt to secure relief from the economic hardships imposed by U.S. silver policies, China sought modifications in the U.S. Treasury's silver-purchase program. But its pleas fell on deaf ears. After many evasive replies, the Roosevelt administration finally indicated on Oct. 12, 1934, that it was merely carrying out a policy mandated by the U.S. Congress.

Realizing that all hope was lost, China was forced to effectively abandon the silver standard on Oct. 14, 1934, though an official statement was postponed until Nov. 3, 1935. This spelled the beginning of the end for Chiang Kai-shek's Nationalist government. America's "plan" worked like a charm -- Chinese monetary chaos ensued. This gave the Communists an opening that they exploited -- one that contributed mightily to their overthrow of the Nationalists.

Ironically, now the shoe is on the other foot. As was the case in the 1930s, Washington does not have a war plan, or even the idea of a plan, nor do I believe it knows the meaning of the word "plan." That said, if Beijing caves into Washington's current demands for a yuan appreciation, the result is totally predictable. A Chinese upheaval and a world disaster will ensue.

Fortunately, Premier Wen has studied the data. Since China embraced Deng Xiaoping's reforms on Dec. 22, 1978, China has experimented with different exchange-rate regimes. Until 1994, the yuan was in an ever-depreciating phase against the U.S. dollar. Relatively volatile readings for China's GDP growth and inflation rate were encountered during this phase. After the maxi yuan depreciation of 1994 and until 2005, exchange-rate fixity was the order of the day, with little movement in the RMB/USD rate. In consequence, the volatility of China's GDP and inflation rate declined, and with the yuan firmly anchored to the U.S. dollar, China's inflation rates began to shadow those in America. Then, China entered a gradual yuan appreciation phase (when the yuan/dollar rate declined in the 2005-08 period). Without a firm dollar anchor, China's inflation rate picked up, relative to the U.S. inflation rate. And, yes, the volatility of China's GDP picked up and China's average inflation rate rose, too.

In addition to letting the data "talk," Premier Wen must be also listening to the echoes of Karl Schiller, German finance minister between 1966 and 1972, who pithily said: "Stability is not everything, but without stability, everything is nothing." Let's hope he keeps listening.

- Steve H. Hanke is a professor of applied economics at The Johns Hopkins University in Baltimore and a senior fellow at the Cato Institute in Washington, D.C.

 

As a Democrat, I fail to see your point.

The "questions" remind me of Republican Party campaign slogans, where the slogans themselves are dishonest, not intended to be taken seriously, gross exaggerations, or a combination of them all.

They constantly barrage the American public with dishonest campaign slogans, ads that are patently dishonest, crap that the people who run the GOP don't believe themselves, spewing it across the airwaves because they think it will help them win an election, and the vast majority of Democrats, like myself, don't take their dishonesty seriously, but rather take seriously the threat that their dishonesty will possibly win the election for them.

 

There is not a single fact in this that supports America "wanting" to destroying China's economy.

 

Seems like the country wants a trade war with China but doesn't think our politicians have the will power:

http://news.yahoo.com/s/yblog_askam.../china-rising-what-should-the-u-s-do-about-it


I think Americans know we are getting raped by the PRC by unfair and illegal trade practices and that our leadership is going along with it since it benefits corporate balance sheets in the short term.

I guess this is how our days as a superpower come to an end. The Chinese take over, tanks to corporate money corrupting gov't and to the knuckle headed tea party types who focus on stupid crap that means nothing while the world laughs.

Sad to bear witness to our decline.

 

I don't know if you know there is HR 2378 on the table for senate and president to pass it into the law. Regardless of the outcome whether it will be the law, it is pretty self-evident that politicians on the capitol hills want the trade war with China regardless of WTO restraints. Basically, there was a huge question whether categorizing undervalued foreign currency, i.e. Yuan, as export subsidy is WTO consistent under the final version of 2378. One former USTR general counsel and Tim Geitherner all call this into question at their testimonies in the house. Nonetheless, house passed the bill with overwhelming yes votes.
The balls of American politicians should not be questioned, but rather you have to ask the efficacy of a policy starting a trade war with China inconsistent with US's WTO obligations. The strategic question is whether China would welter under US's pressure.

 

Forget the WTO. China laughs in the face of the WTO while it collects on 10% growth and we live with 17% unemployment.

Our economy is in the tank and ain't going to kick start anytime soon. There's no inflation, so might as well start a trade war to kick start our domestic industries. We're actually already in a trade war - more of a currency war.

Time to escalate and turn the heat up on China. China plays tough, let's see if we can play back tougher. All is fair. What are we suppose to do - roll over and die?

 

Again, I hear you. But is this worth the fight, you have to ask. China are mainly selling stuff that aren't made in US anymore. Does US want to make shoes, furniture, steel? China is desperate to go up the value chain, and US wants to get back down.

 

How about cleaning up your financial system, giving loans to manufacturers/small businesses instead of giving more money to banks that won't provide these loans, close tax loopholes that encourage companies to declare their profits overseas (and their losses in America), use money saved from closing that loophole to lower corporate taxes to bring them down to China's levels. I'm sure there are many more things the US can do to improve its economy without violating WTO rules. The problem is whether your politicians want to, or would they rather scapegoat China for short-term political gain.

 

Pretty good list to me.

 

Well the problem is that China is cheating by fixing is currency instead of letting it appreciate - that's killing our industries. So we are trying to fix that and boost our economy. All we are doing is trying to make the field even. If China would stop manipulating it's currency, there would be no problem.

 

Do you honestly believe that if China appreciate its currency, that it will alleviate our unemployment?

Let's put it another way. Suppose the RMB appreciate by 50%. Which would be a gross overestimate but for let's make that supposition for a second. This would mean that they'd for example make ipods for $6 instead of $4. Would that actually mean that companies like apple will pull its factories from China and relocate to the US? Or do you think they'd instead put its factories in poorer countries like India or Mexico or some other country that can make it for $4?

 

I give up.

 

It would help a lot. The difference between growth and stagnation is just a few percentage points.

 

It's not even that, it'd just make American exports more competitive and increase the amount of money that flows into the u.s. - that alone would kcik-start the economy.

Let China make shoes, furniture, and steel. But we can't even sell our CD's and crap in China because it's way over priced.

 

I'm not sure what your point is. Please explain to me how Americans can get more jobs from companies moving their factories from China to another poor country.

There are plenty of stuff China would be willing to buy that's not "overpriced". Currently, China receives most of its high-end technology from countries like France, Germany, Japan, Korea, and ironically even Isreal. Technology that US has, and would be able to sell for billions and billions of dollars.

We don't sell them because they're the big bad communists. Guess what? Other countries don't give a damn. Why do we blame China for being a-holes when we don't want them to prosper?

 

we don't sell them because China insists we hand over the patents first so they can then steal it and make it cheaper and further errode our economy.

We can't even sell music and media to China because they put restrictions on it and let the pirated versions sell without restrictions, so they actually encourage copy-right violations.

I'm sorry, but China is commiting gross WTO violations. But that's why we are dumping our currency. So I don't know what to say but hey, we are in a trade war with China already.