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

I feel like either you or MFW would have better qualifications to write that column than Mr. Li Hong.

 

Shouldn't you be up to the all important task of checking somebody's "boo boo," doctor?

 

For once I agree w/ you.

 

Obviously, considering Li Hong's Chinese and has no clue as to how to write an article suitable for the western audience in both substance and structure. An editor can only do so much.

It's unfortunate that the culture/language barrier often gets in the way of effective communication. This goes both ways. Chinese people often misinterpret and get annoyed at American style of writing too.

 

Am I wrong to say that your qualifications would dwarf the article's author?

 

I am not saying that his writing style was poor, he was a very poor choice to counter Krugman.

 

Sounds like the guy came up with a perfectly reasonable explanation right there. I don't need to tell you Japan isn't very popular in Asia even in the best of times. All I see is a supposed halt of shipments to Japan and an alleged ban. I've yet to see anything concrete. Indeed, if it's as the guy suggested, some mine owner, with an axe to grind, decides to halt exports on his own, there's no government involvement there at all.

I typically don't throw around the "credibility" bullsh1t, but in Krugman's case, I'll make an exception. Krugman has been hitting on the Chinese government and calling its demise one way or another for over a decade. You cry wolf enough times you don't get believed. Now if he had actually provided evidence (kind of necessary in my opinion), that'll be a whole new matter. But instead, what we're seeing the is the same typical bullsh1t speculation.

I provided the explanation, if he can actually counter that, I'm all ears. Until then though, his articles should absolutely be dismissed as the worthless speculations that they are.

 

Chuckles, in terms of economics, accounting, finance, global trade, I'm more qualified. In terms of global politics, I don't measure up.

But in terms of economics, Krugman would do rather well. In terms of China or how the real world works, he needs to get his head out of his ass first.

 

Don't forget, people.

In his world... Friday comes between Monday and Wednesday. So just understand the type of poster you're dealing with here.

 

Krugman is one of the most influential globalization economists, and it is safe to say that Krugman has a much better grasp on how the real world works than you do.

If Atul Gawande wrote an op-ed on how to improve medical practice, I would not say he needs to pull his head out of his ass if I disagreed with his methods.

Here is a synopsis of the Krugman position:

• The Chinese have no intention of revaluing. Most moves they have made to date are cosmetic and done in a calculated fashion ahead of international meetings to deflect criticism.
• "Emerging markets could be a help to the world economy." The shortage of investment opportunities in the advanced economies and the abundance in the emerging markets means it is mutually beneficial to have capital flow to the emerging markets and "drive this recovery."
• We don’t know the RMB’s fair value. "The right way to judge is not the value of the renminbi" but rather the scale of currency intervention China must effect to keep its peg in place.
• "The Chinese are playing with fire here." If they act soon, we can have a reasonable workout. If they wait, protectionism is coming.
• Tim Geithner has held the protectionists at bay but he will not always be the negotiating partner for China.
• China should take the brunt of criticism despite the impact that talk of the Fed’s quantitative easing is having on the US currency.

However, other voices like Michael Pettis of Peking University's Guanghua School of Management have this to say:

Clearly, both China and the World will need to work toward a solution.

 

Neither was I.

You and I may read Krugman's article and think one thing. And a Chinese person who read something different. What's important to argue for a Chinese person, written for the purposes of mainly a Chinese audience, is different from what you and may feel is important. Different values, different beliefs, and let's also face it, different set of editors. One newspaper caters to sensationalism of our media. One caters to pass the censorship of the government.

 

Now here's what I'll do. Unlike your rants, I will actually give you a rebuttal. A REAL rebuttal. Let's examine the economic history the Paul Krugman's native country shall we? Drum rolls.

It all started around that time of the two big big wars. At the time we were on this thing called the gold standard. Apparently people the world over share this affinity for shiny things. It was a good system. A global commodity in which all valued. It was also finite so that you could not manipulate the supply.

Then WWI kinda happened. Now people knew that we it doesn't mean **** how many pounds sterling you print on paper. If you don't actually have the pounds to pay up, nobody's gonna give a damn. We knew this, the Triple Allies knew this, the Triple Entente knew this. The Allies knew this, the Axis knew this. So if you destroyed a warring nation's gold stockpile, you would wipe out that country's ability to wage war. So what did they do, ship the gold to the US of course, and take US dollars (Zee Germans didn't have the option, so Switzerland it is), which geographically, was shielded from such disasters.

This meant that the US dollar became the de facto world reserve currency, contributing one way or another, to the boom in the US. But as the war ended and Europe especially demanded their gold back. Well, the US had kinda spent quite a bit of that money, domestically. So they played the oldest trick in the book. Instead of giving back 24-karat (99.99% fine) reserve gold, let's just say certain additional... impurities, found their way into the gold. Later on it was even worse, the US flat out rejected giving back the gold and instead issued more US dollars.

People and their mother can ***** all they want about Nixon and Bretton Woods, but the fact of the matter is, the gold standard was effectively dead before Bretton Woods was agreed upon, let along abandoned.

So as my reply to Sammy showed, you're pushing one paper over another. It might as well be toilet papers and used Kleenex. Show of course, best by the example of all the countries trying to devalue their way out of economic trouble around the time of the Great Depression.

The dollar, being the reserve currency, is protected to the greatest extent, allowing the US to enjoy far greater economic mismanagement (and consume to a far greater extent) without being punished to the extent that it should, a perk not enjoyed by anyone else. Forget about those worthless currencies in developing economies in SE Asia. What about the UK, a developed economy. Just ask how the Brits feel about George Soros raided the British pound and cost them billions. On the other hand, when bond traders sought to punish the US dollar for "indiscretions," they very quickly found out that you don't fight the Fed.

This very significant little perk meant many things, not the least of which is that the US could print massive amounts of money without being punished by inflation to the extent that it should. Make no mistake about it, the US IS trying to devalue its way out of debt. It also IS trying to devalue its way into exports, as it had done in the past. The value of the US dollar, measure in real terms, against a trade weight basket, is down over 35% since the 80's.

And when certain troublesome news came up, like oh, when M3 supply increased from $7 trillion in 2005 to $8 trillion in 2006, what did the Fed decide to do? Why, no longer keep track of M3 of course, the broadest measure of money supply. Make no mistakes about it, we have lost track of money supply. You can guestimate it. And let me tell ya, after the financial crisis, M3 is guestimated to be "down" to "only" about $10 trillion.

And if you're an Asian economy, you make something for America, settle in the international settlement currency, the US dollar, which buys a loaf of bread. Then 3 month later after you made that shirt and shipped it, you discover that some additional M3 made their way into the market, compare to your currency, which you use back home. You know the US is trying to devalue its way and screw you. So what do you do? Buy US dollar of course. Gotta keep parity. Previously this was done automatically by gold (could be anything finite and valued the world over really) but since we scrapped by that and you still need an "anchor," you buy the US dollar, the reserve currency, also the currency of the country that owes you a boatload of money. Makes perfect sense to me.

Whereas the US is just printing more money, you're at least engaging in "open market operations." You at least earned that money. But some moronic little twerp will always sit there and say you're manipulating your currency. What a joke.

And btw, other "one of the most influential globalization economists," including but not limited to Joseph Stiglitz and Robert Mundell, or industry leaders such as Jim O'Neil and Stephen Roach, disagree with Krugman.

 

For the newspaper of that status in China, the article is very unsophisticated, put mildly. Bunch of irrelevant stuff, mostly ad hominem. "Carrot and club" and Monroe doctrine? If anything, you don't want to mention it at all and be clear China is not that. Is he saying because US did it, so US can't scold us for doing the same? I would write some substance to refute Krugman, which isn't too hard given Krugman's piece is very biased.

 

As meh says, it depends on how one looks at Krugman's article and Li Hong's counter-article.

If Krugman's article was coming from an objective economic point of view, than yes, Li Hong's article was clearly going off on a tangent of its own.

But.. to many Chinese, Krugman's articles about China are mainly biased and politically motivated - the key word here being "politically". To them, it takes a political article to be the appropriate counter to another political article.

And frankly, most of the pieces I have read from Krugman re China have always seem to be... fitted... for a certain audience and a type of agenda in America...

 

Honestly, I spent senior year of undergrad taking graduate level economics and political science courses because it was interesting and easier than real science.

Kindleberger was writing about this very situation during the 1980s. Even then, Kindleberger recognized that the United States could not remain the sole stabilization of free trade it had been post WWII. An international unit of currency should have been developed decades ago. Even with the strengthening of the WTO (and IMF as a lender of last resort), the world still looks to the US to be that stabilizer of free trade. Liberalism promotes peace because the nations engaged are better off with the trade, even at the expense of national security (of course someone like Waltz would clearly be against this thought).

China needs to realize that with growing power from free trade, it too will have to keep the system moving. Creating a rare earth monopoly, then using an unofficial rare earth sanction against the Japanese is not in the spirit of free trade.

Maybe this excerpt from Krasner will jog your memory for what happens the last two times global trade came to a halt:

Spoiler

The only reasonable explanation that I have read for why China has not allowed a true float for their currency is that they are trying to avoid the same fate that faced Japan in the 1980s.

Just because you call me or any other poster a moron does not make it true. Do not mistake my continued casual posting on a BBS as some kind of fertilizer for your epeen. I do appreciate that you've cut down on the insults.

 

Just because you refute it does not make it not true, LOL

 

True Japan isn't very popular in the rest of Asia but don't you find it just a bit odd that all of the REM extractors, including some with heavy foreign investment which I presume includes Japanese investment, would at the same time stop exporting to Japan? Also the minister's statement just reinforces the idea that the halt in REM shipment to Japan was done for political reasons and not part of a longterm quota regime or that Japan had just happened to reach its quota on Sept. 21st.

 

I think you completely missed the point. I don't need a reminder in economics history. I just taught you one. The point is, there is no such thing as free trade, or fair trade for that matter. My US example merely shows that point. Given the monetary history of the United States of America, you've gotta be brain dead to rely upon their words.

Let's recapture the events. When the US needed to pay back its debts, it cheated, again and again, including single-handedly destroying to gold standard. When its economy was slowing due to the rest of the world recovering from two disastrous world wars, it retched up protectionism, tariffs and currency devaluation. A country such as this has no moral superiority to claim somebody else is "manipulating its currency," when it's doing that very thing. In a world of cheaters, you tip your hat to the guy that cheats the best.

I'll be quite honest, I don't give a crap about "fair" or "free" trade because I've seen and have demonstrated clearly, there is no such things. It's only when morons such as Krugman (or Sammy Fisher) get a little too self-righteous, I bring it out to cut them down in size.

When do you think the US government will stop peddling that "strong dollar" bullsh1t? In my life time? I don't think so.

 

I see some people saying "it's ok for China to cheat and bully other nations because the U.S. did it too a lot". A questionable argument but let's take the cynics side and say the have a point.

So, China has a right to use whatever means it can get away with to advance it's self interests. That alone is a pretty basic statement that doesn't seem terribly outrageous.

Fine. Great. Wonderful.

I say, China should do whatever it wants. Bully, cheat, whatever. But then China shouldn't complain either when the U.S. tries to advance it's own interests by using it's clout and leverage to stop China from doing those things, right?

So we can criticize, put pressure, band together, do whatever to advance our interests by forcing China to play by the rules that have come into being in the modern economic climate.