They have been conspicuously silent during the recent market selloffs...should they be making an appearance already to calm the jitters?
A better question might be why didn't they speak out against all the irresponsible borrowing and lending of the last couple years? An even still better question might be why are people stupid enough to take out a mortgage they can't afford and not read the terms of the loan they are signing for? Now we're probably headed for a recession...is your resume updated?
something to keep an eye on, Baucus-Grasley bill which is taking dead aim at China and some other things Federal Reserve related passed a Senate Finance Committee 20 to 1, hopefully the President will Veto it.
the Club for Growth got a Petition that 1,028 economists (in both political parties) signed advising Congress and the President to avoid China trade retaliation. This number of economist was chosen because it mirrors a similar petition given to Herbert Hoover to veto Smoot-Hawley tariff by the same number of Economist, which he didn't listen to and caused the Great Depression.
NIU007 Wrote:What is it that China has done that we are retaliating for?
The Yuan is pegged to the dollar, which Washington has complained about for years. Recently, Congress threatened trade sanctions if China didn't revalue the Yuan ... a prominent Chinese official responded by saying that China may have to respond to revaluation by selling off some of it's .9-1.3 trillion dollar bonds, forcing the dollar to fall. Mostly, that's a bunch of silly gamesmanship by both parties (IMHO).
This article is two years old - it describes a commitment the Chinese made and didn't live up to.
Quote:But let's look at what the bi-partisan economic illiterates in Congress are actually advocating. First, they whine about lost American jobs. But a 25% higher renminbi is not going to bring any manufacturing jobs back. China is no longer the low cost labor market. There are other Asian countries with lower labor costs. We just will not be able to competitively manufacture products that have high unskilled labor costs.
But we will continue to manufacture high value added items in a host of industries where skill and talent are required. Even though manufacturing as a percentage of US GDP is down, our actual level of exports and manufactured products is up by any measure. It is easy to write about the closing of a plant, and it makes the headlines, but the fact is that free trade has created more jobs by far than we have lost.
Secondly, if our cost of imports were to rise by 20-25%, that cannot be understood as anything but inflationary. And it would not just be Chinese products, but the products of all developing countries. Many Asian countries manage (manipulate) their currencies to keep them competitive against each other and the Chinese. You can bet that if the renminbi rises another 20%, there is the real prospect that they all will.
And much of what China and the rest of Asia produces is bought by those on the lower economic rungs of the US ladder. So, if Congress gets its way, they would be advocating putting pressure on those least capable of paying higher prices. But no one lobbies for the little guy. Congressional members can pander to their local unions and businesses without having to answer for what would be higher prices.
The comment about China not being the low-cost labor market surprises me a little. I thought slave labor was inexpensive, but maybe they only use slave labor to build their infrastructure...
Even if China doesn't sell off their US treasuries, if they just stop buying as much of our new debt then the cost (interest rate) will go up and hurt us unless we stop spending & borrowing so much. Plus they have the ability to give nuclear technology (for peaceful energy purposes, yeah right) to Iran in exchange for oil. If we're not careful China will have us by the nads, if they don't already.
the bond market(debt) doesn't work like that, China does not have the power to hurt us like that. When an issuer sells debt(bonds), they have a set date of maturity and payout rate that they stick to, so if the holder of any debt were to actually flood the market and sell it they hurt themselves(and create a great buying opportunity for others). The US(issuer) would still not pay anything until maturity date. I suppose it could hurt for a short time the ability to sell new debt.
China has no leverage over us, they are just political threats trying to stop our idiot politicians from throwing tarrifs on their goods. They have no desire to screw the US economy because they are heavily invested in it, thus they screw themselves.
China is very good at making counterfeit items also, part of their threats is to keep our customs from being to strict on what is allowed to enter from China. Its a big part of their economy and China has to create atleast 20 million jobs each year.
restricting trade is generally a bad thing also, the Hawley-Smoot Tarrif act mentioned is the main source of the great depression. We through tarriffs on 20,000 import items in effort to "protect the american company, or worker, etc.", and it created the biggest Trade Surplus we'd ever had and also the Great Depression. the Nations we attacked through tarrifs, retaliated naturally by doing like wise on their end with American Imports thus hurting american export companies. Within 2 years the Unemployement rate in the US doubled and Depression started.
Protectionism is a bad idea, even more so today in the global economy.
(This post was last modified: 08-14-2007 09:29 AM by GGniner.)
GGniner Wrote:restricting trade is generally a bad thing also, the Hawley-Smoot Tarrif act mentioned is the main source of the great depression. We through tarriffs on 20,000 import items in effort to "protect the american company, or worker, etc.", and it created the biggest Trade Surplus we'd ever had and also the Great Depression. the Nations we attacked through tarrifs, retaliated naturally by doing like wise on their end with American Imports thus hurting american export companies. Within 2 years the Unemployement rate in the US doubled and Depression started.
Protectionism is a bad idea, even more so today in the global economy.
Don't underestimate the fact that the economy was global 70-100 years ago. Today is referred to as the second (or nth) era of globalization - war, communism, and socialism put a damper on that for many years.
GGniner Wrote:I suppose it could hurt for a short time the ability to sell new debt.
That is the point. New treasury bonds are sold at auction at the lowest interest rate bid. More bidders means the interest rate attached to the bond for its lifetime will be lower than if there are fewer bidders. And since China buys so much of our debt at relatively low rates they do have a considerable impact on our national budget. Now they are looking at creating car factories in Iran to produce low-cost autos to market worldwide which of course is against our interests but they will do as they please, in our face. And don't get me started on counterfeiting and intellectual property theft. :muttering:
