Dave Wrixon

Why Krugman Is Wrong About the Yuan

@ James Lewis

"I have to say however I do not agree with what you have stated in this article. The USD is not weak on any long-term relative basis, purachins power basis. If you look at long term currency charts you will see it is exactly in the middle of its range. Not expensive, not cheap. Not high, not low."

Yes, but such comparisons are distorted by the amount of credit available. Purchasing Power is in the US is about to take a haircut.

Why Krugman Is Wrong About the Yuan

Probably because you have got very comfortable with US Government Propaganda. It has to be a bit like watching New on a different TV channel?


On Nov 20 06:37 AM BigBadBarry wrote:

> This almost sounds like Chinese Government propaganda to me...

Can China Sustain 8% Growth?

Absolutely right, it cannot be sustained indefinitely purely on Government Stimulus but it could easily do 5 years without recovery in the rest of the World and China's consumers are no less capable of sustaining an economy than anyone else's if they are lent enough money. Over the next year or two their will be a wall of money heading for capital investment in China. The trick as ever is to ensure that a substantial proportion of it finds its way into wealth generating industry. This is an area where the US has failed utterly in recent years, and China has excelled beyond all expectation. Will it continue to be so successful over the long-term. No, it is very unlikely that rate of closure with Western Economies can be sustained at current levels for more than another 5 or ten years because by then their really won't be much of gap left to close.


On Oct 23 10:47 AM Tom B wrote:

> Through 3 years: probably.
> Through 5 years: conceivably
> Through 10 years: bubble bursts-- just like "dot-coms"; Japan in
> the 1980's; Banks in the "2000's"".
>
> Think about it: 1) Do you trust their accountants? 2) Do you trust
> their poison/contaminated/da... products? 3) Does planet Earth have
> the resources to lift another billion plus people to a US standard
> of living? 4) Do you think the people will tolerate the Govt's continued
> genocide forever? 5) Do you think the US will buy into the poisonous
> concept of "free trade", without any checks and balances, forever?
> 6) What about Latin America--closer; better trained workers. What
> about India? Better trained workers; everyone speaks English already;
> FUNCTIONAL democratic Government.

U.S. vs. China: Has Trade War Begun?

Iran would have been a democratic country if the US had not deposed its government and installed a dictator to facilitate the theft of its oil.


On Sep 14 12:37 PM thiazole wrote:

> So what if Ford had been a nonprofit organization? Where do you
> think the automobile would be now? Seem Iran had a "government"
> automobile that they finally scrapped. It was sub 100hp and got
> less than 10mpg. Profit is the driver of innovation. To deny profit
> is to deny innovation.

U.S.-China Trade Spat: Warning of Worse to Come?

Interesting perspective. Is this comment relating to the US Greed for fossil fuels?


On Sep 14 12:55 PM Glen88 wrote:

> Perry,
>
> Sorry to disagree, but it is much to simplistic to say that both
> sides will get hurt, so the status quo should be maintained. You
> would have to show that people are not getting hurt now and choose
> the best long term option. There is a cost for everything.
>
> Cheap goods and low interest rates come at the expense of jobs and
> reduced government revenue. This in turn will lead to higher taxes
> in the future, along with higher interest rates once saturation in
> debt levels is reached. When the US labour market was constrained,
> the expense was exceptable and even beneficial. Once unemployment
> levels reach the point of ending wage competition, the cost pile
> up.
>
>
> Often missed in the lesson of the tragedy of the commons, is that
> if the other herders cannot be persuaded from limiting the grazing
> of there herds, that the best option is to allow your cattle to compete
> for the finite share.

U.S.-China Trade Spat: Warning of Worse to Come?

Isn't this exactly what America's problem is today.

Actually, you are quite wrong. China is more than capable of surviving without you, it is just that that are only just beginning to realize it.

America has used the Strong Dollar to policy to buy the World's goods and service for next to bugger all and just about everyone was caught in a trap due to the US sucking out most of the World's Investment. But this is revolution and the cart is going to get upset and just about everyone will get a share of the apples.


On Sep 14 12:22 PM Perry D. wrote:

> Glenn88,
>

> Currency manipulators over the long run damage themselves by, among
> other things, bastardizing their economies.
>
> China in particular is a house of cards waiting to collapse, and
> it will be something to behold.

The Great Bubble of China: Beginning of the End or the End of the Beginning?

Yes, you really have to factor that up by how much the Yuan would have appreciated if allowed to do so against the dollar, and perhaps by how much the dollar is really actually worth rather than what is it the delusional markets are currently trading at. I think China will catch up around 2015 and certainly no later than 2020. Of course they still only be earning a quarter of what the average American gets but things won't stop there.


On Jul 29 09:08 AM TradingHelpDesk wrote:

> For the stock market rally it may be the beginning of the end, but
> for the Chinese economy, with $2 trillion of reserves, it's just
> the beginning of the path to economic dominance. 20 years and the
> Chinese economy will over-take the US in GDP output - it's outperformed
> the US by about 10% over the past year. (Q2 Chinese GDP 7.9% annualised
> compared to -2.0% in the US?)

China's Well-Prepared; We're Not

Which part of the developing World are we talking about here?


On Jul 14 09:57 AM nobby73 wrote:

> The greatest tragedy in all of this is the majority of the developing
> world would much prefer to be doing business with the US than China.
> They see the US as a beacon of hope and democracy and look to the
> American way of life as something to copy. Unfortunately, American
> firms, especially the banks and those Friedmanite loonies at the
> IMF have screwed them over time and time again, using the privatisation
> and over-leverage model that the US has finally managed to screw
> itself with. For years, the Chinese have been visiting countries
> across the globe offering basically interest free loans and the locals
> have preferred to stick with Western banks with Libor + 800 bps and
> have been willing to pay this.
>
> Now that the US is in a terrible mess and the capital has been switched
> off, they have no choice but to turn to China.
>
> If the Chinese model is the future of civilisation, we are all screwed,
> liberty is more important that material wealth.

China at the G8 (Or, What Happens When Your Banker Says No)

Yes, what starts as a trickle will end in a rout. A bit like a dam bursting really. Those that believe that the dollar will not be challenged for decades have understood nothing. China is probably buying a little time to get it ducks in row, but they have certainly not gone into hybernation.


On Jul 14 07:44 AM User 353732 wrote:

> The desire of a growing number of important nations to shift away
> from the dollar is really a desire to protect themselves against
> the economic philosophy( borrow and repudiate; steal and spend) and
> economic policies of the US Govt.
> The principal products of US Govt policy now are economic fear, risk
> and misery: a farrago that assures rising umemployment, falling global
> competitivess and a compressing productive economy. More and more
> Nations are concluding that "just say NO" to US economic policy is
> a strategic imperative. It is not merely China that is openly contemptuous
> of US economic policy and wants to manage around the symbol of that
> policy----the enervated dollar----but also Russia(for geostrategic
> reasons as well) India, South Africa, Brazil ,Mexico, Indonesia and
> , surprisingly, in its own timorous way Japan. Soon enough, these
> Nations may be joined by Germany , South Korea and Poland in openly
> rejecting US economic policies . By the end of 2009, The US could
> find nations accounting for a clear majority of the global economy
> aligned against it economically and financially.
> Other countries want to escape from the dollar because they want
>
> to flee from the contagion of bad US Govt economic policies, which
> is transmitted via an increasingly diseased currency.

China’s Economy Stable but Strong Growth Unlikely Soon

Great one sided perspective on the great plan.


On Jun 24 12:03 AM Tom E. wrote:

> China wants their currency to become a major reserve currency and
> they want to continue to rig it for trade advantage.
>
> I don't think they are going to have a lot of luck with this one
> sided plan.

Fixing China Trade Is Key to a Sustainable Recovery

How about Americans getting off their back-sides and actually making product instead of whining? You will get little sympathy because the US has been using its power to skew the terms of trade with smaller and poorer nations for half a century.

From what I have seen of American industry it comprises mainly of making mediocre product at hight cost, and then trying to make back the difference through building brands through incredibly expensive advertising. Obviously, there is some mileage in this approach, but eventually the wheels just fall off. The recession is making everyone look twice, and more often and not objective analysis shows many top brands to be little more than hype, and certainly not worth the price differential.

Will China Drop U.S. Debt? Unlikely

They are not making threats. They are offering the US an opportunity to Save Face.


On Jun 18 11:11 AM Donald Ingram wrote:

> You underestimate the Chinese - big mistake. The Chinese do not make
> "empty threats". The Western mind prepares for the future by planning
> five years down the road? One year ahead? Okay, maybe twenty years
> when it comes to what the kids do after college.
> The Chinese however have a totally different approach to time that
> is a bit vexing to the Western way of thinking. They plan in generations.
> As in what the great-grandchildren will be doing. This is one of
> the great strengths of China, this patience in all things.
> They have made their mind up that the dollar will be replaced and
> that they will take a leading position on the worlds stage as befits
> their size of population. This will happen. Maybe not soon. Maybe
> take some years. Or a generation. Happen it will.

Will China Drop U.S. Debt? Unlikely

I don't think if you have any concept of how much China is being expected to ramp up its contributions to cover US excesses. It would very soon be in for two to three times what it is in for already. There are times when it is sensible to cut you losses and run. It seems that at the moment it is try to prop up US Treasuries in the bond market whilst at the same time using them and other dollar assets to swap for assets that are no so dependant on the dollar. Commodities might be priced in dollars but they do not generally depreciate with the dollar. In otherwords, the rug is being pulled but the statue is being temporarily stabilized by other means.

Multiple Warning Shots from China

Don't worry most of it will end up in the US as cars.


On Jun 02 01:42 PM Moon Kil Woong wrote:

> LOL Geithner just lost face to China. So when do we need to grovel?
> The simple fact is China has been ranting and raving for the last
> year about the reveral of all their magic bond profits as rates went
> down to Zirp. This is just a reveral of a abnormality that made them
> richer playing the let's not let our currency float.
>
> Sure, they can buy up all the copper and steel they want. They can
> refuse US dollars. Then they can have a dead economy and a few more
> purges. They should think before they start something that will end
> up hurting themselves as well as their trading partners.
>
> It's not like buying copper and iron will end up helping them. It
> just encorages people to mine more of the stuff faster. Then, unless
> the population doubles, what will you do with it all, start making
> iron apartments to replace concrete ones? Think of the electrical
> problems with a short circut in one of those.
>
> Get real, countries hoarding raw materials just show how newb China's
> economist really are. You only make your economy strong long term
> by increasing productivity and consumption. What the world is asking
> China to do is good for it whether or not they realize it.
>
> Of course, the US curbing it's appitite is also good for it long
> term too, whether or not it likes it either. The two of them are
> making an imbalanced global system that will haunt the entire world
> economy. It's not a one sided problem like China would claim. Geithener
> should make that fact quite clear rather than grovel.

Multiple Warning Shots from China

Yes, the ECB is very bad for the European economy if you think that monetary expansion should be the main driver of economic development.

It may not be clear to all at present but whilst Europe may have been a bit moribund by comparision to the USA, it does not have the highly damaging financial bubbles that the US does, neither is it going to suffer the hyperinflation that the US will. And furthermore, as you point out, it is now about to attract a whole load of foreign investment which will drive sustainable growth.

For those more interested in the deeper lessons to be learnt here, you might wish to refer to Essop's Fables.