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Michael Clark

Michael Clark
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  • Just What We Need: A Trade War [View instapost]
    Thanks, mna. That does help. A couple more questions. Are Black Holes storehouses of anti-matter? And is there any way that a Black Hole (which sucks matter in) could transform itself into a White Hole (which spits matter out)?


    On Sep 14 09:15 PM mna wrote:

    > At the risk of sounding like a huge nerd...(sorry about being off
    > topic btw) I'll try to answer this, as I've got some background in
    > particle physics.
    > 1) yes, theoretically there can be an anti-water. Dimension has
    > nothing to do with it. anti-water can exist in the current dimension
    > (theoretically), and would be made up of anti-particles. However,
    > as anti-matter is created, it is almost always instantaneously annihilated
    > by Matter, and releases energy and other particles. So as far as
    > we know, there's not enough anti-matter in the universe to create
    > anti-matter objects, much less anti-matter worlds.
    > 2) electron orbits are simply a function of the energy it has. The
    > more the energy, the "higher" the orbit.
    > 3) plasma is just ionized matter. It's one of the states of matter.
    > The original state of all matter (as in during the big bang), is
    > still under debate. As far as we know, there may be evidence for
    > a state called the quark-gluon plasma which may represent matter
    > in the universe in an early age. Also, the idea of a liquid, solid,
    > and gas does not apply at the atomic level (you can't have a liquid
    > hydrogen atom, for example. Instead, you have a group of hydrogen
    > atoms/molecules that exist in the liquid state). Those states are
    > simply the manifestations of movements and interactions of lots of
    > molecules at the molecular level.
    > hope that helps.
    > On Sep 14 03:30 PM Michael Clark wrote:
    Sep 15 02:08 AM | 2 Likes Like |Link to Comment
    Thanks G&D.
    Sep 15 02:01 AM | Likes Like |Link to Comment
  • Gold: Is $1,000 the New Floor or the Same Old Ceiling? [View article]
    It's a new floor. We're going through the roof. 2010 through 2019 will be historic for gold.
    Sep 14 04:18 PM | 1 Like Like |Link to Comment
  • Look Who's Betting on Inflation [View article]
    The 1970's was an odd period, because we had a depression and inflation at the same time. We had unemployment at 13 % and runaway inflation caused by the Oil crisis.

    But gold actually ran crazy at the end of this Night Cycle. Penny gold mining stocks went through the roof. Everyone wanted gold -- there was panic buying.

    Here's a few examples of what happened in later 1970-80: Lion Mines, selling at $.07/share in 1975 was selling at $380/share in 1980. Bankeno: 1975, $1.25/share; 1980: $430/share. Wharf Resources: 1975, $.40/1980: $560. Steep Rock: 1975: $.93/share; 1980: $560/share. Azure Resources: 1975: $.05/share; 1980: $109/share. Only a strange, very abnormal market will see these kind of panic-buying returns: but we are now in another Dark Age Cycle and Ben Bernanke is trying to make sure that such buying panic comes in to the precious metals markets again.

    I have charts of historical gold in Day/Night cycles at this instablog

    On Sep 14 08:54 AM Sterling Hayden wrote:

    > You are actually betting on deflation even though you don't know
    > it!
    > Despite the mythology of gold, it actually has virtually no correlation
    > with the cpi, Gold has had long periods of negative return while
    > inflation was positive ( 1980's).. The only period when gold has
    > consistently done well is during recessions when the inflation recedes
    > or actually goes negative.
    Sep 14 04:15 PM | 1 Like Like |Link to Comment
    That's a pretty good situation to be in.

    On Sep 14 08:19 AM SlimJim wrote:

    > People need to do their homework and be creative with the situation
    > they are in because it seems many are in denial from top to bottom
    > concerning the events that are unfolding...I'm personally debt free,
    > own no properties including real estate investments or homes anymore,
    > I use commercial or public transportation, and I am liquid and mobile...
    Sep 14 04:13 PM | Likes Like |Link to Comment
    You're right, Gary. And then, after all that sucking in and destruction of matter, the Black Hole transforms into a White Hole, and begins spitting out matter again. This process goes on for ever apparently.

    On Sep 14 03:42 PM Gary A wrote:

    > Deflation is a black hole, or like the nowhere man in the Beatle's
    > Yellow Submarine, who sucks up everything, then the picture itself,
    > and is left with a blank white screen and himself. Then he proceeds
    > to suck up himself and only the blank screen remains.
    > I saw it about 40 years ago, so don't hold it against me if it is
    > slightly inaccurate. Point is, the deflation man will suck the entire
    > universe and then himself, into oblivion. Better to approach deflation
    > with less debt. So stop, Bernanke and Geithner. Stop now.
    Sep 14 04:12 PM | Likes Like |Link to Comment
  • Look Who's Betting on Inflation [View article]
    I've been writing about these ideas for some time and tend to forget that some people are new to this board. Here's a draft of a book I'm writing. It has the whole framework mapped out: the basic idea is that every living form passes through day and night cycles, as the earth does. Periods of activity, growth, expansion, empire, science, more masculine qualities -- this is the Day. And periods of rest, contraction, diisintegration, religion, more feminine qualities -- this is the Night. Economic cycles do the same.

    These ideas are actually very old. Hindus write about Brahma breathing out the world, a time of expansion of the bubble of the world, and that was a 'Day of Brahma'; and then Brahma breathed in the world, a 'Night of Brahma'. Economic expansion corresponds to the Day of Brahma idea; economic contraction and depression correspond to the Night of Brahma idea.

    Economic cycles in American history seem to correspond to 36 year cycles, 18 for a day, 18 for a night. Stocks do wonderfully during a day cycle, and gold does poorly; stocks do poorly during a Night-Cycle, but gold, historically, seems to do well.

    The idea is that everything goes through a spring (a fertility), a summer (a growth), an autumn (a harvesting), and a Winter (rest). These are very old ideas, really -- and they are the basis of all religious philosophy.


    On Sep 14 01:04 PM Maxe Paul wrote:

    > What the hell is a night cycle? You are suggesting gold goes up at
    > night? WTF are you talking about?
    > You made this crap up didn't you?
    Sep 14 04:00 PM | 1 Like Like |Link to Comment
  • Just What We Need: A Trade War [View instapost]

    That was an interesting read.

    I'm definitely NOT arguing that protectionism is a good thing. I'm just arguing that it is down the ladder of causes of a depression. Here's an instablog I wrote about it earlier today:

    I think there is a certain amount of inevitability to history...that the historical process uses humans, we don't use it. We are cells in the body of history. We fulfil roles in the process. The historical archetypes or patterns are already written for us.

    On Sep 14 11:37 AM thiazole wrote:

    > Michael, here is a Charles Wheelan article that hopefully you will
    > understand. Protectionism is the devil to the economy.
    Sep 14 03:36 PM | 1 Like Like |Link to Comment
  • Just What We Need: A Trade War [View instapost]

    I enjoy a science lecture. That's how I learn. I love to learn.

    I actually have another question on chemistry -- as analogical behavior, of course. I'm charmed by the idea of anti-matter, the symmetry of matter. If there is really such a thing an anti-water (anti-matter Hydrogen and Oxygen molecules), in what dimension does anti-water manifest? If there is mirror-matter, is there a mirror world? I have theories on this...but I wonder what a chemist would say to these questions.

    I also have questions about the 'motivation' for an electron changing orbits. What impels an electron to change its orbit? I have a theory that plasma is the original state of the universe and that matter and anti-matter are separated by the plasma state and the plasma state is actually the place, the state, where matter and anti-matter meet and annihilate each other...and that an atom 'journeys' from plasma state to gas atom, to liquid atom, to solid atom and then returns to liquid atom, gas atom, plasma state, and then moves into comparable states in anti-matter, forming a kind of figure 8 in this process....

    I'm sure there are many holes in this theory. But does it make any sense from the chemist's perspective?

    Thanks for helping.

    I always enjoy your articles.

    On Sep 14 02:30 PM John Lounsbury wrote:

    > Michael - - -
    > Don't get upset with me for reverting to my Chemistry teaching days,
    > but I wouldn't want any chemistry students to read your comment and
    > miss an exam question.
    > First, I must assure you that I do not contest your statement that
    > water freezes because the surrounfing temperature drops. That is
    > correct.
    > What I do want to clarify is the heat transfer process in freezing.
    > Actually freezing water warms the surrounding matter. When it freezes,
    > water transfers energy, called the heat of cyrstallization, to its
    > surroundings. That is why orange groves spray water on their trees
    > when there is going to be a few hours below freezing to protect the
    > fruit from freezing. The water is sprayed on and warms the fruit
    > until both are at 32 degrees F. Then, if the surrounding air is
    > at 32 or below, the water freezes, releasing heat to the air and
    > the fruit. This helps keep the temperature of the fruit from going
    > below freezing. If the temperature remains below freezing for more
    > than 2-3 hours, everything will cool and the fruit will freeze.
    > The time can be extended by continuous spraying of water warmer than
    > 32 degrees.
    > I apologize if you didn't want a science lecture.
    Sep 14 03:30 PM | 1 Like Like |Link to Comment
  • U.S. vs. China: Has Trade War Begun? [View article]
    We'll see about that, ConceptWizard.

    That is a HUGE destiny you have hung on a people who have been historically uncomfortable with empire, with expanding its borders indefinitely, with colonies abroad -- which was inventive and intelligent and scientific -- but whose greatest monument during its empire was to build a huge wall to keep dangerous people out.

    Western culture is founded on individuals stepping out of the protection of the group and discovering new territory to expand into, physical territory, intellectual territory, technological territory. Chinese culture -- Asians generally -- seems founded on individuals not stepping out of the protection of the group, and not discovering new territory to expand into. Chinese seem to be better at copying what exists than at creating what does not exist.

    I say this not as a criticism of Asian culture, which I admire in many ways. Their worship of order does not tolerate the chaos needed for a truly creative individualism.

    The greatest superpower the world has every seen? Perhaps. I think they could be very dangerous militarily and politically, because of their size and population. I think the Chinese might also self-destruct into regions and warring identities, as happened with the former Soviet Union.

    On Sep 14 02:02 PM conceptwizard wrote:

    > There will be no trade war. China will simply refuse to fund deficits,
    > we will buckle under like a baby with a nipple in its mouth.
    > They own us. If you throw the BRIC in which are other communist countries
    > we are toast.
    > China is taking advantage of this once in a lifetime opportunity
    > to buy US assets, commodities and corner the market on natural materials
    > used in batteries for electric cars.
    > They are backing their currency with gold and physically hoarding
    > it at their new airport facility. The have opened purchases of Gold
    > and silver up to the general public in order to capture more of it
    > inside the country. After all what is the peoples in a communist
    > country belongs to the Government as well.
    > Welcome to the Birth of the Greatest Superpower the world has ever
    > seen. The dragon.
    Sep 14 02:27 PM | Likes Like |Link to Comment
  • U.S. vs. China: Has Trade War Begun? [View article]
    Rick: I'm not sure what your nationality is. I think you should tell us so that we can be on a level playing field. I think I agree with one of your last paragraphs, about health care, and about government being concerned with the welfare of its people. That IS the role of government, isn't it?

    The rest of your diatribe seems childish and petulant. Every American is stupid, every American is bad, destructive, cruel, not wonderful like...Canadians, Scots, English, French, Germans.

    American finance did torpedo the global economy. It also built it. American finance fueled a destructive global stock market bubble that brought more wealth to the entire world than an any time in human history....before it destroyed that same wealth. Some good; some bad. Yes, the Canadians are mild by comparison, with a mild history, and a relatively mild historical responsibility. Scotland is much the same. England, France, Germany really can't be lecturing Americans on virtue. They killed or enslaved everything in sight until America appeared on the scene. Actually, look at any empire in history, and you will find abuse, arrogance, greed, well as learning, science, history, technology, law, culture given to the rest of the world. Aemrica is no different.

    You have the right to hate us as a country; and we have the right to hate you back, as a country. That is what protectionism is, isn't it? I guess that's where we are heading again.

    On Sep 14 12:47 PM rick12345 wrote:

    > Reading many of of the comments on seeking alpha over the past 6
    > months has actually opened my eyes as to how stupid americans really
    > are. Before this experience I thought it was just a myth, but now
    > I am thoroughly convinced. No wonder your economy is so fucked. Whats
    > more, it comes as no surprise that millions of people lost their
    > jobs or had their homes repossessed; As a nation, you simply don't
    > possess the mental intelligence to deal with anything that is not
    > dictated through a populist medium such television or the internet.
    > Ironically, these are the two biggest commodities america has been
    > able to export to the world, while the rest of the world has taken
    > your ideas and proven that they can do it a lot better.
    > Yes, the world does blame america for the world financial crisis,
    > and yes we also blame you for creating a world of fear, plagued by
    > terrorism and prejudice. Why the fuck wouldn't we ! It were your
    > banks that collapsed, causing everlasting repercussions for what
    > was ultimately a stable banking system globally. People around the
    > world didn't even know what a toxic asset or a government bailout
    > was until you clowns came along. We had a steady job and plenty of
    > money in our pension funds to retire on. Now we've lost thousands
    > of dollars through a stock market that was run by a bunch of morons
    > on wall street, and a few extra years of work to look forward to.
    > I'm glad that I live in a country run by a government who will endeavor
    > to look after its citizens when they become sick or unemployed. I
    > am also glad that I live in a country which is not on the verge of
    > bankruptcy or alienation from the rest of the developed world. That
    > country, I am also glad to say, is not the usa.
    > rick12345 signing off for the last time.
    Sep 14 02:07 PM | 2 Likes Like |Link to Comment
  • U.S. vs. China: Has Trade War Begun? [View article]
    I realize that comprehending a non-linear reality is difficult. Metaphor is also disliked by some; our society has been taught to distrust poetic thinking, and non-literal understandings. This has led to great advances in technology but to an impoverished literature and philosophy.

    My comments, unless specifically stated, are about American history, not Chinese history.

    My argument that protectionism is a symptom of depression rather than a cause is not shared by many economists or writers on financial topics. But it was the general view of economists in the 1930s. And there are some economists, those who focus on finance and not trade, who view protectionism as a symptom, not a cause.

    In fact, Susan Strange wrote a book "Casino Capitalism" in 1986, before this crash obviously, in which she focused on the issue of the causes of economic depression and concluded that it was mismanagement on the part of international finance -- not trade policy -- that causes depression. I quote this book at some length because it provides a VERY interesting view of causes of economic discord. This view is very literal, and very linear, as agrees with my own view of protectionism.

    My own view (and it is obviously not mine only as she discusses it as one of two main branches of economic thought) is mentioned by the author when she talks about some form of 'determinist' version. My view is that the thieving and corrupt cartel of international bankers that she says 'cause' depressions....are actually agents of the depressions -- but that a duality built in to the 'laws of nature' is the actual cause of depressions.

    There are 'seasons' to every cycle and 'cycles' to every life and objective form of creation. Oswald Spengler, Gambatisto Vico, Mauricio Ficino have written masterpieces on historical morphology. Kant, Nietzsche, Heidigger also explored these ideas. James Joyce's 'Finnegans Wake' is an exposition of historical cycles shown in the history of one family -- this non-linear thinking is the basis of all traditional religious philosophy.

    In my mind corrupt, thieving bankers turn the wheel that turns the expansion into a contraction...and, much later, after the wheel has already turned, protectionism appears, as a symptom of the wheel having been turned.

    Casino Capitalism by Susan Strange

    Casino Capitalism: Susan Strange's critical commentary on the weaknesses of the international financial system as they developed in the 1970s and early 1980s is as timely today as when it first appeared in 1986. The re-issue will be of undiminished interest to general readers and those interested in world politics and economics and all who share concerns about bank failures, financial fraud, political corruption, money laundering, and general volatility in world financial markets. Casino Capitalism continues to challenge conventional ideas on the role of money in world society.

    In the last chapter, I suggested that the roots of the world’s economic disorders are monetary and financial; that the disorder has not come about by accident, but has in fact been nurtured and encouraged by a series of government decisions.
    The interpretations that tend to dismiss the monetary and financial aspects of world economic disorder as unimportant seem to fall into two groups: those that put the main stress and blame for disorder on weakness in trade policies, and those which avoid putting the blame anywhere in particular by offering one or other form of determinist version of recent economic history….

    Thus, when it comes to contemporary interpretations of the recent past, a split or schism appears between the two. And it is the opinions of the economists concerned with trade relations between states, rather than those concerned with monetary relations, that have predominated and have most influenced informed opinion – at least in industrialized countries. Any review of the Western press at the time of the meeting of trade minister in Geneva in November 1982, for instance, or at the economic summit of heads of state in 1983 or 1984, would show that protectionism was widely identified as the greatest danger to the world’s future prosperity, not monetary mismanagement.

    Yet, while the professional schism explains – at lest in part – why there has been this broad division of opinion, it does not explain why the trade interpretation has been so predominant over the monetary one.

    The puzzle remains why – despite the testimony of many historians – the trade-based interpretation of world economic depression should predominate so strongly over the financially-based interpretation (such as Davis, 1975, and Lewis, 1939). The reasons could be professional, historical or political – or a mixture of all three. Professionally, it is much easier for teachers to explain and for students to understand the depressive effects of trade barriers than the more complex processes of credit shrinkage and monetary uncertainty. Historically, it must be remembered that a major foreign policy objective of the Roosevelt and Truman administrations was to fashion a post-war world economy as wide open as possible to American commercial and financial domination (Bloc, 1977).

    To this end, the belief that protectionism and discrimination must at all costs be avoided in the general interest, as well in the national interest of the United States, had to be confidently and repeatedly driven home, even though this was inconsistent with the conclusions reached by most historians of the time that protectionism was a symptom, not a cause, of depression.

    Finally, there is a political explanation. Putting the main accent of protectionism serves to share the blame fairly equally among all concerned. The Europeans and the Japanese are as guilty – in some respects, more guilty – of this particular sin as the Americans. Even developing countries indulge in protectionism, so it is not only the rich who are at fault. Power over money and finance, however, is much more asymmetrically distributed among governments, the United States standing clear above all others….

    [I realize this is] a critical denial of the conventional wisdom of liberal economists. They have persuaded everyone – students, politicians, journalists – that the great danger to the world economy is protectionism, and that beggar-thy-neighbour trade barriers had been the cause of the 1930’s depression. Not so, I argue in ‘Casino Capitalism’ Mismanagement of money and credit is more dangerous than protectionism in trade policy. I pointed out that economic historians of the 1930s had concluded almost unanimously that protectionist policies were the result of slowed growth and stalled trade, not the cause. Lack of credit, not foreign tariffs, had made insolvent debtors and poor customers of a great many developing countries in Europe, as well as in Latin America and the Pacific. It is time, therefore, to put the record straight about the past and to draw the right conclusions about the priority of money over trade in policy-making for the present.

    On Sep 14 11:28 AM coreopsis wrote:

    Another typically senseless comment from Clark. In the eighteenth century, the Qianlong Emperor rebuffed George III's moves to open the Chinese market to British goods. Where was the 'Depression'?

    Protecting home markets has had a long history well before there was any definition of 'depression'. The only depression I feel is reading such rubbish.
    Sep 14 01:26 PM | 1 Like Like |Link to Comment
  • U.S. vs. China: Has Trade War Begun? [View article]
    Very good comment. It's clear that 'dumping' is what Europe and America are preparing for.

    America may be the current bully of the world. But Russia wanted to be the bully of the world. And China definitely wants to be the bully too. We should not be naive about this.

    On Sep 14 10:51 AM David White wrote:

    > You make soem interesting points Jeff. I enjoyed the read. However,
    > you have neglected the economic aspects of this "trade war" almost
    > completely. At the end of last week China released the following
    > economic information:
    > 1) China exports were down 23% y-o-y.
    > 2) The Chinese trade surplus was down 45% y-o-y.
    > 3) The Chinese industrial production was up 12.3% y-o-y.
    > If undustrial production is going up dramticially and exports are
    > going down dramticially, the Chinese consumer has to buy all of these
    > products to make the growth sustainable. However, Roubini says the
    > Chinese consumer's behavior is essentially unchanged. Some extra
    > buying has occured due to stimulus actions (such as vouchers). However,
    > these will end soon. That will leave the Chinese with huge productions
    > increases, but no markets to sell these extra products in. The world
    > markets are supposed to recovery only very slowly according to current
    > forecasts. The Chinese will have to sell their products somewhere,
    > or they will likely face a recession. The Chinese government will
    > not want to countenance that. Neither will the Chinese people. They
    > will happily dump their products on the US and Europe in order to
    > avoid that. The US will have to impose tariffs in order to save its
    > businesses. Otherwise China will simply take over markets by being
    > willing to sell at a loss for an extended period of time. After all
    > that is better than a recession, isn't it? Plus they would get to
    > increase market share.
    > The US cannot allow this. "Namby pamby" actions by the US government
    > will not cut it. There will have to be tariffs. There will have to
    > be vigilance. Otherwise the US will simply lose a trade war without
    > firing a shot. it is nice to think that everyone plays by the rules.
    > However, the fact is that many countries do not. China is not about
    > to, given the economic problems they are now facing. I applaud Obama
    > for his actions. US businesses will need protection. The Chinese
    > will not play fair.
    Sep 14 11:29 AM | Likes Like |Link to Comment
  • U.S. vs. China: Has Trade War Begun? [View article]
    Chinese Trade Barriers Equivalent to Protectionism

    By Jason Subler
    Wednesday, February 25, 2009
    BEIJING - China might not have engaged in the kind of overt protectionism of the "Buy American" programme recently, but it has enough barriers to free trade and investment in place to leave itself open to such charges down the road.

    Beijing has pulled out all the stops in recent weeks to pillory the United States for the local content requirement of its stimulus package, with commentaries in state media calling protectionism a "poison" and a parade of officials pledging China's commitment to free and open trade.

    That may have helped reassure China's trading partners that it is not planning to throw up fresh tariff barriers or otherwise block imports, but its own web of often opaque and subtle blocks on foreigners' participation in the economy hardly leaves it beyond reproach, analysts say.

    Thus, while Beijing may be enjoying something of a hiatus from criticism over everything from its lax protection of intellectual property rights to the value of its currency, it can probably count on fresh attacks if it does not address the fundamental question of imbalances and ensuing trade surpluses.

    "China doesn't have many tools to encourage its consumers to buy more to absorb the contraction abroad. That will lead to a transition period which is going to be very difficult, and that, I'm afraid, will be plagued by protectionism against it," said Joerg Wuttke, president of the European Union Chamber of Commerce in China.

    "They don't have the moral high ground, that's for sure."

    First, take government procurement.

    Despite Beijing's vows that it will not implement "Buy Chinese" provisions as part of its 4 trillion yuan ($585 billion) stimulus package to stave off a deeper economic downturn, it already has a strong local content policy for many products, Western business groups and diplomats say.

    Those restrictions are not always explicit, as in the case of "Buy American".

    But in practice, the overall effect of its often obtuse bidding processes, technical standards and other regulations is that foreigners are regularly at a disadvantage when bidding for government contracts or tenders.

    "The reason that China doesn't have the option of imposing 'Buy China' rules is that it already has them in place," said Arthur Kroeber of the Beijing research firm Dragonomics.

    The EU Chamber cites the example of a Western company whose joint venture (JV) bid for the right to run a network of petrol stations in one city but saw the tender handed to a state-owned competitor that it said had offered a much less attractive bid.

    Provincial officials also routinely favour companies from their own tax bases, a trend that appears to have picked up in recent months as local governments look to prop up their own economies. [ID:nPEK176822] [ID:nPEK178419]

    Beyond government procurement, Beijing maintains strict controls over foreign firms' participation in the economy, barring them from strategic sectors such as some areas of resource extraction and restricting them in many others.

    For instance, foreign auto makers may only produce via JVs, and may have a maximum of four JVs in the country -- two for passenger cars and two for commercial vehicles.

    Onerous technology transfer requirements in sectors such as trains, together with evidence Chinese firms are not keeping the technology in the country as agreed but are exporting it to places such as Africa, are another deterrent, business groups say.

    "We just want to have a decent chance, level playing conditions in order to bid for projects," Wuttke said.

    So what can Beijing expect?

    Western companies have long been pushing for greater access in a range of sectors, from insurance to logistics. Stagnating growth in their home markets could give them, and politicians back home, an incentive to step up those efforts.

    "One area we think is particularly important is service market access. For the U.S. in particular it's an area of strength ... and yet it's a relatively closed sector here," said Robert Poole, vice president for the China operations of the U.S.-China Business Council.

    While Beijing has avoided antagonistic policies like those of India, which has temporarily banned imports of Chinese toys and said it would slap safeguard duties on Chinese aluminium imports, some of its own steps could hand ammunition to critics abroad.

    Its stimulus spending has focused mainly on boosting domestic demand through infrastructure and other investments. However, authorities have also increased export tax rebates for products ranging from textiles to machinery as part of plans to support nearly a dozen important industries.

    That kind of overt support for exports, at a time when the U.S. trade deficit with China hit a record $266.3 billion in 2008, could grate on critics abroad and potentially bring its currency policy back into closer focus.

    "The yuan is an issue, and then the export tax rebates," said Sherman Chan, an economist with Moody's in Sydney.

    Beijing has kept the yuan in a tight range of around 6.84 per dollar over the last seven months, having let it rise 19 percent since revaluation in 2005.

    "People think that the yuan has been artificially kept at a very low rate in order to sustain China's export competitiveness," she said.

    Beijing's susceptibility to charges of subsidising its industry may explain in part why it has gone on the offensive, including by sending a buying mission to Europe on Tuesday.

    But such efforts, which some analysts see as little more than public relations exercises, are unlikely to do much to stave off future complaints, potentially ranging from anti-dumping investigations to cases at the World Trade Organization (WTO).

    BusinessEurope, a lobby group, said China's curbs on raw materials exports may violate WTO rules. [ID:nLO424688]

    At the root of the problem is the overcapacity China has built up in many industries as part of its investment- and export-led growth model, and whether it can boost domestic spending and reduce excess capacity quickly enough to close the gap now that overseas demand is plummeting.

    While some of the specific industry support plans, notably that for autos, focus on consolidation, there is evidence that some heavy industrial companies are receiving special injections of loans to keep them afloat, said Kroeber of Dragonomics.

    "That does mean that (they) are sustaining excess capacity and increasing the likelihood that China will continue to export steel and all of this stuff," Kroeber said.

    "So that is a problem," he said.
    Sep 14 11:26 AM | 1 Like Like |Link to Comment
  • Obama Is Wrong to Impose Punitive Tariffs on Chinese-Made Tires [View article]
    James: I wrote a long response to your note, saying how much I support much of what you are saying -- but I clicked the 'back' button by mistake and lost it.

    I agree with you that America too often stresses ONLY the material reality (the pocketbook strategy), to our detriment as a culture. Science has gone out of its way to prove there is no soul; and we often seem to behave like the soul is a fallacy or simply the creation of some ancient imagination. It is odd that American is 'religious' and so many Americans consider themselves religious, but so little attention to the soul is paid. Religion is about more than the defeat of 'evil', evil being always defined as the side of an issue one is NOT standing on.

    As far as China, the government has been sponsoring their companies for about 60 years. America has only been sponsoring its companies -- banks and insurance companies -- for about a year. Chinese companies can't fail unless their government wants them to fail. They have a stream of investment directly from the government whenever they need it.

    As far as a trade war: is China going to push the trade war and back off its sponsorship of American borrowing? Does China benefit from a weakened American economy? Not very much. Not until their own people can begin to consume all the cheap products China is producing. And if China dumps her TBonds and the dollar sinks, does China benefit from an American default on her debt? No. China is between a rock and a hard place.

    China understands politics. Where can China go with its money, if not America? But more gold, yes. I hope they do. But commodities are no place to be if the global economy continues to sink, which is highly likely.

    'The Art of War': "When the position is such that neither side will gain by making the first move, it is called temporizing ground."

    On Sep 13 12:41 PM James Lewis wrote:

    > I disagree with all those that think this was a stupid thing to do,
    > for fear of retailation. I question whether or not some of the comments
    > come from Americans who just dont give a damn about their country
    > or whether they have idea of the current reality in that the USA
    > will be on a downward spiral until it is able to re-structure its
    > economy to include more production that is consumed domestically.
    > American can not compete with 95% of manufacturing because it structures
    > its policy (long term) around all the WTO rules. It does not subsidise
    > industry (long term, the current bailouts which can be construded
    > as subsidies are emergency measures), it is unable to force wages
    > down and keep the workers in its factories living sub-standard lifes,
    > it can not devalue the currency because of implications as its the
    > worlds reserve currency. America has very low import tarrifs on most
    > of its goods.
    > China has the entire State Owned Enterprise company network subsidised
    > by cheap loans (that are very often forgiven and written off by the
    > state owned banks). Their manufacturing sector is subsidised on every
    > level (loans, taxes, utility prices, free pollution disposal). The
    > yuan was kept artificially low for a very long time (I question whether
    > or not it is only 10% from fair value now)
    > The playing field is far from fair and China (in its self interest)
    > refused to play more fairly. America pussy footing around and doing
    > nothing to improve its negotiation positon had to send a message
    > to China.
    > Those who think the USA have more to lose in a trade war with China
    > have not thought about the simple arithmetic. China runs huge trade
    > surplus with the USA. As the Surplus country they have the most to
    > lose especially when their economy is structured to run trade surpluses
    > (ie geared towards production). The simple truth is USA companies
    > have not be given access to Chinese markets as a whole, especially
    > in the financial realm. So actually it is in the interest of the
    > USA to take this type of action and if a trade war starts and it
    > leads to reduction in trade between the countries. It is positive
    > for the USA. Please note that those who think China is needed to
    > finance the US need to understand that as the savings rate has increased
    > in the US, there is a far less reliance on the chinese to buy treasuries
    > as the US public is.
    > The US needs to re-build it manufacturing sector and needs to keep
    > more jobs at home during the upturn of the next business cycle. Consumption
    > in this new cycle will be lower, the US needs to capitalise on it
    > as much as it can.
    > For those that think giving the american people access to public
    > health care is wrong and is communism. I strongly suggest you think
    > about what you are saying. This is not about policitics, the governments
    > job is to look after its people. It is the right of everyone in the
    > universe; if they are ill to have access to help/love/health care
    > regardless of their financial situation.
    Sep 14 11:17 AM | 1 Like Like |Link to Comment