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Tuesday, May 08, 2007

A Currency Lesson

An interesting point here:

American manufacturing executives Tuesday urged the US government to get tougher with China on exchange rates, claiming the modest rise in the yuan has done little to ease the massive US trade deficit.

“We voiced our concerns on how to best deal with this issue, notably pressing for faster appreciation of the yuan in this month’s Strategic Economic Dialogue and further enforcement of international agreements.”

“The necessary appreciation of China’s currency has not occurred,” Campbell said, noting that China foreign currency reserves have now reached 1.2 trillion dollars.

I thought it was interesting that the way that China is holding down the value of their currency is by holding onto a LOT of dollars. 

Of course the biggest loser in China’s undervaluing their currency is the people of China.  The winners would likely be the American consumer.  Still artificial influences in the market always turn out badly and we should keep the pressure on to get them to let their currency float in the market.  It’ll be better for the Chinese people and in the long run the American people.

This is one area of economics I wish I understood better.

Comments

Avatar for FreeRepublicans.com

Could you imagine the kind of inflation we would have if the U.S. Government kept printing money like they have been and it wasn’t being sent overseas to China and Japan; and from illegals here to their families in Mexico?

People like to say that the trade deficit doesn’t matter, but China has the ability to not only outbid us on the oil market but to also drop the dollar, switch to the Euro, and flood the currency market with dollars.

Hyper-Inflation as a Weapon of Economic War.

FreeRepublicans.com on May 8, 2007 at 07:20 pm

FreeRepublicans-

China has enough dollars to buy the Louisianna Purchase!


"All the perplexities, confusion and distress in America arise not from defects in their Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit and circulation.”
- John Adams

Troy_Pineri on May 8, 2007 at 07:27 pm

but China has the ability to not only outbid us on the oil market but to also drop the dollar, switch to the Euro, and flood the currency market with dollars.

Well they couldn’t outbid us.

They could hurt our economy I think, but to a greater degree they’d hurt their own.  Still they don’t seem to care as much about that.


What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.


The Whistler's signature
The Whistler on May 8, 2007 at 07:37 pm

On an “currency economics” related note, a good friend of mine is convinced, and trying to convince me, he’s going to make 50% annual return on his money by sending it to this company

Anyone know anything about this place?  It seems so “unknown” on the internet (Google the company name and you only get 103 hits, maybe 104 now that I mentioned it here) that it seems like an obvious scam.  But he says his father has been in it for a little while now and doing fine…

Any opinions?


I think Rob hates me… I mean, just look at the pic he took of me!

Sphagnum on May 8, 2007 at 07:54 pm

Thanks for the tip Sphag, but I’ve got all of my money tied up in a Nigerian money transfer that should outperform your investment by a large margin.


What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.


The Whistler's signature
The Whistler on May 8, 2007 at 08:22 pm

The truth is that China is losing money on everything they sell, and the workers are paying the difference.  It’s the Marxist fantasy about the capitalists oppressing the workers, but it’s taking place in a Communist country!  I love the irony.


Will America hold to the principles of capitalism and free enterprise or will it embrace elements of socialism, Marxism and communism? Those are our choices.
Voting for conservative Republicans is the choice for free enterprise, personal, economic, religious and political freedom; any other choice supports socialism, Marxism and communism.
Throw out the Dems and the RINOs; save America

robert108 on May 8, 2007 at 09:15 pm

The truth is that China is losing money on everything they sell,

Do you have a source for this?


"All the perplexities, confusion and distress in America arise not from defects in their Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit and circulation.”
- John Adams

Troy_Pineri on May 9, 2007 at 05:20 am

Troy: That’s what happens when currency is undervalued. Somebody pays the real price, and in this case, it’s the Chinese workers.  When I say “losing money”, of course it means with honest accounting.  Enron did the same thing.


Will America hold to the principles of capitalism and free enterprise or will it embrace elements of socialism, Marxism and communism? Those are our choices.
Voting for conservative Republicans is the choice for free enterprise, personal, economic, religious and political freedom; any other choice supports socialism, Marxism and communism.
Throw out the Dems and the RINOs; save America

robert108 on May 9, 2007 at 08:06 am

Troy: You see, Enron was essentially doing the same thing the Chinese are doing.  The difference is that Enron went out of business, because the free enterprise system is self-correcting.  Even with all the support from the Clinton admin, Enron was doomed to go out of business, because they really weren’t making money.  On the other hand, totalitarian socialism isn’t self-correcting, so the Chinese govt will continue to oppress its workers in its attempt to act like it’s really prosperous.


Will America hold to the principles of capitalism and free enterprise or will it embrace elements of socialism, Marxism and communism? Those are our choices.
Voting for conservative Republicans is the choice for free enterprise, personal, economic, religious and political freedom; any other choice supports socialism, Marxism and communism.
Throw out the Dems and the RINOs; save America

robert108 on May 9, 2007 at 08:28 am

Troy: I also refer you to the “dot com bubble”.


Will America hold to the principles of capitalism and free enterprise or will it embrace elements of socialism, Marxism and communism? Those are our choices.
Voting for conservative Republicans is the choice for free enterprise, personal, economic, religious and political freedom; any other choice supports socialism, Marxism and communism.
Throw out the Dems and the RINOs; save America

robert108 on May 9, 2007 at 08:29 am
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