The TOTALLY None US Political Thread

I'm not sure if this is the right place for this, but since the discussion has touched on currency a bit I'd like a non-US opinion, as well as some help with understanding the economic aspects of the alleged currency manipulating by China referred to in this article:
http://news.yahoo.com/s/nm/20100312...MDeW5fdG9wX3N0b3JpZXMEc2xrA3NlbnNjaHVtZXJzYQ—
Here's the gist:
– Senator Charles Schumer said on Friday he plans to move forward soon on legislation aimed at stopping China from "manipulating" its currency.

"Now more than ever, there is a consensus to finally confront China's currency manipulation..[Yada yada political speak jobs legislation blah blah]"

Schumer's statement comes as President Barack Obama's administration faces a decision by April 15 on whether to formally label China as a currency manipulator in a semi-annual Treasury Department report.

Many U.S. lawmakers complain that China's currency is undervalued by as much as 40 percent, giving its companies an unfair price advantage in international trade.
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The article goes on to mention that a 27.5 percent tariff on Chinese imports had been proposed at one time because of this.

So this over-valuing thing—is this basically like saying "My cost to produce this widget is forty yuan, ( but it was actually only twenty yuan because you don't know how much a yuan really is) so, I'm selling it to you for fifty yuan, and only make a profit of ten yuan (ostensibly; but thirty yuan actually)" ? (Sorry to be so convoluted, but that's how my dim little mind works in the numbers area.)

And is there really anything anyone else can do about it if it is true?
 
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As long as we want to buy cheap stuff, from people who work under poor condtions in China, china has power to do anything they want.
 
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Here's how it was oversimplified for me a long time ago, Mags:

A loaf of bread costs $1 here. A loaf of bread costs 100 yuan there. Based on buying power, if I give Chairman Mao a crisp $1 bill, he should give me 100 yuan back--equivalent value. Now, whenever I give Mao a crisp $1 bill, he insists on giving me 150 yuan for it (artificial control of the exchange rate). Suddenly my buying power goes up--it's cheaper for me to buy his bread than to make my own. The Chinese people get screwed because they're still getting paid in yuan and their living standard is still based on 100 yuan loaves of bread, but the government doesn't really care because they're selling bread out the yingyang and end up with lots of crisp $1 bills, regardless of what all the paper is actually "worth".
 
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Thanks dte. So it's basically the opposite of what I was thinking then? China gets less actual money but sells more stuff and controls more market share and we get more buying power? So why do the politicians think this is bad and want to change it? (I realize if $1 buys more Chinese goods than American goods, the money goes overseas to support the Chinese economy instead of the local one but is that all there is to it?)

Because I doubt tariffing Chinese goods and thus raising the prices dramatically across the board at Wal-Mart and Lowes and Home Depot, et al, is going to have a net positive effect on either jobs or the buying power of the average US consumer, and in fact might make a sizable dip in the consumer spending aspect of the recovery, which is pretty shaky anyway.
 
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Consider the increasing number of unemployed American bakers and their cost to your economy. Now multiply that by the number of industries in which it is happening!!
 
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magerette said:
Thanks dte. So it's basically the opposite of what I was thinking then? China gets less actual money but sells more stuff and controls more market share and we get more buying power? So why do the politicians think this is bad and want to change it? (I realize if $1 buys more Chinese goods than American goods, the money goes overseas to support the Chinese economy instead of the local one but is that all there is to it?)
Click to expand...

That's all there's to it.

Because I doubt tariffing Chinese goods and thus raising the prices dramatically across the board at Wal-Mart and Lowes and Home Depot, et al, is going to have a net positive effect on either jobs or the buying power of the average US consumer, and in fact might make a sizable dip in the consumer spending aspect of the recovery, which is pretty shaky anyway.
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Yup, that's the downside of correcting the imbalance, whether through tariffs or through a revaluation of the Yuan from the Chinese side. Correcting the imbalance would drastically reduce the purchasing power of the American poor and middle class, while drastically favoring those with capital invested in the American economy. The jobs effect would only bite in the long term; presumably better jobs would migrate back to the US, which would then improve the purchasing power of the poor and the middle classes.

The trouble is that the imbalance *has got to be* corrected -- not even the USA can continue spending beyond its means forever.

If it was up to me, I'd slap that 22% duty on Chinese imports, and then use that to offset the redistributive effect the duty would have, by funneling some of the benefits from the capital-owners to the poor and middle class, to be gradually phased out over a few years as the economy adjusts and those better jobs reappear Stateside. Knowing how the US works, though, they'll probably just slap on the tariff and let the poor take care of themselves...
 
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Thanks for the additional information, Prime J.
If it was up to me, I'd slap that 22% duty on Chinese imports, and then use that to offset the redistributive effect the duty would have, by funneling some of the benefits from the capital-owners to the poor and middle class, to be gradually phased out over a few years as the economy adjusts and those better jobs reappear Stateside. Knowing how the US works, though, they'll probably just slap on the tariff and let the poor take care of themselves…
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No, that (mitigating the effects to the poor and middle class) won't happen.

Frankly, I doubt they're in a big hurry to do anything. It takes an act of some massive supernatural power to get anything through congress these days. It looks like they have some arbitrary diplomatic deadline to meet, so I'm sure they'll make some sort of statement, but actually doing anything about anything through legislative initiatives...that's apparently beyond us right now.

And you can have your thread back before I get off on that subject and totally hijack it. :)
 
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Prime Junta said:
Correcting the imbalance would drastically reduce the purchasing power of the American poor and middle class, while drastically favoring those with capital invested in the American economy.
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and push up inflation and thereby intrest rate pressures as well…

...and thinking a little more about it - if the Yuan appreciates China will be getting a break on the cost of their raw inputs which have been surging lately so you might find it doens't have as much effect as hoped on their compeditivness.
 
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V7 said:
and push up inflation and thereby intrest rate pressures as well…

…and thinking a little more about it - if the Yuan appreciates China will be getting a break on the cost of their raw inputs which have been surging lately so you might find it doens't have as much effect as hoped on their compeditivness.
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China doesn't need to import much on the raw material side. They get some oil, and they get steel (although they're frantically working on domestic sources for that). Pretty sure they're net exporters for raw materials, particularly since they've got a virtual monopoly on lots of the increasing-demand rare earth elements.
 
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dteowner said:
China doesn't need to import much on the raw material side. They get some oil, and they get steel (although they're frantically working on domestic sources for that). Pretty sure they're net exporters for raw materials, particularly since they've got a virtual monopoly on lots of the increasing-demand rare earth elements.
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They're huge importers of iron ore, coal and natrual gas from Australia (our biggest export market actually exceeding the US and Japan) and got badly burnt when they refused the contract prices Korea and Japan agreed to hopeing to use their market share to get a better deal (spot prices subsequently doubled). While they have control of some of the rare earth elements thats a tiny imput compated with their need for steel and fuel.

Those demands incidently will also drive up costs to the US if China is buying more.
 
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Yep, they certainly hit us hard on steel last year about this time. Prices went from about $500/CW to $1200/CW in about 2 months because they were snatching up every piece of scrap they could find. That demand has eased a lot since last year due to the combination of the global slowdown and their increased domestic capacity.
 
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They've been building their steal production but they still need to import the iron ore which just moves the pressure further down the supply chain.

http://www.smh.com.au/business/bhp-makes-headway-in-ironore-wars-20100312-q2bu.html

http://uk.finance.yahoo.com/news/ir...st-double-by-april-tele-30fee6dcff9f.html?x=0

I don't think the Yuan is sustainable at the current rate but I'd be very sceptical of any politican telling you a revaluation is simple, harmless or likely to fix any of the structural problems in the US economy. Floating or repricing the Yuan will effectivly be a fundamental restructuring of the international economy as its been running for the last 15 years or so with all the disruption that entails and its likely to hurt all round.
 
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Exactly, and that's why it would be so very useful to have politicians who can find their ass in a dark room with both hands -- because there is a quite a lot that can be done to mitigate the shocks and keep those worst affected from having their lives destroyed, but it takes some skill and some will. By the numbers, every economy will be hit, but at the individual level, those countries will do best that manage this transition most easily; those that don't will be stuck with new semi-permanent marginalized groups, internally skewed income structures, and quite possibly a structurally damaged economy and society.

Ideally, this would be done gradually -- the revaluation (or tariff, or whatever), would be done over the space of a few years, with the shock mitigation measures similarly ramped up, and then the measures ramped gradually down as the world economy adjusts. But that never happens, so it's much more likely that it'll be business as usual again for a few years, and then another crisis that makes 2008 look like a golden age.
 
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As someone whose total life savings are tied up in the market and who was hit hard by the 07/08 crash, you really know how to cheer someone up!! Retirement was supposed to be a relaxing, happy time. Ha!!!!
 
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Well, they say that the safest investment combination is US government bonds and bottled water. If the former crash, the latter will be in very high demand.
 
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Sorry, but they're not available here in Oz, and water is for washing!! :)
 
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I didn't realize we had so much available. Good to know. It's not specifically mentioned in the article, but I believe those rare earth mines are pretty ugly from an environmental standpoint. Of course, to the enviro-nuts, a fencepost hole should be a superfund site, but it does sound like there's lots of nasty chemicals involved.
 
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