A comment that I left on my previous post….
Mr. techy2468
I am glad that I am not the only one who thinks that the US and China are equally to blame.
But I think that you and I fundamentally differ on the nature of what China is doing. You see China as being someone who is sneakily manipulating its currency to gain an unfair advantage. But I see China as being akin to General Motors. They are desperate to maintain the market for their goods so they are offering 0% financing to their customers.
It is not an accident that China started its massive currency intervention when all the signs were pointing to the fact that the US was going to have a recession. I think we in the US would have had a good recession if China had not “saved” us.
So in the short term China’s policy has been very good to the US. But in the long run, it is putting off pain today for more pain tomorrow just like GM is.
I think that the pain that you and Mr. Setser fear from higher interest rates is going to happen no matter what. The only question is whether you want your pain now or you want it worse later.
Ape Man….i agree with you cent per cent…
but please note that as per free trade policy china is doing breaking the rule by subsidizing its export due to currency manipulation.
which puts other exporting countries at a disadvantage if they dont want to manipulate their currency.
but on the other hand if USA was to raise interest rate, that is not going to benefit anyone and its going to hurt a lot of people.
so china is supposed to let the good become expensive so that other countries can compete on a equal ground.
the side effect interest rate in usa will go up……we dont care, we have to pay the price some day…..since this imbalance cannot go on forever…..so lets start thinking about taking small pills today rather than go for a massive surgery tomorrow.
I don’t have a lot of time tonight. But look at this way, if China gives subsidized loans to its own companies that would give them an “unfair” advantage, right? So why is the fact that the Chinese are giving subsidized loans to the US markets considered beneficial to the Chinese manufactures?
True, a high dollar makes it tough for manufactures to export. But I think that is more then balanced out by the fact that US manufacturer have access to cheap capital. GM would have gone broke by now if it were not the easy money that China (and others) provided. The same could be said for many other manufactures.
As I see it, the problem is not that China is cheating us, but that it is turning us into the proverbial welfare queens. We are becoming addicted to cheap money. That is why I do not see even cheaper money (lowering interest rates) as being the answer.
well i agree that USA is not at such a disadvantage.
but what about other countries whose exports are getting hammered because of subsidized china exports.
isnt it against free trade??
What countries would you say are getting hammered because of China’s currency manipulation?
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