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Friday, April 2, 2010

Ya Lookin’ For A Trade War, Partner?

We had the cold war, and then Reagan’s War on Drugs, and his joint venture war in the Falklands with his girlfriend, Margaret Thatcher, which brought us the War against Saddam, by Pappy Bush, for drinking the oil milkshake located in Kuwait; next, we moved on to LittleBoyBush’s War on Terror, which brought us to the Iraqi Freedom War, and the War in Afghanistan. President Obama continues the presidential legacy of finding something to call “War”.

Now, President Obama has found his own voice of war by calling out the Chinese for keeping their Reminbi (RMB) undervalued as a currency, and pegged to the dollar. We are now hearing calls by those in Congress for a Trade War. Oh, how we love the sound of war, and its sweet destructive affects upon the lives of millions of people here at home and elsewhere.

Recently, we have heard from five of our dear Congresspersons looking for a fight with China. Senator Charles Schumer, of New York, and Senator Lindsey Graham, of South Carolina, and three others showed their fangs after taking their cues from Mr. Obama. It looks like there is a cram of 130 Congressional pack hounds standing behind the five snarling government dogs that have introduced legislation that would label China as a currency manipulator and are pressing the Chinese currency to float more freely. They are pressuring Tim Geithner to call out a statement that China is a currency manipulator. The Treasury department will decide if China should be labeled as such. It hasn’t been since 1994 that such a designation had been authorized.

China’s prime minister did not waste anytime unleashing his own growls upon the five Viagra induced Congressional pitbulls. Bloomberg reported, by Randow and Salamat (“Roubini Sees Trade War…”), that Mr. Fan Gang, a Chinese central bank advisor, said “China “may resume a managed float of its exchange rate” if the global economy stabilizes and uncertainty around the economic outlook diminishes.” What is he thinking? That the only way that China will rebalance their currency is when the global economy stabilizes? 

Nouriel Roubini, economics professor at NYU, said, “As long as the U.S. won’t take immediate action against China there will be negotiations. But the Chinese clearly stated that if the U.S. were to brand China a manipulator and took action right away, the Chinese wouldn’t stay idle, they would take retaliation.” Now, that sounds like war! The U.S. likes a good war, and the groundwork is being laid out for it to possible happen.

Chinese commerce minister, Chen Deming, warned that there could be trouble in River City if the U.S. levies a punitive tariff on Chinese imports into their most favored trading partner. U.S. consumers will be suffering more than anyone. He went on to say, “If the United States uses the exchange rate to start a new trade war, China will be hurt. But the American people and U.S. companies will be hurt even more.”

Chen knows how life is in the U.S., since he spent time at Harvard University. He doesn’t understand why the Obama administration believes that threats will accomplish his goals. “You’re not going to get 1.3 billion Chinese to change by insulting them….economically it makes no sense.” He doesn’t believe that the U.S. trade deficit will decrease by limiting imports. What will the U.S. do? Will it put tariffs on all foreign imports? Is it only targeted at China? Will China get around it by producing consumer goods in Taiwan, Vietnam, Mexico, or South Korea? The only way to effect the trade deficit would be for Americans to save more of their incomes and reduce their overall consumer spending practices; or to push the dollar lower and increase U.S. exports.

Mr. Chen made reference that the U.S. will probably not be producing their own telephones or televisions anytime soon in order to cover the loss of those same products being imported from China. “That production isn’t going to return to America, that’s just not practical. Globalization has changed all that.”

It is my belief that Mr. Chen is mistaken. The U.S. could start producing such products again if the Obama administration stimulated, i.e. subsidized, the manufacturing sectors as the Chinese have done over the past years.

China’s Premier Wen denied that the RMB was undervalued when he said, “I understand that some countries want to increase their share of exports. What I don’t understand is the practice of depreciating one’s own currency and attempting to press other countries to appreciate their own currencies solely for the purpose of increasing one’s own exports. This kind of practice I think is a kind of trade protectionism.” (Found on MPettis.com, 3-17-10). Professor Michael Pettis (Michael Pettis is a professor at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets, and a Senior Associate at the Carnegie Endowment for International Peace) wrote, “Wen is absolutely right! Undervaluing or depreciating a currency certainly is a form of trade protectionism, but that, I think, is exactly the point. In a world of sluggish growth and rising unemployment, everyone’s currency policies are legitimately going to be scrutinized over whether they constitute trade protection.”

Here is more of the arrogance oozing out of the Chinese government, (as written in MPettis.com “How Will an RMB Revaluation Affect China, US and the World”), by Professor Michael Pettis) and spoken by Zhao Qingming, a researcher with China Construction Bank as he stressed that imbalance’s of an economy’s deposit and investment were the fundamental reasons for a nation’s trade surpluses or deficits. “Exchange rates have only minor influence. In fact, yuan appreciation brings more adverse effects to western countries than positive ones. In the past tens of years, because of the yuan devaluation and export rebate policies, western countries, to a large extent, were able to enjoy low inflation, low living cost, and current standard of living, and western governments were able to reduce financial deficits and allow their people to consume excessively.”

This is Professor Pettis’ response. He wrote that the first part of Zhao’s statement is basically correct, but he is way off with the second part of his distorted view of a devalued currency. “The second part is certainly wrong and probably meaningless. More interestingly, it seems a little weird to argue that one of the benefits that China has provided the world with its undervalued exchange rate is low consumer prices that allow countries like the US “to consume excessively”. Aside from the fact that this pretty explicitly acknowledges that the currency is undervalued, since excess consumption is exactly the problem in the US, and since Chinese per capita consumption is much less than 10% of that of the US, it seems that China should be more approving of US attempts to return the favor and allow Chinese consumers the benefit of subsidizing US prices.”

Mr. Michael Whitney, (“The Looming Trade War With China”), brings up the following impressive viewpoint. He quotes Mr. Chen, (extracted from Washington Post, China’s commerce minister: U.S. has the most to lose in a trade war”) “If the United States does decide to impose tariffs on China, American companies operating in China, which account for more than 60 percent of China’s exports to the United States, would surely be hurt the most. ‘In the end, America is the one that needs to adjust’”. Chen continued, “One reason why a revaluation would be dangerous for China, is that profit margins for Chinese exporters are tiny—ranging from 1.7 to two percentage points.”

Mr. Whitney asked, “does anyone seriously believe that the corporations would slit their own throat by starting a trade war? Consider this: Maybe China’s “currency manipulation” policy was just one of the many preconditions demanded by foreign corporations before they relocated to China. Naturally they would want to ensure that they’d have an advantage over the competition regardless of the costs to China or workers in America. In other words, the multinationals are probably the driving force behind the exchange rate.”

Ms. Carolyn Bartholomew wrote in The American Prospect (“The Great Industrial Wall of China”), “China policy has, over the past two decades, been driven by the interests of the multinational corporations, and those global firms have benefited from many of China’s policies. Starting several decades ago, it was a handful of exporting elite—Boeing, Motorola, and GE among them—who argued persuasively to the Bush, Clinton, and Bush administrations that the U.S. economic interests would be served if only these companies had access to the Chinese consumers…As more and more companies signed on, and the investment banks got involved, production shifted to China…”.

“Instead of adjusting our trade and economic policy, U.S. policy-makers adjusted the rationale for the continuation of a status quo that was failing the American worker. Of the estimated 1.94 million U.S. jobs lost to China since China’s economic reforms started 30 years ago. 1.05 million of them—over half—were lost since China acceded to the WTO in 2001….Today, of course, we see the result of that sort of thinking. With the global economic crisis, American workers have ended up without jobs and without pension funds.” “At the behest of the U.S. based multinationals, Washington has championed the causes of corporate interests masquerading as free trade.”

This viewpoint is the crux of what globalization has done to the American worker. It sounds like we are being distracted, and redirected from the real cause of our trade deficit by our Congress and President Obama. Mr. Whitney pointed it out to us, which is that U.S. corporations walked away from the American worker in order to find the cheapest labor force with a stable government; and that was China. Outsourcing was the result, yet we were conned into believing that outsourcing would be good for us. We would have more leisure time as we invested our savings with the “financial experts”, and in return, we would have more dividend and capital gain income. WOW! Wasn’t that a crock of nothin’stuff!

What appears to be a solution to the trade deficit might not be to force China into revaluing their currency, but to tell American corporations that if they continue to produce outside the country and import goods that were once made in America back to us we should tariff those products and tax those corporations. That could be the framework for a rebalancing effort.

Professor Pettis wrote, “Although Premier Wen noted again in his speech…that China is “worried” about the value of its US dollar reserves, perhaps as a warning that China would counteract any US trade move by selling off USG bonds, [Paul] Krugman doesn’t seem especially worried about this threat.” “[Krugman] said that if China were to sell all of its US investments, it would help the economy by acting as a form of quantative easing and fighting a “liquidity trap” that has recently been affecting the US economy.” “China was the top foreign investor [of] US government debt, with holdings of $898.4 billion in Treasury securities.”

Professor Pettis added that the main long-term impact of dumping USG bonds might be no more than to cause a liquidation of Chinese assets at very low prices, and an equivalent transfer of wealth from China to the US (or to others likely at some point to buy cheap dollar assets).

“An RMB rebalancing would impact with a decline in exports and shrinkage in their manufacturing. Foreign currency investors and those investing and stockpiling of commodities and other goods would also be negatively affected. The winners would be households. There would be an increase in personal wealth, growth in future assets and incomes, as well as an increase in consumer spending on imports boosting GDP.”

Professor Pettis begins to summarize, “Remember that each domestic imbalance requires the other, so that if China adjusts, the US must adjust, too, and if the US adjusts, China must adjust, too….Either way, the rebalancing in China will force an equivalent rebalancing in the US. As the price of Chinese goods rise, the net impact will be to transfer resources from US consumers, who have to pay more for their imports, to US producers (US producers become more globally competitive.) This rise in Chinese consumption relative to Chinese production would be necessarily matched by a rise in US production relative to US consumption.” (Investment is a factor in economic growth, as well.)

“Remember that trade surplus exists because of the imbalance between Chinese domestic production and Chinese domestic consumption (technically the surplus is the difference between savings and investment), and so anything that affects the subsidies to manufacturers, or that affects household income, will also affect the trade surplus.”

“Rebalancing just means that in China economic growth will be less than consumption growth, and in the US consumption growth will be less than economic growth….If the RMB revalues, this is the same as if all the currencies of the rest of the world depreciate….This is why policy coordination and gradualism is so important…China will rebalance, but it cannot do so quickly….Chinese producers have become so addicted to a wide variety of implicit subsidies, besides the currency, that they cannot possibly adjust very quickly. It will take years [8-10] of continuous adjustment to wean them away from an undervalued currency, too-low interest rates, excessive credit aimed at SOEs (State Owned Enterprises), and sluggish wage growth.”

So, do we have the time? Do the other trade deficit nations have time? Do other countries that want to revalue their own currencies have the time? Do 130 members of Congress and this administration have the time? Or, is a trade war on the horizon?

Thanks for reading, jerry
For Professor Pettis’ piece click here.

15 comments:

SPECTRE of Deflation said...

Jerry, I'm you and Karl on this one. Fuck the China Machine already. They knew/know exactly what they were/are doing all the way through this mess. They knew the GSE paper was pure shit. In order for them to industrialize and destroy our productive economy, they needed a very cheap currency, and a way to keep the party going over here as long as possible by reinvesting their surplus trade balance into GSE and Treasury paper. Now they claim that evil America hoodwinked them which is pure bullshit.

On healthcare, here's my take from anon source:


"Let me get this straight. We're going to be gifted with a health care plan written by a committee whose chairman says he doesn't understand it, passed by a Congress that hasn't read it but exempts themselves from it, to be signed by a president who also hasn't read it and who smokes, with funding administered by a treasury chief who didn't pay his taxes, to be overseen by a surgeon general who is obese, and financed by a country that's broke. What the hell could possibly go wrong?" -origin unknown

SPECTRE of Deflation said...

Here's a democrat rep. saying he doesn't care about the Constitution regarding healthcare. From the mouth of thieves and traitors:

http://dailyradar.com/beltwayblips/video/phil-hare-doesn/

Short Short Stories said...

Hi Spectre, you are right, at least those in the TeaParty movement are getting off their butts and saying something. I object to the lies, the ignorance and rest of it that is not based in fact. I support active protest, but make some sense so you become legitimate and not brushed aside by the higher-ups.

Regarding Phil Hare, I don't think you and I will have common ground on this one. What i see as a Constitutional issue is the right to have health care. I see as a Constitutional right. The videographers probably did not read the bill and were badgering the guy who said some things that were just blurted out. I have done that, too.

I thought the guys behind the camera showed themselves to be stupid, and arrogant. People have the right to health care, and not have to go bankrupt treating themselves or family members. Remember, over the last 30 plus years, the rich have stolen jobs and sent them away. Working people are destitute, and unable to find work that can buy food, shelter, clothing, fuel, and health care to boot. The rich can afford health care, since we subsidized their incomes so they can afford it.

Our current system with these death panel driven insurance companies have created this dilemma and since they have not regulated themselves, we the people must do it.

I am all in favor of a single payer system.

I know your position, and we will just not see it the same way, my friend.

enjoy the day, jerry

SPECTRE of Deflation said...

Straight from his old lady's mouth Jerry. I know an excuse will be made, but anyone who loves truth more than a Party/ideology will not call this fraud President, and this fact comes from the mouth of his own wife and not me. The court can sort this out rather quickly if truth is the goal.

Michelle Obama: Barack's Home Country Is Kenya.mp4


http://www.youtube.com/watch?v=HLDHDfPNBME&feature=related

SPECTRE of Deflation said...

Jerry, Hare is nothing more than a traitor. Anyone who says a single issue is more important than the Constitution is a traitor. You get 535 pet issues, and we have us a formally democratic govt. acting like Germany pre WWII with Hitler as dictator. You see, we have thousands of years of experience with this Jerry. This ain't new, so some history may be in order before you comment on it.

You think the Jews living in a democratic Germany at the time Hitler came to power ever thought their poor sorry asses would find themselves in cattle cars headed for their deaths? Be very fucking careful what you wish for my friend. In fact Hitler gave the Germans Universal Healthcare. How did that work out for it's citizens?

I will wrap myself in the Constitution while I will let you count on Hare for his good wishes. Those wishes can change over time, but the Constitution never changes.

I will take the freedom the Constitution gives me to either succeed or fail as that is up to me. Nowhere does it say that I have to provide for your every need or want. Freedom allows you and I to fail, while tyrany promises you everything until they have complete control of your every act.

SPECTRE of Deflation said...

Hey Jer, you sure you don't want to put the Constitution before an individual ideas? Look at this video and tell me you want to depend on the good wishes of the stupid fuckers that don't care about a Constitution?

Collateral Murder

http://www.collateralmurder.com/

jerry, of eye on washington said...

Of course my friend the Constitution is first and foremost to all Americans, not just to you or me.

We are not in Hitler's fascist Germany, yet, as far as I can see. We are in what has been, since Post FDR, a for-profit-war stimulus enterprise. As I have always said, these corporations cannot make a profit in the private sector without feeding from the Govt. trough.

Secret operations, spying, subversion of the Constitution has been part of this nation's past, unfortunately. Our leaders for generations have been engaged in for-profit stimulus packages for themselves.

Of course, we the people need to monitor and track our government's dirty secrets, and open dirty secrets, such as mass killing in a for profit Middle Eastern war.

Obama is in it. He continues the charade by appeasing the military brass and neo-con New American Century neo-fascist wannabees.

I would say NOT TO FEAR! The people are agitated. One thing about the TeaParty groups, they are ready for protests. They are ready to mobilize. The rest of us will join them when the mass rallies begin against the stupidity of government, greedy incentives and dangerous warmongers.

Hey, many of us know that hard times are ahead in spite what is being said. It may take a few years, but unless jobs come back, trouble is ahead.

The Jews are not a people who will allow themselves to get "railroaded" again!!! They don't forget!!!

Regarding Obama's "homeland", I would say mine is the Ukraine. My people's birthplace is there. Several of my people are still there, but for the most part, have all fled to other places. Now, some of us are here.

thanks for your views. You have a keen eye. Your senses are raised. You are not alone. The American people may seem like sheep, but I am sure once angered enough, they will stand ready to march forward in protest to evil.

take care, jerry

jerry, of eye on washington said...

Of course my friend the Constitution is first and foremost to all Americans, not just to you or me.

We are not in Hitler's fascist Germany, yet, as far as I can see. We are in what has been, since Post FDR, a for-profit-war stimulus enterprise. As I have always said, these corporations cannot make a profit in the private sector without feeding from the Govt. trough.

Secret operations, spying, subversion of the Constitution has been part of this nation's past, unfortunately. Our leaders for generations have been engaged in for-profit stimulus packages for themselves.

Of course, we the people need to monitor and track our government's dirty secrets, and open dirty secrets, such as mass killing in a for profit Middle Eastern war.

Obama is in it. He continues the charade by appeasing the military brass and neo-con New American Century neo-fascist wannabees.

I would say NOT TO FEAR! The people are agitated. One thing about the TeaParty groups, they are ready for protests. They are ready to mobilize. The rest of us will join them when the mass rallies begin against the stupidity of government, greedy incentives and dangerous warmongers.

Hey, many of us know that hard times are ahead in spite what is being said. It may take a few years, but unless jobs come back, trouble is ahead.

The Jews are not a people who will allow themselves to get "railroaded" again!!! They don't forget!!!

Regarding Obama's "homeland", I would say mine is the Ukraine. My people's birthplace is there. Several of my people are still there, but for the most part, have all fled to other places. Now, some of us are here.

thanks for your views. You have a keen eye. Your senses are raised. You are not alone. The American people may seem like sheep, but I am sure once angered enough, they will stand ready to march forward in protest to evil.

take care, jerry

Anonymous said...

Well looky here! The demographics are the money shot. For newbies, it has both the crime syndicates shitting gold bricks, we need them for Fort Knox after all, and rightfully so, as Americans are waking up to the fact that DC and Wall Street are one. Now there are plenting including Jerry who will argue that individuals within the Democratic Party are in fact fraudsters, but they are unwilling to make the final step into reality where they would realize that both Partys are one in the same.

They are arguing over who gets your wealth America. Look at healthcare companies since this was passed. Wall St. should tell all but the most dense what was really happening. Outright theft of what is left of your private wealth. You know, the nest egg that you worked your entire life for? Ya, that one. Next up will be stealing your private pensions so that govt. employees can continue to be payed in order to police your every move.

Capital Controls were snuck into a Jobs Bill recently. This is put in place by Banana Republics when rational people realize that everything they have worked for is about to be stolen by these crooked bastards and bitches in DC. Vote them all out in November folks while we still have something to save.

More Than a Quarter of Americans Are Supporters of Tea Party Movement, According to Gallup
Monday, April 05, 2010
By Staff

(CNSNews.com) - More than a quarter of Americans describe themselves as supporters of the Tea Party movement, and the demographics of this group generally mirror the demographics of the national population, according to a USA Today/Gallup Poll.

From March 26-28, Gallup asked 1,033 adults this question: “Do you consider yourself to be--[a supporter of the Tea Party movement, an opponent of the Tea Party movement] or neither?

Twenty-eight percent said they considered themselves to be a supporter of the Tea Party movement. A smaller percentage, 26%, said they were opponents of the Tea Party movement. Thirty-eight percent said they were neither, and 8 percent had no opinion.

“In several other respects, however--their age, educational background, employment status, and race--Tea Partiers are quite representative of the public at large,” Gallup’s Lydia Saad wrote in an analysis of the poll.

According to Gallup, 75 percent of the U.S. population is non-Hispanic White, while 11 percent are non-Hispanic black, and 15 percent belong to other races. Meanwhile, 79% of Tea Party movement supporters are non-Hispanic white, while 6 percent are non-Hispanic black, and 15 percent belong to other races.

The poll discovered that one unifying factor for the Tea Party movement is opposition to the new national health care law recently signed by President Barack Obama. Asked whether they considered the bill a “good thing” or a “bad thing,” 87 percent of Tea Party movement supporters said it was a bad thing, and only 12 percent said it was a good thing.

Among the general population, according to Gallup, 50 percent said the health care bill was a “bad thing” and 47 percent said it was a “good thing.”

jerry, of eye on washington said...

It is very disappointing that the TeaPartiers have gotten stuck on the health care bill, since 30% of Americans receive some sort of government supported health care. More will be relying on it in the future, especially children to the age of 26.

Here is what Warren Buffet said,

"On March 1, 2010, billionaire Warren Buffett (who is considered one of the world’s most savvy investors[53]) said that the high costs paid by U.S. companies for their employees’ health care put them at a competitive disadvantage. He compared the roughly 17% of GDP spent by the U.S. on health care with the 9% of GDP spent by much of the rest of the world, noted that the U.S. has fewer doctors and nurses per person, and said, “[t]hat kind of a cost, compared with the rest of the world, is like a tapeworm eating at our economic body."

The biggest disaster that the TeaPartiers are sidestepping is the economic theft allowed by this government and its lackies. The Corporatebaggers in Congress and the White House and the Fed, which appears to be under the eye of Congress for violating the law when buying garbage from Bear Stearns. This is the biggest concern for the country, along with fraudulent wars and war profiteering.

thanks, jerry

Anonymous said...

Ron Paul to Obama: Don't Assassinate American Citizens!

http://www.youtube.com/watch?v=6_7W0U_BuVU&feature=player_embedded

Anonymous said...

Jerry, I read an article yesterday that Democrats are joining the Tea Party Movement in droves. You are behind the times my friend, still fighting the last war. People are realizing neither of these flea bag crime syndicates represent their best interests. Democracy in action. In November, kick these lying, stealing pieces of shit out of office. Show these stupid fucks who really runs things per the Constitution.

Anonymous said...

Jerry, it's not disappointing at all that Tea Partiers are against Obama healthcare. This is about control of the people. It's not about saving money, we won't, it's not about covering everyone, it won't, and it's not about saving citizens on their personal expenses, it won't. Wall St. won Jerry! Look at the healthcare stocks since the debacle was passed. I always say follow the money. In this case you don't even have to follow because it's so obvious. What's really amazing to me is that if we were discussing any other industry you would agree with me, but because it deals with an important issue for you, you are willing to willfully ignore this fact. Truth, stripped bare is all that matters. Fuck the Republicans and Democrats already. Kick them out of office, and let's put some adults in charge while there is something left to save.

jerry, of eye on washington said...

As was seen during the anti-war movements, there were many, many other individuals, and groups attending the Washington protests wanting to demonstrate for their own reasons. I am not surprised that there are Democrats and Independents joining in on the TeaParty protests.

One thing is for sure, once many of our future unemployed realize that they are without health care, their spouses are without health care and their kids are requiring SCHIPS care, their adult kids are without jobs living at home, and they are hoping that there will still be unemployment compensation during at time that they may be without work for a year or more, will they be protesting against their own self interests? Will they have to go without unemployment benefits? Will they have to go without? Will they lose everything? Will their lives fall apart? Will suicides and family genocide be the report in the evening news?

It is true, that the anger over the outrageous and corrupt theft of our financial system, as well as Bernanke's corrupt actions to meet the greedy needs of his corruptors-in-arms (his illegal purchases of Bear Stearn's private toxic mortgage bonds via Maiden Lane II, III- a strict violation of the law) needs to be the protest order of the day, the year, the month.

I still have to go back to who and what has funded these TeaParty events. Dick Armey and his Corporatebagging lobby group and similar corporate whores who have raped the country of its wealth. They are funding the protests against health care reform to distract them from the real issue, which is the Corporatebagger theft upon the wealth of average Americans.

I do agree that most of those in Congress need to be removed and replaced, but not with more Corporatebagger supporters. 2 and 6 years is too long to have fresh whores elected.

I don't feel I am behind the times. I know I see what is going on very clearly. I feel fairly sure about what is in store for the country over the next several years, and what many Americans will be experiencing. I tend to feel there are many who have let their emotions get in the way of clarity.

jerry

SPECTRE of Deflation said...

In 1 year Obama has doubled the kill rate by drone, as well as sending tens of thousands of troops to Poppy-stan. The comical part is the dumb fuck gets a Nobel Prize for peace. The left should feel so proud. END SARCASM!