Hello Haim, << Jay all you write is right but I think you are missing the other side of the equation>>
I think I have not missed anything, and here is why, with more of what is right.
I think the inevitable is precisely that, inevitable. However the politicians wish to twist against the tension of the rope blowing in the wind, it will do no good, but only (a) prolong, and/or (2) make worse a situation.
<<Assuming a steep fall in USD will generate inflation in the US as commodity prices will rise as will other imports not originated in SE Asia and China>>
… Do not assume. Count on a steep fall in the USD, and depend on a rise in commodity prices.
<< … Direct result will be a deep recession in the US which in turn will also destroy the fragile EZ recovery>>
… this is inevitable.
<<Now if this is the outcome of a sharp USD devaluation who will be the swing buyer of China's output ?>>
… Chinese themselves, so as to keep its balance of trade in balance, and thus the global economy will shrink, inevitably and inexorably.
<<… what would China achieve by having less export to their captive market ?>>
… You seem to think China can stop an inevitable process and stand in the way of an inexorable force. Let me illuminate the path for correct thinking, ‘China is just another country swamped in the deluge of liquidity that J6P in the US brought on to himself’ is a clue.
<<..... less jobs exactly the reason that they oppose floating their currency>>
… Let me give you a hint. Given the nature and scale of China’s pent-up demand and social needs, the RMB will devalue in any free exchange rate regime. The US is talking ‘free float’ but meaning ‘re-peg at higher rate’.
<<… important to embark in huge infrastructure projects finance by their trade surplus. This is the only way I see some stabilization coming in the world economies.>>
… Firstly, you are under the mistaken impression that China is not already implementing <<infrastructure>> and carrying out <<fiscal stimulus>>. China is in fact running the largest budget deficit ever in its history, and constructing the largest series of infrastructure projects on the scale of USA 1920-1950s. In implementation and on the drawing boards, highways, bridges, dams, airports, industrial zones enough for the whole planet, ports, railways, and a canal connecting Shanghai to Bangkok, a bridge connecting Hong Kong to Macao, a strategic expressway connecting China to the India Ocean via Burma, turning back the desert at Beijing's wall, pipe-lining water from south to north, and, and, and … all financed by J6P and his deluge of liquidity as controlled by maestro Greensputin and chanted on by professor BurnAndKaput, now championed by the ignorant politicians who haven't a clue, and thus making things worse, as in not better.
Oh, yes, and then there is the space program for poor little third-world China;0)
Secondly, you are mistaken in thinking that China can do anything about reversing the decline of standard of living in the US or the EZ. The US and EZ managed to set off the process all by themselves through their socialist policies and communist tendencies and central planning via discount rate powered easy money.
China has a trade deficit, not surplus, with the world. Unlike Japan, China’s USD is building up very slowly because China imports more than it exports. Do you know what that means? It means Chinese RMB should fall, not rise, in any free market scheme.
China has a trade surplus with the US because the world’s factories (that means factories from all around the world, including the US of A) voted, in the most democratic process imaginable, thumbs up on China and thumbs down on California, yeah for capitalism and nay for socialism, yes for obedient enthusiastic labour, and no for lazy, indebted, complaining workers doped on social handouts. In a phrase, to summarize for you, ‘affirmative on Beijing and negative on Washington DC’.
Should the US feel it is such a blessedly endowed and well-run country, then compete. Who is stopping the US from doing so? And how are they stopping the US?
<<Removing the huge pile of liquid USD assets by spending it on infrastructure will calm the markets improve standard of living in China and increase domestic spending>>
… China has been trying, but the US is printing up the stuff faster than any country can remove the stuff, because, as professor BurnAndKaput had said explicitly, the marginal cost of printing is zero.
The US is printing fast because the US is scrambling on all its commitments it took on of its own free electoral will, franchised by birthright, however ignorant and uneducated, and thus undeserving (call me an elitist;0), and, to be polite, the US is failing at its duties as defined by itself.
<<China coastal towns are already in boom times China must trough fiscal stimulus energize the inland region by grants and tax incentives and setting a minimum wage law substantially higher (see Russia) than the present ongoing compensation including in the factories run in the various prisons.>>
… you are suggesting that China should revisit the good old days of communism, as a solution to the world’s problems engendered by J6P’s spending habits ?
<<China government … Manipulating FX level will not solve the main problem>>
… On this point, would someone tell me how China is manipulating the exchange rate of the USD?! If USD is piling up in the PBOC, and the US does not allow the sale of any worthwhile US capital equipment, including construction trucks, and does not allow the investing of Chinese USD in Long Beach port facility, should China perhaps simply burn the USD?
Aha, I think we have stumbled on to the truth … J6P does not want to repay his debt!? Well, in this case, and this is in fact the case, the USD will fall deeply, inevitably, and the world will inexorably sink into a debt depression, possibly triggered by the same protectionism that set off the 1929 event.
<<It is unacceptable that China should exploit their own people misery and underpayment to disc locate people livelihood around the Western world, or force upon the Western World a lower standard of living>>
… Oh, yes, I remember how the Chinese invaded themselves for 200 years by forming eight civilized countries, and messed up things even more by throwing out these same 8 countries, and surviving one of the longest running era of chaos, just so that it can export misery to the same civilized world.
Haim, you are way off on this point. While you are at it, why not blame the fall off Rome on China as well.
<<If China would not take the appropriate steps to lift the standard of living of their own population on their own expense, I would fully support a forceful action such as a declaration of war to destroy most of China recent achievement. It will cost a lot human sacrifice and human lives ? So be it! Some were politicians must get it or pay the consequence>>
… What ever has happened to you, and your democratic beliefs?
In any and all cases, I believe it is too late for that ‘Final Solution’.
You should be cognizant of the folly of such solutions, for they inevitably leads to downfall.
The peoples of the world are democratically casting their money ballot to support the inexorable rise of the standard of living in China because they no longer believe in socialism and the birthright of one SUV in every garage in the socialist centrally planned areas of the same world.
Besides, I happen to believe in the almighty, and that right ultimately, however arduously, still makes right, and that is why what should happen must happen, willy by the nilly, twisting in the wind, or otherwise.
What must happen is GoldUpDollarDown, possibly followed by global depression triggered by competitive devaluation and mutual protectionism.
I recommend, in the same sense that you recommended, knowing full well that nothing will change, that the US should carry out structural reforms, encourage education (especially of macro/micro economics, and exchange currency regimes), reintroduce family values and refresh on work ethic, reinvigorate democracy, be pro-enterprise, get rid of maestro Greensputin, export professor BurnAndKaput, and spend less time doing whatever it is doing, because it is all starting to go wrong, rapidly, and seemingly inexorably, meaning inevitably.
Chugs, Jay |
