…getting no credit for it.
President Barack Obama hailed a decision by the Chinese government over the weekend to allow its currency to fluctuate more freely with market forces.
Obama and Treasury Secretary Tim Geithner both welcomed an announcement by China’s central bank that it would allow greater exchange rate flexibility for the yuan, which is pegged against the value of the U.S. dollar.
“China’s decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy,” Obama said in a statement. “I look forward to discussing these and other issues at the G-20 Summit in Toronto next weekend.”
This will help our economy.
But what are the hard numbers behind the fluff? It could be a great thing, or it could be almost meaningless.
Look, China is cheating and exporting deflationary pressures here. They need to float their currency. If they refuse to do so, we ought to put up tariffs.
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March 17, 2010 – The Wall Street Journal, added the following:
“I can understand that some countries want to increase their share of exports,” Mr. Wen said, in an apparent reference to the Obama administration’s goal. “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,” he added. “This kind of practice I think is a kind of trade protectionism.”
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.
An article in the People’s Daily has Wen also warning that “China opposes accusations and even forceful measures that press for yuan appreciation, which will not benefit the exchange rate reform.”
China Financial Markets
"But I will not let myself be reduced to silence."And Yves Smith thinks it’s smoke and mirrors:
http://www.nakedcapitalism.com/2010/06/is-chinas-renminbi-announcement-mainly-optics.html
Yves has been insufferable ever since this crisis. I used to read her all of the time, but haven’t since his inauguration. She’s like Chris Hedges, only in dealing with finance.
I’m trying to think of some way the comparison with Hedges resonates. Drawing a total blank. How is she similar?
None of his criticism is placed in context, but I guess Hedges came to my mind because of a recent piece that I read of his regarding the religious right. It was riddled with extreme hyperbole and sometimes outright conspiracy.
And that’s how I’ve been reading Yves since late 2008, early 2009.
I think what really got my attention was this post of hers:
http://www.nakedcapitalism.com/2009/03/investor-on-private-public-partnership.html
She wrote that before the plan was even unveiled. Now, how one can claim they already have analysis that’s “damning on its face,” despite the fact that they haven’t even seen the plan yet, is beyond me.
That’s more or less how I’ve seen her posts for a while. Occasionally she has some nice articles, like this one:
http://www.nakedcapitalism.com/2010/01/volcker-does-not-get-it.html
But overall? It’s not worth venturing over there, and the only time that I do is if someone links to it on another blog.
My biggest criticism of Volcker is that he gets too tripped up on the matter of size. Most others seem to make the same mistake, but Volcker’s smarter than that, so I hold him to a higher standard.
It isn’t the size of the banks that counts. It’s the kinds of bets they’re allowed to make, the regulatory regime that restrains them, etc. You can have small banks and still suffer the same fate we suffered during the crash, except that it becomes even more complicated as you try to unwind transactions.
As for Naked Capitalism — meh. I think they’ve done a respectable job discussing the European crisis, although not as well as others. Mostly they seem interested in doom porn rather than — as the situation calls for — political economy.
Correct 😉
Also, I’m glad that someone else understands that limiting bank size is not only a stupid thing to push in that it’s fairly impossible with the current system that we have through the FDIC, but it’s also very trivial to our economic well-being.
Why? Because she used to work in the belly of the beast so she knows how much needs to be done to clean it up?
Wen is “absolutely right” in the sense that he’s pulling a Karl Rove projection stunt: Accuse others of currency manipulation when you’re the one doing it.
This was a huge stick people were hitting the President with: and yet China signed on to Iran sanctions and devaluation something Bush didn’t ever get.
Bet you won’t hear boo about this on the cable networks or the MSM.
That seems to be the theme of his Presidency. I know I’ve been way off base with my criticisms in the past but not now.
There are other things that they should get some credit for but don’t get mentioned enough. I think that Robert Gibbs should start every Press Briefing with about 5 minutes of these accomplishments:
Do Not Pay? Do Read This Post
In 2009, improper payments totaled nearly $110 billion, the highest amount to date.
…and this is what the plan is for controlling improper payments:
http://www.whitehouse.gov/omb/...
I suspect that 100+ Billion is a lot more than ‘pork’. Why haven’t the ‘pork busters’ fixed this before?
100+ Billion is for just ONE year! That would buy a lot of fruit for school lunches!
More great information about our government becoming more efficient & transparent:
http://www.whitehouse.gov/omb/...
And here is another one:
http://www.whitehouse.gov/omb/...
For the diehard geeks, you will surely find something of interest here:
http://www.whitehouse.gov/open
Check out all of the Administration’s Blogs:
http://www.whitehouse.gov/blog
The White House Blog
Middle Class Task Force Blog
Council of Economic Advisers
Council on Environmental Quality
Office of Management and Budget Blog
Office of Public Engagement Blog
Office of Science & Tech Policy Blog
Office of Urban Affairs Blog
Open Government Blog
Partnerships Blog
US Trade Representative Blog
I am hereby tooting the White House’s horn for them since they don’t do near enough bragging
They will get more value for their goods and the change is not drastic enough to resurrect American manufacrturing. There are now many structural barriers, i.e. those who know how to run and plan manufacturing facilities, such as me, are retiring and the younger generations have no experience or training. A modern manufacturing plant can’t emerge out of nothing. You need tools to make the tools to make tools. That expertise is now in Asia and Europe but dead in the USA. There is a lot of talk, for instance, about solar panels reviving American manufacturing, but China is the cheaper source and they have more technical expertise to boot. An American solar panel industry cannot survive without government subsidies, and even with subsidies cannot be a technological leader, not for another generation. The thirty years since Reagan have truly screwed the American economy. All we know is sales and finance.
This is a great political football in the US, but that’s about it. Foreign goods are wildly overpriced in China, but it has almost nothing to do with the exchange rate. Taxes and duties create a market that’s generally hostile to imports. Then you have a cultural attitude that anything deemed a luxury automatically should cost an arm and a leg. A few percentage points difference in the exchange rate won’t change anything.
I’m mostly reiterating points here but having lived in China off and on for the last few years, everything in it rings true to my experiences.
As for who deserves credit, I happened to get into a conversation on this topic a few months back with a Chinese economics professor and came away with the impression that there was a growing debate within China over the exchange rate. More and more people are beginning to feel that development needs to slow down a bit, and raising the value of the yuan is seen as one way of doing that. Raising the yuan is also a great political football for nationalists, who see its value relative to other currencies as an indicator of Chinese power in the world.
So:
We Americans really have to get over the myth of free trade. We seem to be the only ones who truly believe protectionism is a bad word, and it’s killing us.
Nice to know that China has its share of insecure people looking for penis substitutes as well. The idea that you’d use the value of your currency as a way of “keeping score” with other countries is fundamentally stupid, but I know plenty of people in the US who think that way too.
Where have you been?
China is just about the only country that can match the US stroke for stroke (heh) in the area of insecure people trying to overcompensate.
He gets no credit because it actually has nothing to do with him. American pressure was always an exceedingly minor aspect of this change. Yang Yao details the internal concerns that were likely far more influence in this move.
http://www.economist.com/economics/by-invitation/guest-contributions/yes_its_own_reasons