How much will taxpayers shoulder?

[Zenda]

You're comparing ...

Don't blame me for using the numbers presented by Kandrathe, please.

Ofcourse, these figures have grown. According to Wiki, China has some $1905 billion in foreign reserves (september 2008), Japan $997, and Russia $485, for example. Not all of it is US currency, though. That amount is estimated to be 65-75% of the total, worldwide (Euros is some 25%).

It is worth noting that having reserves of foreign currency is needed to cover for imports (oil mostly, for many nations), and that having large amounts of it is costly. The money is subject to inflation and would have been better used for investments.

Also worth noting is that the USA is nowhere on the list. The USA doesn't need foreign reserves, because everyone needs dollars to buy oil. This is why most reserves are in dollars instead of exotic valuta. Not because there are American goods to import, but simply because dollars will be accepted anywhere. Ofcourse, this situation might change as more oil-producing nations start using euros and local currencies instead. I'm afraid that $700 billion won't cover the damages of that process :whistling:

So, when China spents the profits of its succes on buying dollars because they have little choice and also a lot of oil to buy, they are accused of unfair monetairy manipulations. Funny, how capitalism depends on promises of wealth and luxury, but starts to break down when too many people actually earn their reward :glare:

[Jester]

Don't blame me for using the numbers presented by Kandrathe, please.

They were correct in context, but you took them out of context. Kandrathe didn't mix 2000-2003 growth numbers with a 2008 bailout. You did.

-Jester

[Zenda]

Kandrathe didn't mix 2000-2003 growth numbers with a 2008 bailout.

Maybe you misread something? I didn't try to connect the 2000-2003 growth numbers to a 2008 bailout, but he did. I merely pointed out a flaw in his reasoning.

[Jester]

Maybe you misread something? I didn't try to connect the 2000-2003 growth numbers to a 2008 bailout, but he did. I merely pointed out a flaw in his reasoning.

Kandrathe posted a quote from a 2003 article about the topic. Perhaps he should have gotten a more recent article, but nothing he's said has indicated that he thinks this problem simply stopped in its tracks as of 2003. Quite the contrary. You, however, took those 2003 numbers, and plugged them straight into the 700 billion bailout from 2008 here:

Let me get this straight. Five years and more ago, they bought $193 billion worth of dollars, effectively increasing the value of a dollar, which had a negative influence. This caused a problem so big, that you need $700 billion to clean it up. Right?

Either you didn't understand that the value had grown by nearly tenfold over the last five years, or you chose a very strange and uncharitable way to express your criticism. Either way, my comments stand.

-Jester

[Zenda]

... a very strange and uncharitable way to express your criticism.

I see. My reply was not 'philosophical correct' enough for your taste. I guess we'll have to live with that. But maybe you can explain better then, why the Chinese cannot be held responsible for this? Or do you agree with Kandrathe perhaps?

Anyway, those who like the Economic Policy Institute so much should also take a look at this, much more recent article: The false fiscal dilemma.

"Scaremongering about 'trillion dollar deficits' is misleading and will misdirect policy."

No mention of growing foreign reserves in there, btw, Chinese or otherwise.

[kandrathe]

I see. My reply was not 'philosophical correct' enough for your taste. I guess we'll have to live with that. But maybe you can explain better then, why the Chinese cannot be held responsible for this? Or do you agree with Kandrathe perhaps?

Anyway, those who like the Economic Policy Institute so much should also take a look at this, much more recent article: The false fiscal dilemma.

"Scaremongering about 'trillion dollar deficits' is misleading and will misdirect policy."

No mention of growing foreign reserves in there, btw, Chinese or otherwise.

I think that EPI article was mostly focused on the US federal budget, borrowing, and deficit spending. There is no mention in there about trade at all. I agree with the premise of the article in principle, there is not much to worry about in terms of the USA being able to handle it's deficit spending as a function of GDP or GNP.

The part I object to is that $412 billion (roughly 8%) of the federal tax money is given every year to foreign international banking to pay for the interest on the debt. It's like the US has an unlimited credit card where the government never pays down the principle, and only pays the interest charges. Many people in the anti-war community argue that this unlimited credit mostly (50% to 80%) goes to finance military endeavors. If the US had a balanced budget and had to live within its means it might force the congress to be more cautious before embarking on military expeditions.

[Jester]

I see. My reply was not 'philosophical correct' enough for your taste. I guess we'll have to live with that. But maybe you can explain better then, why the Chinese cannot be held responsible for this? Or do you agree with Kandrathe perhaps?

Anyway, those who like the Economic Policy Institute so much should also take a look at this, much more recent article: The false fiscal dilemma.

"Scaremongering about 'trillion dollar deficits' is misleading and will misdirect policy."

No mention of growing foreign reserves in there, btw, Chinese or otherwise.

I have no strong opinion on the matter of Chinese holding US dollars. On one hand, it's protectionism, which is a dangerous long-run policy that can have detrimental effects for both the US and the Chinese consumer. On the other hand, it's not getting these dollars by some magical process. It buys them fair and square. Plus, almost every country protects its industries and manipulates it currency, so what the Chinese are doing is only noteworthy by degree.

However, if I've learned anything about international money markets vs. government monetary policy, it's that their interactions are non-obvious, extremely complicated, theoretically uncertain, and even hindsight is not 20/20. What I can say is that unless you've got a good coherent set of data, you're not even at square one.

-Jester

[Zenda]

However, if I've learned anything about international money markets vs. government monetary policy, it's that their interactions are non-obvious, extremely complicated, theoretically uncertain, and even hindsight is not 20/20. What I can say is that unless you've got a good coherent set of data, you're not even at square one.

I don't think that the people who make a living from money markets, in whatever capacity, are much smarter as for example you and me. It's all based on speculation, after all. While predicting outcomes may be impossible, it should'nt be too difficult to understand at least some of the processes involved.

Your explanation on the China issue sounds fair enough, but I think you should reconsider even the slight accusation on monetairy manipulations. My response to Kandrathe might help.

[Zenda]

There is no mention in there about trade at all.

You didn't mention trade before, either, but I'm glad you bring it up. Let's take a look at this EPI article from July 2008: China trade costs jobs in every state.

"Unbalanced U.S. trade with China since 2001 has had a devastating effect on U.S. workers. Between 2001 and 2007, 2.3 million jobs were lost or displaced, including 366,000 in 2007 alone. These jobs were displaced by the growth of the U.S. trade deficit with China, which increased from $84 billion in 2001 to $262 billion in 2007.

Growing China trade deficits between 2001 and 2007 eliminated jobs in all 50 states ..."

I see no reason to disagree with this article. It mentions trade deficits, and not foreign reserves as a cause of problems. But how come there is a trade deficit? The answer to that must be obvious: China exports a lot, to the USA and other nations, while the USA exports only warfare material which the Chinese don't need (they make plenty of it, themselves). And China isn't the only one.

The real problem is that the USA is no longer a producing nation. It can't produce enough to sustain it's own population, let alone to export much. And the things it could export are too expensive, due to high wages. I'm afraid a powerful automated industry is no match for a billion cheap hands, nowadays.

I don't think the Chinese are responsible for this mess, because they manipulated with currencies. I do think they play a bit unfair, because better circumstances for their population would make competing harder, in the big game of global economy. Then again, it's a free market, not?

[Jester]

Then again, it's a free market, not?

This is rather the point, isn't it? Chinese markets aren't free, not internally nor externally, which is what lets them do what they do with their currency. A free market would forbid capital controls. Either they would have to fix their currency and forego any ability to manipulate their economy with it, or float their currency and let the markets take it where they will.

The real problem is that the USA is no longer a producing nation.

Then nobody is. China just passed the US this year as the world's leading manufacturer, and they have over four times the population. Per capita, and in total, the US is still the largest economy in the world, twice the size of the Chinese economy.

-Jester

[kandrathe]

You didn't mention trade before, either, but I'm glad you bring it up. Let's take a look at this EPI article from July 2008: China trade costs jobs in every state.

"Unbalanced U.S. trade with China since 2001 has had a devastating effect on U.S. workers. Between 2001 and 2007, 2.3 million jobs were lost or displaced, including 366,000 in 2007 alone. These jobs were displaced by the growth of the U.S. trade deficit with China, which increased from $84 billion in 2001 to $262 billion in 2007.

Growing China trade deficits between 2001 and 2007 eliminated jobs in all 50 states ..."

I see no reason to disagree with this article. It mentions trade deficits, and not foreign reserves as a cause of problems. But how come there is a trade deficit? The answer to that must be obvious: China exports a lot, to the USA and other nations, while the USA exports only warfare material which the Chinese don't need (they make plenty of it, themselves). And China isn't the only one.

The real problem is that the USA is no longer a producing nation. It can't produce enough to sustain it's own population, let alone to export much. And the things it could export are too expensive, due to high wages. I'm afraid a powerful automated industry is no match for a billion cheap hands, nowadays.

I don't think the Chinese are responsible for this mess, because they manipulated with currencies. I do think they play a bit unfair, because better circumstances for their population would make competing harder, in the big game of global economy. Then again, it's a free market, not?

In addition to what Jester said, my only quibble with that article is that it fails to recognize the global trend of replacing manufacturing jobs with automation and productivity. China is also losing manufacturing jobs, although new sector growth more than offsets their loses. It is the opposite in the US, where the manufacturing workers are hit by global competition for wages, efficient production, and advances in automation.

[Zenda]

In response to Jester, post #30

"Chinese markets aren't free, not internally nor externally, which is what lets them do what they do with their currency."

You are free to *not* buy Chinese products. They didn't get this huge amount of US currency by dumping their Yuans on the global market, but because Americans choose to buy so much Chinese goods (without offering affordable USA-made goods in return).

Besides, protecting local markets with export subsidies and import taxes isn't a Chinese invention, but one of the (over)developed world.

"China just passed the US this year as the world's leading manufacturer ..."

Manufacturing things is one thing, being able to export goods that are in demand is another. We are talking about unbalanced trade deficits here, remember? But tell me, do you really see more 'Made in USA' as 'Made in China' goods, even in the USA itself?

In response to Kandrathe, post #31

"my only quibble with that article is that it fails to recognize the global trend of replacing manufacturing jobs with automation ..."

You mean as a reason for the mentioned loss of jobs? Possibly, but unless you want to blame China for your automated industry, that is another discussion.

[kandrathe]

In response to Jester, post #30

"Chinese markets aren't free, not internally nor externally, which is what lets them do what they do with their currency."

You are free to *not* buy Chinese products. They didn't get this huge amount of US currency by dumping their Yuans on the global market, but because Americans choose to buy so much Chinese goods (without offering affordable USA-made goods in return).

However, China is intentionally manipulating its currency to form a lopsided trade environment, thus creating a barrier to free trade. "You are free to not pay twice as much for the same product due to tariffs or currency value manipulations." doesn't quite ring fair now does it?

Besides, protecting local markets with export subsidies and import taxes isn't a Chinese invention, but one of the (over)developed world.

Subsidies and taxes are a part of fair trade negotiations. This assumes a level playing field in other areas, such as currency value which is the topic here.

"China just passed the US this year as the world's leading manufacturer ..."

Manufacturing things is one thing, being able to export goods that are in demand is another. We are talking about unbalanced trade deficits here, remember? But tell me, do you really see more 'Made in USA' as 'Made in China' goods, even in the USA itself?

In response to Kandrathe, post #31

"my only quibble with that article is that it fails to recognize the global trend of replacing manufacturing jobs with automation ..."

You mean as a reason for the mentioned loss of jobs? Possibly, but unless you want to blame China for your automated industry, that is another discussion.

No. The article you posted from EPI blames China for job losses, which is only true for a part of the job losses. It is true when their unfair competition drives industries into bankruptcy, but not when the US industry is still thriving and productive. Advances in technology have accelerated automation and production efficiency in all sectors of the US resulting in vast productivity gains which are not paralleled by vast increases in employment.

[Jester]

You are free to *not* buy Chinese products. They didn't get this huge amount of US currency by dumping their Yuans on the global market, but because Americans choose to buy so much Chinese goods (without offering affordable USA-made goods in return).

How many $CDN or £ they have is not going to affect their trade with the US. I don't have any American money, and I never have, except trivially.

Besides, protecting local markets with export subsidies and import taxes isn't a Chinese invention, but one of the (over)developed world.

As I said, the difference is one of degree. China's protection is more thoroughgoing, and more harmful to both the American producer and the Chinese consumer, than that of any other major power at present.

Manufacturing things is one thing, being able to export goods that are in demand is another. We are talking about unbalanced trade deficits here, remember? But tell me, do you really see more 'Made in USA' as 'Made in China' goods, even in the USA itself?

First, the quantity of "Made in China" is just an anecdote, and is not the relevant consideration. If China produced every knicknack on the planet, and the US produced all the steel, planes, cars and electronics, you'd see a lot more "Made in China", but it would mean exactly bupkiss.

Second, I'm not in the USA, and never have been except trivially, so I couldn't tell you. If I were to come up with an anecdote, it would probably be that all our cookies seem to come from Poland.

Third, the whole point of the argument Kandrathe is making is that the trade deficit with China is maintained by currency manipulation, so if the US has lost its post-WWII export surplus, that is in part because China refuses to play ball with the Yuan except on its own terms. That's protectionism through currency manipulation causing that effect, making Chinese products competitive in the US without the US being able to compete in China. A free currency would close that gap very quickly, but as has already been noted, China has no free currency, only the heavily controlled Yuan.

Last, the USA exports great reams of stuff, over a trillion dollars' worth last year. That's more than China, and almost as much as the EU collectively, and at a fraction of the population. The difference is that they import more than they export, which is not a measure of the weakness of the American economy, but rather the relative desire *and ability* of the American consumer to consume. The Chinese do not have such options, and I dare say that if their government would let them, they'd take them.

-Jester

[Zenda]

However, China is intentionally manipulating its currency to form a lopsided trade environment, thus creating a barrier to free trade.

Looks like you want to start this discussion at square one again, so I suppose you have some credible and recent material to support that accusation, this time? Just to keep me from abusing your outdated reference? :mellow:

Advances in technology have accelerated automation and production efficiency in all sectors of the US resulting in vast productivity gains ...

Which explains the current overwhelming success of your automobile industry, ofcourse :huh:

[kandrathe]

Looks like you want to start this discussion at square one again, so I suppose you have some credible and recent material to support that accusation, this time? Just to keep me from abusing your outdated reference?

Look it up yourself lazy bones. I already said nothing has changed in the last years, only the size of the impact on the US economy. The sucking sound remains. Prove me wrong.

Which explains the current overwhelming success of your automobile industry, ofcourse :huh:

Yeah, well check out the port of Long Beach. Import Autos Pile up at the Port of Long Beach

It doesn't look like Americans are buying cars foreign or domestic.

[Zenda]

First, the quantity of 'Made in China' is just an anecdote

Hardly. They also make much of the parts (electronic and otherwise) used in American and European products, you know.

Third, the whole point of the argument Kandrathe is making is that the trade deficit with China is maintained by currency manipulation, so if the US has lost its post-WWII export surplus, that is in part because China refuses to play ball with the Yuan except on its own terms.

That's a rather strong statement, but I'm sure you can show some proper references to it.

The difference is that they import more than they export

Which is all the difference that matters. Being able to produce much in absolute numbers while needing even more doesn't make things easier. It's the shortage that counts.

... which is not a measure of the weakness of the American economy, but rather the relative desire *and ability* of the American consumer to consume. The Chinese do not have such options, and I dare say that if their government would let them, they'd take them.

You should try selling that desire_and_ability_of_the_American_consumer_to_consume phrase to some Republican PR commitee in the USA:)

Do you really think it would be a good idea, to have all Chinese living like Americans and Europeans do right now? With their numbers, they are causing enough environmental damage as it is.

[Kevin]

Look it up yourself lazy bones. I already said nothing has changed in the last years, only the size of the impact on the US economy. The sucking sound remains. Prove me wrong.
Yeah, well check out the port of Long Beach. Import Autos Pile up at the Port of Long Beach

It doesn't look like Americans are buying cars foreign or domestic.

Yeah Toyota's net sales fell by 69% in the 3 months leading to Sept. http://news.bbc.co.uk/2/hi/uk_news/england...ire/7741282.stm I can't find the article the other day that was talking about the "big threes" decline in sales (Ford down 30%, GM down 41%, etc). It listed the equivalent figures for Honda, Toyota, and Volkswagon and while GM was worse of anyone else, most of the foreign manufacturers were listed in the 25-35% range as well for world wide sales. Again a lot of that is because the US is the largest market and we just aren't buying anything that big ticket. I'll keep looking to see if I can get that linked.

But to be fair, the US manufacturers made some bad strategic decisions as well.

[Zenda]

Look it up yourself lazy bones. I already said nothing has changed in the last years, only the size of the impact on the US economy. The sucking sound remains. Prove me wrong.

I was hoping to conclude this discussion without unpleasantries, but alas. It turns into a philosophical ACORN-like debate regarding the burden of proof anyway, so I won't have much to add.

Yeah, well check out the port of Long Beach.

Funny, I never realised the USA imported even cars in substantial numbers :whistling:

[Delc]

Funny, I never realised the USA imported even cars in substantial numbers :whistling:

We have better things to do than work in factories, so we get other people to do it for us.