India refuses to side with US on trade imbalances

[CardSharp]

The devaluation of the American dollar does not just affect Chinese exports to the US. China has more than 2 trillion in dollar reserves which she has bought to keep the dollar artificially up....it is like the value of your house sinking after you paid all the money.

The Yuan is linked to the dollar...so when the dollar will sink either China has to raise the Yuan which will make her exports more expensive all over the world not just to the US or try to lower the Yuan..which is where the currency war will start.

The other way around. You've got it flip-flopped.

 

[Hussein]

The other way around. You've got it flip-flopped.

exact.

the best is to put as much money in another countries too.
so China would not be dependant on US games.

 

[Ras]

The other way around. You've got it flip-flopped.

Nope I have it the right way...if China will not allow the Yuan to rise to her right value then US will push the dollar down artificially to close the gap.

 

[Ras]

Money is not true wealth, resources are. If you send troops to war you need to purchase fuel and logistics. Troops need to eat, sleep, have recreation besides the usual fighting. All this requires production and resources. The military equipment requires materials, metals, and other resources which may be imported. And here's the ultimate recipe for fiscal disaster:

1. Start prolonged wars
2. Boost money supply by printing money and hand that money to military industrial complex.
3. Military industrial complex recruits more people, pays higher salaries
4. Enriched people need to find a way to spend money all this extra money
5. Guess what goods these people will buy?
6. Oops we now have a huge trade deficit
7. Cry about currency valuations, cheap labor, unfairness of the world blah blah

Hope you get the point.

Actually Frum lays it out simply,

1) China sells us more than it buys.

2) Therefore China accumulates dollars.

3) Therefore China spends the dollars.

4) Therefore the dollar declines relative to Chinese currency.

5) Therefore Chinese goods become more expensive.

6) Therefore Americans buy less from China and sell more.

7) Therefore the trade surplus ends. It's all beautifully self-regulating.

The trouble with the theory is that in China's case, step 3) does not happen.

The recession was made in China - CNN

 

[gregarious]

US cannot undervalue USD to just match the trade deficit with China, it would lose the advantage which it enjoys currently with other countries. Also, USD is meant to be a stable currency as many commodities, such as Petroleum, Gold etc, are traded in USD as underlying currency. In addition, countries maintain their foreing reserves in USD and not any other currency.

Just to narrow the trade gap with China, US would not compromise on her currency value.

The currency war will go on till the time China wants to keep it on.

 

[CardSharp]

Actually Frum lays it out simply,



The recession was made in China - CNN

Political pundit not economist. Used to write for Bush.

 

[SandsofTime]

Actually Frum lays it out simply,

There is no obligation on China to spend the dollars it accumulates. Controlling spending is the sovereign right of China. On the other hand if US thinks its importing too much then it has the option of raising import taxes. Trouble is US never adopted correct policies to control the rampant spending and consumerism. All the recent growth in US has been fueled by speculation and consumption. Now the bubble is deflating and time has come for payback.

US cannot undervalue USD to just match the trade deficit with China, it would lose the advantage which it enjoys currently with other countries. Also, USD is meant to be a stable currency as many commodities, such as Petroleum, Gold etc, are traded in USD as underlying currency. In addition, countries maintain their foreing reserves in USD and not any other currency.

Quantitative easing is the sovereign right of US. It can do it if it wishes so. If the dollars held by other nations are devalued in the process then it should be their problem to manage it because they chose to trade with it in the first place. Secondly, it may be the only option left to US to get out of this muddle. The inflated currency will rationalize the purchasing power of US consumers, reduce imports, reduce wages and bring back jobs. In the end it will bring more balance to the world. Ultimately people will realize the age of the dollar as the reigning currency is coming to an end. The sooner people realize it the better prepared they will be for an alternate system with a world currency or basket of currencies.

 

[Nothing]

I don't think the USA is in the economic position to start a trade/currency war at the moment.

It's the USA that is at risk of a double-dip recession. We are not.

They are in trouble not because of Asia , because of their own mis-management of economy.
3 decades ago they forced entire world to accept American products and their multinationals were looting entire world.

Now when we got mature enough to compete them by our hard work and intelligence they are trying to stop us.

It is American government's choice to make economy consumer driven. But they forgot to make companies capable enough to provide that much products at competitive rates.
Their entire system from health care to social security and labor laws are so much complex and messed up , many companies can't grow in this environment. They started moving out of USA for sack of survival.

for e.g.My employer is paying 5000$ yearly for my health insurance in USA and same employer was paying 3500 INR (77 $) in India for my entire family for almost same benefits. My employer can't afford more employees here because of this type of extra costs.

Their trade imbalances is their problem and they are increasing it by printing more and more $$$$$$.

 

[Chinese-Dragon]

They are in trouble not because of Asia , because of their own mis-management of economy.
3 decades ago they forced entire world to accept American products and their multinationals were looting entire world.

Now when we got mature enough to compete them by our hard work and intelligence they are trying to stop us.

It is American government's choice to make economy consumer driven. But they forgot to make companies capable enough to provide that much products at competitive rates.
Their entire system from health care to social security and labor laws are so much complex and messed up , many companies can't grow in this environment. They started moving out of USA for sack of survival.

Exactly right.

They can keep printing dollars if they want, it's not going to change the fundamental imbalances.

 

[PakSher]

They are in trouble not because of Asia , because of their own mis-management of economy.
3 decades ago they forced entire world to accept American products and their multinationals were looting entire world.

Now when we got mature enough to compete them by our hard work and intelligence they are trying to stop us.

It is American government's choice to make economy consumer driven. But they forgot to make companies capable enough to provide that much products at competitive rates.
Their entire system from health care to social security and labor laws are so much complex and messed up , many companies can't grow in this environment. They started moving out of USA for sack of survival.

for e.g.My employer is paying 5000$ yearly for my health insurance in USA and same employer was paying 3500 INR (77 $) in India for my entire family for almost same benefits. My employer can't afford more employees here because of this type of extra costs.

Their trade imbalances is their problem and they are increasing it by printing more and more $$$$$$.

Though the balance of free trade always works in the favor of China and India, but they do not buy in return. Free trade also has to be balanced trade.

 

[Chinese-Dragon]

Though the balance of free trade always works in the favor of China and India, but they do not buy in return. Free trade also has to be balanced trade.

Is it our fault that we prefer to "save" instead of "spend"?

The problem they have is with their "credit card culture". The solution is easy, the average American needs to stop consuming five times as much as an average Chinese person.

Just tighten their belts, and stop splurging on Walmart products.

 

[Ras]

Political pundit not economist. Used to write for Bush.

Never said he was but he lays it out clearly...

 

[Ras]

Is it our fault that we prefer to "save" instead of "spend"?

The problem they have is with their "credit card culture". The solution is easy, the average American needs to stop consuming five times as much as an average Chinese person.

Just tighten their belts, and stop splurging on Walmart products.

Ya..and that will happen when the exports from China become more expensive due to the sinking dollar.

I accept that there are fundamental problems with the American economy which have nothing to do with China but the currency situation with China has gone on way too far.Trade should be both ways and balanced not in one nation's favor.

 

[Ras]

They are in trouble not because of Asia , because of their own mis-management of economy.
3 decades ago they forced entire world to accept American products and their multinationals were looting entire world.

Now when we got mature enough to compete them by our hard work and intelligence they are trying to stop us.

It is American government's choice to make economy consumer driven. But they forgot to make companies capable enough to provide that much products at competitive rates.
Their entire system from health care to social security and labor laws are so much complex and messed up , many companies can't grow in this environment. They started moving out of USA for sack of survival.

for e.g.My employer is paying 5000$ yearly for my health insurance in USA and same employer was paying 3500 INR (77 $) in India for my entire family for almost same benefits. My employer can't afford more employees here because of this type of extra costs.

Their trade imbalances is their problem and they are increasing it by printing more and more $$$$$$.

Yes health care is expensive because almost 99% of the drugs which save everyone in the world are researched and made in America. How many drugs has India invented?...ZERO. All you have done is copy the American researched and developed drugs illegally for 3 decades under the "generic" model.

 

[Nothing]

Is it our fault that we prefer to "save" instead of "spend"?

The problem they have is with their "credit card culture". The solution is easy, the average American needs to stop consuming five times as much as an average Chinese person.

Just tighten their belts, and stop splurging on Walmart products.

In support of your argument

CHINA: 38%
China has one of the highest savings rates in the world, partly because there is no national safety net ( I am impress buy china. Its good to invest money for future )

INDIA: 34.7%
India's savings rate has been building along with the acceleration of its GDP growth (Even in India we have huge problem of unaccounted money(Black money) people save lots of in form of gold, benami property and money as cash which is unaccounted. Many economist estimate Black money is size of 30% to 40% of GDP)

U.S.: 3.9%
U.S. savings are up from a 1.7% low but far below a postwar average of 7% or so ( they had -ve savings rates in some quarters)

JAPAN: 2.8%
The savings decline in Japan from 15% in 1992 is the most dramatic in the industrialized world (Government reduce interest rates to almost 0% and reduce taxes to encourage people to spend money )


Fact about US credit card culture

Average credit card debt per household with credit card debt: $15,788*

609.8 million credit cards held by U.S. consumers. (Source: "The Survey of Consumer Payment Choice," Federal Reserve Bank of Boston, January 2010)

Average number of credit cards held by cardholders: 3.5, as of year end 2008

Total U.S. revolving debt (98 percent of which is made up of credit card debt): $852.6 billion (Almost 70 to 80 % of current Indian GDP), as of March 2010 (Source: Federal Reserve's G.19 report on consumer credit, March 2010)

source
How Household Savings Stack Up in Asia, the West, and Latin America - BusinessWeek

Credit card statistics, industry facts, debt statistics