This thread is referring to an economic fight.......and the reason is news and data released during past month ...some of which i posted below
---Nobel laureate Paul Krugman is one furious economist. He doesn't seem to stand the sight of China continuing to keep its currency undervalued. "Impose a surcharge of 25% on Chinese imports," he has urged the US administration through a NY Times article. He further adds that the US has very little to fear from a Chinese retaliation. If China sells its US assets, the biggest loser is going to be China itself. For the step will weaken the dollar thus reducing the value of the remaining dollar holdings of China.
Furthermore, a weaker dollar will also make the US exports more competitive and will aid the economy in coming out of the recession faster. Thus, the prospect of a weaker dollar will actually turn out to be a boon in disguise for the US economy, feels Krugman.
---Also... last week when US President Obama called on China to move to a 'more market-oriented exchange rate', Chinese authorities have been quick to retaliate.
Chinese authorities have completely rebuffed the US's claims that its currency is undervalued, and have made it clear that they have no intentions to let its currency appreciate.
--- Economist Paul Krugman has estimated that global growth would be about 1.5% higher if China stopped restraining the value of the Yuan. With so much at stake, it will not be surprising to see US and Chinese relations deteriorate further in the days to come due to this one major bone of contention.
Not these quotes from Krugman again, these academics write headline grabbing articles to please the conventional media/political wisdom, if you listen to academics like Krugman or Rubini and invest according to their theories you'd be bankrupt several times and over now.
The RMB issue has been discussed to death on these investor forums here:
Why Should China Change? -- Seeking Alpha
Is a Trade War Brewing? -- Seeking Alpha
China has pegged its currency to USD for decades and so do many OPEC countries, it was never a problem before and in fact Bush back in 2001 said it is a good thing that China ties its currency to the USD.
The real problem is that the US runs an unreasonable fiscal policy and the US consumers got encouraged by senseless cheap credits spent more than they earned, (I still remember back in 2006 or 2007 the average US household spent more than it earned!), and now things are bad they need a scapegoat and China is the obvious choice.
The matter of fact is when the Yuan appreciated 20% from 2005 to 2008, the US trade deficit with China still increased over 30%, the bottom line is if a country (government or its consumers) gets carried away with spending it will run into deficits, one simple example -- the US still spends over $2.4 Billion a day (!!) on military, and it has to imposes high taxes on its corporations and working citizens to fund all its lavish spending, its education on the other hand are facing severe cut backs (including the University of California, arguably the best public university in the whole world), the answer to this as many American people have already pointed out -- they should get their own house in order and fast. The politicians of course naturally tend to do the opposite -- it's never their fault, it's always someone else making the mistakes.
Back to the Yuan issue, it will gradually appreciate and the chinese government has given its strongest hint this month, (in fact it will have to given how fast the US is printing its money), but how much and how fast it appreciates does not depend on the US politicians, the eventual goal of the Yuan would be fully convertible but if the US doesn't start to have a more sensible fiscal policy, that day may also be the day that the USD loses its world reserve currency status and replaced by some other kind of medium.
One sensible politician I think the US currently has is republican Ron Paul, he is said to be running for the next presidency and it'd be interesting to see how this will turn out. Many of his views are just spot on in my opinion: stop the bureaucrats in the Fed (who have NEVER made a living in the market themselves) from printing money like there's no tomorrow, bending the laws of a market by bailing out bad money (incompetent companies) with good money (prudent tax payers and profitable companies), cut the loss in Iraq and other overseas war fares for better self-preservation etc.
These videos are truly quite something to watch:
Before you jump out you should do somehome work, the 7% poverty is not given by chinese govt, the same as your 40% poverty rate. if use chinese criteria, china only have 40million poverty population.
, prrety good right?
