Comments on: Paulson Hoist on His Own Petard (Yuan Version) http://www.nakedcapitalism.com/2007/08/paulson-hoist-on-his-own-petard-yuan.html Sun, 22 Nov 2009 15:18:28 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Yves Smith http://www.nakedcapitalism.com/2007/08/paulson-hoist-on-his-own-petard-yuan.html#comment-496 Yves Smith Thu, 23 Aug 2007 18:02:00 +0000 http://www.nakedcapitalism.com/2007/08/paulson-hoist-on-his-own-petard-yuan-version/#comment-496 Steve,<br/><br/>Apologies for not drafting the piece clearly enough to highlight that the issue was Treasury's self defeating response rather than the IMF saying the dollar was overvalued. The perils of posting after midnight.<br/><br/>Treasury clearly did not anticipate that the IMF might conclude that the dollar is overvalued generally. Why this would be a bad outcome, given our trade deficits, isn't clear to me, but this exercise was clearly about getting the yuan to appreciate, period. I haven't followed the currency debate in a granular fashion, but I don't recall Treasury ever objecting to the characerization of China as a currency manipulator (by implication, if you say a country has a cheap currency and they need to let it appreciate is more or less saying they are manipulating). Saying that the dollar is overvalued takes the air out of that argument.<br/><br/>Or wore this move was about appeasing Congress and Treasury panicked when the focus and the discussion when down another path.<br/><br/><br/>Brad,<br/><br/>I was remiss in not putting the link to the Bloomberg piece in. That's been corrected. <br/><br/>Reading the Bloomberg piece again, I missed the significance of the Aug 1 IMF report, Aug 2 congressional testimony sequence. The Aug 2 session had to have been set well in advance, so Treasury had just gotten the IMF report the day before. Clearly not enough time to do the normal scripting of answers to likely questions. Probably hard to duck if a Congressman is waiving a 54 page report at you. Steve,

Apologies for not drafting the piece clearly enough to highlight that the issue was Treasury’s self defeating response rather than the IMF saying the dollar was overvalued. The perils of posting after midnight.

Treasury clearly did not anticipate that the IMF might conclude that the dollar is overvalued generally. Why this would be a bad outcome, given our trade deficits, isn’t clear to me, but this exercise was clearly about getting the yuan to appreciate, period. I haven’t followed the currency debate in a granular fashion, but I don’t recall Treasury ever objecting to the characerization of China as a currency manipulator (by implication, if you say a country has a cheap currency and they need to let it appreciate is more or less saying they are manipulating). Saying that the dollar is overvalued takes the air out of that argument.

Or wore this move was about appeasing Congress and Treasury panicked when the focus and the discussion when down another path.

Brad,

I was remiss in not putting the link to the Bloomberg piece in. That’s been corrected.

Reading the Bloomberg piece again, I missed the significance of the Aug 1 IMF report, Aug 2 congressional testimony sequence. The Aug 2 session had to have been set well in advance, so Treasury had just gotten the IMF report the day before. Clearly not enough time to do the normal scripting of answers to likely questions. Probably hard to duck if a Congressman is waiving a 54 page report at you.

]]> By: Anonymous http://www.nakedcapitalism.com/2007/08/paulson-hoist-on-his-own-petard-yuan.html#comment-495 Anonymous Thu, 23 Aug 2007 15:11:00 +0000 http://www.nakedcapitalism.com/2007/08/paulson-hoist-on-his-own-petard-yuan-version/#comment-495 sobel was responding to congressional pressure to pin China as a manipulator, and the treasury's (legalistic) defense has hinged on a combination of "we cannot determine china's intent -- so we cannot determine if it has been intervening b/c it intends to maintain a competitive advantage" and "there is no consensus on whether china is undervalued, or by how much" ergo no manipulation and please don't impose 30% tariffs. <br/><br/>the comments by the unnamed senior treasury official in the imf report were incredibly stupid, and i am pretty sure that they didn't come from sobel (full disclosure, sobel was my boss in 2000-01). mussa is right -- if the US is going to argue that the $ isn't overvalued, it can hardly argue that other countries currencies are undervalued. <br/><br/>bsetser sobel was responding to congressional pressure to pin China as a manipulator, and the treasury’s (legalistic) defense has hinged on a combination of “we cannot determine china’s intent — so we cannot determine if it has been intervening b/c it intends to maintain a competitive advantage” and “there is no consensus on whether china is undervalued, or by how much” ergo no manipulation and please don’t impose 30% tariffs.

the comments by the unnamed senior treasury official in the imf report were incredibly stupid, and i am pretty sure that they didn’t come from sobel (full disclosure, sobel was my boss in 2000-01). mussa is right — if the US is going to argue that the $ isn’t overvalued, it can hardly argue that other countries currencies are undervalued.

bsetser

]]> By: Steve Waldman http://www.nakedcapitalism.com/2007/08/paulson-hoist-on-his-own-petard-yuan.html#comment-494 Steve Waldman Thu, 23 Aug 2007 14:50:00 +0000 http://www.nakedcapitalism.com/2007/08/paulson-hoist-on-his-own-petard-yuan-version/#comment-494 At first blush, this just seems dumb. After all, the statements "the yuan is undervalued against the dollar" and "the dollar is overvalued against the yuan" are entirely equivalent.<br/><br/>But the politics might be brilliant. After all, Treasury officials know they need to be careful about what they wish for. It is politically intolerable right now not to oppose the "undervalued Yuan". Treasury has to wage a battle they'd prefer not to win. So, they use a twist of phraseology to make throwing the fight a matter of national pride.<br/><br/>If I didn't think changing the <i>status quo</i> "global imbalance" was urgent, I'd tip my hat at the artistry. As it is, you've drawn from me yet another sigh. At first blush, this just seems dumb. After all, the statements “the yuan is undervalued against the dollar” and “the dollar is overvalued against the yuan” are entirely equivalent.

But the politics might be brilliant. After all, Treasury officials know they need to be careful about what they wish for. It is politically intolerable right now not to oppose the “undervalued Yuan”. Treasury has to wage a battle they’d prefer not to win. So, they use a twist of phraseology to make throwing the fight a matter of national pride.

If I didn’t think changing the status quo “global imbalance” was urgent, I’d tip my hat at the artistry. As it is, you’ve drawn from me yet another sigh.

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