naked capitalism

Anonymous says:

Obama is saying his plan will ‘create’ or ’save’ 3 million jobs. Just watch the emphasis move to ’save’ over time – and how do you prove or count saved jobs?! You can’t. That’s his out…

ruetheday says:

ndk – I posted the following comment on your blog as well:

“But every USD is still worth 6.83 CNY, and there was no inflation in China.”

This is where your analysis goes wrong. If the US were to effectively double the dollar money supply, China would have to double the Yuan supply in order to maintain the 6.83:1 peg. Doubling the Yuan money supply would obviously cause domestic inflation in China. China is unable to maintain the numeric peg in the face of dollar creation without also engaging in Yuan creation. You included one too many constraints in your analysis.

ndk says:

This is where your analysis goes wrong. If the US were to effectively double the dollar money supply, China would have to double the Yuan supply in order to maintain the 6.83:1 peg. Doubling the Yuan money supply would obviously cause domestic inflation in China. China is unable to maintain the numeric peg in the face of dollar creation without also engaging in Yuan creation. You included one too many constraints in your analysis.

That’s not necessarily true in several ways, ruetheday:

1) The connection between money supply and inflation is very tenuous at best in our current world. China’s money supply was growing far more rapidly than their inflation rate, as was that in the US and Europe.
2) Not all the money the US creates would end up in, or even affect the holdings of, China. Maintaining the peg just depends on covering for the trade surplus, and to some extent the current account surplus. China’s capital account is supposed to be quite closed. Hot money found a way around that anyway, but it’s coming back big time now.
3) Sterilization. There are a lot of ways that a government can lock down new money so that it isn’t inflationary. China sold sterilization bonds, which took yuan out of circulation for extended periods of time. They also sterilized other intervention by raising the required reserves ratio (RRR), which would strengthen the banking system and decrease money creation, at least if it were enforced well.

Thanks a lot to everyone for taking a read and posting some comments. It’s not really a blog so much as a place I can put my longer thoughts for posterity without bothering others too much.

Anonymous says:

Reform plan raises fears of Bank secrecy
The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy.
http://www.telegraph.co.uk/finan…nk- secrecy.html

“Quite why the Bank has to keep its operations so shrouded in secrecy is a mystery to me,” said Simon Ward, economist at New Star. “This [reform] will make it much more difficult to track what the Bank is doing.”
Among the details which will no longer be published are those revealing the extent to which London’s banks are using the Bank’s deposit facilities – a yardstick of pressure in the financial system.
Debating the issue in the House of Lords recently, Lord James of Blackheath, a Conservative peer, said: “Remove [this] control and there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses.

ndk says:

Don’t miss Buiter’s latest.

Thanks, anonymous. He totally scooped me. Belh. I’ve written a few thoughts on it anyway.

Anonymous says:

In regards to Bush, i didn’t know modern hegemonic cryptofascists had any principles other than to rule.

Skippy

bab says:

Anon, Anyone who invokes Ahmadinejad as a threat has just revealed his utter cluelessness about the Middle East. Ahmadinejad is a figurehead with no power.

Oh, and as for his oft quoted remark that he wanted to wipe Israel off the map? It’s a mistranslation. From the Guardian:

“So there we have it. Starting with Juan Cole, and going via the New York Times’ experts through MEMRI to the BBC’s monitors, the consensus is that Ahmadinejad did not talk about any maps. He was, as I insisted in my original piece, offering a vague wish for the future.

“A very last point. The fact that he compared his desired option – the elimination of “the regime occupying Jerusalem” – with the fall of the Shah’s regime in Iran makes it crystal clear that he is talking about regime change, not the end of Israel. As a schoolboy opponent of the Shah in the 1970’s he surely did not favour Iran’s removal from the page of time. He just wanted the Shah out.”

http://www.guardian.co.uk/commentisfree/2006/jun/14/post155

Anon, you undermine your case by trying to stuff distortions down other people’s throats and brand everyone who questions Israel’s neocon tactics as anti-Israel.

Israel has clearly lost sight of what is at stake here and is handing a huge strategic win to its opponents with these repeated errors. It isn’t anti-Israel to point out the country is shooting itself in the foot.

In fact, these over-the-top, often ad hominem attacks are so desperate sounding that they create the impression that you don’t have a case to make absent name calling and histrionics. If you were factual and measured, you’d persuade a lot more people. The sort of salvo you tried is self-defeating. Oddly parallel to Israel’s program in Gaza.

Anonymous says:

One way regimes consolidate their hold on power during a crisis is to stir up patriotic feeling against an external enemy. During (what is propagandized as) the moral equivalent of wartime, populations are willing to make sacrifices and bear hardships that would provoke serious unrest in normal times.

If China’s leadership ever felt that there was no longer any good outcome possible in this crisis for their domestic economy, that a crash scenario was inevitable one way or the other, then they would probably engineer an outcome that allowed for blaming external forces, on their timetable and on their terms.

A sudden stop scenario, where China throws the US dollar under the bus, would fit the bill. China’s dollar reserves made worthless by default or inflation would then be blamed on American bad faith and deception.

If China ever felt that multi-year trillion dollar deficits and quantitative easing amounted to a slow-motion stealth attempt by the American side to achieve the same thing, and the US could not be persuaded to reconsider, then China just might preemptively pull the plug first. There is no reason why they would agree to become the proverbial boiled frog that relaxed its muscles as the water temperature imperceptibly kept increasing. Arguing that China has no choice but to keep buying US debt indefinitely is naive.

In this scenario, China might even unilaterally award itself compensation for its worthless dollar reserves in the form of confiscation of US intellectual property (trademarks, copyrights and patents), legitimizing its pirate industries in a stroke. The precedent for this would be the United States’ confiscation of German intellectual property during World War I. Creating global brands has been a high-priority but elusive policy goal; among other things, it would enable Chinese companies to capture the full profit margin of consumer sales rather than the pennies that are typically the lot of OEMs. Suddenly higher profits would go a long way to reemploying a restive and disgruntled floating workforce. The rest of the world would probably shrug their shoulders and go along with it, knowing that they were buying the same products made by the same Chinese factories as before, with only ownership of the brand being changed. As music and software piracy have shown, consumers are supremely indifferent or even outright hostile to intellectual property owners who try to enforce their rights in ways that inconvenience them.

Faith in a mutually-assured destruction stalemate is perhaps misplaced if one side can contrive to shape the destruction asymmetrically instead and feels that doing so is hardly any worse than any other possible outcome.

mj says:

Bab-

The other side-

“Iranian journalist Kasra Naji translated this sentence from the original Farsi as follows: “It is the mission of the Islamic Republic of Iran to erase Israel from the map of the region.”

former Iranian President Rafsanjani made the statement: “If one day, a very important day of course, the Islamic world will also be equipped with the weapons available to Israel now, the imperialist strategy will reach an impasse, because the employment of even one atomic bomb inside Israel will wipe it off the face of the earth, “

“On April 14, 2006, Ahmadinejad insisted that Israel was “heading towards annihilation”

“Iranian journalist Kasra Naji translated this sentence from the original Farsi as follows: “It is the mission of the Islamic Republic of Iran to erase Israel from the map of the region.”

“Michael Axworthy served as the Head of the Iran Section of Britain’s Foreign and Commonwealth Office in 1998-2000 and then subsequently as a lecturer at the Institute of Arab and Islamic Studies at the University of Exeter- Some of the dispute that has arisen over what exactly Ahmadinejad meant by it has been rather bogus. When the slogan appeared draped over missiles in military parades, that meaning was pretty clear”

Seems fairly clear that some reasonable people are interpreting the comments a bit differently. And frankly, to assume what you say is true, is to assume that Iran lacks the capacity to understand what the alleged interpretation actually implies vis a vis their intent. The use of propaganda is well defined in Iranian history and I assert that this regime is way too media savvy to simply let a “lost in translation” excuse cover up original intent. Questioning Israel is absolutely just, but let’s be VERY clear about how much credibility we’re willing to assign an Iranian regime (the mullahs or as you assert, the real power) that commissioned an assassination attempt on the pope, that has repeatedly lied about its willingness and ability to develop processed uranium, as well its purpose, and a history of virulent terrorist support. Sorry- now we can get back to economics..