naked capitalism

AmericaninChina says:

I can only laugh when I read Western analysts’ assertions that China’s economy is “severely imbalanced” being mostly reliant on exports; that China has failed to move from the mercantalist model; that China’s economy will soon collapse from its huge real estate bubble, etc. etc. China now has a huge domestic economy that’s probably larger than that of the US. Because very few Westerners actually travel thru China and most believe that BS statistics that the Chinese government puts out, the prevailing view in the West is that China continues to be a “developing” economy which is still mostly reliant on exports, and as such will crash if the yuan is revalued. This is the view that has been carefully crafted by the Chinese government and has been used over and over again (successfully) to justify their currency peg, and to ensure the country’s predominance in global manufacturing. Ms. Pelosi states that “China needs to play by the rules..”. The only important “rule” for China is to become a dominant global economic power, and that they have achieved, greatly helped by the American patsies who during the past several decades have willingly transfered their vast wealth to China.

jim says:

To me China’s biggest weakness is it size of it’s population and the level of polution in the environment. It seems simply unsustainable.

I would encourage the rest of the world consider how much of the worlds resources China is allowed to have access to.

avg john says:

For me it’s all about “shared pain”.

Many economists claim that pursuing a fair and balanced trade policy is simply protectionism and will lead to higher priced goods resulting in a lower standard of living for Americans, and will not meaningfully create new jobs and opportunities for America. I don’t see it that way, but for argument sake I will allow that just pressuring China to revalue its currency or placing tariffs or imported goods and components is not a magic bullet that will restore our economic health.

Now admittedly, I am not an economist or Wall Street global financial analyst. I am just one of the great unwashed masses. I approach this just from what I consider common sense. And my common sense tells me, when I reflect on America’s economic future is, “here be the path to destruction, despair and poverty”.

Economists(some) tell me it is in America’s long term best interest to move to a global based “free trade” economy, but I must be patient because in the short term it means a little sacrifice, dislocation and pain, while our neighbors in emerging markets build the necessary physical infrastructure and sophisticated capital markets to support a healthy mature economy. Fine, I’m just a little person and I have to do the best I can under the circumstances.

BUT, when economist and Washington policy makers ask me to be patient WHILE wall street and multi-national coporations are making record profits, executives are making obscene bonuses, the streets of our capitals are flooded with corporate and foreign business lobbyists, poverty is rising, unemployment is in the double digits, and our nation is held hostage to foreign ownership, count me out. If sacrifice and pain is required, let’s ALL do a little sacrificing, thank you very much.

Let the policy makers concentrate their efforts on making sure Americans basic needs are met. People are well fed and housed, they have affordable and quality health care, they are safe from violence, they are free, and they have opportunity to be gainfully employed and for those that are willing, they have opportunity to achieve their dreams with enough hard work, diligence and perhaps a little luck.

I say we need new tough trade policy(the stick), coupled with intelligent targeted tax policy (the carrot), to restore the American economy. For me (and I believe many of the unwashed masses), I don’t give a fig whether higher prices on discretionary purchases of foreign goods means little johnny won’t have as many ipods, xboxes, or a new shiny car when he turns 16. If it means little mary doesn’t get that $50,000 party on her 16th birthday, well that’s tough. And the simpsons don’t need a television in every room, if it means double digit unemployment for their fellow Americans.

I am an independent voter, and this topic is one of my hot buttons. No politician that supports this continued path of economic destruction, greed, and madness need count on my vote come November. I don’t care what ivy league school they graduated from or how smart and sophisticated they appear to be. To me they are idiots.

Jim says:

I’d like to see a trade war break out between China and the US and see the arrogant, overbearing US taught a painful lesson. It might be a useful way to take the US down several pegs. It is pegged a present far above its proper place in the world pecking order. If it doesn’t pull in its horns, they will be chopped off sooner or later, and that will be very painful.

Economic Darwinism says:

I think your voice matters. I wish you and some of the other high-profile (for good reason) bloggers, such as Barry Ritholtz and Calculated Risk would put your heads together and try to find solutions that make sense. If you all endorsed a specific plan and tried to rally your readers behind that plan, something might actually happen. Or so one could dream. You all were phenomenal at seeing and reporting on what was happening, but we need ideas.

But the time line I had in mind far predates November 2008, i.e. the earliest article you refer to above. By that time, it was pretty much too late. You were all well aware of the slow motion train wreck back in 2006 and earlier. I know, because I was aware of it due in large part to reading your blogs. I remember feeling like a Cassandra. One of my last research pieces (in mid 2007) before resigning was a warning that the Bear Stearns hedge funds blowing up was the trigger for a crisis that would far surpass that of LTCM due to the sheer size of the credit/structured derivatives market which no one (especially the quants and risk managers) understood. All my credit models were showing extreme negative risk premiums across the entire fixed income spectrum. Grantham was talking about the first global asset bubble, etc. Things felt like a jack-in-the-box ready to pop. It just needed a trigger and the ABX/Bear Stearns was that trigger.

Now here I am sitting in Hong Kong. The mood here is quite different than Los Angeles (and probably NYC), believe me. I am sincerely impressed by the steps China is making to float their currency and for the US to try to accelerate the process, although not surprising, is completely counterproductive. They should focus on getting their own house in order starting with getting rid of Bernanke and Geithner. As long as they remain in control, the US policy makers have very little legitimacy.

Remember the Chinese students laughing at Geithner? Imagine what they would do if Bernanke showed up.

When China is ready to float its currency, it will float. In my opinion, this is likely to happen prior to 2015. But it will happen slowly and methodically.