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Re: China tells "The City" & Wall Street......
Jawboning.
China can't survive without demand for its exports. -
Re: China tells "The City" & Wall Street......
Chinese industrialists sell exports. China's central bank converts their dollars to Chinese currency. Those banks in turn buy treasuries to keep exports competitive. In today's global fiscal conditions it seems that China is 'bailing out' its producers, much like the feds are bailing out FIRE. Both general publics, and savers in particular, get screwed. The irony is the world's production/consumption state and the world's FIRE department have so much in common :eek:Comment
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Re: China tells "The City" & Wall Street......
I think this article was specifically about a refusal to plow money into banks. That doesn't preclude other means of supporting Chinese exports, right?Originally posted by phirang View PostComment
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Re: China tells "The City" & Wall Street......
Under fractional-reserve lending in the US, commercial banks create the money(I know you know this, Ash, but just stating for completeness.)
Therefore, to create the credit necessary to buy the chotchkas from China in the first place, you need capital reserves.
To have the chinese transfer $x00B to help re-capitalize US banks so they can lend again(with gov backstops, of course) would induce demand for chinese goods.
A honcho from the PBoC just flew into the US today. I think something big is brewing.Comment
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Re: China tells "The City" & Wall Street......
This domestic experiment could get difficultOriginally posted by phirang View Post
China must use the opportunity offered by the current global financial crisis to restructure and reorient its economy toward domestic development financed by sovereign credit denominated in Rmb, away from excessive dependence on export for fiat dollars to feed profit to foreign investment. This shift requires a period of strict capital and currency control until China is free from the effects of dollar hegemony which inhabit the application of sovereign credit for domestic development. In this uncertain climate of international financial turmoil, China should refrain from further measures to move its currency towards free and full convertibility in the global currency markets. Appreciating the exchange value of the Rmb will only strengthen dollar hegemony while doing little to solve China’s problem of export dependency.
The amount of sovereign credit needed to develop the Chinese domestic economy will be enormous and much larger than China’s current $2 trillion foreign reserve. Any further move toward free and full convertibility of the Rmb will restrict China’s ability to finance its much needed domestic development with massive sovereign credit. Until foreign trade is reduced to around 35% of GDP, China will find it counterproductive to let the Rmb appreciate against other currencies. The domestic sector must accelerate its growth to reduce the current level of foreign trade from its 70% of GDP to around 30% of GDP, and to increase consumer spending to 70%. This means the domestic sector must grow at a rate double that of the export sector.
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http://henryckliu.com/page175.htmlComment
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Re: China tells "The City" & Wall Street......
Hmm... good point. I guess there's no point in engaging in currency manipulation by itself if the consumer credit creation machinery is broken. Either they need the US banks healthy and lending, or they need to find some way to directly extend credit to US consumers... or they have to completely reconfigure their economy on the fly.Originally posted by phirang View PostComment
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Re: China tells "The City" & Wall Street......
Originally posted by phirang View PostChina, US Open Talks But Breakthroughs Unlikely
Thursday December 4th, 2008 / 13h09
By Denis McMahon and Liu Li
Of DOW JONES NEWSWIRES
BEIJING -(Dow Jones)- China and the U.S. opened the fifth round of high-level strategic economic talks in Beijing Thursday, but the transition in the U.S. government make it close to certain that the discussions won't yield breakthrough agreements on issues such as currency reform...
...People's Bank of China Gov. Zhou Xiaochuan left for the U.S. soon after giving his morning speech at the SED. He will attend the Group of 30 meeting in the U.S. being hosted by Timothy Geithner, Obama's nominee for Treasury Secretary.
According to a person at the international department of the PBOC who declined to be named, Zhou will attend the G30 meeting in New York from Dec. 4-6.
While the PBOC official said it was unclear whether Zhou would meet Geithner, the G30 is being hosted by Geithner in his current capacity as the president of the Federal Reserve Bank of New York.
Larry Summers and Paul Volcker are also members of the group, a private, nonprofit international body composed of very senior representatives of the private and public sectors and academia...
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Re: China tells "The City" & Wall Street......
You also require a borrower who is not himself already insolvent. Unless China is about to recapitalise the homeowner too?Originally posted by phirang View PostIt's Economics vs Thermodynamics. Thermodynamics wins.Comment
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