Why is Ben calling for an end to the US subsi.. err Chinese subsidy for exports?

[blazespinnaker]

It seems to me that if the Chinese stop pegging the RMB to the USD, there will be fewer purchases of US debt, which will end the vendor financing that keeps the US economy afloat.

Will the Chinese start buying american goods? Will the economies magically re-adjust gently as the Chinese stop becoming this exporter to the world?

[blazespinnaker]

Re: Why is Ben calling for an end to the US subsi.. err Chinese subsidy for exports?

It seems to me that if the Chinese stop pegging the RMB to the USD, there will be fewer purchases of US debt, which will end the vendor financing that keeps the US economy afloat.

Will the Chinese start buying american goods? Will the economies magically re-adjust gently as the Chinese stop becoming this exporter to the world?

I know we're not big fans of everything coming up roses around here, but this is a pretty bullish agreement -

http://us.rd.yahoo.com/finance/finho...use.html?.v=10


What if china agrees to spend a big chunk of that trillion dollars hiring americans to build things for the chinese? You know, throw a lot of money at IBM, GE, Boeing .. the big industrial boys. Fair trade ...

[jk]

Re: Why is Ben calling for an end to the US subsi.. err Chinese subsidy for exports?

question: what do you do if you have u.s.$700 billion, knowing that the u.s. dollar is depreciating?

ans: spend it on things of lasting value, i.e. capital goods.

[Finster]

Re: Why is Ben calling for an end to the US subsi.. err Chinese subsidy for exports?

question: what do you do if you have u.s.$700 billion, knowing that the u.s. dollar is depreciating?

ans: spend it on things of lasting value, i.e. capital goods.

You can boil the whole trade deficit thing down to one equation. OPEC and the Chinese send us things that we burn up and wear out, and we send them our seed corn.

[Charles Mackay]

Re: Why is Ben calling for an end to the US subsi.. err Chinese subsidy for exports?

It seems to me that if the Chinese stop pegging the RMB to the USD, there will be fewer purchases of US debt, which will end the vendor financing that keeps the US economy afloat.

Will the Chinese start buying american goods? Will the economies magically re-adjust gently as the Chinese stop becoming this exporter to the world?

The media is reporting it that way but I doubt if that was the real mission. Paulson, Bernanke, and the rest of the "high level" U.S. of Goldman gang are probably cooking up a witches brew to accomplish during the last two years of the lame duck Bush regime. They'd like to have the "medicine" out of the way by the time a Demo president is elected in 2008 and before China is required to float the RMB (due to happen in 2007 from WTO entry).

Maybe they'll raise interest rates to break the back of bearish dollar sentiment and bullish gold and commodities sentiment. They are tyring hard to give us our mini ka aren't they? But, maybe it turns into a full blown major ka? Did the Chinese demand that the U.S. raise interest rates or face a dollar collapse? If the Chinese sell, then everyone sells. If they hold, then maybe other's hold. Remember when Volcker flew to Europe and the European central bankers demanded he raise interst rates and protect the dollar? Volcker came back and raised rates 500 points.

My guess is that the Chinese demanded that the Treasury and Fed chiefs both come to this meeting? Otherwise they both wouldn't have been there.

[WDCRob]

Re: Why is Ben calling for an end to the US subsi.. err Chinese subsidy for exports?

Have I just missed the detailed reporting from these meetings? Haven't seen much in the media about the trip, which seems odd.

[Jim Nickerson]

Re: Why is Ben calling for an end to the US subsi.. err Chinese subsidy for exports?

Have I just missed the detailed reporting from these meetings? Haven't seen much in the media about the trip, which seems odd.

Here are a couple of web opinions.

December 17, 2006
Paulson, Bernanke Strike Out
by Mike Shedlock
http://www.safehaven.com/article-6522.htm

December 15, 2006
Ben and Hank's Not So Excellent Adventure
by Peter Schiff
http://www.safehaven.com/article-6510.htm