Comments on: Yes, trade policies do matter

By: trade asset

trade asset — Sun, 24 May 2009 21:11:35 +0000

This is a great stuff. i know the trade policies does matter in the trading activities. china made products cheap and best. These products are sell in all over the world. For increase your business the good relations are necessary. so any of the businessman wants to alter these factors which affect the business module economy of business. So thank’s for the information.

By: litz

litz — Thu, 12 Mar 2009 13:18:53 +0000

I do agree with some kind of global macroeconomic governance,to smooth the boom and burst cycle. However, this is mainly the job of Fed, who has the ability to regulate the comsuption and debet of US household by raising interest rate(Do you think the Fed also lose its control over money supply as far as the dollor was pegged by the big economy like China,as you have argued for the Chinese central bank?). Fed is the de facto world central bank with a unique ability to shape the unhealthy monopoly demand.
My last consideration is somewhat contradictory to my belive in the proper macroeconomic governance. Is the boom and burst cycle that bad? The fast global growth in the last decades do improve the situation of a large amount of population. The poorest benefit from the big boom. Given that they are always the last to be able to get access to the prosperity from the spill over, the higher the boom the wider is its coverage.

By: litz

litz — Thu, 12 Mar 2009 11:58:00 +0000

To my understanding, the chinese trade surplus, which suppose to have a central role in fostering the global macroeconomic imbalances that fed into the financial collapse, comes from two sources: the saving/cosuming habit of Sino-US and the currency regime. Your critics is mainly focus on the later. My question is, how much would change, even if chinese had a float regime. The gap of imbalance would surely be narrowed, however, not neccessarily fundementally to prevent a finacial collapse, given the unsustainable high leverage in the US finacial system.

My second argument is, demand and supply are the two sides of same coin. Excessive overproduction must be in cooperate with excessive overcosumption.However, the demand of the world economy is so monopoly concentrated in US,which is almost irreplacable. The supply, which is right now mainly dominated by the chinese export, is indeed easily replacable. If we only change the chinese currency regime without adressing the rest of developing countries, a trade replacement would likely happen,without big restrictive impact on the US demand(It has occured during the revaluation period of chinese Yuan). Lot of potental suppliers are willing to repeat the chinese success. They will do the same,peg to the dollor, lending money to US cosumer to buy their products. The party will not end without chinese.

By: Who’s Blogging about Cato ( Government and Politics ) | Believe In America News

Thu, 12 Mar 2009 04:03:06 +0000

[...] University Professor Michael Pettis quotes Daniel J. Ikenson on his blog, which covers trade policy in China. The quote was pulled from [...]

By: Nemo Incognito

Nemo Incognito — Wed, 11 Mar 2009 08:47:49 +0000

Would have to agree on Glen M’s comments regarding price fixing locally – China, for example, has no good bauxite deposits and not particularly cheap power yet they have a huge aluminum industry including the production of primary alumina. This is going to become more of an issue now that Alcoa 5 yr cds is 1100bps and the market is horribly oversupplied. I think a big part of this problem is that certain large SOEs have become so big that not only are local governments captive to them, the central government is too. The net-net in aluminum is either a trade war and all that entails or the banking system finding itself long a lot of Chinalco credit which is never going to get paid back. Chinese policymakers and people have got to learn to say no to these super SOEs – they’re sucking up an awful lot of capital and exacerbating trade problems all in the name of the ultimate political advantage of their management teams.

By: jerrypearl

jerrypearl — Wed, 11 Mar 2009 03:33:01 +0000

Really excellent article. I agree that currency devaluations right now are not good for the US. It is a race to the bottom. Regarding the point that US manufacturing went overseas because the domestic bosses did not want to make the stuff anymore due to lack of will or the desire to compete, I think is incorrect. Over the last 30 plus years US manufacturing was slowly moved overseas because there were more profits in doing so. As financial securitization took off and huge profits in capital gains, dividends and rents were gained, the wealth investors saw more profits in making things wherever cheaper labor could be found, and work rules, unions, and other profit-blockers could be avoided. Stockholders and Wall Street were happy to see bigger profits made by putting the US worker on the street or at the mercy of the bosses controlling wages. Once wages were made stagnant, and average workers had to borrow to keep a life style going, the cheaper stuff from Asia bought at Wal-Mart type stores became accepted.

Now that China has become a very big player in manufacturing, there would be no reason for them to start building aircraft to compete with Airbus. China has had enough time to advance their technologies, manufacturing efficiencies, and brainpower.

http://eye-on-washington.blogspot.com

By: seatrus

seatrus — Tue, 10 Mar 2009 21:11:27 +0000

Talking about Argentina, both China and Argentina started to attract foreign investment in the late 1990s. The extent of corruption and cronyism were similar in the two countries. Yet after a dozen years or so, China is sitting on top of 2 trillion reserves, while Argentina is sitting at the bottom of a hole that she cannot climb out. What made the difference was that Argentina followed the advice of IMF closely, allowed foreign predatory banks to decimate their own banking system, while China did not. The barrier the Argentina government put up against China trade will not solve the problem, because the trade imbalance was not the cause of the problem.

U.S. companies moved many of the labor intensive, energy inefficient and high pollution production lines to China, which was one cause of China’s high pollution and energy consumption during the past decade. Are those CEOs willing to relocate or rebuild their factories back in the U.S. again, with higher costs in labor, insurance, energy, environment and raw materials? No. When the American companies started to move out at the beginning of the globalism, I guess the slogan was “Greed is good.” Americans were promised to have nice high tech jobs. It turned out that these jobs went to foreigners holding temporary work permits (H-1B).

By: lux

lux — Tue, 10 Mar 2009 18:56:13 +0000

Dr.Frank Loo :
I just read that Mr.Warren Buffet recorded a similar slogan during his earlier days on the wall of an restaurant:
” In God we trust, all others pay cash”

By: bomlat

bomlat — Tue, 10 Mar 2009 18:28:02 +0000

China can not change the FX reserve to oil/gold or anything else,only if allow the yüan to be stronger.Much stronger.

By: Glen M

Glen M — Tue, 10 Mar 2009 16:31:56 +0000

Dr. Lo,

I think that a better way to end the crisis is to do what Peter Morici, Paul Krugman, Paul Vloker, Warren Buffet, Martin Feldstein, Michael Pettis, etc. suggest. That is to fix the BoT and the crisis will take care of its self.

I agree with you that the US has to save more and spend less. The day of reckoning for that mistake has long gone. The question that remains is why would anyone want to fund that? Specifically why did China step up its purchases of US treasuries at the end of 2008? It is like a drug dealer selling on credit to its one and only customer who’s lost his job from being high. Hardly good business sense.

IMO the way this will enevitably play out can be surmised by Brad Snow’s comment “the dollar is our currency, but your problem”.