sandinista

Now, thought the title may cause more stir than the actual content of this article, I would like to point out a well-written editorial about the economic situation between the United States and China. It's a good read, and it does help put the economic conflicts between the United States and China into perspective. I think this guy is coming out with a book soon, but his editorial is a good enough read:

http://www.reclaim-america.com

Post your thoughts.

-----------------------------------

Please post content along with links when possible.

Thank You, Ronald Reagan for your U.S. job promotion plan!

Shame on you, George W. Bush, for trashing it!
Your 1988 parting gift to the country you loved (known in U.S. law books today as 22 U.S.C. 5301 et seq.) and the KNOWLEDGE AND POWER it has given to your fellow Americans to put the U.S. back in global business and re-hire millions of jobless Americans - all strictly within the existing rules of the World Trade Organization to which, as you well knew, we belong as upbeat advocates of a better and fully employed free trade world

Reagan's law, supported in Congress in 1988 by Senator John F. Kerry among others, gives the U.S. the right to take action, including raising tariffs, against any country that subsidizes its own exports or penalizes imports from the U.S.. It also provides the right to raise tariffs on any country that artificially depresses its currency exchange rate so that it lowers the price of its imports into the U. S. It not only gives the U.S. the right to take these actions, it requires that the Secretary of the Treasury certify that each country's exchange rates are not manipulated and to certify that countries do not subsidize exports or otherwise discriminate against U.S. products. If the U.S. Treasury Secretary can't certify that such trade is free of currency rate discrimination against U.S. products, then he is, in effect, required to take action against these countries.

The problem is that virtually all countries either subsidize exports or manipulate their exchange rate against the dollar. The U.S. has been so lax for so long that other countries have come to depend upon virtually unconditional access to the U.S. market. China sets its Yuan currency exchange against the dollar at about 40% below the Yuan's true value.

__________________
"Nature herself makes the wise man rich."
-Cicero

Mephisto2

I think an economic war between China and the US would harm America a lot more than it would China.

In other words, the US would "lose the war".


Mr Mephisto

Mephisto2

By the way, I stopped reading the article after a few terribly awkward sentences and blatant spelling errors. It also seems to be couched in very partisan terms.

Nice thread idea though.


Mr Mephisto

Tarl Cabot

I wrongly predicted in 1994 that we would be at war with China by now.

I'm still worried about what we'll do when mainland China invades Taiwan, but the prospect of that seems to have dimmed for now.

Zeld2.0

China literally makes half the stuff we have in this country. Its got the people to produce it. China is going to be the major power in Asia in the next decade (actually it already is in most things).

I don't think a war between China and the U.S. is likely in the next decade (it would be a disaster for both countries) but a war between Japan and China seems likely.

Paq

umm..japan is protected by the US, so if there is a war between china and japan, it will really be between the US and japan.....

scary shit when ya think about it....1.6 billion people, the largest standing army and an economy that is growing at our expense....

__________________
Live.

Chris

sandinista

Well, sorry the editorial didn't live up to your high expectations in political commentary. I really quite frankly don't care if you don't want to read the article. I posted this thread with the intention that people would read the article, and comment on it. Instead, I get more of the same shit, which is "china and the US war is scary, blah blah blah". I guess my topic title was misleading, but it would be nice if someone took the time to read the article, digest it, and then provide some interesting commentary on it, instead of just saying "well, this guy says 'economic war between china and us" better just spill the same shit I've been saying in all the other posts on this subject.

__________________
"Nature herself makes the wise man rich."
-Cicero

quicksteal

How am I supposed to comment on an article that reads like this:

After reading this three times, I can finally figure out what this person is saying, but I have no respect for this opinion b/c it's so poorly put together. That's what Mr. Mephisto was trying to say, so there's no reason to whine at him. I'm no businessman, but isn't the dollar getting lower (at least against the Euro) by the day? Personally, I don't think this market correction would take care of our ridiculous trade deficit. To make up for the fact that we're bad with money, we need more viable products that we can sell to international consumers, and for that, we will have to depend on innovation. Thanks to W's tax cuts, companies have enough money to invest in our own economy, hopefully helping lift ourselves out of serious trouble. It's no sure thing, but there's hope.

jimbob

Unfortunately the tax cuts went mostly to the rich, and with capital as mobile as it is these days the investments they make will be where markets are growing, wherever that may be in the world - it won't necessarily make the US rich, just those who got the tax rebates. Ironically China, India and others have barriers to foreign investment, which the article doesn't mention. If the tax cuts were for the sections of society most likely to spend on home-produced goods and services then the positive effect would be slower but more likely: people have more money so can spend more now (and lower tax, so can be paid less in the future while still taking home the same salary). This increased spending power encourages investment, financed initially through borrowing, and the money trickles up through the economy to the entrepreneurs, financiers and brand-owners identified by Bush as the most deserving of the tax cuts, who eventually collect the lot.

I'd not heard about the law the article deals with so was eager to read on but the sentence above suggested early on that it was going to be biased and unfounded. I know that many countries ignore WTO rules, but to say the US does not is just ridiculous. Its cattle get $150 per year (2001, EU=$435!), the steel industry is still subsidised even after Bush had to back down on his policy of increased import tarriffs and overseas food producers pay higher import tax on processed food than raw material - so US food processors keep their huge markups. Furthermore, the US uses bilateral trade agreements to influence the foreign policies of its trade partners. So when New Zealand and Australia were both negotiating in 2002 Australia got a deal whereas New Zealand stood firm, listened to its people, and opposed the war in Iraq.

What China seems to be doing is not so different from what the US has done for the past half-century - used its power to influence global markets in its favour. As well as being the main player in the WTO and World Bank, the US has benefitted from being the major currency because other countries have to get dollars if they want to buy things like steel, copper and oil. Interestingly Saddam Hussein began (or was to begin) trading oil in Euros.

I've seen a few documentaries on the end of the Cold War lately. The conclusion of some Americans is that they won it not because the USSR was bankrupt but because of 'a little thing called Democracy'. Either they're naive or brainwashed or the free world has nothing to fear from China.

Zeld2.0

The Cold War as we know it may have 'ended' but the rift is still very much there even today between Russia and the U.S.

sandinista

While I do recognize I was a bit whiney about Mephisto's comment - I still stand that he didn't even bother reading the article, and since he didn't, he had no justification to comment on it.

And about your comment about the dollar getting weaker: that is SUPPOSED to happen. If you know ANYTHING about free trade theory - since we spend so much on the other country's economy, and none on our own, our dollar is supposed to grow weaker and the chinese dollar is supposed to float, fixing the trade deficit because US companies will find it cheaper to buy US-manufactured goods and chinese companies will do the same because of a strong Chinese dollar - but currently, the Chinese dollar is being artificially kept low - because the Chinese are buying all of the defecit in the form of bonds. That's what this whole article is about. If you read it three time, you would have seen that, but maybe you just have a knack for ignoring those kinds of things.

__________________
"Nature herself makes the wise man rich."
-Cicero

pedro padilla

The US economy is in shambles. The Bush administration is currently spending money which will be repaid by your grandchildren.
China has every reason to back away from their long time support of the dollar. Not so much economic war but ecomomic self preservation is the issue.
Life in the US is rapidly going to resemble that of Argentina. There is a major and basically inevitable meltdown around the corner.
China questions dollar slide
(Agencies)
Updated: 2004-11-29 16:26
Chinese Premier Wen Jiabao has criticized the United States for not taking measures to halt the slide in the dollar and insisted that China will not revalue the yuan under pressure.
"We have to ask a question. The US dollar is depreciating and it is not managed," he told reporters in Laos late Sunday when asked about pressure to change the yuan's decade-old peg to the dollar.
"What is the reason for that? Shouldn't the relevant parties adopt measures?" he asked.
Turning the tables on the United States, he contrasted the lack of US attention to its currency with China's attitude during the Asian financial crisis seven years ago.
"China is a responsible country," he said. "In 1997, during the financial crisis, we maintained the basic stability of the yuan and made the kind of contribution that we should."
At the time, many hailed Beijing's decision to keep the yuan unchanged, providing a rare oasis of relative strength and certainty while all around the region one currency after another collapsed.
Now US exporters complain that the yuan, pegged at about 8.3 to the dollar since 1994, is undervalued and gives China an unfair advantage by making Chinese exports cheaper.
"Honestly speaking, the more speculation (about a yuan revaluation) there is in society, the more unlikely it is that the necessary measures can be undertaken," Wen told journalists.
Chinese analysts estimate that this kind of speculation has allowed up to 30 billion dollars of "hot money" to enter across China's borders as investors hope for a revaluation of the currency.
Their gamble is that China's central bank will revalue the yuan, giving them an immediate overnight profit.
However, a decision to adjust the currency policy after a decade of stability was not to be taken lightly, the premier indicated.
"You must consider the impact on China's economy and society and also consider the impact on the region and the world," he said.
A series of important conditions would have to be in place before any major changes could take place, he said.
"The most important thing is that we need a stable macro-economic environment, a healthy market mechanism and a healthy financial system," he said.
"We will continue to push forward the reform on the yuan exchange rate, while maintaining overall stability in our economy," Hu was quoted as telling Bush ahead of the Asia-Pacific Economic Cooperation*forum talks.
He indicated that China would seek to prevent wild fluctuations in the yuan exchange rate if and when the peg was loosened.


India, China and other countries start dumping US dollar and buy Euro
Bala Vaddi, Special Correspondent
November 27, 2004
The India, China and other countries have started dumping US Dollar quietly and buying Euro. That put a very serious pressure on US Dollar. Chinese and Indian central bank officials denied such reports. But Foreign exchange traders say they are quite convinced of Indian and Chinese moves. According some traders, there are many other countries specially oil rich Middle Eastern countries running away from dollar.*
Reserve Bank of India (RBI) Governor Y.V. Reddy said the composition of the country's foreign exchange reserves could change when asked on Wednesday if the bank was considering boosting its holdings of the strengthening euro. The central bank does not give a breakdown of its reserves -- the world's fifth largest -- but analysts said it may already have reduced the proportion of dollar holdings and would likely continue to do so. India's reserves, which comprise dollars, euros, sterling and yen in undisclosed proportions, have risen by nearly $23 billion so far in 2004 to a record $123.5 billion. "The question of composition of reserves ... it's a very dynamic situation. You can’t take a view on a daily basis," Governor Y.V. Reddy told reporters on the sidelines of a news conference. The dollar has long been held as a reserve currency, but the single European currency hit a record high against it on Tuesday, and again on Wednesday, after the Russian central bank said it could review the share of euros it holds among its $113 billion in reserves. Asian central banks have been among the largest buyers of dollars as the economic tide turned in their countries'' favour leading to massive investment and trade inflows. These banks were partly looking to build up their ammunition following a crisis in 1997 and to protect their trade competitiveness. But the U.S. unit has declined sharply because of doubts about the fundamentals of the U.S. economy, which is running wide fiscal and trade deficits. It has fallen nearly 4.5 percent against the euro so far in 2004.*

If we have promised more than our economy has the ability to deliver [in Social Security and Medicare expenses], as I fear we may have, we must recalibrate our public programs so that pending retirees have enough time to adjust through other channels. If we delay, the adjustments could be abrupt and painful.”
- Alan Greenspan
**Chairman, Federal Reserve Board*Forbes

“Buffett said the transfer of the country's ‘net worth’ abroad would eventually lead to ‘major trouble.’‘In effect, our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than we produce - that's the trade deficit - we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.'”
- Warren Buffett
**CEO, Berkshire Hathaway & 2nd Wealthiest Person in the World
**Running on Empty

The outlook for the global economy is the most uncertain for 20 or 30 years, according to Bill Gross, the influential chief investment officer of Pimco, the world\’s biggest bond fund manager. ‘Too much debt, geopolitical risk and several bubbles have created a very unstable environment which can turn any minute…. With all this consumer debt, business debt, government debt, smaller movements in interest rates have a magnified effect…a small movement can tip the boat…. The US dollar is being supported by the kindness of strangers – Japan and China. It should be 20% lower than it is.”
- Bill Gross
**Chief Investment Officer, Pimco
**Financial Times

this is also an interesting, simply worded analysis of the current situation:
http://economist.com/opinion/display...ory_id=3446249

sandinista

Pedro: You are doom and gloom. yes, the economy will go down the tank if we don't do something soon, but the chinese premier was making up excuses about revaluing the yuan. The chinese are making a huge amount of money by keeping it devalued, simply because US companies will continue to buy chinese products. If the yuan is revalued to something near what it should be, it will go a long way to fix the economy as it is.

__________________
"Nature herself makes the wise man rich."
-Cicero

pedro padilla

gloom and doom is right. if you folks living in america actually need any more indication of the current flow of things:

Rampant Insider Selling Raises Red Flags - AP Reports Major Corporate Execs, Including Some From the Homebuilding Industry Are Dumping Stocks - Serious Predictor of a Coming Crash - Special Commentary by Michael C. Ruppert


[In 2000 and 2002, as the US financial markets tanked, investors lost trillions of dollars in equity as stock prices plunged and investment portfolios - many connected to pension funds - lost trillions of dollars in value. What was documented in both cases was that senior executives at many of the twenty or more companies involved (WorldCom, Enron, Adelphia, Merck, Global Crossing, to name a few) had engaged in a tactic called "pump and dump" just before the stock prices collapsed. Stock prices are pumped up by the executives and key insiders who then sell at the peak before everyone else gets reamed.

In a pump and dump operation, those who can influence stock prices issue glowing reports which cause investors to put their hard-earned dollars into a stock right before it collapses. This is a wealth transfer from poor or middle class folks to the absurdly wealthy. Immediately prior to the stock's collapse, the guys on top cash out and then the price plummets. The bad guys have the cash and the little investors and pension funds have nearly worthless or severely devalued paper.


This AP story is especially alarming for a number of reasons.


In light of FTW's recent (third-ever) economic alert, a number of very credible warnings from financial experts and the continuing intentional devaluation of the dollar, this is especially ominous. It is made more so by the fact that one of the nation's leading homebuilders is dumping stock hand over fist. This does not bode well for the housing bubble.


A critical distinction needs to be made however. Insider trading and insider selling are two different things.


Insider trading is a criminal activity in which a person with advance knowledge, acquired through inside involvement with economic or business events, violates his or her fiduciary and/or legal obligations for the sake of personal profit. This is what happened before 9/11 on markets from Hong Kong, to Tokyo, to Chicago, to New York, London and Berlin. This is what Martha Stewart was sent to jail for. As described in Crossing The Rubicon, right after 9/11 the SEC issued (then quickly suppressed) a list of 38 companies where it suspected that persons with inside knowledge of the attacks knew that the stock of these companies would be adversely affected by the attacks. They thereby made undisclosed billions in profit after betting that the share prices would fall.


Insider selling is a relatively tightly-policed area of stock trading where those employed at senior levels of publicly traded companies start divesting themselves of stock they own in their own companies. Insider trading is always a criminal activity. Insider selling may or may not be, which is why the SEC watches and reports on it fairly closely. Disclosure of insider selling is required by law and executives who sell stock in their own companies are required to report it for the benefit of shareholders and other investors. It is these required reports which prompted this AP wire story.


Given the fact that this pattern was evident just before each of the last two major financial slumps, this is a very ominous warning indeed. The Wall Street executives dumping their stocks are still trying to get small investors and pension funds to buy in when they know that a crash is coming. FTW strongly recommends to its subscribers that they take a look at any 401(k) plans or pension funds to which they belong and consider making immediate shifts out of stocks and into precious metals. For those lucky enough to have such assets, a consensus is emerging that now is a good time to have at least half of one's portfolio in precious metals.


We cannot make these warnings any clearer. - MCR]



Rampant Insider Selling Raises Red Flags


By Rachel Beck
Associated Press
Dec. 14, 2004


NEW YORK - Talk about a double standard. While corporate leaders tout the benefits of investors owning their stocks, many executives seem to be running for the doors themselves.


Selling of shares by insiders - which includes executives and other top officers and directors at a company - has been rampant in recent months, with sales rising to their highest level in more than four years in November.


While no one can pinpoint an exact reason for that run-up, the implication is troubling since big insider selling is often considered bearish for the overall market as well as for individual stocks.


Of course, not all insider selling should be construed as a bad sign. Some stock sales may just be routine or may be executives wanting to free up money to cover personal expenses or to help pay the taxes on shares they buy after exercising options. And in some sectors, namely technology, stock compensation is often the bulk of executive pay, so they sell their stock for income.


In addition, November has historically been a busy time for insider selling. That's because it comes after most companies have reported their third-quarter earnings and restrictions for selling have been lifted. In addition, some executives sell in November for tax purposes.


Still, insider-trading trackers at Thomson Financial say the recent selling bonanza is "particularly noteworthy."


Some $6.6 billion in insider stock sales took place last month, the highest level since the $7.7 billion in sales tallied in August 2000, according to Thomson. Contrast that with the $144 million worth of stock that was bought by insiders last month.


The most selling came from in the financial sector, where executives sold $882 million of their own stock in November, and health care companies, whose insiders sold $734 million worth of shares. Selling in both sectors was double the five-year monthly average, according to Thomson.


On a company-specific basis, consider what has gone on at networking company Avocent Corp., where company statements seem to contradict insiders' actions. On Nov. 1, the company announced a buyback plan for up to two million shares and said in a news released that the purchase of the stock "represents a solid investment for our shareholders."


Apparently, the company's insiders seemed to have ignored that memo. In the month following the announcement, they sold 578,565 shares out of an aggregate of 645,756 insider shares sold during the last 12 months, according to Vickers Weekly Insider, a newsletter that tracks trading by company executives.


There was no buying during that time period.


To be fair, much of the selling came as executives exercised their stock options, not surprising given that its shares have climbed 30 percent in the last two months reaching their highest level since last winter. In addition, the company's officers were blocked from making stock transactions from December 2003 through April of this year because of Avocent's acquisition of OSA Technologies Inc., according to vice president and chief accounting officer Edward Blankenship.


Yet, as Vickers editor David Coleman points out: "If they thought the stock would continue to climb, wouldn't it be in their interest to hold on to it rather than immediately get out?"


Looking beyond companies where executives say one thing but do something else, Coleman points to other warning signs that investors should use to gauge potentially negative signs associated with insider selling. He suggests looking out for insiders who have sold their stock at times that don't coincide with when they exercise options, or those who sell above and beyond the amount that they have exercised.


Sometimes, though, investors refuse to heed such warnings.


Take, for instance, the surge in shares of homebuilder NVR Inc., which has seen its stock jump from just over $432 a share at the start of the year to now trade about $730 apiece. That rise has come despite expectations for a slowdown in the housing market as interest rates begin to climb.


Also troublesome with that giant stock run-up is that NVR's insiders have been bailing out of the stock big time. They have sold more than $220 million in shares this year alone.


Among those selling: NVR CEO Dwight Schar, who hasn't purchased any stock since June 2002, only exercised just over 83,000 shares this year and has sold about 265,000 shares at a market value of about $155 million, according to Thomson. The company declined to comment on its insider selling, said NVR spokesman Dan Malzahn.


At least so far, NVR's investors have ignored the insiders' moves, and haven't been hurt by that decision. Whether that luck continues will surely be tested in the months ahead.

Orpheus

Currency re-evaluation will have a negligible effect on the trade deficit.

Read Kenneth Rogoff's new article on the trade deficit at NBER.org.

jonjon42

I believe they don't have a decent navy to get it over the sea really... The economic impact is frightening though.

__________________
A damn dirty hippie without the dirty part....

pedro padilla

on the lighter side...
http://www.brothercanyouspareajob.com/watch.html