Thread: Barack Obama urges China to relax grip on its currency

Originally Posted by jujuman13

Link
BBC News - Barack Obama urges China to relax grip on its currency

What possible incentive would Obama offer the Chinese.

I vaguely recall President Bush asking for the same, the Chinese ignored his request.
They believe (and who is Obama that he should think otherwise) that the value of the Chinese Yuan is a matter for the Chinese to decide.

Yes American goods are priced way too high, but this is by and large because our manufacturing costs are way over any Asian Country.
Largely due to the fact that Obama's henchmen have been pushing to raise the wages paid to American workers for a number of years.

Was the Bush admin henchmen pushing to lower the wages and the standard of living of Americans?

You won't hear me say this very often but I support Obama on this one. It's not a huge stretch because Bush was doing the same thing. It's in the interests of both countries for the currency to float freely, so it shouldn't require any additional incentive by the US. I think China recognizes this and is slowly reacting.

China raising its currency is a double edged sword


It lowers the high inflation rate that China currently has as imports are cheaper, especially as it is moving towards a higher level of domestic consumption

But it lowers the value of it USD holdings.

So I would continue to expect the status quo untill China can move a far larger chunk of its USD holdings into investments that will be protected from USD devaluation

Originally Posted by Lord Tammerlain

China raising its currency is a double edged sword


It lowers the high inflation rate that China currently has as imports are cheaper, especially as it is moving towards a higher level of domestic consumption

But it lowers the value of it USD holdings.

So I would continue to expect the status quo untill China can move a far larger chunk of its USD holdings into investments that will be protected from USD devaluation

It's also causing some serious global imbalances. Some small countries might be able to get away with manipulating their currency, but China can't for much longer.

Originally Posted by gopman

It's also causing some serious global imbalances. Some small countries might be able to get away with manipulating their currency, but China can't for much longer.

Lets recall some history

Japan has been manipulating its currency for 20+years

Before the last Breton Woods, all currency valuations were fixed in relation to the USD(

The massive global imbalance is not caused by the Chinese currency being cheap, but by China being a very efficient (cost basis) manufacturer. Combined with very high domestic savings in China. The high saving's in China is required due to a poor social safety net in China. Those are not things that will change buy China raising its currency valuation.

China by keeping its currency low increases the rate of inflation in China. A higher Chinese currency is not going to see US exports to China increase in any real manner. It has gone up by 23% since China started to allow appreciation by the way. The US economy can not compete with China on the goods the US will allow to be exported to China, and it wont export the goods that it has an advantage in to China.

Leaving agricultural goods to be exported

The main groups hurt by the low Chinese currency are other south east asian countries that compete with China for exports to the US.

Originally Posted by jujuman13

Yes American goods are priced way too high, but this is by and large because our manufacturing costs are way over any Asian Country.

Come again? Can you tell me what high value industrial manufactured product that is made in America has manufacturing cots way over any Asian country?

Do they beat us at low cost, low value mass manufacturing? Yes.

Do they beat us at high value, high cost manufacturing? No.

Originally Posted by obvious Child

Come again? Can you tell me what high value industrial manufactured product that is made in America has manufacturing cots way over any Asian country?

Do they beat us at low cost, low value mass manufacturing? Yes.

Do they beat us at high value, high cost manufacturing? No.

Besides the fact that you didnt distinguish between low cost/value and high cost/value, how did you come to this conclusion?
Now I've been to China a few times I can tell you from just wondering around a mall that they make high tech products which compete with American brands.
Now "American brands" itself is kind of an outdated term with manufacturing, production, resources, assembly occurring all over the world there's really no such thing as a national brand anymore.

Originally Posted by Wiseone

Besides the fact that you didnt distinguish between low cost/value and high cost/value, how did you come to this conclusion?
Now I've been to China a few times I can tell you from just wondering around a mall that they make high tech products which compete with American brands.
Now "American brands" itself is kind of an outdated term with manufacturing, production, resources, assembly occurring all over the world there's really no such thing as a national brand anymore.

The US does not do well on consumer goods, industrial products, chemicals etc are areas the US does do well in.

However the Chinese are moving hard into chemicals (all types). And have now driven the price of glyphosate (Round Up) down drastically

The Chinese replied that they'll loosen their currency when Obama loosens his grip on healthcare.