China-US fracture
Not much discussion these days on this blog about China, but while everything else was going on, events in the US and China have led to a pretty bad impasse, revolving around China’s pegged and undervalued currency, but also pointing to the probable train wreck at the nearing end of China’s historic “market socialism” growth-surge.
Here’s a scary mental exercise: What happens if China suddenly unravels? From its own contradictions.
Across the United States, conversations about politics have not been this charged since the final days of the last presidential campaign. In the space of a week the passage of landmark healthcare reform and Google’s exit from China have made for anxious and animated discussion.
AND
A war of words has broken out between China and the United States and the pundits are predicting that it will end in a full-blown trade war. The Obama administration thinks that China is manipulating its currency to gain an unfair trade advantage and increase its exports. China’s Premier Wen Jiabao’s adamantly denies the charge. “I do not think the renminbi is undervalued” he says. “And we are opposed to countries pointing fingers at each other or taking strong measures to force other countries to appreciate their currencies….If the United States uses the exchange rate to start a new trade war, China will be hurt. But the American people and US companies will be hurt even more.”
AND
…while we’re on the subject of China, Obama had to make an unscheduled stop in Kabul to survey the wreckage of Karzai’s newly found independent streak… and his relations with China… and Iran.
Great moments in diplomatic timing are hard to distinguish when the practitioners are inscrutable entities. Afghan President Hamid Karzai’s visits to China and Iran within the week rang alarm bells in Washington which were heard in the Oval Office of the White House.
In Vietnam, the US puppets never went over. Obama’s inheritance from Bush is the rising influence of Iran… and makes it more likely that Obama will attack Iran, where Bush’s hands were tied by a losing war where Iranophiles were his last allies, and he could not.
After year-long optimism that the three decade old US-Iran standoff might finally come to an accommodation, the two sides are ratcheting up their rhetoric and in the process risk new escalation with unpredictable consequences.
Stan:
Lindorff on Obama’s Afghanistan.
…and Patrick Cockburn on the Iraq-Iran connection:
FULL
29 March 2010, 1:55 pmLisa:
Saturday, March 27, 2010
The Chinese Are Coming! The Chinese Are Coming! Oh My!
By Yeva Nersisyan and L. Randall Wray
One of the scare tactics in the toolbox of the deficit hawks is the argument that Chinese ownership of U.S. government bonds is dangerous, economically and politically. Portraying the government as a currency user akin to households, they argue that after reaching some debt to GDP threshold, sovereign governments face difficulties in finding takers for their debt so that they have to pay higher interest rates to compensate holders for higher risk of default. Indeed, it is frequently claimed that China is responsible for “financing” a huge portion of our federal government’s deficit—and that if China were to suddenly stop lending to Uncle Sam, he might be unable to finance his deficits except at usurious rates. So China controls Uncle Sam, holding his debt hostage.
This is nonsense.
The rest at:
http://neweconomicperspectives.blogspot.com/2010/03/chinese-are-coming-chinese-are-coming.html
29 March 2010, 8:39 pmLisa:
More good answers for these common misunderstandings:
“First of all, let’s repeat this once again. The United States is not revenue constrained. We do not sell debt to China and Japan in order to finance our spending. Likewise, we do not tax in order to spend. We simply spend. It might sound counter-intuitive, but this is how our monetary system works and has worked since 1971 when we became a non-convertible floating exchange rate system.
http://pragcap.com/jim-grant-downgrades-u-s-credit
——————
WILL THE UNITED STATES DEFAULT ON ITS DEBT?
Let’s get this straight. The United States government CANNOT default on its obligations without some sort of mental lapse from Congress (the trade here, short sovereign US CDS every time it spikes). The government is the sole supplier of the sovereign currency. The government has a monopoly on money & carries NO foreign currency denominated debt. If they have fiscal problems they simply print more. They press a button on a computer and magic money appears in an account. That’s literally how it works. The US government is not a household or a state. They are not Greece who does not print their own currency. It’s ENTIRELY different.
http://pragcap.com/us-default
——————————
Excellent discussion of the above, and more, at the entry below. See especially the remarks of Tom Hickey, which are a very good summary of modern monetary theory, as well as those of Mosler.
US Taxes
http://moslereconomics.com/2010/03/26/us-taxes/
5 April 2010, 4:47 pmLisa:
The Class War Goes on in Beijing, Just as It Does in Washington
China’s Flawed Economic Model
Americans have a fundamental misunderstanding about the US/China relationship. China is not in the driver’s seat and neither is the United States. There’s a third party involved, but that party remains mostly invisible. And that’s how they like it.
http://counterpunch.com/whitney04062010.html
6 April 2010, 2:51 pmLisa:
Expanded version of the above Whitney article:
The Last Flight of the Chinese Hindenburg
http://smirkingchimp.com/thread/mike_whitney/27803/the_last_flight_of_the_chinese_hindenburg
Corporate Whines
The Looming Trade War With China
http://www.the-peoples-forum.com/cgi-bin/readart.cgi?ArtNum=17615&Disp=1&Trace=on
6 April 2010, 3:04 pmLisa:
Brilliant article:
I just found out – state kleptocracy is the problem
http://bilbo.economicoutlook.net/blog/?p=9106#more-9106
7 April 2010, 3:23 pm