Wall Street and the Treasury Department have been some of the strongest supporters of China in the United States, and until the Iraq debacle, Treasury and Wall Street were critical in keeping the dragon slayers. With the dragon slayers and blue team in total retreat over the Iraq debacle, what results is an American government that is more pro-China than any government since Nixon took his trip in 1972.

Also, I do not understand why you argue that one of the sins of Wall Street is to encourage global labor arbitrage when China has been one of the huge beneficiaries of that arbitrage.

For its part the Chinese government agrees with the “Treasury-Wall Street” complex on most economic issues. The differences are rather minor. The question are being argued is *how* Beijing intends to do currency revaluation not whether to do it.

The questions are *how much* foreign banks are allowed to own Chinese banks rather than whether to allow this.

Wall Street, multinational corporations, and the Treasury Department are all China’s friends and allies out of greed and self-interest. They business of Wall Street is to make money, and a rich and powerful China is making and will continue to make a lot of people filthy rich.

China for its part is setting up its domestic and foreign policy so that lots of people get filthy rich from its rise, so that there isn’t a politically significant group opposed to it.

Brad:

You attach too much importance to exchange rates – sometimes it is better to set aside macroeconomic building blocks and return to first principles. Think of an exchange rate as being a common factor in the price of all goods, services and investments available from a currency area, and think of countries as traders which buy and sell all of these things. China’s exchange rate peg (assume that this is to the US dollar only) simply represents a commitment to buy (or, in theory sell) enough to fix the RMB/US$ common factor. It is easy to appreciate how such a self-imposed constraint can be costly for China, but harder to see how it damages the US. Having made their commitment, what the Chinese buy then depends on US prices, which are set multilaterally in a competitive process. If the US does not like what China buys – ie bonds instead of manufactures – then it can change its prices. There is no need for international coordination.

“Up to 50% of the drugs sold in Asia and Africa are fakes, in a trade estimated by the US Food and Drug Administration to be worth between $35bn and $44bn (£18.5bn-£23.1bn) annually… Experts maintain that the trade is based in China, a focus for all manner of counterfeiting…” http://www.guardian.co.uk/international/story/0,,2018238,00.html

“Beyond the benefits of language and democracy, Indian companies are undeniably helped by the fact that a lot of international investors would rather put their money in the hands of Indian entrepreneurs than Chinese ones… “India is light years ahead when you talk to managements,” he says. “You can go into an Indian company and… hear about return on equity, return on invested capital, [profit] margins. You go into a Chinese company, you never have the faintest idea what you’re going to get.” (Nor will you know if you can trust the numbers. On one trip to mainland China, Mr. Rooney sat down with someone from a large international accounting firm and asked how Chinese bookkeeping practices differed from those in the developed world. In two ways, replied the accountant: “Accuracy and reliability.”)…” http://www.globeinvestor.com/servlet/story/RTGAM.20070217.wrcover17/GIStory/

Yes, yes… we’re always meddling, and while some certainly lose, let’s not act like nobody wins from the US “meddling” via it’s forgein policy. As I said before, we’re not perfect, but we’re better than the rest. And AGAIN… isn’t that why you’re here Chiang? If there was some place better to be, we would be there. Perhaps that time will come in our life time and we will all evacuate this place for a land of MORE promise, but until then I’m guessing you’ll keep you address the same.

And AGAIN, let me point out that before you started talking politics with me, we were “debating” how evil hedge funds are raping and pillaging the earth. Just remember that perception is not reality – and that is how the collapse of the pound went from being called Black Wednesday to White Wednesday. Ten years after the fact, many Brits recognized that they should erect a statue of the Quantum Crowd to thank them for ending the wasteful spending of their tax dollars used in defending a ridiculous policy. Their recession would have endured forever under that policy, but instead they took the pain and moved on to much better times.

And AGAIN, in regards to the situation with China… let’s not act like the Chinese government and people are benefiting somewhat from the relationship with the US. I know it’s far from perfect, but China has profited handsomely from it’s best customer. Maybe not everyone there, but then without the business over the last 15 years, who knows where they’d be.

It all comes down to control

“Noam Chomsky is a noted linguist, author and foreign policy expert. On February 9, Michael Shank interviewed him on the latest developments in US policy toward Iran, Iraq, North Korea and Venezuela.

Michael Shank: With similar nuclear developments in North Korea and Iran, why has the United States pursued direct diplomacy with North Korea but refuses to do so with Iran?

Noam Chomsky: To say that the United States has pursued diplomacy with North Korea is a little bit misleading. It did under the [Bill] Clinton administration, though neither side completely lived up to their obligations. Clinton didn’t do what was promised, nor did North Korea, but they were making progress. So when [George W] Bush came into the presidency, North Korea had enough uranium or plutonium for maybe one or two bombs, but then very limited missile capacity. During the Bush years it’s exploded. The reason is, he immediately canceled the diplomacy and he’s pretty much blocked it ever since. ”

[Edited by Brad Setser. Please do not paste large blocks of text in the comments section. Links are acceptable]

The old slogan “what’s good for General Motors is good for America” has been made inoperative by US engineered financial globalization. Beginning under the Clinton-Rubin Administration, the Wall Street-Treasury complex has promoted global labor arbitrage to improve corporate profitability with jobs increasingly shifted to low-wage locations overseas to reduce labor cost. Moreover, the official “strong dollar” policy mantra has been repeated by successive Treasury Secretaries since Robert Rubin. Instead of foreign governments, such as China’s, being wrongly accused of manipulating the exchange value of their currencies, US big business should be recognized as the real culprit that manipulates global labor markets to gain unfair advantage over labor, both foreign and domestic. With wage labor rate rising in China, US big business has threatened the Chinese by shifting production elsewhere to even lower cost locations in India and Vietnam. Furthermore, Paulson’s primary agenda for pressing the Chinese to further open their economy to Wall Street financial interests will have minimal impact on the US-China balance of trade. What’s good for Wall Street is good for Washington special interests.

Regards,

http://news.yahoo.com/s/ap/20070221/ap_on_go_ca_st_pe/paulson_asia;_ylt=AqWIfs3iQedIv1jsz6l.Vz0Bxg8F

When cHina sets the RMB/ $ exchange rate, it is also setting the dollar/ RMB. It is effectively setting the value of the dollar — another sovereign country — through its intervention (especially since others are reluctnat to appreciate v. the RMB). That is why I find arguments to the effect of “the RMB’s exchange rate is cHina’s own sovereign choice” unconvincing. China is the one intervening, to be sure — that is its own choice. but that choice has implicaitons for the composition of output in the US. It helps some and hurts others (I am one of those who has been helped, but i sympathize with those who have been hurt). China’s policy choices spill over beyond its borders.

So, of course, do those of the US. Its economic policies, to be sure. Its security policies even more so — that is another topic.

But the fact that policies in the US and china impact a lot of others are exactly why some forms of international financial and policy coordination is needed.

The solution to solving most of US foreign policy problems is simple, stop interfering in the internal affairs of other sovereign nations. As former President Thomas Jefferson stated, “the United States should trade with all nations of the world, but never become entangled in foreign alliances or the internal matters of other nations”. In a twist of irony, Thomas Jefferson’s statement would be lauded by the Chinese Foreign ministry. It is absolutely none of the US damn business to tell the rest of the world how to run their lives, manage their governments, or run their respective monetary policies. Notice that the Chinese don’t have to worry about the problem of airplanes flying into their skyscraper buildings. The Chinese nation state can also do without the self serving advice from Washington bureaucrats Henry Paulson or Robert Rubin.

Regards,