Whither the dollar-riyal-renminbi?
The funny thing about the dollar is that it is now kind of weak — except against the currencies of those places that actually have large current account surpluses.
The dollar is close to record lows against many European currencies, and at multi-year lows against the Canadian dollar and the Australian dollar.
But the yen is even weaker, and China and the Gulf still track the dollar. Between them, Japan, China and the GCC countries (or the oil exporters writ large, as North Africa and Russia peg to either the dollar or a euro/ dollar basket) account for a very large share of the world's current account surplus.
China did let the RMB rise by 1.5% against in q2 – but that is not anywhere near enough to make up for its large accumulated undervaluation, ongoing Chinese productivity gains and the dollar's slide v lot of other currencies. China has depreciated over the course of this year against its the currencies of its largest trading partner (the EU). No wonder China’s current account surplus is big and still growing.
A lot of press reports confuse appreciating against the dollar with a broad-based real appreciation. They aren't the same thing. Not when the dollar is sinking.
The Saudis didn’t even let the riyal rise. It fell along with the dollar. That certainly isn’t helping to offset the inflationary pressures associated with the Gulf’s growing desire to spend — especially in conjunction with a set of policy decisions that will increase the share of the windfall that is invested at home and reduce the share of the windfall that is invested abroad.
Oil at $70 plus and a 1.35-1.36 dollars/euro have attracted a lot less attention the second time around, but the combination is a sure recipe for both a large Gulf surplus – and a lot of gulf inflation. The Gulf’s surplus is falling (imports are no doubt way up, though perhaps not up 40% y/y like Russia’s), but it is still big.
And then there is the yen. The MoF isn’t intervening in the market to hold the yen down. Low yen interest rates, Ms. Watanabe and I suspect more than a few hedge funds - Jesper Koll’s work on the yen carry trade convinced me that it is sizeable — are more than sufficient. So far, the rise in Japan’s current account surplus has prompted bigger outflows and a weaker yen …
There has been a bit of talk about how Japanese housewives have bought yen when foreign investors have sold yen and sold when foreign investors were buying yen, stabilizing markets. But my read of the post March data (presented here by the Econocator) is that both Japanese day traders and the pros have been betting against the yen. Like Gillian Tett, I wouldn't bet that Japanese housewives always will act to stabilize markets.
Not all those borrowed yen though are flowing to the US. This isn’t 1998. The yen is low v. the dollar, but it is record low against pretty much the rest of the g-10.
Japanese investors — and a few hedge funds - can get more carry financing the US, Australian and New Zealand current account deficits than financing the US current account deficit.
And if they don’t want to finance a current account deficit at all, there is always the euro. The Eurozone’s surplus with eastern Europe and the UK – along with rapidly growing exports to the oil exporting economies – offset its growing deficit with Asia. And the euro no longer yields all that much less than the dollar.
The dollar had a bad week, even in the absence of any really bad data coming out of the US. Macro Man (twice), Barclays Capital (via the Econocator) and Bloomberg all have hinted that China might have decided to start the quarter by selling dollars. Macro Man on Friday:
In FX, meanwhile, the market (or, more specifically, central banks) have decided that they are buyers of EUR/USD at current levels no matter what. So after payrolls produced a run of stop losses down to 1.3568, Macro Man's best buddies the central banks have helped drive it up to a high of 1.3642.
A bit of central bank selling seems likely to have contributed to the dollar's recent weakness. But it seems to me that the dollar fundamentally has been on emerging market central bank life support for some time. There is a reason why central banks are able to move markets.
The dollar's yield differential against countries with better balance of payments fundamentals is shrinking – and, at least for now, the US isn't growing faster than the other major economies. And should US growth pick up due to an acceleration of domestic demand, well, the already large US current account deficit would get even larger. While the US current account deficit isn't as big as the Australian or New Zealand current account deficit (as a percent of GDP), the US trade deficit is actually bigger than either the Australian or New Zealand trade deficits — and that matters for the long-term dynamics.
Even with the weak yen, the dollar is now lower than it was in 2004 against the other major currencies – at least according to the Fed’s index. And the dollar is starting to drift down against the emerging world – see the Fed’s “other trading partners” series.
Here, though, the dollar remains fairly strong. Emerging currencies haven’t recovered from the 1997 crisis, even though their economies have. Indeed, the recent dollar depreciation against a basket of emerging economy currencies has basically just offset the depreciation associated with the set of crises of 2002-2003.
Bottom line: if you think the dollar is weak, just think how much weaker it would be if it was not attracting a record level of support from emerging economy central banks. Look at the COFER data through q1:
Using the COFER data to estimate dollar reserve growth — and thus central bank financing of the US — requires making a few assumptions about what countries that do not report are doing, but my best guess is that they are still buying a lot of dollars.
The COFER data only goes through q1, but I would be shocked if the data doesn’t show a further increase in emerging market financing in q2. The data from the 24 countries Christian Menegatti and I follow didn’t match the COFER data in q1 perfectly, but it generally matches up reasonably well – and it shows record intervention in April and May and then something of a fall-off in June. 
Any estimate though for q2 is very preliminary though, as a lot of key countries — notably China and many large oil exporters — haven't provided data for May, let alone June. And I am still puzzled by the gap between the countries we follow and the COFER data in q1.
No matter how much China revalues the yuan, it’s never going to be enough to narrow the wage gap with the Unuted States. The one hour wage of a U.S. auto assembly worker can cover the salary of the Chinese worker counterpart for an entire week. That is why while Toyota and Honda invest in state-of-the-art robotic systems for their U.S. assembly factories in Kentucky and Ohio respectively; by contrast, the Toyota and Honda factories in Guangzhou China utilize a significantly higher percentage of manual labor. In China, it is cheaper to substitute manual labor for automation. The American Big-3 car manufacturers have lost significant marketshare to higher-quality Japanese vehicles made mostly in the United States. The Toyota Lexington Kentucky factory is among the world’s most technologically advanced. Most of the mainstream Toyota vehicles including the Camry and Toyota are manufactured in North America; the higher-end Lexus vehicles are entirely imported not from low-labor cost China, but higher labor cost Japan. Toyota has overtaken General Motors as the world’s largest car manufacturer simply because onc car manufacturer builds highly reliable and fuel efficient vehicles, and the other company doesn’t.
In today’s Businessweek online, Boeing rolls out the 787 composite airliner. The 787 is the first large commercial jet to incorporate an all-composite fuselage and wing—about 50% of the plane is made from carbon-fiber materials. The lighter-weight materials combined with advances in jet-engine technologies have resulted in an airplane that will use 20% less fuel than similar-size aircraft.
http://www.businessweek.com/print/bwdaily/dnflash/content/jul2007/db2007079_638051.htm
If American industry is to successfully compete in the global economy, it will have to emulate Boeing’s success with developing the innovative 787 aircraft.
Demands for China yuan revaluation driven by rising U.S. xenophobia
Yuan’s Fastest Gains Fail to Quiet U.S. Lawmakers
http://www.bloomberg.com/apps/news?pid=20601089&sid=a_YGUj9kfEGo&refer=china
July 9 (Bloomberg) — China’s yuan is rising at the fastest pace since the nation’s central bank abandoned its link to the dollar in 2005, and U.S. lawmakers still aren’t satisfied.
The yuan’s rally has done nothing to curb U.S. politicians planning new protectionist duties on exports from China.
This is a very unusual occasion when trade protections are actually a good idea.
China will now allow the free market to work. So the US must price its goods competitively using other means.
Doing so will also lower US consuption and increase savings, two things that vitally need to happen.
China clearly has enough reserves to handle decreased demand for its tradeable goods.
Some argue it’s “dangerous” to punish China for not playing by the rules. But I believe it’s much more dangerous not to.
…Should say will “NOT” allow the free market to work.
Dave….sorry to say that your comments are too biased.
i would like to nullify your argument about difference in wages in china and usa….by giving example of IT workers in india.
in 1995, the average wage for a top notch IT guys was around Rs. 200,000 today its around Rs. 1,500,000. unluckily india is not very competitive in manufacturing wages with china….because of china’s currency manipulation.
india had to let its currency appreciate by 10% in last quarter….because of growing IT wages were causing high inflation.
DC — you also left out the fact that the ratio between toyota’s us sales and its us production is falling, as the increase in toyota’s us production has lagged its us sales. Clearly toyota production in the US helps the US economy (and us BOP) more than say GM production in China for sale to the US — I hope I have always been clear on this point: I want more (fuel-efficient) Toyotas to be made in the US, not fewer Toyotas.
Whew, I’ve been away for quite some time. Very informative post though with good charts. Any thoughts on Robert Mundell’s admonition for China to print more money? It’s counterintuitive but it might be worth looking into by the Chinese officialdom who hold him in high regard.
Emmanuel, I think the Chinese authorities are still busy exploring Mundell’s ideas on multinational currency unions!
Emmanuel — thanks for noticing the charts …
speaking of charts, any chance you might be able to extract and send to me a couple of the charts in the (interest) Chiamerica ferguson paper you blogged about a while ago — your skills there are impressive.
Biased? The American public votes with their pocketbook on the purchase of automobiles, a large expense in most household budgets. No one forces anyone at the point of the gun to purchase Japanese cars or Chinese textiles. Why aren’t they buying fuel inefficient and a low reliability “Hummer SUV” vehicles from General Motors? Why is the Kentucky manufactured Camry the #1 selling vehicle in the United States? Is Consumer Reports magazine also part of a conspiracy that rates General Motors vehicles among the most unreliable and Toyota among the most reliable? Is a devaluation of the US dollar versus the Japanese yen all that is required to rectify the industrial situation as General Motors management claims? Get real!
Guest:
India had to let its currency appreciate by 10% in last quarter….because of growing IT wages were causing high inflation.
Dave - Reply
There is too much hype surrounding India’s IT industry. Overall, IT employs only 3 percent of the Indian workforce, by official Indian government statistics. More than likely, India’s inflation rate is more impacted by weather patterns, with a higher percentage of its population engaged in rural farming.
Certainly, India’s english speaking IT industry is ahead in Western outsourcing over China, but this simply reflects the fact that the Chinese IT industry has more than enough domestic business. Moreover, the Chinese IT industry excels in outsourcing from Japan, with the northeast city of Dalian having a large percentage of workers fluent in the Japanese language.
India isn’t very competitive globally simply because China’s infrastructure is light years ahead of India. In fact, the Chinese high-speed railway network is today more advanced than the United States with train speeds raised recently to upwards of 250 km/hr on major trunk lines.
http://www.railwaysofchina.com/dongchezu.htm
With a much better primary school education system, the overall Chinese population is also much better educated than India. The state-driven Chinese economy is far better structured and organized for economic efficiency than chaotic India. Funny how, the biased US based media somehow always develops a case of amnesia on India’s problems, but exaggerates any and every problem in Chinese society.
P.S. I returned back from China last month. For the record, websites of the New York Times, Washington Post, CNN, Newsweek, and Washington Times are NOT censored or blocked by China Telecom. Even the Rgemonitor could be accessed from Guangzhou.
DC: “In fact, the Chinese high-speed railway network is today more advanced than the United States with train speeds raised recently to upwards of 250 km/hr on major trunk lines.”
Well, that’s not much of a bragging point. We all recognize our rail network sucks, but compare our air traffic systems. I think China ought be congratulated for what it has achieved in terms of infrastructure build out, but still recognize it’s a BIG country with lots of work ahead.
I second your point on the websites though. However, have you tried any controversial Chinese websites? They still seemed blocked and censored.
Finally, I would caution not to pin India on just IT or its education system. Sure, India pales to China in many ways, but its people are just as hungry for change. It may take some time, but it will happen.
dc — isn’t toyota in kentucky b/c the dollar collapsed v the yen in the 80s? and isn’t the weak yen one reason why a falling share of toyota’s us sales are us made cars? it isn’t gm v toyota. it is also us made toyotas v japanese made toyotas. the weak yen clearly weakens the incentives for japanese car makers to produce in the us.
Brad,
Toyota is in the US because rival Honda was the first to build factories in the Ohio. In fact, Honda manufacturers more cars in the US than in Japan. And Honda is still increasing US production with new factories in Indiana and Ohio for a new Civic vehicle and engines. Honda is also expanding with new factories in Guangzhou China, but for the subcompact Fit model in the domestic Chinese market. Honda’s corporate philosophy is to build vehicles in the markets they sell to. By the way, I was in a luxury shopping mall in Shenzhen with stores like Cartier, Tiffany, Gucci, etc. Also displayed in the shopping mall were Acura vehicles manufactured by Honda’s Ohio operation. The Japanese even do a better job of selling American-made products in the Chinese market than the Detroit Big-3 companies.
Dave…. you seem to make it a point to argue as though it is “china vs usa” or “china vs india”.
my post went as guest the first time.
my point was not that india is superior…but i just wanted to show how exchange rate can play a big role….
why are chinese products cheap……because of exhange rate, is that too hard to understand.
and how to keep chinese products cheap forever, keep the exchange rate the same.
even india does not wants to let its currency appreciate too much, but it was forced to do it to contain inflation……and in case of india i think its imports are almost as much as its exports so not much incentive like china to keep its peg with all its might.
btw i have not read anywhere why china does not want to let the exchange rate market driven. can you shed some light how it can be harmful other than that its exports will become expensive (and other countries will suddenly become competitive)
Will Japan Destroy the yen to save the dollar?
http://www.europac.net/newspop.asp?id=9132&from=home
by Peter Schiff
As the Japanese government continues holding short-term interest rates near zero while printing yen like it is going out of style.
The only logical answer I can offer is that the Japanese realize that if they stop the flow of global liquidity they will destroy the dollar and the U.S. economy. To survive, the U.S. must be able to both limitlessly exchange the dollars it prints for the goods the rest of the world makes and then pay low rates of interest on its IOU’s that foreigners accumulate as a result. Were the Japanese to turn off the monetary spigot and raise interest rates to normal levels, Americans would not be able to do either.
This scenario apparently terrifies the Japanese, as they fear that such a severe recession in American means similar problems for Japan. However, their fears are misplaced as their real problem is the enormous cost of trying to prevent this from happening. Their fixation on what might happen to Japan if the American economy were to run off the rails has blinded them to the far greater costs of trying to keep in on track.
techy2468
why are chinese products cheap……because of exhange rate, is that too hard to understand.
Dave - Reply
It’s mainly the cost of labor. For an unskilled textile worker to an electrical engineer, the wage differential between China and the U.S. is approximately 50-1 and 10-1, respectively. In other words, Intel or IBM can hire 10 Chinese engineers for the salary of 1 American engineer. Is that so difficult to understand?
Dave Chiang on 2007-07-09 15:45:47
Agree on point re cost of labor.
But if the cost of labor is so low, it suggests the cost of capital is very high. Is that necessarily the case?
Despite low global interest rates, the cost of capital is high relative to labor in the Chinese economy. Thus a Toyota or Honda car factory in Guangzhou will be significantly less automated than its counterpart in the United States.
In China, almost every business is significantly overstaffed compared to the U.S. For instance, on the Hong Kong thru train to Guangzhou, there will be 2 conductors per car, whereas even on Amtrak, there is 1 conductor for 2 cars. Productivity levels in China are much lower than in the U.S. but with wages only a fraction, it really doesn’t matter. To a certain extent, Chinese government policy encourages overstaffing at every level in both public and private enterprises to absorb unemployment. Believe me, with a 1.6 billion population, the Chinese government really has to try hard finding employment for everyone.
Brad: Interesting article: China should speed up the yuan’s rise” by Jonathan Anderson (www.feer.com); thoughts?
D. Chang: True, RGE can be accessed from China, but none of the links; i.e. Macro Man is blocked (that should make his day); and the train system is a nightmare and logistical bottleneck;
guest — I agree with anderson’s conclusions (namely china should accelerate the pace of rmb appreciation), tho not necessarily all of the logic leading to the conclusion.
incidentally, there are a few too many guests around, if you can, do pick a moniker “techy, a set of initials, whatever)
Guest on 2007-07-09 18:32:58:
Perhaps you should check with your ISP. Last time I checked, Macro Man wasn’t blocked.
DC:
I disagree about labor costs. If it were truly the main factor, then China should be much more competitive in areas where labor costs are high, such as engineers, economists, accountants and translators. Instead, China is very competitive in low to mid end manufacturing, where labor cost is low and higher end jobs are harder to come by, a point alluded to by Brad.
Incidentally, some in China are now suggesting that an exchange rate of 6:1 is very reasonable. Whether this translates into reality soon is anybody’s guess.
The Chinese government pace of RMB appreciation is appropriate given current economic conditions. The primary consideration of the China PBoC should be monetary stability for the Chinese economy, not a popularity contest among self-serving Western Economist pundits. Chinese officials always take foreign opinions with a grain of salt.
LC,
You write, “China is very competitive in low to mid end manufacturing, where labor cost is low and higher end jobs are harder to come by”. Well, one should remember that China started way behind the curve, and was playing catch-up for the past two decades. In Aerospace for instance, Boeing has decades of experience that will take a concerted effort by any competitor to overcome. But as a measure of how the Chinese aerospace industry has advanced, Europe’s Airbus is building a A320 assembly line in Tianjin with significant domestic fuselage content. In industry after industry, the Chinese have narrowed the technology gap with the rest of the world from automobile production, communication systems, to semiconductors. The South Korean government estimates that Chinese Industry has narrowed the gap to between 5 to 10 years versus leading edge Korean corporations in the electronics sector.
Anderson spent better half of the article arguing that revaluation is a non-issue. The reval argument is center on the heavy industry sector. I don’t see why tax won’t work better if it is sector specific. China had outright forbidden certain exports of smelted products and withdrawn a large amount of VAT rebates concentrated in this sector, since 7/1. For the products involved the effect should be equivalent to a rather large appreciation. It is likely that he penned the paper before this was announced? The effect of the policy change couldn’t possibly have shown yet — earliest would be on July export figures.
On currency hedging he brought up the issue without giving a satisfactory answer. Right now who other than the central bank can underwrite the USD/CNY hedging? With tax change it is simple for them to grandfather in long term contracts, not with currency changes.
Rural migrant wage inflation is a good thing, if sustained. That will drive domestic consumption faster than any reasonable appreciation. Why muck with that?
Could someone care to explain this ?
“india had to let its currency appreciate by 10% in last quarter….because of growing IT wages were causing high inflation.” ??
IT wages are causing inflation ? This is the funniest I have heard on this blog.
I thought its the inflation that is causing rising wages
well, higher spending by IT professionals is one source of inflationary pressure. but i suspect the real source of inflationary pressure was india’s large and only partially sterilized fx intervention …
hz — i am not sure a stronger rmb trades off with higher rural wages/ wages for rural migrants. indeed, i think there are a host of things china could do to stimulate domestic demand if net exports were not contributing so much to growth (note the june trade surplus — $26-27b … ) kind of big.
agree that anderson spent most of the article arguing that a revaluation really wasn’t all that important — and arguing with people like me — before concluding that china should move a lot faster than it is. i decided to focus on the point of agreement.
Brad,
I don’t have proof that there is strong link but one would think the more cost pressure coming from the appreciation front the less room to raise nominal wages. I am of the opinion that nothing stimulates spending faster than a rising wage coupled with a whiff of inflation.
Here is some adjustment the U.S. is going through: http://www.nytimes.com/2007/07/10/business/worldbusiness/10energy.html?ref=business
Want it or not, adjustments will be coming.
wow, and this:
http://www.nytimes.com/2007/07/10/business/worldbusiness/10energy.html?ref=business
Seems like policies always take the path of least resistance. But eventually reality catches up. The most likely adjustment scenario in my mind: energy and other input factors keep the inflationary pressure high; Fed/ECB have to keep interest rate high enough but the inflation pressure won’t really respond because it is exogenous, and eventually consumers have to capitulate thus reducing import demands; meanwhile China, facing stalling exports, has to stimulate domestically and urbanization will be energy and other input factors intensive and thus the pressure will stay on — its policy will counteract Fed/ECB, then we get some semblance of adjustments.
I somehow doubt that my potshots are terribly worrisome to Beijing, but if they are, then I guess that would explain the mysterious hissing I’ve been hearing on my home phone ;). I’d be curious to know if anyone else else is having the same problems as Guest above….
“…Xiamen authorities are considering new regulations to bar anonymous contributions and require websites to approve all postings…” http://www.guardian.co.uk/china/story/0,,2120808,00.html
re: “meanwhile China, facing stalling exports”
“…Mr Zheng is the most senior official to be executed since 2000 and the unusually harsh penalty and swift enforcement… underlines mounting government concern about the scandals that have damaged the reputation of Chinese products. “…we cannot be too optimistic about the current food and drug safety situation.” …the government is now rotating officials in key positions on a regular basis to prevent them from forging too close ties with companies…” http://www.ft.com/cms/s/86ea503c-2eb4-11dc-b9b7-0000779fd2ac.html
Macroman: where I live all typepad blogs are blocked; I’m sure it’s nothing personal -
brad - as it was you raised the ‘guest’ issue, and again here, and on the topic of anonymous posters, if you can explain how the monikers help you, others and the discussion in general as long as participants are free to use multiple ID’s. I did suggest date and time only as being the only accurate ID, along with the content and style of the commenter - no one protested. And if you really can’t distinguish, if your ‘guest comment critiques’ - which, I assume, have to include those using the ‘guest’ ID to establish dual, perhaps multiple ID’s - could also be posted to the site for discussion rather than emailed to ’suspects’?
‘Real’ names too, if not backed up by credible email address for verification, are of dubious merit. Responses to the ‘DC’ posts, (no reason to believe that’s the real name as the writer has lied extensively - actually boasts about it) when signed as ‘guest’, ‘anonymous’… differ… The moniker can distort and detract from the content have the potential to further distort, rather than clarity. At the end of the day, in my view, readers should be responding to what is being said, not the phony ID. But it’s your blog.
It is unfortunate that the DC posts, signed as DC or whatever other ID he/she may choose, seem to consume each discussion he/she enters, always bringing it back to same simple message, raising the concern of what can be done if/when CCP stooges, or fabricated wannabees with nothing better to do with their time, move in on sites outside of China and try to control the debate. These interventions have to have resulted in the loss of many ‘quality’ participants. But readers, in my view, should focus on identifying that type of content for what it is, regardless of the moniker, perhaps with a view of limiting, rather than inviting more of it.
The Chinese want nothing more than to live their lives without interference from self-serving U.S. Neo-liberals who understand little or nothing about China’s history or culture, but always seem to want to dictate to the rest of the world, how to run their personal lives, families and government. The rest of the world has a simple message to the United States, mind you own damn business !
The Chinese want nothing more than to live their lives without interference from self-serving U.S. Neo-liberals who understand little or nothing about China’s history or culture, but always seem to want to dictate to the rest of the world, how to run their personal lives, families and government. The rest of the world has a simple message to the United States, mind your own damn business !
And the rest of the world says the same thing to China’s army of military and industrial spies.
Written by on 2007-07-10 06:39:46
At the end of the day, we all have our axes - the example cited is certainly not the only one.
But vigorously expressed views can disrupt, rather than provoke thought, when recyled to excess.
It’s all a question of style.
i do not want to block discussion. i do want discussion to flow — and it is hard to have a real discussion when lots of “guests” are posting, especially if some “guests” are actually rather regulars …
dc is welcome to participate here. i don’t agree with his point of view, but it is representative of a strand of the debate. and since he posts with a consistent name, we can identify his contributions and evaluate them consistently. if he takes material out of context, that impacts on his reputation –
time identifies a particular post, but it doesn’t allow a reputation to be established, even for a internet only alias. I understand some people’s need for anonymity, and i understand that some want the added layer of anonymity that comes from something like guest or anonymous. but i also think that regular participants on this board should post in a way that makes it clear that they are posting regularly, and that allows us all to evaluate their contributions. simple as that.
re: “since he posts with a consistent name” - he/she does not.
dc — no posts as guest please. if something accidentally shows up as guest, put a note up indicating that it was you. thanks.
re: “It’s all a question of style”
question of intent - there can be many motives.
Dave… we cannot just mind our own business….everyone is now connected/meshed together because of globalisation.
selfish attitudes (leave me alone, i am happy with what i am doing) will just lead to confrontation…..and its not confrontation of the righteous…..its all show business by politicians…..nothing good will come out of it.
i am still waiting to hear, about why china cannot let its currency float as per market, when all other countries do not have any problem doing it.
(except for those who want to peg to the dollar).
i understand that china needs the export to keep growing but its leading to every other nation manufacturing loss because they cannot compete because of the currency manipulation. (one can say that other countries are not fortunate enough to only have cheap export business, they alos have higher end business hence they cannot devalue their currency to make their exports cheap)
i do agree with your argument that USA should reduce its spending and save a bit……but at the same time china is lending cheap money to buy more stuff (too irresistable for americans)
so i hold both parties responsible for irrational behavior.
To Brad and All Commenters:
Anyone can post using the “Guest” moniker (intentionally or not) even regulars. If commenters want to be “distinguished” for saying something, they should not be posting as either “Guest or blank” — complaining about it is “childish and waste of time and space”.
If you have something to say, just say it and be done with it (period). I for one am glad that Dave Chiang is spending his time giving his thoughts here — you should all respect that!
re: “complaining about it is “childish and waste of time and space”…” - your words only
techy2468 - You are taking the discussions here: exports, exchange rates, USA, China, etc too seriously!
Globalization does not require nor force us individuals to buy foreign made products — to me, discussions about Costs/Prices and Individual behaviors matter more than anything else. Who cares if one country is selling more or less as long its people don’t go hungry, commit frauds or crimes, and especially engaging wars for whatever reasons.
“Change starts at Home” meaning if one wants to see improvements here and else where, it first has to be willing to sacrifice something to see any improvements down the road — that is the true global “exchange rate” — not these “man-made” paper foreign currencies stuff that commenters here are so addicted to!
The RMB’s 1.5% Q2 appreciation quoted by Brad must have given the Chinese a negative (or close to negative) local-currency yield on their US Treasury holdings over that period.
Could it be that the Chinese will vigorously resist the idea of having their currency appreciate against the $US (for more than a short period) by more than the interest rate they receive on their $US holdings? While mathematically interest rate effects are a continuous function, psychologically there’s a huge difference between making a (however small) real return on your FX holdings and making a real loss.
Dave Chiang et al have an axe to grind. Go grind it somewhere else!