Comments on: Does a bigger boom imply a bigger bust?

By: ReformerRay

ReformerRay — Wed, 12 Nov 2008 03:01:15 +0000

Protectionism rightly has a bad name. But, the bad name should be limited to classical protectionism, which is the imposition of import restrictions on specific products whose domestic producers have political clout.

Imports can and should be restricted from entry into the U.S. by some means other than protectionism, as classically defined.

These other ways include “import certificates” as proposed by Warren Buffett and tariffs limited to all imports from the five nations that are responsible for 60% of the U.S. trade deficit in 2005 and 2006.

By: RebelEconomist

RebelEconomist — Tue, 11 Nov 2008 14:12:32 +0000

Twofish,

Sometimes (no, often) I think you just like being contrary. How is Citizen A going to finance and accumulate billions of dollars in treasuries without attracting the notice of the US authorities? Do you think that the US authorities would not already have powers to disrupt an arrangement like the one involving dillars that you describe, if, for example, Citizen A was working as an agent of a Columbian drug dealer? Capital controls are generally imperfect, but they can at least constrict capital flows while other adjustments are made. Try to be more constructive.

By: Monday morning links | Commodity

Monday morning links | Commodity — Tue, 11 Nov 2008 05:08:02 +0000

[...] climbs as commodities rally on China – ReutersOil jumps above $64 on higher stock markets – APDoes a bigger boom imply a bigger bust? – CFRHow Low, How Bad, How Long? – Hussman FundsLaying Out a Feast for Bears and Gold Bugs – [...]

By: satish

satish — Tue, 11 Nov 2008 05:01:30 +0000

if US want to make china to revalue, just buy all hard cash and deposits floating in the market. This will simply starve china which largely a cash based society of any liquidity in the system thereby forcing china to revalue.

By: bsetser

bsetser — Tue, 11 Nov 2008 04:40:22 +0000

2fish — just in case there is any doubt, i do support a fiscal stimulus in the us. my concern was that a global policy mix of stimulus in the us and various props for exports in china might work against a necessarily rebalancing. i had hoped consequently to see china also takes steps to stimulate its own economy – -and today’s measures are clearly steps in the right direction.

By: Twofish

Twofish — Tue, 11 Nov 2008 03:45:55 +0000

RebelEconomist: Existing money laundering regulations and supervision should make it impossible for countries to evade Reserve Control by disguising government acquisition of dollar assets, such as by using agent fund managers, on anywhere near the scale necessary to affect exchange rates.

No it won’t. US Citizen A buys US Treasuries. Citizen A then sells “redemption notes” to the Chinese government which entitle the holder to whatever US Treasuries are paying. Investment banks do this all the time. OK. You put a tax on all dollar assets. Fine, those redemption notes aren’t denominated in dollars. They are denominated in “dillars” in which one dillar happens to be worth exactly one US dollar. There’s no tax on dillar assets.

By: jwy

jwy — Mon, 10 Nov 2008 23:27:35 +0000

Mr. Setser, Im curious as to your opinion of how the global unraveling and recession will affect the rest of the BRIC economies sans China.

By: fly

fly — Mon, 10 Nov 2008 23:02:42 +0000

Patrice Hill: isn’t the prospect of China directing a good part of its reserves toward domestic spending worrisome for the United States?

bsetser: but i would rather see china buy more us goods than see china increase its overall purchases of US debt.

China will maintain a trade surplus against US, just like Japan, South Korea and other Asian countries. It’s a long term policy and not going to change.

Purchase of US debt is also for long term strategic and not investment reasons.

China will not sell its US debt holdings to finance domestic economy. They would rather print and devalue the RMB.

As long as China continues to rack up dollar reserves, their influence and power grow. That much is now evident.

For the US this is a losing game in the long run. American share of the global economy declines, as well as its influence and power.

What do you think of Warren Buffet’s idea of balancing trade with export credits?

By: credulous_prole

credulous_prole — Mon, 10 Nov 2008 22:58:58 +0000

The US is collaborating with China as far as I’m concerned: China stimulus = RFC a la chinoise.

EVERY country that can WILL stimulate, but the key is coordination.

Russia can participate or not, but it really doesn’t matter if it sinks: it only means cheaper energy and materials.

By: RebelEconomist

RebelEconomist — Mon, 10 Nov 2008 22:46:43 +0000

Although I think there are better ways of handling China's exchange rate policy, if the new US administration is considering protectionist measures, I would suggest that Reserves Control would be the most suitable.