This, along with rumors that the Chinese will again allow (engineer) the devaluation of the RMB, are more than reminiscent of the beggar-thy-neighbor policies enacted in the early thirties that allowed (ensured that) the Great Depression would become ‘Great’.

For one (at that earlier time), the competitive withdrawals from gold convertibility. France was one of the first to do so and France (like other ‘early adopters’) saw output rise again sooner than late adopters. The US was one of the last countries to go off the gold standard.

We’re back again (squarely) at a situation where production has grown enormously (China [and several other countries in E Asia]) and now vastly exceeds global demand (given that the debt-levitating US consumer has fallen back to earth).

There was no orderly way to unwind this inequality at the time of the Great Depression. And so one of the most common of the traditional solutions imposed itself: war.

CHina is sure to blame, so are Japan and germany.

In fact, nothing has changed since the demise of the gold exchange standards and the good ol keynesian times :
The blame is always put on the deficit countries even though it turns out surplus countries do absolutely nothing to end their surpluses.

China will hit recession soon and that will serve it well.

All in all, Europe might be the only continent relatively in balance. THe only problem is : will it stand united ?

UK SPain Ireland have had the most massive housing booms and deficits. Germany has been the surplus country for long and has had no boom since the early 90’s …
I kow little about eastern europe. I bet they must rely on exports, though no proof.

I have long said China was doing nothing to rebalance its econoomy, just as the USA were doing nothing to fight preventively the coming debt deflation crisis.

Everything happening now is just sad because it was self evident that it would happen this way, Data was there everywhere to tell the US and Chinese leaders beware of debt deflation crisis, rebalance your respective economies. But no one dared move first.
And there we are.

Collectively humans do not seem bright.

i am just curious and i cant imagine how will they repay them back.

departure from this risk getting yourself into a stalinistic world economy

http://sun-bin.blogspot.com/2008/11/china-unhelpful.html

To your final paragraph:

That means that you do not expect Obama to interact strategically when China does so? Suppose China decided to do something contrary to long standing (rational or not) demand like CNY/USD appreciation by announcing a steady depreciation back to 2004 levels (whether that would be fasible or not). Would the US remain mute?

I find it very unlikely that Obama is going to undertake much in the way of protectionism. He has assembled a huge coalition of very different people, and within his coalition of Wall Street bankers, Mid-West auto workers, California high tech workers, and Latino migrant farmers, you have lots of people that are very pro-globalization, pro-trade, and no one that I can see that would obviously benefit from tariffs or trade restrictions.

It’s really important to realize how much the economy has changed since the 1980’s, and Obama won because he is speaking to the present and future rather than to the past. For example, in talking about jobs, jobs, jobs, Obama is not only talking to Michigan auto workers but also to Wall Street investment bankers that have been losing jobs by the tens of thousands in the last year. He has the huge and difficult job of keeping people in his coalition happy, and I don’t see how any sort of trade restrictions or China bashing is going to fit in any of this.

Good to see a discussion on behavioral economics here. I guss it all depends on what you want to use this reasining for. Mainstream theoretical economics (the kind some people call neoclassical when it is used ideologically by policimakers who ignore its necessarily reductionist nature) is a wonderful axiomatic structure and an excellent starting point for enquiry. The dichotomy mentioned in your discussion is also reductionist and not very useful in discussions on policy. Of course very few people are pathologically selfish and very few people are saintly altruistic. I think that twosif’s point that groups (where preferences are developed in ways members would consider “rational” (not in the technical sense, but in the sense that informed rational argument plays a role, even when autocrats state their preferences, because even an autocrat needs to delegate some implementation work) tend to adopt rational (and then usually “selfish”) policies because it is much easier to convince or impose behavior that “serves the interests (as defined ad hoc)” than forces the goup to make sacrifices that are perceived as not to benefit the members or even the leadership itself.
Despite the fact that the rational choice movement in theoretical politics has basically failed to produce the kind of influence over applied politics that its economics cousin had over applied economics, there is no real alternative for what often is called “realism”. What 2fish attributes to the players in the US-China relationship (which contains elements of conflict as well as cooperation, a “marriage de raison”) seems to be right. The consequence is, of course that China will not give in to US demands and vice versa, as long as neither exceeds the boundaries of the marriage. Most threats and little provocations that we can observe are cheap in terns of US-China relationship (i.e. low cost) and quite valuable politically (high benefit) domstically. I guess the tax rebate is timely and will silence some of the criticism in the Pearl Delta. It also sets up the game, in a probing way, with the incoming adminsitration: will they ignore this (probably not if a moderate observer like Brad is unhappy about it) and, more interestingly, will the incoming administration find a response that prevents further erosion of the position re the CNY/USD rate, AND avoids overt protectionist (very expensive) policies as some Democratic groups may desire (very little benefit).

I didn’t say ignore those lines. I said there is no reason to be tyrannized by them.

Twofish: If you aren’t selfish and ruthless, you just aren’t going to find yourself in a position of economic or political power or stay there for very long. I know a lot of nice, kind, selfless people, but they are just not going to be running a government..

As I said before the whole categorization is completely bogus. Outside the NYSE, real people are neither “selfish” nor “selfless”. Or if you prefer they are usually both.

Such simplistic assumptions about behavior won’t help you understand the world. It’ll help you defend ideological positions though.