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Originally Posted by LivinLOS
I find it fairly arrogant that America expect to simply tell another country what it should do with its own currency.. China will do whats good for China, not what is good for America.. When cheap consumer goods was spurring the US consumer to spend and that was touted as a way out of recession you didnt hear any grumbles from the US administration then.. Its hipocracy to want it at one point and then reverse course and expect another country to do something detrimental to thier own economic well being and benefit the USA's at the USA's request.. If the roles were reversed America would tell them to feck off..
Also Capital didnt go there for a better return, captial has accrued there because Americans bought Chinese goods, Chinese are not buying American goods.. Simple !!! American dollars go to China and China sends them 50 USD DVD players, Ipods, Plasma TVs, Clothing, etc.. They are able to produce these items at a fraction of what a US company can produce them at..
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I would not call this arrogance. A bit closer to the pot calling the kettle black. America's loose money policy has been bascially unsound, IMHO. Because the past 4 US administrations hae been very pro-free trade, and pro-globalization, they do not want to get into a tariff war with China. It would go againt the principles that they preach. However, China is flooding the US with cheap goods. China is contributing to all the problems that you decry with this policy. Raising the value of their currency would be an appropiate and resposible action, which in the long haul, would benefit all parties IMHO. You decry America's profligacy of 5% consuming 25%, but are not China, Japan, and many others(probably LOS included), encouraging America to do so. It takes two to tango. Nobody is forcing China to sells its' goods so cheaply, in fact, quite the opposite.
As far as an accrual of trade deficit dollars conributing to the boom in China, that is not entirely the case. It is probably a contributing factor, but look at what China is doing with trade profits. Buying US bonds, and attempting to buy US companies, like Unocal and Maytag. That is a lot smarter than plowing their profits back into their own economy. That would require spending the hard-earned capital and thereby distributing it back into the global currency market. They want to accumulate capital, and use it to control resources and acquire more sources of capital, not distribute it. Distributing the capital would dilute it, and also would weaken the dollar, same as letting their currency float would do.
Much of their current boom is being fueled by foreign investment. Foreign investors, including Americans, are bringing tons of new capital into China, because aggressive investors can make large returns there, rather than meager below inflation returns offered in American investments. This is another example of smart Chinese economic strategy. Why spend their hard-earned capital when they can get foreigners to build up their economy for them with foreign capital. Then their capital is free to go for control of resources, technology gained by buying foreign companies, and political clout which ultimately comes from holding enough US bonds to be able to wreak havoc on the US econoy if they chose to do so. Very good strategy. Plus they also get a free infusion of valuable technology when foreigners come in , build hi-tech plants and teach Chinese to operate them.
I wish Greenspan and the others at the controls running the US economy had the brains and balls the Chinese economic architects seem to have.