GOP Debate #1

[LegendKiller]

Oh no, China devalues its currency again!

http://www.cnn.com/2015/08/12/china/china-currency-explainer/index.html

Must be escalation of trade war rather than an economically developed nation using monetary policy to stimulate economic growth!

Fuck out of here you clown.

Yeah, monetary stimulus to drive export growth.

Exactly, get the fuck out of here.

 

[LegendKiller]

It's also worth pointing out that the reason for our trade deficits are completely different than what they have traditionally been. We used to run trade deficits because of energy imports. Now we're a net exporter of energy, and prices are low anyway.

We are currently running trade deficits because effective stimulus policies have increased consumer demand (i.e. made consumers richer) and US consumers are buying more imports as a result.

Please show me where we are a net energy exporter.

Furthermore, please show me where we just started running trade deficit because of stimulus policies? That'll be an interesting correlation.

Which consumers are "richer" exactly? I'd love to see that.

Imports are up not because wealth has increased. Imports are up because manufacturing is down and we import because that's the only way to get the goods (which are also cheaper relative to US) due to offshoring from currency/labor arbitrage.

 

[Blackjack200]

First you say we aren't beggared, then you go to point out that the distribution is wrong (which I agree) but it is wrong because we have beggared specific classes to the benefit of others.

The byproduct of generating economic growth is balance of trade when the person you are trading against has an appreciated currency relative to yours and you do not let yours naturally float. This is the same problem Germany has with the rest of the Euro. A German DM should have a much higher rate than a Greek Drachma, because the current account deficits. However, since they have one currency, and Target2 doesn't result in currency adjustments, you get accumulation of reserves, through Target2, that doesn't result in relative appreciation, resulting in cheaper German goods being sent to a debtor nation without any adjustment for currency.

You've unwittingly stumbled onto an important reason for China's peg: it makes Sino-American trade easier if the rates are stable, just like the Euro makes intra European trade easier. And similar to the Euro problem, China found itself glued an American monetary policy that didn't make sense. In fact, Krugman points out that keeping the peg has caused the Renminbi to appreciate relative to other important (for China) currencies. That's a big reason for the depreciation. Krugman suggests that if the Renminbi is allowed to float now, it will actually fall, and quite a bit. China keeps costs low in many different ways, trashing their environment, stealing IP, and ignoring worker rights.

The problem with Frankel's analysis is that it relies almost solely upon [the notion that a point in time (2014) matters. It doesn't. Especially when that point of time has other factors *and* the peg is in place within a narrow band. That narrow band has obviously resulted in lower growth, so what did China do? Depreciated to stimulate growth. Since they are export dependent that growth comes on the backs of the US, mainly because their goods become cheaper, while our goods exported to China become more expensive. Thus they accumulate more reserves.

2014 is significant for the shift in American monetary policy from pumping $85 billion a month in June 2013 when the taper began, to $0 in October 2014. The USD immediately appreciated against the EUR, GBP, and KRW, and so did the pegged CNY.

Furthermore, he ignores that the automatic balancing of FCR, excluding temporal actions, would now lock China into a deflationary spiral that they couldn't get out of. They have fucked the entire globe, and themselves, and the US. They have allowed too much to accumulate, too quickly, and now it is at the peril of everybody. If they are lucky they'll get a Japan style malaise, but that's only after they'll try to depreciate the shit out of their currency, again, to generate economic gains through US consumers (and workers).

They're depreciating it because they cannot support it anymore. Capital is leaving the country.

But our currency manipulation is wholly different. 1) Chinas (mostly) USD peg results in almost no differential for our system. Notice other countries that have become larger exporters to the US? Vietnam, pretty much pegged, among others. And 2) US is far less export driven. Please show where the US is a net energy exporter. Shale longevity is still unproven given the rapid decline of the wells.

I was wrong, we are not a net energy exporter. But the trade gap in energy has narrowed considerably, and energy prices could head lower if China does contract and Iranian production increases.

Our currency manipulation is indeed different in both method and effect, but ultimately we are still manipulating our currency to pursue our national interests, and those manipulations have a huge impact on our trading partners. So this vilification of China is quite silly.

You're a Johnny Come Lately to the student loan problem. I've been talking about state budgets for a very long time. If I didn't think you'd dox me I'd show you some actual work I've done on it, professionally. Here is one from 2014

http://forums.anandtech.com/showpost.php?p=36578397&postcount=204

I also started discussing tuition costs in 2009.

My point is that the higher education issue is a problem of tuition and government cuts, China doesn't really factor in.

 

[Blackjack200]

Lol - the "turnstyle days". Nice, the pass rates for my cohorts were not very high. I took 1 in 04, 2 in 05 and 3 in 07 (took year off for illness in my family). Let me ask you, do you have your charter? Did you pass in one shot on all 3?

Failed L1 in Dec '13. Registered again this December.

Yeah, monetary stimulus to drive export growth.

Exactly, get the fuck out of here.

Yes, and domestic consumption. China wants to be like the US. They want the CNY to be a reserve currency someday, they want a consumer economy.

Please show me where we are a net energy exporter.

Furthermore, please show me where we just started running trade deficit because of stimulus policies? That'll be an interesting correlation.

Imports from China fell from 2008 to 2009, when the US economy contracted. Growth returned the following year and imports expanded again.

Which consumers are "richer" exactly? I'd love to see that.

Imports are up not because wealth has increased. Imports are up because manufacturing is down and we import because that's the only way to get the goods (which are also cheaper relative to US) due to offshoring from currency/labor arbitrage.

You're being obtuse. Most consumers certainly are richer than they were in 2009-2010, and demand is sensitive to consumer wealth.

Anyway, what's going to happen when self-driving cars and trucks start eliminating jobs in the transportation industry? Won't have big, scary, mean China to blame for that one, will we? Who can we point the finger at? Maybe we should worry more about our domestic policies and things within our control.

 

[fskimospy]

I don't have a lot of time right now to respond, but I would appreciate it if you provide a metric from a legitimate source that shows that most consumers are RICHER to any significant degree. Your "voodoo math" was very amusing; however, I'd like to see something a little more credible if you don't mind.

You've already been shown a number of them.

You're confusing median income for employed people with the income/wealth of the average consumer. They are very different things.