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Economy
In reply to the discussion: STOCK MARKET WATCH, Wednesday, December 14, 2011 [View all]Demeter
(85,373 posts)8. Economic Conflicts with China and Class War in the United States By Dean Baker
http://www.nationofchange.org/economic-conflicts-china-and-class-war-united-states-1323792610
....there is not a common U.S. interest against China. The interests of the 99 percent differ greatly from the interests of the 1 percent. Until this fact is recognized more generally, there is no possibility that our economic relations with China will change in a way that benefits the vast majority of working people in the United States...In short, there is a very clear class divide in U.S. negotiations with China. The 1 percent have their laundry list of special concerns that will make them even richer. The 99 percent care about a lower-valued currency to create millions of manufacturing jobs. We will see which side the Obama administration is on.
.............................................................................
The central issue with China is the fact that the dollar is over-valued against the Chinese currency. This over-valuation is the result of the explicit Chinese policy of pegging its currency against the dollar. The peg is often referred to as manipulation, but it doesnt really fit the bill for two reasons. First, it is an official policy. China targets the value of its currency quite openly; it is not doing it in the middle of the night when no one is looking. The second reason is that Chinas mechanism for targeting the value of its currency is something that on alternate days our Treasury actually requests. They buy up U.S. government debt. If this seems absurd, it should because it is. The way in which China keeps its currency down against the dollar (or keeps the dollar up against its currency) is by buying huge amounts of U.S. government bonds.
The media often tells us that we need China to buy our debt. This is not true. There are plenty of other potential investors, including the Federal Reserve Board. However we cannot both want China to buy U.S. government debt and then complain about Chinas currency manipulation. This is how they manipulate their currency...But the currency issue is only one of many complaints that routinely appear in the list of grievances against China. The longer list includes complaints that China doesnt respect the patents and copyrights of companies like Pfizer and Disney, they dont grant full access to financial giants like Merrill Lynch and Goldman Sachs, and they put up barriers to retail chains like Wal-Mart who want to open up stores across China. These sorts of items are often lumped together with the undervaluation of the Chinese yuan to make a sort of economic indictment against the Chinese government.
One can argue the merits of each of these issues, but that doesnt have anything to do with the real world. There is no court where we are going to prosecute China for its economic wrongdoing. China is a huge powerful country. Its GDP is nearly 80 percent of U.S. GDP. By comparison, at its peak the GDP of the Soviet Union may have been half as large as the GDP of the United States...We are not ever going to be in a situation to dictate to China what it can and cannot do. We are going to have to negotiate with them as the equal that they are. This means that in order to get some concessions from Chinas government on issues that we care about we will have to give up on other issues.
....there is not a common U.S. interest against China. The interests of the 99 percent differ greatly from the interests of the 1 percent. Until this fact is recognized more generally, there is no possibility that our economic relations with China will change in a way that benefits the vast majority of working people in the United States...In short, there is a very clear class divide in U.S. negotiations with China. The 1 percent have their laundry list of special concerns that will make them even richer. The 99 percent care about a lower-valued currency to create millions of manufacturing jobs. We will see which side the Obama administration is on.
.............................................................................
The central issue with China is the fact that the dollar is over-valued against the Chinese currency. This over-valuation is the result of the explicit Chinese policy of pegging its currency against the dollar. The peg is often referred to as manipulation, but it doesnt really fit the bill for two reasons. First, it is an official policy. China targets the value of its currency quite openly; it is not doing it in the middle of the night when no one is looking. The second reason is that Chinas mechanism for targeting the value of its currency is something that on alternate days our Treasury actually requests. They buy up U.S. government debt. If this seems absurd, it should because it is. The way in which China keeps its currency down against the dollar (or keeps the dollar up against its currency) is by buying huge amounts of U.S. government bonds.
The media often tells us that we need China to buy our debt. This is not true. There are plenty of other potential investors, including the Federal Reserve Board. However we cannot both want China to buy U.S. government debt and then complain about Chinas currency manipulation. This is how they manipulate their currency...But the currency issue is only one of many complaints that routinely appear in the list of grievances against China. The longer list includes complaints that China doesnt respect the patents and copyrights of companies like Pfizer and Disney, they dont grant full access to financial giants like Merrill Lynch and Goldman Sachs, and they put up barriers to retail chains like Wal-Mart who want to open up stores across China. These sorts of items are often lumped together with the undervaluation of the Chinese yuan to make a sort of economic indictment against the Chinese government.
One can argue the merits of each of these issues, but that doesnt have anything to do with the real world. There is no court where we are going to prosecute China for its economic wrongdoing. China is a huge powerful country. Its GDP is nearly 80 percent of U.S. GDP. By comparison, at its peak the GDP of the Soviet Union may have been half as large as the GDP of the United States...We are not ever going to be in a situation to dictate to China what it can and cannot do. We are going to have to negotiate with them as the equal that they are. This means that in order to get some concessions from Chinas government on issues that we care about we will have to give up on other issues.
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