RMB appreciation won't solve global imbalance

[china]

Economy


RMB appreciation won't solve global imbalance

(Xinhua)
Updated: 2010-10-06 15:51

Comments(16)

Print

Mail

Large Medium Small NEW YORK - Appreciation of the Renminbi (RMB) won't solve the global imbalance, because in any case the United States will continue to have large trade deficit, Nobel economics laureate Joseph Stiglitz said here Tuesday.
"We may start to import textile from Bangladesh and Sri Lanka, but we will not start to produce textile ourselves. We will continue import from other countries," he told reporters at a conference in Columbia University.

Related readings:

IMF urges cooperation to prevent currency war

Troubling currency interventions

China opposes US bill on foreign currency reform

US House of Representatives passes bill on foreign currency
"The basic problem in our macro-economy is that the United States saves too little," he said. "Our household saving rate went down to zero, now our household saving is increasing, but our government, national saving rate did not change, because the increasing deficit." "Even China consumes more, most of the consumption will not go to the importing from the United States," said the economist.
He also criticized the current monetary policy in the United States and the European Union, and decried its impact on global growth.
"There is lots of instability caused in part by the flood of liquidity from the Fed (US Federal Reserve) and the ECB (European Central Bank). The irony is that the Fed is creating all this liquidity with the hope that it will revive the U.S. economy. It is doing nothing for the US economy and causing chaos for the rest of the world," he said.

 

[damngrumpy]

The problem is the United States and Europe are buying too much from
the rest of the world, and not producing things domestically. Unless we
in North America especially begin to produce products for export, our
trade imbalance will never improve and the economy will not grow. We
cannot be sustainable as a nation of consumers without producing and
selling things to the rest of the world. Our companies have no loyalty to
the country, and the multinationals will deal with anyone even the worst
of rights abusers and claim they are trying to improve the lives of those
they are taking advantage of.
We need to define where we fit into the world before the world leaves us
behind and we become a back water like Greece.

 

[china]

The problem is the United States and Europe are buying too much from
the rest of the world,

What about Canada.......................

 

[earth_as_one]

Canada's manufacturing has been hit just as hard as the US and Europe. Thankfully Canada's economy also benefits from exporting raw materials to China, India and other countries which now produce the majority of the world's manufactured goods.

BTW, the Chinese RMB isn't appreciating in value. Its maintaining its value. The US and Europe are devaluing their currencies by printing money aka quantitative easing. That's also why precious metals, base metals and rare earth elements cost more in American dollars and Euros.

Which leads to a dilemma for anyone holding American dollars or Euros. As the US and Europe devalue their currency, holders of these currencies, are loosing value. At some point China and other nations will start dumping their $US and $E wholesale. Then the $hit will really hit the fan. Another financial crisis is coming, but this time, it will be about the collapse of the $US and loss of confidence in the fiat system. We are going back to the days when paper currencies were supported by gold, silver and other hard currencies which can't be printed.

FYI: I converted most of my RRSP to gold, Canadian resource companies and companies traded on the Shanghai Stock Exchange. I started doing this 2 years ago and I have now more or less completed the conversion.

Watch Out for Currency Wars - MoneyShow.com

 

[china]

At some point China and other nations will start dumping their $US and $E wholesale. Then the $hit will really hit the fan. Another financial crisis is coming, but this time, it will be about the collapse of the $US and loss of confidence in the fiat system. We are going back to the days when paper currencies were supported by gold, silver and other hard currencies which can't be printed.

FYI: I converted most of my RRSP to gold, Canadian resource companies and companies traded on the Shanghai Stock Exchange. I started doing this 2 years ago and I have now more or less completed the conversion.

Wise.

 

[captain morgan]

BTW, the Chinese RMB isn't appreciating in value. Its maintaining its value. The US and Europe are devaluing their currencies by printing money aka quantitative easing. That's also why precious metals, base metals and rare earth elements cost more in American dollars and Euros.

Which leads to a dilemma for anyone holding American dollars or Euros. As the US and Europe devalue their currency, holders of these currencies, are loosing value. At some point China and other nations will start dumping their $US and $E wholesale. Then the $hit will really hit the fan. Another financial crisis is coming, but this time, it will be about the collapse of the $US and loss of confidence in the fiat system. We are going back to the days when paper currencies were supported by gold, silver and other hard currencies which can't be printed.

FYI: I converted most of my RRSP to gold, Canadian resource companies and companies traded on the Shanghai Stock Exchange. I started doing this 2 years ago and I have now more or less completed the conversion.

Watch Out for Currency Wars - MoneyShow.com

Great observation about gold prices... The only other thing that i would add is that gold is (traditionally) traded in USD and the increase in the value of gold can be (in part) tied to the depreciating USD. That said, I don't know if the Chinese gvt is too keen on seeing the US dollar devalued so much considering that they hold so many greenbacks in T-bills.

The American Feds are in a peculiar position in that by devaluing their dollar, they can (relatively) pay-off their debt with less money (ie gold that is artificially increasing in value).... It will be very interesting to see what the federal Reserve does when gold hits the 1400-1500 mark... Perhaps drain out Ft Knox and settle a big chunk of their national debt?