Open thread August 11, 2015 Dan Crawford | August 11, 2015 8:12 am Tags: open thread Comments (13) | Digg Facebook Twitter |
Any thoughts on the Chinese devaluation last night? It was only 2%, but it’s an odds on bet there will be more of this in the months to come.
In 2014 the trade deficit with China was $315b. It’s headed the wrong way. China is exporting some of its deflation to the US.
What to do? Sit back and watch, or take out a stick?
Good piece at Bill Mitchell’s Blog on the LMCI – shows the labor market weakening.
After reading this got me to thinking of a FED nit in the employment criteria used to change rates. Why not let wages rise at a decent clip? Which led me to reading about NAIRU and NAIBER (non-accelerating-inflation-buffer employment ratio). See more on the latter here:
Nanute – There are a number of options. Some are small beer, others could have significant consequences.
By law, the Treasury can name a trading partner as a currency manipulator. As of last April, China was not on that list. Much has changed since then.
Go to an extreme and there would be tariffs.
I don’t think there are any good sticks, but there are a few lying around.
The China story is just a part of the global currency war going on. Go to the following chart that tracks the $ vs major trading partners. The $ is 15% higher in just the last year. The US is losing the war…
The legislation on currency manipulation:
I am pleasantly surprised with your comment at August 11, 2015 4:11 pm.
I would have sworn that you were solidly in the Global Free Trade camp. Did I misjudge you or have you had some recent conversion?
Certain some strange statements around the entire devaluation. Talking about markets and letting it float. Maybe they are, maybe they’re just using it as an oddly colored towel to cover for a fast and loose intervention.
But if they’re intervening on this sort of scale, how long can they do that for? Longer than the Swiss…but how long?
I should clarify “on this sort of scale” to mean: moving the currency 2% today, and making a policy statement that you can move the currency by 2% per day every day.
lol Matt, the L what?The labor market is weakening, really? Was it weakening 1999 like it shows as well?
Why even bother with these nonsense posts.
They can manipulate currencies, but this was a blip. It will be old news soon enough. The damage was done between 1997-2005. You missed it.
JimH – I’m an ardent free trade guy. BUT free trade does not mix with currency manipulation.
The rage, it peaked at 8.3 in Oct 1999 and then declined right up through the 2000 recession. Right now we dipped into negative territory since 2012.As oil capex continues to get cut it may stay weak. This has been a horrible labor recovery either way you cut it since 2008. So hardly nonsense.
It doesn’t appear to me that any of the commentators are tired of being raped by China probably because you have not felt the pain. If we had a leader we would have the variable rate balanced trade agenda tariff in place and we would not have to worry about all this currency manipulation b.s. from anybody. Perhaps we will now kick the can down the road for China to become a world reserve currency but that is not going to stop or save all the many thousands more lost jobs coming . Japan has been playing this game for many years and now we get Iran and China joining in.as we again sit and do nothing. There is no such thing as free trade or a free lunch. The American middle class has been paying the price all along. I believe that we need a congress, a senate and a president that will enact the variable rate balanced trade agenda now, today. I don’t think we can wait until the election is over will be too late for our economy. We need a leader who is not afraid to stand up to China and all the manipulation and deception is just economic war that we are loosing badly… More of the same elections will change nothing as the greedy self serving-looting government and corporatocracy uses debt as a weapon against US citizens- middle class…This is the great power money interest has over democracy.
BKrasting wrote: “I’m an ardent free trade guy. BUT free trade does not mix with currency manipulation.”
But some types of currency manipulation are okay. It is okay to sell products into the US economy and then leave the proceeds in dollars instead of taking yuan home. (Thus keeping the yuan cheaper when compared to the dollar or the dollar higher when compared to the yuan, whichever.)
Maybe we should put an end that type of currency manipulation too?
“America could, for example, enforce rules to prevent other countries from accumulating too much of our currency. In fact, others do just that precisely to avoid exporting jobs. The most recent example is Japan’s intervention to hold down the value of the yen when central banks in Asia and Latin America started buying Japanese debt.”