hypocritexposer said:
Clinton Talks
“In talks with Clinton, China will ask for a guarantee that the U.S. will support the dollar’s exchange rate and make sure China’s dollar-denominated assets are safe,” said He in Beijing. “That would be one of the prerequisites for more purchases.”
http://www.bloomberg.com/apps/news?pid=20601009&sid=a_dsDz145J_A
The Bloomberg article was pretty good. We need a devaluation of the dollar so the Chinese stop subsidizing their trade. Yes, it will mean that our interest rates don't get subsidized by China but that is exactly what is needed. The Chinese need to sell those treasuries and buy U.S. goods. It will help our economy because of the demand and get us to take a more responsible look at our economy. For too long, the "devil's" deal with China has been that China manipulates its currency (this is what happens when there is no floating currency), has a trade surplus and "invests" that trade surplus in the U.S. by buying assets which includes treasuries. When they buy treasuries (to the degree they have) they artificially lower interest rates and indebt future generations of U.S. citizens who are on the hook for the borrowing. These are the problems we have been experiencing and have now come to a head in our economy. If we want the train to keep going in the same direction, we will cave to the Chinese in various ways. If we want to stop the nonsense that has allowed politicians to quietly sell out economy unnoticed by the masses until now, we will tell the Chinese they made a bad investment. It seems with the spending and treasury buying we are flooding the market with dollars so we are going to inflate our way out of the Chinese finger handcuffs and will not be able to rely on foreign governments to subsidize our govt.'s reckless spending.
Right now, with the velocity of money (the measure of how the economy and the turnover of internal trade) is low so pumping dollars in the system is fine. We will have to take those dollars out when the velocity increases (the economy gets better) so that we do not have the inflationary spiral. Paul Volker is on the administration's advisory board and put an end to the stagflation under Reagan (stagflation or inflation in othe ways is the potential problem with this loose money policy):
"Volcker's Fed is widely credited with ending the United States' stagflation crisis of the 1970s. Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983."----(from Wiki on Volker)
The trick, which the govt. in general has a poor track record, is to reduce govt. outlays and or loose money policy after the velocity increases.
I sure hope they are successful. We need some sort of a "jubilee" in this country due to the concentration of wealth and all the political policies it has been buying through corrupt or incompetent politicians and their appointees, and it sure seems like we are getting it. It does bring a lot of uncertainty for many but also a lot of opportunities if handled correctly.
If we do have to give China something, I hope it is Bill and Hillary who started this mess. It is better than giving concessions to them that have actual value.