http://english.aljazeera.net/indepth/opinion/2011/04/2011422162154348108.html
Imports wouldnt curtail economic growth. In contrast, it would only help support it. Any form of private consumption would lead to economic growth as its a major element in GDP evaluation. Consumer spending, whether it is on foreign or domestic goods is a major contributor to economic vitality. But it wouldnt necessarily reduce inflation in China because goods sold from the united states would normally be priced above what goods are priced in China. In order to reduce inflation, China would have to import the product at american prices, and then sell the product domestically at an even lower price. This way, setting the price below market value wouldnt create shortfall in goods since the state would simply use imports to cover the gap.
The logic isnt flawed. However currency appreciation is the more preferred choice. And if not, at least continue to drive up the money supply. Stagnating the money supply and reducing bank loans would slow down economic growth. Thats the very reason why Japan entered a recession. It tried to keep export prices stable by holding down money flow as appreciation in the Yen moved to counter that.
Instead of trying to keep a favorable trade balance, the better policy is to maximize what you are capable of building and producing. Instead of holding onto foreign bonds and currencies. The best thing to do is to let them go. Trade them towards tangible and physical assets. The balance in trade measured in currency becomes irrelevant as the balance is best measured in the total amount of physical assets than can be delivered to China in exchange for fiat currency and finished goods.
americans will eventually get their trade balance with China, but they will be losing their currency as a sacrifice. Bonds and currencies dont require much effort to produce. They can be performed by key strokes. Physical assets and commodities however do require significant effort to produce. And that thus should be your main focus.
Sunday, May 15, 2011
A response to trash propaganda
The article written by Nouriel Roubini below assumes the economy slows down due to bad investment strategies and nonperforming loans. It assumes other things like income disparity and other ridiculous myths.
http://english.aljazeera.net/indepth/opinion/2011/04/2011415133455105416.html
China is the world's largest economy. And it has little to do with investment strategies and the performance of its loans. It has to do with money supply. On a very paper or digital level, a world seen from spreadsheets and databases, the economy is simply a set of numbers. It doesnt really matter if loans are profitable to banks, or whether or not people are even paying back their loans. What matters is whether or not liquidity continues to enter the money supply. As more money is poured into the previous pool of money, that pool gets bigger and the economy appears larger.
Chinese national banks could continue to write off loans whether they are good or bad. So long as the People's Bank of China continues to distribute more of it, there will be more money to make. The single most powerful force in China's economic growth is this single Central Bank. A single 35 trillion RMB injection into the Chinese economy would almost double the Chinese GDP over night. It has little to do with goods or services, exports or imports, or the performance of loans. It is simply an act of money creation.
http://english.aljazeera.net/indepth/opinion/2011/04/2011415133455105416.html
China is the world's largest economy. And it has little to do with investment strategies and the performance of its loans. It has to do with money supply. On a very paper or digital level, a world seen from spreadsheets and databases, the economy is simply a set of numbers. It doesnt really matter if loans are profitable to banks, or whether or not people are even paying back their loans. What matters is whether or not liquidity continues to enter the money supply. As more money is poured into the previous pool of money, that pool gets bigger and the economy appears larger.
Chinese national banks could continue to write off loans whether they are good or bad. So long as the People's Bank of China continues to distribute more of it, there will be more money to make. The single most powerful force in China's economic growth is this single Central Bank. A single 35 trillion RMB injection into the Chinese economy would almost double the Chinese GDP over night. It has little to do with goods or services, exports or imports, or the performance of loans. It is simply an act of money creation.
You are wasting bandwidth.
They could have used any method to keep their factories humming. Regardless of who was printing the money to keep Japanese firms motivated to keep producing output. Whether it was the federal reserve or the Bank of Nippon. As long as that money reached the hands of Japan's industrialists and working class, they will continue to do what they always do.
An order is an order, a transaction is a transaction. It doesnt matter if it that transaction stems from american quantitative easing or Chinese quantitative easing. The result is the same. Once that money is delivered whether its for rain coats or for J20s, people then go to work.
Bullshit. Japan chose that outcome for itself. They could have continued to run monetary easing policies to keep the economy going to light years and beyond. They intentionally chose to stagnate the nation's money supply.
The Japanese doubled their Yen supply on a five year basis. This created record inflation and record economic growth. By the 1980s, that velocity began to slow by the order of Japan's finance ministers. They bought it to an absolute halt by around 1995, where the Yen supply barely grew an inch between then and 2000. That is what caused Japan's recession. And every year, Japan complains about deflation this and deflation that. But look at the Yen supply. You arent printing any new money, you arent loaning any new money, so how can there be new money?
Cut the crap, China is fine. I would rather have high velocity economic growth and high velocity inflation, than a recession with no jobs, no economic growth, and declining consumer prices.
An order is an order, a transaction is a transaction. It doesnt matter if it that transaction stems from american quantitative easing or Chinese quantitative easing. The result is the same. Once that money is delivered whether its for rain coats or for J20s, people then go to work.
Bullshit. Japan chose that outcome for itself. They could have continued to run monetary easing policies to keep the economy going to light years and beyond. They intentionally chose to stagnate the nation's money supply.
| Year | Yen Supply | |||
| 1955 | 8,369,500 | |||
| 1960 | 16,009,700 | |||
| 1965 | 32,866,000 | |||
| 1970 | 73,344,900 | |||
| 1975 | 148,327,100 | |||
| 1980 | 240,707,315 | |||
| 1985 | 323,541,300 | |||
| 1990 | 440,124,900 | |||
| 1995 | 493,271,700 | |||
| 2000 | 501,068,100 | |||
| 2005 | 502,905,400 | |||
| 2010 | 477,327,134 |
The Japanese doubled their Yen supply on a five year basis. This created record inflation and record economic growth. By the 1980s, that velocity began to slow by the order of Japan's finance ministers. They bought it to an absolute halt by around 1995, where the Yen supply barely grew an inch between then and 2000. That is what caused Japan's recession. And every year, Japan complains about deflation this and deflation that. But look at the Yen supply. You arent printing any new money, you arent loaning any new money, so how can there be new money?
Cut the crap, China is fine. I would rather have high velocity economic growth and high velocity inflation, than a recession with no jobs, no economic growth, and declining consumer prices.
Not in the least likely.
Strengthening the RMB would further strengthen economic growth. Since economic growth is calculated on the total amount the RMB appreciates against the dollar or against other currencies. An appreciation of 10 percent in the RMB would equally mean a 10 percent increase in economic growth.
All of that is true, and has been stated repeatedly previous times. But the fact still remains. A stronger currency would only strengthen the economy even more. Likewise, a 10 percent appreciation of the RMB against the dollar is a 10 percent depreciation of the dollar against the RMB. Thus any currency appreciation in the RMB would also mean a depreciation of the us economy against the Chinese economy.
The major part of economic growth comes from inflation. This is why consumer prices rise every year. The total amount of money produced that goes to GDP growth is never equal to real goods and services produced. Otherwise, consumer prices and commodities would remain stagnant. But they simply dont because money creation always outstrips the creation of goods and services. You arent explaining anything that people dont already know. And it doesnt really add to the discussion.
Purchasing treasury bonds has no influence on the value of the RMB against the dollar. Because the value of the RMB isnt determined by any set of supply and demand activities relating to treasury bonds. The value of the RMB is whatever Beijing says it is. They could purchase zero us securities, and Beijing could still undersell whatever the global price the RMB happens to be. Since they wouldnt have to purchase RMB at a higher price in order to inflate demand. All they would have to do is sell it below the global market price in order to produce more supply.
All of that is true, and has been stated repeatedly previous times. But the fact still remains. A stronger currency would only strengthen the economy even more. Likewise, a 10 percent appreciation of the RMB against the dollar is a 10 percent depreciation of the dollar against the RMB. Thus any currency appreciation in the RMB would also mean a depreciation of the us economy against the Chinese economy.
The major part of economic growth comes from inflation. This is why consumer prices rise every year. The total amount of money produced that goes to GDP growth is never equal to real goods and services produced. Otherwise, consumer prices and commodities would remain stagnant. But they simply dont because money creation always outstrips the creation of goods and services. You arent explaining anything that people dont already know. And it doesnt really add to the discussion.
Purchasing treasury bonds has no influence on the value of the RMB against the dollar. Because the value of the RMB isnt determined by any set of supply and demand activities relating to treasury bonds. The value of the RMB is whatever Beijing says it is. They could purchase zero us securities, and Beijing could still undersell whatever the global price the RMB happens to be. Since they wouldnt have to purchase RMB at a higher price in order to inflate demand. All they would have to do is sell it below the global market price in order to produce more supply.
Thursday, May 12, 2011
Currency mess
To simplify things. Money isnt important. Its just a medium to encourage and make transactions easier. People could have used stones and wood chips to exchange goods and services. But the official currency today is government printed money. Its not really the value or volume of the paper currency that gives credibility to a nation's economy. Its the total amount of productivity that can take place every single day, within every single year. That is the true value of a nation's economy.
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