| Topic: |
Religions > Atheism |
| User: |
"" |
| Date: |
19 Apr 2005 10:58:11 PM |
| Object: |
Ot economics question |
Can someone please explain this for me?
I'm totally baffled by the meaning.
The Dollar Danger
http://www.washingtonpost.com/wp-dyn/articles/A64605-2005Apr18.html
http://forums.delphiforums.com/atheistrefuge/messages?msg=1791.6143
Page A18
TREASURY Secretary John W. Snow did his best to sound serious over the
weekend about the fault lines in the world economy.
He called on China to stop pegging its currency to the dollar, a
reform intended to allow the Chinese currency to rise, easing the
flood of cheap exports that contributes to the record U.S. trade
deficit.
At the same time, Mr. Snow promised cuts in the U.S. budget deficit,
which would reduce the nation's consumption, including the consumption
of imports; Japan and the European Union were urged to promote growth,
which would suck in U.S. exports. All of these reforms are intended to
bring the nation's trade deficit back toward balance.
If they fail, markets may cut the trade deficit in their own blunt way
-- via a precipitous collapse of the dollar.
Both are pretty much over my head.
atheist@home#1554
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| User: "Yang, AthD h.c, Kicking AWOLs Cocaine Snorting Ass" |
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| Title: Re: Ot economics question |
20 Apr 2005 12:21:37 AM |
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On Wed, 20 Apr 2005 03:58:11 GMT, wrote:
Can someone please explain this for me?
I'm totally baffled by the meaning.
Typically when a country is running a large trade imbalance, the
exchange rate will depreciate, thereby bringing in the trade account
back into balance. For example, if Turkey buy a lot of grapes from
Greece, the Turkey dinar will become less vaulable versus the Greek
Drachma, so it is cheaper for someone for Greece to buy something from
Turkey. In this case we say that the "Turkey Dinar has depreciated
relative to the Grrek drachman due to trade account pressures".
The difference with the US is that the dollar has been the
international reserve currency since WWII, which means that
governments such as Japan and China buy greenbacks, not for purely
economic considerations, but for geopolitical reasons.
This might seems like a free luch for the Americans- we can buy all
the Toyotas we want without losing our buying power! but it's actually
pretty bad. Instead of having the international currency market
gradually adjust, the jump in the exchange rate could severely reduce
the real buying power of average Americans. More on this below.
The reason why the Chinese reminbi is pegged to the dollar is because
this increases the relative competitiveness of the Chinese good- Goods
made in China are cheaper as a result. But this is not a zero cost
strategy for China, in order to "peg" the exchange rate, the Bank of
China has to buy greenbacks to defend the exchange rate, which means
that China has a billion of US dollars in its reserve.
How do foreign goverments intervene in the currency market? They buy
US treasury bonds, which we constitutionally have to repay (or as
George W Bush calls these t-bills, "worthless IOUs", during his Social
Security phaseout PR tour). US t-bills are denominated in greenbacks,
which means that in order for Bank of Japan to buy US t-bills, they
have to first purchase US dollar, increasing the demand for the dollar
and indirectly affect the exchange rate. More than half of the world
demand for the dollar comes from government banks.
Now let's suppose that we have a president with zero fiscal
responsibility, who runs up a huge budget deficits. Now let's imagine
Bank of China, who has a few hundred billion dollars worth of US
dollars sitting in its vault, and they're hit by the realization that,
if the the US goes over the cliff because it has zero fiscal
restraint, all that US greenback might be as worthless as a Weymar
Deutchmark, so it might be prudent for them sell off all their
greenbacks. Now imagine Bank of Japan, the Bank of Taiwan, and all the
large institutional holders all doing exactly the same thing, causing
the dollar to crash.
What is the effect of the dollar crash? Imagine alll of a sudden
everything in Walmart being 3-4 times as expensive, imagine gasolines
at $10/gallon (they are import goods), imagine half the people in the
US who sell cars for a living gettng laid off overnight, imagine
having to pay twice as much to manufacture anything (we import steel
from Asia), imagine Argentina, whose middle class became impoverished
overnight, but worse. The US goods would become cheaper for foreigners
to purchase as a result, but in the short run this actually makes the
US worse off (this is referred to as the "J" curve in international
finance) because the amount of good sold initially is overwhelmed by
the fact that they now are worth a lot less to the world.
This is why economist want a slow readjustment of the dollar rather
than a sudden collapse thereof. And it's against the Chinese's
interest to the US economy to tank since they would be stuck would all
the trinkets they can't sell.
The Dollar Danger
http://www.washingtonpost.com/wp-dyn/articles/A64605-2005Apr18.html
http://forums.delphiforums.com/atheistrefuge/messages?msg=1791.6143
Page A18
TREASURY Secretary John W. Snow did his best to sound serious over the
weekend about the fault lines in the world economy.
He called on China to stop pegging its currency to the dollar, a
reform intended to allow the Chinese currency to rise, easing the
flood of cheap exports that contributes to the record U.S. trade
deficit.
At the same time, Mr. Snow promised cuts in the U.S. budget deficit,
which would reduce the nation's consumption, including the consumption
of imports; Japan and the European Union were urged to promote growth,
which would suck in U.S. exports. All of these reforms are intended to
bring the nation's trade deficit back toward balance.
If they fail, markets may cut the trade deficit in their own blunt way
-- via a precipitous collapse of the dollar.
-----
Yang
a.a. #28
AthD (h.c.) conferred by the regents of the LCL
a.a. pastor #-273.15, the most frigid church of Celcius nee Kelvin
EAC Econometric Forecast and Sorcery Division
Proudly plonked by Lani Girl and Crazyalec (aka aka Yang's little poltregeist *****)
The Bush 'balanced' budget: 1.6 trillion and worsening
The Bush 'economic' policy: 12 million FEWER jobs than Clinton and counting
The Bush Iraq lie: -1559 GIs, one friend's co-worker's son and mounting
Having Bush ***** up my country: Worthless
.
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| User: "Divin Marquis" |
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| Title: Re: Ot economics question |
20 Apr 2005 01:01:22 PM |
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Le Tue, 19 Apr 2005 22:21:37 -0700, Yang, AthD (h.c), Kicking AWOL's
Cocaine Snorting ***** a écrit :
which means that China has a
billion of US dollars in its reserve.
"a billion"? Try a few hundreds.
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| User: "" |
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| Title: Re: Ot economics question |
20 Apr 2005 04:15:53 PM |
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On Tue, 19 Apr 2005 22:21:37 -0700, "Yang, AthD (h.c), Kicking AWOL's
Cocaine Snorting *****" <eacmole@/*AWOLBUSH*/mail.com> wrote:
On Wed, 20 Apr 2005 03:58:11 GMT, wrote:
Can someone please explain this for me?
I'm totally baffled by the meaning.
Typically when a country is running a large trade imbalance, the
exchange rate will depreciate, thereby bringing in the trade account
back into balance. For example, if Turkey buy a lot of grapes from
Greece, the Turkey dinar will become less vaulable versus the Greek
Drachma, so it is cheaper for someone for Greece to buy something from
Turkey. In this case we say that the "Turkey Dinar has depreciated
relative to the Grrek drachman due to trade account pressures".
Thanks.
I was hoping you would see this.
I couldn't figure it out.
I'm just starting to focus on economics and love the beautiful
complexities involved.
I'm currently reading a book on the lives of the most influential
economists throughout history.
Some of them were very strange, eccentric and interesting characters.
Nothing boring about them.
What does a professional economist do if he doesn't teach?
What attracted you to the field?
atheist@home#1554
<snip>
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| User: "Yang, AthD h.c, Kicking AWOLs Cocaine Snorting Ass" |
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| Title: Re: Ot economics question |
20 Apr 2005 11:00:25 PM |
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On Wed, 20 Apr 2005 21:15:53 GMT, wrote:
On Tue, 19 Apr 2005 22:21:37 -0700, "Yang, AthD (h.c), Kicking AWOL's
Cocaine Snorting *****" <eacmole@/*AWOLBUSH*/mail.com> wrote:
On Wed, 20 Apr 2005 03:58:11 GMT, wrote:
Can someone please explain this for me?
I'm totally baffled by the meaning.
Typically when a country is running a large trade imbalance, the
exchange rate will depreciate, thereby bringing in the trade account
back into balance. For example, if Turkey buy a lot of grapes from
Greece, the Turkey dinar will become less vaulable versus the Greek
Drachma, so it is cheaper for someone for Greece to buy something from
Turkey. In this case we say that the "Turkey Dinar has depreciated
relative to the Grrek drachman due to trade account pressures".
Thanks.
I was hoping you would see this.
Barry Eichengreen and Paul Krugman are two giants in the field of
international fiance. Krugman's work in this field is the reason why
he is a John Bates Clark Medal winner, given biennially to the top
economist under 40- making him also a perennial Nobel hopeful.
I couldn't figure it out.
I'm just starting to focus on economics and love the beautiful
complexities involved.
I'm currently reading a book on the lives of the most influential
economists throughout history.
Some of them were very strange, eccentric and interesting characters.
Nothing boring about them.
What does a professional economist do if he doesn't teach?
Private industry economists are the little elves who set the credit
card rates, mortgage rates, and the insurance rates for everyone. We
also help manage portfolio volatility, That's why I mock Fred stone
for his investment strategy- All investment firm aim to lower
volatility, not up them*. Someone who "invests" based on three minutes
worth of ideology-driven statements will get eaten alive by large
financial institutions, with its armies of statisticians, economists
and actuaries, 99.9 percent fo the time.
What attracted you to the field?
History. Most of the written history are of the "Great Man" genre- the
Romans by Tacitus, the annals of Justintine by Procopius. But
economics is the study of the underlying dynamics that drove society.
I am of the opinion that improved crop yeilds in mideveal Europe, the
development of propate property as an institution, and the effect of
trade on one's standard of living- tells you more about what happened
then than who Henry VIII married and then cheated on.
And lest you think I pick economists based on political idology, let
me refer to you a work by Milton Friedman- his study on silver in the
1600's- imported to Europe via the New world and its effect on China-
whose mentary system at the time was based on silver- is a pretty cool
article to read.
Incidentally, this is why neoclassical economists won out over the
Austrian economists. The Austrians insist that real life should not
matter to theory, whereas the neoclassical ecnomists, in the tradition
of Adam Smith, insists that economics has to be based on empirical
evidence.
-----
Yang
a.a. #28
AthD (h.c.) conferred by the regents of the LCL
a.a. pastor #-273.15, the most frigid church of Celcius nee Kelvin
EAC Econometric Forecast and Sorcery Division
Proudly plonked by Lani Girl and Crazyalec (aka aka Yang's little poltregeist *****)
The Bush 'balanced' budget: 1.6 trillion and worsening
The Bush 'economic' policy: 12 million FEWER jobs than Clinton and counting
The Bush Iraq lie: -1562 GIs, one friend's co-worker's son and mounting
Having Bush ***** up my country: Worthless
.
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