Watch The Birdie (Is That PANIC I Hear In China?)
The Market Ticker ® - Commentary on The Capital Markets
Posted 2010-09-27 11:15
by Karl Denninger
in International
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Watch The Birdie (Is That PANIC I Hear In China?)
 

I think so....

Sept. 27 (Bloomberg) -- Nobel-Prize winning economist Robert Mundell said U.S. legislation to press China to raise the value of the yuan would be a “disaster” and fail to narrow the trade deficit between the two nations.

“This is not going to help Americans,” Mundell said in a Bloomberg Television interview in Hong Kong. “This is not going to create jobs for Americans. It’s just going to create a disaster.”

Disaster eh?

Well perhaps you can tell me why China should get to levy tariffs on US Chicken that are in fact larger than the change in exchange rate we're seeking?

Sept. 26 (Bloomberg) -- China will impose an anti-dumping duty as high as 105.4 percent on U.S. broiler chicken products, effective tomorrow, the Ministry of Commerce said today.

105% eh?

Sounds to me like the proper response is for us to levy a 100% tariff on everything China produces.

See, Mundell is in Hong Kong.  And he knows - if they have to actually pay their workers on a US scale for the middle class, or if they have to stop poisoning the air and water - they can't compete and their economy will collapse.

Indeed, Wen has said so - if they revalue up by 20% their entire model of screwing Americans would implode overnight!  When a foreign government tells you that they're playing games and have built their economy on a house of cards, you generally should believe them - and then act to protect yourself.

There's also the fact that our chicken producers do comply with our environmental laws.  And they'd comply with our labor laws too, if we'd start arresting those who employed illegal immigrants.

But even so, what's the difference here?  Even the illegals being paid under the table are making more than $2/day that is common in China.

Reality is that China has used their mercantile policies, along with a jackbooted government, to effectively siphon off the wealth and jobs of Americans.  Even more insulting, when they can't compete in a given area (such as poultry) they simply throw up a wall.

Fine.  Two can play that game, and we damn well should.

It's time to take America back folks.

Wen can and should be told by the United States to stick it sideways.

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Ck_dexter
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trade war ... bitches.

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"In other words, that the discussion about what is good, what is beautiful, what is noble, what is pure and what is true, could always go on. Why is that important, why would I like to do that? Because that's the only conversation worth having." Christopher Hitchens.
Randy123
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You want our chicken feet China? You pay up.

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China is the Enemy. Wake Up.

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Boiled_frog
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I wonder what would happen if we suddenly stopped doing business with China?

Who would be in worse shape I wonder? I think us in the short-term but them in the long-term.
Rickcaird
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Robert Samuelson has a column on just this topic today in the WaPo:

http://www.washingtonpost.com/wp-dyn/con....

Still, I am not convinced some kind of tariffs would not result in a worse situation than we have now. I understand it would allow US manufacturing to be more competitive both domestically and internationally. But, at the same time, the Chinese people are being forced (by their government) to subsidize purchases by Americans. These tariffs would hurt the poorest Americans.

Second, the Chinese government has to keep its people occupied. If it is not from working, then it might well be from international "adventures". Right now, we are having such adventures both with the fishing boat captain and Japan and also with the US and South Korea over North Korea. We have documented attempts by China to shoot down satellites.

My point is that instituting tariffs would not be all "peaches and cream". There could easily be significant downsides to go along with the tariffs.
Genesis
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Well yeah, there would be consequnces. Duh

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Jwm_in_sb
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"My point is that instituting tariffs would not be all "peaches and cream". There could easily be significant downsides to go along with the tariffs."

That's what the Military is for...
Asdqwe
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Well it's put up or shut up time for Congress and Osama. Do they back off on fear that China will do more of these moves? Or does this anger them even more into full scale tariffs on Chinese goods until the RMB is valued up? I'm guessing the second choice.....

Does anyone else think that the RMB might actually fall (and maybe hard) if China actually let it float? I think it's possible. China is a mess of bad loans and bad policies.
Mari
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But, but, but... how would we get our cheap holiday decorations??? I mean, come on, Halloween and Thanksgiving and Christmas are coming and we MUST have cheap prices on all the crap that we buy to decorate our homes and on the costumes and clothes we wear to show that we have the appropriate spirit! Sure, these items might be tainted with lead in the paint which won't do our children any good and there is a certain irony in having people without religious freedom produce our nativity sets and other symbols of a Christian holy day (to the extent that people keep it as such), but should we really bother with such trifling details when the stuff is CHEAP??? After all, if consumers have to start paying a higher price, they MIGHT start paying attention to how screwed up the economy is and the powers that be do NOT want that!

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Curbyourrisk
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Quote:
I wonder what would happen if we suddenly stopped doing business with China?


Wal-mart would be the greatest short ever.....rivaling my CROX short....

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Time is up.

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Azengrcat
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curbyourrisk wrote..
Wal-mart would be the greatest short ever.....rivaling my CROX short....


My vote would be for Target. It has the same crap from China but charges more for it.
Sangell
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Other than rare earths, and even that can change, what is China the sole source of? We can buy textiles from Bangladesh or Vietnam, hell we can even start making them in the rural south again.

I chatted with a retired executive from Reynolds Metals who told me of that firm's dealings with China back in Chou En Lai's day. Chinese aluminum was 'dirty' and could not be sold on the world market so Reynold's was brought over to build them a plant. I asked why they did it knowing full well the Chinese would undercut them someday on world markets? His answer was that if they didn't the French would as he showed me the beatiful Jade figurines he was presented with by Chou.

Now Boeing will be compelled to turn over their technology in return for the right, for a limited time, to sell commercial aircraft to China. Folks it is easy to grow an economy when you don't have to pay for R&D, product design or anything but let foreign companies transfer their know how to you for free or just steal it via espionage or nice gifts to American executives.
Obseedian
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If tariffs are imposed there is no guarantee those jobs will come back to America. They could just as well go to Latin America or Eastern Europe. The US would have to impose wage-parity duties on all of its trading partners, not just China.

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Jake3463
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The Chinese have been playing games for 20 years. They have a great lobbying effort in D.C. and several partners like Wal-Mart and Target and some of the big banks will fight tooth and nail for them in the corridors of D.C.

My only question is in 1960, what would be done to a paid lobbyist from the Soviet Union who was in favor of allowing the Soviets to have a free trade policy and export to us using slave labor. My guess such a person would be branded a traitor and would face possible treason charges.
Mortgageguymn
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I knew I was about to hear some BS as soon as I read the words "Nobel-Prize winning economist".
Leslie
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Quote:
I asked why they did it knowing full well the Chinese would undercut them someday on world markets?


"The Capitalists will sell us the rope with which we will hang them."
-Vladimir Ilyich Lenin
Yaldor
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I just don't get it.

Can't people just stop buying Chinese **** and reduce their consumption of Saudi Arabia oil ?

If they can not - why not raise interest rates to say 2% - so that some debt-based-consumption would ease ?

How hard can that be ?

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Steganosv
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Chinese Chicken, Chicken to China. Now, where did I put that copper-coated cup to make goosling's Ginger beer Dark 'n Tans?
Pietertvl
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The Chinese haven't merely stolen our manufacturing sector.
They've stolen our antidumping regulations as well. Almost perfect copies, yet again.

Folks. The US has been pulling this SH*T in trade forever. We wrote this book.
Those 100% duties? That just means, give or take a bit of fudging, that our poultry producers have been selling chickens in China for half of what they sell similar chicken for in the States. That is, they'll take whatever they can get overseas. After selling what they can in the States in a managed oligopoly of supersize producers with sophisticated less than competitive pricing regimes. Ie, price setting.

Overseas, its Wild West pricing.

So ... get over it. Tit for tat.

Does this mean the global trading regime is perfect? Hell no. But spare me the indignant holier than thou, we've been aggrieved BS.

PS -- former DC antidumping expert witness talking here.

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"All the perplexities, confusion and distresses in America arise not from defects in the constitution or confederation, nor from want of honor or virtue, as much from downright ignorance of the nature of coin, credit, and circulation." ~ John Adams
Yahuw
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We will have a hot war soon. I hope you folks are ready for it.

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Sixmil
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The trade-weighted average tariff in the US was only about 1.5% in 2003.

1.5%

What's the prize if we get it to zero, free traders? Is that when we're all going to be rich?

So, a 1.5% tariff is a barrier to trade, but a 33% tax on income doesn't affect my ability to earn a living? How about the gasoline tax?

Free traders are so full of s, they are now down to trying to frighten the public with apocalyptic stories of war and famine to prop up their bankrupt world view. "When goods don't cross borders, armies do" - what's that from, the cutting room floor of Ferris Bueller's Day Off?

Also consider this - economic integration requires political integration. You should not have any trouble finding examples of this in recent history.

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Reven
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It's taken me a while to come to this reluctant conclusion, but I think China's economy should be dismantled in a systematic fashion involving all out economic warfare. The chaos in China will hopefully lead to the people overthrowing the current Government. China is a much greater threat to us than a million Osama Bin Ladins hiding in caves. We will suffer as well through this, but I think it's worth it long term. I think Japan would join our effort once it began. Once China is on it's knees, then we can dictate new terms of trade that are truly fair. We are already 10-15 years behind the curve on recognizing the threat, now it's obvious they secretly declared war on us a long time ago.

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"We are now paying for the funeral of Keynesian theory." -Eric Sprott
Yahuw
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Reven,

Economic warfare with what weapons? Our best chance to take out China and Russia was during and little after World War II (Korean War). The best bet to marginalize the Chinese is most likely direct confrontation, which were all this trade **** is leading too...

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U.S. Army 82nd Airborne Division - "All Am!"
U.S. Rangers 75th Battalion - 3rd Ranger Battalion
U.S. SOUTHCOM
Throxxofvron
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Everyone is still making the assumption that the Yuan is drastically undervalued with respect to the US Dollar.

What happens if the Dollar/Yuan Peg is pulled and the Yuan falls?

What happens if the Trade Imbalance remains and China intensifies buying of the Dollar?

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DIONYSUS: " Thou hast no knowledge of the life thou art leading; thy very existence is now a mystery to thee. " -from 'The Bacchantes' By Euripides “During times of universal deceit, telling the truth becomes a revolutionary act.” -George Orwell

Genesis
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Admin A True American Patriot!
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Throx, as I've repeatedly said, we must stop the wage and environment imbalance.

Either our wage and environmental laws are defensible or they're not.

If they are, then they are for all products sold in the US no matter where they are produced.

If they're not, then they're not anywhere, including here in the United States.

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I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
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