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Kidicious: Why would you expect an answer to your point, when you've told him that he doesn't know what he's talking about, when clearly he does?
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I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891 -
China can't sell off their reserves and keep their currency undervalued. Isn't he saying that they can?Originally posted by DanS
Kidicious: Why would you expect an answer to your point, when you've told him that he doesn't know what he's talking about, when clearly he does?I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
- Justice Brett KavanaughComment
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Tingkai, I replied to you yesterday but the server swallowed it. Luckily I'd copy-pasted it before it disappeared...
Tingkai, you can't get something for nothing. Pegging the Yuan to the dollar may not be done through the standard method of currency reserves, but it has to be paid for in the end.
Take Company A (a factory that exports to the US)
They make widgets, pay their workers in yuan and get paid in dollars. Under any free market system they'd then convert those dollars to yuan and pocket the difference. Now they still do that, but they get an additional boost because the yuan is artificially undervalued. Conversely, noone in their right minds will sell yuan to the Chinese government. So the Chinese government ends up with more and more US dollars that they've bought for an inflated price. To pay for this they have to use yuan they've collected through taxation or through printing more. If the former, then it's money directly out of the pocket of every chinese citizen. If the latter, then inflation will really start to be a problem...12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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They do get reserves that way. But they also have to buy dollars to keep their currency pegged. It doesn't just happen by trade.I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
- Justice Brett KavanaughComment
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They can keep the yuan pegged that way in their own country, and can keep it pegged through a minor amount of currency trading outside their country (minor because the amount of foreign-held yuan is probably low). Either way, it isn't any less expensive because of their artificial exchange rates; it's probably significantly more expensive...12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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I think you lost me. Do you mean that they keep up the value of their reserves (dollars), and so the dollars that they buy to peg their currency are more expensive?Originally posted by KrazyHorse
They can keep the yuan pegged that way in their own country, and can keep it pegged through a minor amount of currency trading outside their country (minor because the amount of foreign-held yuan is probably low). Either way, it isn't any less expensive because of their artificial exchange rates; it's probably significantly more expensive...I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
- Justice Brett KavanaughComment
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I'm saying that in addition to the fixed amount of dollars they have to "buy" (through whatever scheme they use) which has a certain fixed cost associated with it (fixed meaning independent of the scheme) there are probably additional costs associated with doing it through legislated+enforcement means. In other words they'd be better of pegging their currency through the standard means. The way you can see this is that if there were any shocks in the price of the yuan (i.e. it spikes and the government needs to buy more US dollars) then under currency-buying scheme they could buy the first few dollars at a slightly cheaper price. Under current scheme they pay the highest price for every dollar.
The major point is that when there is any trade in currency (as there must between the US and China due to large one-way trade in goods) then it will cost a government to peg one currency to the other, especially when one currency is consistently overvalued.
The Chinese end up with a larger and larger number of US dollars, all of which were bought at excessive prices.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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We should let the GSE's go under. There will just be a write off and some banks will take a haircut. It's not the end of the world. The property is still there.Comment
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Very interesting. I don't think I understand completely though. Probably because I don't really understand the methods that the Chinese use.Originally posted by KrazyHorse
I'm saying that in addition to the fixed amount of dollars they have to "buy" (through whatever scheme they use) which has a certain fixed cost associated with it (fixed meaning independent of the scheme) there are probably additional costs associated with doing it through legislated+enforcement means. In other words they'd be better of pegging their currency through the standard means. The way you can see this is that if there were any shocks in the price of the yuan (i.e. it spikes and the government needs to buy more US dollars) then under currency-buying scheme they could buy the first few dollars at a slightly cheaper price. Under current scheme they pay the highest price for every dollar.
The major point is that when there is any trade in currency (as there must between the US and China due to large one-way trade in goods) then it will cost a government to peg one currency to the other, especially when one currency is consistently overvalued.
The Chinese end up with a larger and larger number of US dollars, all of which were bought at excessive prices.I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
- Justice Brett KavanaughComment
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Poor little kid. Still on my ignore list. Too dumb to follow any math in finance or econ and it shows. (not the lack of math, the dumbness.)Comment
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Who, me?12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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No. He pretends to ignore me. He's a child.I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
- Justice Brett KavanaughComment
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I love insulting someone who is on my ignore list. It's like hitting someone who's head is in a bag.
Oh...and Kitty, like I would dare taunt you with lack of math. You'd ***** slap me with a PDE.Comment
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Am I talking **** with this currency trade thing? I'm just pulling it out of my ass, if you hadn't noticed. But it seems to make sense...12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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If the yuan is totally controlled by the BoC, there should be a black market, on which the rate of conversion should be different from the official rate. And if the official rate undervalue the yuan, the black yuan would value more dollars that the official yuan. As this situation would not help the conversion of black yuan into dollars, we can expect that the black market yuan would not be significantly different from the official yuan. This would be a strong indication of the undervaluation of the yuan. Any clue about a black market of the yuan ?
As long as the trade balance stays positive, and that the sales price of exported goods, expressed in yuans, is above cost, there is no need to modify the official value of the yuan.
And this is reinforced by the declining value of the dollar.Statistical anomaly.
The only thing necessary for the triumph of evil is for good men to do nothing.Comment
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