To arms! China is plotting against us!

[Princeps]

This debate reminds me of this...

http://www.youtube.com/watch?v=54CpPlCnM4I

See 3:06.

 

[nihilistic]

Well, you just contradicted yourself. Now you own a slice of the pie in China. In the future, China will own a large slice of the pie in the US. The positions will then be reversed.

Investment tends to benefit both sides, that's clear. However, the profits from the investment will go to the home country, would they not? Who ends up benefiting more? Have US investments in foreign countries made it poorer? Conversely, have all the countries US invested in become wealthier compared to the US?

That just means that the two countries are more financially interdependent. They are very similar moves by both parties. I still don't see how you can ascribe ulterior motives to one party and ignorance to the other. And the "who ends up benefiting more" stuff is just more baiting, as economics isn't a zero-sum game, unless you have vested interests in seeing others suffer. Unless you are going to admit to that statement, that you want to see the Chinese suffer, you really don't have an argument.

I studied economics, thank you very much. And you still haven't showed me how I contradicted myself, despite all your theorising.

Theorizing? What I posted above is as much 'theory' as math theorems are 'theory'. They are not even case studies. They describe the very basic interactions and consequences between supply and demand. I don't see how you can claim to have "studied economics" if you can't even understand that. Unless what you studied is actually termed "remedial home economics".

To invest in the US, China will need dollars. And when there's enough dollars in its foreign reserve, they can correct the exchange rate and the people can then buy the readily available dollar for a smaller amount of yuan. The Chinese will become richer vis a vis the Americans and can start to buy up American companies and real estate. And I did make provision for the devaluation of the US dollar due to a large supply of it suddenly becoming available. All the Chinese government needs to do is not release that much dollars in one go. The macroeconomic goals of the Chinese government would have changed by then. Instead of being the factory of the world, China would then want to be the financier of the world. It's part of economic progress, isn't it?

Let's actually deconstruct this paragraph of BS:

"To invest in the US, China will need dollars. And when there's enough dollars in its foreign reserve, they can correct the exchange rate and the people can then buy the readily available dollar for a smaller amount of yuan. The Chinese will become richer vis a vis the Americans and can start to buy up American companies and real estate."

The Chinese knows of and care about currency in terms of yuan. If they "correct the exchange rate" when "there's enough dollars in its foreign reserve", from their point of view, 1 yuan is still 1 yuan, but their massive 1 trillion dollar invest in dollar suddenly become worthless. That's especially true if the 'correction' spawned massive inflation in the US. Let this be economics lesson #1, in case you didn't get it from my previous post.

"And I did make provision for the devaluation of the US dollar due to a large supply of it suddenly becoming available. All the Chinese government needs to do is not release that much dollars in one go."

So in other words in your scenario you are attributing the devaluation pressure from your previous segment almost fully to currency speculation by the Chinese government. Equivalently, you are claiming that if you have a lot of money, you can make money by making the following transactions regardless of market conditions:

1. convert lots of $$ from currency A to currency B
2. convert lots of $$ from currency B to currency A
3. profit?

Look, I already explained in excruciating detail in my last post why this ends up screwing the person making these inane transactions. But, if you seriously think this is a viable plan, why don't you go to the giant hedge fund guys with this idea? You could be making millions per month.

"The macroeconomic goals of the Chinese government would have changed by then. Instead of being the factory of the world, China would then want to be the financier of the world. It's part of economic progress, isn't it?"

And this gem miraculously manages to top of the other two quoted sections in terms of pure stupidity. Even if they followed your imbecilic plan and by some some travesty of every basic economic principle, managed to earn a good deal of money, how does that change their "macroeconomic goals" at all? Why would China ever willingly dismantle their being "the factory of the world" when they have 1.3 billion mouths to feed? I don't think any kind of "economic progress" can support 1.3 billion "financiers" as long as human civilization is still confined to Earth.

What kind of drugs did it take you to make this crap up and may I please have some of it? Maybe I'll even pay you in USD, which I assume you will make good use of by converting it freakishly back and forth with the yuan?

 

[DNK]

Funny how such a facetious thread turned nasty. Any civility left in here?

On another note, I still maintain that in the end the British will conquer the world. You are all really underestimating their craftiness... History has shown that they are not to be taken lightly. Just look what they did in Iraq: they knew that they were going to be losing power to the US, so they made Iraq a political mess, screwed with the Middle East, knowing the US would pick up the slack later, then left, and viola! US hegemony -> Saddam -> Bush -> US losing hard -> US vs. China -> nuclear war -> Hail Britannia!!!

It's pure genius. If you don't believe me, look at their most evil of creations: the Canadians. That's proof enough of their intentions.

 

[aelf]

That just means that the two countries are more financially interdependent. They are very similar moves by both parties. I still don't see how you can ascribe ulterior motives to one party and ignorance to the other. And the "who ends up benefiting more" stuff is just more baiting, as economics isn't a zero-sum game, unless you have vested interests in seeing others suffer. Unless you are going to admit to that statement, that you want to see the Chinese suffer, you really don't have an argument.

So where do profits from investments go? I notice you avoided that question.

Theorizing? What I posted above is as much 'theory' as math theorems are 'theory'. They are not even case studies. They describe the very basic interactions and consequences between supply and demand. I don't see how you can claim to have "studied economics" if you can't even understand that. Unless what you studied is actually termed "remedial home economics".

If you would only make your description of basic economics somehow relevant to the topic at hand...

Let's actually deconstruct this paragraph of BS:

"To invest in the US, China will need dollars. And when there's enough dollars in its foreign reserve, they can correct the exchange rate and the people can then buy the readily available dollar for a smaller amount of yuan. The Chinese will become richer vis a vis the Americans and can start to buy up American companies and real estate."

The Chinese knows of and care about currency in terms of yuan. If they "correct the exchange rate" when "there's enough dollars in its foreign reserve", from their point of view, 1 yuan is still 1 yuan, but their massive 1 trillion dollar invest in dollar suddenly become worthless. That's especially true if the 'correction' spawned massive inflation in the US. Let this be economics lesson #1, in case you didn't get it from my previous post.

Why would their investments become worthless when they haven't even made a large part of that in the first place? The same people in China that might stand to lose from the revaluation of the yuan can also benefit from being able to expand their investments. And as if the Chinese government is going to be stopped by some companies that already have investments in the US.

"And I did make provision for the devaluation of the US dollar due to a large supply of it suddenly becoming available. All the Chinese government needs to do is not release that much dollars in one go."

So in other words in your scenario you are attributing the devaluation pressure from your previous segment almost fully to currency speculation by the Chinese government. Equivalently, you are claiming that if you have a lot of money, you can make money by making the following transactions regardless of market conditions:

1. convert lots of $$ from currency A to currency B
2. convert lots of $$ from currency B to currency A
3. profit?

I didn't make such an assertion. You are putting words in my mouth. In the hopes of sounding clever, perhaps.

Look, I already explained in excruciating detail in my last post why this ends up screwing the person making these inane transactions. But, if you seriously think this is a viable plan, why don't you go to the giant hedge fund guys with this idea? You could be making millions per month.

I didn't say the Chinese will buy dollars and sell dollars and make profit. Let's put an end to this nonsense.

"The macroeconomic goals of the Chinese government would have changed by then. Instead of being the factory of the world, China would then want to be the financier of the world. It's part of economic progress, isn't it?"

And this gem miraculously manages to top of the other two quoted sections in terms of pure stupidity. Even if they followed your imbecilic plan and by some some travesty of every basic economic principle, managed to earn a good deal of money, how does that change their "macroeconomic goals" at all? Why would China ever willingly dismantle their being "the factory of the world" when they have 1.3 billion mouths to feed? I don't think any kind of "economic progress" can support 1.3 billion "financiers" as long as human civilization is still confined to Earth.

What kind of drugs did it take you to make this crap up and may I please have some of it? Maybe I'll even pay you in USD, which I assume you will make good use of by converting it freakishly back and forth with the yuan?

Had enough spewing insults already? Ok, good. Now that you're calmer, maybe we can talk more sense.

First, do you think China wants to stay in the status quo forever? I haven't heard of a single country that wants to continue being a haven of cheap labour and low-cost factories. So what if they have 1.3 billion people? You have hundreds of millions of people in the US. That didn't stop the US from being the financier of the world. There will be poor people and there will be rich people. I don't see how that is relevant to the fact that China will be seeking to take its economy to the next level.

Secondly, you do very well in rationalising the current policies of the Chinese government. However, where do these policies lead? Are you saying they will go on forever this way, unchanging? This sort of short-term vision is what I was talking about. So what do you think China will use its massive foreign reserves for in the future? Buy more and more US Treasury bonds?

Lastly, you must also look at the strategic level. If China can afford to buy up the major oil companies of the world, for example, that would result in increased Chinese influence on the global stage at the cost of that of the US. I'm sure I don't have to go into detail explaining how exactly this works, right?

 

[nihilistic]

So where do profits from investments go? I notice you avoided that question.

Maybe it goes back to the investor? Do you seriously want to humor us with these pathetic attempts at "gotcha"?

Do you realize that we own a far larger piece of them than they do of us? Do you realize that most of the 'trade deficits' that we have with China is made up of American companies setting up shop in China to export here, of which American investors end up keeping most of the profits?

If you would only make your description of basic economics somehow relevant to the topic at hand...

My statements are absolutely relevant to whatever I responded to. Maybe you should stop responding in non-sequitur?

Why would their investments become worthless when they haven't even made a large part of that in the first place? The same people in China that might stand to lose from the revaluation of the yuan can also benefit from being able to expand their investments. And as if the Chinese government is going to be stopped by some companies that already have investments in the US.

I thought the whole issue at hand is that they did invest and you are complaining about them investing? By what twist of logic are you now claiming that they are not investing now?

Do you even agree that the Chinese has about 1.2 trillion of US dollars? Do you agree that foreign currency is a form of investment? And the second half of that quote is completely unintelligible.

I didn't make such an assertion. You are putting words in my mouth. In the hopes of sounding clever, perhaps.

I didn't say the Chinese will buy dollars and sell dollars and make profit. Let's put an end to this nonsense.

Well, then can you tell me which idiot made this statement:

To invest in the US, China will need dollars. And when there's enough dollars in its foreign reserve, they can correct the exchange rate and the people can then buy the readily available dollar for a smaller amount of yuan. The Chinese will become richer vis a vis the Americans and can start to buy up American companies and real estate. And I did make provision for the devaluation of the US dollar due to a large supply of it suddenly becoming available. All the Chinese government needs to do is not release that much dollars in one go.

In that first sentence you clearly stated that Step 1 is "buy dollar with yuan". In the second sentence, you alluded to China singlehandedly depreciating the dollar against the yuan, which can only be accomplished by Step 2: "buy yuan with dollar". In the third sentence you mentioned the next step for China will be to buy up American real estate, but that stuff is priced in dollars, of which must must be obtained by Step 3: "buy dollar with yuan", if you ever want to realize the "savings" when the dollar supposedly becomes cheap. In the final two sentences you seem to imply that China doesn't even need a massive stake in dollars to wreak havoc. Are you conscious about the meanings of the words you are typing at all?

First, do you think China wants to stay in the status quo forever? I haven't heard of a single country that wants to continue being a haven of cheap labour and low-cost factories. So what if they have 1.3 billion people? You have hundreds of millions of people in the US. That didn't stop the US from being the financier of the world. There will be poor people and there will be rich people. I don't see how that is relevant to the fact that China will be seeking to take its economy to the next level.

You see, the phrasing you used is:

Instead of being the factory of the world, ...

That implies that with some foreign exchange cash, China can somehow magically transform a good majority of their 1.3B population into white collar jobs. That's not how it works. You should read up on what happened to the Spanish economy after Spain enriched themselves with the gold they robbed away from the native-american genocide.

Secondly, you do very well in rationalising the current policies of the Chinese government. However, where do these policies lead? Are you saying they will go on forever this way, unchanging? This sort of short-term vision is what I was talking about. So what do you think China will use its massive foreign reserves for in the future? Buy more and more US Treasury bonds?

Well, I assume they are rational actors out to maximize their ROI. I do not assume that they are idiots who follow one single trading strategy and I do not assume they are so ironically and poetically imbecilic to out to speculate with a 1.2T USD investment aimed to stem speculation. Yes, I assumed they have freaking brains in their freaking heads. Maybe you have alternative theory?

Lastly, you must also look at the strategic level. If China can afford to buy up the major oil companies of the world, for example, that would result in increased Chinese influence on the global stage at the cost of that of the US. I'm sure I don't have to go into detail explaining how exactly this works, right?

Look, kid, at this point nearly anything they do short of shooting themselves in the foot is going to "result in increased Chinese influence on the global stage". And realistically, why shouldn't the Chinese government act in a way that would "result in increased Chinese influence on the global stage"? Are you condemning the Chinese for having a monetary policy? Are you condemning them for doing something other countries wouldn't have done or for something that a country shouldn't do? There are mountains of legitimate criticisms and indictments one can pin on the Chinese government for various ghastly things it has done. What is amazing is that throughout this whole thread, you simply failed to name even one.

 

[aelf]

Maybe it goes back to the investor?

Maybe? You are good at economic theory, aren't you? What is the motivating factor behind business? Would investments be worthwhile without profit for the Chinese stakeholders?

Do you realize that we own a far larger piece of them than they do of us? Do you realize that most of the 'trade deficits' that we have with China is made up of American companies setting up shop in China to export here, of which American investors end up keeping most of the profits?

Again, you are making points that do nothing to address mine. You own a far larger peice of China. That is now. In the future, the opposite would likely be true.

And the trade deficit I was referring to is the result of China exporting far more goods the US than the US is to China due to a cheap yuan. You are aware of this problem, aren't you?

My statements are absolutely relevant to whatever I responded to. Maybe you should stop responding in non-sequitur?

Well, at least you stopped throwing economic theory at me in attempts to show that you're right. That's progress.

I thought the whole issue at hand is that they did invest and you are complaining about them investing? By what twist of logic are you now claiming that they are not investing now?

You are either twisting my words or not understanding what I'm saying. The issue at hand is they are accumulating a lot of US dollars with which they can use to buy a large piece of the US economy.

Do you even agree that the Chinese has about 1.2 trillion of US dollars? Do you agree that foreign currency is a form of investment? And the second half of that quote is completely unintelligible.

Yes, and they would be able to use this 1.2 trillion dollars and more to buy up US companies. The revaluation of the yuan would only mean that the Chinese yuan holders would be able to get their hands on more US dollars than ever before. Heck, the Chinese government might not even have to revalue the yuan to begin. The central bank could simply lend Chinese companies large amounts of US dollars at low interest rates to make investments as a start.

In that first sentence you clearly stated that Step 1 is "buy dollar with yuan". In the second sentence, you alluded to China singlehandedly depreciating the dollar against the yuan, which can only be accomplished by Step 2: "buy yuan with dollar". In the third sentence you mentioned the next step for China will be to buy up American real estate, but that stuff is priced in dollars, of which must must be obtained by Step 3: "buy dollar with yuan", if you ever want to realize the "savings" when the dollar supposedly becomes cheap. In the final two sentences you seem to imply that China doesn't even need a massive stake in dollars to wreak havoc. Are you conscious about the meanings of the words you are typing at all?

I was right when I said that you are not thinking outside your box. You are simply interpreting what I said in any way you wish. Yes, they would buy dollars with yuan, but after that they would simply proceed to use those dollars. What I said about devaluing the dollar was referring to what would happen if a large amount of dollars was suddenly made available to the Chinese, thereby increasing the supply of dollars in the market. This can be solved by not releasing such a large amount of dollars at once.

That implies that with some foreign exchange cash, China can somehow magically transform a good majority of their 1.3B population into white collar jobs. That's not how it works.

That's not what I meant at all. So what if the majority of the Chinese people remain as blue-collar workers? That doesn't mean the Chinese companies can't own a large stake in the US economy and reverse the roles. Instead of American companies making investments in China and profiting from them, it will be Chinese companies investing massively in the US and profiting from it.

Well, I assume they are rational actors out to maximize their ROI. I do not assume that they are idiots who follow one single trading strategy and I do not assume they are so ironically and poetically imbecilic to out to speculate with a 1.2T USD investment aimed to stem speculation. Yes, I assumed they have freaking brains in their freaking heads. Maybe you have alternative theory?

Again, I didn't say that they will become currency speculators.

Look, kid, at this point nearly anything they do short of shooting themselves in the foot is going to "result in increased Chinese influence on the global stage". And realistically, why shouldn't the Chinese government act in a way that would "result in increased Chinese influence on the global stage"? Are you condemning the Chinese for having a monetary policy? Are you condemning them for doing something other countries wouldn't have done or for something that a country shouldn't do? There are mountains of legitimate criticisms and indictments one can pin on the Chinese government for various ghastly things it has done. What is amazing is that throughout this whole thread, you simply failed to name even one.

I'm sorry. Don't be getting a heart attack on me now.

Growing Chinese influence is inevitable, I've said that. However, China is using questionable methods to advance itself there ahead of time, possibly to ensure that it becomes too powerful to contain before any other power can rise to challenge it. Of course, that is acting with national interest in mind. Acting in national interest is not wrong but being a bad trade partner is. And the US and other countries should also act with their future national interests in mind, if they are any good.