Stefan Heidenreich on Fri, 26 Dec 2008 20:11:22 +0100 (CET) |
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Re: <nettime> Dollar Shift: Chinese Pockets Filled as Americans Emptied |
dear Felix, let me try to summarize some ongoing debates on the issue. On Dec22nd Bloomberg claimed to have knowledge through a leak that China's reserves shrank the first time in 5 years. http://www.bloomberg.com/apps/news?pid=20601089&sid=atlPtgBgI.9Q&refer=china China's reports on its currency reserves seem to be very intransparent and come only every 3 months. Brad Setser, one of the bloggers who regularly comment on the chinese economy, doubted the reliability of these numbers. http://blogs.cfr.org/setser/2008/12/23/so-what-is-going-on-with-chinas-reserves/ Bcs as the Chinese trade surplus is still growing, reserves need to grow in order to keep the Yuan pegged to the Dollar. The most interesting piece on that was done by Michael Pettis: http://mpettis.com/2008/12/no-f-ing-way-these-numbers-are-awful/ Where he discusses also the prospects of policy reactions during the unfolding crisis. He adresses it as an overcapacity problem, requiring adjustment on the Chinese side. Whilst the Chines central bank tries to blame the Americans for overconsumption. One should look at the unequal couple China / US not only in terms of debtor/producer and creditor/consumer but also from a different angle. Main interests in both countries were perfectly well served throughout the last years. The capitalists in the US made a bargain by profiting from wage arbitrage, selling stuff to their increasingly indebted consumers. China has run an incredible development programme, rushing a process of industrialisation and modernization within the 20 years. The credit to the US served for something like an inverse development aid programme, directed at China's own economy. The trade inequality, the overproduction, the dollar peg - all were necessary ingredients, welcome on both sides. Now both find themselves in a dead end. Any overreaction could spoil the whole system - and risks to devaluate the dollar and thereby all the chinese dollar-notated reserves. Pettis also hints at the fact, that within the chinese government there is neither a consensus nor the ability to react quickly. Changes process slowly there. http://mpettis.com/2008/12/can-parochial-concerns-undermine-the-global-adjustment-it-has-before/ It is important to note that the inequalities correspond to differences of the both systems. Whilst in China business is still largely run under close state control, in the US the state has been run increasingly as business (not necessarily serving the interests of the country's citizens). One of the most interesting aspects of it all is to observe it as a conflict of two systems. Not that I would call one a democracy and the other one not. Both are econo-cracies, but with differently chosen actors. So the question remains, at which point the crisis reaches an intensity enforcing the inequality to be adressed. In the best case shortly after Obama takes over we could enter a reverse process of growing state expenses in the US, a controlled depreciation of the dollar, and on the other side an unpegging of the yuan with a reorientation towards asian currencies. So maybe things need not to 'break' at all, but will adjust slowly. S Felix Stalder schrieb: > [This is the last third of a NYT article about an issue I understand less > and less. Why are the Chinese continuing to buy US debt particularly now > that the yield is effectively zero? The short term logic is understandable > and well explained below. To keep the system going. But what about the > long term? Contrary to what this article suggests, I doubt that this is > going to last forever. But how is this going to break? Through massive > inflation and much higher interest rates? This is all puzzling to me, even > if I suspect this is a key piece of the puzzle. Felix] > > http://www.nytimes.com/2008/12/26/world/asia/26addiction.html?pagewanted=3 > # distributed via <nettime>: no commercial use without permission # <nettime> is a moderated mailing list for net criticism, # collaborative text filtering and cultural politics of the nets # more info: http://mail.kein.org/mailman/listinfo/nettime-l # archive: http://www.nettime.org contact: nettime@kein.org