What now, what next?
The US dollar goes lower while the oil price goes higher, and so do the US government's expenses. What if the latest surge in demand from US consumers indicates a problem whose solution is structural, unspoken of, and only marginally addressed by most current debates around oil, currency valuations, and such? Is the world economy viewed, by the handlers of capital, as a fixed pie whose growth comes mostly through increased asset prices, especially in the developed world? What if, by lacking the capability to manufacture most goods it needs, matters in the US can only worsen unless... it rebuilds its manufacturing capabilities? How likely a scenario would this be and what would the markers be along its timeframe?
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4 comments:
I got an idea! Let's invade Iran!
the author has a point, lacking tradeable goods and services from what it produces, the us is vulnerable to growing deficits till no end in sight or else
Greenspan Says China Currency Revamp Wouldn't Help U.S. Manufacturers
By THE ASSOCIATED PRESS
WASHINGTON (AP) -- Federal Reserve Chairman Alan Greenspan told lawmakers Thursday that there's no credible evidence U.S. manufacturing activity or factory jobs would be helped by China revamping its currency system.
The Bush administration has been pressing Beijing to change its system.
Greenspan, in prepared testimony to the Senate Finance Committee, said some ''mistakenly believe'' that a marked increase in the value of the Chinese currency, the yuan, relative to the U.S. dollar ''would significantly increase manufacturing activity and jobs in the United States.''
''I am aware of no credible evidence that supports such a conclusion,'' he said.
The United States' trade deficit swelled to a record $617.6 billion last year, including a $161.9 billion deficit just with China, the highest ever with a single country.
Greenspan, who issued a fresh warning to policy-makers not to turn to protectionist measures to deal with global trade tensions, has maintained that America's bloated trade deficits wouldn't be helped by a change in China's currency system.
Some lawmakers in Congress want to impose hefty 27.5 percent tariffs on Chinese goods flowing into the United States if Beijing doesn't move to a more flexible currency system.
Greenspan said such tariffs, if implemented, would lower imports from China but would also raise imports from other ''low-cost'' sources of supply in other countries.
''U.S. imports of textiles ... assembled computers, toys and similar products would in part shift from China as the final assembler to other emerging-market economies in Asia and perhaps in Latin America, as well,'' Greenspan said. ''Few, if any, American jobs would be protected.''
For two years, the Bush administration has been prodding China to stop linking its currency, the yuan, to the U.S. dollar, and instead move to a more flexible currency system.
Facing criticism from Democratic and Republican lawmakers, manufacturers and others for not being tough enough on the Chinese, the administration has intensified its efforts.
Over the last month, the administration has announced new limits on the amount of clothing that China can ship to the United States. It has threatened to brand China a currency manipulator unless it changes its policies. And the government has appointed a special envoy to work with China on these issues.
The Bush administration, however, has refused to bring a trade case against China over its currency practices, something that is vexing to critics.
Sen. Max Baucus, D-Mont., complained the administration ''seems to me to have no plan'' to deal with the China trade situation and America's swollen trade deficits.
Baucus and Senate Finance Committee Chairman Charles Grassley, R-Iowa, in a joint letter to United States Trade Representative Robert Portman on Thursday, requested that Portman report to the panel when he is finished with his top-to-bottom review of ongoing trade issues with China.
In terms of what, if anything, Congress should do about China, Grassley said: ''We must be thoughtful in our actions and get it right. We can't afford to act rashly and get it wrong.''
A number of bills, taking various approaches, have been offered in Congress aimed at dealing with what critics believe are China's unfair trade practices.
American manufacturers contend that China's system is hurting U.S. exports and contributing to losses of U.S. jobs. Manufacturers believe the yuan is undervalued by as much as 40 percent. The weaker yuan makes Chinese goods cheaper in the United States and American products more expensive in China.
Greenspan said that at some point China will let the yuan rise against the U.S. dollar because its current system represents an increasing threat -- including inflation -- to the Chinese economy.
In pushing China to make a change, the administration has laid out a similar case.
In today's Times it's estimated that
"Americans now produce only about 75 percent of the merchandise they purchase, importing the rest. That is down from 90 percent or so a decade ago, according to various studies. The percentage was even higher in the late 1980's, the last time the dollar went through a long, similarly managed decline - in those pre-euro days - against the German, French and Japanese currencies."
I doubt only 25% of our total consumption is not being manufactured by us, yet who'd know these guys' accounting rules? I am wondering how would one qualify what companies make in other countries and sell it inside the US under some American brand?
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