A new capitalism will emerge from the current crisis...

amcluesent

>more government control of everything as being the way ahead<

Yep, the cure for third-way socialism is old-labour socialism. Mandy will nationalise Nissan up in Sunderland and call it...British Leyland!

setmefree2

Peston details what Xiaochuan said to Paulson but Peston never addresses what Paulson & Obama need to say to the Chinese. The Chinese need to be told to float their currency and to develop their internal markets.

The Chinese can't complain as they are part of the problem and therefore part of the solution. They should open their markets to the West and they should stop fixing their exhange rates so low against the dollar so that nobody in the West can compete with them.

The relationship between the West and China is symbiotic, Peston overlooks this and his view is therefore one dimensional IMHO.

WTF?_2

setmefree2 wrote: »

Peston details what Xiaochuan said to Paulson but Peston never addresses what Paulson & Obama need to say to the Chinese. The Chinese need to be told to float their currency and to develop their internal markets.

The Chinese can't complain as they are part of the problem and therefore part of the solution. They should open their markets to the West and they should stop fixing their exhange rates so low against the dollar so that nobody in the West can compete with them.

The relationship between the West and China is symbiotic, Peston overlooks this and his view is therefore one dimensional IMHO.

Those damn Chinese - imagine not doing what's best for the West!

Send a gunboat I say.

setmefree2

!!!!!!? wrote: »

Those damn Chinese - imagine not doing what's best for the West!

Send a gunboat I say.

Nope that's not what I said;) Peston's article says that Paulson was chastised by Xiaochuan, (which of course may not be true) but the Chinese are no position to criticise anyone - they are part of the problem. It's not all the West's fault, don't you know?

The Chinese Government willingly & happily went along with everything so far. They can't start moaning just because it hasn't turned out as they hoped it might. Maybe they should start spending some of the trillions of dollars they have tucked away or give some of it back as tax cuts to the poor Chinese people who slave away, whilst their government keeps hold of all the spoils of their toil.

PS When people in the West are unemployed and they realise that the the Chinese and Indians are keeping their exchange rates artificially low to provide jobs for themselves (and build up massive trade surpluses with the West) do you think Westerners will be happy?

WTF?_2

setmefree2 wrote: »

Nope that's not what I said;) Peston's article says that Paulson was chastised by Xiaochuan, (which of course may not be true) but the Chinese are no position to criticise anyone - they are part of the problem. It's not all the West's fault, don't you know?

The Chinese Government willingly & happily went along with everything so far. They can't start moaning just because it hasn't turned out as they hoped it might. Maybe they should start spending some of the trillions of dollars they have tucked away or give some of it back as tax cuts to the poor Chinese people who slave away, whilst their government keeps hold of all the spoils of their toil.

PS When people in the West are unemployed and they realise that the the Chinese and Indians are keeping their exchange rates artificially low to provide jobs for themselves (and build up massive trade surpluses with the West) do you think Westerners will be happy?

One of the arguments for 'saving the pound' is that the country can set interest rates to suit its own needs. That's what governments do - adjust their exchange rate to suit themselves (as much as they can).

The Chinese have supported the value of the dollar overall by buying up US T-bills in massive amounts. Would you be happy if they flogged them off, boosting the relative value of their own currency by sending the dollar into the toilet?

They also have faced heavy inflation at home by pegging their currencies to a given level - that's their prerogative. In effect, the US has exported much of its domestic inflation to China and the Middle East (by virtue of the petro dollar and currency pegging) which more than suited us in the West over the past decade. We also 'imported deflation' from China to balance out an awful lot of inflation at home. A mutually beneficial relationship.

A bit much to ask them to act counter to their own interests to now bail us out. They'll act as they see fit and they now own enough of our debt to be able to call the shots on quite a lot of our economic policy.

Primrose

As a country I think we have become far too dependent on the service industry, especially Financial Services. If we want to strengthen our own economy and reduce unemployment, surely we should be trying to build up our UK manufacturing industry again instead of importing and propping up the economies of other countries. And growing more of our own food too, instead of importing, We had to do it during the last war. I think there are some lessons to be learned from history. Pity nobody studies it in any depth at school these days !! Or if they did, they've forgotten all they learned.

setmefree2

!!!!!!? wrote: »

They also have faced heavy inflation at home by pegging their currencies to a given level - that's their prerogative.

Given discussions we have had, I find it surprising that you would support a fixed exchange rate. What happened to "markets must find their own equilibrium" ? Or does that only apply to UK house prices?

The main criticism of a fixed exchange rate is that flexible exchange rates serve to automatically adjust the balance of trade. When a trade deficit occurs, there will be increased demand for the foreign (rather than domestic) currency which will push up the price of the foreign currency in terms of the domestic currency. That in turn makes the price of foreign goods less attractive to the domestic market and thus pushes down the trade deficit. Under fixed exchange rates, this automatic re-balancing does not occur.

After China's entry into the WTO in 2001 , China flooded the world with goods destroying manufacturing everywhere, causing wrenching adjustments all around the world. Prices plunged - inflation gave way to deflation. Consumers sucked the imports up. By 2008 everyone now has whopping trade imbalances with China.

That's what a fixed exchange does.

How can you blame the West for this?

mewbie_2

setmefree2 wrote: »

After China's entry into the WTO in 2001 , China flooded the world with goods destroying manufacturing everywhere..

I think, to be fair, we had already destroyed our own manufacturing base by then.

setmefree2

!!!!!!? wrote: »

The Chinese have supported the value of the dollar overall by buying up US T-bills in massive amounts.

Theydidn't just buy T bonds - they bought debt issued by Fannie & Freddie, corporate bonds, residential mortgage securities and CDOs.

It was the massive trade imbalance that allowed them to buy all this debt from the US, and the trade balance was caused by the fixing of exchange rates.

setmefree2

mewbie wrote: »

I think, to be fair, we had already destroyed our own manufacturing base by then.

I don't think that's true. I still own plenty of clothes made in the UK sold by M &S; my shoes were probably made in the UK too, sold by Clarks. Both of these companies only recently moved production when they could no longer compete.

It's not all the West's fault. And China is not totally innocent. And Peston does no-one any favours painting the West as a villain.