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

Generali

setmefree2 wrote: »

http://www.bloomberg.com/apps/news?pid=20601087&sid=a2v.AWwaVpj8&refer=home

Quote
China may keep cutting interest rates, add to a 4 trillion yuan ($581 billion) spending plan and stall gains by the yuan against the dollar to help exporters and stimulate the economy.

The yuan’s biggest one-day decline in three years on Dec. 1. prompted speculation that China may allow its currency to depreciate, helping exporters by making their products cheaper in overseas markets.
The yuan may weaken as much as 10 percent against the dollar, Morgan Stanley said last week.

END QUOTE



The Chinese are not helping. I'm not blaming them, of course, we are all in this together. I just don't think this helps anyone IMHO. Furthermore, such a devaluation is going to add yet more deflation to Western Economies.

And make protectionism much worse too. Admittedly, if the US decides to put up trade barriers against China or even let her currency slide too much, the Chinese can say, "Screw you buddy. We're selling your debt and we ain't buyin' no more". Then the world economy will see what a real depression looks like.

The Chinese have got the Americans over a barrel and they both know it.

purch

Well.. I was thinking about the car industry - Morris Motors / Leyland - the coal industry - steelworks - that sort of thing

I don't think China was invented when those went down the tube !!!

purch

The Chinese have got the Americans over a barrel and they both know it

Unusual movie you must have been watching on the flight down to Oz :eek:

sabretoothtigger

China dont have to launch a nuke to destroy america, they hold 500bn of their debt

Generali

sabretoothtigger wrote: »

China dont have to launch a nuke to destroy america, they hold 500bn of their debt

$585,000,000,000 as of Sept 2008 plus $60,400,000,000 held by Hong Kong according to the US Treasury.

The UK is the 3rd largest holder with $338,400,000,000. A lot of that will be bonds held 'in custody' on behalf of foreigners, especially Arabs.

http://www.treas.gov/tic/mfh.txt

The US Congress looked in to the security implications of a country that isn't necessarily a friendly power holding such a large proportion of its debt:

http://fpc.state.gov/documents/organization/99496.pdf

fc123

setmefree2 wrote: »

The Chinese are not helping. I'm not blaming them, of course, we are all in this together. I just don't think this helps anyone IMHO. Furthermore, such a devaluation is going to add yet more deflation to Western Economies.

This thread is fascinating......my old dad was trying to explain this one to me, but made it sound too complicated and I glazed over.
We were talking about the factory I use in Leicester....rooms full of unused knitting machines that cost £40k each, now ''worthless''. Formerly employing 70 F/T staff, now 6 on flexi time. He retires in 4 years time....dear dad thinks I should take it over. His 'phone has not stopped ringing the past 6 months...looking for UK production...companies like John Lewis. He turns the work down as he retires in 4 yrs and doesn't want to gear it up again.

Even I can't work out why the change is happening now.

The ever decreasing prices issue (so more deflation in goods) is a strange one as it does get to the point where a price becomes benchmarked at such a low level (thinking Primark bras @ £2 or Tesco jeans @ £4) that comparable items cease to be worth selling. The rail space costs are too high for the low priced products. I have that problem in my own store now.

Most big chains will just keep the extra margin (so selling prices stay the same as now) no matter how low the Chinese go on price.........but the volumes have now gone.....the novelty of the £4 jean is wearing off.


I haven't fully read the peston link yet (but I've read plenty of !!!!!!?) but this article suggests that they won't lower export prices further...unless I don't understand it fully. Still learning economics ATM.
http://business.timesonline.co.uk/tol/business/economics/article5257439.ece

The Chinese economy is slowing down sharply after almost 30 years of growth and the effects are being felt on the streets.
Riots and demonstrations have been reported in cities across China in protest at a swath of factory closures. Last week hundreds swarmed into an abandoned toy factory in Dongguan, a grimy southern town synonymous with sweat-shops. The protesters destroyed police cars and ransacked offices as managers fled in panic.
Two-thirds of small factories making toys for export have closed in the first nine months of the year. Falling demand and tough new product safety rules in Europe and America mean many will never reopen.
The value of the yuan, which has risen some 20% against the dollar since 2005, has levelled off and may decline. Foreign buyers say China’s cost advantage has already been eroded.