European Tribune - Community, Politics & Progress.

Europe's brilliant China policy

by Jerome a Paris
Wed Apr 28th, 2010 at 02:50:05 AM EST

I think we should take a moment to praise our European leaders, who, while America was frothing at the mouth and yet dithering and blathering, took effective action to solve one of the most frustrating problems of the times: China's cynical mercantilist policies through their persistent under-valuation of their currency.

Europe has quietly and successfully implemented a 20% re-evaluation of the yuan against the euro without a peep from either the markets or the Chinese. This will protect domestic activity against subsidised competition from Asian exports, it will protect workers' jobs and their wages from the ever-downward pressure from Chinese wages and working conditions, and it will protect our energy intensive industries from freely-polluting, carbon-unconstrained factories out there.

And the most brilliant part is that no one has noticed! But they deserve our congratulations. Nobody could have expected such bumbling incompetence in the resolution of the minor debt crisis in Greece, and that show of procrastination, inconsistency and pigheadedness (rather than strongheadedness) have brilliantly scared investors away from the euro. Congratulations!

. Home
. About
. Contact
. New User Guide
. FAQ
. ET Editorial Guidelines
. Search
. Search (Google)

Username:
Password:

. Make a new account
. Reset password

Europe's brilliant China policy | 25 comments (25 topical, 0 editorial, 0 hidden)

There's no reason (4.00 / 14)

why we shouldn't create positive, pro-European narratives ourselves.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 28th, 2010 at 02:51:12 AM EST

Re: There's no reason (4.00 / 5)

Here's a pro-European narrative:

We'd be better off replacing the Ecofin with a roomfull of monkeys with Bloomberg terminals...

If our pro-European narrative doesn't lead to tarring and feathering the neoliberal third-wayist nationalistic nincompoops that have been running the EU for the last 15 years, it will be useless.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Wed Apr 28th, 2010 at 04:25:44 AM EST
[ Parent ]

Re: There's no reason (4.00 / 3)

running the EU

That was a typo.

I wanted to say ruining but running into the ground would work, too.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Wed Apr 28th, 2010 at 06:20:48 AM EST
[ Parent ]

Re: There's no reason (4.00 / 3)

The odd thing is that we had a neo-liberal meltdown that almost lead to a depression, and my neighbors living in subsidized housing across the street are somehow to blame, and increasingly they are starting to believe it themselves.

You have to wonder: if the meltdown didn't convince people, what will?

A place like DailyKos is infested with mantras like, "We have a huge debt problem in the USA," and one of the posters was even named "New Deal Democrat."

by Upstate NY on Wed Apr 28th, 2010 at 10:55:48 AM EST
[ Parent ]

Re: There's no reason (4.00 / 4)

Since the neoliberal meltdown wasn't enough we'll have to try a 10-year depression and see how that works.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Wed Apr 28th, 2010 at 11:18:25 AM EST
[ Parent ]

It ill work the usual way (4.00 / 3)

A populist will emerge; neo-fascism will prevail; there will be a major war; a big enough fraction of the (surviving) elites will see the light.

Rinse and repeat.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 28th, 2010 at 12:06:04 PM EST
[ Parent ]

Re: It ill work the usual way (4.00 / 2)

Oh well, as long as there's a happy end.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Apr 28th, 2010 at 04:09:45 PM EST
[ Parent ]

Re: There's no reason (4.00 / 3)

New Deal Democrat has gone to the dark side with Bonddad. They've turned into hacks now that Obama is in the White House. So it goes for having enduring values instead of whoring yourself if the people in power are on your team.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Wed Apr 28th, 2010 at 12:52:57 PM EST
[ Parent ]

Re: Europe's brilliant China policy (4.00 / 3)

You've just ruined this brilliant plan by telling everyone about it. Now they know what's going on, the Chinese will take their money out of their U.S. investments and buy Greek bonds, sending the Euro up again...

by gk (g k quattro due due sette "at" gmail.com) on Wed Apr 28th, 2010 at 02:57:45 AM EST

Re: Europe's brilliant China policy (4.00 / 4)

Well that will settle the Greek Debt Krisis and all the PIIGS problems with it.

What fun, manipulating the Chinese!

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Apr 28th, 2010 at 03:16:25 AM EST
[ Parent ]

Re: Europe's brilliant China policy (none / 0)

You say that in jest, but it is a hell of an idea.

Talk the Chinese into buying up sovereign debt in the eurozone as a way of stabilizing the currency area. The Chinese get a currency appreciation, and the euro gets a crisis out of the way.....

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Wed Apr 28th, 2010 at 12:54:52 PM EST
[ Parent ]

Re: Europe's brilliant China policy (none / 1)

For those who would like a chart, here it is.

Rien n'est gratuit en ce bas monde. Tout s'expie, le bien comme le mal, se paie tot ou tard. Le bien c'est beaucoup plus cher, forcement. Celine

by UnEstranAvecVueSurMer (holopherne ahem gmail) on Wed Apr 28th, 2010 at 03:16:13 AM EST

Re: Europe's brilliant China policy (none / 0)

I can't see google finance charts, but there's this other source.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Wed Apr 28th, 2010 at 04:05:46 AM EST
[ Parent ]

Re: Europe's brilliant China policy (4.00 / 2)

I have a cunning plan.....

Let's bail out all banks doing crazy stuff but not Greece. In this way we will show the markets who rules and we will be able to make profits...how? I bet any blog talking about Europe will increase its readership. It is time to find some banks to put ads in this site...it might be a shitty deal for the banks.. but what the hell they know.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Wed Apr 28th, 2010 at 03:32:34 AM EST

Re: Europe's brilliant China policy (4.00 / 3)

Delighted that the EU works so well.

Let me raise the EU flag in my home.

If I was given the chance, I would even have voted for the lovely clique that so brilliantly rules us.

"Nullius in Verba"

by tiagoantao (put_my_login_here <> gmail com) on Wed Apr 28th, 2010 at 06:05:24 AM EST

Re: Europe's brilliant China policy (4.00 / 3)

Don't worry. I voted for you...

Frank's Home Page and Diary Index

by Frank Schnittger (mail Frankschnittger at hot dotty communists) on Wed Apr 28th, 2010 at 07:10:48 AM EST
[ Parent ]

Re: Europe's brilliant China policy (none / 0)

was Asterix banned left off the ballot again?

by paving on Wed Apr 28th, 2010 at 04:51:45 PM EST
[ Parent ]

Re: Europe's brilliant China policy (none / 1)

In theory a good theoretical case against democracy. If there are people fool enough to vote for me, democracy clearly is doomed.

In practice (not that that matters) we are seeing, real time, how well the EU is managing this.

Anyway, this is a discussion better had in 3 years time. As we will see how this played out...

"Nullius in Verba"

by tiagoantao (put_my_login_here <> gmail com) on Thu Apr 29th, 2010 at 07:21:04 AM EST
[ Parent ]

Re: Europe's brilliant China policy (4.00 / 4)

Baseline Scenario: Wake The President (By Simon Johnson)

While you slept, there was a fundamental repricing of risk in financial markets around Europe - we'll see shortly about the rest of the world. You may see this called a "panic" and the term conveys the emotions involved, but do not be misled - this is not a flash in a pan; financial markets have taken a long hard view at the fiscal and banking realities in Europe. They have also looked long and hard into the eyes - and, they think, the souls - of politicians and policymakers, including in Washington this weekend.
...
This is about the fundamental structure of the eurozone, about the ability and willingness of the international community to restructure government debt in an orderly manner, about the need for currency depreciation within (or across) the eurozone. It is presumably also about shared fiscal authority within the eurozone - i.e., who will support whom and on what basis?
It is also, crucially, about stabilizing the macroeconomic situation without resorting to more unconditional bailouts. Bankers are pounding tables all across Europe, demanding that governments buy out their position - or bring in the IMF to do the same. We again find ourselves approaching the point when the financial sector will scream: rescue us all or face global economic collapse.

(h/t Drew)

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Wed Apr 28th, 2010 at 08:51:31 AM EST

Re: Europe's brilliant China policy (none / 0)

Maverecon blog: Sovereign default in the eurozone and the breakup of the eurozone: Sloppy Thinking 101 (January 14, 2009)

Was the depreciation of the euro that more or less coincided with the sovereign credit warnings and the Greek downgrade (although it started earlier) due to increased concern about the fiscal sustainability of some eurozone member states? Who knows? And what is more: who cares? The eurozone member states no doubt welcome the weakening of the euro, which had become the world's second most overvalued currency, just as UK Ltd welcomed the decline in sterling, which reached more than 25 percent from its previous peak until the recent weakening of the euro. Depending on the fiscal measures taken by the sovereigns of the fiscally challenged nations, and depending on the response, if any, of the ECB to the threat or reality of sovereign default, any response of the euro can be rationalised.
I view the widening of the sovereign risk spreads inside the eurozone as a welcome development. With the revised Stability and Growth Pact effectively emasculated as a fiscal discipline device, it is essential for national fiscal discipline in the euro area, that the market believes (1) that national sovereign debt is indeed just national, not joint and several among all eurozone member states, and (2) that the ECB will not bail out ex-ante or ex-post a eurozone member state that gets itself into fiscal problems. The very low sovereign risk premium differentials in the early years of the eurozone were worrying to me, because it seemed to indicate that the markets believed that a fiscally incontinent government would be bailed out by the other eurozone national governments or by the ECB. The new larger and healthier sovereign risk premium differentials indicate that the markets may be able to provide more fiscal discipline than suggested by the early years of the common currency. That is good news indeed.
So we may well see sovereign defaults by EU national governments, both inside and outside the eurozone. But it is more likely in my view that Scotland will leave the sterling monetary union (and the United Kingdom) and adopt the euro as its currency than that an existing eurozone member will leave the eurozone. We shall see.

Note the date: one year before the current troubles with Greek debt started.

Last year (and after that was written) Greece successfully refinanced €60bn of debt. This year, it's having trouble raising €50bn.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Wed Apr 28th, 2010 at 09:21:35 AM EST
[ Parent ]

Re: Europe's brilliant China policy (4.00 / 3)

It's interesting though that Buiter did not consider one big factor in his proscription. Eurozone reluctance to have a member's default wreak havoc on European banks.

He clearly thinks contagion is more dangerous when you try to support a member state in trouble, but there's no mention of banks in his argument, which is odd since the date of the article comes after the banking meltdown.

by Upstate NY on Wed Apr 28th, 2010 at 11:08:25 AM EST
[ Parent ]

Re: Europe's brilliant China policy (4.00 / 4)

Considering banks need/have sovereign guarantees to get through this crisis and states need the private banks to buy their bonds, the only solution seems to be for the ECB to buy the sovereign debt using the private banks as intermediaries.

Over Germany's dead body, of course.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Wed Apr 28th, 2010 at 11:17:28 AM EST
[ Parent ]

Re: Europe's brilliant China policy (none / 0)

Though who knows what Angie will be saying on May 10.

Jesus died for somebody's sins but not mine - Patti Smith

by dvx (dvx.clt ät gmail dotcom) on Wed Apr 28th, 2010 at 12:06:10 PM EST
[ Parent ]

Re: Europe's brilliant China policy (4.00 / 2)

Problem is, some people see a lot of money to be made if they can force the issue before May 10...

by Metatone (metatone [a|t] gmail (dot) com) on Wed Apr 28th, 2010 at 12:23:21 PM EST
[ Parent ]

Re: Europe's brilliant China policy (4.00 / 2)

Angie has a history of starting out advocating the right policy and then abandoning it under pressure from the rest of her party...

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Wed Apr 28th, 2010 at 02:25:05 PM EST
[ Parent ]

Europe's brilliant China policy | 25 comments (25 topical, 0 editorial, 0 hidden)

Go to: [ European Tribune Homepage : Top of page : Top of comments ]