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But the interesting thing is when Martin Wolf says (in his Why China's exchange rate policy concerns us)
We can make four obvious replies to Mr Wen. First, whatever the Chinese may feel, the degree of protectionism directed at their exports has been astonishingly small, given the depth of the recession. Second, the policy of keeping the exchange rate down is equivalent to an export subsidy and tariff, at a uniform rate - in other words, to protectionism. Third, having accumulated $2,273bn in foreign currency reserves by September, China has kept its exchange rate down, to a degree unmatched in world economic history. Finally, China has, as a result, distorted its own economy and that of the rest of the world. Its real exchange rate is, for example, no higher than in early 1998 and has depreciated by 12 per cent over the past seven months, even though China has the world's fastest-growing economy and largest current account surplus.
Recent comment threads about the Savings Glut theory include:
The concern behind Pettis' article is that regardless of whether the savings glut theory is correct it may be harder for China to reconfigure its economy for internal consumption than it is for the US to stop consuming on credit.
This sounds like another rehash of the savings glut theory...
Personally, I believe that some, probably many of those who profited by shipping all of the manufacturing to China knew what the impact on US employment would be--trading $20/hr jobs for $8/hr jobs--and that that was just fine with them. And I expect that belief to be substantiated in time, perhaps even in my lifetime, if we manage to retain any vestage of "free speech."
The policy needs to be rolled back regardless of who it hurts. "Let justice be done or let the Heavens fall!" Justice aside, as it usually is, the system is unstable and HAS to be unwound or it will soon blow up. Unwind or blow-up are really our choices.
"It is not necessary to have hope in order to persevere."
Savings glut, savings smut. That is like trying to figure out "Who hit Johnnie". I could give a FF.
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