Is China subsidizing its exports or subsidizing US imports? In his written remarks - but not in his actual speech in Beijing - Bernanke urged China to stop subsidizing its exports via a weak RMB (see also Brad Setser's comments...). He could have as well said that China is subsidizing US imports of Chinese goods, thus keeping Wal-Mart prices and US inflation lower than otherwise. Of course, from an economic point of view subsidizing exports is equivalent to subsidizing imports. But - from a political economy of protectionism perspective - speaking of export subsidies is putting the blame on "unfair" Chinese policies rather than recognizing, as the term "import subsidy" would have conveyed, that this Chinese currency policy is highly beneficial to US consumers and that it is keeping US inflation lower than otherwise.
Also speaking of "export subsidies" in the context of currency policy is loaded and dangerous: export subsidies are illegal within the WTO rules. And arguing that a weak currency is effectively an export "subsidy" could even give legal cover to those in the US who may pursue protectionist legal action against China because of its alleged export "subsidies". This is not an idle threat: when I was at the White House's CEA in the late 1990s we had to fight non-stop bone-headed protectionist proposals by the Dept. of Commerce ... to change US "dumping" rules to include low import prices due to the weakening currency values of some of our trading partners (for example the Asian currencies in crisis). ...
"Inflation is only low if you exclude food, energy, housing and taxation - the very things rising and likely to continue to rise in the years ahead.
The crony capitalists have rigged the inflation measure to provide false confidence, and got away with it as long as people could borrow to finance consumption. With tightening credit and falling house prices, more workers will actually demand higher incomes to meet their increased debt payment obligations. Then we'll have a good old fashioned inflationary spiral at the same time the economy is in recession. Stagflation reborn out of war and oil shocks - just like the 1970s."
"Inflation has been horribly high. The CPI/core CPI has been extremely low. THAT IS WHY WE ARE IN THE POOH!"
"About inflation . . . " Inflation is only low if you exclude food, energy, housing and taxation - the very things rising and likely to continue to rise in the years ahead. "
Good observation. I would like to add healthcare and college education costs to your list of exclusions."
"There is no "easy" fix to this. It is either massive deflation (Destruction of credit by bankruptcy) or the destruction of the currency (Hyperinflation and a reform of the currency = start from scratch).
Somebody pointed the difference between Hyperinflation and strong inflation for the future. Sorry to mention it, but you ALREADY HAD DOUBLE DIGIT INFLATION! You now have Deflation and a skyrocketing CPI, but then things change. The pattern followed is:
Inflation -> Deflation -> Hyperinflation
The Great Depression is not the usual way ... it is historically seen very unusual"
"You nailed it ... BUT thats not what people think! Don´t forget ... Wall Street morons think that inflation is a "CPI thing". And now that the dollar is going to probably fall against Petrodollar currencies and currencies which export to the US, the CPI is going to go UP, making people think that we have an inflation problem, while we actually have a deflation problem on the asset side. If central banks were to stick to your definition of inflation, we wouldn´t be blogging here and sharing our fears."
...une chose est plus que certaine dans cette affaire des "subcrimes"...on ne peut vraiment pas affirmer que Pancho Villa (qui était
en 2004 une des très rares "lonely voices in a sea of irrational exhuberances") n'ait pas essayé d'avertir les "veaux?"...
...there's aninteresting debategoing on about the "housing recession" and its side-effects tied to "everyday" consumer goods i.e. e.g. coffee sales at
Starbucks, Laser eye surgeries, Amazon, Motorola etc. etc.
Pancho on the other side, he preferes focusing his attention mainly on a rather different chart (as an indicator) to get an idea/opinion of the state?/shape of the US economy or of what really? is
in fact going on...(see below)
Pancho's conclusion...Hhhhmmm...!!!!! (Got some thoughts...?)
