[Pops]

So it seems the new econo-doomer worry is a trade war, or is it a currency battle or is it both?

At any rate, with economies in the toilet around the globe (perhaps even China has overdone it but won't admit it), everyone is trying to get the perpetual growth machine started again by lowering the value of their currency - and maybe raising tariffs as well.

Premier Wen Jiabao confesses that China’s ability to maintain social order depends on a suppressed currency. A 20pc revaluation would be unbearable. “I can’t imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs,” he said.

Telegraph

We take for granted the inevitability of the global economy continuing - accelerating, till the oil runs out - just like we did a couple years ago thinking the economy could somehow continue to operate long enough to force the price of oil to $500 or $1,000 a barrel.

We have tunnel vision, now the talk is all hyperinflation and currency debasement to the point of trading little airline bottles of scotch for a bag of beans, but what if that's wrong? What if, like elastic demand stopped the price of oil at $150, the Global Trade War (GTW) only goes on long enough to kill off demand for 20k mile Happy Meal toys but not so long as to cause Armageddon - you know, like was forecast in '08?

What would a Global Currency/Trade War look like?

[evilgenius]

Can you say 'deflation'? The big worry that global thinkers have is that just like the last depression this one will be marked by trade wars which will prevent any rising back out of the hole.

In the short term the dollar should catch fire, until it too gets picked on as they pile on the last man standing so to speak. Piling on means that without any fear of sunken economies to distract cognitive dissonance that investors will not be able to keep from letting their fears about US debt derail everything.

[americandream]

I would need to see a mass flight of Western capital out of China to believe these prognostications and as yet, I see nothing to suggest that. For one thing, China gets to continue playing at big boy whilst the real power in the West turns a blind eye. And before anyone comes rushing at me with this or that tale of Chinese military prowess, I'ld add that we haven't really seen Western capital cornered and enraged and hopefully we don't live to see that inevitable fearsome sight. There will be nothing quite like the sight of worlds paramount economy harnessing it's technical advantage (earned over many a century's advance over the other regions we share this world with) to secure it's place at the top of the table. Don't be fooled by the mild mannered diplomacy we have come to expect of our Western leaders. They will attend to mortal enemies (and that includes us, the commons) with the same efficiency we saw on display during WWII.

So it seems the new econo-doomer worry is a trade war, or is it a currency battle or is it both?

At any rate, with economies in the toilet around the globe (perhaps even China has overdone it but won't admit it), everyone is trying to get the perpetual growth machine started again by lowering the value of their currency - and maybe raising tariffs as well.

Premier Wen Jiabao confesses that China’s ability to maintain social order depends on a suppressed currency. A 20pc revaluation would be unbearable. “I can’t imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs,” he said.

Telegraph

We take for granted the inevitability of the global economy continuing - accelerating, till the oil runs out - just like we did a couple years ago thinking the economy could somehow continue to operate long enough to force the price of oil to $500 or $1,000 a barrel.

We have tunnel vision, now the talk is all hyperinflation and currency debasement to the point of trading little airline bottles of scotch for a bag of beans, but what if that's wrong? What if, like elastic demand stopped the price of oil at $150, the Global Trade War (GTW) only goes on long enough to kill off demand for 20k mile Happy Meal toys but not so long as to cause Armageddon - you know, like was forecast in '08?

What would a Global Currency/Trade War look like?

[Tyler_JC]

China is keeping its currency artificially cheap. The longer they do this, the more unbalanced the global economic system becomes and the worse the damage caused when it is finally forced to float freely.

It's not a trade war if currency markets are allowed to return to natural equilibrium. It's a trade war when they are actively interfered with.

If China lets the Yuan float, it would decrease trade tensions, not increase them.

In the end, everyone would be better off. Chinese consumers would be richer and non-Chinese manufacturers would be more competitive. Chinese current account surpluses would shrink and non-Chinese current account deficits would shrink.

[americandream]

American factories based in China need a market for the profits they repatriate back home. The Chinese home ministry, having assumed the role of efficient manager, obligingly holds the prices of the exports at a level that facilitates exchange in the West and in the process, the system lives to work another day.

Thats how this world is run. There is no long term plan as such. It's a race to the edge as the thorn in the side of this little scheme, the Chinese worker who provides the added value, must be kept as close to the margin for cost efficiency and the resulting investment premium. In other words, you manufacture cheap and sell expensive, in the process sharig the profit between a whole load of middle men from politburo members to fund managers. Increase, wages, the cost savings are ecliped and returns depressed, investors move elsewhere and the Chinese elite are left with an export driven economy out of sync with its local needs and with significant problems.

China is keeping its currency artificially cheap. The longer they do this, the more unbalanced the global economic system becomes and the worse the damage caused when it is finally forced to float freely.

It's not a trade war if currency markets are allowed to return to natural equilibrium. It's a trade war when they are actively interfered with.

If China lets the Yuan float, it would decrease trade tensions, not increase them.

In the end, everyone would be better off. Chinese consumers would be richer and non-Chinese manufacturers would be more competitive. Chinese current account surpluses would shrink and non-Chinese current account deficits would shrink.

[Newfie]

First, I have no qualifications so ignore all I say.

What would it look like? So lets say money becomes unstable, then you barter. Show me yours and I'll show you mine.

The US craves oil. Mid East has oil and craves water transported via grain, rice, corn, etc. US has water. Who can out bid us? China? India? Russia? EU? Canada!

That's where this layman thinks the game lays. Barter. It leaves the US in a pretty good position, relatively speaking.

Then the Guberment lets the dollar collapse or hyper inflate to erase the trillions of debt while keeping things moving sufficiently well along to stifle the worst of the riots.

Cheers

[americandream]

Thats all correct until you have the cards stacked in the favour of the wealthy who buy and sell politicians and are so widely dispersed that nationalism means nothing to them. In such an instance, all the old reasoning from the days of protectionism really do not apply. For example, who really owns the US, China, India, Japan, the UK, etc, etc. And don't tell me its the Jews, bankers, reptiles or some such other nonsense. These countries are essentialy subject to the whims of the large pools of monies in the hands of funds and well off individuals and families. In that instance, irrespective of who gets the oil, global capital ultimately benefits. If the national and regional governments act in whatever capacity, its to serve those masters despite apearances.

This lot paid a high price to win the Cold War and bring the world to heel. You don't think they are simply going to hand their hard won gains over to some manager in India or China, do you? Any fiscal policy applied works to that end, whether its to provide temporary relief to the masses or encourage their indebtedness so as they may continue consuming.

First, I have no qualifications so ignore all I say.

What would it look like? So lets say money becomes unstable, then you barter. Show me yours and I'll show you mine.

The US craves oil. Mid East has oil and craves water transported via grain, rice, corn, etc. US has water. Who can out bid us? China? India? Russia? EU? Canada!

That's where this layman thinks the game lays. Barter. It leaves the US in a pretty good position, relatively speaking.

Then the Guberment lets the dollar collapse or hyper inflate to erase the trillions of debt while keeping things moving sufficiently well along to stifle the worst of the riots.

Cheers

[eXpat]

Round 1!!
House Votes 348-79 To Declare (Trade) War On China

We're not sure what they hope to accomplish with this, but the House has voted 348-79 to penalize China for its practice of fixing the yuan to the dollar, at a level which foreign exchange experts in Congress believe to be too low.

WSJ:

The measure would allow, but not require, the U.S. to levy tariffs on countries that undervalue their currencies. The bipartisan support highlights lawmakers' long-simmering frustration with Chinese trade practices as well as their sensitivity to the faltering economic recovery with elections looming. It's the strongest trade measure aimed at China to make it through a body of Congress after more than a decade of legislative threats by U.S. lawmakers.

We doubt this will go anywhere in the Senate, which is gridlocked beyond all rhyme and reason, but the message is sent.

http://www.businessinsider.com/house-votes-348-79-to-declare-trade-war-on-china-2010-9#ixzz10xvhPC68
Things will start to get interesting...

[Newfie]

Thats all correct until you have the cards stacked in the favour of the wealthy who buy and sell politicians and are so widely dispersed that nationalism means nothing to them. In such an instance, all the old reasoning from the days of protectionism really do not apply. For example, who really owns the US, China, India, Japan, the UK, etc, etc. And don't tell me its the Jews, bankers, reptiles or some such other nonsense. These countries are essentialy subject to the whims of the large pools of monies in the hands of funds and well off individuals and families. In that instance, irrespective of who gets the oil, global capital ultimately benefits. If the national and regional governments act in whatever capacity, its to serve those masters despite apearances.

This lot paid a high price to win the Cold War and bring the world to heel. You don't think they are simply going to hand their hard won gains over to some manager in India or China, do you? Any fiscal policy applied works to that end, whether its to provide temporary relief to the masses or encourage their indebtedness so as they may continue consuming.
Cheers

[/quote]

Humm, not sure of the argument here. I don't have this worked out in detail, no one has. We will have to see how it goes.

The 'wealthy' may not be so wealth anymore. If the financial game collapses then they take a big hurt. Those that own things of importance: farms, water rights, oil rights, factories, they may be the ones on top. True, for you and I it is a reordering at that top that still leaves us under someones boot.

But then, there are sooooo may of the masses. A popular uprising could be in the works (think 2015/2016) with some real wing nut in the running for President. At what point do the Fascist take over? What then is the value of 'wealth'?

All I'm saying is that in a global trade war the value of money is degraded and the value of barter increases. And the US has a pretty good position vis a vis the competition. Any thing beyond that is wild speculation, which is fun, but not terribly useful.

[Tyler_JC]

The 'wealthy' may not be so wealth anymore. If the financial game collapses then they take a big hurt. Those that own things of importance: farms, water rights, oil rights, factories, they may be the ones on top. True, for you and I it is a reordering at that top that still leaves us under someones boot.

But then, there are sooooo may of the masses. A popular uprising could be in the works (think 2015/2016) with some real wing nut in the running for President. At what point do the Fascist take over? What then is the value of 'wealth'?

All I'm saying is that in a global trade war the value of money is degraded and the value of barter increases. And the US has a pretty good position vis a vis the competition. Any thing beyond that is wild speculation, which is fun, but not terribly useful.

I guess someone should define "trade war".

[americandream]

I don't mean to suggest that there is a cabal of the super wealthy sitting somewhere in a huddle scheming our manipulation. However, taken together, I suspect that anyone in control of significant amounts of capital tends to act in concert with others in a similar predicament. For one thing, there is an entire industry resourcing the investing industry with a whole array of advisories. In addition, aspiring members of the elite tend to emulate those they view as established members. So collectively, there is a sort of uniformity of behaviour that gives this group certain indentifiable features. They consist of a collection of various types from old nobility, to the noveau riche and all the managers of the various funds and mutualities in between.

The world post the Cold War has been ordered to facilitae the free flow of their investments under the terms of the WTO. They have co-opted whole swathes of what were previously nationalist and state capitalist cadres, in the process absorbing them into their ranks thereby swelling them. All of this is functioning reasonably favourably at the moment given the vast surplus value locked up in the remaining oil reserves as well as the huge armies of manufacturing and service personnel in Asia. These people are truly sitting on a gold mine at the moment hence the apparent paradox of relative stability despite the convulsions of the recent bailout.

At some time in the future (and I reckon it is possibly around the middle of this century) we will see this surplus dry up as commodity reserves dwindle and labour costs rise. It is at this point, I anticipate the rise of strong socialist sentiment. I suspect there will be an organic awareness in the masses that with each passing year, growth is slowing for reasons no one is capable of controlling. None of the ideologies that promise abundance will stand up to scrutiny including the Fascists which is why I suspect that there will be a swing to anti-private and communitarian ideas. The masses will sense, by herd instinct, that drastic limits will be required for all the reasons that will make sense then and seem so alien now.

Obviously there will be the rise of opportunistic politics but when confronted by the arrival of limits, I think their very failure to articulate coherent policies will serve to emphasise the dire predicament of the commons.

Thats all correct until you have the cards stacked in the favour of the wealthy who buy and sell politicians and are so widely dispersed that nationalism means nothing to them. In such an instance, all the old reasoning from the days of protectionism really do not apply. For example, who really owns the US, China, India, Japan, the UK, etc, etc. And don't tell me its the Jews, bankers, reptiles or some such other nonsense. These countries are essentialy subject to the whims of the large pools of monies in the hands of funds and well off individuals and families. In that instance, irrespective of who gets the oil, global capital ultimately benefits. If the national and regional governments act in whatever capacity, its to serve those masters despite apearances.

This lot paid a high price to win the Cold War and bring the world to heel. You don't think they are simply going to hand their hard won gains over to some manager in India or China, do you? Any fiscal policy applied works to that end, whether its to provide temporary relief to the masses or encourage their indebtedness so as they may continue consuming.
Cheers

Humm, not sure of the argument here. I don't have this worked out in detail, no one has. We will have to see how it goes.

The 'wealthy' may not be so wealth anymore. If the financial game collapses then they take a big hurt. Those that own things of importance: farms, water rights, oil rights, factories, they may be the ones on top. True, for you and I it is a reordering at that top that still leaves us under someones boot.

But then, there are sooooo may of the masses. A popular uprising could be in the works (think 2015/2016) with some real wing nut in the running for President. At what point do the Fascist take over? What then is the value of 'wealth'?

All I'm saying is that in a global trade war the value of money is degraded and the value of barter increases. And the US has a pretty good position vis a vis the competition. Any thing beyond that is wild speculation, which is fun, but not terribly useful.[/quote]

[Newfie]

I guess someone should define "trade war".

Yeah, I probably went and over reacted.

[Pops]

with economies in the toilet around the globe..., everyone is trying to get the perpetual growth machine started again by lowering the value of their currency - and maybe raising tariffs as well.

That's what I meant by "trade war"...

From what I know of such stuff, these are usually 2 countries ticked-off at each other about some silly thing and raise the tariffs on sherry in retaliation for perceived unfairness in red worm exports or some such.

But it seems different this time...

In plain terms, the currency war has officially begun. Since Japan’s announcement, numerous other countries have begun intervening in the currency markets including Brazil, Colombia, Peru, Russia, South Korea, Serbia, Romania, and Thailand.

In plain terms, WWIII is already being staged in the currency markets. Predicting exactly how this will all play out is impossible, but the clear result is that market volatility will be increasing and we are absolutely guaranteed heading for a Crash.

http://www.zerohedge.com/article/war-ha ... -are-stake

Consider that the currency markets trade over $4 trillion in market volume per day. To put that number in perspective, the entire world stock market is about $36 trillion in market capitalization.

[Pops]

Smoot-Hawlet II here we come...

A new NBC News/Wall Street Journal poll shows that 69 percent of Americans believe free trade agreements with other countries have cost jobs in the United States, while just 18 percent believe they have created jobs. A 53 percent majority—up from 46 percent three years ago and 30 percent in 1999—believes that trade agreements have hurt the nation overall.

Link

[Newfie]

But who would build our TV's and iPods?

We are so dependent upon global trade I see real limits to what can be done.

But I think you are pointing to a rise in nationalism, and on this I agree.

[Ludi]

But who would build our TV's and iPods?

We are so dependent upon global trade I see real limits to what can be done.

Import tariffs will enable TVs and iPods to be imported, but they will cost you more.

Then maybe folks will decide they could sell more TVs and iPods if they could avoid the extra expense of import tariffs by opening factories in the US.