Dismally, as it relates to the markets.: The weight of China's reserves.
I read David's stuff regularly and this is the best post from him I've ever read.
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4 comments:
When Graham and Schumer went to China, they were hell bent on gaining currency reform. They came back with their hats in their hands and no concessions. IMO the reality is that great strides have been made in China's economy with staggering numbers of middle class consumers created (250-300 M) in a generation. That leaves 700+M still living in subsistance level (2$/day) occupations. Uneducated, unwashed, poor do not do well when their primary currency is substantially devalued (read revolution). China needs the US to buy their goods every bit as much as the US needs China to help keep our real inflation in check. We didn't have trading partners like China during the 1980's when Carter was the President. We had high taxes, a cold war trading mentality, rising commodity prices and weak leadership. It resulted in stagflation and it sucked. Tom in Indiana
Thanks a million for the kind words.
Roger:
I do not agree with David's analysis concerning the affects of the dollar's deprecition on the price of repayment of America's forgien debt. His analysis seems to be counterintuitive when you take into account the composition of America's current account. The link below is of an econmist's article on the san fran fed site that refutes David's inital analysis (Specifically the last paragraph before the conclusion). Also, I am curious as to why you enjoyed that article so much, for I beleive David has made much more interesting posts in the past.
Please respond if you disagree, I am curious because I read both of your blogs regulary and usually respect your opinions.
http://www.frbsf.org/publications/economics/letter/2005/el2005-17.html
I liked the post because it was indepth opinion, more so than what David usually writes.
I'm not sure I completely agree with it either but it was an indepth opinion from someone whose content I respect.
It was a useful piece to learn from regardless of whether he is right or wrong or whether I agree or disagree.
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