[GJM] "HereYe HereYe, Get Your Chinese Goods While they're Cheap" [CITS Capital & Debt Watch]

[W. Curtiss Priest]

**                                                              **
		     W. Curtiss Priest, Ph.D.
	  Center for Information, Technology & Society
	      466 Pleasant Street Melrose, MA  02176
  E-mail: BMSLIB at MIT.EDU, Voice: 781-662-4044, FAX: 781-662-6882

			 July 26, 2008

			Public Issue #134:

		    CITS Capital & Debt Watch

    "HereYe HereYe, Get Your Chinese Goods While they're Cheap"

	Commentary by Dr. W. Curtiss Priest, Director:

How is it that despite a plummeting US dollar and despite drastic
rises in the costs of energy, and thus rises in costs of everything
transported or agribusiness grown or heated or cooled, that Walmart et
als. prices still look cheap?

The answer has been, and still is, that China is almost giving goods
away.  This can't last.

A trade economist sees it this way.  A country engages in dumping.
Dumping is the term when a company or country engages in selling
products (or services) at below cost, with the result of driving other
producers out of business, and thus leaving the dumping country to
reap the spoils.

Dumping is illegal.  The US Federal Government is supposed to either
place tariffs on such goods, to raise their prices to prevent home
producers from suffering, or, are supposed to file charges against the
country, threatening boycotts or other serious action if the country's
practises are not stopped.

What I'd like to know is why has China been permitted to dump goods
(and some services) on the American economic backbone, with only the
occasional trip of our Secretary of State, lashing Chinese
representatives with a wet noodle?

Yes, labor is cheaper in China.  Yes, they are poisoning the land and
the people with toxins, toxins not permitted in the US.  But, even
accounting for that, by the pegging of the Chinese Yuan to the US
dollar, everything we collectively buy from China is vastly
underpriced.

Next to me are a stack of catalogues from the Chinese-made tool seller
called Harbor Freight Tools.  I have various items circled as "too
tempting."  One is an 18-volt 3/8" drill with a keyless chuck.  It is
priced at $14.99  Is it any good? Yes.  I already bought two last
year.  Do I need any more?  Heck, I can't even purchase the
replacement battery packs for the entire price of this drill, chuck,
case, bits, battery pack, and charger.

Do trade economists mostly agree that the Yuan is greatly undervalued
and is due for a massive adjustment?  Yes.  See article abstract below
from the Berkley Electronic Press.

What is a consumer supposed to do?  If tomorrow that tea cup, that set
of table knives, that (genuine) oak kitchen medicine cabinet, etc.
might triple in price, isn't it wise to stock up now?

My problem is, I've stocked up already.  About ten years ago a
competitor to Harbor Freight rented the dog race track outside of
Boston called Suffolk Downs.  Here, with little overhead, were tables
and tables of low cost, reasonably high quality Chinese-made goods.
The library of nearly 600 books on money and finance at our Center is
held in two handsome solid oak cabinets, with drop front glass covers
-- from that trade show.  Other items came via (and I laugh everytime
I say the name of this catalogue) Heartland America.  Heartland
America?  Who are they kidding.  Ninety percent of everything in the
catalogue is made in China.  Heartland China.

So, if you haven't used your stimulus check money yet, use it to
further undermine the US economy by purchasing yet more Chinese-made
goods.  Yeh, that'll stimulate the economy -- of China.

Regards,

WCP
Editor (in disbelief)
**********************************************************************

Previous issues of the CITS DEBT WATCH:
   http://groups.google.com/groups/search?q=cits+debt+watch
   http://www.google.com/search?q=cits+debt+watch The Berkeley
Electronic Press

Global Economy Journal

Vol. 8 (2008) / Issue 2 / What's New in Our World?

The Undervaluation of the Yuan Dispute: Is a Repetition of Germany's
Experience in 1969 Necessary, Inevitable or Desirable? A Comment and
Reply to John A. Tatom

Christian M. Oberpriller, Bundeswehr University Munich Beate Sauer,
Bundeswehr University Munich Friedrich L. Sell, Bundeswehr University
Munich

["fair use," "teachable moment," "archival," Section 107(a), 1976
Copyright Act and 1998 Digital Millennium Act]

Abstract

The present article is a reply to the article by John A. Tatom titled
"The US-China Currency Dispute: Is a Rise in the Yuan Necessary,
Inevitable or Desirable?," recently published in this journal. We
found that John Tatom seems to only give a partial description of the
US-Chinese economic relations, of the main features of the Chinese
economy, and also of the macroeconomic policy options available to
China. We argue that the real exchange rate is not the appropriate
measure for a currency undervaluation, but it is the continuous,
one-directional and accelerating accumulation of foreign exchange
reserves. We also argue that the likely improvement in the US trade
balance deficit caused by an appreciating Yuan will not be offset by
growing US trade balance deficits with other East Asian countries.
Furthermore, giving up the actual currency peg will benefit rather
than harm China, provided that the steps towards Yuan flexibility will
be taken in the right sequence and order. We hold that a revaluation
of the Yuan is necessary, inevitable and desirable just as much as it
happened to be with the Deutschmark in 1969. It would not "damage
Chinese development." China needs a Yuan appreciation mainly in its
own interest to assure domestic financial market stability, and to
avoid an overheating of its economy and a soaring inflation.

Recommended Citation

Oberpriller, Christian M.; Sauer, Beate; and Sell, Friedrich L. (2008)
"The Undervaluation of the Yuan Dispute: Is a Repetition of Germany's
Experience in 1969 Necessary, Inevitable or Desirable? A Comment and
Reply to John A. Tatom," Global Economy Journal: Vol. 8 : Iss. 2,
Article 7. Available at: http://www.bepress.com/gej/vol8/iss2/7
[Editorial Note:  Bepress articles are available via subscription
only, you can consult a local reference librarian for a copy]