Comments on: More G-20 bickering http://www.irisheconomy.ie/index.php/2009/03/14/more-g-20-bickering/ Wed, 16 May 2012 22:36:11 +0000 http://wordpress.org/?v=2.6.3 By: The Irish Economy » Blog Archive » On German Concerns About US Monetary Policy http://www.irisheconomy.ie/index.php/2009/03/14/more-g-20-bickering/#comment-2514 The Irish Economy » Blog Archive » On German Concerns About US Monetary Policy Wed, 18 Mar 2009 17:22:10 +0000 http://www.irisheconomy.ie/?p=1085#comment-2514 [...] Kevin has raised the issue of differing attitudes in Europe and the US about the need for expansionary fiscal policy, with the Germans being particularly reluctant to adopt expansionary policies.  This piece in today’s FT shows that some of the difference in attitudes reflects German concerns about US monetary policy. [...] [...] Kevin has raised the issue of differing attitudes in Europe and the US about the need for expansionary fiscal policy, with the Germans being particularly reluctant to adopt expansionary policies.  This piece in today’s FT shows that some of the difference in attitudes reflects German concerns about US monetary policy. [...]

]]> By: Kevin O'Rourke http://www.irisheconomy.ie/index.php/2009/03/14/more-g-20-bickering/#comment-2494 Kevin O'Rourke Wed, 18 Mar 2009 09:21:34 +0000 http://www.irisheconomy.ie/?p=1085#comment-2494 Thanks for the reference Mick. Thanks for the reference Mick.

]]> By: Mick Costigan http://www.irisheconomy.ie/index.php/2009/03/14/more-g-20-bickering/#comment-2370 Mick Costigan Mon, 16 Mar 2009 16:28:59 +0000 http://www.irisheconomy.ie/?p=1085#comment-2370 Kevin, Further to the conversation last week regarding the G20 and coordinating fiscal stimuli, I wanted to draw your attention to a very interesting article on China in this month's Atlantic by Jim Fallows*, an excellent journalist and a someone with deep knowledge of China. I strongly recommend this article to all readers of the blog. His overall thesis will not be news to you but it is that China is like the U.S. in the 1930s, having just run a major surplus with the rest of the world. However China's dependence on foreign trade is far greater than America's was at the time. As a result: "The real counterpart to Smoot-Hawley would be Chinese protectionism—or rather, any effort by China to defend its huge trade surpluses, as the U.S. once did. China’s government is unlikely to rely on outright Smoot-Hawley–style tariffs. Instead it could increase subsidies to exporters; it could try to push the RMB’s value back down, after three years of letting the currency rise; it could encourage manufacturers to restrain wages; it could impose indirect barriers to imports, as with its recent pressure on China’s airlines to cancel outstanding orders for Boeing and Airbus airplanes. By early this year, China’s government was in fact doing every one of these things. As a result its global trade surplus, instead of shrinking as expected when the world economy deteriorated, grew dramatically. Exports fell, but imports fell much more: in January, exports declined by 17 percent and imports by more than twice as much—by 43 percent. This is an economic problem for other countries. But it could be an even more serious political provocation, if China is seen as forcing its share of unemployment problems onto everyone else. And thus, to bring this scenario to a close, the best China can expect from today’s shocks might be unemployment rates higher than America’s in the ’30s. The worst would be for China to start a trade war that makes things even harder for itself." Fallows goes on to posit that a new, more innovative China could emerge from what follows this crisis, which is also an interesting point. * http://www.theatlantic.com/doc/200904/chinese-innovation Kevin,

Further to the conversation last week regarding the G20 and coordinating fiscal stimuli, I wanted to draw your attention to a very interesting article on China in this month’s Atlantic by Jim Fallows*, an excellent journalist and a someone with deep knowledge of China. I strongly recommend this article to all readers of the blog.

His overall thesis will not be news to you but it is that China is like the U.S. in the 1930s, having just run a major surplus with the rest of the world. However China’s dependence on foreign trade is far greater than America’s was at the time. As a result:

“The real counterpart to Smoot-Hawley would be Chinese protectionism—or rather, any effort by China to defend its huge trade surpluses, as the U.S. once did. China’s government is unlikely to rely on outright Smoot-Hawley–style tariffs. Instead it could increase subsidies to exporters; it could try to push the RMB’s value back down, after three years of letting the currency rise; it could encourage manufacturers to restrain wages; it could impose indirect barriers to imports, as with its recent pressure on China’s airlines to cancel outstanding orders for Boeing and Airbus airplanes. By early this year, China’s government was in fact doing every one of these things. As a result its global trade surplus, instead of shrinking as expected when the world economy deteriorated, grew dramatically. Exports fell, but imports fell much more: in January, exports declined by 17 percent and imports by more than twice as much—by 43 percent. This is an economic problem for other countries. But it could be an even more serious political provocation, if China is seen as forcing its share of unemployment problems onto everyone else. And thus, to bring this scenario to a close, the best China can expect from today’s shocks might be unemployment rates higher than America’s in the ’30s. The worst would be for China to start a trade war that makes things even harder for itself.”

Fallows goes on to posit that a new, more innovative China could emerge from what follows this crisis, which is also an interesting point.

* http://www.theatlantic.com/doc/200904/chinese-innovation

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