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Let me get this straight, China is selling its products to the US at artificially cheap prices and labor in exchange for ... ... pieces of green paper with $ o

by yc1010 12y ago

Let me get this straight, China is selling its products to the US at artificially cheap prices and labor in exchange for ... ... pieces of green paper with $ on them. To the tune of 3.5 trillion http://en.wikipedia.org/wiki/Foreign_exchange_reserves_of_the_People%27s_Republic_of_China http://en.wikipedia.org/wiki/Foreign_exchange_reserves_of_th... The US could overnight introduce a "new" dollar exchangeable at 1:1 for any bank accounts/funds held in US Banks in USA. Cash could also be exchanged at 1:1 provided a valid IRS tax clearance certificate is shown proving that tax was paid on this cash. So the US solves several problems with one stroke: 1. China endsup with a pile of worthless paper and a broken economy bringing manufacturing and jobs back to the US 2. US Companies laundering and holding funds abroad problem is solved, They can pay 20-30% tax to bring these funds back giving the economy a huge once off surplus. 3. The black economy is decimated as criminals endup with worthless paper or are forced to convert and hence pay tax on their dollars. Considering the US has in the past made holding gold illegal, its not exactly outside the realm of possibility.

seanmcdirmid 12y ago
Didn't the China do this with RMB in the 80s? I mean, no one would actually trust the yuan to use it as a reserve currency, while plenty of people trust the USA (making it illegal to hold gold is different from taking it away). And anyways, trust is quite important to the USA economy, they aren't going to just piss it away.
- yc1010 12y ago
  That is true, but if another deep recession occurs it could happen. Faced with large unemployment and stagnant economy politicians would do anything. And solving 1) China 2)laundering corporations and 3) black economy in one go would seem like an attractive option, especially if it results in a huge surplus which could be used towards "job-creation" and "stimulus". Hell a few years ago "magicking trillions of dollars" in the form of QE was unthinkable, yet it happened http://i.imgur.com/1NnUxNU.png http://i.imgur.com/1NnUxNU.png What is more remarkable is that it didn't lead to rampant inflation (yet?) As for "taking money away" point, governments regularly do this thru' money printing.
  - seanmcdirmid 12y ago
    But the USA economy ATM is doing very well. Employment is still an issue, but that has more to do with more efficiency than morbid supply and demand. We buy as much from China as China from us, we are so intertwined that the USA or china pissing in either pot would just hurt each as much, if not more, than the other. >What is more remarkable is that it didn't lead to rampant inflation (yet?) Nobody but the libertarians (who don't really get economics) expected it to. A low amount of inflation is healthy given that it pushes people to spend or invest, not just sit on it.
  - muraiki 12y ago
    I think that without a mechanism to transfer that QE into wages, price inflation cannot occur. If Joe Consumer as a whole has less dollars available (such as through unemployment, lack of raises, lower wages due to increased supply of workers, etc.), that decreases demand and thus acts a check against price inflation.
ginko 12y ago
How does wrecking the Chinese economy solve any problems? (Not to mention also completely destroying international trust in the US dollar)
- yc1010 12y ago
  For one it would bring jobs and manufacturing back to the US. It would also prevent the rise of a military adversary which could threaten the stability of the region and allies such as Taiwan, S. Korea, Japan and Australia. Don't forget this http://en.wikipedia.org/wiki/Nixon_Shock http://en.wikipedia.org/wiki/Nixon_Shock
atlbeer 12y ago
I don't think you understand the importance of being a reserve currency is.
desdiv 12y ago
Per capita, each Chinese person owns $927 out that 3.5 trillion dollars[0]. Yeah, that's gotta suck for them. Not as much as it will suck for the Japanese though, who'll lose 10 times of that at $9645 per capita. The Belgians have it even worst; each of them will have $33854 stolen from them. Wait, hold on. Why are we stealing from Belgians again? [0] http://www.factcheck.org/2013/11/who-holds-our-debt/ http://www.factcheck.org/2013/11/who-holds-our-debt/
vorg 12y ago
4. The euro and RMB become the new reserve currencies, and thus Germany and China leverage their status as the countries having the factories.
crimsonalucard 12y ago
This is not smart idea. What you propose is a very hostile action that's akin to declaring war on not just China but any country that has involvement with US currency. China is not your enemy. Yes they became number one, but the US economy and Chinese economy are interdependent on one another. The better solution is to wait. Manufacturing costs in China will eventually rise just like the GDP. If the cost rises high enough manufacturing within the US will become viable again. This is exactly what happened with Taiwan and Japan.
zghst 12y ago
The Chinese people are not our enemy. China has had a large mindshare in Western culture for centuries and now their government is getting strong enough to project power that challenges the West. Overall the Chinese seem very level headed and determined to contribute toward global stability and growth. I fear, however, that their presence on the world stage may be something unlike we've ever seen. People today are naive in trusting the restraint, rationality, and reach of the CCP's agenda.

by yc1010 12y ago

seanmcdirmid 12y ago

Didn't the China do this with RMB in the 80s? I mean, no one would actually trust the yuan to use it as a reserve currency, while plenty of people trust the USA (making it illegal to hold gold is different from taking it away). And anyways, trust is quite important to the USA economy, they aren't going to just piss it away.

yc1010 12y ago
That is true, but if another deep recession occurs it could happen. Faced with large unemployment and stagnant economy politicians would do anything. And solving 1) China 2)laundering corporations and 3) black economy in one go would seem like an attractive option, especially if it results in a huge surplus which could be used towards "job-creation" and "stimulus". Hell a few years ago "magicking trillions of dollars" in the form of QE was unthinkable, yet it happened http://i.imgur.com/1NnUxNU.png http://i.imgur.com/1NnUxNU.png What is more remarkable is that it didn't lead to rampant inflation (yet?) As for "taking money away" point, governments regularly do this thru' money printing.
- seanmcdirmid 12y ago
  But the USA economy ATM is doing very well. Employment is still an issue, but that has more to do with more efficiency than morbid supply and demand. We buy as much from China as China from us, we are so intertwined that the USA or china pissing in either pot would just hurt each as much, if not more, than the other. >What is more remarkable is that it didn't lead to rampant inflation (yet?) Nobody but the libertarians (who don't really get economics) expected it to. A low amount of inflation is healthy given that it pushes people to spend or invest, not just sit on it.
- muraiki 12y ago
  I think that without a mechanism to transfer that QE into wages, price inflation cannot occur. If Joe Consumer as a whole has less dollars available (such as through unemployment, lack of raises, lower wages due to increased supply of workers, etc.), that decreases demand and thus acts a check against price inflation.

ginko 12y ago

How does wrecking the Chinese economy solve any problems? (Not to mention also completely destroying international trust in the US dollar)

yc1010 12y ago
For one it would bring jobs and manufacturing back to the US. It would also prevent the rise of a military adversary which could threaten the stability of the region and allies such as Taiwan, S. Korea, Japan and Australia. Don't forget this http://en.wikipedia.org/wiki/Nixon_Shock http://en.wikipedia.org/wiki/Nixon_Shock

atlbeer 12y ago

I don't think you understand the importance of being a reserve currency is.

desdiv 12y ago

Per capita, each Chinese person owns $927 out that 3.5 trillion dollars[0]. Yeah, that's gotta suck for them. Not as much as it will suck for the Japanese though, who'll lose 10 times of that at $9645 per capita. The Belgians have it even worst; each of them will have $33854 stolen from them. Wait, hold on. Why are we stealing from Belgians again? [0] http://www.factcheck.org/2013/11/who-holds-our-debt/ http://www.factcheck.org/2013/11/who-holds-our-debt/

vorg 12y ago

4. The euro and RMB become the new reserve currencies, and thus Germany and China leverage their status as the countries having the factories.

crimsonalucard 12y ago

This is not smart idea. What you propose is a very hostile action that's akin to declaring war on not just China but any country that has involvement with US currency. China is not your enemy. Yes they became number one, but the US economy and Chinese economy are interdependent on one another. The better solution is to wait. Manufacturing costs in China will eventually rise just like the GDP. If the cost rises high enough manufacturing within the US will become viable again. This is exactly what happened with Taiwan and Japan.

zghst 12y ago

The Chinese people are not our enemy. China has had a large mindshare in Western culture for centuries and now their government is getting strong enough to project power that challenges the West. Overall the Chinese seem very level headed and determined to contribute toward global stability and growth. I fear, however, that their presence on the world stage may be something unlike we've ever seen. People today are naive in trusting the restraint, rationality, and reach of the CCP's agenda.