Re: [A-List] [Fwd: Re: [gang8] THE DOLLAR VS THE EURO]

["Anyutka" <annewilliamson@xxxxxxx>]

Thanks, Henry, helpful information - but the 1 to 2 worker/pensioneer
ratio is very worrying.  I don't see how China can cope with that grim
statistic without social pain.  I hope I am wrong.  Additonally, I always
thought the one child policy short-sighted since Chinese parents, in
thinking
a son guaranteed their golden years, sacrificed their daughters thus setting
up
a social crisis 20 years down the road, i.e. not enough brides. Between the
pension problem, and the bribe problem, there could be a real upheaval.
But,
I agree, China does not need to play in the international currency markets
at this
stage of their financial development.  But the Americans are very confident
they can
compel China to float within the next 12 to 18 months.  I don't see it, esp.
with what you have reported.  The consequences would be very dangerous
to the government and extremely hard on the people. Looks like a serious
contretemps is on the horizon.  -A.

PS  I've long wanted to ask you for a recommendation of an English-language
history of China.  I am very much in the student category, and would
appreciate
any recommendations.

----- Original Message -----
From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
To: <a-list@xxxxxxxxxxxxxxxxxxx>; <gang8@xxxxxxxxxxxxxxx>;
<pkt@xxxxxxxxxxxxxxxx>; <TheNewForum@xxxxxxxxxxxxxxx>
Sent: Saturday, June 28, 2003 4:51 PM
Subject: Re: [A-List] [Fwd: Re: [gang8] THE DOLLAR VS THE EURO]


> The unemployment problem in China is complex. I will have something to
> say about it in my next installment in central banking in Asia Times.
> But one way to modrate unemployment in China is to stop the massive
> layoffs by the state owned enterprises. SOE reform in China has been
> heading down the wrong path for almost a decade.  The pension problem in
> China is part of the unemployment picture because Chinese demographics
> is such that retirees are rising in number faster than new workers
> entering the market at the rate of almost 2 to one because of the one
> child policy.  Simple math: two parents retire; they produce one child
> to replace their jobs. If China lives up to its socialist commitment to
> strengthen free education by extending the tertiary education time frame
> and enlarging the college and graduate student population, it will be
> helpful to the economy and the unemployment problem.
>
> The yuan is also a complex issue.  The official GDP of China is around
> $1 trillion in currenct exchange rate (8.2 to 1). But the PPP (purching
> power parity) according to thw World Bank for China is 4 to 1 against
> the US.  In other words, on a PPP basis, Chinese GDP is $4 trillion
> against the US' $10 trillion.  If the RMB yuan is 50% undervalued, than
> Chinese PPP GDP would double to $8 trillion.  No economists I know see
> the Chinese economy as 80% in size as the US economy.  China will not
> free float or free convert the RMB in the foreseeable future.  China
> does not feel it can handle the internation currency market and the
> manipulation og hedge funds and currency traders.
>
> In an official speech at the Moscow State Institute
> for International Relations on 28 May 2003, ,President Hu Jintao
> declared that China will spend 20 years of hard work to strive to make
> our gross domestic product in the year 2020 be four times what it was in
> the year 2000, and to exceed the goal of $4 trillion, calculated
> according to the current rate of exchange between the renminbi and the
> dollar.  If PPP ratio remains the same, projected Chinese GDP would be
> 150% of US GDP, making China the larest economy, but still not on a per
> capita basis.  But data from the past two decades indicate the Chinese
> GDP has been growing at a slower pace than US GDP, and the GDP gap
> between The uS and China increased rather than decreased between 1978
> and 1988, while in absolute term Chinese GDP increased.
>
>
> China needs an independent central bank and a freely convertoible
> currency like Kennedy needed a trip to Dallas to assure a second term.
>
> Henry
>
> Anyutka wrote:
> > I largely concur with Michael's and Henry's posts, and the currently
rising
> > dollar is evidence that Europe is suffering from an appreciated euro.  I
> > disagree with Hale, and do not think the euro will hit 1.40; in fact, I
hold
> > the position that the dollar is about to enter a multi-month rally with
> > first resistance at 100-102.  Time will tell who's correct.  (I believe
the
> > dollar will plummet again and more severely than it has over the last 2
> > years either late this year, or next.)  But what's interesting is the
> > current US pressure on the Chinese to float the yuan (which they must do
> > before 2008 as a member of the WTO.)  Evergreen Bank is now offering
yuan
> > accounts to Americans, and Warren Buffet took a huge position in
Petrochina
> > as did BP.  As the yuan is about 50% undervalued, China is able to draw
> > tremendous direct investment at the expense of US and EU workers...I
have
> > been told that China must create 10 million jobs a month in order to
keep
> > the population "on board" with the govt.  Henry, is this correct?  And
how
> > likely is it that China will knuckle under to US pressure and float the
yuan
> > within the next 12 mo.s?  (BTW, if the US does get the Chinese to float,
I
> > don't think the results will be quite what they expected.) -A.
> >
> > ----- Original Message -----
> > From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
> > To: <a-list@xxxxxxxxxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>;
> > <TheNewForum@xxxxxxxxxxxxxxx>
> > Sent: Saturday, June 28, 2003 3:28 PM
> > Subject: [A-List] [Fwd: Re: [gang8] THE DOLLAR VS THE EURO]
> >
> >
> >
> >>
> >>-------- Original Message --------
> >>Subject: Re: [gang8] THE DOLLAR VS THE EURO
> >>Date: Sat, 28 Jun 2003 12:53:24 -0400
> >>From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
> >>Reply-To: gang8@xxxxxxxxxxxxxxx
> >>To: gang8@xxxxxxxxxxxxxxx
> >>References: <14d.20e5023f.2c2f0ba4@xxxxxxx>
> >>
> >>The recent rise of the euro against the dollar, the first wave since the
> >>euro's introduction, is the result of an EU version of the Plaza Accord
> >>on the yen, albeit without a formal accord.  The strategic purpose is to
> >>reduce the euro to the status of the yen, as a subordinated currency of
> >>the dollar and the dollar system.  The real effect of the Plaza Accord
> >>was to shift the support of the dollar, and the pain associated with it,
> >>from New York to Tokyo.  What is happening to the euro now is far from
> >>being the beginning of the demise of the dollar.  It is the beginning of
> >>the reduction of the euro into a subservient currency to the dollar.  It
> >>is a strategy to make the EU a structural supporter of a rising dollar
> >>in the long run.  It is the equivalent of the Romans' brilliant strategy
> >>in making a dissident Jew a Christian god, to pre-empt the domination of
> >>Judaism over the Roman empire.  By allowing a trade surplus denominated
> >>in dollars to be accumulated by non-dollar economy, such as yen, euro,
> >>yuan, the cost of support the value of the dollar is then shifted to
> >>these non-dollar economies, which manifest in low wages and weak
> >>domestic consumption in these economies.
> >>
> >>The anti-dollar crowd has nothing to celebrate.
> >>
> >>Henry
> >>
> >>Hudsonmi@xxxxxxx wrote:
> >> >
> >> > THE DOLLAR VS THE EURO
> >> > There has been a lot of talk about OPEC and a number of other
countries
> >> > diversifying their foreign exchange reserves by shifting from dollars
> >
> > to
> >
> >> > euros.
> >> > In some quarters this has been viewed as a move to "bring down the
> >> > American Empire." Moving out of the dollar, it is claimed, would stop
> >> > America's free ride.
> >> > Well, not exactly yet!
> >> > On Thursday at the Forecasters Club I spoke with David Hale, who
writes
> >> > often for the Financial Times on international affairs and is quite
> >
> > well
> >
> >> > connected with U.S. officials. He told me that he expects the euro to
> >
> > be
> >
> >> > forced up to $1.40 against the dollar this year. The expectation, he
> >> > explained to the group, was that Europe and Asia would finance 60
> >> > percent of the U.S. domestic budget deficit this year, as a result of
> >> > the balance-of-payments deficit ending up in the hands of foreign
> >> > central banks - mainly Asia and Europe - and placed in U.S. Treasury
> >>bonds.
> >> > Suppose that OPEC, Venezuela and some Islamic countries move out of
the
> >> > dollar into euros. This will put further upward pressure on the
euro's
> >> > exchange rate against the dollar. The main pressure would be felt by
> >> > Germany, which went into the European monetary system with an
> >
> > overvalued
> >
> >> > d-mark as a result of its merger with East Germany (which David
likened
> >> > to a leveraged buyout at too high a price for the entity being
> >> > acquired). The pressure will be for Germany either to undertake
> >> > structural reform (i.e., anti-labor, even Thatcherite market reforms,
> >> > winding down of pension, social security, health and other public
> >> > services) or - and this thought must have U.S. diplomatic strategists
> >> > chuckling - forcing Germany to withdraw from the European monetary
> >
> > union.
> >
> >> > So the currency diversification move, ostensibly threatening the
> >> > dollar's free ride in the long run, would help break up its number
one
> >> > nemesis these days, the European monetary union, in the short run.
> >> > The political issue is whether Germany will continue to subsidize
> >> > Ireland, whose currency is undervalued. (Note: now that sterling is
> >> > falling, it will make it easier for it to join the Euro without
> >> > experiencing German-type problems later on.)
> >> > Many of the opponents of America's free ride keep looking for instant
> >> > victories without thinking tactically.
> >> > Michael Hudson
> >> >
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> >> >
> >> >
> >> >
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