November 29, 2004


Chinese PM Redirects Blame for Currency Rates to Washington (Heda Bayron, 29 November 2004, VOA News)

Chinese Prime Minister Wen Jiabao has rejected pressure for exchange rate reforms and criticized the United States for not doing its part to keep the dollar from weakening. Washington has been calling on China to adopt a flexible exchange rate system to ease pressure on the dollar and reduce the U.S. trade deficit.

Inactions have consequences.

Posted by Orrin Judd at November 29, 2004 3:10 PM


If the US was running a modest budget surplus, it wouldn't be facing the possibility of tipping into crisis now, and perhaps not ever. Such a surplus would reassure investors that a fiscally responsible government was at the helm, and perhaps allow the US enough time to adjust gradually to an unsustainable situation.

But, wait! The US *was* running a modest budget surplus once. It seems to have disappeared, somehow...

And you'd have to be blind, deaf and stupid to portray that disappearance as "inaction".

Posted by: Phoenician in a time of Romans at November 29, 2004 5:54 PM

Thank you very much. No one has ever been able to make me really understand the Punic Wars before.

Posted by: David Cohen at November 29, 2004 6:34 PM

Great. Now we can get you started on understanding the difference between the Carthaginians and the Phoenicians proper...

Posted by: Phoenician in a time of Romans at November 29, 2004 7:47 PM

Is this proof that Phoenicians suffered from high blood pressure? Or was it just hysteria...

Posted by: Randall Voth at November 30, 2004 9:27 AM

Gee, it never occurred to me that the Phoenicians were Chineese. Will wonders never cease.

Posted by: Uncle Bill at November 30, 2004 10:46 AM


The currency situation is neither a "crisis" nor "unsustainable".

What we have is China subsidizing US consumers, which seems like a pretty good deal to me.
Plus, it creates American jobs.

If we didn't have to purchase foreign oil, it'd be perfect.

Posted by: Michael Herdegen at November 30, 2004 6:41 PM

Even the optimists know that the current account deficits are not sustainable at these levels. The dollar's drop is a symptom of that unsustainability. Read this article by Bill Gross. Bill manages the Pimco bond funds, the world's largest bond funds, so he knows a thing or two.

Posted by: Robert Duquette at November 30, 2004 10:05 PM

A bearish bond trader? Wonders never cease....`

Posted by: oj at November 30, 2004 11:29 PM


Having read the Gross article, I have to wonder: What about it do you think is a big deal ?

Gross basically says that Asia is subsidizing American spending, and that when they decide to stop, (if ever), the US will have to raise interest rates.

OK, and ?

To whom else are China, Japan, South Korea, or Europe going to sell their products ?
It's a buyers' market, and America is the biggest buyer.

What I don't get is what horror you believe awaits us when the party ends.

Posted by: Michael Herdegen at December 1, 2004 2:10 PM