Admiral Ackbar
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[quote name='Dr Mario Kart']maybe he's just really good at selling his ideas. There arent generally simple ways to make anyone, much less everyone, happy.[/QUOTE]
Actually, his take is quite ingenius. It's one of those, "Why didn't I think of that." ideas and that's usally what I take as a mark of genius.
His idea is to set up a dual exchange rate for exporters to reduce the trade deficit. For example, lets say our exchange rate with China is 8 Yuan for 1 dollar. 8Y=1D.
The problem is, if the Chinese reduce the deficit, it doesn't do anything, because the exchange is even. For example, lets say the Chinese reduced the difference to 6Y=1D. There are lots of problems. One, Chinese products become more expensive, So things cost more at Walmart. But the idea that Americans will buy less CHinese goods and more American is BS. Because even if there is a 20-25% difference most people will absorb it. Say prices increase 10% at Walmart. It's not going to stop people buying chinese. Especially because, there are no US products to buy. Less than 11% of the US workforce is in manufacturing. That's below pre Civil War Levels. There are no US products for them to buy.
Alternatively, it's supposed to make US prices cheaper. SO the Chinese buy more US products. But again, there are no US products to buy. We export more raw materials than manufactured goods. And in some ways that makes things just as bad. Because the raw materials assembled in China will be less countering out somewhat the increase in costs. So this wole idea that if China floats it's currency will help out is just wrong.
But what if the US for a short ter adjutory period, say a decade, creates a two tiered unilateral import/export exchange rate.
Here's how it works.
Again, lets set things at 1D=8Y in China. The US Federal Goverment says, "Look, if you buy American products, we're going to make the rate 1D=6Y. At first it sounds like a subsidy but it really isn't because it's an currency exhcanged and it involves ALL US Goods Exported. So when the China Businessman goes to buy US Dollars is he going to go to the CHinese Gov. at the 8Y=1D rate. Hell no, he's going to go straight to Uncle Sam becayuse we'll give him 6Y=1D. His buying power in American markets improves substantially. And again, this doesn't necessarily mean the Chinaman will buy more American. But it's a start.
And the argument against this is two fold. First, the Chinese will get pissed. But for the Chinese man on the street his buying power has just improved considerably. And the value of the US Dollar in the free Market has not because for all other financiial transactions involving US Dollars are tiered to the 8Y=1D ratings. So there may be a slight downward adjustment but overall the dollars held by the Chinese Gov. will keep their relative value while at the same time actually adding money to the Chinese Economy ebcause now the average Chinese person has greater buying power.
The second argument is that other nations will be pissed. But that's why you do it for every country on earth. If you buy American, you get this same % cut on exports in the currency exchange. That way no one feels like they're getting screwed. And they'll go along with it because 1) their buying power improves, 2) they're getting the same deal as everyone else, 3) their currency holding will remain relatively strong and 4) We're the US and the rest of the world does what we tell them.
But this is only for US Exports. For US imports, the exchange rate will stay the same. For example, if then Walmart had to buy goods at 6Y=1D they would be pissed, because again, chinese goods have just become more expensive. But Imports stay at the same free market floating 8Y=1D so imported goods from the outside will remain as cheap.
In a nutshell, it's basically saying, Look, people won't import less foreign goods. It just isn't going to happen. So we need to look at the export side and give a better incentive for foriegn countried to buy more US goods. And while it won't happen over night, eventually as those overseas economies grow they will slowly start buying more American goods, which will cause more manufacturing jobs to be created and more people to get employed yet not negatively effect the development of the rest of the world because we're still buying at the same rate. Then, once the trade deficit is reduced by say, 50%, we slowly merge back the exchange rates to a more manageable level.
In a sense, it's like the ADV fire sales they have. They're in debt. They need cash. And the more people buy their stuff the more likely they'll get more purchases and Cash to pay off their immediate debt. So they slash prices by 40 to 50% for a short term. It would basically be the same thing. The difference is, ADV may lose money because they're making production goods. The US doesn't lose money, it just gains money, because the Gov isn't the producer. It's the business. The US just gets cold hard cash. On paper it would be a slight loss but in reality it would be an economic gain because the US wasn't getting those dolalars anyway nd not producing anything.
I mean, it's a sheer genius idea.
Actually, his take is quite ingenius. It's one of those, "Why didn't I think of that." ideas and that's usally what I take as a mark of genius.
His idea is to set up a dual exchange rate for exporters to reduce the trade deficit. For example, lets say our exchange rate with China is 8 Yuan for 1 dollar. 8Y=1D.
The problem is, if the Chinese reduce the deficit, it doesn't do anything, because the exchange is even. For example, lets say the Chinese reduced the difference to 6Y=1D. There are lots of problems. One, Chinese products become more expensive, So things cost more at Walmart. But the idea that Americans will buy less CHinese goods and more American is BS. Because even if there is a 20-25% difference most people will absorb it. Say prices increase 10% at Walmart. It's not going to stop people buying chinese. Especially because, there are no US products to buy. Less than 11% of the US workforce is in manufacturing. That's below pre Civil War Levels. There are no US products for them to buy.
Alternatively, it's supposed to make US prices cheaper. SO the Chinese buy more US products. But again, there are no US products to buy. We export more raw materials than manufactured goods. And in some ways that makes things just as bad. Because the raw materials assembled in China will be less countering out somewhat the increase in costs. So this wole idea that if China floats it's currency will help out is just wrong.
But what if the US for a short ter adjutory period, say a decade, creates a two tiered unilateral import/export exchange rate.
Here's how it works.
Again, lets set things at 1D=8Y in China. The US Federal Goverment says, "Look, if you buy American products, we're going to make the rate 1D=6Y. At first it sounds like a subsidy but it really isn't because it's an currency exhcanged and it involves ALL US Goods Exported. So when the China Businessman goes to buy US Dollars is he going to go to the CHinese Gov. at the 8Y=1D rate. Hell no, he's going to go straight to Uncle Sam becayuse we'll give him 6Y=1D. His buying power in American markets improves substantially. And again, this doesn't necessarily mean the Chinaman will buy more American. But it's a start.
And the argument against this is two fold. First, the Chinese will get pissed. But for the Chinese man on the street his buying power has just improved considerably. And the value of the US Dollar in the free Market has not because for all other financiial transactions involving US Dollars are tiered to the 8Y=1D ratings. So there may be a slight downward adjustment but overall the dollars held by the Chinese Gov. will keep their relative value while at the same time actually adding money to the Chinese Economy ebcause now the average Chinese person has greater buying power.
The second argument is that other nations will be pissed. But that's why you do it for every country on earth. If you buy American, you get this same % cut on exports in the currency exchange. That way no one feels like they're getting screwed. And they'll go along with it because 1) their buying power improves, 2) they're getting the same deal as everyone else, 3) their currency holding will remain relatively strong and 4) We're the US and the rest of the world does what we tell them.
But this is only for US Exports. For US imports, the exchange rate will stay the same. For example, if then Walmart had to buy goods at 6Y=1D they would be pissed, because again, chinese goods have just become more expensive. But Imports stay at the same free market floating 8Y=1D so imported goods from the outside will remain as cheap.
In a nutshell, it's basically saying, Look, people won't import less foreign goods. It just isn't going to happen. So we need to look at the export side and give a better incentive for foriegn countried to buy more US goods. And while it won't happen over night, eventually as those overseas economies grow they will slowly start buying more American goods, which will cause more manufacturing jobs to be created and more people to get employed yet not negatively effect the development of the rest of the world because we're still buying at the same rate. Then, once the trade deficit is reduced by say, 50%, we slowly merge back the exchange rates to a more manageable level.
In a sense, it's like the ADV fire sales they have. They're in debt. They need cash. And the more people buy their stuff the more likely they'll get more purchases and Cash to pay off their immediate debt. So they slash prices by 40 to 50% for a short term. It would basically be the same thing. The difference is, ADV may lose money because they're making production goods. The US doesn't lose money, it just gains money, because the Gov isn't the producer. It's the business. The US just gets cold hard cash. On paper it would be a slight loss but in reality it would be an economic gain because the US wasn't getting those dolalars anyway nd not producing anything.
I mean, it's a sheer genius idea.
ing Phantasm!
Nice.
