Notes From Underground: The Long March toward Yuan appreciation–Schumer, Levin, Graham vs. the G-20

As we head into next weekends G-20 meeting, the swords of reprisal are being sharpened by the wagging tongues of political expediency. Sander Levin, chairman of the House Ways and Means Committee, is threatening that Congress will move to punish the Chinese for their recalcitrant behavior toward the rebalancing of the global financial and economic system if the Obama administration fails to get China to revalue the YUAN.

The Chinese warned today that the G-20 is not the place to discuss bilateral financial friction. The recent EURO depreciation has softened the calls of the EU for Chinese revaluation so the issue falls mainly to the U.S.  and some peripheral nations that are also concerned about the YUAN’s stability. Levin referred to the Chinese currency position as mercantilism and the world’s trading nations are tiring of its manipulated advantage. As we always warn, the G-20 is doing its best to make itself totally irrelevant and this upcoming meeting will be one more attempt to seal its fate.

Another piece of news on the global trade front is that Brazil is going to suspend its WTO-approved sanctions on U.S. COTTON exports. Previously, the Brazilians were going to install tarriffs on U.S. products as retaliation for the illegal subsidies provided to U.S. cotton growers that made exports less expensive. The Brazilians fought hard in the WTO to get this judicial ruling and now its seems strange that they are going to voluntarily suspend action. As our readers know, we at NOTES spend a great deal of time trying to look beyond the headlines and this is one of those situations. We think there is more to this, especially ahead of the G-20 and we believe that the U.S. will remove the tarriffs on Brazilian ethanol and/or sugar. We will be watching the price action in the sugar market to verify any hint of truth to this hypothesis … but so the world goes.

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3 Responses to “Notes From Underground: The Long March toward Yuan appreciation–Schumer, Levin, Graham vs. the G-20”

  1. Ron Says:

    Yra,
    Please explain to me why it is truly wise for the people of the U.S. in the long run to allow its industry to hollowed out and sent to China? I always look at the example of the impoverishment of Argentina and Portugal of countries that went down this road. I genuinely want to know why I am wrong, because I truly hope I am wrong.

    Argentina appeared to had debt fueled prosperity for awhile, setting the stage for busts, but when the debts finally came due for the last time and there was no industry left to back up the debt or jobs for the people, populism followed and the impoverishment came.

  2. reagan Says:

    Ron
    US jobs are not going to China alone, they are going to Bangladesh, India, Vietnam, Mexico, and soon with the devaluation of eastern european currencies, to Europe and Britain. As an owner of 2 small companies, I have shifted all my production first to China, and now to Vietnam, and I will not bring them back. US factories have not only been losing jobs when the dollar is strong, but even faster when the dollar is weak, because raw materiel costs have been higher between 2003 and 2007 because of the weaker US dollar. Worst, US taxes are too high, wages versus productivity is not higher than Korea, Taiwan or even Germany and Japan. And US workers are too lazy to undergo retraining to adapt to newer products. Currency devaluation is the politicians kook-aid for the masses and it seems you have been watching too much TV and not reading enough. When the USD devalues, I have no intention to sell in the US market, who wants to be paid in funny money? hence another reason to move production to where our markets are ie Asia and Latam.

  3. yra Says:

    deng xiaoping and his comment about capitalism being a better mouse catcher.The fall of the berlin Wall and developement of Chinese capitalism has unleashed a powerful force and downward pressure on wages in the west.The model of the New Industrial state developed by J.K. Galbraith is flawed in the transforming global market and we are paying for that now—the world is adjusting but it is important if our policy makers understand this and not let political expediency be their guide[ha ha ha] and here in lies the problem–and that with a FED that is based on the principles of avoiding deflation and a return to 1937 .

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