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DanS
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Kickball Capital of the World
Jan 1970
time: 00:31
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Well, who's to say that a liberalized Yuan market would not have had the same or better stabilizing impact?
With regard to whether we can oblige the Chinese to do one thing or another, of course we can't. It was the "because it would open the door to international speculation which is dramatically disruptive for a developping country" opinion that raised the red flag (so to speak).
Last edited by DanS on 03-12-2003 at 21:59
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DanS
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Kickball Capital of the World
Jan 1970
time: 00:31
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Are the Chinese excessively cautious, or are they prevented to move by the remaining weaknesses of their country, such as the underdevelopped banking system, the obsolete state owned industry, the unemployment, ... , could be, but China is so big that I am afraid the problems are big too. |
OK, the heart of the issue is that China is not availing itself of the advantages of a market. At the same time, China did not take part in the Asian meltdown. But to take from those circumstances that China did not take part in the Asian meltdown because it did not have a currency market is fallacious. Further, to insinuate that this is somehow indicative of market failure where no market existed smacks of rank socialism.
That's why GP's post was right on the money. You seem to have little faith in markets. If you do have faith in markets, then explain yourself!
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Dont forget the famous Soros speculation against the £ which ended by a devaluation. |
Yes, China has about as large of an economy as the UK on a currency conversion basis, I guess. The pound is still traded on the currency markets despite the meltdown, of course, much to the UK's benefit.
Last edited by DanS on 07-12-2003 at 01:23
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DAVOUT
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AUERSTADT
Jun 2002
time: 05:31
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quote:
OK, the heart of the issue is that China is not availing itself of the advantages of a market. At the same time, China did not take part in the Asian meltdown. But to take from those circumstances that China did not take part in the Asian meltdown because it did not have a currency market is fallacious. Further, to insinuate that this is somehow indicative of market failure where no market existed smacks of rank socialism.
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Your desire to put an infamous label on any observation regarding the market disagreeing with your simplistic views makes a discussion difficult. Anyway, I must insist that it quite usual to compare the benefits of a system (the market), with those of another system (the absence of market) in order to understand their respective effects; this is not socialist, it is a method.
And I confirm that it is a quite common presumption among expert that China did not take part in the meltdown because it was protected by its foreign exchange arrangement.
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That's why GP's post was right on the money. You seem to have little faith in markets. If you do have faith in markets, then explain yourself!
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I cant find GP post on this thread.
I kindly ask you not to look for faith in my statements about economy in general and particularly about foreign exchange. Markets are more useful when they are looked at for what they are, that is places (material or immaterial) summarizing the exchanges resulting from the activity of men, and tending to equilibrium, although sometimes they fail. The faith you are talking about would consist of blindly believing that markets ALWAYS reach equilibrium which is not true.
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Yes, China has about as large of an economy as the UK on a currency conversion basis, I guess. The pound is still traded on the currency markets despite the meltdown, of course, much to the UK's benefit.
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You seem not to realize that a devaluation made when under attack has some unpleasant consequences, extremely costly for all holders of this currency not participating in the attack; it is far from being free of charge, somebody had to pay for the gain of Soros. The fact that the pound recovered in the following years could only demonstrate that the speculation alone was able to bend the BoE, without fundamental reasons.
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DanS
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Kickball Capital of the World
Jan 1970
time: 00:31
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This is getting a little tiresome, because I'm out of my element. But I'm interested enough in your thoughts to think that it's worthwhile pushing a little more.
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Your desire to put an infamous label on any observation regarding the market disagreeing with your simplistic views makes a discussion difficult. |
I don't know how you have adequate knowledge of my views to label them simplistic.
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Anyway, I must insist that it quite usual to compare the benefits of a system (the market), with those of another system (the absence of market) in order to understand their respective effects |
But you didn't do that in this situation. You seem to assume a failed Chinese currency market when making the comparison. Why?
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And I confirm that it is a quite common presumption among expert that China did not take part in the meltdown because it was protected by its foreign exchange arrangement. |
It could have not taken part if it had a freely traded currency as well. Indeed, it might be that a freely traded Yuan would have stabilized the other Asian currency markets. Has anybody done a study on this?
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I cant find GP post on this thread. |
TCO = The Poster Formerly Known As GP
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Markets are more useful when they are looked at for what they are, that is places (material or immaterial) summarizing the exchanges resulting from the activity of men, and tending to equilibrium, although sometimes they fail. The faith you are talking about would consist of blindly believing that markets ALWAYS reach equilibrium which is not true. |
This is a strawman. Where did I indicate that faith in the markets means blindly believing that markets always reach equilibrium?
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The fact that the pound recovered in the following years could only demonstrate that the speculation alone was able to bend the BoE, without fundamental reasons. |
I seem to remember that the fundamental reasons worked themselves out in the meantime (if you have a clearer memory, then I would be interested in knowing how you remember it). Indeed, wasn't the UK's solution to have a more flexible currency, rather than less?
Soros and his ilk were the instigators, but it's not as if they didn't recognize imbalances that they believed they could take advantage of. And since we've established that speculators provide a valuable service...
Last edited by DanS on 08-12-2003 at 22:54
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DAVOUT
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AUERSTADT
Jun 2002
time: 05:31
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This thread should apply for the Most Tiresome Thread Award 
Lets go :
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I don't know how you have adequate knowledge of my views to label them simplistic.
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My knowledge of your views comes from what you said in this thread, that is that a country can only benefit from having its currency freely exchanged on a market; as you are not discounting any occurrence when this could be wrong, and as you did not mention other aspects of your views, I could only conclude that your views are simplistic (which in my opinion is much more friendly than commie or socialist 
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You seem to presume a failed Chinese currency market when making the comparison. Why?
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The actual experience was that, in the Asian meltdown, China was not contaminated. A market could have done the same, but it could also have been contaminated. Therefore, when comparing the absence of market system and the market system, the first has the advantage of having proven immune under actual circumstances (when all other markets were failing), whereas the second could have HYPOTHETICALLY performed as well.
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It could have not taken part if it had a freely traded currency as well. Indeed, it might be that a freely traded Yuan would have stabilized the other Asian currency markets.
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Even an hypothesis must be supported; I have no supporting rational to provide. What I know, is that in a decision making process (should we right away change the pegged yuan for a freely tradable yuan), I would not decide such a move on the basis of unsupported hypothesis.
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Has anybody done a study on this?
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I assume that something of the sort could exist in the IMF papers because the IMF has never(?) expressed the though that China was badly wrong in the choice of the foreign exchange arrangement.
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Where did I indicate that faith in the markets means blindly believing that markets always reach equilibrium?
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You did not indicate that, it is my understanding of what faith applied to foreign exchange could be.
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I seem to remember that the fundamental reasons worked themselves out in the meantime (if you have a clearer memory, then I would be interested in knowing how you remember it). Soros and his ilk were the instigators, but it's not as if they didn't recognize imbalances that they believed they could take advantage of.
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Previously you said :
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The pound is still traded on the currency markets despite the meltdown, of course, much to the UK's benefit.
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This can be understood as if the devaluation was of no consequences, to what I answered that in this case,
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The fact that the pound recovered in the following years could only demonstrate that the speculation alone was able to bend the BoE, without fundamental reasons.
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I of course agree that there were imbalances which have to be recognized sooner and later, and Soros only decided it should be sooner.
Last edited by DAVOUT on 08-12-2003 at 23:56
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DanS
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Kickball Capital of the World
Jan 1970
time: 00:31
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Let's try to wrap this up, because China's system is interesting to discuss in itself and the discussion shouldn't be obscured by semantics.
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My knowledge of your views comes from what you said in this thread, that is that a country can only benefit from having its currency freely exchanged on a market; as you are not discounting any occurrence when this could be wrong |
Where did I say that a country can only benefit from having its currency freely exchanged? I don't think that I even implied it. If China is to trade without bartering, it has to have some sort of currency exchange. A bad exchange is better than none at all. But a better exchange would be big additional benefit to China.
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which in my opinion is much more friendly than commie or socialist |
Well, GP was busting your balls a little. But after this conversation, you still seem to dwell on the market failures rather than an even-handed analysis of the disadvantages and benefits of the market to a developing country.
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The actual experience was that, in the Asian meltdown, China was not contaminated. A market could have done the same, but it could also have been contaminated. Therefore, when comparing the absence of market system and the market system, the first has the advantage of having proven immune under actual circumstances (when all other markets were failing), whereas the second could have HYPOTHETICALLY performed as well. |
All part of the analysis of the relative merits of the hypothetical. But you haven't done this analysis, or at least haven't shared it with us. The hypothetical doesn't seem outrageous, after all. Is it?
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This can be understood as if the devaluation was of no consequences, to what I answered that in this case, |
That's not the way I meant it. I would say that the UK on balance is much better off with the devaluation and their current system versus no devaluation and a less free system.
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DAVOUT
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AUERSTADT
Jun 2002
time: 05:31
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Here is the problem :
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If China is to trade without bartering, it has to have some sort of currency exchange. A bad exchange is better than none at all.
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This is not true.
Summarily, China exports are billed in $. China receives $ in payments. With these $ China pays its imports and buy US bonds. There is no need of other exchanges of currencies. The yuan is not convertible, and cannot be used for international trade.
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But after this conversation, you still seem to dwell on the market failures rather than an even-handed analysis of the disadvantages and benefits of the market to a developing country.
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From the beginning, I tried to understand, and quite unsuccessfully to explain, why China decided in favour of the peg yuan, and still consider it to be adapted to their state of development. As the main differences between a convertible currency and an unconvertible one, is the absence of market, I necessarily focussed on this point. But you ceaselessly want to qualify the idea, and surprisingly their apparent author, rather than discuss their own merit, hence your insistence in seeing only one thing from which you derive political opinions.
In this matter, I am motioned by pure intellectual interest toward a complex problem which will be the subject of multiple issues, commentaries, and international fights in the years to come, and we are exactly in the proper timing to try to be aware of it.
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All part of the analysis of the relative merits of the hypothetical. But you haven't done this analysis, or at least haven't shared it with us. The hypothetical doesn't seem outrageous, after all. Is it?
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As a neutral observer, I do my best to modestly understand why China uses for the time being the peg yuan, but I am not able to tell the Chinese authorities that they are wrong or right. I realize that any change is a heavy decision and cannot be made on the basis of hypothesis, even if they can be said non outrageous.
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03-12-2003 21:53
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