18-07-2003 21:02									#151
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Kidicious: Why would you expect an answer to your point, when you've told him that he doesn't know what he's talking about, when clearly he does?

	18-07-2003 22:25									#152
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quote: Originally posted by DanS Kidicious: Why would you expect an answer to your point, when you've told him that he doesn't know what he's talking about, when clearly he does?

China can't sell off their reserves and keep their currency undervalued. Isn't he saying that they can?

	19-07-2003 20:38									#153
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Tingkai, I replied to you yesterday but the server swallowed it. Luckily I'd copy-pasted it before it disappeared...

Tingkai, you can't get something for nothing. Pegging the Yuan to the dollar may not be done through the standard method of currency reserves, but it has to be paid for in the end.

Take Company A (a factory that exports to the US)

They make widgets, pay their workers in yuan and get paid in dollars. Under any free market system they'd then convert those dollars to yuan and pocket the difference. Now they still do that, but they get an additional boost because the yuan is artificially undervalued. Conversely, noone in their right minds will sell yuan to the Chinese government. So the Chinese government ends up with more and more US dollars that they've bought for an inflated price. To pay for this they have to use yuan they've collected through taxation or through printing more. If the former, then it's money directly out of the pocket of every chinese citizen. If the latter, then inflation will really start to be a problem...

	19-07-2003 20:46									#154
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They do get reserves that way. But they also have to buy dollars to keep their currency pegged. It doesn't just happen by trade.

	19-07-2003 20:52									#155
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They can keep the yuan pegged that way in their own country, and can keep it pegged through a minor amount of currency trading outside their country (minor because the amount of foreign-held yuan is probably low). Either way, it isn't any less expensive because of their artificial exchange rates; it's probably significantly more expensive...

	19-07-2003 20:57									#156
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quote: Originally posted by KrazyHorse They can keep the yuan pegged that way in their own country, and can keep it pegged through a minor amount of currency trading outside their country (minor because the amount of foreign-held yuan is probably low). Either way, it isn't any less expensive because of their artificial exchange rates; it's probably significantly more expensive...

I think you lost me. Do you mean that they keep up the value of their reserves (dollars), and so the dollars that they buy to peg their currency are more expensive?

	19-07-2003 21:05									#157
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I'm saying that in addition to the fixed amount of dollars they have to "buy" (through whatever scheme they use) which has a certain fixed cost associated with it (fixed meaning independent of the scheme) there are probably additional costs associated with doing it through legislated+enforcement means. In other words they'd be better of pegging their currency through the standard means. The way you can see this is that if there were any shocks in the price of the yuan (i.e. it spikes and the government needs to buy more US dollars) then under currency-buying scheme they could buy the first few dollars at a slightly cheaper price. Under current scheme they pay the highest price for every dollar.

The major point is that when there is any trade in currency (as there must between the US and China due to large one-way trade in goods) then it will cost a government to peg one currency to the other, especially when one currency is consistently overvalued.

The Chinese end up with a larger and larger number of US dollars, all of which were bought at excessive prices.

	19-07-2003 21:05									#158
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We should let the GSE's go under. There will just be a write off and some banks will take a haircut. It's not the end of the world. The property is still there.

	19-07-2003 21:11									#159
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quote: Originally posted by KrazyHorse I'm saying that in addition to the fixed amount of dollars they have to "buy" (through whatever scheme they use) which has a certain fixed cost associated with it (fixed meaning independent of the scheme) there are probably additional costs associated with doing it through legislated+enforcement means. In other words they'd be better of pegging their currency through the standard means. The way you can see this is that if there were any shocks in the price of the yuan (i.e. it spikes and the government needs to buy more US dollars) then under currency-buying scheme they could buy the first few dollars at a slightly cheaper price. Under current scheme they pay the highest price for every dollar. The major point is that when there is any trade in currency (as there must between the US and China due to large one-way trade in goods) then it will cost a government to peg one currency to the other, especially when one currency is consistently overvalued. The Chinese end up with a larger and larger number of US dollars, all of which were bought at excessive prices.

Very interesting. I don't think I understand completely though. Probably because I don't really understand the methods that the Chinese use.

	19-07-2003 21:15									#160
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Poor little kid. Still on my ignore list. Too dumb to follow any math in finance or econ and it shows. (not the lack of math, the dumbness.)

	19-07-2003 21:16									#161
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Who, me?

	19-07-2003 21:17									#162
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No. He pretends to ignore me. He's a child.

	19-07-2003 21:20									#163
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I love insulting someone who is on my ignore list. It's like hitting someone who's head is in a bag.

Oh...and Kitty, like I would dare taunt you with lack of math. You'd ***** slap me with a PDE.

	19-07-2003 21:21									#164
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Am I talking **** with this currency trade thing? I'm just pulling it out of my ass, if you hadn't noticed. But it seems to make sense...

	19-07-2003 21:25									#165
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If the yuan is totally controlled by the BoC, there should be a black market, on which the rate of conversion should be different from the official rate. And if the official rate undervalue the yuan, the black yuan would value more dollars that the official yuan. As this situation would not help the conversion of black yuan into dollars, we can expect that the black market yuan would not be significantly different from the official yuan. This would be a strong indication of the undervaluation of the yuan. Any clue about a black market of the yuan ?

As long as the trade balance stays positive, and that the sales price of exported goods, expressed in yuans, is above cost, there is no need to modify the official value of the yuan.

And this is reinforced by the declining value of the dollar.

	19-07-2003 21:28									#166
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quote: Originally posted by KrazyHorse Am I talking **** with this currency trade thing? I'm just pulling it out of my ass, if you hadn't noticed. But it seems to make sense...

I didn't read it.

	19-07-2003 21:29									#167
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I certainly would hold on to my Yuan if I could get a hold of them at the exchange rate. If they ever unpeg it, it will shoot up.

	19-07-2003 21:36									#168
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Kitty, I read it. But didn't follow it. I think one can think through these currency debates in terms of arbitrage arguments and such. I.e. in terms of microeconomics. That the currency is constrained does not prevent one from thinking it through. You can get wonderful insights from using microecnomics to look at constrained markets like rent-controlled apartments, subsidized food, etc.

	19-07-2003 22:55									#169
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quote: Originally posted by TCO We should let the GSE's go under. There will just be a write off and some banks will take a haircut. It's not the end of the world. The property is still there.

The question is what happens to property prices and the US financial markets. They are too big to fail. Even too big to regulate.

	19-07-2003 23:23									#170
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Aaah bullshit. I remember hearing about how LTCM was too big to fail. They just unwind the bad loans. There's lots of value in the portfolio. If someone has to lose money, let it be the people who took the risk.

	19-07-2003 23:24									#171
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test bullshit ****

	19-07-2003 23:25									#172
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I thought you were against bailouts. Why do you advocate one for Freddie. Let it sink or swim.

	19-07-2003 23:26									#173
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IMO they should be liquidated as soon as possible. I'm not advocating a bailout; I'm just sure one will happen.

	19-07-2003 23:27									#174
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Why liquidate? Why not just refuse to do the bailout.

	19-07-2003 23:28									#175
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Good. We are on the same side. hopefully our side wins in the likely case that there is an insolvency.

	19-07-2003 23:31									#176
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"Why liquidate? Why not just refuse to do the bailout."

Because the longer they operate, the more they destort the financial markets and asset prices.

"hopefully our side wins in the likely case that there is an insolvency."

Yeah, but to me that seems highly unlikely.

	19-07-2003 23:33									#177
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Why was this thread not started under "NASDAQ part 29" damn you dans

	19-07-2003 23:33									#178
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quote: Originally posted by HershOstropoler Because the longer they operate, the more they destort the financial markets and asset prices.

That is the case with any bankrupt institution. If the creditors can find a covenant broken than they can create the bankruptcy. Otherwise, they have to sit and wait, while more of their money goes down the drain. tHat's a risk you take when you buy a bond.

Let the carnage happen. Laissez faire.

	19-07-2003 23:34									#179
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quote: Originally posted by HershOstropoler Yeah, but to me that seems highly unlikely.

Don't give up so easy. There are a reasonable amount of people who oppose a bailout.

	19-07-2003 23:35									#180
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quote: Originally posted by TCO Let the carnage happen. Laissez faire.

libertarian