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Krugman is at it again. January 21, 2011

Posted by hslu in China, Economics, Global Affair, jobs, Nursing, Politics.
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Paul Krugman has been saying the same thing about the Renminbi for a long time. A bad economic theory from Krugman’s mouth can sound like true after he tirelessly say it a thousand times.If you ask 11 economists for their opinions, you get 12 answers. Krugman’s rant is the 12th answer here.
I am not sure that a stronger Renminbi is good for the US unemployment picture. The US may get a few thousand jobs here and there in the exporting industries but everyone in the US will pay more at Wal-Mart for goods coming from China. Is that good for the US economy? I am not so sure.
As of now, there is no other country in the world can replace China’s manufacture capacities. No one. In 10 years maybe. But not now.
No other country has the infrastructure to produce the amount of goods that China is exporting to the rest of the world now. If the US wants to blame someone, I am telling you that it was all Bill Clinton’s fault. His pro-Chinese policy triggered a tsunami of foreign direct investments rushing into China to build plants after plants. These American companies did it not because they don’t like American union workers. It was because they liked the Chinese worker much more. They don’t take 10 days of sick leaves a year. They don’t take 30 minute coffee breaks once every a few hours. They don’t read newspapers on company time. They don’t ask for double digit raises every few years. They don’t have fat pensions. They don’t have unsustainable health insurance benefits. They don’t come late and they don’t leave early. And they got paid at 1/5 or even 1/10 of the union wage doing similar work.
Who is the guilty party here? Americans, look into the mirror. That’s who. I haven’t mention that all these Amercian companies wnat to sell something to all these Chinese workers too.
The US promotes free trade. This is free trade. Live with it, Krugman.
The US has no one to blame but itself. Krugman, wake up and face the reality. It is not Renminbi problem. the problem lies with the costs of American workers. It is structural. It is system wide. There is no use to blame the Chinese currency. The America’s workers are not as competitive as you might believe. Period.
Hmm, did I mention other American problems such as QE2, The TARP, the first Obama stimulus and second smaller stimulus disguised as pay roll tax relief? The world will face a bigger inflation problem thanks to the Fed and US Congress. Is that what the world needs? Krugman?
So, shut up! Krugman!
Don’t talk up the Renminbi to hide the real problem of the United States. You can’t use a stronger Renminbi to compensate for a less competitive American worker force. If it ain’t so, the American companies will not move their capitals to China. They would more than happy to stay in the US. No one put a gun to the heads of these companies’ CEOs. They did it willingly. They did it with the support of their board members.

China is looking after its own interest just like the US does. What Krugman is not aware of or his sheer inability to think clearly is that China is not a pure capitalism country. The central government in China can direct significant power to where the problem is  that no US agency or Obama can match its effectiveness.What Chinese government is doing now is take a moderate, step-wise approach just like Chinese have been doing for hundreds of years.
What didn’t work in the Nixon era may be the right medicine in China if it is done judicially. Everyone predicted a 6+% inflation rate in December for China. It came in at 4.8%. Did you check your numbers, Krugman?
If the Chinese government wanted to, their actions can be swift and focused. As for the US, they have to weigh the pros and cons of every policy and each one of these policies is subject to attacks whether the government like it or not. As a Democracy, by default, many policies are moderate in nature at best because special interest groups will make sure it is so.
Except the ObamaCare which Democrats got it done behind closed doors, lie to the public, phony math and illegal bribes using public money. Well, that a topic for another day.


Inflation is coming June 17, 2010

Posted by hslu in China, Economics, Energy, Global Affair, Gold.
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For the past 20 years, China has exported deflation to the rest of the world and we have enjoyed very favorable prices on just about everything except commodity and energy.

Cheap labor and foreign direct investment enabled China manufactured many items dirt cheap for so long that we forgot what inflation was like. The terrible 15+% prime rate and nearly 18% mortgage rates of the late 70’s and early 80’s have became distant memories. The recent financial crisis has artificially kept the interest rate stuck in the range between 0 and 2%.

Well, this period of low inflation is about to end in the near future. A friend of mine who has worked for Wal-Mart for the past 9 years has told me that Wal-mart has increased their prices by a quarter to fifty cents on many items in recent weeks  to offset the high costs from China. The labor unrest has hit Honda and Toyota auto plants in Southern China. The largest iPhone and iPad manufacture in China 富士康 has to raise the salary of their workers by as much as 33% across the board to prevent more suicides from happening (13 so far this year from a single plant.) Just in the last two to three weeks, the minimum wage of young workers has gone up by ~20% in many cities all over China by order from the central government. It has become necessary in order to prevent social unrest in the midst of the young work force.

China’s workers have waken up and they learned quickly to unite and fight for better working condition and higher wages.

It is about time for them to share the profits with the management and party officials. They earned it the good old fashion way. And they deserved a fat raise.

Well, this wave of wage inflation will come to the United States and other parts of the world sooner rather than later.

Don’t forget that every developed and developing country have printed way too much money to keep inflation in the bag. It will rear its ugly head when we least expect it.

Just make sure that you don’t get caught with your pants down.

Buy some gold when it is still cheap.

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