The one thing that seems to be certain is that for China (or some other country) to peg their currency so that it is undervalued, they MUST be willing to hold the overvalued paper that comes in… The second that they decide that they don’t want the overvalued paper, the currency peg begins to disappear.

I made a big one on the cash for clunkers post and I learned something from it – there’s always a silver lining.

Seems appropriate to post here.

Don’t worry about it. That money’ll come back as investment. Sans capital controls and a loathing of foreign investment, et al, we wouldn’t have to worry so much about currency fluctuations…

What is the market clearing price of a ticket out of Auschwitz? I suppose this question has an answer, but the answer has nothing to do with “free market economics”. If it does, then every economy is a “free market economy”.2. I can’t agree with you here. Again, this system seems roughly equivalent to taxing Chinese factors of production and using the tax revenue to bid the exchange rate down to the fixed level. Would this tax be identical to the Chinese not having their own currency?What does something cost to make? Again, is the “cost” of labor simply the cost of avoiding starvation, or does “cost” mean something else?You’re missing the restraints of trade that you aren’t discussing. You’re assuming that one Chinese merchant’s ability to negotiate a price with one U.S. merchant is the only “freedom” that matters. In reality, countless forces affect the price these two traders negotiate, and these forces aren’t necessarily what the liberal traditional calls “proper”.

Global imbalances are generally understood to be persistent trade deficits (that definition is admittedly less formal than the definition of “trade deficit”).

RE: “There is no deficit. And there is no imbalance.”

There is a goods and services deficit and there is an imbalance of net exports.

Re: “Why are you worried about a persistent trade deficit if, AS YOU SAID, one balances goods with money? ”

Because persistent deficits carry with them the risk of a swift, violent, currency correction. If they gradually adjust it’s not as worrisome.

And for the fourth time, what is a global imbalance? or a trade deficit? You said you’re the one here worried about global imbalances, about which you said: “Persistent trade deficits have been labeled “global imbalances”. And then you said “I suppose you could call a trade deficit a trade imbalance, but it doesn’t make much sense – you balance goods with money.”

Why are you worried about a persistent trade deficit if, AS YOU SAID, one balances goods with money? There is no deficit. And there is no imbalance.

1. If I manufacture a shirt in China and export it to the US, how am I not free to charge whatever the market will bear?

2. Fixed exchange rate is, from pricing perspective, identical to the Chinese not having their own currency at all. It is as if the Chinese quote all prices in 1/7 of a US dollar.

If something costs $4 to make, they will sell it for more than $4. If it can be sold only for $4 or less, they will stop making it.

What am I missing?

And I still don’t know what a global imbalance is. Or a trade deficit. When I trade with someone, it’s just that–trade. There’s no “imbalance”. So if trade is balanced with money, as you said, what is a global imbalance?

If you can’t see that these statements contradict one another then you’re are either disingenuous or intellectually goofy.”

How do they contradict each other? When you cut a tax the benefit is shared by producers and consumers. When you raise a tax the cost is shared by producers and consumers. Where’s the contradiction, Matt? Who’s being disingenuous or goofy?

RE: “And ok, so, what’s a global imbalance?”

I defined it in the first sentence of the last paragraph of the comment you just responded to.

Let’s try this again. See the statement above?

You said this earlier:

“I think part of the appeal of undervaluation for countries is that, as you alluded to, it does act as a subsidy for producers (and consumers as well, obviously)”

If you can’t see that these statements contradict one another then you’re are either disingenuous or intellectually goofy.

I admit that you later clarified your statement by saying consumers of this country or producers of that country blah blah whatever–but your first statement:

“I think part of the appeal of undervaluation for countries is that, as you alluded to, it does act as a subsidy for producers (and consumers as well, obviously)”

cannot be right. Spoon feed on that smart guy.

And ok, so, what’s a global imbalance?

RE: Pt. #2 – I should have said PLEASE read then report, I’m sorry.

How would an undervalued currency help consumers of imports??? I think everyone on here is at a level where I don’t have to spoon-feed that to you, and if anyone is confused they are usually mature enough to ask.

RE: “Exactly what is a “trade imbalance”? I don’t think they exist, but I’d like your take.”

Persistent trade deficits have been labeled “global imbalances”. I don’t know what a trade imbalance is. I suppose you could call a trade deficit a trade imbalance, but it doesn’t make much sense – you balance goods with money.

Ohhhhh, you didn’t make that clear now did you? Forgive LCJ and I for not realizing that when you said “producers… and consumers” you were really saying “some producers… and consumers.”

“I’m usually the one here who’s always concerned about persistent global imbalances”

Exactly what is a “trade imbalance”? I don’t think they exist, but I’d like your take.

Something else I’ve noticed about carnivals is that the game booths accept cash while the rides accept tickets. I find that interesting. Perhaps the carnival operators are more concerned about ride operators stealing cash or maybe the game operators get a cut of their haul in such a way that they’re less likely to steal. Or maybe it’s just a matter that the ride operators are more likely to have their cash aprons pick pocketed as they’re primary concern needs to be on safety.