Grow up. When someone like PTJ says something simple about foreign exchange which he's been trading for 30 years, one should at least check their facts before spouting off like an ignoramus. You seem to know very little about anything except posting bullshit and making an ass of yourself.
So funny. I knew this because I visited China in 1988 and 1995. Both times at Bank of China you could exchange 1 US dollar for 8.7 RMB, but in the black market you could exchange 1 US dollar for 9.0 RMB, since at that time no one wanted to hold RMB. I just asked a Chinese friend of mine and he did not remember anything about the "devaluation on Jan 1, 1994". He had been sending money to his relatives in mainland China for twenty years and he said US $ has been worth less and less in China in that period. He also mentioned that before 1994 China had a two price system in which the foreigners sometimes had to pay double price for the same service but eliminated the practice around 1994. The mis-conception of devaluation could be because of that. If you knew any Chinese from mainland, ask them how much a US dollar was worth in China prior to 1994.
Happy Halloween Trader, BTW - zero sum trade in whatever context you assume I mean and whatever context I contend, seems to be subject to confusion because the relationship and its context was never defined. From the book: "In a very real sense, we all compete to enrich others." http://mises.org/books/game.pdf The fact that real competition exists to defend a situation which in Austrian economics view, has a non zero-sum outcome does not negate the reality that crude econometrics and a layer cake of hedge fund trade cannot provide an authentic replacement for a real exchange of Trade.
There is little doubt that cross border investment flows represent both opportunity and risk. Moving capital where it should be more productive represents a rise in liquidity for the recipient economy. This creates an obligation and risk to effectively employ investment capital. The cross border flows which precipitated the Asian contagion of the late 90's seem to be back in vogue. Those economies learned hard lessons. This is why some are now putting up barriers to investment flow. In the case of China, US trade deficits were offset with Chinese investment in US assets (financial instruments). This became a self reinforcing behavior. The US banking system blew it's self up and now China is being taken to the wood shed as the primary reason the US economy is having difficult growing out of a financial Armageddon of our own making. Comparative advantage is a nice idea when you are making money creating it in other places. When the cows come home to roost, it becomes a game of political smack down and brinkmanship. Perhaps globalization was predestined to end in trade war. From Wiki on Post Keynesian Economics: Introduction The term Post Keynesian was first used to refer to a distinct school of economic thought by Eichner and Kregel (1975)[4] and by the establishment of the Journal of Post Keynesian Economics in 1978. Prior to 1975, and occasionally in more recent work, Post Keynesian could simply mean economics carried out after 1936, the date of Keynes's The General Theory. [5] Post Keynesian economists are united in maintaining that Keynes's theory is seriously misrepresented by the two other principle Keynesian schools: neo-Keynesian economics which was orthodox in the 1950s and 60s - and by New Keynesian economics, which together with various strands of neoclassical economics has been dominant in mainstream macroeconomics since the 1980s. Post Keynesian economics can be seen as an attempt to rebuild economic theory in the light of Keynes's ideas and insights. However even in the early years Post Keynesians such as Joan Robinson sought to distance themselves from Keynes himself and much current Post Keynesian thought cannot be found in Keynes. Some Post Keynesians took an even more progressive view than Keynes with greater emphases on worker friendly policies and re-distribution. Robinson, Paul Davidson and Hyman Minsky were notable for emphasising the effects on the economy of the practical differences between different types of investments in contrast to Keynes more abstract treatment.[6] The theoretical foundation of Post Keynesian economics is the principle of effective demand, that demand matters in the long as well as the short run, so that a competitive market economy has no natural or automatic tendency towards full employment.[7] Contrary to the views of New Keynesian economists working in the neo-classical tradition, Post Keynesians do not accept that the theoretical basis of the market failure to provide full employment is rigid or sticky prices or wages. The positive contribution of Post Keynesian economics[8] has extended beyond the theory of aggregate employment to theories of income distribution, growth, trade and development in which demand plays a key role, whereas in neoclassical economics these are determined by the supply side alone. In the field of monetary theory, Post Keynesian economists were among the first to emphasise that the money supply responds to the demand for bank credit,[9] so that the central bank can choose either the quantity of money or the interest rate but not both at the same time. This view has largely been incorporated into monetary policy, which now targets the interest rate as an instrument, rather than the quantity of money. In the field of finance, Hyman Minsky put forward a theory of financial crisis based on financial fragility, which has recently received renewed attention.[10] Strands There are a number of strands to Post Keynesian theory with different emphases. Joan Robinson regarded as superior to Keynesâs Michal Kaleckiâs theory of effective demand, based on a class division between workers and capitalists and imperfect competition.[11] She also led the critique of the use of aggregate production functions based on homogeneous capital â the Cambridge capital controversy â winning the argument but not the battle.[12] Much of Nicholas Kaldorâs work was based on the ideas of increasing returns to scale, path dependency, and the key differences between the primary and industrial sectors.[13] Paul Davidson [14] follows Keynes closely in placing time and uncertainty at the centre of theory, from which flow the nature of money and of a monetary economy. Monetary circuit theory, originally developed in continental Europe, places particular emphasis on the distinctive role of money as means of payment. Each of these strands continues to see further development by later generations of economists, although the school of thought has been marginalized within the academic profession. From Wiki on Austrian Economics: The Austrian School is a heterodox school of economic thought that emphasizes the spontaneous organizing power of the price mechanism. Its name derives from the identity of its founders and early supporters, who were citizens of the old Austrian Habsburg Empire, including Carl Menger, Eugen von Böhm-Bawerk, Ludwig von Mises, and Nobel laureate Friedrich Hayek.[1] Currently, adherents of the Austrian School can come from any part of the world, but they are often referred to simply as Austrian economists and their work as Austrian economics. The Austrian School was influential in the late 19th and early 20th century. Austrian contributions to mainstream economic thought include involvement in the development of the neoclassical theory of value and the subjective theory of value on which it is based, as well as contributions to the "economic calculation debate" which concerns the allocative properties of a centrally planned economy versus a decentralized free market economy.[2] From the middle of the 20th century onwards, it has been considered outside the mainstream,[3][4] with notable criticisms related to the School leveled by economists such as Bryan Caplan, Jeffrey Sachs, and Nobel laureates Paul Samuelson,[5] Milton Friedman,[6] and Paul Krugman.[7] Followers of the Austrian School are now most frequently associated with libertarian political perspectives that emanate from such bodies as the Ludwig von Mises Institute and George Mason University in the southern US.[8] Austrian School principles advocate strict adherence to methodological individualism â analyzing human action exclusively from the perspective of an individual agent.[9] Austrian economists also argue that mathematical models and statistics are an unreliable means of analyzing and testing economic theory, and advocate deriving economic theory logically from basic principles of human action, a method called praxeology. Additionally, whereas experimental research and natural experiments are often used in mainstream economics, Austrian economists contend that testability in economics is virtually impossible since it relies on human actors who cannot be placed in a lab setting without altering their would-be actions. Mainstream economists are generally critical of methodologies used by modern Austrian economists;[10] in particular, a primary Austrian School method of deriving theories has been criticized by mainstream economists as a priori "non-empirical" analysis[5] and differing from the practices of scientific theorizing, as widely conducted in economics.[11][12][10] Austrian School economists generally hold that the complexity of human behavior makes mathematical modeling of an evolving market extremely difficult (or undecidable) and advocate a laissez faire approach to the economy. They advocate the strict enforcement of voluntary contractual agreements between economic agents, and hold that commercial transactions should be subject to the smallest possible imposition of coercive forces. In particular, they argue for an extremely limited role for government and the smallest possible amount of government intervention in the economy, especially in the area of money production (advocating instead a commodity money system).
So when you wrote "the bigger economy is zero sum" you meant trade in the sense that both parties benefit?
Oh please... tell it to the Federal Reserve: On January 1, 1994, the Chinese government unified its exchange rate system by abolishing the official rate. Overnight the market value of China's currency fell by 50%. http://www.frbsf.org/econrsrch/wklyltr/wklyltr98/el98-01.html
thx. this post is what makes ET worthwhile . Unfortunately too many posters including some moderators are in the habit of denigrating others because of the emptiness in their own lives. this is a cliche but a true one.
I think in that context, its more like a relationship of "You let me be a producer, and I'll let you be a Consumer" is at play. The thing is when the machinations of finance get involved, you have leveraged trades effecting relationships and you start to see that the original setup (you let me be a producer, and I'll let you be a consumer) is a false premise. Its only when the layered levels of finance retool the real economy and turn it into a kind of capital flight situation do people realize that at the very bottom, there is a flawed logic in the China USD relationship. Even a revaluation is a band aid. In the sense that the premise for a trade relationship is flawed, I mean that its a zero sum relationship, but we've been both breathing the fumes of the relationship for a little while now instead of been driven by something more viable and authentic in the long term. But given how Markets are in zero-sum, eventually both parties end up paying the bill for a flawed relationship. Perhaps George Soros' term use to describe a false premise in which the global financial system is built is effective in describing this better.