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what about the yuan is undervalued?

#41OrcaPosted 7/6/2011 3:54:45 PM
Tbh, I really thought TrueKu wanted to find out about something he didn't have a lot of knowledge on. Turns out he is like Fenriswolf.

Would China floating its currency solve all of America's problems? No.

Would it help America in some way? Yes.

Is it wrong for China to peg its currency? From a purely economic perspective (and I'd claim, a humanist perspective), yes. Pegging is really only justified for struggling 2nd and 3rd world economies. China is an economic power house and doesn't have the justification to peg (lol). Ultimately this leads to long term malinvestment.
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http://www.thebrokenheadphones.blogspot.com/
#42TrueKu(Topic Creator)Posted 7/6/2011 4:52:00 PM(edited)
So how is the true value of the yuan calculated?
How does one come up with a percentage to say a currency should rise 20, 30, 40%.

The only ones running their mouth is propaganda machine soccerball & spiderman.
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Just to see what happens.
#43OrcaPosted 7/6/2011 5:03:58 PM
You don't need to come up with anything. You just have to let the currency float. The market does the rest.
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http://www.thebrokenheadphones.blogspot.com/
#44DHumePosted 7/6/2011 5:37:49 PM
Tbh, I really thought TrueKu wanted to find out about something he didn't have a lot of knowledge on. Turns out he is like Fenriswolf.
Really, it's neither. His posts elsewhere don't exactly point to the conclusion that he is a China-supremacist, just that he shows a strong aversion to the idea of actually learning something new and enjoys the attention he gets when he fails to do so.
#45TrueKu(Topic Creator)Posted 7/6/2011 6:43:23 PM
Orca posted...
You don't need to come up with anything. You just have to let the currency float. The market does the rest.

Then explain the thousands of press that says "China yuan may be undervalued as much as 30% or something"
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Just to see what happens.
#46OrcaPosted 7/6/2011 6:47:21 PM
It's an estimation. We can only make an educated guess as to what the real value of Yuan is. To find out its actual value you, it has to float.
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http://www.thebrokenheadphones.blogspot.com/
#47TrueKu(Topic Creator)Posted 7/6/2011 6:58:11 PM
Okay from:
http://online.wsj.com/article/SB10001424052748703421204576327051036865710.html

The origins of the 40% figure are related to research by John Williamson and William Cline, economists at the Peterson Institute for International Economics, into what the yuan's value would need to be to bring all current-account balances—including those of China and the U.S.—down to 3% of GDP.

OKay, wtf?

40% is calculated from current account balance...
wtf? So they China has large trade surplus.
So they come up with a number that is supposed to lower to whatever they want.

US runs trade deficit with 90 countries.
Why not tell other countries to revalue their currency?

Yen does not need to be revalued, yet look at the giant surplus.
How is 40% revaluation supposed to fix it when free floating yen has caused ""bring all current-account balances—including those of <COuntry> and the U.S.—down to 3% of GDP."

Then look https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html


China $ 272,500,000,000
2 Japan $ 166,500,000,000
3 Germany $ 162,300,000,000
4 Russia $ 68,850,000,000
5 Norway $ 60,230,000,000
6 Saudi Arabia $ 52,030,000,000
7 Switzerland $ 49,350,000,000
8 Netherlands $ 46,690,000,000
9 Singapore $ 44,080,000,000
10 Taiwan $ 39,000,000,000
11 Kuwait $ 38,200,000,000
12 Korea, South $ 36,350,000,000

191 United States $ -561,000,000,000
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Just to see what happens.
#48-Kicksave-Posted 7/6/2011 7:03:12 PM
So how is the true value of the yuan calculated?
How does one come up with a percentage to say a currency should rise 20, 30, 40%.


I already explained one of the more common ways through PPP. You got beligerent and attacked the idea. You don't have to agree with this approach or Geithner's assertion that the yuan is undervauled, but it's still how the "underlying true" valuations are typically estimated worldwide. I thought that's what you asked to know. If you already have a strong preconception of your own that you wish to advance, then what is the point of asking such the question on an obscure topic?

But if it still escapes you, the general idea is this: Let's say we are making plastic cups. Assume that they are made by the same special machines and everyone buys their raw material/petroleum from the same source, such that no country has a productivity advantage in volume cup-making. As an importer for Wal-mart, I notice that can generally buy one plastic cup for one dollar, either domestically, or from Vietnam, or Mexico, or wherever. But I notice that, under prevailing exchange rates, my dollar buys me TWO plastic cups from China. Again, we are assuming same productivities and factor costs for this common item. In this case, I might realize that the Chinese currency is undervalued.

So I don't care if you agree, disagree, or what. I'm just pointing out why many investors, treasury officials, the IMF, etc., might suspect China of currency manipulation.
#49OrcaPosted 7/6/2011 7:06:22 PM
Why not tell other countries to revalue their currency?

How can other countries revalue their currency when they're not valuing it in the first place?

Some currencies are low because they're valued less. The Yuan is low because it's artificially made to be low.
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http://www.thebrokenheadphones.blogspot.com/
#50-Kicksave-Posted 7/6/2011 7:23:36 PM
One more note...the single thing that is probably incriminating China the most is the unprecedented size and constant growth of it's foreign currency reserves ($3 trillion). A country trying to manipulate/devalue their currency accumulates foreign currencies and sells their own. There's very little other overt explanation for this coincidence and magnitude.