How can we solve our problem with China?

[nev670]

How about the "Made In China" thing? China has thousands of sweat shops and their trade is massice. This means that they don't need that much money and they won't have to hurry for the debt to be paid back =/ . . .

[legoboy792]

agreed to all the following. and yes im sure that chinas economy could not fall unless most of the world stopped taking items from it. if they wanted to anyway the economy of those countrys would most likly dip, then rise back up again, when the demand for products increased. but then another china will be born. so then we will be like this again with another country.

[lord_carbo]

I know this is a bit old however:

Originally Posted by legoboy792

We are currently in major debt with China, and we should take some action for this. Problem is how can we do this. My first suggestion would stop putting things we get from china on credit or stop getting things at all. if anyone has any other ideas post your comment now.

1. The biggest problem here is that you're assuming there's a problem, which allows you to use circular logic. The first thing you should be asking is "is there a problem?"

Why do people even trade in the first place? By the logic of what a trade deficit is, my family has one with our grocer, but we still go every week! Surely there must be a reason why people would do things like this even if it doesn't benefit them.

Would somebody agree to a voluntary transaction if that person thought were to lose out by accepting? No. And that's the thing about trade: people trade to make themselves off. If two parties are trading, there must be a feeling of mutual benefit.

So how does this principle change at all when we're changing money and IOUs for hard goods?

The Chinese are doing it because they feel like the American currency will be worth something in the future. The Americans are doing it because they want cheap goods, allowing then to spend on other things (including more cheap goods!). Both China and America are trading because they feel that it will be mutually beneficial. And I'd say that individuals know quite a lot about what is in their own interests. Unless by some anomaly, both China and the United States are likely benefiting more than either is losing out.



2. Not buying things from China would exponentially increase the price of the goods we buy every day. It's easy to say, "stop buying things from China." But it'd be hard to do, even if there were more manufactured goods made in America. After all, the significant reduction in costs is why foreign manufactured goods won out over American goods.



I agree with Adam Smith:

"There is no commercial country in Europe of which the approaching ruin has not frequently been foretold by the pretended doctors of this system, from an unfavorable balance of trade. After all the anxiety, however, which they have excited about this, after all the vain attempts of almost all trading nations to turn that balance in their own favor and against their neighbors, it does not appear that any one nation in Europe has been in any respect impoverished by this cause."

[legoboy792]

so you say that there is no problem at all?

[s0ulst0n3]

Originally Posted by lord_carbo

2. Not buying things from China would exponentially increase the price of the goods we buy every day. It's easy to say, "stop buying things from China." But it'd be hard to do, even if there were more manufactured goods made in America. After all, the significant reduction in costs is why foreign manufactured goods won out over American goods.

I'm kind of just skimming this thread, so I apologize if this has been repeated...but why does America sell trades with one of their enemies? I mean, I know a lot of the stuff is beneficial to us, but to what extent? I believe the American government should stop all trades with China, as China could easily spread some type of disease, or anything contagious in a small toy, send it over to America, and create a nation-wide epidemic.

Think about it, it only takes ONE toy with a unknown disease to create a nation-wide effect. I basically just recapped what i said in the previous paragraph, but I believe this is true.

Just my opinion on the matter.

[devonin]

Um...China isn't an enemy of America. Last I checked, just having a different style of government doesn't make you somehow at war.

Also, "China is going to send a disease to America through some trade product"?

How? Why? China's economy is booming because of massive trade with the West, what reason could China possibly have to get themselves missiled into oblivion for doing something so stupid?

[legoboy792]

well.........................................wasnt there a crises, cause all the toys sent from china had a high lead content?

[tsugomaru]

Because when China built toys, they were thinking "lets put lots of lead in them to poison Americans." More than likely, it was a mistake and poor manufacturing conduct. China isn't the only place in the world where health risks are sacrificed to produce something cheaper.

~Tsugomaru

[legoboy792]

okay, i would agree on that point, but it does show the power that china has on us, if it wanted to, it could poison the toys they send over here. and i belive that we dont have a thourogh enough way to go through the ships. one of the problems is that the barges carring all the stuff over from the east, are so large that they can only be partially searched before another barge comes in. so imagine what can be sneaked over through those barges.

[nev670]

illegal immigrants maybe ?

[devonin]

A list of random "what if's" involving potential attacks on America by a nation that simply put will never be idiotic enough to ruin their incredibly fast growing economy, and slowly repairing international reputation by doing something that dumb doesn't really strike me as the best use of your CT time.

[lord_carbo]

Originally Posted by legoboy792

so you say that there is no problem at all?

No more than there is a problem walking across a street.

Most people don't even know the negative possibilities of a trade deficit anyway. Allow me to explain trade-deficits and why it's improbable that one will ever become a problem.

Think of the American economy as a box. Take some of the money out and there's less money in the box. So more must be printed to meet the demand for money (remember that money is a good like any other, and has its own supply and demand curves), and the demand curve for money basically goes up and down with the total wealth of the economy. That money that was taken out will likely go back in because that money is only good here. That'll increase the supply and consequentially reduce the value because the supply and demand were already in equilibrium. If you don't understand why the value of a dollar can decrease, imagine this: at this very instant, everybody in the world has their income doubled and their savings doubled. Well the same amount of goods and people would still be around, so that would just mean everything gets doubled in price. Thus, the value of each dollar was halved.

So people overseas eventually want to spend this money here. When they do that, inflation occurs. Except these overseas traders-- who have financial incentives, mind you-- wouldn't be doing this if they thought that the problem would be substantial. They have faith that the value of the dollar will hold up by the time they spend it. If everybody overseas wants to spend those dollars at the same time, then there will be many losers because by the time a lot of them get to spend it, the value of each dollar would decrease. This is why trade deficits are usually "auto-correcting." I use quotes because there's nothing really to correct. The trade deficit will probably never get too large because the people who want to spend American money will also lose out from inflation. If anything, they'll lose out more because we have their iPods and they have our paper.

[legoboy792]

okay, bu ttaht point leads to a recession, of which we are already in. the dollar is ats its lowest value. and this trade is just hurting it more, cause we pront more and more of it.

and teh barge thing, that works with all countries for the east not just china. immigrants im not so sure of.

[nev670]

Wait, like illegal immigrants or just immigrants, because that is different.

[legoboy792]

im sayign that there might not be much of a problem with illegal immigrants with the barges.

[lord_carbo]

Originally Posted by legoboy792

okay, bu ttaht point leads to a recession, of which we are already in. the dollar is ats its lowest value. and this trade is just hurting it more, cause we pront more and more of it.

Inflation does not make a recession. It's actually a well accepted principle of macroeconomics that it's impossible to tame inflation without causing more unemployment (and with it, a decline in GDP) and vice-versa. When high inflation and low GDP growth go hand in hand, it's called "stagflation." Read this to understand.

About the comment saying trade is aggravating the recession: I bet every economist who knows about the Smoot-Hawley Tariff disagrees with you.

[kzh]

There isn't much of a problem right now as China will definitely not do something so foolish and uncalled for, possibly self damaging. However, there is a problem which might arise in the future, when China overtakes the US in terms of its economy and with its current modernization of its military, it won't be long before they can match up to the technological superiority of the US armed forces though a combination of new, decent technology with their incredibly potentially huge citizen army. And by the way China has nukes too, it doesn't really take hundreds of nukes to shatter the American infrastructure, China has like 500? Nothing compared to US 's thousands, but certainly more than sufficient. All the talk about US 's industrial bases and such, they could be easily wiped out through missile bombardment and Bush's 'Star Wars' program would probably fail, as you see current statistics on missile interception is woeful, not to talk about a sudden attack. Yes and did you realize that China has the capability to strike down satellites in orbit? Pretty sure that would mess up the US.This is in terms of 'threat analysis' , I'm not saying China will attack, but once China comes into this position where chances are that it will succeed, then a problem may arise. Then, if China demands to be paid back, what can the US do? Refuse and have war declared? And US 's pushing around of other countries wouldn't help them get many allies too. Suppose by then China has established good ties with major countries especially in Europe and of course Russia. Even if war does not occur, when China takes the place of US, assuming that US does not do anything dramatic to prevent that, it could then slowly drain the US until US becomes no more like Britain is today compared to its former Imperial and Colonial glory. Things can happen in an instant and if the US isn't prepared for it, their whole foundation based on notions of their superiority will crumble. The Americans are not particularly nationalistic people too and in times of war, do you think they will support a war or favor a peace in which they pay the economic price, just like Venice? Do you know why (IMO) America was able to sustain itself through wars and disasters and such while the colonial powers of the past could not? Because it was big and had a big and committed citizenry with attractive ideals, not like the imperialists who only subjugated the populations of other countries, who had smaller populations of their own and could not coordinate their forces. BIG = WIN. Yeah the Romans could kill 10 for 1, but just happened so that they got weakened to the state of 6 for 1, not bad, but it also just happened that a bunch of barbarians with 9 times their size came along to raze their precious city. How Sad.

[Zythus]

The controversial thing about China's future is their communism. Surely, China will become, or already is, a critical world power. Needless to say that military caliber will parallel or exceed that of the US. The country may be prosperous with building of new infrastructure, new alliances, and new resources, but the poverty and the quality of their citizen lives are unchanged. It is because of their communist policies that the nation is the poorest at its core, with no progression whatsoever. It may be powerful for the entity of China, but down for their denizens, they aren't doing so hot.
So, to upheaval and uproot the source of their innate problems, their communism needs to convert to, hopefully, democracy.