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Author Topic: Currency Rift With China Exposes Lost Clout of U.S.
Bob Frey
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SEWELL CHAN, On Sunday October 10, 2010, 9:44 pm EDT

WASHINGTON — At a private dinner on Friday at the Canadian Embassy, finance officials from seven world economic powers focused on the most vexing international economic problem facing the Obama administration.

Over seared scallops and beef tenderloin, Treasury Secretary Timothy F. Geithner urged his counterparts from Europe, Canada and Japan to help persuade China to let its currency, the renminbi, rise in value — a crucial element in redressing the trade imbalances that are threatening recovery around the world.

But the next afternoon, the annual meetings of the International Monetary Fund ended with a tepid statement that made only fleeting and indirect references to the simmering currency tensions.

The divergence between the mounting anxieties over Chinese policy and the cautious official response was a striking display of the difficulty of securing international economic cooperation, two years after the financial crisis began.

Above all, officials say, the crisis has shifted influence from the richest powers toward Asia and Latin America, whose economies have weathered the recession much better than those of the United States, Europe and Japan.

“We have come to the end of a model where seven advanced economies can make decisions for the world without the emerging countries,” said one European official involved in the weekend talks. “Like it or not, we simply have to accept it.”

The shifting dynamics have most drastically affected the United States, which pushed more forcefully than its counterparts for stronger pressure on China but has been unable to persuade them to stand with it at the forefront of the debate.

World leaders broadly agree that for the global economy to be more stable, imbalances between creditor countries like China and Germany and debtor countries like the United States and Britain have to be fixed. Correcting those imbalances, some economists say, will help create jobs in the United States and reduce the threat of inflation and asset bubbles in China, which could imperil its rapid growth.

The idea behind the I.M.F.’s efforts is that economic growth will be higher with international cooperation than without it.

In interviews, American and European officials involved in discussions over the Chinese currency last week outlined several reasons a unified position has been so hard to forge.

For one thing, China has moved adroitly to deflect criticism of its currency policies, by pledging to move at a gradual pace and by pointing to other sources of global imbalances. This leaves Western diplomats struggling to strike the right balance between forceful rhetoric and patient cajoling in pressuring China to act.

Another factor is that the most dire part of the crisis has passed, and because recovery has been uneven across the globe, many countries are now motivated by parochial concerns and no longer feel the urgency act in concert.

“We are moving from a consensual to a more confrontational period in global economic governance,” said Thomas Kleine-Brockhoff, senior director of policy programs at the German Marshall Fund of the United States, which promotes trans-Atlantic cooperation.

Complicating the effort is a dispute between the United States and Europe over how to change board representation within the I.M.F. to give greater voice to the fast-growing economies that are propelling global growth. The Americans want emerging countries, especially China, to have more representation, but Europe is reluctant to give up some of its positions on the board.

And significantly, in the eyes of many countries, the United States has lost some of the standing it needs to shape global policy. Not only is Wall Street viewed by many as having initiated the world financial crisis, but also, a number of countries fear that policies by the Federal Reserve are pushing down the dollar’s value — exacerbating the very phenomenon the Obama administration has criticized in other countries.

“Other countries are no longer willing to buy into the idea that the U.S. knows best on economic policy, while at the same time the emerging markets have become increasingly influential and independent,” said Kenneth S. Rogoff of Harvard, a former chief economist at the I.M.F.

The inconclusive I.M.F. outcome meant that the currency issue will again be a focus when President Obama and other leaders of the Group of 20 economic powers gather next month in Seoul, South Korea.

Despite the bland language of the official statement put forth on Saturday, American and European officials said the weekend meetings were not a failure.

After all, the 187-member I.M.F. is not a customary forum for decisive collective action, and changes in national economic policies typically occur in a gradual, incremental fashion. A Treasury official pointed out that the gatherings focused high-level attention on the currency problem, and ended with an agreement for the I.M.F. to play a greater role in monitoring its members’ exchange-rate practices and the “spillover effects” of each country’s economic policies on the rest of the world.

Even so, economic and political forces have made it difficult for the United States to address what Mr. Geithner has called the “central existential challenge of cooperation.” Many economists have warned of a destructive currency war that could ensue if countries forge their own paths on monetary policy.

Indeed, in a speech on Wednesday, Mr. Geithner in essence accused China of setting off a cycle of “competitive nonappreciation,” in which countries block their currencies from rising in value to support their exporters — as Japan, Brazil and South Korea have recently tried.

In general, the Europeans have taken a far more conciliatory line toward China. The French finance minister, Christine Lagarde, said on Saturday, “It’s not helpful to use bellicose statements when it comes to currency or to trade.”

Other officials have quietly expressed worry that the United States is itself a factor in the currency weakening: the Fed’s expansionary monetary policy, which is intended to support the supply of credit to the economy, has contributed to the weakening of the dollar.

Europe and Japan “certainly want the renminbi to appreciate,” said Edwin M. Truman, a former top official at the Fed and the Treasury Department, “but meanwhile they don’t want the dollar to depreciate along with it.”

Allowing the renminbi to rise would make Chinese exports more expensive and American exports cheaper. That would assist with rebalancing: getting China to spend more and save less and the United States to spend less and save more.

A vital part of the American strategy has been to argue that China would also benefit from letting the renminbi rise.

Doing so, many economists say, would reduce the risk of inflation and asset bubbles, and help reorient growth away from exports and coastal manufacturing areas and toward domestic consumer demand and poor rural regions in need of development. China signed on last year to a G-20 platform for “strong, sustainable and balanced growth,” which has become a sort of motto for global the recovery.

But there is little agreement on how to make the motto a reality.

James D. Wolfensohn, a former president of the World Bank, said each side had a point. “The Chinese have a legitimate case that they have to keep their economy going and that they’re not going to let us run their economy for them,” he said. “On the other hand, we have a legitimate case that China ought to bear its share of the burden and show some leadership.”

http://finance.yahoo.com/news/Currency-Rift-With-China-nytimes-182426222.html?x= 0&sec=topStories&pos=main&asset=&ccode=

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glassman
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in other words? we are practicing a much higher level of "international "freetrade' than the Chinese. They donot even have *internal* freetrade, they do not have elections either...

this import duty idea seems frightening to so many people, but 15% real unemploymetn for the foreseeable future is much more frightening... it's so frightening in fact that people refuse to even consider the possibiltiy, much less think the problem thru...

i say to Dems: elect the GOP and let them live with it, cuz it cannot be fixed without US putting a severe import duty in chinese made good regardless of who the import/export co is... nobody wants to be the one who raises taxes... everybody is your "friend"? LOL

the Great depression didn't really get going until '33... the crash of 29 intitated teh chain reaction, but it took about 5000 banks failing to really get it going "good". the 2008 plan to bailout the banks was designed to stop that domino from tipping... so we are 15% + real unemployemt that's halfway from 5% (acceptable) to 25% (Dperession) unemployment...

yes, we are at the crossraods and cutting US govt spending will put more people in the unemployment roles.... i'm not even sure anymore that a Depression can be avoided (or could have been)

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CashCowMoo
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You do not here much about Taiwan in the news lately, wonder how much military is amassed on the Chinese coast that is closest to that island. You know the Chinese are drolling over taking it back. By law, we have to defend Taiwan even if it means war. How can we go to war with someone who holds us by the ba**s!?

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glassman
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How can we go to war with someone who holds us by the ba**s!?



who holds whose balls? there is an old saying in banking...

if somebody owes the bank 10,000$ and can't pay thedebtors have a problem...if somebody owes the bank 10 million and can't pay? the bank has a problem.....

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Don't envy the happiness of those who live in a fool's paradise.

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CashCowMoo
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quote:
Originally posted by glassman:
How can we go to war with someone who holds us by the ba**s!?



who holds whose balls? there is an old saying in banking...

if somebody owes the bank 10,000$ and can't pay thedebtors have a problem...if somebody owes the bank 10 million and can't pay? it's the banks problem.....

I think China is holding ours with a kung fu grip.

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It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so.

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glassman
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quote:
Originally posted by CashCowMoo:
quote:
Originally posted by glassman:
How can we go to war with someone who holds us by the ba**s!?



who holds whose balls? there is an old saying in banking...

if somebody owes the bank 10,000$ and can't pay thedebtors have a problem...if somebody owes the bank 10 million and can't pay? it's the banks problem.....

I think China is holding ours with a kung fu grip.
in a war? we would default and trash the whole world economy...

China loses Capital and we lose DEBT... think about it...

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Pagan
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quote:
Originally posted by CashCowMoo:
How can we go to war with someone who holds us by the ba**s!?

How is that even an issue? If we are at open war with China...are they gonna repo our tanks on the battlefield? Who cares if the hold our debt during an open war with them? What point were you trying to make with that statement?

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CashCowMoo
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No Pagan, they are not going to repo our tanks on the battlefield. Because if they tried, they wouldnt get far trying to do that.


Now, I am talking about the economic perspective. I dont think they WANT to go to war, because they need us just like we need them. However, they can use what they have to push us around and even threaten wars or conflicts very boldy.

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It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so.

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glassman
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I dont think they WANT to go to war,

one of the most astute things you have ever posted cash...

not only do they not want to got war with US now or ever in the past? they don't and never have wanted to go to war with anybody...

even the Chinese revolution under Mao which was bloody as hell was a very poorly run war...

most of the people he killed were opium addicts and their families left over from the when Britain traded opium with China...


To subdue the enemy without fighting is the acme of skill." - Sun Tzu ...

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Pagan
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quote:
Originally posted by CashCowMoo:
No Pagan, they are not going to repo our tanks on the battlefield. Because if they tried, they wouldnt get far trying to do that.


Now, I am talking about the economic perspective. I dont think they WANT to go to war, because they need us just like we need them. However, they can use what they have to push us around and even threaten wars or conflicts very boldy.

I disagree with your assessment. They do have some power economically....but to threaten wars and such. NO. Just imagine if we went to war with China. What do you think the first thing the US would do is? We would choke off they're oil supply. Embargo they're products. Etc....etc...etc. And that's before any actual physical conflict. They know this....and in no way want a war with the US. It's all bluster for appearance sake.

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It is impossible to make anything foolproof because fools are so ingenious.

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T e x
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The traditional view is that China would simply start surrendering prisoners, a hundred thousand, two hundred thousand, five hundred thousand...per day...until we went broke providing for them under Geneva Convention protocol.

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Nashoba Holba Chepulechi
Adventures in microcapitalism...

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CashCowMoo
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quote:
Originally posted by Pagan:
quote:
Originally posted by CashCowMoo:
No Pagan, they are not going to repo our tanks on the battlefield. Because if they tried, they wouldnt get far trying to do that.


Now, I am talking about the economic perspective. I dont think they WANT to go to war, because they need us just like we need them. However, they can use what they have to push us around and even threaten wars or conflicts very boldy.

I disagree with your assessment. They do have some power economically....but to threaten wars and such. NO. Just imagine if we went to war with China. What do you think the first thing the US would do is? We would choke off they're oil supply. Embargo they're products. Etc....etc...etc. And that's before any actual physical conflict. They know this....and in no way want a war with the US. It's all bluster for appearance sake.
China isnt ready yet, but they will be. Our growing business in China is helping fund the expansion of their military. They are planning on building multiple aircraft carries to project Chinese firepower now...a whole new ballgame.


As for oil, China is going oil crazy in Africa doing business with governments that are not as friendly to the U.S., and they have all sorts of minerals and resources. They are buying silver mines in South America, I mean crap man they are going around the globe securing as much natural resources as they can.

Like I said I dont think they want a war, but 2015 China will be different than 2010 China, and 2020 China....well how strong do you think they will be by then?

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jordanreed
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wouldn't a war with china be WWIII?...would the supr powers be stupid enough to go there agin?....or would that kind of war is whats needed toget the economy moving?

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jordan

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T e x
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quote:
Originally posted by jordanreed:
wouldn't a war with china be WWIII?...would the supr powers be stupid enough to go there agin?....or would that kind of war is whats needed toget the economy moving?

The only way would be an end-of-days scenario in which the world has run out of...everything.

As mentioned, before that they simply surrender of a hundred million prisoners for us to house, feed and clothe.

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Nashoba Holba Chepulechi
Adventures in microcapitalism...

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CashCowMoo
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I think the future wars will be over natural resources more so than they have ever been. Remember when Russia went into Georgia not that long ago? One of their main aerial targets was that pipeline. Russia has huge natural gas fields in Siberia, Gazprom. Oh and Iraq, well there is no question there. Straight of Hormuz, water in Israel, minerals in Africa, and the list goes on forever.

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It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so.

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Peaser
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I wonder if we will accept a one world currency after the rest of the world accepts it?

Will a one world currency come before or after a one world government?

I just hope and pray that I don't live to see it transpire.

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Buy Low. Sell High.

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T e x
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It will be the Buckaroo, an index tied to Texas, Australia, and home-brewed beer.

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Nashoba Holba Chepulechi
Adventures in microcapitalism...

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Peaser
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heh, heh...

Considering the world tends to lean in favor to which country has the most power, I highly doubt that our country will have much say in the matter, in say 20 years.

Fall in line, soldier...

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rounder1
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You could some up the outcome of a war with china in four words.....mutually assured economic destruction.

We can no longer match them in manufacturing....and even if we were to default on the debt and nationalize their assets here.....we could not finance a war (not one of that magnitude) for very long without them.

They would implode under excess capacity with our demand removed and would likely face an internal revolt as their economy began to crash.

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"The greatest argument against democracy is a five minute conversation with the average voter." (WC)

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glassman
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we could not finance a war (not one of that magnitude) for very long without them.

wo! you don't really beleive that do you?


To subdue the enemy without fighting is the acme of skill." - Sun Tzu ...

we already lost????

if this is how strongly "Fox news" has reduced Americans confidence then i really am justified in being angry.

we enter the WW2 in much worse shape than this and we took over the world afterwards.

i think the days of America can only be counted by the people that will stand up and be counted themsleves.

nobody *wanted* to sign up to the war knowing they would pay 90% taxes for 20 years afterwards.

every time we go to WalMart and buy Chinese goods we are signing the same contract a little at a time...

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Don't envy the happiness of those who live in a fool's paradise.

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glassman
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For most of its early history, the RMB was pegged to the U.S. dollar at 2.46 yuan per USD (note: during the 1970s, it was appreciated until it reached 1.50 yuan per USD in 1980). When China's economy gradually opened in the 1980s, the RMB was devalued in order to improve the competitiveness of Chinese exports. Thus, the official RMB/USD exchange rate declined from 1.50 yuan in 1980 to 8.62 yuan by 1994 (lowest ever on the record). Improving current account balance during the latter half of the 1990s enabled the Chinese government to maintain a peg of 8.27 yuan per USD from 1997 to 2005.


As of August 2, 2010, the yuan is valued at 14.7 US cents (or 6.796 per US dollar),[23] which is €0.112 (or 8.89794 per euro).[24]


http://en.wikipedia.org/wiki/Renminbi

the real value of the Yuan is double or less than half the rate maintained by the Chinese Govt., depending on which direction you examine the problem from...

hence, a 100% import duty on the wholesale value of any Chinese goods is not protectionism at all... it simply taking the money the Chinese Govt is pocketing and putting it (back) in our pockets...

i know everybody hates Taxes and Obama had to promise he woulnd't raise taxes on us "poor folks" to get elected..

our country (as a whole) refuses to accept simple truths.. this situation with China is not "freetrade" in any sense of the word... anybody who claims that it is is either a LIAR, or a fool.

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Don't envy the happiness of those who live in a fool's paradise.

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rounder1
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Its really not about confidence in my mind....its a just that it would be a war with two losers.

Even if a winner could be declared it would be a peeric victory.

If we were to default that much debt.....what nation would loan us money. A war of that magnitude (in terms of cost) would dwarf anything we have yet seen.

Further, short of Nukes (God Forbid)......I don't see either side submitting..... I can't really see that China could successfully occupy this country..... but I can't see our troops on the ground surrounded by 1.5 billion chinese and being very successful either.

My comments about mutually assured economic destruction was meant to imply that I believe......whether naturally or by engineering.....we are so in bed together with the chinese economically that there is no way that we will fight each other in the foreseeable future.....it would destroy (exageration for effect) both of us and for what? Short of a "pearl harbor", "world trade center", or Duke Ferdinan (sp?) situation.....it just aint likely to happen.

One other thing.....I am trying to think in terms of cause and effect, logical conclusions, and so forth.....I always hesitate to post about Military type things because I have never served so I feel as though I don't have a right to speak on military readiness......my comments are strictly based on running through possible scenarios in mind.

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glassman
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Further, short of Nukes (God Forbid)......I don't see either side submitting..... I can't really see that China could successfully occupy this country..... but I can't see our troops on the ground surrounded by 1.5 billion chinese and being very successful either

that's absolutely true... there is nothing to be gained by bloodwar in that sense...

but what i have been trying to tell people here for years and am making no headway is that China has already declared war on US much the same way we waged war with Russia.

and they are winning.

we could defend Taiwan effectively with our *subs alone* if we were willing to use nukes.. and that is what keeps US a world power no matter how bad our economic situation becomes. It might only take one sub to do it too.. they are so powerful it's difficult to comprehend.


China is literally killing US with the death by a thousands cuts right now.

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Don't envy the happiness of those who live in a fool's paradise.

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rounder1
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but what i have been trying to tell people here for years and am making no headway is that China has already declared war on US much the same way we waged war with Russia.

That is a good point and accurate in my mind.....I am skeptical of man made climate change, but I still take steps to be "green" just because I think good stewardship is a worth while cause.......It would be awesome if you could rally people in a similar way to be economic patriots..... the "green" movement (whether right or wrong) has done an amazing thing in terms of modifying the behaviour of a large percentage of the population

It would be really cool to see something of the same magnitude transpire with how people dole out there money.

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glassman
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rally people in a similar way to be economic patriots.

they made fun of Biden when h esaid paying taxes is a patriotic duty, but They followed Bush when he said shopping is our patritotic duty...

i was "pumping" hard holding of gold and silver in '04-'05 at $300 and change and $7 and change because of the trade deficit with China... toady they've tripled and still going... people (right here at this board) said i was crazy....

BUT! and here's the real problem, people don't even seem to understand why the US govt is printing so much money (forcing gold and silver hard holding up), and it's because they have to in order to "shake" the "economic parasitism" of the Chinese Govt. (as opposed to the people of China).... The people of China? they are not guilty here, and they don't even get to vote....


why on Earth did China buy US Treasuries with their 2 trillion in cash when they could have bought GOLD and Silver in metal form (hard holdings)??????


becuase they are killing our economy. and htey are doing it on purpose.

"The Capitalists will sell us the rope with which we will hang them."

Vladimir Ilyich Lenin

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Don't envy the happiness of those who live in a fool's paradise.

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glassman
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glassman
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Icon 1 posted February 24, 2004 11:54 Profile for glassman Send New Private Message Edit/Delete Post Reply With Quote I like gold exploration stocks--they are FUN-- right now the gold mining stocks reflect the price of gold fairly well-GOLD has been doing an inverse to the dollar / euro----i don't buy the metal, too much cost associated with brokering--i do buy silver dollars when i can get them cheap---China/US dollar issues are going to be the key gold going up--the fed has been waffling about how to shake the yuan off the dollar--Europe buys from China too --they are getting hurt on the exchange---Japan stepped in and stopped the fall of the dollar-for a while anyway----------



within the next year? i realised that buying metal was the only way to go... because too much shorting was going on and they cannot short your metal if you hold it..

China buys more and more US treasuries forcing the interest rates to continue to fall....

this make the shrot-term thinkers go crazy because they can borrow money so cheap and make money off it..
it got so bad that the banks were LOANING THEMSELVES the money (that never even existed) to underwrite US mortgages...

that's where they bought all the rope...

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Don't envy the happiness of those who live in a fool's paradise.

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T e x
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quote:
FREMONT, Calif. — A few years ago, Silicon Valley start-ups like Solyndra, Nanosolar and MiaSolé dreamed of transforming the economics of solar power by reinventing the technology used to make solar panels and deeply cutting the cost of production.
Founded by veterans of the Valley’s chip and hard-drive industries, these companies attracted billions of dollars in venture capital investment on the hope that their advanced “thin film” technology would make them the Intels and Apples of the global solar industry.

But as the companies finally begin mass production — Solyndra just flipped the switch on a $733 million factory here last month — they are finding that the economics of the industry have already been transformed — by the Chinese. Chinese manufacturers, heavily subsidized by their own government and relying on vast economies of scale, have helped send the price of conventional solar panels plunging and grabbed market share far more quickly than anyone anticipated.

As a result, the California companies, once so confident that they could outmaneuver the competition, are scrambling to retool their strategies and find niches in which they can thrive.

“The solar market has changed so much it’s almost enough to make you want to cry,” said Joseph Laia, chief executive of MiaSolé. “We have spent a lot more time and energy focusing on costs a year or two before we thought we had to.”

http://www.nytimes.com/2010/10/13/business/energy-environment/13solar.html?_r=1& nl=&emc=aua21

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Nashoba Holba Chepulechi
Adventures in microcapitalism...

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glassman
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i've posted this dozens of times, i'll repeat..

i see POS chinese "glass art" selling retail here for just about what my materials and energy costs are.... forget paying me regular wage and forget business profits..

the edge that i have si that they are simply manufacturing the stuff without understanding what they are making... or they make it with a concept of art that is foregin to US... they may think it's beutiful, or they may not understand what we think is beautiful...

that brings to mind a sector that caanot be farmed out.. advertising... you have to be immersed in the culture you are appelaing to in order to make "contact"

which makes me wonder who eats at Burger King these days [Big Grin] those flute commercials are even wierder than the King plastic face commercials...

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Don't envy the happiness of those who live in a fool's paradise.

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All your base are belong to us

Please don't eat none- this- store food

toiret this way

The civilized and tidy circumstance is a kind of enjoyment.

Bargain Item! Burn the spring chicken

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No longer eligible for government service due to lack of tax issues.

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T e x
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There's a pretty interesting story behind the B-King ads...will dig up some links someday...

Chinese can even do neon mass production, eg, those "Open" signs and beer signs: huge mass production. Were a neon guy to even try to compete, each sign he made would put him deeper in the hole.

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Nashoba Holba Chepulechi
Adventures in microcapitalism...

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The Bigfoot
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Sometimes you wonder if a high price on oil/gas wouldn't be a good thing. Raise the cost of shipping and all of a sudden locality becomes a whole lot more important.

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Watched a video last night, some 60 minutes thing from 1990's. It showed Bill Clinton, he was giving a speech about how great his trade deals with China were...he kept talking about how these deals would open up Chinese markets to buy American goods (as if the average Chinaman had the money to buy it in the first place).

Made me sick to watch, I do not get what the Clintons and the Chinese have when it comes to lovemaking because Hillary doesnt mind either. The story was actually on Wal-Mart, showed the port of Long Beach and back in 2004 I think the trade deficit just at the Long Beach port alone....a majority of the imports from China were all going to Wal Mart!

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It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so.

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quote:
Originally posted by CashCowMoo:
Watched a video last night, some 60 minutes thing from 1990's. It showed Bill Clinton, he was giving a speech about how great his trade deals with China were...he kept talking about how these deals would open up Chinese markets to buy American goods (as if the average Chinaman had the money to buy it in the first place).

Made me sick to watch, I do not get what the Clintons and the Chinese have when it comes to lovemaking because Hillary doesnt mind either. The story was actually on Wal-Mart, showed the port of Long Beach and back in 2004 I think the trade deficit just at the Long Beach port alone....a majority of the imports from China were all going to Wal Mart!

Ya know Cow, you should think about taking a multi-vitamin, maybe have a better diet...and get some exercise.

You seem to be sick all the time. Maybe you should get checked for Mad Cow disease or something? [Big Grin]

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It is impossible to make anything foolproof because fools are so ingenious.

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CashCowMoo
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I do take Centrum, cut fast food out, and have been running a local trail that goes along a nice creek.


However, I did fall off the wagon last weekend and bought some Burger King, ordered Domino's pizza, and havent been running. Blah....


I actually have been accused of mad cow disease (AKA Bovine spongiform encephalopathy) numerous times....can you believe that?

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It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so.

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quote:
Originally posted by CashCowMoo:
I do take Centrum, cut fast food out, and have been running a local trail that goes along a nice creek.


However, I did fall off the wagon last weekend and bought some Burger King, ordered Domino's pizza, and havent been running. Blah....


I actually have been accused of mad cow disease (AKA Bovine spongiform encephalopathy) numerous times....can you believe that?

Nope...NOPE...I can't believe somebody would have accused you of having that affliction. How dare they! Well...that is unless you talked politics with them...then I can kinda see it. But otherwise...HOW DARE THEY!!! [Wink]

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It is impossible to make anything foolproof because fools are so ingenious.

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