Apparently, at least one of the columnists at the Washington Post reads this blog. Sebastian Mallaby, a veteran from the Economist and contributor to Foreign Affairs, Foreign Policy, Prospect, the National Interest, the New York Times, Policy Review, Slate and the New Republic, and specializing in globalization, trade, investment trends, international development and economic policy, has apparently taken my advice for Tim Butcher to heart. Mr. Mallaby decided to follow up with Tim Geithner’s recent and much discussed comment about China’s “manipulation of currency” and penned a piece that’s not safe for your computer if you are drinking coffee while reading it.
Geithner is correct that China manipulates its currency. What’s more, this manipulation is arguably the most important cause of the financial crisis [because] … faced with a deluge of cheap money, no regulatory regime can be expected to prevent bubbles [and] … Chinese money flooded into the United States because of the push factor from China, not the pull factor from Americans [therefore] … there is no getting around China’s culpability.
The comments section accompanying this essay is also a good read. The first comment started with the following line:
I am sorry but this is bordering on the ridiculous. Blaming China for the current economic crisis is as absurd as blaming the road for making an accident while driving drunk.
[UPDATE] Just for the fun of it, I checked out a bit about Mr. Mallaby prior writings. Well, what do you think of his logic in an article titled “deregulation didn’t cause financial mess” from last October?
The key financiers in this game were not the mortgage lenders, the ratings agencies or the investment banks that created those now infamous mortgage securities. … Rather, the key financiers were the ones who bought the toxic mortgage products. If they hadn’t been willing to buy snake oil, nobody would have been peddling it.
Yeah, sounds like scapegoating 🙂
btw, have you seen the comments? He’s receiving a full load 🙂
Charles Liu says
I’m not one to say there’s a media consiracy against China, but this sort of things isn’t uncommon, nor is it unexptected.
While you’re at it Mr. Mallaby, Bernie Badoff said the Chinese made him do it.
Well … while I would like to chuckle about the article … I wonder if it’d be more constructive to at least get a grip of where things went wrong … and with that understanding to see if there is any role China can play to help right the ship.
So what went wrong in the financial crisis?
1. lack of regulation of Wall Street (credit rating agencies not doing their job, short-term for-profit mentality propelling companies to go along with the euphoria and not sound any alarms on risks in mortgage-backed securities)
2. Americans growing fat gleefully leveraging housing bubble using their homes as personal credit card
3. easy money (ultimately causing a housing bubble) from low interest rate
4. easy money (ultimately causing a housing bubble) from China’s “trade imbalance” – caused by American restrictions on exports of technologies China needs?
5. easy money (ultimately causing a housing bubble) from China’s “trade imbalance” – caused by Chinese “currency manipulation”?
6. what else?
In my opinion, it’s only by understanding (at least on a high level) what went wrong that we can start effectively reject scapegoating…
“Yes, your honor, I guzzled a bottle of Johnny Walker and robbed a bank but it wasn’t my fault. You see, I was drunk at the time so it was the fault of the guy who sold me the Scotch!” 😛
@Allen – EU restrictions on exports are more lax, but this doesn’t mean our exports to China are that high. Mainly it’s because the US and EU have (or had) money to spend, and China was happy to supply.
As for the current crisis, I think we likely to see whole-sale nationalisation of the banks followed by their restructuring, in the UK at least, if things get much worse. This is likely to happen in the US as well. Hell, if anyone out there has been listening to Nassim Talib he seems to be of the opinion that this is exactly the cure needed – split the public service role played by the banks in terms of current accounts, mortgages etc. from the risk-taking role of investment. We should never have to bail out the banks like this again – good old fashioned market economics where the people who take the risks carry the risks themselves is what is needed. Long-term balanced budgets might be a good thing as well. And, for the absolute maintenance of long-term economic growth, far more investment in R&D, both by the state and by private business.
Mathew Parris wrote a good article on this in the Times:
Read the rest here:
. . . except over and over, in pretty much every one of your posts and comments.
Jed Yoong says
This is so absurd.
The Southpark song “Blame Canada” comes to mind….
“a veteran from the Economist and contributor to Foreign Affairs, Foreign Policy, Prospect, the National Interest, the New York Times, Policy Review, Slate and the New Republic, and specializing in globalization, trade, investment trends, international development and economic policy, ”
Obviously it doesn’t look good for the publications he writes/wrote for….
So absurd. What next?
Hong Konger (Steve&Jerry) says
Here’s something for the old timers – The (last) interview of George Carlin
It probably won’t come as much comfort, but it’s worth noting that most educated Americans are pointing their fingers at Wall Street, Bush, the American people, etc. before China.
As for the currency manipulation thing, it has been a beef between the US and China since before the crisis. While the crisis has put more pressure on the Treasury Dept. to help out US exporters, US politicians have been complaining about this issue since at least 2005. As for Geithner’s comments, I certainly hope he holds his tongue now that he’s officially Treasury Secretary. A trade war between two of the world’s 3 largest economies is the last thing we need right now. If I were him, I’d table the issue until the crisis is over.
Hong Konger says
Haven’t seen Jerry on FM for a long time. Yesterday, in HK, I saw a middle aged caucasian guy and a younger lady coming out of the TST Middle Road MTR exit, looking kinda lost with a map in his hand. I swear the thought, “could this be Jerry and his daugther?” crossed my mind. LOL. Part of the TST was closed off to traffic yesterday for the huge crowd gathered at the waterfront to catch the spectacular New Year’s fireworks firing off from the Star Ferry water course.
TonyP4, where are you? Give us a joke to chuckle about won’t ya?
Here’s one for ya:
How many social workers does it take to change a light bulb?
1) “The light bulb doesn’t need changing, it’s the system that needs to change.”
2) None. Social workers never change anything.
3) None. They empower it to change itself!
4) None. The light bulb is not burnt out, it’s just differently lit.
5) None. They set up a team to write a paper on coping with darkness.
6) Two. One to change the bulb and another to put your kids into care.
7) Five. One to screw it in, three to form the support group, and one to help with placement.
It is partly true that Chinese manipulate the currency. However, it has no effect on American export to China. As American culture (or all others too), it is easy to blame others than ourselves: it is nothing wrong with my government and our citizens (both are big spenders and fight the wars we cannot afford), but the ‘evil’ Chinese.
– Chinese currency and I think Hong Kong too were basically pegged with US’s, so it would not affect import/export with currency fluctuations. Now, it is pegged mainly with US and EU.
– Most countries would like to increase the value of its own currency. If you borrow from me with my country’s currency and it increases its value by 10%, you need to pay me 10% more with your own currency.
For the same scenario, I can buy your country’s assets (like land, factories…) 10% cheaper.
– The drawback. It discourages import from US to China in theory if Chinese currency is adjusted to the market – explain later.
It is not true as US and China are perfect trade partners. The majority of Chinese goods are of cheap, low-cost consumer products and US goods are of high-tech and wheat… In a sentence, they do not compete with each other.
China keeps the currency close to US, so it has to eat their profits by reducing jobs loss. The US consumers benefit by low cost consumer goods. If you argue the jobs also go to China. With the US high salary, it would go to other developing countries if not go to China. So, it is a win-win situation for US.
– “to adjust to the market”. One way is go back to the gold standard that waw removed by US. Basically your currency value is adjusted by the gold reserve in your central bank.
It is over-simplified for discussion.
Hong Konger says
Have you heard/read this one before?
The Wisdom of the Bulls:
You have two cows.
You sell one and buy a bull.
Your herd multiplies and the economy grows.
You sell them and retire on the income.
AN AMERICAN CORPORATION
You have two cows.
You sell one and force the other to produce the milk of four cows.
You are surprised when the cow drops dead.
A FRENCH CORPORATION
You have two cows.
You go on strike because you want three cows.
A JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk.
You then create clever cow cartoon images called ‘Cowkimon’ and market them World-Wide.
A GERMAN CORPORATION
You have two cows.
You re-engineer them so they live for 100 years, eat once a month, and milk themselves.
A BRITISH CORPORATION
You have two cows.
Both are mad.
AN ITALIAN CORPORATION
You have two cows, but you don’t know where they are.
You break for lunch..
A SWISS CORPORATION
You have 5,000 cows and none of which belong to you.
You charge others for storing them.
AN INDIAN CORPORATION
You have two cows.
You worship them.
A MALAYSIAN CORPORATION
You have two cows.
You signed a 40-year contract to supply milk at RM0.06 per litre.
Then midway through, you raised the price to RM0.60 or you cut the supply.
When the buyer agrees to the new price, you change your mind again and now want RM1.20.
The buyer decided you can keep the milk and they go look for milk that comes from recycled cows or the cow urine instead.
Your two cows retire together with the Prime Minister.
And last but not least,
A SINGAPOREAN CORPORATION
You have two cows.
One cow-peh and one cow-bu.
I’ve posted several jokes that I do not know you’ve read them. However, I will post them here again. Let me know whether you’ve already read them.
Except for the reply letter to Bill, most jokes are circulated to me and I just recycle them.
@ Hong Konger: Thanks for the jokes. I got through the first three parts of the George Carlin interview last night. You were right; I’m definitely enjoying them! 😛
@HongKonger, #12. It is funny. The joke below was
It was told by a guy with story-telling talent. I believed it for minutes. Stupid me!
How America was named – from alternate history?
The Chinese cook in Columbus’s ship saw America for the first time and said in Taishanese, “Ah Mud Li Ka (roughly translated as “what is this?”), and that’s why it is called America – of course it is not true but the joke is quite funny to me. 🙂
8″ is better than 1″
We were supposed to have 8″ of snow in Boston, but no snow. The beautiful but naive anchor lady asked the weather man, “Hi Bill, what happened to the 8″ you promised me last night?” The whole staff in the set laughed so loud that they’ve to go on commercial for the next hour.
It teaches us to be careful to talk/write in public. Most jokes are 1. double meaning, 2. exaggeration, 3. making fun of others. 4. Sex or sexual organ. This joke is all of above.
Bill just forwarded his idea of saving the airline industry. The picture of the good looking stewardess is taken out so we do not lower the moral standard of this blog.
HOW TO SAVE THE AIRLINES?
Dump the male flight attendants. No one wanted them in the first place.
Replace all the female flight attendants with good-looking strippers! What the hell, they don’t even serve food anymore, so what’s the loss?
The strippers would at least triple the alcohol sales and get a ‘party atmosphere’ going in the cabin. And, of course, every businessman in this country would start flying again, hoping to see naked women.
Because of the tips, female flight attendants wouldn’t need a salary, thus saving even more money. I suspect tips would be so good that we could charge the women for working the plane and have them kick back 20% of the tips, including lap dances and ’special services.’
Muslims would be afraid to get on the planes for fear of seeing naked women. Hijackings would come to a screeching halt, and the airline industry would see record revenues.
This is definitely a win-win situation if we handle it right — a golden opportunity to turn a liability into an asset.
Why didn’t Bush think of this? Why do I still have to do everything myself?
My reply to Bill is as follows:
We have started this service in ‘Virgin’ Airline – our logo is ‘Everyone can ride on a virgin’, or’ all our stewardess were virgins’.. There is a section for children and ladies (unless she is lesbian). The demonstration of sucking oxygen is breath-taking and every one pays attention. I stop dreaming what they do for first class service…:)
We also offer job opportunities for your former ‘assistants’. Lewinski and her look-alike will bring a lot of expertise to our airline.
We can double the profits by having a section for ladies and gays.
Your bright ideas always work. We respect your ‘Just Do it’ spirit. How many can change the defination of ‘sex’ and ‘intern’ overnight? Keep it up, Tony
@ TonyP4 #15: That one reminds me of an old joke my father told me decades ago…
When the English captain Henry Hudson was exploring the area around what would become New York for the first time, the fog had rolled in and his Dutch first mate was peering through it. He made out a shape in the distance and asked the captain in broken English, “Is dat an’ island?” Hudson thought he said “Staten Island” and so the name stuck. 🙂
Hong Konger says
Yes, Tony, I have read all those funny jokes from you here on FM. Thanks for the reminder, I am gonna copy them and email them to my buddies.
A CHINESE CORPORATION
You have two cows
One is named Tibet and the other Taiwan
You think they belong to you but the West insists they do not
Both are 9 years old but one is prettier than the other; the West accuses you of abusing their human rights
Through joint-venture; now the West owns 50% of your cows;
Now the cows have to produce twice amount of milk at half the cost
Your 50% of the cows produces milk contaminated with lead and melamine
You ended up having to shoot the cow pokes and the West accuses you of abusing their human rights
The US accuses you of price cutting on the milk so you increased it from 8.2RMB per US$ to 6.8RMB per US$; the US accuses you of manipulation
The West says that one of the cows actually belongs to the Dalai Lama and since the West owns 50% of the cows, the other belongs to it
With no cows left, you are unable to feed your family, the West accuses you of abusing their human rights
Old Hong Kong. Life was simpler than. No bird flu, no financial crisis. No pollution.. and no money to buy staffs we do not need.
Students in America are taking a math test, as in many class rooms all the white guys are sitting next to the Asians and Chinese kids. The white guys look over at the Chinese kids test papers and copy their answers. Now at the same time in the back of the room the black guys are counting their balls as the white girls look on in delight and awe.
It’s not just a joke I heard, it is what it is.
Might as well as get obese people suing McDonalds over fat foods.
It looks like the honeymoon between China and Obama is over. I’m glad that I voted for McCain.
It is a kind of too generalized.
About 30% of US schools are really bad. Usually they’re in urban with a mixed of races. Your description fits the type. However, the best two high schools in Boston are in the city that require strict entrance examination.
The other 70% high schools are not bad. They may not be top in science and math competition. However, they train students to think and to do more than just science and math.
US have 40% of top colleges in the world and produce more Nobel price winners than any other countries.
Hence, it is partly true and we like to amplify other shortcomings.
I got this from a supporting group thought I share with you here. The important of typing in the Email address correctly:
LESSON to be learned from typing in the wrong email address:
A Minneapolis couple decided to go to Florida to thaw out during a particularly icy winter. They planned to stay at the same hotel where they spent their honeymoon 20 years before. Because of their hectic schedules, it was difficult to coordinate their travel schedules. So, the husband left Minneapolis and flew to Florida on Friday, and his wife was flying down the following day.
The husband checked into the hotel, and unlike years ago, there was a computer in his room, and he decided to send an email to his wife. However, he accidentally left out one letter in her email address, and without noticing his error, sent the email to the wrong address.
Meanwhile…somewhere in Houston … A widow had just returned home from her husband’s funeral. He was a Minister who was called home to glory after suffering a heart attack. The widow decided to check her email, expecting messages from relatives and friends. After reading the first message, she screamed and then fainted. The widow’s son rushed into the room, found his mother on the floor, and then glanced up and saw the computer screen which read:
To: My Loving Wife
Subject: I have Arrived!
I know you are surprised to hear from me… They have computers here now, and you are allowed to send email to your loved ones. I have just arrived and have been checked in. I see that everything has been prepared for your arrival tomorrow, and look forward to seeing you then. Hope your journey is as uneventful as mine was.
See you soon,
your loving Husband
S.K. Cheung says
To vmoore55 #22:
gosh, could you make your stereotypes a little more extreme next time? This one was still a bit subtle, I think. If your day-job doesn’t work out, you’d make one heck of a racial profiler.
Geithner just bugs me, not only did he try to dodge his taxes, he makes this silly argument.