Xie Guozhong: The United States Should Boycott The United States Quantitatively And Loosely.

The G20 Seoul summit was once considered a pressure cooker for China.

Before the previous ministerial talks, Geithner, the US Treasury Secretary, pointed out that the euro and yen were high enough, and that the emerging economies could restrict capital inflows, and that resource exporters could avoid trade surplus of no more than GDP4%. He actually designed a united front for China, because he made up all the countries except China.

Geithner hopes that all countries will point their finger at China at the G20 summit.

However, his calculations were lost. The G20 summit is becoming a global collective boycott.

Before the summit, a swords had begun.

Germany has played a leading role in opposing QE2, and China is happy to express its support.

On the other side, the US led a campaign to reduce trade surpluses, which was supported by India in its QE2.

The battle camps have been identified.

On the one hand is the largest trade surplus country and the other is the largest deficit country.

This is a story more complicated than a mere trade surplus.

The absurdity of placing trade surpluses as targets is why they did not list trade deficits as denouncing objects.

Instead of letting surplus economies do this, why can't the biggest deficit countries bear any responsibility to curb the deficit?

Emerging economies control capital inflows and raise interest rates

This war of words has deep meaning. We will continue to discuss it later.

The war against hot money has started.

Taiwan is restoring control of foreigners' holdings of local bonds.

South Korea is considering heavy taxes on foreigners holding their bonds.

China has tightened its scrutiny of foreign capital inflows.

At present, most of China's foreign exchange reserves are not from trade surplus, but hot money.

If the government moves the truth, it can certainly stop hot money from flowing in.

The campaign against inflation is also heating up.

Australia has raised interest rates again.

China has raised the deposit reserve ratio.

The market predicts that there will be four sharp increases in interest rates in the next 12 months. I think the rate of increase will be even greater.

India's central bank also raised interest rates, especially tightening real estate loans.

When the United States adopts a super loose monetary policy, emerging economies must control capital inflows and raise interest rates to fight inflation and asset bubbles.

It seems that the US QE2 has convinced others that they should do so.

It's been a little late, and it's too late for some countries.

Inflation in some emerging economies may reach two figures.

Now it seems popular to hide the real CPI and not report it. This is a trick to prolong prosperity, but the consequences are serious.

For emerging economies, a negative combination of negative interest rates and huge trade deficits is also rising.

History has proved that this will lead to crises.

Brazil and India are in this camp today.

Although Brazil has maintained a trade surplus, it is too small to offset the impact of the Fed's policy on commodity prices.

When commodity prices reach such a high level, a country like Brazil should have a huge trade surplus like Russia.

India is in a big deficit, and its real interest rate has been at a serious negative level from some angles.

Its prosperity continued because the Fed's policy encouraged some speculative capital to finance its deficit and support its currency.

China and Russia face inflation as well.

However, they have large trade surpluses, so when the Fed is forced to abandon its policies, they will not face the liquidity crisis.

But Brazil and India have no cushions to sit on. Unless they shrink sharply in the next few years, they will suffer in the 2012 crisis.

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Rich countries will stop growing

Germany has plenty of reasons to be unhappy with the US policy.

10 years ago, its economy was considered dead.

At that time, the German economy was inseparable from high priced commodities.

When East Asian countries such as China and Korea produce similar products, few people think that Germany has another opportunity.

But the Germans did not give up.

They sharply cut costs, and even surprised the French that the cost of producing wine was greatly reduced.

In addition, they have made innovations to make their products more dependent on intellectual property rather than commodities.

With low cost and price advantage, Germany has gained another export boom.

But this time, the United States wants to turn the issue into exchange rate.

The United States is facing a lot of problems that Germany has faced before, but it does not seek to rebuild, but finds a fast way through currency depreciation.

Although Germany is highly competitive, it is not as fast as emerging economies.

Nor should it be so fast.

The high rate of economic growth belongs to the emerging economies.

If the rich countries try to raise their growth rate, they will run in high deficits and lose wealth.

The reason is globalization.

Information technology gave birth to the multinational corporations in twenty-first Century, and made the current globalization different from the past.

A multinational group is a company in name and substance. It controls global empire, just like a previous local enterprise made locally.

It changes the world through investment and trade with an economy.

Now, supply and demand are global.

The Arbitrage Behavior of multinational companies makes it impossible for the workers in developed countries to compete with the workers in the developing countries. There is no big difference between the two sides in the foreseeable future.

Under such tension, demand stimulus policies in developed countries will expand the trade deficit and will not have a big effect on the employment rate.

Europe and Japan have accepted this reality and turn to the mode of wealth storage: focusing on pricing power rather than export volume; the goal is to maintain low growth rates, providing protection and cushioning for unemployed workers.

The United States is in a very difficult position because it wants to solve its own problems through growth.

When a country's labor force is 10 times the price of developing countries, and the developing countries have 10 times that of your population, the idea is irrational.

Yes, technology and quality can boost exports, but they are not quantitative.

We see that the iPhone, the best selling product in the US, has not improved its production at home. We should be alert to some possible buzz.

The US government hopes to change the global realities simply by rearranging the exchange rate.

To make this idea work, we must rapidly lift the living standard of China and India to the developed countries, or rapidly reduce the standard of living in the United States, such as China and India.

Neither is possible.

American politics needs this quick cure, but the world can not provide it.

When the United States continues to pursue this impossible, the world will become a dangerous place.

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The continuous concentration of income and wealth is a global phenomenon.

1% of the US population accounts for 1/4 of total revenue and 40% of wealth.

China's household income is less than 40% of GDP, probably the lowest in the world.

Don't regard exchange rate or trade balance as their problem.

The concentration of income and wealth is the real factor to magnify the challenges brought by globalization.

Globalization does bring about the concentration of income and wealth.

When capital is dominant and labor is weakened, capital owners benefit more from globalization.

This has been demonstrated in some of the world's leading companies, which are beautiful, lucrative, and some of the major economies that are struggling with low growth rates and high unemployment rates.

But in explaining the concentration of wealth and income, globalization is by no means the only reason, and perhaps not the most important reason.

The financial bubble, the financial bubble created by the loose monetary policy created by people like Greenspan, is the most important factor to expand this imbalance.

Bubbles mislead low-income earners to borrow and spend paper money.

These debts only benefit a few people.

When the bubble burst, the poor could not spend any more money.

Their spending cuts also cut the need for their workforce.

The consumption needs of the poor usually create jobs for the poor.

China's low consumption can be attributed to an overstrong government rather than an undervalued exchange rate.

The impetus for China's economic development is the government's willingness and large-scale investment plans.

The government accumulates wealth through monopoly revenue from taxation, real estate sales and monopoly sectors.

Under such a system, consumption can not play a core role.

Focusing on the exchange rate issue will not solve any problem, but will only make the situation worse.

The story ends with the collapse of the US Treasury market.

The United States is obsessed with running its economy by manipulating demand, lowering or lifting debt prices.

But it does not realize that supply side management is the key to the global era dominated by multinational corporations.

Because the latter does not provide instant pleasure.

Under political pressure, the United States will continue to apply manure to monetary policy and exchange rate in order to reduce unemployment rapidly.

It only stops when it can no longer go on.

Only the collapse of the national debt market can play this role.

The US Treasury bond market is not rational.

The federal government's deficit accounts for 10% of GDP and the current account deficit of the United States accounts for 5% of GDP.

The dollar is so fragile that inflation is likely to be above average.

But yields on treasury bonds are close to historical lows.

Investors defend themselves that they can sell them to the fed at high prices.

Bernanke, who is insightful, sells his options just like Greenspan did before.

At that time, investors were crazy about buying all kinds of financial instruments because they hoped that Greenspan would save them in times of crisis.

But, as Greenspan promised, Bernanke's commitment worked only when everyone believed.

This is a psychological trick.

When it is tested, it will fail.

The Fed can't buy all its Treasuries.

This will trigger extreme inflation.

A crisis triggers the panic of bond holders.

It may be out of concern about another huge dollar depreciation or inflation.

Inflation may come in 2012.

Most US policymakers do not believe inflation will come, otherwise, they will have to withdraw those US dollar banknote printing machines.

But when people look at the prices of food and crude oil, it will be clear that inflation is only a matter of time before the emerging economies and commodities attack the United States.

Fasten yourself up before falling into the vortex ahead.

Unfortunately, it is likely to end with another crisis.

I hope this world will be better after 2012.