Is China Manipulating its Currency for Export Advantage?

Reuters 1/23/2009 (Blue Text are Links)
"The Chinese government has never used so-called currency manipulation to gain benefits in its international trade," AFP reported the Chinese Commerce Ministry as saying in a faxed statement.

On Thursday, Treasury Secretary designate Timothy Geithner said in a written response to questions from a U.S. Senate panel that "President Obama -- backed by the conclusions of a broad range of economists -- believes China is manipulating its currency."

U.S. Treasury officials and members of Congress have long criticized China for keeping its currency, the yuan, undervalued, saying this undermines U.S. trade competitiveness by making Chinese goods artificially cheap.

Wall Street Journal 1/23/2009
Should Mr. Geithner win Senate confirmation, as the committee recommended, his choice of language will likely draw attention to Treasury's next report on international currency practices, due in April. U.S. trade law requires the report to identify any country that manipulates its exchange rate for purposes of gaining an advantage in international

"You don't want to be the bull in the China shop when it comes to currencies right now," said Frank Vargo, a vice president of the National Association of Manufacturers, which has long lobbied against China's yuan policy. "But...we all know the Chinese currency is deliberately undervalued." A spokesman for the Chinese Embassy in Washington couldn't be reached for comment on Thursday afternoon.

TIME Magazine 1/23/2009
Trade hawks in Congress, pushed by union allies and some manufacturing lobbies in Washington, have long pined for this. But the Bush Administration resisted, preferring to fold the currency issue into the broader biannual "strategic economic dialogue" (SED) started by former Treasury Secretary Hank Paulson. That less confrontational setting was more likely to produce results on the currency issue than any forum that smacked of the U.S. putting Beijing on trial for "manipulation," the Bushies believed. In fact, over the past two years, the RMB did rise nearly 20% against the dollar.

Geithner's rhetoric before the Senate raises the question: Is the less confrontational approach now history? The short answer: in tone, perhaps. But in substance, not a whole lot is likely to change.

Discussion on Wikipedia: (Value of the renminbi - Chinese Currency)
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 during the 1980s, the RMB was devalued in order to reflect its true market price and to improve the competitiveness of Chinese export. 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. On 21 July 2005, the peg was finally lifted, which saw an immediate one-off RMB revaluation to 8.11 per USD.^[18] The exchange rate against the Euro stood at 10.07060 yuan per Euro. The RMB is now moved to a managed floating exchange rate based on market supply and demand with reference to a basket of foreign currencies.

On 10 April 2008, it traded at 6.9920 yuan per U.S. dollar, which is the first time in more than a decade that a dollar bought less than seven yuan,^[20] and at 11.03630 yuan per euro.

On 15 October 2008, the renminbi traded at 6.83170 yuan per U.S. dollar, which is a 21.8% increase and the highest rate since the removal of the peg. On the other hand, it traded at 9.19740 yuan per euro^[21] , which corresponds roughly to the rate at the time of the lifting of the peg against the US-Dollar.

Purchasing power parity - Scholarly studies suggest that the yuan is undervalued on the basis of purchasing power parity analysis.

• The World Bank estimated that, by purchasing power parity, one United States dollar was equivalent to approximately ¥1.9 in 2004.^[22]

• The International Monetary Fund estimated that, by purchasing power parity, one United States dollar was equivalent to approximately ¥3.462 in 2006, ¥3.547 in 2007, and had been expected to be equivalent to ¥3.694 in 2008.^[23]

Capitalization and Redistribution of Assets Project -- the C.R.A.P. plan

President Obama's plan does nothing to stimulate the economy. It is only going to get us further mired in a debt that will take a long time to crawl out of.

What this city, county, and the rest of the metro are going to have to understand is that no one is coming to our rescue. We will succeed or fail on our own and that is a good thing. We have been disenfranchised by Washington and Raleigh. It is us against the World and frankly I like it that way.

MSNBC shows no C.R.A.P. money targeted to the Hickory Metro Area

C.R.A.P. plan discussed "at a Glance" by the Detroit Free Press

President Obama pushes C.R.A.P. and another Tax Cheat

Easy Money discussed by the Wall Street Journal

Here is what Glenn Beck has to say about President Obama's C.R.A.P. proposal.

Catawba County Unemployment Rate hits 10.7%

I think we could see 15%+ in the Unifour area. Unemployment has nearly doubled in the last 14 months. I hope that I am wrong. Here is a link to all of the unemployment numbers for local counties.

Transformative Leadership -- All Chips In. How 'bout You?

In Sunday's Business Section of the Hickory Daily Record, The President of the Catawba County Chamber of Commerce Danny Hearn, offered an article entitled Creating transformative leadership is crucial to area (you can click the link - there is no online edition).

I have a little trouble understanding the jargon, but after looking up some of the keywords, I can see that he is pretty much spot on in his assessment. As we have stated here many times on this blog, you can't drive a car by looking in the rear view mirror. You must look forward, through the windshield, or you are bound to crash. In my opinion, our community has crashed, because of nostalgia, complacency, and stubbornness. These are three characteristics of people who live in the past.

There have been too many people in our local leadership positions that have been insulated from the financial problems that many of our citizens have experienced. That is the reason why people will tell you, "That's the way it's always been," when you point to deficiencies in our local area. To me, that is just an unacceptable response. I'm sorry, I am old enough to know better. Whole sections of this city have not always been blighted and it is immoral to ignore the plight of the least of us.

I think that Mr. Hearn is looking to do what has needed to be done in this area for years. We have to change the negative, "Can't Do" culture that has permeated through this community. I like what he says in his last paragraph of this article, "Please join us as we create a new system of values, concepts, capacities, strategies, attitudes, and behaviors..." Those are the words I have longed to hear and he is asking us to join together to do this.

What I think needs to be understood is the jargon Mr. Hearn has laid out in this article. We all understand what trends are. It is the general direction in which something tends to move. The concept that I had trouble understanding is "Weak Signals." To be honest, I have never heard of this term before.

In looking it up, Weak Signal Theory defines the ability to recognize and act upon subtle changes in conditions (such as markets) that may lead to extreme changes that can create barriers to growth. Weak Signal Theory espouses the Reduction of Noise (clutter) around projects, by not enabling Band-Aids (Temporary Fixes) to be placed on those projects to facilitate completion. Those Band-Aids mask "Weak Signals" that can lead to disastrous results. Another important "Weak Signal" problem solving issue is "Sense Making." Sense Making takes into account historical data, and using the patterns of that data, to theorize logical conclusions. By learning from past patterns of anecdotal evidence, we cut through problematic noise and get right at the heart of solving problems.

Next, Mr. Hearn went into the need for development of Transformative Leadership Skills. I agree with what he states here about Transformative Leadership Characteristics, but I have questions about "Characteristic 1," The ability to think systematically. I understand the need to have a plan as long as it does not espouse uniformity. In my opinion, uniformity kills innovation.

I agree completely with what Mr. Hearn states about the differences between Transformative Leaders and Traditional Leaders. Harry Hipps says it best, "Almost everyone wants a position and title but who wants to find, promote and evaluate initiatives that may carry some risk and may even fail." Transformative Leaders do not worry about failure. They learn from it!!!

Here I go being honest again, but in my humble opinion, this is where our educational system has failed us. It has turned the masses into a bunch of memorizing, copycat, follow the leader, cheating, grade earners. I was a failure in my formative education and I know why. Formal education isn't about obtaining knowledge, it's about being a good little robot and obtaining a letter of the alphabet (grade) that labels you. I have never accepted labels. Now that we are in changing times, all of the good little robots are running around, freaking out, babbling, "Does not compute, Does not compute, Does not compute," because they cannot think outside of the box.

I am reminded of something a local citizen said about the proposed Cloninger Mill Park. He said, "In 100 years, people will look back and ask why anyone attached a piece of commercial property to this land?" Personally I am not arrogant enough to look that far forward, but I can look back to the changes we have seen since 1909. We have seen 18 Presidents, America has fought in six major wars including 2 World Wars, 14 recessions have occurred including a Great Depression, there was still a Czar in Russia, and it was the first year the Indianapolis Motor Speedway was opened -- for automobile testing.

We must embrace change and relish it. My grandmother will be 95 years old in July. She gives me perspective. She has seen all of this transformation from an economy based on agriculture and sweatshops to where we are today. For all of the simplicity that life had to offer back then, there were still problems. We don't have to deal with Polio, billowing smokestacks, no indoor plumbing, or lack of electricity. We have the whole world at our feet.

We must carry forward with progress so that we may leave a lasting legacy to our descendants, as has been left to us. With all we have been given, we have the responsibility to not let what we have inherited wither. It is our obligation to enhance this area economically, culturally, educationally, spiritually, and environmentally for all our citizens; now and in the future.

The State of Hickory, North Carolina 2009

On July 15, 2007, I was honored to contribute a Guest Commentary that was printed in the Hickory Daily Record (HDR). The article entitled "An All-American City deserves first-class leadership" is the lead entry of this blog and I am grateful to the Hickory Daily Record for basically allowing me to give a State of Hickory address at that time.

I still believe every word that I wrote in that letter to this day. 18 months later, we are still nowhere near righting the wrongs that were discussed. The hangover from the fiber-optic, furniture, and textile busts are obviously still haunting our community. The standard of living is getting worse in our community and we are enduring the brunt of the current recession, because we have not addressed the serious, underlying issues that we have faced during this decade. Eighteen months later, how much of a difference has that All-American City designation made?

Was I wrong? After the article, I heard certain people say that the All-American City designation was going to entice businesses to come to our area. Since that initial article, we have continued our downward slide losing nearly 10,000 jobs in the Unifour area and nearly 4,000 jobs in Catawba County. I know that I am beating a dead horse. My Grandmother calls me a gadfly, but I have only posed these questions to wake people up to the fact that the status quo was and is unacceptable.

I wrote a follow-up article to the HDR that was never published, but I believe that it was just as important as the first article. I believe it was never published, because the HDR was given some heat, because of the first article. The following week (7/22/2007) we were blessed with an article telling us how Hickory's job picture was on the upswing and Commscope was rehiring all of these new workers. How's that working out now?

My second article was entitled Building the Bridge to Hickory’s Future. This article points to the fact that we have never had a cohesive strategy when it comes to economic development.

1) Our area has been inundated by Temporary Work Agencies over the last decade. Whether you feel these enterprises are building blocks of community development or not, it is a fact that they enable corporations to not pay full scale wages and benefits to the workforce. Over the last few years, many people went back to the companies they were originally working for and worked as temps through companies such as Adecco and Manpower. Many of these people worked (or have worked) for over a year without receiving full-time status. Should our Economic Development Leaders be prostituting our citizens like this, when they are supposed to be the representatives of those citizens' interests? What kind of security has that brought people?

2) We have seen city leaders devote themselves to issues that did not enhance the public's interest. These social issues took away their focus from the most important issue that our city has faced over the last 8 years. That issue is Jobs.

We are losing many of our best and brightest young people in this area, because of the lack of opportunity. I have seen it first hand. My cousins Jessica and Stephan Moore have told me if there was opportunity in this community, then they would be here. They are both Dean's List students. Jessica just graduated from NC State and Stephan graduated last year from UTI and is working in Memphis, Tennessee. I can name countless people under 30 years old that are no longer here, because of the lack of opportunity. What does this say about the longterm viability of our community?

It is no secret that we have seen a major influx of retirees, in this area, over this past decade. Right now, I feel that we have assimilated these people well; but as we see our city's younger demographic dwindle and the older demographic expand, we are going to see a tight squeeze on our local area's governmental budgets. The elderly are on fixed incomes. No matter how much money they have in the bank, they always must think about the possibility of catastrophic health care issues. While the elderly consume a disproportionate amount of public services, they don't stimulate the private economy by purchasing commercial goods and services at the rate that younger generations do.

We cannot afford to turn this area into a retirement village. We must create opportunities for younger generations so that we can level the demographic anomaly that we could soon be facing. Look at the issues that South Florida is facing because of the current Real Estate Crisis. Much of this is due to the fact that the demographics in that region are out of kilter. With so many 30 year olds and younger moving away from our area and more and more retirees moving in, we are seeing the shrinkage of a viable housing market. We could soon find ourselves in a similar situation as that of South Florida.

What would happen to our housing market if the 65+ age bracket becomes 25%+ of our population by 2025? Who are the elderly going to sell their houses to, if the best and brightest young people move away? People working in Fast Food restaurants and Retail Stores have a hard time when it comes to housing affordability. Many Retirees use the appraisal value of their home for reverse mortgages to subsidize their retirement. The value of their houses are going to fall if we don't have a robust and viable local economy. The consequence will be less money to live on in their golden years.

You can see the perilous situation that our community now finds itself in. Our Economic Decision Makers have not made good long-term decisions. Certain leaders have pushed this notion of bringing in more geriatric care centers and marketing our community to retirees. That might be alright as part of a total comprehensive strategy, but folks we cannot afford for that to be "The Strategy."

The strategy has to be jobs. We have been behind the curve for eight years on the jobs issue. We have lost over 28,000 jobs in the Hickory Metro area. Yes, some of that can be laid at the feet of Raleigh and Washington, but our city is far from powerless and we are far from blameless.

The lack of power that we have is a mindset. There has never been any determination to make things any better around here. We have taken for granted that Raleigh and Washington are going to work us over because we are Republicans. I don't buy that, because I have looked at other Republican areas (such as Texas, Utah, and Tennessee) and seen them thrive.

This recession is reshuffling the Economic Deck of Cards in this country and throughout the world. We can stand at Washington's Pork Barrel Trough and beg for some scraps or we can try to get all of the Pork recipients to spend money on Hickory's economy by figuring out what the 21st century market needs. To do this we must begin implementing some sound policies and strategies. People must understand that nostalgia, complacency, and stubborness have caused this city to fall behind.

We must have leadership that is selfless, willing to step outside of the box, willing to take calculated risks, and willing to take the heat for failure. We can't get stuck in a losing effort, because of pride. If it's obvious that Plan A isn't working, then it is time to move on to the next strategy. By doing this, we will eventually find success. We must have decision makers that don't live in denial and don't have issues about accountability. The citizens need, and deserve, to know the direction this city is headed in. Apathy is grown from the seeds of disenfranchisement. We need more participation. Our city will not suffer if we fail. Our city will suffer if we do not try.

May God Bless Us