> Oh sure, the US is just the biggest manipulator by far with more than > likely the longest history of doing so. Minor irony then that they > still pressurize China as if it were the only one doing it. > http://www.nytimes.com/2012/02/16/business/global/appreciation-in-chinas-currency-goes-largely-unnoted.html > > The falling USD has put a lot of inflationary pressure on China, and > it's something China has to take mostly lying down for the moment.
It doesn't. The falling USD will, at best, decrease the price of oil priced in renminbi, which will be a deflator, same for all imports. A rising local currency can only slow down growth for an export led economy, and will almost definitely not increase inflation. Why it does increase inflation is if China attempts to buy all that USD that people are throwing at it in the form of FDI and stock market investments, and issue renminbi, which increases the money supply and thus causes inflation. (this is a major cause of the inflation India is seeing today - the stupidity of the mid 00s) > A strong Euro and a weak dollar will see America's economic dominance > into the next decade - or at least that's the driving belief behind > all this. The Fed's emergency line of credit to the ECB is show that > everything that can be done, will be done to make sure the Euro stays. > When it's all invented money anyway, it's just a matter of loosening > the right economic screws to restore confidence. This digresses from the discussion but the fed's emergency line is pretty standard in crises, and it is a dollar-euro swap, the only reason for which is this: Euro banks lend to companies all over the world in - hold your breath - dollars. That might sound silly but even european companies have borrowed in dollars (as have many Indian companies, from European banks). The swap line is to maintain the dollars required to carry these loans ahead, that's all. In essence, it will allow a Euro bank to pay in euros and get dollars through the ECB if it really really needs it. > As a social net the concept is undoubtedly good. As far as > implementation goes, I have only heard mixed reports. There is > evidence that NREGA is reducing deaths due to poverty - in many parts > of India untouched by the economic miracle NREGA is the only source of > income which doesn't depend on the local landed and wealthy. It's a > source of calories if you will. I think this might entail an entirely new discussion but it is important to balance such goals with the fact that we are creating moral hazard and laziness of gargantuan proportions, which is even worse than say an export subsidy. (Oil subsidies I would rate at the same bad-ass level as NREGA). NREGA is a purely political ploy, and has only economic and human negatives, from corruption at one end, to no-productivity at the other. The feel good factor only lasts a little bit - and has already worn out as people have realized that you can't stop this SOB no matter what you do now. Also it stupidly didn't come with an end date (I think that is required of everything including reservation) While NREGA has seen some people come out of poverty, it is a wasted effort because as we go we'll see prices move so that those very people go back to being classified as poor. Instead, the focus on increasing productivity with the same money would have helped us get a lot more out of the system - like building roads, which you can't do under NREGA because it requires a levelling machine at the very least. >> Real wages aren't falling in India at all, no matter how you look? Our >> per capita income is up, our wages in general are up and afaik, more >> than inflation. Do you have a source I can look at? > > At the macro economic level you maybe right - the economic dashboard > numbers are all trended upwards. There are new income opportunities > where there were none, GDP/PPP indicators are all higher now than they > were a couple of decades ago. However it just means that gains in > certain sectors are masking massive failures in others - the real > wages epidemic is somewhat unnoticed because it has just not fallen at > the same rate as the US/EU/JAPAC - so it is less visible. It's a very tiny percentage of population that has seen a wage decrease. In any given year, you will find that 25% of people will lag the growth that others see, that's the nature of the game of life, it is never ever (and not designed to be) consistently distributed. > > (BTW, I am not denying the genuine economic progress that has happened > in some places, there are definite improvements in specific industry > segments and social pockets, but so too there are other sections of > society that have been adversely affected by inflation and > urbanization.) > If you are a bank employee at a nationalized bank, or a government > employee or otherwise salary scale bound you will find that real wages > haven't kept up. You can no longer buy a flat within central parts of > any major or even minor Indian city on a government salary, or enough > gold for an Indian wedding. Land and gold prices are important because > they are true sources of wealth - they will persist even when the cash > economy fades in importance or undergoes a crisis of confidence. I disagree. Both gold and land prices are traded and are susceptible to speculative mania and bubbles. They have happened forever. Gold is slightly better than land, but it is still the same thing. I have been dealing with (honest) government servants recently and they have been able to afford decent housing. Teachers in govt schools get paid 2x what the equivalent in private schools is and at the lower levels the wages are very good now. (It's at the higher levels that salaries don't go up quite as much) If anything, the way to bring land prices down is: repeal land control acts, remove the tax deductions for housing (that is, that you can park capital gains in housing and not pay tax, and that you can get deductions for principal repayments), remove the concept of "priority sector" for housing specifically, create a zoning structure that is transparent and build roads. If you do that, house prices will not just moderatt, people will move out of their stuffed cities as well > I should have expanded on the McAloo Tikki comment, it was more a > sociological statement than an economic one - urban population > density, urban poverty, urban environmental devastation, rural > population flight, farmer suicides, divorce rates, nuclear families > are all staggeringly higher now than they were in the 80s, and 90s. > > That is not very good progress is it? Farmer suicides are far less important, statistically, than that of housewives. Even for economic reasons, suicide by other categories as a percentage of their population is far more significant - but we love farmers and P Sainath so we give them front page stories. As a percentage of population suicide rates have come down. Rural population flight is because of horrendous land laws that don't allow industry in (who said we should be an agri economy!). Urban population density is higher for similar reasons. Divorce rates are a good thing because according to me, India had way too many bad marriages (we were at the other end of the scale) - the maximum number of divorces today are mutual IIRC. Nuclear families are awesome - and a sign of progress and freedom. We have a truckload of stuff to do, but I wouldn't go the socialistic way. I also think the McAloo tikki statement has the weird irony to it that it's now cheaper than much of the street food we see.
