summercomfort (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
summercomfort) wrote2008-08-01 10:07 pm
summercomfort) wrote2008-08-01 10:07 pm
talking economics in China
Oh my god, I think I've just had the most frustrating conversation about economics EVER. Now, granted, my knowledge of economics is shoddy, but that's not why it's frustrating.
So, me and uncle. It started out with him saying that China is suffering because America raised oil prices. And I'm like, "so America raised oil prices just to make you suffer?"
So he's like: "Of course. America wants to slow China's GDP growth"
Me: "How does raising the price of oil slow China's GDP growth? I thought China was slowing itself?"
He proceeds to explain to me the "three horses that pull the chariot of Chinese Economy:
- Foreign trade (export) and investment
- Domestic investment (incl. government tax breaks, etc)
- Consumption
Me: "Yeah, I get this. China is too much export, which means there's a large foreign reserve of US dollars that they can only spend by buying bonds or otherwise investing in America. And since all the foreign money coming in means producing more rmb, they end up collecting the rmb from domestic investments to prevent inflation, meaning that banks don't get to do domestic investment."
(Well, I understood those concepts. It was hard to say that in Chinese, though. We got into some translation problems)
So he says: "Yeah, well now Foreign trade is down because the value of the Chinese yuan is up and the value of the American dollar is down."
Me: "Perfect time for Chinese people to do domestic investment now that they have the rmb!"
Him: "Except that people want to cash in on China's rising rmb value, so they invest in the (currency? cash?) market, which brings in foreign money in the form of non-investments. (It's called "hot money" in Chinese? Or "hot cash?") (I mean, I know what he's talking about--playing the exchange rate market)
Me: "How do they do that?"
Him: "They might sign a fake trade agreement or investment agreement with a Chinese company. That's why the amount of Foreign reserve is about $100 billion higher than the actual exports"
Me: "That's a bummer. Why doesn't the Chinese government do something about it?"
Him: "They can't, really. So of our 3 horses, two are down -- we have lower foreign trade, and we can't invest in our own domestic companies. These are the results. So what's the cause?"
Me: "What?"
Him: "You figure it out."
Me: "Seriously, I have no idea what *you* think the reason is. I have plenty of things that *I* think can be the cause..."
Him: "No, you figure it out. I've laid it all out for you."
At this stage, I will stop and query the readers: What do *you* think is the cause of the slowing of Chinese economy?
(And I know at least 4 of you have learned Econ properly.)
(I was thinking ... uh... didn't we start this be talking about rising oil prices and the Chinese rmb rising against the falling dollar?)
Finally, after about 5 minutes of awkward silence, he's like, "America! America's falling dollar and rising oil prices. Our stock market follows America's, and so does our real estate! And who is hurt the most? Us! And the other developing nations. (Tiger countries)"
Me: "Um... so you're saying that there's a bunch of people at the head of American government/corporations who got together and said, 'We need to screw China and India so let's mess up our own economy to make them suffer?"
Him: "No, they don't need to get together. The point is that there are so many countries invested in America that 2/3 of the effect of America's failing economy is felt by everyone else in the world!"
Me: "I totally agree that you guys got the short end of the stick there. But we're suffering, too, and why is America's economy failing? What you see as a cause, I see as another effect."
Him: "America needs to fix its regulatory structure. America needs to get out of Iraq. The Federal Reserve needs to increase interest rates."
Me: "Hah, as if it were as easily said than done. Like backing out of Iraq -- there's so much political capital at stake. I mean, Iraq and the economy, that's what the election's going to be about."
Him: "Don't take elections so seriously. Nothing's going to change. Politics are good for a laugh, but there's no use actually caring about politics. You'll just be disappointed"
Me: "But there's a small amount of accountability in terms of next election and legacies and suchlike. I'd rather be disappointed than apathetic."
Him: "Me, I don't care."
Me: "Well, right now Hu's doing pretty good. But wouldn't you care if suddenly he went batshit crazy? Wouldn't you want to participate? Do Something? Or is some God-like figure going to descend from the heavens and fix everything?"
Him: "Natural progression."
And that's where we decided to stop talking to each other.
Now! Let's talk about what made that conversation so frustrating!
- Language barriers in terms of fancy economic terms. It made him think I was stupid. When in fact I just had no idea that 投机 and 投资 were different things.
- The casual way that America is blamed for everything. Well, in this case, yes, the American economy brought the rest of everyone down, but *please*, can we
(a) not personify America? It makes America easier to blame, but also easier to construct conspiracy theories. This is not the first time I've heard talk here about "America plotting against us by raising the oil prices"
(b) remember that Americans have lives, too, and that this is an election year? (Which means complaints of the everyman might matter). In other words, WE WANT TO FIX THE PROBLEM, TOO. We may be self-interested, but it's not like we're ignoring these problems. My uncle and others seem to think, "We're hurt more than America, so they're screwing us at only a small cost to themselves"
(c) remember that it takes two to tango. You were perfectly happy to peg the Chinese rmb 8 to the dollar 10 years ago. Wonder why your foreign reserve is so high?
- the political apathy. I mean, yes, in a way it makes sense given the government and the Cultural Revolution, but still. You're raising up a generation of economically-involved but politically-apathetic people. That's ... not healthy?
So, me and uncle. It started out with him saying that China is suffering because America raised oil prices. And I'm like, "so America raised oil prices just to make you suffer?"
So he's like: "Of course. America wants to slow China's GDP growth"
Me: "How does raising the price of oil slow China's GDP growth? I thought China was slowing itself?"
He proceeds to explain to me the "three horses that pull the chariot of Chinese Economy:
- Foreign trade (export) and investment
- Domestic investment (incl. government tax breaks, etc)
- Consumption
Me: "Yeah, I get this. China is too much export, which means there's a large foreign reserve of US dollars that they can only spend by buying bonds or otherwise investing in America. And since all the foreign money coming in means producing more rmb, they end up collecting the rmb from domestic investments to prevent inflation, meaning that banks don't get to do domestic investment."
(Well, I understood those concepts. It was hard to say that in Chinese, though. We got into some translation problems)
So he says: "Yeah, well now Foreign trade is down because the value of the Chinese yuan is up and the value of the American dollar is down."
Me: "Perfect time for Chinese people to do domestic investment now that they have the rmb!"
Him: "Except that people want to cash in on China's rising rmb value, so they invest in the (currency? cash?) market, which brings in foreign money in the form of non-investments. (It's called "hot money" in Chinese? Or "hot cash?") (I mean, I know what he's talking about--playing the exchange rate market)
Me: "How do they do that?"
Him: "They might sign a fake trade agreement or investment agreement with a Chinese company. That's why the amount of Foreign reserve is about $100 billion higher than the actual exports"
Me: "That's a bummer. Why doesn't the Chinese government do something about it?"
Him: "They can't, really. So of our 3 horses, two are down -- we have lower foreign trade, and we can't invest in our own domestic companies. These are the results. So what's the cause?"
Me: "What?"
Him: "You figure it out."
Me: "Seriously, I have no idea what *you* think the reason is. I have plenty of things that *I* think can be the cause..."
Him: "No, you figure it out. I've laid it all out for you."
At this stage, I will stop and query the readers: What do *you* think is the cause of the slowing of Chinese economy?
(And I know at least 4 of you have learned Econ properly.)
(I was thinking ... uh... didn't we start this be talking about rising oil prices and the Chinese rmb rising against the falling dollar?)
Finally, after about 5 minutes of awkward silence, he's like, "America! America's falling dollar and rising oil prices. Our stock market follows America's, and so does our real estate! And who is hurt the most? Us! And the other developing nations. (Tiger countries)"
Me: "Um... so you're saying that there's a bunch of people at the head of American government/corporations who got together and said, 'We need to screw China and India so let's mess up our own economy to make them suffer?"
Him: "No, they don't need to get together. The point is that there are so many countries invested in America that 2/3 of the effect of America's failing economy is felt by everyone else in the world!"
Me: "I totally agree that you guys got the short end of the stick there. But we're suffering, too, and why is America's economy failing? What you see as a cause, I see as another effect."
Him: "America needs to fix its regulatory structure. America needs to get out of Iraq. The Federal Reserve needs to increase interest rates."
Me: "Hah, as if it were as easily said than done. Like backing out of Iraq -- there's so much political capital at stake. I mean, Iraq and the economy, that's what the election's going to be about."
Him: "Don't take elections so seriously. Nothing's going to change. Politics are good for a laugh, but there's no use actually caring about politics. You'll just be disappointed"
Me: "But there's a small amount of accountability in terms of next election and legacies and suchlike. I'd rather be disappointed than apathetic."
Him: "Me, I don't care."
Me: "Well, right now Hu's doing pretty good. But wouldn't you care if suddenly he went batshit crazy? Wouldn't you want to participate? Do Something? Or is some God-like figure going to descend from the heavens and fix everything?"
Him: "Natural progression."
And that's where we decided to stop talking to each other.
Now! Let's talk about what made that conversation so frustrating!
- Language barriers in terms of fancy economic terms. It made him think I was stupid. When in fact I just had no idea that 投机 and 投资 were different things.
- The casual way that America is blamed for everything. Well, in this case, yes, the American economy brought the rest of everyone down, but *please*, can we
(a) not personify America? It makes America easier to blame, but also easier to construct conspiracy theories. This is not the first time I've heard talk here about "America plotting against us by raising the oil prices"
(b) remember that Americans have lives, too, and that this is an election year? (Which means complaints of the everyman might matter). In other words, WE WANT TO FIX THE PROBLEM, TOO. We may be self-interested, but it's not like we're ignoring these problems. My uncle and others seem to think, "We're hurt more than America, so they're screwing us at only a small cost to themselves"
(c) remember that it takes two to tango. You were perfectly happy to peg the Chinese rmb 8 to the dollar 10 years ago. Wonder why your foreign reserve is so high?
- the political apathy. I mean, yes, in a way it makes sense given the government and the Cultural Revolution, but still. You're raising up a generation of economically-involved but politically-apathetic people. That's ... not healthy?
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no subject
I also think it's interesting that his prescription for ending the worldwide recession is for the Federal Reserve to raise interest rates. High interest rates discourage businesses from investing, which reduces GDP -- not the right way to get out of a recession. I guess he's figuring that higher interest rates would strengthen the dollar? Which is true, but it sounds like five years ago he was complaining that the dollar was too strong and flooding China with American currency.
But honestly, the funniest thing to me is the assumption that American businesses and politicians would self-injure for the sake of making China suffer. I'm sorry to break it to you, Sushu's Uncle, but we don't care about you enough to try to sabotage you. :D
no subject
Yes! I agree! But I guess when profit beckons, patriotism goes out the window?
> I also think it's interesting that his prescription for ending the worldwide recession is for the Federal Reserve to raise interest rates.
Yeah, me too. I was making weird faces. I was like, "but it would mean people would lend less..." And he was like "no, they'd lend more because they'd get higher returns!" And I was like "We're talking about the Fed here. Deciding lending rates between banks. Which would decrease lending in general" And he was like "They'll just pass the expenses onto the actual lendees!" And then I got confused.
> I'm sorry to break it to you, Sushu's Uncle, but we don't care about you enough to try to sabotage you. :D
Haha, exactly!