Saturday, July 21, 2018

A new API.

To make a techy analogy: The current administration acts as a different API ("application programming interface") between the United States and China.  However, the outputs and reaction functions continue to play a similar tune:

So we see statements like this:

"China called on the United States to play its part in resolving trade frictions between the two countries, and said Beijing isn’t devaluing its currency to boost exports as tensions simmered ahead of President Xi Jinping’s first meeting with U.S. President Donald Trump."

In light of evidence like this:



(Graph depicts Yuan dropping against the dollar since May...a bit counter-intuitive given the tarriffs put in place.)

Now, Trade Deficits are like political positions themselves...they typically change state ("good" or "bad") depending on whatever political position one wants to make at a given time...more on that later.  Devaluation is a response based on purchasing power, and is much more systemic than Trade arguments in that it effects all goods and services.***

***Which is, of course, why Trade Deficits/Surpluses are not quite as meaningful anymore.  In the Days of Adam Smith or David Ricardo, goods and services may have been unique to a country or region.  In the modern era, a product designed in California, with parts manufactured in several Asian countries, yet assembled in Latin America makes the very notion of country balances a much less powerful indicator of economic position.