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Thursday, October 27, 2011

The EU Bailout: China's on Board

    In judging whether you like the EU deal or not, China's has seen enough and is convinced, they welcome it:

    "We hope that this consensus ... is conducive to boosting market confidence," Foreign Ministry spokeswoman Jiang Yu told a regular news briefing. "China is willing to make joint efforts to preserve the global economic recovery and growth."

     Some may value such support more than others... Recently there has been a rise in China bashing, with a recent Senate bill to in some way sanction China with higher tariffs if they don't allow their Yuan to accrue at the pace some have decided they should. For my part I was not sure at all about such action. The main reason I have been anything less than wholly dismissive of this is because Krugman has supported it. Yes I admit: if he supports something I almost assume there must be some merit in it somewhere.

    The idea is that China by keeping it's Yuan pegged or at least not letting it grow as fast as it naturally could has hurt our exports. What this comes down to is we seemed to have been saying this: "China your weak dollar policy is no fair. It's harming our desire to have our own weak dollar policy." I guess not many countries want a strong dollar anymore but how can we argue that it's not fair for China to have what we want?

    I read Krugman's support as more desperation than anything-which is perfectly understandable. However with the positive recent data we've been seeing-today's 2.5 percent GDP and 2.4 percent consumer spending-as well as a lower trade deficit maybe this was simply a desperation move and we should put it behind us.

    Back to now, China was unhappy with us then, happy with Europe now:

    "China supports the measures taken by the EU to deal with the debt crisis problem," Jiang said.

     "China was also ready to increase cooperation with the EU in areas of investment, trade and finance, she added, without providing details."

      China's official Xinhua news agency said the outcome of the EU summit was "positive but filled with difficulties", adding the deal showed that Europe could surmount its economic woes.

      http://www.cnbc.com/id/45057522

      Ok, I guess I should admit it, on this I'm with China. I think it's a very good development. I know there are details to be worked out and the devil is always in such details. Nevertheless, there is more than enough known of the broad outline to support: a 50 percent haircut on Greek debt and a quadrupling of the EU EFSF bailout fund. Couple this with some improving numbers here in the U.S. and there is some room for some very tempered optimism.

    

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