new pricing

[dpicker]

with the US dollar dropping in value it is driving the GAD guitars up in cost in the USA. i think the GAD will be losing it's appeal and causing more interest in our US made guitars.

 

[dpicker]

I was looking at a Guild classical C3 but with the price jump i am going to look around at other options.

 

[Default]

How big of a jump was it?

 

[dpicker]

Bing didn't give the exact amount but i think it was well over a $100.00 jump. i don't know i want to put close to $700.00 in a kick around classical guitar. if i am going to spend that much i will take a look some USA, Canadian or Spanish classicals that will have a better resale.

 

[dpicker]

arounld 12%

 

[john_kidder]

with the US dollar dropping in value it is driving the GAD guitars up in cost in the USA.

One of the great current problems with the world's economics is that the Chinese currency is pegged to the US dollar. The Saudis and other petrodollar holders are moving rapidly to the Euro, knowing that the Chinese have to support the dollar in te near and intermediate term at least. The Chiness hold so much US debt that if they were to let the renmimbi float, or to move to the Euro as the record currency, then their debt would rapidly slide. So, just like the US internal debt, there's great pressure to keep the currencies tied (except from the very few actual free traders in the US gov't, who;'ve been arguing for years that the undervalued renmimbi has been on of the great curses of the US economy, causing great volumes of US consumer purchases of Chinese goods which would otherwise not have occurred, hence less foreign debt, etc.)

So any US retailer or distributor who tells you that he has to raise prices because the dollar is dropping against the Chinese currency is just full of, what did Graham call it, S * * T? From almost any other country in the world, imports are getting more expesive in the US. Not from China.

 

[Graham]

Great insight John, and the word is $&#@. :wink:

 

[chazmo]

This is going to be a very ignorant economic question, but how is it that a significant part of US's national debt is held by China? Not to pick on China, but how is this aligned with the mission of a capitalist country like the US? I guess I just don't get it. That seems very wrong to me.

 

[danerectal]

In a free market economy, everyone worldwide has the right to destroy one's economic guts. :roll:

 

[Graham]

This is going to be a very ignorant economic question, but how is it that a significant part of US's national debt is held by China? Not to pick on China, but how is this aligned with the mission of a capitalist country like the US? I guess I just don't get it. That seems very wrong to me.

This is an ignorant and short answer, I hope others will expand on it, but when the Gov't of the day ends up running a deficit for all of their expenses, it covers those expenses with debt, which can be bonds or the like which are offered on the open market. Whomever buys the bonds, to fund the deficit, in fact becomes a creditor and owns the money of that particular Gov't, State, Company, etc.

Fact of financial life for most if not all countries I believe.

Bueller, Bueller, Bueller......?

 

[chazmo]

This is going to be a very ignorant economic question, but how is it that a significant part of US's national debt is held by China? Not to pick on China, but how is this aligned with the mission of a capitalist country like the US? I guess I just don't get it. That seems very wrong to me.

This is an ignorant and short answer, I hope others will expand on it, but when the Gov't of the day ends up running a deficit for all of their expenses, it covers those expenses with debt, which can be bonds or the like which are offered on the open market. Whomever buys the bonds, to fund the deficit, in fact becomes a creditor and owns the money of that particular Gov't, State, Company, etc.

Fact of financial life for most if not all countries I believe.

Bueller, Bueller, Bueller......?

So, Graham, I do indeed assume we're talking about US treasury debt here, and not corporate notes. The latter would be simple to explain, as anyone can do as you described.

I'm not sure the China would purchase US debt on an open market type of system. I guess that was my point. Certainly, the US govt. would have to decide, consciously, to "sell" that debt to China. My question was "Why China?" That said, maybe I've got this system wrong and how it works internationally. I thought there was some notion of intent and cooperation when countries buy each others' debt instruments.

 

[Graham]

So, Graham, I do indeed assume we're talking about US treasury debt here, and not corporate notes. The latter would be simple to explain, as anyone can do as you described.

I'm not sure the China would purchase US debt on an open market type of system. I guess that was my point. Certainly, the US govt. would have to decide, consciously, to "sell" that debt to China. My question was "Why China?" That said, maybe I've got this system wrong and how it works internationally. I thought there was some notion of intent and cooperation when countries buy each others' debt instruments.

I understand that bonds are sold on the open market, basically beggars can't be choosers. China might look at this as a nice investment or retirement property. :shock:

 

[danerectal]

It's not the US gov as much as it is the Federal Reserve. They own all those silly cotton papers we refer to as money. Since they themselves are a bank, loaning this currency to the US gov, they can actually loan out much more than they're worth. :roll:

 

[Bing k]

with the US dollar dropping in value it is driving the GAD guitars up in cost in the USA.

So any US retailer or distributor who tells you that he has to raise prices because the dollar is dropping against the Chinese currency is just full of, what did Graham call it, S * * T? From almost any other country in the world, imports are getting more expesive in the US. Not from China.

Well John, for whatever reason, the 08 Guild GAD price sheets I received today are up 12% over the July 07 sheets.

 

[john_kidder]

Well John, for whatever reason, the 08 Guild GAD price sheets I received today are up 12% over the July 07 sheets.

There is upward pressure on all your import prices, for sure. Shipping is up worldwide, internal inflation's running about 4%, etc. And who knows, maybe Fender's reacting to apparent demand? But it's not a function of the US $ v. the Chinese remnimbi.

how is it that a significant part of US's national debt is held by China?

Some call it simply "vendor financing" - the US buys such an enormous amount of Chinese manufactured goods that the Chinese are vitally interested in US liquidity. So they buy US T-bills and other debt instruments in very large amounts. Henderson International says "China’s direct official buying of US marketable bills, notes and bonds was equivalent to 55% of US net new outstandings in 2006", and probably even higher in 2007 There's also a fair amount of Chinese direct investment in US companies, through their state-owned investment funds, which now are managing something in the order of $1.3 trillion of their foreign exchange surplus. That's been growing rapidly, and may increase further in the near term - some expectations are that the "Sovereign Growth Fund" will have $10 trillion in funds within a very few years.

And with the remnimbi pegged to the dollar, it's more attractive, all other things being equal, for them to place the funds in the US. From the US point of view, as the dollar declines (due in part to massive current account deficits and givernment debt), other lenders are less willing to take US debt. So the US diplomatic pressure to float the remnimbi has died down to a very quiet rumble, rather than the loud roar it was a few years ago.

 

[Jeff]

.............. how is it that a significant part of US's national debt is held by China? ......... That seems very wrong to me.

I think you're pretty much right on, It is wrong.

Landfills are full of cheap, cast off imported goods, thousands more tons added daily. The quality & value of much of what is imported chaps my hide.
Concept of accumulating debt to purchase this production is twisted.

Anybody have insight on 'Beanie Baby' futures. I'm 50% owner of a sizeable Beanie Baby collection, quietly mouldering away in the shed out back, each proudly labelled "Made In China". Buy & hold the current strategy, in for the long term, , money in the bank.

GAD guitars infinitely more dignified form of trade.

 

[dpicker]

Chazmo wrote:
how is it that a significant part of US's national debt is held by China?

Boy John i am impressed you are a finical scholar. I learned more in this artcle than i think i want to know. if China even wanted to pull out of our market we would be in deep DoDo, but so would they.

 

[chazmo]

[quote="Bing k":e1b2b] Well John, for whatever reason, the 08 Guild GAD price sheets I received today are up 12% over the July 07 sheets.

There is upward pressure on all your import prices, for sure. Shipping is up worldwide, internal inflation's running about 4%, etc. And who knows, maybe Fender's reacting to apparent demand? But it's not a function of the US $ v. the Chinese remnimbi.

how is it that a significant part of US's national debt is held by China?

Some call it simply "vendor financing" - the US buys such an enormous amount of Chinese manufactured goods that the Chinese are vitally interested in US liquidity. So they buy US T-bills and other debt instruments in very large amounts. Henderson International says "China’s direct official buying of US marketable bills, notes and bonds was equivalent to 55% of US net new outstandings in 2006", and probably even higher in 2007 There's also a fair amount of Chinese direct investment in US companies, through their state-owned investment funds, which now are managing something in the order of $1.3 trillion of their foreign exchange surplus. That's been growing rapidly, and may increase further in the near term - some expectations are that the "Sovereign Growth Fund" will have $10 trillion in funds within a very few years.

And with the remnimbi pegged to the dollar, it's more attractive, all other things being equal, for them to place the funds in the US. From the US point of view, as the dollar declines (due in part to massive current account deficits and givernment debt), other lenders are less willing to take US debt. So the US diplomatic pressure to float the remnimbi has died down to a very quiet rumble, rather than the loud roar it was a few years ago.[/quote:e1b2b]

John, that is great information. Thanks for helping to educate me in this! I find it fascinating how the economic forces have clearly overtaken political concerns here. Maybe it's true that the Chinese gov't is more aligned with US foreign "policy" than I would've thought possible. Anyway, fascinating stuff. If for no other reason than I get to use the word "remnimbi" in a sentence! Maybe it's time to write a song...

 

[chazmo]

.............. how is it that a significant part of US's national debt is held by China? ......... That seems very wrong to me.

I think you're pretty much right on, It is wrong.

Landfills are full of cheap, cast off imported goods, thousands more tons added daily. The quality & value of much of what is imported chaps my hide.
Concept of accumulating debt to purchase this production is twisted.

[ ... ]

Jeff,

While I don't disagree with your point about quality and value of Chinese goods, it's indisputable that US purchasing is driving Chinese growth. This really isn't much different than Japan in the '70s and early '80s. The end result will someday be that Chinese standard of living will grow (I'm talking economically, of course), products will improve until they become too expensive for the Chinese to build... I think what's different from Japan is the sheer magnitude (and the expected length of time this process will take) in China.

My point about China owning a big part of the US debt was more of a political statement. I didn't (and don't) understand why the Chinese government is "placing their bet" (if you will) with the US. As I mentioned to John above, clearly economic forces have overridden political forces in China for this to happen. Unless China's political intent by this is to ultimately destroy / control the US someday. This is why, on the US side, I was questioning why US gov't would allow it.

 

[danerectal]

The end result will someday be that Chinese standard of living will grow (I'm talking economically, of course), products will improve until they become too expensive for the Chinese to build...

This is really the reason it's happening. There are also diplomatic reasons for trade agreements, not just economic. By improving China's economy and including them in our trade circuit, we pay down their aggression toward the US.