
Dow plunges more than 950 points after China devalues its currency - azhenley
https://www.cnn.com/2019/08/05/investing/dow-stock-market-today/index.html
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blondie9x
Just wish China government would agree to the demands on intellectual property
and tech patents transfer. Getting to a deal could be really easy if China
stops the intellectual property and transfer requirements.

[https://en.wikipedia.org/wiki/China–United_States_trade_war](https://en.wikipedia.org/wiki/China–United_States_trade_war)

~~~
Arrezz
When did China originally start disrespecting intellectual property? Or is it
the case that they've never respected it? Do you know of a good resource to
learn about the history of this topic?

~~~
jhbadger
Traditionally nations only started respecting foreign intellectual property
when they started to generate more IP that they wanted others to respect than
they used from outside. For example, in the 19th century, the USA didn't
respect British copyright. Charles Dickens was a very popular author in the
USA, but he didn't get a cent from the sales of his books there. So he came
over to the US a couple of times to give lectures in large auditoriums in
major cities -- sort of like a rock star making money from touring rather than
from album sales.

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std_throwaway
750 points sounded much scarier when the DOW was below 10000. Now it's just
3%.

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j7ake
At current interest rates, 3% is nearly a year of interest gone.

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adventured
If it were actually guaranteed to be gone, that would matter as a comparison
point. The market however obviously isn't fixed and can rise or fall, bounce
back or not. There's nobody that can consistently, accurately predict near-
term moves.

The market could be down another 3% this time next week. Or it could snap back
- emotional over-reaction - and recover most of this loss in the next week or
three (sentiment on Wall St suddenly changes to eg: this means the Fed will
have to step in and cut rates further, so stocks rise back up; it's just about
impossible to tell how the wind will blow in the coming weeks, even if there
is a hint of real bearishness about re the trade war & China).

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disconnected
Ok, I'm confused.

As of my posting, the HN submission title is:

> Dow plunges 750 points after China devalues its currency

The article title:

> Dow plunges 800 points after China devalues its currency

And the first paragraph of the article is:

> The Dow tumbled more than 830 points [...]

So... which is it?

Edit to add: ok, the article's contets are apparently dynamically generated
(or are being updated manually). I didn't know they did that. You can
disregard this comment.

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bena
I think it's being updated as it tumbles.

Right now, it says 875

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meddlin
wow...950 now. As of comment, latest article update: 3:21 PM EST

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didip
I am confused about 1 thing. China can't possibly keep doing this at a rapid
pace, right?

If they keep doing this, then their own people's savings is rapidly
disappearing.

And since their people have a hard time buying US real estate anymore, won't
the people get angry?

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internet_user
There is a very healthy industry based around evading Chinese capital
controls.

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tunesmith
Does anyone know of any nice interactive models to play with that demonstrate
trade, tariffs, and currency levels? I just don't have an intuitive sense for
this yet.

~~~
resters
What we saw is the market responding both to the economics of it and also to
the knowledge that China has started adjusting its currency to combat Trump's
tariffs.

I think many expected this to happen, but what is interesting is that it
happened today, so long before the election. China is effectively signaling
that it can do a LOT more of this leading up to the election.

Imagine a lager currency adjustment that sent the Dow down 3K points. A lot of
people are imagining that today who were not thinking about it before.

So this puts a lot more pressure on Trump to pull back on the tariffs. But
Trump won't want to do that yet, so China has a bit of time to illustrate that
Trump is not in control of things the way he claims to be.

As someone who does not want the US Government meddling in the economy, I'll
be very pleased if China manages to force Trump to repeal the tariffs,
regardless of whether China continues its own backward trade policies.

~~~
tunesmith
Given this administration's thinking pattern, wouldn't they see the potential
damage to US manufacturers and try to increase tariffs further, vicious-circle
style? Who gets constrained first? If that doesn't cease, couldn't that
eventually obliterate trade relationships entirely and make war more likely?

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resters
> Given this administration's thinking pattern, wouldn't they see the
> potential damage to US manufacturers and try to increase tariffs further,
> vicious-circle style?

I think they will want to do that, but ultimately the US has limited ability
to do certain things.

> couldn't that eventually obliterate trade relationships entirely and make
> war more likely?

Yes, that is in my opinion the worst aspect of Trump's trade policy. Economic
cooperation between people of different nations helps prevent war. Trump is
punishing Americans for cooperating with Chinese exporters, while trying to
vilify the Chinese government, Chinese academics studying in the US, etc.

It's a horrible and repugnant political ploy. The US woke up and looked in the
rear-view mirror and saw that China caught up dramatically in the past few
decades (during which the US wasted trillions on the middle east).

China did not waste trillions in the middle east. Instead Xi lifted an
unprecedented number of people out of poverty and invested heavily in Africa.
China pours more concrete in a month than the US does in a year, and China
produces more top tier hard science research than the US, not to mention
China's top universities are 100x more competitive than Harvard.

Trump's actions reveal a weak and flailing US, the worst thing any of us can
do is assume that he has a clue what he's doing in any kind of negotiation or
foreign policy scenario.

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Leary
Funny how trump calls this "currency manipulation" when in fact they are
stopping propping up their currency.

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pbhjpbhj
"plunges" 3% ... me sobs in Brexit.

We've lost just under 20% off GBP vs USD since the vote went to Leave from the
anticipated Remain.

China's an export economy, no? So, devaluing helps to buoy production for
export, keeping people in work. Seems to be how China does things: I'm
thinking of all those ghost cities they build.

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tedsanders
China is not an export economy. They have a very balanced current account, <
1% of GDP.

[https://www.themoneyillusion.com/things-that-smart-people-
do...](https://www.themoneyillusion.com/things-that-smart-people-dont-
know/?fbclid=IwAR3j5L_WxachUW1zoEoV50Jg1-_DycRvXeEgdEOgqGnl6AUAVIwsOuVpZWo)

The justification that the Trump administration gives is that if you look at
the subset current account that is trade, then further subset down to goods
only (not services) and then futher subset down to bilateral goods trade with
the USA then indeed China has a big surplus.

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peshooo
I'm not an expert but your article shows the current account, not trade. And
about the trade most of the sources say between 400-500b US$ of trade surplus
per year. Which means the exports are about 22% larger than the imports.

For example here:
[https://wits.worldbank.org/CountryProfile/en/CHN](https://wits.worldbank.org/CountryProfile/en/CHN)

~~~
tedsanders
Thanks for the correction/clarification. Looks like that surplus equates to
~1.7% of GDP.

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b_tterc_p
Say you (as the US) wanted to keep the same level of trade between the US and
China- and the tariffs rose and the yuan fell in such a ratio that this
remains true.

The net outcome is good right? The US gets slightly more tax (larger % of a
smaller number), Chinese economy has to deal with loss of currency value?

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voodooranger
so if there’s a chinese product that i like and it costs 100 yuan before
devaluation, and say 1 dollar == 100 yuan. after devaluation, the product
might cost 150 yuan but now 1 dollar == 150 yuan. so my dollar still buys the
same amount of goods. what am i missing?

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dsalso
Not exactly, it depends on the particular good. The price in yuan could stay
100 or not move as much. In that case your purchasing power has increased

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jermaustin1
So its a great thing for the US if we want to import more stuff?

So its basically saying: I see your 10% Tariff and raise you a 10% discount!

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jeremy_wiebe
But doesn’t that also raise Chinese import costs the same amount? Or is that
where Chinese tariffs in the things they import come into play (like Canadian
canola, etc)?

This feels like a sort of race to the bottom.

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mytailorisrich
From what I understand they haven't devalued anything. They withdrew some
support and let the free market do the rest, which is exactly what the US have
been demanding.

Of course they did that at a time when they knew the result would suit them...

It looks like a message to the US.

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Fjolsvith
Can someone tell me how this affects only the US Dollar and not every other
currency in the world?

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jonknee
It has? EUR/USD is +.75%, AUD/US is -.55%, USD/JPY is +.5%.

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Fjolsvith
Quoting the CNN article:

"Asian markets all fell more than 1.6% Monday, and Hong Kong's Hang Seng
closed down 2.9% as protests continue in the region. In Europe, London's FTSE
100 finished down 2.5%. Germany's DAX and France' Cac 40 closed 1.8% and 2.2%
lower, respectively."

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rdtwo
China just let its currency float more it was more pegged to the dollar
before. Also isn’t this a good thing for US consumers as it cancels out some
of the trade war stupidity

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pkaye
Does that mean their currency was overvalued before?

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addicted
Contrary to what you hear in the US, China has not been trying to devalue
their currency for the past few years. In fact, they’ve been trying to
strengthen it as they’ve been trying to build their domestic market and
present the Remnibi as a dollar alternative.

Admittedly China did indeed artificially weaken their currency to help exports
in the past but this hasn’t been true for quite some time.

~~~
internet_user
Wrong. Yuan has been devalued by close to 10% since this April.

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addicted
Well yeah since the tariff wars started. This article has a good explanation
of what they have been doing.

[https://thefederalist.com/2017/07/03/china-secretly-
manipula...](https://thefederalist.com/2017/07/03/china-secretly-manipulating-
currency-make-yuan-stronger/)

China was keen on strengthening the yuan and were doing that for a couple of
years, but the trade wars have shifted their calculations. The earlier
strengthening gives them some additional leeway.

I think the reason for this drop in the exchanges is because letting the yuan
drop is China’s way of saying they’re in for a fight. A stable yuan was
basically a precondition for trade talks, and this coming right after the last
round means the hope for a resolution seems remote at best.

I still don’t understand how China expects to win the trade war. The US has a
lot more firepower. But I guess leadership incentives are not aligned with the
country and it’s peoples incentives (which is true in the US as well).

~~~
TheBranca18
What is winning the war mean in this case? Because the producers in the US,
such as soy bean farmers, are not winning anything. Consumers and producers
generally don't seem to win trade wars. Especially when tariffs come into
play.

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internet_user
The final prize in this war is who gets to write the rules of the world order,
who gets to become/remain the hegemony. Economics/trade is just one
battleground of many.

Soybeans are so inconsequential to this, in the larger picture of things.
Sure, it sucks for farmers.

Would you rather have rich soybean farmers and a social credit score assigned
to you personally for posting your opinions openly?

~~~
TheBranca18
I feel like you're offering a false choice. The point of the tariffs is to
punish China for a trade deficit and make companies produce things more in the
United States according to this administration. Companies aren't changing
things as a result of these tariffs as far as I can tell. So currently,
consumers and producers are being punished and the administration isn't
getting what it wants either. I just struggle to see the point. Personally I
think it's more of an anti-globalist segment of the administration, as a trade
deficit isn't necessarily a bad thing.

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SubiculumCode
So now is the time to buy buy buy?

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easymovet
Genius, if they are using it to buy gold or bitcoin.

~~~
luma
Are you seriously suggesting that China's angle here is to purchase
economically-significant quantities of Bitcoin?

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FourScore
Anyone who hasn't realized that this is about more than economics is deluding
themselves. This is about a struggle for global supremacy between two nations
with wildly different views about reality.

The CCP does not believe in the rights of the individual and holds an iron
grip on China. It is instituting policies straight out of an Orwellian
dystopia and wants to export its model around the world.

The most powerful nation sets the world agenda, whether we like that or not.
The United States cannot allow China to set the agenda.

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nostromo
Trump puts 10% tariffs on Chinese imports bringing billions into the treasury,
China devalues currency to compensate... net effect: Americans pay the same
price but get billions in free tax money. Thanks, I guess?

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wavefunction
Where's this nutty notion coming from that tariffs yield revenue to the
government?

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pwinnski
Tariffs do result in money to the government... from US importers. My mother,
for example, sells products on Amazon that are manufactured for her in China.
She must now pay tariffs to the government when she has more products made for
her, and has had to stop selling several products as a result, since the
tariffs made them unprofitable.

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musicale
My first reaction was: since when does the Dow have its own currency?

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mars4rp
Great, now US can print more money and get even more stuff out of china for
cheap. US will be more prospect and chines would be employed. win win?

