Interview: University of Maryland---Byrne, Patrick---Chief Executive Officer
>> earlier the u.s. treasury released a report on whether china’s government manipulated the value of its currency. joining me from washington with his take on the report and why he believes the administration should label china a currency manipulator is peter morici from the university of maryland. welcome to the program.
>> nice to be here.
>> i gather from the notes you thought the administration, as i indicated, should have labeled china a currency manipulator, but tell me what that exactly means. don’t every country control its money supply, which could be a form of manipulation? don’t lots of countries buy and sell their own currency to affect foreign exchange?
>> we all have to issue new money each year, but china goes onto foreign exchange markets and sells its currency to keep its value low. last year china purchased about 12% of its g.d.p. in u.s. government securities. it spent about $205 billion on government securities to keep its currency low. this constituted 33% on its subs sydney from exports. this is major manipulation. it’s been going on with increasing force year after year for the last 10 years and is causing major distortions in global trading. as the report says it does. however what the report falls short of doing is calling it what it is, currency manipulation.
>> i wanted to show a six-month chart of how china’s yuan has performed compared with the dollar along with other currencies like the euro, japanese yen and british pound. what it shows is over six months, china is the only-on it chinese yuan is the only to have appreciated against the dollar, suggesting some of us to say maybe we should consider a trade war against japan or england or europe instead of china. those currencies have fallen.
>> it’s perfectly reasonable that their currency fall at value in times and rise in value at times. if you drew a chart the last 10 years, you find the val uste chinese currency has not moved much at all, where other currencies move up and move down. china has a rapidly growing current account surplus, about 6% of its g.d.p. in order to sustain this it buy as lot of foreign currencies which means it gets the exports and no one else does.
>> are you saying manipulation of the currency by money supply is ok and foreign exchange trade is not ok? what if they dumped a lot of yuan on the market and increased money supply than sted of this trading, would that be better?
>> no what i am advocatesing they do is let the market determine the price of their currency. as the europeans do, as we do.
>> republican senator lindsey graham and democratic senator chuck schumer are considering a bill to put a tariff on chinese imports. i want to know from your perspective how much u.s. inflation would that trigger? are you for that?
>> i don’t think it would trigger a great deal of inflation. if you go back to the 1980’s we had run-ups in the currency, rundowns in the currency. currency values can move quite a bit without causing domestic inflation. if you look at the oil economy because they sell their oil in terms of dollars, fluctuations in the price of oil have the aquiffle lent effect. we had a dramatic increase in oil prices in the last year. now they have fallen back a bit. we haven’t had much change in u.s. inflation. other market adjustments will absorb this. i don’t think we have anything to fear by letting markets determine the price of the chinese currency. we let markets determine the price of so many other things. are you advocating or supporting the notion we shouldn’t have markets determine the price of currency? government should set them and manipulate their money supply to accomplish that end?
>> what you acknowledged is all companies manipulate their supply. >> you said that and tried to paint me into a corner. let me be clear with you, if you would let me, please. all countries have to expand their money supply each year to accommodate their needs of trade because their economies grow inside so you need more money to accommodate that. that is not manipulating currency. if you are advocating governments don’t print money, then --
>> that’s ok. i am just asking questions. the u.s. has been claim for years a weak yuan presents risks to the chinese exi, but the chinese don’t seem to be buying into that idea. if you were a chinese policy maker, would you believe―why don’t they see the risk to their economy we claim exist wts a weak yuan?
>> you are asking me to support or justify another person’s words, which i don’t care to do. the chinese leaders are motivated by the desire to create lots of exports and lots of employment in coastal areas to deal with unemployment on the farm, so to speak. by maintaining an undervalued currency, they can accomplish this objective. also if they unhinge the currency and let it find its market value, this will cause adjustments within the chinese economy and will allow it to be more market driven and cause the communist party to have less control. one thing to remember is that paramount in the mind of chinese leaders is maintaining control.
>> we’re almost out of town tfment i appreciate the spirited debate, our thanks to peter morici of the university of maryland. when we come back after the quick commercial break, the third largest drug maker has plans to cut 7,000 jobs. we’re talking merck.
点击播报
Listen Market briefing --- Bob (fast)
Semiannual foreign exchange report -- Peter (slow)
NYSE --- Deb (fast)
Nasdaq --- Robert (slow)
Home sales --- Suzanne (slow)
report whether china’s government manipulates the value of its currency. we are standing by for the treasury international affairs undersecretary tim adams to hold a news briefing on the semiannual foreign exchange report. headlines are crossing. let’s go right to the treasury department where peter cook is standing by.
>> thank you, bob bowdon. i have the report in my hand. the report concludes for the 11th year in a row, no u.s. major trading partner has been designated as a currency manipulator and that includes china that. will disappoint some members of congress and u.s. manufacturing community who say china is clearly manipulating its currency to the detriment of u.s. workers and businesses. part of this report cites progress china made with regard to its currency. specifically the decision to drop the almost decade-long peg to the u.s. dollar saying that was an initial step for china. u.s. will be watching carefully to see how much further china is willing to go with regard toiths currency. i want to read from a statement accompanying the report from treasury secretary john snow. he says kine’s adoption of a new exchange rate mechanism was an important step. while china has taken additional steps to further open capital markets . its progress is limited and so far slow to be sufficient. the system is highly restricted. distortion and risks still persists. further more, the exchange rate ridgedity continues to dampen flexibility in the entire region. it is imperative china moves toward greater flexibility as quickly as possible. the treasury will focus on china’s progress implementing the exchange rate flexibility its leaders repeatedly introduced. we expect much more here at the treasury department news conference and to take question abouts this latest assessment from the u.s. treasure rifment
>> thank you, peter cook. just quickly to get reaction in currencies. checking our currencies to show you where they are moving in response to this report on the china’s currency. this is an intraday moving cart right now of the chinese yuan. what it shows is this currency has not moved much in six months. 8.0825 yuan to the dollar. if you look at a six-month chart, this is the day in july when they had the revaluation. we had some―by the way, as this chart moves lower, that is the yuan gaining value against the dollar. there has been some appreciation of the yuan against the dollar. not significant compared to that reval that took place in july. we’ll get more reaction from peter maricci at the university of maryland later in this half-hour of the program. the initial euphoria over the holiday shopping season evaporated, knock the stock market from a four-year high. dow down over .3% on the day. the s&p 500 down almost .9%. you see in particular the intraday chart where almost at the lows of the session on the s&p. similar with the nasdaq. pretty much a movement downward throughout the session. that is the worst of the three indexes, finishing down more than 1% on the day. lots of disappointment in the market today from lackluster retail sales over the weekend to also news from merck. deborah kostroun joins me from the floor of the new york stock exchange.
>> thank you, bob. what we’ve been seeing over the past 1 1/2 months is a drop in gasoline prices. many people, as we were getting ready for this holiday shopping weekend, people thought we might see better retail sales. while we did see some scounlters performing well, it was disappointing when you get to some of the mall-based traffic. that led to a little bit of inflation here in the market . remember, we’ve been going very strong for the past five weeks. also it was merck, the biggest drag in the dow jones industrial average on the day. this was―they lost about 5% on the day. largest loss since august. revenue will be fall buying $2 billion. their patent expires next year on zocor, their best-selling drug. merck going to be eliminating 7,000 jobs, closing five plants. you saw the drug stocks all lower in today’s session. also the first of four federal trials concerning merck’s vioxx painkiller. that begins in houston. also as we are talking about the retailers, remember the retailers have been some of the best performers over the past five weeks with this rally has been going on. however, we saw retail stocks some of the worst performers in today’s session. not only did you see some of the discount retailers like wal-mart, they had some good traffic, but it was the mall-based traffic where we saw a little bit of disappointment. a little bit of concern that some of the luxury retailers may not live up to their expectations. that always leads onto earnings as well. a little bit of disappointment there. bigger than expected drop in home sales that led to home builders lower. now we’ll check in with robert gray at the nasdaq.
>> nasdaq falling an even 1% on the session. it was below average volume. decliners outpacing advancers by a better than 2-1 margin. nasdaq has seen six consecutive week of advances. falling lower in this monday session. retailers leading the way lower here on nasdaq as well. take a look. you see american eagle outfitters and specially retailers falling. particularly large amount today. a.e. down 4.1%. we saw the online retailers, etailers and ebay falling today. ebay down 3% today. ebay had risen earlier. cibc saying they see their earnings trading above the firm trend forecast, but eventually falling lower with other names. google shares down 1.2% in today’s session. yahoo falling 2.5% today. yahoo shares downgraded to hold on valuation concerns. we see those shares falling today. apple computer rising to another record in today’s session. the shares closing up .5%. we are above $70 per share in the early trading today. piper jaffray raising their target for emup to $79 per share. you see that’s just about $9 and change where they stand at the moment. also reports electronics leading the way on some of the sales over the weekend. ipod one of the hot commodities with the christmas and holiday wish list. intel shares of smith barney out with a note expecting intel to raise the forecast to the higher end of their previous outlook in their mid quarter update coming on december 8. that helped intel shares in today’s session. one of the big decliners today in the biotech group. we saw american pharmaceutical partners shares plunging some 17.5% today. they make generic injectible medicine. the company is agreing to acquire its largest shareholder. the price tag $4.1 billion that. deal should close the first half of next year. the company says the combined company will be called abraxis bioscience. now back to bob bowdon.
>> thank you, robert gray. sales of previously-owned homes fell more than expected in october. suzanne o’halloran joins me with more on the numbers and what they may mean for tomorrow’s report.
>> october may have been the slowest month since march for sales of previously-owned homes. economists say it’s still the seventh highest reading ever. existing home sales fell nearly 3% to an annual rate of seven million as mortgage rates and prices rose. even so, economist scott anderson at wells fargo says the numbers are still pretty decent.
>> some moderation in the housing market aa peers inevitable. it’s important to note existing home sales are down in the months of october, they are still above where they were last year. they’ve been hot since april.
>> economist ian shepardson agrees and points out prices remain strong. median price of an existing home rose more than 16% to $218,000. that’s the biggest jump since july 1979. although prices are rising, so are supplies. there are now 14% more homes for sale than a year ago. that could be problemic if the market continues to slow. more data on housing tomorrow when sales of new homes are expected to show a slight decline to a 1.2 million annual rate. rising mortgage rates may mean the entire market is softening after a five-year boom. average rate object a 30-year mortgage was 6.28% last week, up more than .5% from a year ago. economists at mortgage company freddie mac says housing may be slowing, but it is still growing.
>> let me be very careful here. when i say it’s peaked, it’s the growth rate in the housing market peaked. we will continue to see growth in housing strong home sales throughout next year and probably through 2007. house price increases will continue to be very, very strong, but strong being in the 7% 208% range not the 10% to 12% range.
>> back to you.
>> thank you for that, suzanne. coming up after the commercial break, we’ll get reaction to the currency manipulation report with university of maryland’s peter morici.
