printThe synophobic narrative in this country has it that somehow China’s currency manipulation is responsible for America’s trade imbalance with that country. In a manner, the pegging of the renminbi to the dollar has enabled America’s grotesque, Fellini-worthy excesses. But the relatively austere Chinese are not responsible for our appetites.
Explains Peter Schiff:
“The peg, they argue, offers China a competitive advantage by making its products cheaper in U.S. markets, thus allowing Chinese firms to gobble up market share and steal jobs from U.S. manufacturers. The thought is that were China to allow its currency to rise, American manufactures would regain their lost edge, and both manufacturing firms and the jobs formerly associated with them would return. In this narrative, the struggle centers on the United States’ diminishing leverage in persuading the Chinese to lay down their unfair weaponry. It’s a sympathetic picture, but it tells the wrong story.
While the peg certainly is responsible for much of the world’s problems, its abandonment would cause severe hardship in the United States. In fact, for the U.S., de-pegging would cause the economic equivalent of cardiac arrest. Our economy is currently on life support provided by an endless flow of debt financing from China. These purchases are the means by which China maintains the relative value of its currency against the dollar. As the dollar comes under even more downward pressure, China’s purchases must increase to keep the renminbi from rising. By maintaining the peg, China enables our politicians and citizens to continue spending more than they have and avoiding the hard choices necessary to restore our long-term economic health.”
Update (Nov. 25): Pat Buchanan too believes the US is owed Chinese “gratitude” for “throwing open its market to Chinese goods”:
had it not been for U.S. magnanimity … Beijing would never have registered the double-digit growth rates it has seen for the past two decades. Some gratitude China is showing.
In other words, Americans had been begged to buy mounds of cheap Chinese goods they had no interest in, and, out of the goodness of their hearts, bless them, they relented, bought Chinese stuff and catapulted China to “double-digit growth rates.”
This line from Pat Buchanan is precious:
“All have come to see Obama as a diffident, dithering, doubting dilettante who can be dissed with impunity.”
The US is the debtaholic and China is opening up more liquor stores! Still – at any given time, swapping cell phones and plasma TV’s for pictures of Ben Franklin seems like a good trade to the
counterfeiter.
Let’s see:
1. The Fed and the US banking cartel creates money from nothing.
2. In order to maintain the fixed exchange rate, the Chinese central bank and banking cartel creates money from nothing.
3. We blame the Chinese.
Mr. Buchanan ought to stick with history and politics. He’s out of his element when it comes to economics.
Oops. Forgot one thing. For all of Buchanan’s brilliance on many topics, his misguidedness on free trade has held him to kindergarten status politically. Protectionism is a pipe dream and irrational economic suicide, and is predicated on a fundamental misunderstanding of economics.