Those in Washington who protect the protectionism of China seem to always trumpet any Chinese announcement that the country will possibly allow it currency to appreciate. How they can claim to be free traders while supporting that government’s currency pegging is beyond me.
We now know that China’s currency was falling against the dollar during May.
The Obama Administration refuses to act, and John Boehner and Dave Camp continue to block a House vote that would help solve the problem.
The Treasury Department continues to “urge” China to let its currency values float with out the massive government intervention required to peg their renmimbi to the dollar. But Treasury implausibly refuses to label China a currency manipulator:
The Treasury Department issued a report last Friday criticizing China’s management of its exchange rate and calling for the first time for China to release data on the scale of its foreign exchange market interventions. But the report stopped short of labeling China a currency manipulator, a label that Chinese leaders have indicated they would bitterly resent and oppose.
The scale of this problem is massive. China’s currency undervaluation is 25-40%. That is a 25-40% price advantage when selling to the U.S. and competing with domestic firms here… courtesy of the Communist Party of China. Boehner, Cantor, Camp and the Administration are coddling and supporting this currency price manipulation as the U.S. economy slides back towards recession.
In China, politics has primacy over economics. The ultra-nationalists, who are well represented within the Party’s top echelons, are angry with the US over, inter alia: Hillary Clinton’s pivot toward Asia; our role in promoting Aung San Suu Kyi’s freedom and the beginning of political change in Burma, hitherto a Chinese vassal state; our role in the release of Chen Guangcheng; our “interference” in the South China Sea territorial waters dispute; and the discovery of a CIA mole in China’s State Security Ministry. All this occurs at a time when the Bo Xilai scandal(s) have exposed deep divisions in the Party leadership, adding to the difficulty of a smooth transition. Certainly, one factor in China’s recent currency aggression lies in its own internal political turmoil. As China has made clear that it is willing to impose higher costs on its ow populace and to risk the stability of the global economy, the US should wise up and do what it can to offset the currency subsidy. Waiting for China to act reasonably is like waiting for Godot.
Way to go Mr. Stumo. More than any other factor, currency manipulation has caused the devastation of the American economy. First with Japan and now China, the manipulations of currency exchange have been wiping out America’s industrial sector one segment at a time for 60 years. For 30 years China’s State Planning Committee has been sparring with America’s State, Commerce and Treasury Departments. The Committee is wise to count on the slow to react characteristics of democracy. It offers reversals (feints) whenever cornered. And both sides, the Committee and the Departments, count on the greed of capitalism to push rules regarding currency exchange manipulations back down the list of priorities.
However, America’s silent majority (the jobless) are coming to realize that those who broker off-shoring are merely serving the interests of State, Commerce and Treasury in a struggle to sustain America’s global leadership position. America’s silent majority is well aware that its standard of living is fading and becoming aware that imported goods have a price advantage bolstered exchange rate advantages, not wage rate advantages. The silent majority is also beginning to look beyond the top 1% who broker the export of jobs. They are just pawns used by the global exchange rate manipulators. It is America’s State, Commerce and Treasury Departments that are being out maneuvered by China’s State Planning Committee. Our Departments need to step up their intellectual skills and stop drilling holes in the bottom of what keeps America’s standard of living afloat.
Yes, the Midwest is waking up the reality that the portion of the Bretton Woods Agreement that gave a 4 to 1 price advantage to the Japanese and German industrial sectors was written without an exit clause and that for 45 years one segment after another of America’s industrial sector collapsed. Legislation imposed the disadvantage. We really can’t blame a State Planning Committee that took notes from across the China Sea as Japan’s standard of living rose quickly from the ashes of WWII.
Keep writing Mr. Stumo