Sunday, 06 Feb 2011
Dow Jones reported that the US Treasury recently declined to name China or any other country as a manipulator of its currency in the Treasury much awaited report on foreign exchange policies.
The Treasury recognized there had been a move toward greater flexibility of the Chinese yuan. "Treasury's view however is that progress thus far is insufficient and that more rapid progress is needed."
Lawmakers, hearing from US manufacturers complaining their products are being outsold by Chinese goods made at a cheaper cost wanted Treasury to name Beijing a manipulator and are threatening to pass punitive legislation. The Obama administration held up publishing the report until after the state visit by President Mr Hu Jintao in January.
The report warns that Beijing risks fueling already high inflation and creating asset bubbles in its economy.(sourced:DowJones)
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China’s Innovative Way of Skinning the United States!
Insanity: doing the same thing over and over again and expecting different results. – Albert Einstein
As long as the United States continues to allow China to manipulate the U.S. Dollar and therefore manipulate our trade with ALL our trading partners:
- our balance of trade with ALL our trading partners will be worse than it would otherwise be.
- free trade agreements will work to our disadvantage and we should halt entering into new ones.
Mark Twain is credited with an early use of the cliché "more than one way to skin a cat" in A Connecticut Yankee in King Arthur’s Court, as follows: “she was wise, subtle, and knew more than one way to skin a cat, that is, more than one way to get what she wanted”. Thefreedictionary.com defines beggar-thy-neighbor as: an international trade policy of competitive devaluations and increased protective barriers that one country institutes to gain at the expense of its trading partners. Under the guise of fostering ‘indigenous innovation’, the Chinese government has creatively used a non-conventional, subtle version of beggar-thy-neighbor. Its version doesn’t entail the competitive devaluation of its own currency, which would enhance China’s exports and inhibits its trading partners’ exports to China. China’s version perpetrates an over-valuation of the currencies of one or more of its trading partners. This negatively affects all the trade of the pegged trading partner(s), not just trade with China. During the recent period China pegged its currency to the U.S. Dollar, its version of beggar-thy-neighbor was 8 times as damaging to the U.S. economy as what the media refers to as “China keeping it currency undervalued”.
In November 2003, Warren Buffett in his Fortune, Squanderville versus Thriftville article recommended that America adopt a balanced trade model. The fact that advice advocating balance and sustainability, from a sage the caliber of Warren Buffett, could be virtually ignored for over seven years is unfathomable. Until action is taken on Buffett’s or a similar balanced trade model, America will continue to squander time, treasure and talent in pursuit of an illusionary recovery.
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