Opinion: US should not label China a manipulator
Obama administration should avoid labelling China as a manipulator. It is something that is being decided upon.
Contrary to some who think that China is not manipulating its currency, I am of the opinion that it is clearly manipulating its currency. However, it isn't a one-way street, and China actually pays a price for this. It should also be noted that America's loss in manufacturing has little to do with the currency manipulation. America's peak in manufacturing, believe it or not, was somewhere in the 1940's and it has been declining ever since (I'm referring to manufacturing as a share of world production; in terms of raw production, USA probably has higher manufactured output now than at any time.) Clearly, American manufacturing started going down before China even showed up on the scene.
In any case, speaking as a largely free-market guy (but not as free market oriented as libertarians or most on the right,) the currency peg has to go. It distorts everything and messes things up for everyone, including the manipulating party. I mean, just look at Japan. The artifically low Yen has resulted in excessive export-oriented industry development. Japan is facing a brutal collapse in their industry and the Yen is still likely undervalued (although it will probably be forced down due to central bank intervention.) If Japan hadn't manipulated its currency, it's possible that they might have a stronger local, consumption-oriented, economy.
To those who are surprised by Treasury secretary Geithner's hard line against China last week, one needs to keep in mind that the Obama administration will take a harder line against China due to their ideological stance (left-leaning parties are more protectionist.) I think it is an inappropriate time to be flexing the weapons of trade. I strongly urge the US government, not that I have any impact on them whatsoever, to avoid labelling China as a manipulator.
If Obama wants to do it, he should do so if and only if China de-values its currency. Then, in such a case, the world opinion will be on USA's side and some global consensus can be reached on China. Otherwise, Obama is going to end up lost and alone like George Bush was with his Iraqi war (unless your idea of friends is, of course, the 'coalation of the willing'.)
Contrary to some who think that China is not manipulating its currency, I am of the opinion that it is clearly manipulating its currency. However, it isn't a one-way street, and China actually pays a price for this. It should also be noted that America's loss in manufacturing has little to do with the currency manipulation. America's peak in manufacturing, believe it or not, was somewhere in the 1940's and it has been declining ever since (I'm referring to manufacturing as a share of world production; in terms of raw production, USA probably has higher manufactured output now than at any time.) Clearly, American manufacturing started going down before China even showed up on the scene.
In any case, speaking as a largely free-market guy (but not as free market oriented as libertarians or most on the right,) the currency peg has to go. It distorts everything and messes things up for everyone, including the manipulating party. I mean, just look at Japan. The artifically low Yen has resulted in excessive export-oriented industry development. Japan is facing a brutal collapse in their industry and the Yen is still likely undervalued (although it will probably be forced down due to central bank intervention.) If Japan hadn't manipulated its currency, it's possible that they might have a stronger local, consumption-oriented, economy.
To those who are surprised by Treasury secretary Geithner's hard line against China last week, one needs to keep in mind that the Obama administration will take a harder line against China due to their ideological stance (left-leaning parties are more protectionist.) I think it is an inappropriate time to be flexing the weapons of trade. I strongly urge the US government, not that I have any impact on them whatsoever, to avoid labelling China as a manipulator.
If Obama wants to do it, he should do so if and only if China de-values its currency. Then, in such a case, the world opinion will be on USA's side and some global consensus can be reached on China. Otherwise, Obama is going to end up lost and alone like George Bush was with his Iraqi war (unless your idea of friends is, of course, the 'coalation of the willing'.)
Obama / the Dem's (we won prgram so in your face Republicans) so far
ReplyDelete1 - China sabre rattling (their largest creditor
2 - attempt to shut down Canadian (or non-US) steel imports
3 - Apology letter to Iran
And why is anyone buying US treasuries?
Great start... hey isn't Obama on cnbc again.. gee I can't wait.