Mr. Robert Pozen has eloquently written of Beijing’s autocrats maintaining unfair trade practices by artificially pegging their dollar to ours. In so doing, our Federal Reserve is outsourcing its expertise to the Chinese along with inflation and the creation of an asset housing bubble along the Chinese coastline! All are reasonable threats indeed, but as I written about in this blog before, the American ‘specialists’ that drive so much policy within Treasury and Federal Reserve are currently out of ammunition regarding our own economy, to effectively parry the growth of China, our ineffective specialist’s are moaning like teenagers instead of commanding and teaching the American Republic the required political capital needed to fix this Keynesian mess. How else to put it, we need more Hayek and less Keynes. The Chinese are acting like a Superpower is supposed to act. WE’RE WHINING! Currency manipulation is not the long term problem with China. The political ambitions of its Communist autocrats IS! The impending racial civil war that is brewing throughout China IS THE ISSUE. For those that continue to read my posts chronicled in the category of ‘China’ understand that absent the consent of its people and the rule of law, China is violently fracturing internally. But the economic specialists in Washington never seem to bother to study the social, political impact of their policies.
The call for a reduction in U.S. trade deficit with China relative to Yuan appreciation is worthy of the bean counters, the specialist mandarins that occupy perches throughout our government. WE NEED A SYNOPTIC APPROACH TO FIX OUR OWN CURRENCY PROBLEMS. Yes, this is intrinsically related to the deficit. But whining that competitors are beating you is not a political strategy. What’s required here is an informed Congress, one that understands that the vast majority of our macroeconomic problems are not going to be fixed by competitors.
The single most significant impact on the Chinese economy is not the value of the Yuan, but cheap labor. With rising social, economic disparities coinciding with an absence of the rule of law and political legitimacy the real domestic problems that Chinese Machiavellian autocrats must struggle are internal, social and MORAL.
The largest macroeconomic challenge facing China are rising wages, most especially in a nation that has no social security and no health care. This means that expectations of rising Chinese consumption is baseless. U.S. Treasury Secretary drove such false ideas of consumption simply because of his specialist mentality, one that works in isolation!
There are three points of interest, all three are grounded in a holistically informed mentality, a synoptic approach is most vehemently opposed by specialists, nevertheless, Chinese exports are only assembled in China, a Yuan appreciation will make factory owners move south into poorer regions outside of the mainland, third, the volume of U.S. exports is determined by the competitive relation between the Euro and Dollar.
Forget the specialists, they always operate in isolation!