Evil Obama and China's
Yuan: It's About the Midterm Elections
"The
American public has the attitude of 'come on guys, do something!' So they are, including
on the currency front. … In the United States, it's once again becoming
fashionable to behave as if the world hasn't changed in the last 20 years. The result
has been that a friendly Obama has become an angry one."
On the surface, the issue provisionally
referred to as “the U.S.-China currency war” is creeping slowly into one piece
of congressional legislation after another. Most recently, this has come in the
form of a bill against
“countries that manipulate their currencies.” In essence, it's a bill that targets
China. The bill is expected to pass every legislative hurdle this month. At
that point, the U.S. administration will obtain a club for imposing import
tariffs on China to compensate for the impact of the undervalued yuan - although
it may not use it.
Various U.S. administrations
have unsuccessfully struggled for years to get China to allow the yuan to
appreciate. Talks about how everyone is deflating exchange rates aren't new - starting
with the U.S.: under the Obama Administration, the value of the dollar has “fallen”
by about 20 percent - and this policy has been quite deliberate. Since January,
the euro has lost about 17 percent of its value. In this crisis, and excuse me
for saying so, everyone wants their exports to be like China's - cheap and high
quality - and to revive their economies. This is just the same as if the yuan
had appreciated by 20 percent and 17 percent, respectively. Ordinarily, all of
this would be extremely boring. But apart from the superficial issue of “currency
history,” there are two very specific and truly interesting aspects of the situation.
Posted
by WORLDMEETS.US
The first concerns the
conceptual anxiety of the Obama Administration's foreign policy struggles. The
second concerns Chinese notions about its transition to a new economic model.
As for the anxiety: After the
year that just passed, Barack Obama would not have won a Nobel Peace Prize. Because
his administration, like a rubber band, is being pulled toward the foreign
policies of Bill Clinton, but without the moral and financial resources that Clinton
had.
Here is an assessment made by
the Washington Post: Obama spent his first two years restoring America's
image in the world, and now he is returning to the policy of “using American power”;
before there was the peace of the G-20, now we'll once again have the peace of
“the U.S. and it democratic allies.” The promotion of “essential American
interests” is on the upswing, and words like “freedom” and democracy” are increasingly
returning to common use.
And since China has rejected
the idea of “joint control of the world with the U.S.,” America is signaling to
anyone who will listen that they'll be protected from Chinese pressure. Not
much will come of this - neither from the smaller countries in Asia or even
Japan, who don't seek an overt "containment" of China - their most
important trading partner. But the American public has the attitude of “come on
guys, do something!” So they are, including on the currency front.
This is due to the November Congressional
elections, but not entirely: voters always want to return to an era that's one
step behind current reality. Moreover, U.S. voters are tired of defeatism. Intellectuals
have gone overboard with jokes like: “the dollar is pegged to the yuan.” Books
like Michael Mandelbaum's The
Frugal Superpower: America's Global Leadership in a Cash-Strapped Era have
become extremely popular. In the United States, it's once again becoming
fashionable to behave as if the world hasn't changed in the last 20 years.
The result has been that a friendly
Obama has become an angry one. The American Gorbachev now wants to become an
American Chernenko.
In other words, he wants to take a respite from change. That's not necessarily
a bad thing. Back in the 1990s, Russia greatly benefited from tense U.S.-China
relations and was slightly fearful of U.S.-China adoration, which was evident
under Bush. But now, things have again turned around: Obama is further strengthening
Russian-Chinese friendship, and the better our relations with China, the better
things will be with the E.U.
The Europeans, for example, are
very interested in the details of the Russian-Chinese oil and gas agreements,
which were signed after President Medvedev's visit.
But beyond this, another plot
is evolving. Once upon a time, America was to Japan as today it is to China; in
the U.S. [during the 1980s], it was customary to despise the Japanese for essentially
the same thing: economic growth based on successful exports and an undervalued
yen, as well as the purchase of U.S. companies by Japanese. The U.S.
administration pressured Japan to allow the yen to appreciate. And it finally
succeeded - in 1985, the value of the yen doubled and Japan was crushed (the
famous collapse of its “bubble economy”). It has yet to recover.
Posted
by WORLDMEETS.US
The Chinese are certainly
well-aware of this - just as they are of the fact that they, themselves, must
soon change their economic model (this was discussed in Beijing at the just-concluded
plenum of the ruling Communist Party). Because the Chinese economy earns very
little in its role as a “manufacturer to the world.” Most of the money is earned
by the foreign creators of intellectual products that are only assembled in
China. Because this is the case, Beijing is adopting a path toward innovation (and
closing about 2,000 steel and cement plants). In other words, Moscow and
Beijing have fairly similar plans and ideas.
Such a turn of events, however,
means higher wages and a high rate for the yuan. The U.S. and Europe are
encouraging China to do this in the hope that Chinese consumers will become avid
importers and extricate the U.S. and Europe from the economic crisis. Although
some may also be hoping that if China is given a strong-enough shove in the
direction of yuan appreciation, it will share the fate of Japan.
