Skip to comments.CHINA FLOATS, AMERICA SINKS
Posted on 07/22/2005 9:00:48 PM PDT by hedgetrimmer
In case you haven't the least idea what the heck it means for China to "float" its currency, let me put it in the language we economists use: China's float don't mean squat. Yet our President, a guy whose marks in Economics 101 are too embarrassing to publish here, ran out to hail the fact that buying Chinese money will now cost more dollars.
The White House line to the media, swallowed whole, is that by making Chinese money (yuan) more expensive to buy with dollars, Americans will buy fewer computers and toys from China--and US employment will rise.
This will happen when we find Saddam's Weapons of Mass Destruction.
Economics Lesson #1: You can't change the value of goods by changing the value of the currency on the price tag. As my comrade Art Laffer wrote me, "If cheap currency makes your products more competitive, all automobiles would be made in Russia." Driven a Lada lately?
Economics Lesson #2: Don't take economics lessons from George Bush. Or Milton Friedman. Or Thomas Friedman. What that means, class, is don't believe the big, hot pile of hype that China's zooming economy is the result of that Red nation's adopting free market economic policies.
If China is now a capitalist free-market state, then I'm Mariah Carey. China's economy has soared because it stubbornly refused the Free--and Friedman-Market mumbo-jumbo that government should stop controlling, owning and regulating the industry.
China's announcement that it would raise the cost of the yuan covered over a more important notice: China would bar foreign control of its steel sector. China's leaders have built a powerhouse steel industry larger than ours by directing the funding, output, location and ownership of all factories. And rather than "freeing" the industry through opening their borders to foreign competition, the Chinese, for steel and every other product, have shut their borders tight to foreigners except as it suits Chinas own industries.
China won't join NAFTA or CAFTA or any of those free-trade clubs. In China, Chinese industry comes first. And it's still, Mssrs. Friedman, the Peoples republic. Those Wal-Mart fashion designs called, chillingly, "New Order," are made in factories owned by the PLA, the Chinese Peoples' Liberation Army.
China's government, by rejecting free-market fundamentalism, can easily conquer American markets, where protection is now deemed passé. And that is why the yuan has kicked the dollar's butt.
In an interview just before he won the Nobel Prize in economics, Joe Stiglitz explained to me that China's huge financial surge--a stunning 9.5% jump in GDP this year--began with the government's funding and nurturing rural cooperatives, fledgling agricultural and industry protected behind high, high trade barriers.
It is true that China's growth got a boost from ending the bloodsoaked self-flagellating madness of Mao's Cultural Revolution. And China, when it chooses, makes use of markets and market pricing to distribute resources. The truth is, Chinese markets are as free as my kids: they can do whatever they want unless I say they can't.
Yes, China is adopting elements of "capitalism." And that's the ugly part: real estate speculation in Shanghai making millionaires of Communist party boss relatives and bank shenanigans worthy of a Neil Bush.
It is not the Guangdong skyscrapers and speculative bubble which allows China to sell us $162 billion more goods a year than we sell them. It is that China's government, by rejecting free-market fundamentalism, can easily conquer American markets, where protection is now deemed passé.
And that is why the yuan has kicked the dollar's butt.
Americas only response is to have Alan Greenspan push up real interest rates so we can buy back our own dollars the Chinese won in the export game. The domestic result: US wages drifting down to Mexican maquiladora levels.
Am I praising China? Forget about it. This is one evil dictatorship which jails union organizers and beats, shackles and tortures those who don't kowtow to the wishes of Chairman Rob--Wal-Mart chief Robson Walton. (Funny how Mr. Bush never mentions the D-word, Democracy, to our Chinese suppliers.)
Free trade and China have no place in the same sentence, unless you are talking about what China DOESN'T have.
Fair enough. Just to give us an idea, how do they compare to yours?
This article was posted for discussion purposes. The opinion of the author is not necessarily my own.
Where I stopped reading this biased crap.
Although I do have a healthy disdain for communism.
So Mr. Palast your smarter than all of the Presidents economic advisers I suppose...
Thought you were a troll until I checked your membership date.... I don't care, I still think you are a troll.
WMT trading at $49.54.
China is currently our third largest creditor. This is a fact that many on both sides of the free trade issue often fail to mention. That is to say, it's always a good policy not to through a brick through the window of the bank that holds you mortgage.
One quick background check on Mr. Palast & the Baltimore Chronicle was all I needed....lovely friends he keeps...Asner, Baldwin, ....nuf said....
You should have stated in your initial comments what you agreed with and what you didn't. I once posted a sarcastic comment without the word sarcasm and I was almost kicked off.
My comment was directed towards the author.
So this dumb-donkey who wrote this article thinks it is far better for the government to control the economy? A liitle fascist or communist huh? I will bet you that if they could, the Chinese workers would lovre to have some American workers rights. Oh yes the mighty Chinese sweatshops make the ones here in the US look like pre-school. What a load of BS!
Such a well spoken, refined economist, who wouldn't listen to what he has to say. This is sounds the kind of guy you can really trust.
Ya, I know they are threatening Taiwan, but they know if we go to war, both our and the Chinese economies will collapse.
I did say that China and "free trade" have no place in the same sentence. China is far from a market economy, and its best for America, IMO, to keep that in mind when we are making policy and trade agreements with China.