Currency Manipulator China - An Irrational Obsession Of Mitt Romney

Candidate With Business Acumen, But A Poor Economist

No doubt, Mitt Romney is an accomplished business man, someone the USA urgently needs to end four years of agonizing und unnecessary Great Recession. However, his understanding of economics seems to be poor as can be shown by his insistence of China being a currency manipulator.

I do not understand which voters Mitt Romney is trying to win with this campaign motto, but if he is smart he would drop it instantly. How much is to be gained with such a slogan versus how much is destroyed by it?

Romney’s Trade Campaign Platform On China

Under “Trade Issues” we read “Confronting China. China presents a broad set of problems that cry out urgently for solutions. …
•Designate China a currency manipulator and impose countervailing duties …” (Emphasis added).

This is certainly overly aggressive language, more suited perhaps for the national defense issue page.

Currency Manipulation & Countervailing Duties

Both terms are taken from the tool box of a mercantilist or protectionist. Both have been tried in the past with considerable negative consequences.

The US thanks to its Smoot-Hawley Tariff Act of 1930, preceded by the similar Fordney-McCumber Tariff Act of 1922, has greatly contributed to the severity of the Great Depression.

Currency manipulation is in the eye of the beholder. Is it currency manipulation that the US keeps short term interest rates for years at artificially and recklessly low rates?

A currency is a two edged sword. It is a measure of value of money of one country versus the value of money in other countries. If one country decides to control the value of its currency to be cheap versus the rest of the world so be it. As most relationships in economics it has benefits, but also disadvantages. A devalued currency promotes exports, but it makes imports more expensive and so on. Thus, China, which is highly dependent on imports of resources and technology, pays a price for devaluing its currency.

The US Needs A Strong Economic Recovery Above Anything Else

The World, including China, is waiting for that to happen!

People, who sit in a glass house should not be throwing stones. That is counterproductive. Meaning, China has acquired a trillion and more dollars in US government bonds, thus helping the federal government to finance its extraordinary debt binge of the past decade. At present, a highly indebted country with a weak economy like the US ought to be careful what it wishes for.