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.
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.
