China Fiddles with the Yuan while the US Dollar Burns

China, yuan, US dollarIt might seem to long time readers that we have something of a Chinese fetish, what with all the articles devoted to goings on in that corner of the world. The truth is, with the Soviet Union gone kaput and the Japanese economy not clicking on all cylinders, China becomes the primary competitor to the US on the world stage. Dare we call it a superpower? Well, if it walks like a duck and talks like a duck…draw your own conclusions. The truth is we cannot ignore either the Chinese economy or military power. They are a player and we’re going to have to figure out how to deal with them.

But China doesn’t even pretend to want to play nice with us and therein lies the rub. Essentially the country is a third world dictatorship that got nukes and birthed several billion people. While journalists love to talk of China “opening” to the rest of the world, don’t kid yourself, it’s still closed as far as the things that matter go. Communist leaders are worried about the incremental degradation of their power as Western decadent businesses and morals creep in, and they should be. When the average peasant can walk into a McDonald’s and buy a Chicken McNugget, how the heck do you expect them to ever be happy with fish and rice again?

Exactly how is it that the Chinese are kicking us all around the ring when it comes to economics? The heart of the matter is that they keep their currency artificially low against the US dollar and we really really really wish they wouldn’t because it tilts the playing field in their direction and offers an unfair trade advantage.

Are the Chinese manipulating their currency in order to attract American companies? Of course! Are they also keeping the yuan’s value low in order to saturate the world with cheap Chinese goods? Absolutely! So what are the G-20 nations going to do about it? Well, they will issue watered-down, weakly-worded statements which Chairman Mao’s minions are surely giggling at behind closed doors, all the while proclaiming they are doing all they can to help the global scene.

So the question becomes how do you deal with an overgrown baby? Spank it, of course.

The American Monetary Association Team

American Monetary Association

Flickr / Jaye

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