By Michele Scrimenti
“For so many years we have watched China’s trade deficit grow and grow and grow, and today we’re finally doing something about it. We’re recognizing that currency manipulation is a way of subsidizing exports.” That’s what Nancy Pelosi said in September. September 2010, that is.
One year later, almost to the day, this is what Sen. Chuck Schumer is saying, ”No longer will Uncle Sam be Uncle sap to China.” Sound familiar? Schumer first started his tirade against China’s currency manipulation declaring, “[China] does not play by the rules.” SIX years ago.
Back then he demanded China raise its currency by 25%. Since then it’s risen by 30% and he’s still bitching.
Someone here is obviously not playing by the rules, and I think it’s you senator. Since 2005, multiple bills have been proposed to punish China for manipulating its currency, and they’ve all come to naught.
This year’s bill, like all the previous ones, allows American companies to file complaints with the US government against companies they believe are benefiting unfairly from the devalued currency. And like all the previous ones, this year’s bill has no chance of actually being enforced, even if it does pass the senate.
Why? Because even congresspeople aren’t that dumb. They know this is political posturing. They know this placates unions and blue collar workers whose jobs have gone to China (Some estimates put that number at 2.8 million over the last decade). And they know this would piss off China and hurt the American consumer so much, that they’d never let it become law.
Also, this bill smacks of hypocrisy.
America, the currency manipulator
First, let’s be clear: China is indeed manipulating its currency. The yuan is pegged to the dollar and is only partially traded on the open market. But any country with a central bank also engages in currency manipulation.
Look at Fed Chair Ben Bernanke, who said Tuesday, “Right now, our concern is that the Chinese currency policy is blocking what might be a more normal recovery process in the global economy.” We’ll ignore the merits of that statement for the moment and examine Bernanke’s role in US currency manipulation: QE1, 2, & 3.
Quantitative easing (youtube is behind GFW) is essentially printing money to buy treasury bonds from investment banks. This move, as many economists and stock brokers predicted, diverted investment from the dollar into commodities, thereby devaluing the US currency. Bernanke, in an indirect way, is engaging in currency manipulation with every round of QE.
The merits and impact of QE are fodder for another post, but it’s pretty obvious that, while not as blatant, frequent or systematic, other countries including the US manipulate their currencies. No one yells at them, of course, because they’re not a scary communist country poised to take over the world.
Now a lot of bloggers and op-ed writers (here, here, here, here and here, yes there are more, but they all say the same thing. Forbes.com alone had three blog posts on this saying the same thing, for the love of God!) seem to have their panties in a bunch over all these shenanigans.
These people have been around the block. Many of them are China experts, even more are political experts. Yet they’re all up in arms over this abortive piece of legislation.
I’d wonder why, but I think it’s fairly obvious. People hear a report in the news and their knee jerk reaction suddenly becomes a full-fledged essay. And within hours of the bill being announced, blogs have spread the fear of a trade war.
My initial reaction was similar: these senators are f#$@ing crazy! But then when I saw that not only was the legislation practically identical to bills proposed for over half a decade, but the quotes from the congresspeople were the same too.
At that point, I realized what more bloggers should have noticed before hitting that all too irresistible “publish” button–it’s all politics as usual.