I had planned a follow up to my Myopic Squirrel post next, but I just can't sit around and eat Kimche today. So let me break with tradition and write a short piece so I can get on with my day. Most of the headlines right now focus on China as a currency manipulator and are encouraging our enlightened government to finally do something about China. But guess what -- all this protectionist mumbo jumbo is exactly like the stimulus policy, the government bailouts and the toothless financial reform -- they amount to a finger in a dike. Worse than that -- they amount to a finger in the famous Dutch dike as a tsunami races to Den Haag.
Yes, yes, yes -- CHINA IS A CURRENCY MANIPULATOR. Geez, how long have we known this? Did we just discover it? Do we have a chance in Hades of really changing their policy? Is China not the giant in the neighborhood who is going to get stronger and stronger? Is there something strange about the timing of all this? As the government grabs at every possible last minute last ditch effort to invigorate a recovering economy, is this not just one more example of something stupid that appeals only to populist and hateful and envious Americans?
And you know what the bad thing is about all this misdirected energy? The bad thing is that it confuses people about the best ways to deal with the impacts of globalization. The tsunami involves more than China -- if you are paying attention you know that China is only one of many countries who threaten top compete more vigorously with US firms. What was announced by EU today? They have consummated the EU/Korea Free Trade Agreement. We talked about working hard at FTAs but the truth is that our government would rather reach for the protectionist/populist card than do the hard work of negotiating and implementing a FTA.
It is easy to make eloquent speeches pointing to China as a currency manipulator. But you know what? Even if China let its currency appreciate -- it would not be a very good thing for anyone. We have a trade deficit in the USA because we spend so much and save so little. We have a trade deficit because other countries save a lot and spend a little. To think that fiery rhetoric and currency changes are going to do anything but create small, annoying, and temporary impacts is to be putting your finger in a small hole in a large dike that is bracing for a 200 foot wall of churning water. Now I can go eat my kimche.
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Yes, it is always easier for politicians to play the blame game instead of rolling up their sleeves to do the tough work of creating a solution to the root problem. It is sad so many of our leaders want to jump on the China bashing bandwagon.
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