The subject of China and its currency has been building for the last several years and now more and more government officials are pointing the finger at China for manipulating its currency and not allowing the yuan to rise. There is legislation currently being debated in the Senate that would compel the Obama administration to make a determination if other countries are not aligning their currencies in the manner that the U.S. government deems acceptable. Eventually, this could lead to tariffs on imports.
Several Chinese officials spoke out against this action today and said that it would start a trade war, which they (the Chinese) do not want. House Speaker John Boehner has come out against the legislation. Even if it did get through the House, it is unknown if Obama would sign it.
This rhetoric has been heating up more and more. I heard it from Romney in the last Republican debate, which tells us enough right there about that man.
The latest and most interesting person to join in the party of blaming China is Ben Bernanke. Good old Helicopter Ben is now instructing other countries on how to manipulate their currencies. Bernanke said, "Right now, our concern is that the Chinese currency policy is blocking what might be a more normal recovery process in the global economy."
So there you have it. Bernanke has chimed in. Since unemployment is still over 9% and the economy shows no signs of getting better with all of the massive deficit spending, the idiot Keynesians are now going to blame China for the horrible policies of the U.S. government and Federal Reserve. Bernanke's Keynesian policies have failed and he knows it and he refuses to take any blame. It doesn't take a libertarian to see that he and the others blaming China are simply trying to escape responsibility for their own failed policies.
If the U.S. government were actually stupid enough to pass this legislation, China would be stupid to get into a trade war. Instead, Chinese officials should just immediately start to sell U.S. treasuries. If they really wanted retaliation, they should make an announcement that if the tariffs are not repealed within 60 days, then they will dump approximately one trillion dollars of government debt onto the open market. This would send interest rates soaring in the U.S. and would immediately trigger a massive recession.
As to the actual merits of China affecting the U.S. economy, these idiots and/or liars have it completely backwards. If anything, China is subsidizing the U.S. in a couple of ways. The Chinese are buying U.S. government debt and doing a favor to the U.S. government. In addition, the Chinese are subsidizing U.S. consumers with inexpensive products.
I think China should have a stronger currency and let their currency rise against the dollar. But this has little to do with the U.S. economy, at least directly. Chinese officials should do this for the benefit of the Chinese citizens who would benefit with cheaper goods and a higher standard of living. It would hurt some exporters in the short term, but overall it would be highly beneficial for the average person living in China.
It seems that every major central bank on this planet is inflating extensively right now. They are all shooting themselves in their respective feet. Even the Swiss and Japanese are doing it. This is mercantilism and it is bad policy. It helps subsidize the exporters at the expense of everyone else using that currency.
This is why gold and gold related investments will continue to do well in the future.