China Currency Head Fake
Just after 5:30 p.m. tomorrow, the Senate will invoke cloture on the China currency bill, S.1619. Passage by late Wednesday is assured. The bill imposes tougher reporting requirements on the Treasury Department and allows countervailing duty suits to be brought for currency manipulation. House passage is very unlikely despite majority support in both parties because Speaker John Boehner (R-OH) won't take it up, even though the House passed a similar bill last year. What's going on here?
This is an exercise in blame avoidance, but given Congress' record low popularity, it doesn't seem to be working. Unemployed workers across the country have seen their jobs move to China in part because of China's currency manipulation that keeps the Renminbi undervalued by approximately 30%, although estimates vary widely as explained in this Congressional Research Service report. Congressional leaders understand that retaliating against China, which holds $1.2 trillion of our debt (See this Treasury table.), could have severe repercussions. So the drill tomorrow is to pass the bill so senators can say they voted for it without revealing that it has no chance of enactment. I don't believe voters will be so easily fooled.
Close observers of Washington infighting may notice that Senator Reid scheduled the China currency bill ahead of President Obama's American Jobs Act, S.1549, to send a message of his displeasure about not being consulted in their formulation of the Jobs Act to Mr. Obama and his aides. This is one more example how contentious and difficult governing has become in Washington. As Washington paddles in all directions at once, our economy goes nowhere.
china's currency bill
I'm glad to read the truth here. It's disappointing but not unexpected. Our subservience to China is not based in the possibility they would dump their holdings. Their T-Bills amount to something like 50% of GDP - they are far too smart to trash the value of this asset. No, our subservience is based on the role of MNC's, who fund candidates, outsource jobs to low wage/ low reg locations, and pocket the difference in profits and CEO wages. They control our national agenda. They don't care about jobs for American workers, and that trumps the issue.
And as for Obama - he deserves this manuver. He is not a Democrat but a wannabe moderate Republican and deserves to be treated as one by Reid.
Fact is China is too big and
Fact is China is too big and powerful for us to push around. Further, given the dysfunctional nature of the US government, China doubtless thinks it has little to worry about. Why be concerned about a nation that can't even raise its debt limit when it needs to without immense sturm und drang as well as brinksmanship, etc.? Any US threats of retaliation probably give the Chinese leadership a good number of good laughs.
Interesting post, WSJ article
There was a Tuesday Sept 27 article, page A5 "Tallying the Toll of U.S.-China Trade" which talked about a ne study that showed that Chinese trade not only has had a significant impact on manufacturing industries (obvious), but also on the towns and cities they are located in. I didn't use to beleive the currency argument, but now we're a drunk at the bar that has passed out because of all the low cost alcohol the Chinese bar tender has so happily plied us with, and we have drunk because of our own greed and stupidity. There was also - whether in the WSJ or Business Week - an article about GE sharing with China it's highly advanced commercial avionics, the article estimated 15 years ahead + and Jeff Immelt defending this saying the Commerce Department had approved it (?!). Our multinationals have been and are a big part of the problem - they think they'll get into China and then China takes their technology and more or less kicks them out. Talk about a mercantilist society! My Dad's comment about the Japanese policy some years ago was "talk and ship" China is far worse, and given their political suppression of dissent it is a terrible choice that we have made, and the world is making.
As Mark Twain said -- history
As Mark Twain said -- history may not repeat but it does rhyme.
We have deliberately been devaluing our currency ever since the QE's started and now we are annoyed that others are playing the same game. Everyone wants to export their way out of their excessive debt loads -- and the math can't work that way. And the reality is that every country sets their currency price against the reserve currency. That is how the reserve currency IS the reserve currency. Others buy it and stick it in their central bank's balance sheet. Now we want what -- the ability to issue unlimited amounts of basically zero-interest currency/debt that has demand - while insisting that those who are demanding it shouldn't be demanding it?
We are governed by clowns.
All we need is critters that rhyme with Smoot and Hawley to sponsor the trade war legislation.