Currency Reform and Fair Trade
http://thedianerehmshow.org/shows/2010-10-05/currency-reform-and-fair-trade
Last week the House sent a message to China. It passed a bill that would allow a nation's currency policy to be factored into decisions on trade tariffs. The risks of protectionism for U.S. businesses and consumers.
Guests
C. Fred Bergsten
director of the Peterson Institute for International Economics and author of "China's Rise."
Ambassador Thomas Niles
vice chair, United States Council for International Business; former U.S. ambassador to Canada, Greece and the European Union; former assistant secretary of state for Europe and Canada under President George H.W. Bush.
Kenneth Lieberthal
senior fellow and director of the John L. Thornton China Center at The Brookings Institution; former senior director for Asia at the National Security Council under President Clinton.
Comments
Please familiarize yourself with our Code of Conduct and Terms of Use before posting your comments.
Contest,(why I prefer the Diane Rehm Show in 25 words or less):
Diane is the best. She prefers topics that educate listeners above promotion, partisanship and spectacle. Diane is polite and exhibits good taste and wise judgment. (That concludes my entry.)
Simply by choosing Diane Rehm over other talk shows I have won. I wish her improving health and many more seasons at WAMU.
Compare today these worthy topics with "Glenn Beck" promotion at On Point. See how Diane has things back on track after her break. It must be challenging for producers and staff to meet her standards and expectations. Her show has trained some of the best in the business.
The Diane Rehm Show is a good example of "fair trade" in broadcasting.
Funny you should say that, Grady, on a morning when our local public radio affiliate has dropped the Diane Rehm show under pressure from listeners in this very right wing area of the US. Diane Rehm is "too controversial"; there were complaints; funding went way down. The station couldn't afford to keep the show. We're back to canned music for two hours.
Fortunately there are other sources for those who have them: streaming audio and satellite radio.
I've been a steady critic of the show for several weeks as it takes what appears to be a right turn -- or at least an establishmentarian turn. What may have motivated that turn, though, is defections like our local affiliate.
Will it be possible to maintain media committed to global, inclusive reporting and discussion of public affairs? Perhaps we need a show on that topic!
Dear Mrs. Rehm, and Dr. Fredberger,
For US policy to seek for Communist China to revalue their monetary exchange rate is foolish. I oppose such initiatives or demands upon China.
The effect is like demanding a vendor of goods to raise their prices for items US consumers shall buy. It would have inflationary effect upon ability of US consumers to buy goods.
It is outrageous for US to ask a country to change its exchange rates to harm US consumers ability to buy goods. When would a consumer say, " I wont buy your goods unless you raise your prices charged me for these goods ," when such a policy act would not benefit the US ?
It would not.
It is stupid, and would lead to inflation and would deter US consumers to have the goods they enjoy now in the quantity they enjoy now.
Government of USA, stay out of my life.
Please abide, USA, we need China to buy our disastrously large outrageous debt amounts to fund the daily ever continuing deficit spending . Until USA decides to correct its terrible fiscal ways, the USA government has no legs to demand any policy in exchange rates of China.
USA must Stop deficit spending, get its own economic and fiscal and financial house in order, reduce debt amount outstanding, and encourage and reward free enterprise and personal wealth and income in USA, and reduce its personal and corporate income taxation rates.
Thoughtfully and Very Kindly Yours,
JamesBryson Culp
Member
The White House Conference on Balanced National Growth and Economic Development 1978, Washington District of Columbia
residing metro Gainesville Florida now
Mr. Culp,
While there is some truth to that argument, there is a fundamental flaw in your understanding of inflation. "Inflation" is commonly understood to be "when prices go up," but this understanding is false. Prices go up or down for all kinds of reasons. *Inflation* is when the amount of money in circulation expands ("inflates") relative to the amount of goods in circulation. Prices then go up as a result as the value of money shrinks as a result of its abundance.
China re-setting the value of it of it's currency (or, allowing the currenct to float and letting the market determine it's fair value, as opposed to government fiat), would not "cause" inflation in the US. It is rather our leaders who have "caused" inflation here by debasing our currency with low interest rates and by running wars and bailouts on what essentially amounts to printed money. China's low exchange rates have simply acted as a buffer up until now, keeping us from feeling the pain of our self-created inflation by artificially keeping the cost of goods low. However, that is ultimately an unsustainable economic model. China may be run right now by an oligarchy of powerful individuals with a vested interest in low exchange rates, but sooner or later, the masses of average Chinese, whose lives would be greatly improved by increasing their wealth through allowing the value of their money to rise, will win out. We can't expect China to stay poor forever so that we can keep living high on the hog, and the longer the current system stays in place, the harder the inevitable fall will be.
There is nothing wrong with encouraging China to abandon the model. Frankly, it's in our long-run best interests, since it's an inevitable pain that will only get worse the longer we put it off. But I seriously doubt there is any real willpower behind the posturing. We have a pretty strong tradition in DC of letting our teeth rot to avoid the pain of going to the dentist.
In Currency We Trust
We've all heard the argument between the atheist and piety, whether "In God We Trust" should be sloganized on currency. Here's my point of view.
The word God is one letter removed from the word good. I don't know if God exist. Show me a clergy of any faith who "knows" of the almighty's existences and I'll show you someone whose trust should be questioned. On the other hand the most rational atheist can't prove the non existence of God. Whether God exist, there is a strong motivator for doing good in such belief, though contrary there are those who hate or kill in the name of an uninstantiated omnipotent being. It is unlikely that God can be measured or given a monetary value. Good on the other hand has a human quantifiable balance. Is it God or human ingenuity capable of moving mountains? I would guess many citizens from Ohio through Virginia question the worthiness of such power, lacking several mountain caps which once glorified their view.
Who is this We in the slogan? My guess it's the money talking. When there's uniformity, it's not God whose trusted, it's conformity. So maybe what these bills are saying is trust me the almighty currency.
Should In God We Trust be sloganized on currency? Let me answer this with a question. When we are blessed with God's dialog, will his trust be sanctioned as advertisement on currency? Deception and greed may be more of a concern.
Without regulation, the value of currency should not be trusted. It is in the realm of possibility that God is all powerful, but the dollar has no feasible chance of being omnipotent.
The Do Good Gauge
While the problem with China is of some importance, the United States has been consistently running a trade deficit with the world since the mid-1980's. The problem appears to be that we have allowed American companies to set our trade agenda. In the old days we might have raised our tariffs across the board to get our trade in balance. Shouldn't we press the WTO to change the rules and require countries in chronic deficit to impose across the board, nondiscriminatory tariffs and countries in chronic trade surplus to impose across the board export taxes.
Though I missed the beginning of the show the comments on the likely outcome of currency changes varied by so much that one could have used a dart board to better effect.
It is unrealistic to expect Chinese currency value increases to make substantial improvement in the deficit or employment. Some of your panel understand that, but others didn't.
No one mentioned the recent passage of the MTB (Miscellaneous Tariff Bill). This bill is used for "Pork" removals of tariffs by powerful companies. The supporters pretend that the bill helps small companies that remove tariffs on components of their products. However, giant companies divide products into dozens of sub categories to evade the single item limited tariff relief. Congress is seduced into thinking they are doing something for small companies and the consumer. Instead giant shoe companies use the MTB to fatten their bottom line.
Here in the comments is a pie of truth, with ingenious listeners outperforming the guests ( who represent powerful interests) again. Matthew has a hopeful prognostication that one billion Chinese laborers will seize control and for a democracy and that then our currency problems will change. he is correct about China being ruled by corporate oligarchy.
For different reasons Mr. Culp (culpusa) in Florida (who claims to have worked for Daddy Bush pushing free trade) and SilenceDoGoodGauge think currency regulation at this stage is of very dubious importance, and they both have a point,
especially when one considers the shenanigans David Blond and Bill Parks highlight. Parks talks about "giant companies" and Blond says the WTO is an impediment to protecting the American worker. It is correct that free trade tends to favor business above labor in almost every instance. China and the USA are two good examples, and there are many others.
I agree again when Matthew predicts change that will negate short term strategies favoring particular parties and specific specualtors. Bill Parks is incisive when he says none of this is for domestic small business, however one defines "small." It might even be good if the Us would raise some tariffs (and some wages) like Blond says was done in the olden days.
As for the spending that worries Matthew and Mr. Culp, they should remember that what borrowed money is spent on matters as much as how much is borrowed. If we had not wasted our deficit on war and tax cuts and bailout for the wealthy and used it wisely we might have a fitter and better educated population today using an improved infrastructure, and would be more able to pay our bills. It was our Oligarchy that dug the hole in which they are trying to bury our human rights, so we are in the same fix as the Chinese population, maybe worse economically in the long run.
I think there is another way to conceive the problem (see next panel).
Think of China as itself a large conglomerated corporation that is for Americans a powerful engine of off-shoring jobs. And if you think about who owns China Inc. it is the same moneyed elite that hord manufacturing capacity and resources everywhere. This gang of mobile global corporate thugs has simply moved their wealth feast to China for awhile, and will move and project parts of it as needed. For the present they still need the legitimacy underwritten by Western legal conventions to support their excessive property rights. You see this shift as our Supreme Court "personalizes" the corporate entity to meet Oligarchical needs and ambitions. Our Constitution, written with "individual rights" paramount is being made a mockery. Law has not yet solidified beyond internecine party struggle in China and so international trade agreements are applied in raw form. These same agreements are made to trump our legislation whenever the oligarchs choose. So as much as SilenceDoGoodGauge bemoans it, the currency the oligarchs print and electronically create at will out of thin air still rules humanity, and is backed by the armed forces of both the USA and China, and many other armies, and mercenaries, all paid for through our government, and our tax burden.
It is a big monopoly game where the bankers alter the rules to always win no matter how foolishly they behave, and the people who do the necessary work always lose.
You sound better, new energy to you. this was very helpful. I could not get my mind around this Yen issue-challenge until your show and the articulate guests who shared their knowledge in ways I could understand. I am better equipped to judge how my vote can effect our actions towards China and I will be taking a class in Fukian as soon as possible in order to prepare for our conquest by the Yen.