Angie Pratt: If Bush Really Wanted To He Could
If Bush Really Wanted To He Could
By Angie Pratt
If George W. Bush was really interested in having China drop its peg to the US dollar he could force the issue. If George Bush actually wanted to see China's Yuan appreciate toward its true value he could simply institute a tariff against Chinese goods. In so doing he would:
* Gather monies to help offset the US deficit from the tariffs ... they are a source of income.
* Raise the price of Chinese goods and, in so doing, make American manufacturers more competitive.
* Reduce the trade gap with China.
* Give the Chinese a choice, remove the peg and float their currency or pay the US a price for its unilateral policy.
Why doesn't Bush do that? Is it ideology or reality that stops him? The truth of the matter is that he doesn't really want the Chinese to let their currency float under market conditions. You see the problem is if China does so, George W. Bush's house of cards caves in.
If the Chinese free their currency to float, the US dollar would immediate devaluate. In the process of this devaluation, Chinese goods in the US would immediate go up. Some analysts' estimates place the increase by as much as 40%. The result would be an immediate increase in inflation in America.
It is the absence of inflation that has allowed the fed to continue the money presses. In the presence of inflation, interest rates will go up. In the presence of inflation, George Bush's budget deficits are unsustainable. In the presence of inflation, you can guarantee a recession.
Of course, there is the other little matter of financing the Bush Administration's Wars.
And, of course, there is the other little problem ... the fact that China is in effect our landlord. We are into China for a bunch of money.
If China so chose, China could bury the United States, and the world, financially. Thus we can't really afford to make them angry. So ... we let them continue sucking at our neck while we make grand proclamations about saving the world from itself.
Boy howdy. Talking about the little Dutch boy with his finger in the dike ... or up his nose.
Written by Angie Pratt ( http://www.politicalposts.com).