The entire world is now pestering China over its currency policies, specifically its decision to peg the yuan at an artificially low level, rather than let it float higher.
The latest is Ambrose Evans-Prichard at UK’s The Telegraph, who basically accuses the country of playing havoc with the world economy and “exporting overcapacity to the rest of us on a grand scale.”
By holding the yuan to 6.83 to the dollar to boost exports, Beijing is dumping its unemployment abroad – “stealing American jobs”, says Nobel laureate Paul Krugman. As long as China does it, other tigers must do it too.
Western capitalists are complicit, of course. They rent cheap workers and cheap plant in Guangdong, then lobby Capitol Hill to prevent Congress doing anything about it. This is labour arbitrage.
At some point, American workers will rebel. US unemployment is already 17.5pc under the broad “U6” gauge followed by Barack Obama. Realty Track said that 332,000 properties were foreclosed in October alone. More Americans have lost their homes this year than during the entire decade of the Great Depression. A backlog of 7m homes is awaiting likely seizure by lenders. If you are not paying attention to this political time-bomb, perhaps you should.
Pritchard goes on to argue that the notion of the US as the world’s biggest threat is completely wrong, and that if China ever went into treasury-dumping mode, the US would respond with a trade shutdown that would instantly decimate the Chinese economy.
And he notes the fundamentally flawed premise of a Chinese stimulus based around building and buying more stuff — essentially creating completely useless overcapacity, rather than establishing the type of societal infrastructure that would encourage citizens to begin consuming.
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