It’s tough to sit idly by and watch our government “miss the boat” on China’s yuan devaluation and its effect not only on exports, but on the currency markets and other countries’ economies. China’s devaluation of its currency has been the headline for the last couple of days, and today’s news that the country intervened and was putting an artificial floor under the currency price is possibly even more disturbing than the fact that China is trying to create artificial stimuli instead of making fundamental productivity changes within the country.
There’s also been reports that China’s central bank continues to be under pressure to weaken the yuan even further. Reuters reported the country is considering an “overall devaluation of almost 10 percent.”
Our country and its officials continue to state that we don’t want to start a currency war, but I think it’s time we realize that we’re already in the midst of one — now, who started it matters less than who sets the pace.
I’m a non-partisan guy, but I must give credit to Mitt Romney who, in 2012, renewed his promise to label China a “currency manipulator.”
In 2012, when he was asked if he was accusing China of manipulation or a trade war, he replied: “There’s one going on right now, which we don’t know about it. It’s a silent one. And they’re winning.”
Another current GOP candidate often squawks the same line, albeit without the details on how to deal with the situation. I do give credit to at least calling currency manipulation for what it is, as our current administration refuses to even utter the words.
The point is that everyone seems to be getting it, except for the people that matter: the current administration.
Comments that Jack Lew made on CNBC in July seem to make it clear that he thinks China’s markets are separate entities from U.S. markets. He states he doesn’t see the “direct link” and that his concern remains long term growth in China. I’ve been arguing that there is a direct link, the counterpoint to this assessment, for the last seven years.
Instead, Lew put responsibility on the Chinese policymakers, stating, “”How do Chinese policymakers respond to this, and what does it mean in terms of core conditions of the economy?” This is a fair point, but to a different question.
This leads me to naturally want to ask our government a very important question, “When do we plan on being proactive, instead of reactive?” When will we lead, rather than reacting to foreign leaders?