The Time of Weak Currency

A new law was adopted in the United States that was directed against Chinese exports. The point of the law is if the decrease of the yuan is still stimulated, U.S. authorities will hit China with a custom duties penalty. The conversations in Congress have been stormy. There were allegations of “financial gangsterism” and claims of the revaluation of the yuan by at least 20 percent. And even at 40 percent. What can be said? The idea is very dubious and extremely dangerous. It may result in a bilateral trade war or, in the worst case, a world trade war.

After all, the Chinese have a right to adequately fight back. Then many American investors who settled in China will suffer. And, of course, they’re not to be blamed for anything. They are already sounding the alarm. What does this look like? In my youth I lived in an old Moscow yard. I remember the rule: if the guys next door beat up our Kolka, we would beat up the first guy that comes our way. This guy could very well be a bespectacled Lenka, coming home from a chess club meeting. Politics is a man’s game. Men, unlike women, never fully grow up and sometimes behave like boys.

Let’s go further. The “golden rule” of practical politics is “If they can, why can’t we?” and has a universal application in time and space. In our case, there are three possibilities. The first case is purely American — when some other country greets a sleazebag dealer with a custom duties penalty for the deliberate devaluation of its own currency. The second case has the same reason but another penalty, namely the strangling of bureaucratic chicanery, technical regulations, etc. The third case has another reason but the same penalty. No comment on this one. It’s possible to find a fault in any policy if there is a desire. Not saying so is chaos shaping up. The probability is quite high. In principle, the WTO should intervene, since the Americans’ actions clearly violate the principles of this respected organization. But for some reason, the U.S. stays silent.

My prognosis: a radical “chinafication” of economic politics will take place overseas. The dollar will be consciously pulled down with all the force possible. The euro will move in the same direction. The same goes for the yen and all other currency. Speedy competition in the currency meltdown in comparison to the yuan lie ahead. Judging by the latest data, the race has already begun. Then, however, the Chinese will have the moral right to Americanize their actions, namely, by resorting to the hammer of customs duties. Relying on the “golden rule.” In addition, if the currency battle is yet to happen, it will be total, unlike past feuds, which were still child’s play. Take the ‘90s for example. I remember the “battle for the banana,” when the Americans rolled out a big financial cannon, cautioning the fans of destruction that each shell is equal to twice the customs tariffs. They hurt our steelworkers with the duties, which are themselves regarded as “punitive.”

IMF Managing Director D. Strauss-Kahn described the situation today as the possibility of a “currency war.” I think this is the way it is. Such a turn of events may result in a true disaster. We are on the brink. World leaders are intelligent people. They certainly understand. I believe that they will not allow this.

Let’s return to China. The local citizens are not to blame for the fact that there are so many of them, or for the fact that they want to live in dignity. It would be immoral and unacceptable to punish them for that. What should be done? Gather a group of world economic experts. Include a Chinese and an American who are in direct communication with their presidents. Lock them in some convenient place. Provide them with food and various drinks. Give them a week or a month. Surely they will come up with something.

Finally, on to Russia. Coming out of a crisis is not the best time to strengthen the ruble. It is more advantageous to weaken. This is not different from other countries. It is possible, of course, to continue to move in the opposite direction, in fact, and to do so alone. But there we will not find anything but an inside budget and imported sausages. We will lose a lot, both in the domestic market and in the world.