Evil Obama and New China

The story “American-Chinese Currency War* (as we will refer to it for our purposes) shows on the surface that the bill against “countries undervaluing their currency rates” is slowly creeping through the channels of Congress. By and large, the bill is against China. It is expected that the bill will go through all the necessary steps in October. Then the U.S. administration will have a club in hand, which may be used to impose import taxes to compensate for the effect of the undervalued currency rate, or which may be not used at all.

Various American administrations have unsuccessfully fought for many years to have the yuan exchange rate raised. There have long been conversations about the fact that everyone is undervaluing their currency rates, starting with the U.S.; under the current administration of Barack Obama, the dollar “fell” by 20 percent, and that was entirely intentional politics. Since January, the euro has weakened by about 17 percent. The “crisis” is that everyone would like to have inexpensive and high-quality exports like the Chinese and revive their economies. It is as much as saying that the yuan rose that same 20 percent and 17 percent, respectively. This would all be utterly tiresome, but apart from the visible surface in the “currency” story, there are still two other particulars of the situation that are of real interest.

The first concerns the Obama administration’s conceptual turmoil when it comes to foreign policy. The second is the Chinese plan regarding the transition to a new economic model.

Concerning the turmoil, this year President Barack Obama would certainly have not received a Nobel Peace Prize because his administration is being stretched like rubber back to the time of Bill Clinton’s foreign policy (without the moral support and material resources that Clinton still had).

The Washington Post had this evaluation: For two years, Obama repaired America’s image in the world, but now there is a return to the policy of wielding “American influence.” Earlier, there was the “G-20 world,” but now there will again be the world of “U.S. alliances with democratic nations.” The advancement of “traditional American interests” is returning, and words like “freedom” and “democracy” are beginning to be used.

Since China earlier abandoned the idea of “joining the U.S. to manage peace,” the U.S. is giving signals to all who will listen that it is protecting them from Chinese pressure. There is little coming out of this; the small countries of Asia and even Japan do not wish to unduly “suppress China,” their most important economic partner. But the American public is attuned to the principle, “Men, just do something.” And they are doing it — including on the currency front.

This is connected to the November elections in Congress, but not entirely: A voter always goes for an era that precedes reality. What’s more, U.S. voters are tired of defeatism. Intellectuals have overdone it with remarks like, “the dollar tied to the yuan rate.” Books like Michael Mandelbaum’s “The Frugal Superpower: America’s Global Leadership in a Cash-Strapped Era” have become popular. In the U.S., it is again becoming fashionable to act as if the world has not changed for the last 20 years.

As a result, there was a good Obama, and he has become evil. He was an American Gorbachev, and now he would like to become an American Chernenko — that is, to take a break from change. Not to say that that is bad. Even in the 1990s, Russia derived no small advantage from the strained Chinese-American relationship and was slightly apprehensive about the Chinese-American love evident under Bush. But now everything is simple again: Obama is further strengthening the Russian-Chinese friendship, and the better our relationship with China, the more successful our dealings will be with the European Union. For instance, Europeans are intensely interested in details of the Russian-Chinese oil and gas agreements after President Medvedev’s visit.

And there begins yet another subject. At one time, Japan was the China to America. In the U.S. it was customary to hate the Japanese for the same things — for growth and successful exports at an undervalued yen, for the buying up of U.S. companies … the U.S. administration pressured Japan so that it transitioned to the higher yen rate. And the aim was achieved — in 1985 the yen doubled, Japan collapsed (the notorious burst of the “economic bubble”) and to this day it cannot fully recover.

The Chinese know this well, of course, as well as the fact that it is time to change its economic model. (This was discussed in the ruling Communist party’s plenary session that was just completed in Beijing.) The Chinese economy earns very little in its role as the “manufacturing workshop of the world”; the overseas authors of the intellectual property for products assembled in China accrue most of the profit. That being the case, Beijing is drawing a rate for its own innovations (and is closing about 2,000 steel and cement factories). Moscow and Beijing are occupied with highly similar thoughts and plans.

Such a turn, however, means high wages and a high yuan rate. Americans and Europeans are pushing China toward this in the hopes that the Chinese consumer will become an avid importer and get out of the U.S. and E.U. economic crises — though some may hope that if China can be strongly encouraged to make the planned crossover, China will share Japan’s fate.

*Translator’s Note: This is a link to another article which is actually entitled “A Time of Weak Currencies,” found here.