Wednesday, April 3, 2013

Yuan To Get Rich

I saw a headline last night that stated that the Chinese yuan is strong against the dollar. That came as absolutely no surprise to me. I have written both here and on Patriot Update about what I call the "Bernanke Bubble". Part of that bubble is the printing of dollars about as fast as they can be printed. This has the effect of diluting the value of every dollar out there. I think it is a bad policy being used to cover for other bad policies.

In the long run, it is bad for our country and weakens our dollar against those with a strong money policy. The Chinese are probably foremost among strong currency advocates. They prop up the value of the yuan even through times when it should be devalued. While this sometimes angers the international financial community, it pays dividends for them.

The United States is at a disadvantage against a country like China. Sometimes the strength of our political system can be it's weakness. We, particularly now, because of ineptness and political disputations cannot even put together a two year plan. The present administration flies by the seat of it's pants based on ideology.

China, on the other hand, while even more immersed in ideology, has the ability to put together a ten or even a twenty year plan. They can do this very effectively now for a number of reasons. The first reason is that they hold the United States in thrall because of the amount of money we have borrowed from them to support our profligate spending.

In fifty years they have remade themselves from a weak agrarian economy into a vital manufacturing economy. There are a number of factors that allowed this to happen. They were able to bring people to manufacturing centers and supply a cheap labor force. The government could build these manufacturing centers with the latest imported technology using public money. The Chinese sent their young people abroad, many to the United States, to get a modern education in business, science, and engineering. 

When these young people returned home they were able to train the inexpensive labor force on the modern technology and techniques to create first rate manufacturing capabilities. As foreign companies migrated their manufacturing to China they supplemented this training with additional product specific training to even enhance China's capabilities.

One other advantage that brought many dollars out of the consumer marketplace into Chinese coffers is their penchant to use other countries intellectual properties without bothering about royalties and such. So those Gucci and Rolex knockoffs may have been helping to finance China.

Are we in a trade war that we are destined to lose? First, we are not in a trade war. We are in world class competition. And we are not destined to lose. We may lose, but it is not a forgone conclusion. Free up the economy. Turn American companies loose. Cut back on both the spending and the regulations. America will grow, prosper, and be even greater than we ever have been. A runner can't run with lead shoes. Believe me, this country can run like no other.

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