Monday, October 29, 2012

Chinese Currency Connection

When a politico makes charges of currency manipulation, I am reminded of a sitcom. I understand it is election season, and the motivation is for the candidates is to procure votes. In this process, someone must be to blame for our problems. And, in this case, it is the Chinese.

Currently, both candidates have made statements about Chinese trade policies, and Dr. Don Boudreaux addresses this issue with his "Open Letter to Mitt Romney" In this article, he responds to a charge Mr. Romney is presenting against the Chinese. This charge is that the Chinese would be labeled a "Currency manipulator" if they did not implement "fair" trade practices.

While the Chinese are far from perfect in their trade practices, but who does the devalued Yuan really hurt? Does it hurt the US Consumers or the Chinese citizens?  If the United States decides to place trade tariffs with China, who does that impact? US Consumers or Chinese Citizens?

I applaud Mr. Romney's tough talk against China's practices. To be fair, I am sure Mr. Obama agrees with the notion that China does not do everything perfectly, but protectionist policies ultimately hurt the US Consumer. A devalued Yuan impacts the Chinese citizens with higher prices and inflation all expressed in Yuan. However, this tough talk sounds nice during a Presidential Election season.

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