Saturday, December 10, 2011

Thanks, China!

Last month, I critiqued Republican Mitt Romney's assertion that China's currency manipulation violated trade norms or hurt US consumers. Carpe Diem blogger and econ prof Mark Perry agrees, in the December 2nd American:
When you hear discussion of China’s currency manipulation, keep the following in mind:
1. China's currency manipulation is a form of foreign aid, and to the direct advantage of millions of U.S. consumers, especially low-income groups, and to the direct advantage of thousands of American companies buying inputs from China.

2. Forcing China to revalue its currency would benefit some American manufacturers competing with China, but would significantly harm those American consumers and businesses currently buying undervalued imports. On net, there would be more harm to American consumers than benefits to American manufacturers, which would reduce our overall standard of living.

3. Like other forms of mercantilism and protectionism, forcing or pressuring China to appreciate its currency would favor certain domestic producers over millions of consumers and import-buying companies, but would make the United States worse off, not better off.

4. Finally, instead of complaining, we should be thankful for China's foreign aid to Americans through an undervalued yuan, overvalued dollar, and undervalued goods that collectively save American consumers and companies billions of dollars every year.
Bottom Line: If you wouldn't object to China sending products to the United States for free, then on what basis would you object to currency "manipulation" that allows you to purchase undervalued Chinese imports at a huge discount and great bargain?
Of course, Chinese citizens are governed by an authoritarian police state. But China's currency policies benefit America.

(via Cafe Hayek)

6 comments:

OBloodyHell said...

>>> Bottom Line: If you wouldn't object to China sending products to the United States for free, then on what basis would you object to currency "manipulation" that allows you to purchase undervalued Chinese imports at a huge discount and great bargain?

Logic??

Logic!?!?!?

Weeeee Don' Neeeeed No STEENKIN' LOGIC !!!

KitWistar said...

@OBH: easy,there.

@Cafe Hayek: thank you for this economic clarification.

@Carl: how are you feeling? any improvement?

Carl said...

Kit: Thanks for asking. Yesterday's test set me spinning for hours. I'm fine today, stretched out on the couch, with the Economist and, later, Army vs Navy. Plus, I'm predicting Andrew Luck for the Heisman.

KitWistar said...

Yes, Luck. And, as always, Yay Navy!

Carl said...

Kit: As a long-time Navy fan, that game was way too close for me. And way too many shots of, and words from, Obama. It was a great game, but I wanted a game, not a campaign event.

Too bad about Luck--Griffin had one extra game, in which he excelled, while Luck didn't play. Luck still goes #1, Griffin, no higher than #4 (I want to Deadskins to land Barkley, not Griffin or Jones).

KitWistar said...

Yup, I agree with all.