Create your own Villain

news item:

Washington (AP)– Congress is pressuring the Obama administration to take a tougher stand with China over trade practices that they say have cost Americans millions of jobs.

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The state always needs a villain.  It is a safe bet that China will be the new scapegoat for American politicians.  This will follow the form of misidentifying causes and promoting solutions that are wasteful at best and harmful at worst.  The latest attempt to make people believe the state is working for them involves the currency issue.

China has kept the value of its currency low by purchasing US dollars and selling its own.  This supply and demand allows the dollar to have relative strength making Chinese goods cheap for the US.  Opportunistic politicians are imagining that this currency manipulation is the reason for American economic hardship.  They claim that this weak currency gives China an unfair advantage.  Curiously though, China like the US, also has a trade deficit.  It imports raw materials then produces the stuff it sells to the world.  If the US pressures China to stop lowering the value of its currency, then the costs of imports for China decreases. Any gains in competition the US imagines it could gain are swallowed by lower Chinese input costs due to its stronger currency.

These details seem to mater little to the American political class who’s actions and rhetoric demonstrate total ignorance on maters of simple economics.

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