UPDATE 1-It is "China's choice" to revalue yuan-Geithner
* Geithner says it is "China choice" to revalue yuan
* Geithner says global recovery "looks quite strong now"
(Adds quotes, details)
By David Lawder
NEW DELHI, April 6 (Reuters) - U.S. Treasury Secretary Timothy Geithner said he was confident that China would see that it is in its own interest to make its currency more flexible, and said global economic recovery "looks quite strong now."
Geithner, in an interview on Tuesday with India's NDTV, said it was "China's choice" whether or not it revalues the yuan.
"As I said before and I'll say it again, but I want to make sure I am repeating myself, I am confident that China will decide it's in their interest to resume the move to a more flexible exchange rate, that they began some years ago and suspended in the midst of the crisis," he said in India's capital.
The United States on Monday reiterated its call for China's currency to be market-based, as lawmakers warned they would act if there was no movement from China on revaluing the yuan. [ID:nN05185135]
Geithner's comments came shortly after a Chinese foreign ministry spokeswoman said China never manipulates its currency and that the U.S. trade deficit with China did not depend on the yuan's value.
"We're working with countries around the world to make sure there is a level playing field globally so that our companies, as they compete globally, are competing on a fair basis. That's the general imperative and it goes beyond China," he told the TV channel.
On Friday, a U.S. Labor Department report showed the economy created jobs in March at the fastest clip in three years.
"I think the global recovery looks quite strong now. It's much stronger than it was even three months ago. There's much broader confidence about its sustainability," Geithner said on Tuesday.
He said the probablity of a double dip recession was "much much lower than it was." (Editing by Tony Munroe and Surojit Gupta)
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Should a nation debasing its own fiat-currency expect to dictate to another nation how to manage its own fiat-currency? Well, it can try. Sometimes, it succeeds as the USA did with Japan in the so-called Plaza Accords in the 1980’s, much to the detriment of Japan. Perhaps, China has learned a bitter lesson vicariously from its neighbor.
Let’s face the ugly truth. Commercially and economically, the USA has become a nation that punishes production while it rewards consumption. A nation that exports her own vital industrial base, sliding into a so-called service-economy in which her citizens sell real estate and commercial paper to one another. A nation that issues a progressively debased currency printed in unending supply by a timid Federal Reserve Bank at the behest of power-hungry politicians buying votes with other people’s money. A nation indebted to foreigners and increasingly owned by them; foreigners, such as China, who can throw her into bankruptcy whenever it suits their own, respective, national interests.
At one time, the world had an international currency … gold; difficult to manipulate. In 1938, Hitler criminalized owning gold in Nazi-Germany, as Roosevelt had done in the United States in 1933. Instead, FDR had substituted a paper-currency promising silver on demand; later, the government reneged on that promise. Today, U.S. currency represents nothing more than a promise on a promise; a promise to confer value by promising to tax the populace. Government, thereby, freed itself to print as much paper-currency as the politicians demand to allow chronic, deficit-ridden spending financed by chronic, unlimited expansion of debt. The inescapable consequence? Over the years, the purchasing power of the U.S. dollar plummeted. Finally, in the early 1970’s, President Nixon formally ended the pretense of inherent value by explicitly decoupling the dollar from both gold and silver.
From the perspective of scientific capitalism,* economically the function of government should be to maintain a stable currency then to allow the marketplace to regulate the economy. Some years, there’ll be inflation, which isn’t necessarily good. Some years, there’ll be deflation, which isn’t necessarily bad. Over the long-haul, however, the rate of inflation should average approximately zero, meaning that politicians can’t get themselves re-elected by buying votes through reckless spending of a devaluing currency.
Has it become a hopeless dream to have a stable and respected national currency? To have a restored and stable value of every denomination? To have a currency that reflects primarily constructive requirements of the productive not self-serving demands of the unproductive?
America currently has an unstable, debased, national currency. Merchants no longer give change to the nearest penny; sometimes, only to the nearest quarter or the nearest dollar! Such debasement generates contempt for the currency, for the economy, and for the nation that it represents. Perhaps, the first step in dealing with China is to restore real value to every denomination of the currency, even the penny.
How? By issuing a new, revalued currency with a zero lopped off the end of each denomination and dividing the denomination by two. America merely will be returning the value of her currency to where it was before the Federal Reserve Bank came into existence and began its relentless debasing of the United States dollar. What’s more, America will be re-establishing respect for every denomination.
Ah, but what about expanding or contracting the supply of currency and credit? Shall we leave it to bureaucrats or, even worse, politicians? No! A producer of goods or services can go to a bank to borrow funds; thus, requiring a pool of capital through savings, which the government now punishes. The bank determines the creditworthiness of the potential borrower. If the bank deems the loan worthy, it lends its depositors’ funds. If the bank needs additional funds, it can borrow the money from the Federal Reserve Bank, as it does currently. The federal government can inflate the supply of money based upon only productive demand.
Science demands measurement. In this case, measurement is automatic and currently in place; namely, the real Gross Domestic Product, including debt.
Undoubtedly, the politicians will hate such policies. Given the opportunity, they (Democrats and Republicans) will push to increase the supply of money for their reckless spending till they have bankrupted the country. “Economic depression” is merely a politician’s euphemism for national bankruptcy. The irony is, after inflicting the damage themselves, the politicians claim that only they can remedy the hurt via even more manipulation, serving to make the situation even worse. FDR’s “New Deal” was an example; Roosevelt made the Great Depression really great.
From a scientific perspective, as always in human affairs, the issue is one of context and contingencies. Allowing Congress to pass laws proclaiming fiscal prudence only then to violate those laws, as they have done in the past, is futile. The only remedy is an explicit constitutional amendment with specificity, objectivity, and accountability built-in.*
Even with a sound and stable currency, would the problem of “currency-manipulation” by China or others still exist? It might. Beggar-thy-neighbor goes back a long way. If China or others indirectly subsidizes its exports via currency-manipulation, doing so would violate the principle of free trade. The remedy would be clear. Calculate the amount of the subsidy and apply it as a tariff to those exports with the monies collected reducing the rate of federal taxation. If the USA wants truly free trade, the government cannot profit from levying tariffs.
Prior to making demands upon other nations, America must clean up her own act; otherwise, she becomes the nun who treads the primrose path.
Gene Richard Moss
Author, Inescapable Consequences (fiction/nonfiction; 2009)* and
Healthcare Reform D.O.A. (non-fiction; 1994)**
* www.inescapableconsequences.com
** Nominated for two national awards by the American Risk & Insurance Association.
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