Be Careful What You Wish For

Quote from Treasury Secretary John Snow:

–It is “a matter of extreme urgency” that Beijing allow the yuan to rise faster and further against the dollar.

–“Let us be clear — we are extremely dissatisfied with the slow and disappointing pace of reform of the Chinese exchange-rate regime.”

–It is “imperative” that China move “as quickly as possible.”

–Snow also prodded Europe and Japan to accelerate economic growth in order to create larger markets for American goods.

The bottom line is…


……that Bush appointee Snow is just about throwing a tantrum because he wants the dollar to fall further and faster than it currently is… be careful what you wish for, is all I have to say.

He also told Europe to grow faster and buy more stuff from us, which raises the question: Can you go around whining to your customers to buy more stuff from you to bail you out when you’ve not even attempted to fix your own problems?

To me, all of these quotes, while not surprising, fit the pattern that I see as the cause of many problems in the world right now, and that is people not taking responsibility for bettering themselves and blaming their problems on others. This is the root of Bush’s problems (well that and incompetence, political cronyism and lies) and that is also at the root of terrorism.

From the May 11 WSJ:

White House Rejects Tough Line Over the Yuan

Lawmakers, Industry Lose
Campaign to Accuse Beijing
Of Manipulating Currency
By MICHAEL M. PHILLIPS
May 11, 2006; Page A3

WASHINGTON — The Bush administration turned aside demands from Congress and industry that it formally accuse Beijing of “manipulating” its currency in order to give Chinese companies an unfair edge over American competitors.

Treasury Secretary John Snow chose the gentler tactic of announcing yesterday that it is “a matter of extreme urgency” that Beijing allow the yuan to rise faster and further against the dollar.

The decision to avoid labeling Beijing a currency manipulator means that while the U.S. is on record formally criticizing Chinese policy, Congress is deprived of a weapon it could use to justify economic retaliation.

“Let us be clear — we are extremely dissatisfied with the slow and disappointing pace of reform of the Chinese exchange-rate regime,” Mr. Snow said in a prepared statement accompanying the Treasury’s semiannual report on global currencies. His rhetoric was tougher than in November when the Treasury issued its previous report. He said then it was “imperative” that China move “as quickly as possible.”

Prodded by lobbyists for unions and manufacturing companies, lawmakers from both parties have for several years been urging Mr. Snow to take a hard line toward China by officially accusing it of unfairly adjusting its currency.

China has allowed the yuan to rise only about 3% since the mid-1990s. On Capitol Hill, the accepted wisdom is that China’s artificially weak yuan costs Americans jobs by making Chinese goods cheaper in the U.S. and American goods more expensive in China. Several bills regarding China are pending in Congress, including one that would impose 27.5% tariffs on all imports from China to counter the supposed price advantage.

The result is that the administration, already struggling to maintain public support on a variety of issues, must juggle intense domestic political pressures with its own judgment of what tactics will have the greatest effect on Chinese policy. That dilemma resurfaces every six months when the Treasury is required by Congress to issue a report identifying countries that manipulate currencies to secure an advantage in international trade. The Treasury must hold formal negotiations with any country it names as a currency manipulator. Despite the fact that the Bush Treasury hasn’t ever taken that formal step, the U.S. and China meet regularly to discuss currency and other economic issues.

Secretary John Snow comments5 on the Treasury Department’s report on international currencies. Mr. Snow has brandished the threat of a designation to try to wring currency concessions from Beijing. But so far he hasn’t carried through on the threat, despite pressure from Congress and business to do so.

In yesterday’s edition of the report, the Treasury carefully walked the line. The department listed the steps China has taken since mid-2005 to relax its grip on the yuan, including a 2.1% revaluation against the dollar last July, a sharper increase in the yuan’s value against the currencies of all of China’s trading partners, and various regulatory measures to loosen capital flows across its borders.

The Treasury pointedly disseminated a fact sheet quoting senior Chinese officials promising to adopt the kind of overhauls the U.S. is demanding. “China will continue to develop the foreign-exchange market [and] increase the flexibility of the exchange rate,” President Hu Jintao said during a trip to the U.S. last month.

At the same time, the Treasury took China to task for not having done more already. “The delay in introducing additional exchange-rate flexibility is unjustified, given the strength of the Chinese economy and the progress in China’s transition,” the report said.

The Treasury’s decision not to designate China touched off an angry response from some on Capitol Hill. Sens. Charles Schumer (D., N.Y.) and Lindsey Graham (R., S.C.) criticized the decision, but announced that for now they would hold off on their retaliatory tariff bill — the legislation that most alarms the administration. On the other hand, Sen. Charles Grassley (R., Iowa) said he would push ahead with legislation to make it easier to penalize countries that use their exchange rates unfairly, a bill seen as more moderate than the Schumer-Graham law.

“Everyone knows China isn’t allowing market forces to influence the value of its currency,” Mr. Grassley said in a written release. “China just isn’t living up to its obligations as a mature economy that’s benefiting greatly from open international trade.”

A Chinese Embassy spokesman in Washington had no comment on the Treasury report.

U.S. officials have resisted industry’s argument that appreciation of the yuan would do much to narrow the huge U.S. current-account deficit, which measured a record $804 billion last year. But officials argue that a more flexible exchange rate would help China avoid a rapid collapse of its red-hot economy, which grew at a 10.2% annualized pace in the first quarter. Mr. Snow said a more flexible yuan would give China better control over its own economy, especially through interest-rate policies.

In addition, Mr. Snow said, a rising yuan would encourage other Asian nations to allow their currencies to follow suit, expanding opportunities for American exporters. “It is a matter of extreme urgency that China act immediately to increase the flexibility of its exchange-rate regime before real harm is done to is own economy, to its Asian neighbors, and to the global financial system,” Mr. Snow said.

The International Monetary Fund and the Group of Seven leading industrialized nations have endorsed U.S. calls for faster appreciation of the yuan. Yesterday, the World Bank added its voice to the chorus.

The Treasury also prodded Europe and Japan to accelerate economic growth in order to create larger markets for American goods.

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