Free trade?

Is the Dubyah administration in favor of free trade?

If we are going to run down the free trade path I would hope we also demand fair trade.

As reported by Yahoo News (see here) we have a trade imbalance with China of 162 billion which is expected to increase to 200 billion next year. Meanwhile China allowed the value of their currency to rise by 2.1%.

What do we do about this? Well the first step is to balance the budget. If we deny the Chinese the ability to keep rolling their profits into federal treasury bonds they are going to have to look elsewhere into investing their profits. They can either start buying something America produces (like our strong agricultural produce) or they can do something else. As long as they can continue to buy treasury bonds they need do nothing else.

If we balance the budget and force them to do "something else" we can win the game. We can continue to pump dollars into their economy and they will start expanding like a big balloon with all the dollars. What are they going to do with the dollars? They can't keep piling them up in their back yard and building a mountain of them. The minute they release the neck of the balloon the value of their dollar holdings will plummet.

Of course we here in America have to deal with something else. Just how much of America will we allow the Chinese to buy up once we force them to invest in "something else"? The Japanese bought skyscrapers at cloud hugging prices only to find these values plummeting once they left the market and were trying to sell.

Dubyah has us embarked on an ever increasing spiral of increasing trade surplus, increasing government deficit spending, and increasing reliance on foreign funding of government expenditures. This spiral is insanity and it can not go on.

If we balance the federal budget, one way or another these dollars are going to return to us. China will have to find a way to invest the income or watch it waste away. They'll have to start buying American. We might not like it when China buys up GM, but if GM is going to be saved the money has to come from somewhere. American investment is not flowing into GM, it is flowing into China!

Of course us Americans can be as restrictive with our monetary and investment policies as the Chinese are. Fair playing field right?

Balance the federal budget and the Chinese are going to have to start working for a living. They can either return the dollars by buying American or they can explode like a balloon while we continue to pump the dollars in.

Did anyone else notice that during the Clinton administration, when we started to narrow the budget deficit, we were rewarded with increase economic activity and investment? Now I realize some of this was due to the dot.com bubble. But if it wasn't the dot.com bubble it would have been something else. If the federal government wasn't sucking up all the investment dollars (which it started to not do) those investment dollars had to go somewhere.

We can deal with the Chinese. The place to start dealing with them is by balancing the federal budget. Let's stop putting our hand out to them and start demanding they start working for a living.


Post a Comment

<< Home