Ever heard of a YUAN? Probably not. It is the Chinese base unit of their currency like our dollar. Today US$1.00 equals ¥6.55 (Yuan). Obama and Geithner are chiding China on China’s efforts to keep the value of their Yuan as low as possible in order to keep Chinese goods at a low-cost to countries that import their goods, LIKE THE U.S.. So, if Obama and Geithner get their way, and China allows their currency to increase in value in relation to our $US dollar, what does that mean to you. Let’s see by showing the relationship of the Dollar to various levels of the Yuan:
Today: ¥6.55 Yuan = US$1.00
So, as the value of the Yuan increases, like Obama and Geithner are proposing it takes more US dollars to by the same item from China. For example, if today you are paying $12.00 at Wal-Mart for a T-Shirt for you children, and if Obama and Geithner get China to increase the value of Yuan to ¥13.00 for each US$, that same T-Shirt would cost you well over $20.00 and it is the same shirt!
The FART Syndrome
Whether you agree that we should buying so much stuff from China the fact is that we do. We have lost countless of our manufacturing and fabrication jobs to China and other low labor cost suppliers that we do not make much here anymore. Manufacturing is less than 20% of our total economy at this point. Even if we wanted to stop buying anything from China, there are 4 Government Created Obstacles to this ever happening. I like to think of these as the FART syndrome. It is made up of:
F: Financial regulations on banks and companies that strangle their ability to compete in the global economy within the U.S. boarders. Our companies have to conform to ludicrous Sarbanes–Oxley Act regulations that no other nation imposes on their companies. Our SEC reporting requirements are archaic, cumbersome and only serve to stifle our ability to compete globally. Bank reserve requirements are eliminating most medium size banks thus centralizing banking control within a small number of large banks, 5-6, and eliminating competitive sources of capital for large and small U.S. businesses.
A: Attorneys lurk around every corner ready to sue the lifeblood out of every American Manufacturer or Business for anything that may or could happen to the consumer. All the while government is telling business every step of the way what they can and cannot do. But, when some moron spills coffee on the crouch, and sues MacDonalds, the attorneys chase the $$$s and government looks the other way with impunity. When the FDA approves a drug today, then someone has a heart attack who is taking that drug, the lawyers line up and sue the drug company into oblivion while the FDA says NOT MY PROBLEM.
R: Regulations in the U.S. are beyond reason and logic. There is nothing this government does not regulate and if they do not, it is an oversight they will soon correct! The worse part is that the government has no responsibility for the consequences of their regulations. Take the BP oil spill. When the initial rig was constructed, it was constructed using government standards and inspected by government inspectors. When it blew up, the government blamed and demonized BP and the attorneys will pick over BPs carcass for years to come.
T: Taxes on U.S. business are the highest in the industrialized world. If you are a U.S. entity and part of a global company, your parent company in lets say London has to view your enterprise in the light that it will never see at least $35 out of every $100 you make. So, would the London parent invest in its U.S. subsidiary or its India or China Subsidiary who is taxed at 0%! Does not take a genius to figure this one out.
So, while Obama, Geithner, and Bernanke at the Federal Reserve are driving the value of the US Dollar into the proverbial toilet, they are trying to get China to go in the opposite direction.
HERE IS A THOUGHT, HOW ABOUT ADOPTING POLICIES THAT STRENGTHEN THE DOLLAR AND LET THE YUAN FALL WHERE IT MAY!
Obama, Geithner, and Bernanke are creating an international inflationary spiral that will soon engulf the globe. Right now the whole world uses the US dollar as the international trading standard. For how much longer? Probably not very long.
Unless you are intentionally trying to devalue the worth of the United States as a world economic leader, the solution is simple:
- Stop Deficit Spending.
- Stop creating needless regulations.
- Lower Taxes for everyone.
- Quit creating housing, credit, stock market, and bond BUBBLES that continue to hammer this economy.
- Stop creating unearned entitlements (Social Security is paid in by the recipients and earned)
- Stop monetizing the debt by printing more money then buying US bonds with the newly created money.
- GET OUT OF THE WAY OF THE U.S. BUSINESS COMMUNITY AND THEIR WORKERS.
So when you hear the great communicator Obama assail China’s currency policies, consider what will happen to you on your next trip to Walley-World (Wal-Mart), when you find your $14.00 T-Shirt selling for over $20.00. You can call it what you will but if Obama-Geithner-Bernanke inflate the value of the Yuan, it will be the largest tax increase on the American Middle Class EVER…