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China Floats, America Sinks

excerpts from a report by Greg Palast. July 22, 2005

In case you haven't the least idea what the heck it means for China to "float" its currency, let me put it in the language we economists use: China's float don't mean squat. Yet our President, a guy whose marks in Economics 101 are too embarrassing to publish here, ran out to hail the fact that buying Chinese money will now cost more dollars.

The White House line to the media, swallowed whole, is that by making Chinese money (yuan) more expensive to buy with dollars, Americans will buy fewer computers and toys from China -- and US employment will rise. This will happen when we find Saddam's Weapons of Mass Destruction.

Economics Lesson #1: You can't change the value of goods by changing the value of the currency on the price tag. As my comrade Art Laffer wrote me, "If cheap currency makes your products more competitive, all automobiles would be made in Russia." Driven a Lada lately?

Economics Lesson #2: Don't take economics lessons from George Bush. Or Milton Friedman. Or Thomas Friedman. What that means, class, is don't believe the big, hot pile of hype that China's zooming economy is the result of that Red nation's adopting free market economic policies.

If China is now a capitalist free-market state, then I'm Mariah Carey. China's economy has soared because it stubbornly refused the Free - and Friedman-Market mumbo-jumbo that government should stop controlling, owning and regulating the industry.

China, when it chooses, makes use of markets and market pricing to distribute resources. The truth is, Chinese markets are as free as my kids: they can do whatever they want unless I say they can't.

You have been reading excerpts from "China Floats, America Sinks" by Greg Palast. You can read the entire piece here: http://www.gregpalast.com/detail.cfm?artid=447&row=0. Thanks to Greg Palast for gregpalast.com. We visit often and we hope you will too.

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