Friday, April 2, 2010

Let the Red Phone go to voicemail, I'm on the other line

President Obama took a very important phone call Thursday night from his new BFF. President Hu Jintao wanted to chat, in fact the call went on for over an hour. We know this wasn’t expected because Air Force One had to park on the tarmac after landing while the two love smitten teenagers kept talking. They were arranging a date for later in the month at the nuclear security summit in Washington (the spring prom as it were).

Back in China, the newly warmed relations were all over the TV news. Their version of the call was that Mr. Hu expressed a desire for healthier ties while stressing Beijing’s positions on Taiwan and Tibet; and the White House said President Obama stressed for China to press Iran on its nuclear ambitions. (Nothing but x’s and o’s on their text messages, no picture sexting so far.)

The White House said emphatically that they did not discuss the Renminbi but they did discuss trade. You can bet the wild swings in the USD were a topic. Obama had tried to shake loose from China’s peg to the dollar by driving the USD down. A weak dollar is in theory as good as tariffs but Wall Street undermining the Euro has driven the USD back up again. None of this sits well with China and they haven’t been shy about saying so.

As a favor to his new friend, Obama will have the Treasury sit on the Congressionally mandated report about China’s blatant currency manipulation. Obama could lay on heavy tariffs under the GATT treaty if China is shown to have engaged in such behavior, which of course they have done every day since China began to trade with the outside world.

China could solve Obama’s US unemployment problem at anytime without doing anything about the currency exchange rate. You see China is not a democracy or a free market in any normal sense of the word. The Peoples Republic of China is a hard core Stalinist regime. They are free market in that they hold their prisoners until they get the best price for their organs (I didn’t say they weren’t capitalists)

If China sees it in their interest they can hold up the transnational corporations that have been siphoning off jobs from the US as much as they see fit. As the only economic super power they can even apply pressure to companies that aren’t dependent on China directly. The Neo-con dream was to build the dragon up and then control it, the dragon doesn’t think so.
China’s officials care about face more than almost anything. Obama was meek and respectful during his visit to China which was great fodder for the rightwing media. But Obama has a stature in the world that China with all its success can’t buy, so Obama can let Hu wear his letter sweater around school and for this China will put out some trade concessions. There will probably be no official agreement announced but what China’s heavy handed government does could solve the unemployment problem, at least until the fall election is over.


John said...

Please, Prairie:

How about an assessment of the relative harm caused to the US, then the world, economies by
1) the realm of $100's of trillions of asset-less default swaps as compared to 2) China's, hardly exclusive, currency manipulation.

Why when the US manipulates its currency, we are told the market is much too massive for it to have any effect but when it is politically convenient to pin the same on China, there is induced a national cold sweat?

The minute China accurately values its currency prices in the US will go up 20-40%. Why does a population in deep recession, with a real 20% unemployment rate, need massive price increase?

I would submit that the entire problem has been caused by the exportation of our manufacturing economy out of the country. All the rest is rather useless squawking about effects NOT real causes.
While China indeed does wield the power it was given, the real gripe is with the suicidal idiots who handed it to them.

prairie2 said...

I mostly agree with your points John, if you read my blog you should realize that things are to the point that anything China does is going to ripple through our economy. Currency exchange rates aren't the real problem or the real fix. The point I was making is that China can throw its weight around as it chooses. Maybe Obama can extract us from this dance of death with China but the transnational corporations and their Republican and DLC lackeys aren't going to allow that to happen if they can stop it.

John said...

Thanks, P2.

Indeed, we've seen the "running dogs" and they trot the streets of DC!

It IS a great blog.
(Malloy "sent" me a while back.)

CA-Jammo said...

Hi, Prairie2!

I heard Malloy reading your missive last week and this caught my ear.

I'm a 28 hear employee of Ross Perot's old company, however, that company was EDS (Electronic Data Systems), ADP, (Automatic Data Processing), was founded by Henry Taub.