The Currency Exchange Rate Oversight Reform Act or as it might be more accurately described as The China Tariff Act passed the Senate 63-35 last night. It survived mainly from the efforts of Jeff Sessions of Alabama who supplied the needed Republican votes to pass it. A long standing proponent of trade deals and an anti-protectionist, this is an unusual move for the Senator that isn’t even up for re-election.
China upped its rhetoric sharply by issuing warnings of another Great Depression like the one “caused” by the 1930 Smoot-Hawley Act that raised US import tariffs sharply. This has always been a popular nugget of wisdom from the conservative re-writing of history. They often tie Smoot-Hawley to FDR despite him not taking office until 1933. US trade with the world in 1930 was a rather insignificant part of the economy and trade didn’t decline more than one would expect with a worldwide depression already in full swing.
The hue and cry on the corporate news is that we dare not anger China or they will dump all of our debt, and this would spell disaster for the US. In fact US Treasuries are selling at premium and China doesn’t hold much more than a trillion anyway, as China has been wisely limiting its exposure. The worst that would happen is that the Federal Reserve would buy up any surplus from the market under its policy of holding interest rates down. China would than hold another trillion in USD that it would need to spend or invest somewhere. Sounds more like a bonus rather than a threat.
The Republicans in the House have been adamantly opposed to passing the bill, but now information has gone out that they will likely pass some version of the Bill early in the year. House Republicans are of course all up for re-election, and their popularity has sunk to the point that the Chamber will almost certainly swing back to the Democrats.
China did start pushing its currency up on Monday with a 0.6% increase in value compared to the USD, but they pushed it down again 0.4% on Tuesday. Nothing happens to the value of the Renminbi (The People’s Currency) that isn’t engineered by the Chinese Government. China is a totalitarian oligarchy controlled by a committee of six even if the western media calls their Comrade Chairman by the erroneous title of President.
In other words they are capitalists, but by our standards, they are benevolent capitalists. China has made fantastic strides in the past 30 years while our capitalists are taking us head long toward the 18th century. Our economies are expected to pass by each other within five years as we go down and China up. Get used 18th century feudalism or fight back. www.prairie2.com