In the Presidential debate last night, Mitt Romney accused China of being a currency manipulator; and I have to say that don’t really understand what that means. Romney certainly isn’t the first person I’ve heard it from. I’ve heard it discussed for years, and no one has been able to explain it to me in way that makes sense. In essence, any country that has a central bank and a fiat currency regime generally falls into that category if they have anything resembling nominal stability – which is a good thing, not bad. Currency management to ensure economic stability is a fact of life that appears to be lost on some of late, especially quite a few with an “R” next to their names. I have to say that because our central bankers allow global issues to effectively tighten monetary policy here in the US and we suffer the consequences for it, doesn’t mean that others should follow us in that walk across the razor’s edge; and they are right for not doing so. It’s a terrible way to run things as demonstrated by the effect of tight money all during the Great Recession.
I hate to shamelessly “borrow” an idea from Lars Christensen, but I’m going to do so anyway. He has a fantastic post about China’s monetary policy that includes a graph showing how the Chinese central bank is following a sort of monetarist approach to their monetary base, targeting between 15-16% growth – and that they have been doing a great job staying on target given all of the turmoil that has been floating around the globe the last few years. If this graph is valid, and I don’t have any reason to question it, I just don’t see how they could be accused of doing anything other than managing their monetary base based on preferred internal economic conditions. If they did try to manage their currency as such to simply rip us off, they would have some nasty side effects, like a nasty inflation problem and I don’t think it would be worth it. It would be a really stupid thing for them to do to themselves.
I think Mitt Romney is mistaken on the China account, at least as far as currency goes. I also think public statements he has made about the Federal Reserve are inaccurate. But I am going to vote for him anyway as an item of faith that much of it is really only election rhetoric. I dread the thought of living through another 4 years of Obama, with absolutely nothing being done about our miserable state of affairs over the last 4 years – from bone-head central bankers to bone-head foreign policy, and every other imaginable debacle in between. It’s time to stop having debacles and get some positive momentum for a change. At the very least, I really cannot see how President Romney can be worse; and if we have to suffer anyway, I at least want to try something else in hope of getting some positive results. With Obama, it will be just more of the same, at best. No one knows what kinds of stuff he will do when he doesn’t have to worry about reelection – and I really don’t trust him enough to want to find out!