Here’s a letter that I sent to the Wall Street Journal:
Peter Navarro asserts that “China mops up vast sums of export dollars through sterilization efforts that are tantamount to forced saving. In the process, Chinese consumers lose significant purchasing power because of the undervalued yuan – and Americans lose millions of jobs” (Letters, Nov. 21).
Ignore the question of whether or not Beijing’s commitment to peg the yuan to the dollar really is currency manipulation. Instead, suppose the Chinese people truly did – voluntarily – have a very high savings rate. Would Prof. Navarro argue that trade with the Chinese under those circumstances would cause Americans to “lose millions of jobs”?
If not, why does Prof. Navarro believe that “forced saving” by the Chinese depresses American employment? From Americans’ perspective, the particular reasons why the Chinese people save as much as they do are economically irrelevant.
But if Prof. Navarro does believe that even voluntarily high savings by the Chinese makes U.S. trade with that country a source of higher unemployment in America, then Prof. Navarro must believe that America’s best trading partners are those foreigners who are most profligate – in which case Prof. Navarro should also believe that he is better off trading with individuals who are profligate than with individuals who save and accumulate capital. I wonder if Prof. Navarro trades only with mall-rat teenagers and other irresponsible spendthrifts. Given his economic ideas, he should seriously consider this course of action.
Sincerely,
Donald J. Boudreaux
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China buys U.S. bonds to keep its currency undervalued. By undervaluing its currency, China sells the U.S. more exports and effectively taxes U.S. exports to China. By doing so, China gains manufacturing jobs at the expense of the U.S., Europe, and many other countries around the world. It is a “beggar thy neighbor” policy that is not intended to help the U.S. finance its budget deficits but rather to increase Chinese jobs at the expense of the U.S. manufacturing base. Please take a deep breath, cast your ideology aside for the moment, and just think about the underlying economics and their implications.
Peter Navarro
Professor, Merage School of Business
CNBC Contributor
(949)-357-9330
http://www.peternavarro.com
Higher wage countries like the U.S. can compete with lower wage countries like China because our rates of productivity are higher. The problem with China is that it uses an elaborate system of mercantilist tools like currency manipulation and high export subsidies to subvert free trade. Don't get hung up on the wage differentials. Focus on what makes free trade work — floating exchange rates and the absence of protectionist and mercantilist policies. The bottom line is that China cheats and is screwing just about every other country in the world with its undervalued currency — from Brazil and Peru to Russia and Thailand.
Peter Navarro
Professor, Merage School of Business
CNBC Contributor
(949)-357-9330
http://www.peternavarro.com
China's growth IS at America's expense when it undervalues its currency and uses massive illegal export subsidies to dump its exports in the U.S. Free trade only works when both countries fairly compete. China cheaps by undervaluing its currency and the mechanism by which it keeps its hard peg to the dollar is to buy U.S. bonds. If you don't understand the mechanics of that, you can't possible understand the broader problem. So please, take some time to learn about the implications of China's hard peg to the dollar.
Peter Navarro
Professor, Merage School of Business
CNBC Contributor
(949)-357-9330
http://www.peternavarro.com
The problem I see is that most people don't understand the mechanics of currency manipulation and its relationship to China holding vast sums of U.S. debt. China does not do this to help us but rather to screw us by maintaining their hard dollar peg at an undervalued rate.
Peter Navarro
Professor, Merage School of Business
CNBC Contributor
(949)-357-9330
http://www.peternavarro.com
China buys U.S. bonds to keep its currency undervalued. By undervaluing its currency, China sells the U.S. more exports and effectively taxes U.S. exports to China. By doing so, China gains manufacturing jobs at the expense of the U.S., Europe, and many other countries around the world. It is a “beggar thy neighbor” policy that is not intended to help the U.S. finance its budget deficits but rather to increase Chinese jobs at the expense of the U.S. manufacturing base. Please take a deep breath, cast your ideology aside for the moment, and just think about the underlying economics and their implications.
Peter Navarro
Professor, Merage School of Business
CNBC Contributor
(949)-357-9330
http://www.peternavarro.com
Higher wage countries like the U.S. can compete with lower wage countries like China because our rates of productivity are higher. The problem with China is that it uses an elaborate system of mercantilist tools like currency manipulation and high export subsidies to subvert free trade. Don't get hung up on the wage differentials. Focus on what makes free trade work — floating exchange rates and the absence of protectionist and mercantilist policies. The bottom line is that China cheats and is screwing just about every other country in the world with its undervalued currency — from Brazil and Peru to Russia and Thailand.
Peter Navarro
Professor, Merage School of Business
CNBC Contributor
(949)-357-9330
http://www.peternavarro.com
China's growth IS at America's expense when it undervalues its currency and uses massive illegal export subsidies to dump its exports in the U.S. Free trade only works when both countries fairly compete. China cheaps by undervaluing its currency and the mechanism by which it keeps its hard peg to the dollar is to buy U.S. bonds. If you don't understand the mechanics of that, you can't possible understand the broader problem. So please, take some time to learn about the implications of China's hard peg to the dollar.
Peter Navarro
Professor, Merage School of Business
CNBC Contributor
(949)-357-9330
http://www.peternavarro.com
The problem I see is that most people don't understand the mechanics of currency manipulation and its relationship to China holding vast sums of U.S. debt. China does not do this to help us but rather to screw us by maintaining their hard dollar peg at an undervalued rate.
Peter Navarro
Professor, Merage School of Business
CNBC Contributor
(949)-357-9330
http://www.peternavarro.com
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