Friday, October 7, 2011

Renminbi Rant Reminder

Last March, during another time of China-bashing, I put up a post on the Old LaMarotte (link) on the subject of the renminbi or the Chinese yuan. Here is the flavor of it:

Ultimately currency control is price setting. By holding the value of the yuan low in exchange for the dollar, the Chinese government is also lowering the price of its goods. It is foregoing revenue. This means that we can obtain Chinese goods cheaper than we could if the renminbi were to float. This also means that the Chinese are willingly accepting a lower price for what they produce. Self-evident? Yes. Why do they do that? They say: “It will benefit our people if we sell our goods at a cheaper price. More people will buy them. We will sell more things and employ more of our people. There is no law which says that we cannot set our prices high or low. The only difference between us and you, America, is that we do this at the national level and you don’t do it at all. You don’t seem concerned for the good of your own people.”

It’s not as if China were lending us billions and selling us cheap goods at the point of a gun. We’re doing it willingly. There are straightforward ways of defending our workers. One of those is to put up stiff tariffs.

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