Lack of Manners, Showing Who is the Barbarian

September 28th, 2010

Has the president Obama no manners at all?

One cannot make up such stuff as this…

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The reason given for Obama’s most unusual procedure is that he and his Congressional cohorts are “protecting U.S. interests: American jobs and American competitiveness”. Of course, Obama would never pay the blackmail if China wanted to force upon the U.S. an unpalatable dollar-policy, e.g., demand that the dollar be immediately put back on a gold standard on the theory that the present dispute would not have arisen if the dollar were gold redeemable as it had been before Nixon’s default. Obama has grossly overplayed a very weak hand. The U.S. has never been in a weaker bargaining position. All the trump cards are in the Chinese hand.

None of the arguments used by Obama in his impolite and immodest lecturing of the Chinese Prime Minister holds water. Exactly the same stratagem was applied against Japan in the 1980’s. At that time the U.S. wanted Japan to let the yen float upwards “in order to help restore America’s competitiveness”. Japan meekly obliged, and the result was: bankrupting the Japanese financial system while America became even more uncompetitive.

That episode has been completely misrepresented by the American media and mainstream economists. To restore balance, here is the other side of the argument. Japan had a huge pile of U.S. Treasury paper as a result of several decades of trade surpluses — fruits of Japanese thrift and good husbandry. As the yen was floating upwards, Japan took enormous losses on its holdings of U.S. paper, since its gold value was no longer guaranteed after Nixon’s default of 1971.

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