Politics and Economics

Olivier Knox, Blogging for Yahoo! reported on how U.S. politicians are talking to the likely future leader of China.

The US vice president notably pressed his guest over rampant theft of US intellectual property, and on charges that Beijing keeps its currency artificially cheap in order to keep the price of its exports down relative to US goods. (Thus hurting US manufacturers and the jobs-hungry US economy — a regular chorus of US complaints sure to grow louder ahead of the November elections.)

It is a street market fight. “No Fair! You sold me those strawberries too cheaply. Charge me more or I will not buy here anymore!”  Surprisingly, I never hear this. China sells stuff to the world cheaply and gets criticized.  Further, if China raised the value of its currency too quickly it would cause a clear rise in U.S. inflation and destabilize its own economy which has given some hope to the world in these times. China has been smart enough to not listen to foolish economics from U.S. politicians who are pandering to an unthinking electorate.

Chinese currency will appreciate against the dollar. However, it should do so slowly so as not upset international or their own domestic economics.   Appreciation means exporters to China win and consumers in the West lose.

It also means it is better to invest cash in China now than later.  I hope U.S. politicians will focus on encouraging America to be its very best. America will not fade into the night anymore than it did when Japan rose 20 years ago. It has its own unique competitive advantage, and it should play to that and not whimper about how China is being unfair selling us good products too cheaply.

Tomorrow, I will write on intellectual property theft with emphasis on Microsoft as an example.

Any other thoughts?

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Posted in: China

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