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Vigilante China is U.S. taxpayer's hero
Commentator Todd Buchholz
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TEXT OF COMMENTARY
Kai Ryssdal: The president's on his way to Asia this afternoon. Four countries in eight days: Japan, Singapore, South Korea and China. On a day when the Treasury Department announced a record deficit for the month of October, it's that visit to Beijing that's getting most of the attention. Aside from, maybe, us, China has about as big a stake in how quickly the American economy recovers as anybody. They own nearly a trillion dollars worth of our debt. So they're watching pretty closely as the government tries to spend its way out of recession. Commentator and economist Todd Buchholz says if we're lucky, the Chinese will keep us honest.
TODD BUCHHOLZ: American culture is filled with vigilante heroes. Take Batman. Without Batman, the citizens of Gotham would find themselves robbed and ridiculed by the Riddler and the Penguin.
Well, these days the Riddler and the Joker stand for our national debt, as deficit forecasts jump by the trillions, as the ratio of deficit-to-GDP hits 11 percent, with virtually no plan to rein it in.
But who is looking out for the American taxpayer?
The Obama White House sounds resigned to breathtaking deficits until the year -- well, pretty much until Generation Y trades in their iPhones for hearing aids.
Today, the American taxpayer, faced with a future of rising taxes, has no powerful friend. Except one: A vigilante character riding in from the East. The Far East. And the name of that character is China. Follow me here.
China is warning the U.S. government to protect our dollar and to protect our runaway budget. Premier Wen Jiabao urged President Obama to "honor commitments and guarantee the security of China's assets." What are China's assets: $800 billion of our bonds. China is almost begging the U.S. government to show a sense of responsibility.
If the U.S. dollar or U.S. bonds collapse, everybody loses. American consumers will get squeezed by higher prices and China loses as well, since their investments in the U.S. would go "poof."
Apparently, China cares more about protecting the American taxpayer than our elected officials do. Chinese leaders are the vigilantes trying to protect the American public from a fiscal fleecing.
Are they protecting Americans because they are nice? No! Noble? No! Charitable? Hah! Of course, it's self-interest. Hey, not all vigilantes are as noble as Batman.
RYSSDAL: Economist Todd Buchholz was an adviser to the first President Bush. His latest book is called "New Ideas From Dead CEOs."
Strange how the Republicans advocate weakening the dollar (that is, strengthening the RMB) when they're in office, but advocate a strong dollar as soon as Dems are in office. The current administration is driving in the right direction: Let the dollar weaken and the RMB strengthen, to give US firms some advantage in export markets.
I would disagree with most of the psoters and agree with Mr. Buchholz. The manufacturing and RMB peg are side issues that are best dealt with differently. If we devalue the dollar, every middle class person with a savings and retirement account will take a beating as inflation eats up that value. The Chinese are in that boat with the rest us and they can sound a very loud alarm.
I appreciate the attempt at humor, but this comment really missed the point about China's holding of US treasury bonds. The hero/villain analogy just doesn't work. It suited both countries - for the US, it enabled the flow of credit that pushed up consumption while, for the Chinese government, buying US treasury bonds is a way of subsizing its export-oriented economic growth. By choosing not to exchange its export earnings from US$ to Chinese RMB, it kept the RMB artificially low and retained China's comparative advantage in manufacturing, thus maintaining its export-oriented growth.
I guess Mr. Buchholz must have forgotten that the weakening of the American dollar due to high deficents makes American manufacture goods cheaper for Americans and Chinese manufacured goods more expensive for Americans. This spurs American manufactureing and creates jobs in manufactureing in America. This is really what the Chinese are worried about.
