President Barack Obama has
been marked by the curse of government failure. But you wouldn't know it by listening to the
political and chattering classes in Washington, DC and other world capitals.
In a classic response, the great dissemblers have done what they do best:
when trouble strikes, they dissemble. Indeed, following the Panic of 2008, they
have been busy burying their mistakes by pointing fingers, covering up and
rewriting history. Alas, their assertions are rarely subjected to what they regard
as the indignity of factual verification. Never mind.
When it comes to pointing fingers at the alleged culprits of our current
economic troubles, the Obama administration has reached back to the rhetoric
of class warfare. Who is better to blame than the usual suspects: bankers,
businessmen, speculators and, of course, the `rich'? Foreigners are favorite
targets, too. China has replaced Japan as the target of choice. From the early
1970s until 1995, Japan was the enemy. The mercantilists in Washington,
DC claimed that unfair Japanese trading practices were behind the
ballooning US bilateral trade deficits with Japan and that those deficits were the
source of many problems in the US economy.
To correct the so-called problem, the US demanded that Japan adopt
an ever-appreciating yen policy. The Japanese complied and the yen
appreciated against the greenback, from 360 in 1971 to 80 in 1995. But, this didn't
close the US trade deficit with Japan. Indeed, Japan's contribution to the US
trade deficit reached almost 60% in 1991. And, if that wasn't enough, the yen
appreciation contributed to pushing Japan's economy into a
deflationary quagmire. Today, the US is playing
the same blame game with China. And why not? After all, China's contribution
to the US trade deficit has surged to almost 45%, reaching magnitudes
registered by Japan in the early 1990s. Let's hope China fails to follow Japan's
lead and ignores US demands for an ever-appreciating yuan. Such a
wrongheaded Chinese compliance would do little more than attract massive hot
money flows into China and create instability in China. This would be bad news
for the world economy's main growth locomotive.
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