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President Barack Obama told Chinese Premier Wen Jiabao to strengthen the Chinese yuan during the East Asia Summit in Indonesia this weekend, China Daily reported. The two met during an impromptu meeting Saturday morning at the request of Wen.
Obama’s national security adviser Tom Donilon told reporters on the sidelines of the conference that Obama stressed the importance of China adjusting its currency value, something the U.S. senate is also pushing.
The Currency Exchange Rate Oversight Reform Act, informally known as the Currency Bill, received a great deal of attention in the media a few weeks back. Passed by the Senate, the bill was a solid piece of legislation aimed squarely at the most destructive of China's many abusive trade policies. However, despite considerable support, the House isn't taking it up and there is no reason to expect President Obama to sign it or for his administration enforce it.
This is because, much of our government, including this White House, has been co-opted by the multinational corporations that profit from China's trade abuses and exploitation of its labor and environment. This cozy system drives up returns on U.S. capital invested in China, making the rich richer, while it undermines the value of American labor, making the poor poorer. No amount of U.S. government largesse can overcome this structural problem.
What is needed to fix our economic problem at home is a show of American resolve on trade. China's pushing its Yuan up dramatically the day before the Senate vote clearly demonstrated what every Chinese dissident will tell you: the Boys from Beijing respect power and action, not supplication.
That hasn't stopped China's apologists in America from rushing to the barricades in defense of the abomination they call "free trade," a one-sided wealth transfer mechanism that has transformed America's manufacturing heartland into a wasteland and Shanghai into a towering dreamscape. Republican Senator Bob Corker of Tennessee trotted out the usual scare tactics and howled that the bill's sanctions would launch a "trade war." Well, Senator, 25 years of escalating trade deficits looks an awful lot like a trade war from Cleveland or Detroit.
However, for those who can't stomach a tariff or a sanction under any guise, we need an outside the box proposal. presidential candidate Buddy Roemer and I (Autry) offer an elegantly simple suggestion: disable China's currency manipulation mechanism now, and simultaneously defuse its growing threat to our national sovereignty.
To keep its currency trading within a specified range, China runs a "sterilization process." This involves vacuuming a vast amount of our Wal-Mart dollars out of their ever-growing trade surplus. The Chinese must ensure that these dollars are not eventually sold on the foreign exchange markets because that would drive down the relative price of the U.S. currency, making American goods more competitive in Chinese and global markets -- the one thing our so-called "trading partner" never wants to happen. So, China buys U.S. Treasuries as the surest way to make these greenbacks "go away," and as has become the largest holder of U.S. treasury securities, to the tune of $1.1 trillion or nearly 25 percent of total foreign holdings. By comparison, the second largest holder is Japan, at $936 billion, followed by the United Kingdom at $397 billion.
Beijing's funding America's debt keeps stimulus addicts like our President quietly inside China's pocket and also supplies China with a financial "nuclear option" against America. A recent People's Daily article titled "China must punish U.S. for Taiwan arm sales with 'financial weapon'" urges Beijing to establish a "direct link between the U.S. Treasury bond purchase and U.S. domestic politics." Let's be clear, People's Daily editorials do not reflect individual opinions, but are actually subtle announcements of new Communist Party doctrine. Do any of us, even "free trade" loving Senators, wish to live in an America where the Chinese Communist Party dictates our politics?