Wherein I Answer Lou Dobbs and Suspect He Is A Chinese Agent

It is always dangerous to argue with the insane, but I am actually willing to answer Lou Dobbs question:

And what I can't quite figure out amongst these geniuses who are
so-called free traders is, why do they think that about a 35 percent to
40 percent undervaluation of the Chinese yuan to the dollar is free
trade? Why do they think 25 percent duties in tariffs on American
products entering China is free trade?

I will leave aside the question of how he or anybody else knows the yuan is undervalued by this much.  I will accept his premise on the basis that we know the Chinese government spends money to keep the yuan lower than it might be otherwise.  Here is my answer:

Yes, it is not perfectly free trade.  But we let it continue because the freaking Chinese government, its consumers, and its taxpayers are subsidizing Americans.  The Chinese government is making all of its consumers pay higher prices and higher taxes just so American consumers can have lower prices.  Napoleon advised that one never should interrupt an enemy when he is making a mistake -- after all, this same strategy managed to earn Japan a decade and a half long recession.  Our correct response is not tariffs, it is to say, "gee, thanks."  This is for the Chinese people to stop, not our government. 

Why is China doing this?  Because it government is using monetary policy to help out a few favored exporters who have political influence at the expense of all of their consumers and exporters.  And Lou Dobbs wants the US to respond exactly the same way, to punish our consumers to favor some of our favored politically-connected exporters so the Chinese consumers can have lower prices.  Great plan.  Is Lou Dobbs an Chinese agent?

  • In his native Mandarin it's: "Liu Dhabbs."

  • In his native Mandarin it's: "Liu Dhabbs."

  • Artd0dger

    So true. Mercantilism never dies: the Chinese are hording money like the 17th century Spanish horded gold, and it will get them about as far.

    If the first fallacy of economics is "the seller wins, the buyer loses," then the second is to play tit-for-tat when encountering the first.

  • markm

    Are the Chinese actually hoarding dollars? Do they imagine that little pieces of paper with green printing actually have intrinsic value?

  • dearieme

    My father exlained these matters to me when I was still in short trousers. So clearly the fault lies with the father of Lou.

  • happyjuggler0

    I agree with virtually your entire post except the part of Japan being our enemy. I am not sure where that came from, but trade is not a zero sum game.

    Are you better off, or worse off, because you can trade with skilled electricians, programmers, manufacturers etc.? Clearly you are better off with more such people around than with fewer such people, as you get a better price on their labor as a result, not to mention possibly a better product or a more varied choice of product available. The US is worse off with a poorer Japan (or China, or India, or Germany, or....) than a richer Japan.

  • josh

    Come on, juggler, he didn't really mean that they are our enemies. They are, however, competitors. And as W.C. Fields said, you should never give a sucker an even break. It just keeps them stupid and impoverishes the both of you. Better to let them suffer from the consequences of their own actions and maybe learn something in the process.