The golden boy of establishment economics is so full of it, I can hardly believe what he just wrote on his blog:
“In reality, today’s currency war is between “Chimerica”—as I’ve called the united economies of China and America—and the rest of the world.”
WTF? Ferguson thinks that the conflict between the USA and China is just a puppet show to distract attention from our “united” economies sticking it to India and Brazil.
Did Ferguson miss Obama’s love-fest in India on his way to the G-20 meeting in South Korea? Does he think that the Chinese are happy about the prospect of India switching from Russian military gear to US gear starting with the cargo plane deal that Obama announced?
Did Ferguson not notice that Bernanke fired the first round from his QE2 bazooka on November 12th, the very same day that the G-20 meeting ended with the mercantilists rejecting US trade proposals?
Did Ferguson not notice Bernanke’s historic speech singling-out China as a detriment to the global recovery? Say what you will about Bernanke, but he is the second-most powerful man in the world. He can make or break entire nations. Only a fool would want to be in his cross-hairs.
Even neocon bossman Charles Krauthammer approved of Obama’s India doings and sez that we have made a strategic geo-political shift from China to India.
Before the G-20 meeting, the USS George Washington aircraft carrier stayed out of the Yellow Sea at China’s insistence. After the G-20 meeting, it sailed back into the Yellow Sea.
Niall Ferguson “job” at Harvard and the London School of Economics is to paint a big, moronic happy-face onto the beginnings of an historic conflict between the USA and China. And that’s just propaganda on behalf of the multi-nationals striving to keep the sweatshop profits flowing, and the factories flowing from the USA to China.
Ferguson also writes:
“If the U.S. prints money while China effectively still pegs its currency to the dollar, both parties benefit.”
Does he really think that the food inflation resulting from the peg is a benefit to the Chinese people?
And then this BS:
“Only America’s “exorbitant privilege” of being able to print the world’s premier reserve currency gives it breathing space. Yet this very privilege is under mounting attack from the Chinese government.”
The Chinese, huh? Criticizing our currency? Don’t make me laugh. Does Ferguson know that the IMF won’t even allow the Chinese yuan into its SDR?:
“The International Monetary Fund said China’s yuan doesn’t currently meet the “freely usable” criteria required for inclusion in its Special Drawing Rights valuation basket made up of the dollar, euro, yen and the pound.”
Ferguson then goes on waxing poetic about China’s grand strategy, concluding that China will overtake the USA just like the Japanese were supposed to do back in the 1980s.
But China’s desperate clinging to its currency peg puts the lie to the whole “grand strategy.” Why would China risk, not only food inflation and a currency war, but the USA “playing the India card” just like Nixon played the China card against the Soviets during the Cold War?
I’ll tell you why. China’s crude sweatshops can’t compete on a level playing field. If the value of the yuan were to be set by market forces rather than dictatorial decree, many of China’s “fabulous” sweatshops would shut down just like Wen Jiabao said:
“Do not work to pressure us on the renminbi rate…. Many of our exporting companies would have to close down, migrant workers would have to return to their villages. If China saw social and economic turbulence, then it would be a disaster for the world.”
Ferguson thinks Wen’s comment was just for show. Ferguson is wrong. The only thing wrong about the quote is that it would be a disaster for the world. The actual disaster is the current “10 and 10″ system where China grows at 10% and the USA suffers 10% unemployment.
That will not last no matter how fervently Ferguson kowtows to Beijing.
Note: The sale of giant cargo airplanes to India is extra-significant because they are critical for projecting military power. And the Chinese military has been having trouble expanding their fleet. Here is what the Defense Department said in its 2010 Annual Report to Congress (page 34):
“The PLAAF has, however, encountered difficulty expanding its fleet of long-range heavy transport aircraft. Neither Russian nor domestic PRC manufacturers have proven able to fill the PLAAF’s requirement for long-haul transports in support of peacekeeping, disaster relief, and other requirements.”
The European Union won’t sell military gear to China, and neither will we, so it’s not easy for China to acquire such aircraft. And that is just another facet of Ferguson’s delusion that we are “united” with China.