On Thursday, October 6th, the U.S. Senate moved one step closer toward sending the Currency Exchange Rate Reform Act to the House for its consent. This legislation has quickly and silently made its way through the approval process with nary a token objection or open discourse as to its merits or more importantly, its dangers.
The foundational arguments in support of this Act are based, principally, on the premise that China arbitrarily suppresses the value of its currency (Yuan) the result of which, it is alleged, economically disadvantages the U.S. The fact of the matter is that there are many reasons for the Yuan’s present value being as it is and the determining factors/forces are not at all dissimilar to those which influence other currencies including the U.S. Dollar. The point being is that none should ignore the fact that the U.S. Dollar’s value (exchange rate) is equally susceptible to manipulations as well and, I might add, deliberately so – the Fed routinely intervenes in currency markets either directly, through its various Member Banks or by way of the IMF.
Passage of the Currency Exchange Rate Reform Act effectively licenses the U.S. Congress to openly meddle with the value – as it deems appropriate – of a sovereign nation’s currency. As if assuming the role of Global Police Force weren’t sufficiently burdensome the U.S. Congress is about to anoint itself with an entirely new scope of authoirty: Über Currency Administrator-Global. What follows are a few hi-lite’s of the Acts provisions:
- SEC. 4.[a.(2.)] “DESIGNATION OF FUNDAMENTALLY MISALIGNED CURRENCIES – With respect to the currencies of countries that have significant bilateral trade flows with the United States, and currencies that are otherwise significant to the operation, stability, or orderly development of regional or global capital markets, the Secretary shall determine whether any such currency is in fundamental misalignment and shall designate such currency as a fundamentally misaligned currency.”
- SEC. 6. FAILURE TO ADOPT APPROPRIATE POLICIES – “(a) In General- Not later than 90 days after the date on which a currency is designated for priority action…. The Secretary shall determine whether the country that issues such currency has adopted appropriate policies, and taken identifiable action, to eliminate the fundamental misalignment. ….If the Secretary determines that the country that issues such currency has failed to adopt appropriate policies, or take identifiable action, to eliminate the fundamental misalignment, the following shall apply…: …(A) IN GENERAL- The administering authority shall ensure a fair comparison between the export price and the normal value by adjusting the price used to establish export price or constructed export price to reflect the fundamental misalignment of the currency of the exporting country.”
- SEC. 6 (continued) sub para (3.) REQUEST FOR IMF ACTION – “The United States shall inform the Managing Director of the International Monetary Fund of the failure of the country to adopt appropriate policies, or to take identifiable action, to eliminate the fundamental misalignment, and the actions the country is engaging in that are identified in section 4(a)(3), and shall request that the Managing Director of the International Monetary Fund….”
- SEC. 7. PERSISTENT FAILURE TO ADOPT APPROPRIATE POLICIES – “(a) …the Secretary shall determine whether the country that issues such currency has adopted appropriate policies, and taken identifiable action, to eliminate the fundamental misalignment….If the Secretary determines that the country that issues such currency has failed to adopt appropriate policies, or take identifiable action, to eliminate the fundamental misalignment, in addition to the actions described in section 6(a), the following shall apply…:
- SEC. 7. (continued) sub para. (1) “ACTION AT THE WTO – The United States Trade Representative shall request consultations in the World Trade Organization with the country regarding the consistency of the country’s actions with its obligations under the WTO Agreement.
- SEC. 7. (continued) sub para. (2) “REMEDIAL INTERVENTION – (A) IN GENERAL- The Secretary shall consult with the Board of Governors of the Federal Reserve System to consider undertaking remedial intervention in international currency markets in response to the fundamental misalignment of the currency designated for priority action, and coordinating such intervention with other monetary authorities and the International Monetary Fund.”
Providing topical commentary is always filled with risk; some will openly dismiss the subject as conspiratorial while other will convulse over my writing style compressing their objections into rapier-like metaphors such as: meaningless drivel or terrible writing – so goes the risk. Yet for those of you who observe the companion and totalitarian-like excesses of this promulgation and are keenly alert to the lessons of history, one might then be prone to a bit of deja vu and appropriately teased by the following question:
Is it July 26th, 1941 all over again? Actually, if the truth be told, this was the day that should “…live in infamy.” By 1941 fully 70% of Japanese oil imports came from the U.S. as did much of its scrap metal and various other commodities all of which were vital to its economy, armaments industry and integral to its war with China. As it is for U.S. Multinationals presenlty doing business with China, pre-WWII trade with Japan was hugely profitable. Still with no open, visible or discernable threat, on July 26th, 1941 , Roosevelt boldy decreed that trade with Japan was now deemed illegal! Now then, back to the present:
The key sponsors of this Act are Senators Sherrod Brown (D-Ohio), Charles E. Schumer (D-N.Y.), and Lindsey Graham (R-S.C.) and I must say I’m not at all surprised as clearly legislation of this type is most certainly not the product of thinking minds yet what is even more troubling is the vote tally: 79-Yea/19-Nay. The spontaneity of any rush into the seemingly benign is always accompanied by a concealed ambition and this charade is no exception. The passage of this legislation should not be viewed through the specter of politics gone awry, it far more serious; the crafting of this misadventure can only be viewed as structured, deliberate and coercive in nature and of the most combustible type.
Whatever one might think of the Act or whether it is the genesis for the next great conflict one critical factor should never be far from ones frame of reference: The Economic Malaise that this Country is presently suffering through has absolutely nothing to do with China’s economic or monetary policies; it has everything to do with the mythical pantomime of global economic regimes attempting to salvage itself from certain and inevitable collapse and it could care less as to the conflict(s) it will most certainly create in its march to oblivion.
A few unassailable points worthy of note:
- China’s economic ascension has been funded largely by U.S. based Multinationals and Financial interests. The balance by U.S. consumers.
- These Interests orchestrated miss-information as to the nature of the global economic routines luring an ignorant and willing Congress into licensing multi-level mechanisms targeting western deindustrialization; Americans know these mechanisms as the WTO, GAAT, NAFTA, CAFTA Treaties and various other economic destabilization tools often referred to as Trade Agreements.
- The U.S. is in a near unsalvageable economic free-fall and Jobs Bills will not save it from certain death. It must be understood that the whole purpose of the global economic routine is to target and cannibalize sovereign nation-state status in favor of the theoretically more manageable economic-block theory. The routine is based on a degenerative notion whereby global resources are centrally hypothecated and directed toward base-labor (cheap) for pure profit-maximizing motives. Doubt me? Look at where global manufacturing is concentrated if one is prone to doubt.
- The argument that actions such as this, i.e., intervening in the affairs of a sovereign nation, is justified on the grounds that it enables the U.S. to better compete in this marvelously fabricated global economy then one should ask themselves the following question: What action, short of developing a domestic and competitively productive economy, would then be outside the realm of global governance? I can think of none.
- The growth in U.S. Debt, both public and private, since 1971 (the year Nixon removed the last vestiges of international gold settlement procedures) mirrors the cumulative growth in this Nation’s Trade Imbalance. The correlation is by no means a coincidence as this Country has adopted a most unseemly and unsustainable monetary policy: Funding economic failure and inefficiencies through the creation and assumption of massive debt-loads.
- It is quite ironic that the U.S. should assail the Chinese for a so-called artificially controlled currency valuation routine particularly as it is this U.S.-perfected extreme of currency valuation that has made the Chinese economic experiment viable and production in China so economically favorable. Was it not the argument routinely expressed that the whole reason for the migration to the Far-East was in search of cheap production? Was it not the high-cost-of-labor argument that motivated U.S. suspension of domestic-based manufacturing and agriculture?
- Often the politicians and the media pundits will claim that the U.S. is at-risk due the amount of Federal Debt owned by the Chinese however nothing could be further from the truth. The fact of the matter is that the U.S. has no such risk as all debt is in dollar denominations and the Federal Reserve has only to print more of it and rest assured the Chinese are aware of the options. They also know that the notional-value of their U.S. Debt investment is increasingly subject to manipulation and devaluation as is the stores of U.S. currency they hold in various financial institutions around the globe. The great contest now being waged against China has more to do with their using the U.S. Dollar to meet their economic demands and by doing so they’re beating the U.S. Global Banking System that until now few would dare challenge.
- 1940’s Japan was a no-contest issue for U.S. Interests until the Japanese made the mistake of using imported U.S. economic resources against U.S. Economic Interests and those of the British. When that line was crossed – July 26th, 1941 was the response.
- It is equally important to consider that China, like 1940’s era Japan, is not a self-sustaining economy. As with its agriculture (food supply), China is not capable of maintaining it new found economic capacity without a perpetual raw material and energy supply chain. Not unlike the U.K., its economic capacity (maintenance and/or growth) is wholly owned by a resource depending demand which it is unable to cure from within its own boarders. Come now, does anyone really believe the Opium Wars were waged for purely medicinal purposes?
- Like the tyrannical rule of the Persians, the Romans, the British and now (I fear) the U.S., when conquest becomes the only means by which the unsustainable nature of their adopted hubris might be satiated then no excesses are deemed excessive. As the need for ever greater and ever more extreme devises of conflict persists, the point of what ultimately becomes unsustainable draws near. Think of it; does anyone wonder why the KGB’s domestic presence was never targeted by the U.S. Government? From the vantage point of a terror-threat, the KGB’s capacity for waging a terror-war on the U.S. was massive yet never even the slightest attempt to publically curtail their presence ever occurred; nothing even close to a TSA strip-search-n’grope or passport/I.D. check. Was it absence of risk or simply the occurrence of convenience? Curious?
How rapidly the 1940’s U.S. Civilian population moved from being a pacifist/isolationist-centered body to one willing to convert itself into a perpetual state-of-war. Seventy years later and little has changed. We are still under a perceived and fabricated fear-mongering threat-exhibition accompanied by the requisite and oh-so-necessary perpetual state-of-war. No sign of success which none can identify yet we have accomplished the amassing of incredible losses and spectacular failures – in these we have our definitive success. Yes indeed the routines are much the same; the events occur in the light-of-day, under the color of reasonable, rational and deliberate authority by people whom you are assured have your best interests at heart; or so it would seem.
“Sauntering ‘bout it day, folly plays for fools random gain and dare not dream nor have care for wonder; advantage is its sole ambition leaving all its plying curses to the assuming who accepts the follies of the foolish as their own.”
Baring a spark of conscience it will be of no great surprise should this legislation be enacted by consent of the House yet what remains of even greater significance will be the Chinese response. Rest assured that the Russian Federation as well as the Iranians, the Pakistani’s and India will be equally curious and no less ambitious. If history serves as a view to coming attractions it is reasonable to assume an outcome which feeds the Beast’s insatiable appetite.
True, the object of my study does nor is it intended to paint a pleasing picture and though I most certainly pray for an alternate outcome the reality is that it will ultimately resolve in what the People are willing to do. So long as the consenting governed are silenced and willing remain so, excess will persistently occur in the extreme accompanied by a very high price. That’s just the way it is.
“Every nation is liable to be under whatever bubble, design, or delusion may puff up in moments when off their guard.” – Thomas Jefferson
“It is the absolute right of the State to supervise the formation of public opinion.” – Dr. Paul J. Goebbels
Curtis C. Greco, Founder