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China Currency Manipulation: Why US Political Accusations Are Unfounded

China has long been a net exporter of consumer goods. They've found their niche in producing vast quantities of goods inexpensively enough that it's more cost-effective to produce them in the Far East and ship them around the world than it is to assemble them in most countries where those products are consumed. China produces everything from textiles and glassware to iPhones and supercomputers. Even as the average standard of living is rising for the Chinese people, they are becoming more competitive all the time.

In the West, however, this trend is reversing. Prices continue to escalate due to inflated costs, and incomes remain stagnant or even decline. Of course, the political elite charged with maintaining their denizens' happiness levels at a net positive have a hard time explaining to Boobus Americanus why his beer is more expensive while his paycheck stays the same.

So, they blame China.

A few decades ago, China was thought to be a legitimate threat to the Western world. Of course, there's always "The Threat," be it the starving Soviets, the neutered "Axis of Evil," or "Terrorism." In this case, though, China was an actual threat, assisting both North Korea and Vietnam in their fight against what was viewed (and understandably so) as Western imperialism in their sphere of influence. However, through disastrous social policies like the Great Leap Forward and the Cultural Revolution, in which upwards of 80 million Chinese died, China suffered a devastating blow that would last into the last decades of the 20th century.

However, as China's business policies became more and more liberal, the door opened for massive investments in that country. Such investments were very lucrative due to the low standard of living (meaning that labor was cheap) and the massive numbers of people (meaning that labor was really cheap). Factory cities began springing up, and consumer goods costs plummeted as inexpensive goods began to flow from China toward the West.

Now, a few decades later, China stands as the world's largest manufacturer of consumer goods, with the world's second largest economy, and that's only going to grow. Even China's evil one-child policy (and forced abortions) will not severely hamper the course of China's future.

Thus, in a play to keep the Chinese goods moving, the government of China has intentionally kept the yuan (officially the Renminbi) devalued against foreign currencies. This means that fewer dollars buy more Chinese goods, while simultaneously increasing the cost of Chinese imports from the U.S. Since China is the #1 trading partner for the U.S., this keeps the balance of power in China, since the U.S. has an insatiable appetite for Chinese-produced goods. (100,000,000 iPads in two and a half years, anyone?)

As a result, and with the aforementioned need to find a bogeyman to blame for government's perennial failures, both presidential candidates have been harping on China, blaming them for their currency manipulation in order to keep their products flowing into America.

On its face, this accusation is hypocritical to the extreme. All countries with central banks manipulate their currency, whether through increasing the money supply (inflation), or adjusting interest rates. It's in a government's best interest to maintain control over currency in order to stabilize costs. The Federal Reserve has been nothing but a currency manipulator since its creation, so what is really at issue here is the fact that China is operating in China's best interest, and not the interest of the United States' central banking cartel.

Just like all the other bogeymen in this nation's recent history, it all has to do with money. The U.S. demands to have its fingers in everyone else's pies, whether through monstrous legislation like FATCA or sanctions against countries resisting U.S. government meddling.

Complaints of currency manipulation are completely stupid. China is serving its own interests, as every government naturally should. The U.S. is the world's worst currency manipulator, and thus has no room to complain. It's time for the loud campaign rhetoric to go away.

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