“The U.S. Empire is a very different thing from the U.S. republic. Americans still think of their country and their government in 19th century terms. Here at The Daily Reckoning, too, we had a hard time getting used to the idea. We had a sentimental attachment to the old republic of Jefferson, Fillmore and Harding. Like getting over a love affair, it took time before we were ready for a new fling. But now, after a suitable interval, we’ve come to appreciate the curves and caprices of the new empire.
Not that it makes Americans safer or wealthier. Not at all; it does just the opposite. But it is so full of bluff, vanity and absurdity that it is far more amusing. Even before we had our morning coffee, we read the paper and found ourselves in shock, awe and stitches.
The headline story in today’s International Herald Tribune tells us that America is fed up with Chinese currency “manipulation.” How are the Chinese manipulating the yuan? By pegging it to the imperial currency! Oh…that is clever…wily…diabolical, isn’t it, dear reader? The Chinese are maintaining their 10-year-old policy of pegging the yuan to the dollar. Doing so, they get around the imperial power’s method of collecting tribute. The United States counts on a steady devaluation of its money. It buys from overseas and pays in dollars. Then, in effect, it prints up more dollars to replace those it has shipped overseas. The resulting “inflation” of the currency…reflected in the increase in prices of oil, gold and other internationally traded goods…is a form of imperial tribute. It’s America’s way of making the empire pay. As the dollar goes down, the trillions of dollars held in foreign accounts become less valuable.
But the Chinese refuse to play along. As the dollar goes down, so does their yuan. Instead of raising prices on Chinese goods and lowering the value of Chinese dollar holdings relative to its own currency, everything remains even. The Chinese aren’t paying their tribute.
Americans are indignant. A Senate committee says it will rewrite the law of the land to make what the Chinese are doing qualify as currency “manipulation.” Bush administration officials say they will give the Chinese a deadline to shape up.”
Awww…I feel so bad for the American Fedral Empire…Boo Hoo…..