Tags: david | skarica | china | yuan | us | trade | penalties

Trade Penalties Against China Are a Waste of Time

By David Skarica   |   Thursday, 30 Sep 2010 09:56 AM

Leave it to politicians to make a bad situation worse.

The House passed a bill that enables the United States to seek penalties against China and other nations that manipulate their currencies lower to create a trade advantage.

Someone should tell these politicians that in the past 40 years, the United States has been biggest culprits of this.

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Most of it wasn’t intentional but just through bad fiscal policies and incompetence.

The current theory is that by China keeping its currency low, it has an unfair competitive advantage against the United States in trade.

What these lawmakers, who are only out for their own political gain, tend to ignore is that since 1970, the U.S. dollar has lost about 75 percent of its value against the Japanese yen.

Despite this, Japan nearly exports twice as much to the United States as America exports to Japan.

You have to make things that people want.

Look at Switzerland. The Swiss have had the strongest currency in the world in the past 200 years yet they still run trade surpluses. Why?

Because they make high-end products people want. People want Swiss watches, chocolates, handmade furniture, etc.

The same goes for the Germans.

If U.S. politicians really want a good trade policy, they should promote investment through tax credits and improved infrastructure and look to make thing in specialty markets like the Germans and Swiss.

Otherwise, all a stronger yuan will do is make imports cost more and create more inflation.

These measures by inept politicians are just more reason why the dollar will be headed lower and gold will soar in the coming years.

About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.

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