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