Tuesday, June 26, 2012

Romney's get tough policy with China: I will do as I say, not as I did

Romney knows the public is angry at China, and he promises to take on China for its unfair trading practice on DAY ONE.  He says he will issue an executive order threatening "countervailing duties" on China unless they float their currency.


This is a leftist union cause, and when one sees Romney espouse it, one has to ask if this is sincere, just as they, lying, praise Reagan for supporting the Solidarity Union in Poland when he went on an orgy of union busting in this country. China has beggared the American worker by setting the price of the Chinese yuan far below the dollar, so that the same product that costs $20 in the U.S. would only cost $5 in China, and mocking the notion of "global free trade" since no trade involving Chinese currency is "free" as long as the government fixes the price by setting the price of currency.  Setting the currency price too low raises the costs of imports to Chinese consumers, discouraging consumption of foreign goods and creating a hidden tariff wall forcing any foreign firms who want to sell in China to manufacture there, and all foreign firms want to be part of what will eventually be the world's largest market.  Low currency prices also  lowers the cost of Chinese exports, allowing them to undercut American producers.  Thus an American worker cannot compete in wages with a Chinese worker making only one-third as much, even when the Chinese worker has a higher standard of living because everything in China costs one-fourth as much as in the US.  It also allows China to industrialize without offering workers higher wages to boost domestic consumption by taking advantage of foreign demand to bring money into the country. And it allows China to receive vast sums in foreign investment.  China is not a free country, and that investment has come with strings.  The foreign companies are required to share their technology with China, eliminating our technology advantage.  The foreign companies are required to hire Chinese managers and gradually eliminate all western top level leaders.  And the foreign companies are not allowed to remove money from the country at whim, so when American companies have accumulated profits there, they cannot simply bring them back and flood America with them.  This economic warfare has been so successful that the US would have become a food importing nation in 2006 if the Chinese hadn't been persuaded to suddenly to make a huge multibillion dollar purchase of soybeans. China's centralized Soybean purchases have kept us a net food exporting country ever since..

Obama has made this a trade issue and China has grudgingly allowed its currency to appreciate since 2010 in order to avoid trade sanctions.


This was never done under Clinton and Bush and for several reasons.  First of all, 80% of Chinese exports to the US were by American firms, so their profits would be cut by trade sanctions.  Of course, the leaders of these firms were all well aware that the currency was mispriced and that this could not continue forever.  Second, brainless economists said, yes we will lose manufacturing jobs, but in the future we should be moving to "intellectual" service jobs anyway; and we will have lower prices for our goods that more than offset the losses.  This was manure.  The jobs lost paid well, while the new service jobs paid poorly and required no skills. Indeed, the whole rest of the world is still struggling to move from services to manufacturing since services economies have typically meant rigid and impermeable class distinctions, and there is no global preference for services over goods and probably never will be.  It was all a feel-good childish fantasy parading as "economics" and funded by the billionaires who endowed economics professorships.  The industrial infrastructure lost was more valuable than the cheap goods offered at Wal-Mart, which were usually lower quality too, offsetting the lower price. And since the profits could not always be repatriated, the economy suffered a net loss, not a net gain.  Furthermore, since most shares in publicly traded companies are held by proxies, one could never be sure if the small number of companies creating our trade imbalance were really owned by the Chinese or Saudis through intermediaries or not.

The Bush family had many investments in China, so their interest in the China relationship was no surprise.  Of more surprise was all the aid and technology sharing Bush did with the Chinese military,  servicing our naval vessels at Chinese ports, sending our green berets to train theirs, and letting them help themselves to our most advanced technology.  Remember when Republicans accused Clinton of treason because Loral Corp. shared missile technology with China, under a deal signed under George H.W. Bush?  It may surprise you to know that George W. Bush shared so much technology with China that the Chinese military has proudly announced they can now track all our submarines, one-third of our nuclear deterrent triad. Furthermore, they are engaged in building a large fleet to neutralize our power not with technology but with numbers.  This is the biggest strategic setback to American military power since Russia got the hydrogen bomb, and its author was our true blue patriot George W. Bush, who treated the Chinese leaders as global allies in the struggle against the middle class and poor of all regions.  It was clear they did not feel the same way about him.


Now Romney the super-patriot will fix all this.  Of course, this means misrepresenting his history.

America's offshoring to China did not just "happen." It was made to happen. American CEOs had no experience dealing with the Communist Chinese, and were reluctant to make the leap. They were helped, partly by retail firms like Wal-Mart and Staples, which advanced the untrue theory that manufacturing prices should decline every year. In fact, they should level off after awhile, but that cut no ice with Wal-Mart and other big retailers, which demanded annual reductions.  Offshoring became the only way to satisfy these lying corporate pirates  with their fraudulent business models.

The leading firms for Outsourcing Consulting in the 1990's? One of them was Bain Consulting.  Bain was the company Mitt Romney began his career with, which he left in 1984 to start Bain Capital.  But Bain Consulting brought Mitt Romney back as chairman after Bain Consulting fell into financial difficulty.  One of the problems was that senior partners had borrowed against the firm's equity, which was disappearing.  Romney came in to restructure the company, helped by getting the FDIC to write-off $10 million of the debt Bain owed the closed Bank of New England for Bain's partners borrowing above their income levels, and set the Consultants on a new path with foreign managers who went gangbusters into the offshoring market.  By 2007, Bain Consulting had 37 offices worldwide.

Romney's own company, Bain Capital, also forced and threatened companies with offshoring to India and China when Romney was in charge, and Romney himself faced embarrassment in 2008 when his $100,000 investment in a Chinese company doing business in Iran was revealed.  In defense, Romney pointed out that Bain was involved in "offshoring" meaning the jobs were still under an American company, as opposed to "outsourcing" that is getting a Chinese company to do the work.  But China's regulations on investment are so strict that they amount to the same thing.


He apparently told his blind trust manager to divest from China after his 2008 loss, but it somehow did not happen.  Even today, Romney is profiting from China's growth and America's decline.


Meanwhile his money manager keeps him invested in foreign currencies, so that if the dollar falls, Mitt Romney will not lose money.


Is America expecting great patriotic things from a president who bets against the dollar in his private life?
Meanwhile, Romney has tens of millions invested in global Goldman Sachs funds which undoubtedly also have Chinese investments.


He has structured his wealth to avoid taxes by plugging as much of his Bain money as he can into a tax-free IRA.


So, should we trust Mitt Romney to get "tough" with China when we see Obama has only been able to make minor improvements in the trade war? Or should we laugh at thinking a rich man who has never demonstrated American patriotism claiming he would do better at the same goal which Obama clearly has of forcing China to revalue the yuan? I think the latter.    Obama is certainly no more an advocate of free trade than Romney, and Romney has demonstrated in the past a disregard for the American worker.

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