Fairytale Logic & Weapons Of Mass Deflation

My father, the wisest man I have ever known, has always told me that “two wrongs don’t make a right”. These insightful words instilled in me, at an early age, a sense of personal responsibility and a general antipathy toward blaming others for the consequences of actions that I control. These are attributes that have served me well throughout my life, as individual accountability is imperative to the building of human character, a prerequisite of, and a steppingstone to, the fulfillment of the American Dream.

That China has made a practice of tying its currency to that of the American dollar is no secret to the world. That the Obama Administration blames this deflation of the Chinese Yuan for America’s economic weakness is slightly more surprising. That the President’s reaction to what he perceives as a snub is to weaken his nation’s dollar is remarkable in its lack of judgment and speaks volumes of the man who initiated it. This “eye for an eye” approach toward global economic diplomacy indicates a lack of principled leadership and an ignorance of the laws of capitalism.

The practice known as “quantitative easing”, in which the Federal Reserve has begun to inject $600 billion of newly printed money into the American economy, is justified by fairytale logic, i.e., that stealing demand from the rest of the world can mask the effects of domestic policy failures. The inevitable result of this type of loose fiscal planning, however, is a lessening of American buying power which, in turn, will necessitate a rise in commodity prices, an increase in unemployment and negative economic growth.

At the recent G-20 meeting in Seoul, South Korea, President Obama, by answering a wrong with a wrong, brought about the most complete and thorough rebuff of a sitting American President at a global economic summit to date. Mr. Obama and Treasury Secretary Timothy Geithner insisted throughout this summit that they were not to blame for America’s domestic woes, painting the United States as a victim of international bullying, mercilessly perpetrated by economic browbeaters such as China, Germany and Brazil, all of whom are using highhanded export and exchange rate policies as weapons of mass deflation. In an attempt to explain his lack of success concerning his primary goals of cutting trade-surpluses and pressuring China into increasing the value of its Yuan, President Obama stated the following: “Part of the reason the United States is attracting dissent is we’re initiating the ideas.” This predilection for blaming its failings on the passions and the prejudices of others has become a trademark reaction of the Obama Administration when faced with scrutiny or dissent. America’s traditional allies, however, appear to be losing patience with the President’s “blame-game” approach. To wit, French President Nicolas Sarkozy - “Clearly the approach of throwing blame at each other doesn’t work.” and German Finance Minister Wolfgang Schäuble - “It doesn’t add up when the Americans accuse the Chinese of currency manipulation and then, with the help of their central bank’s printing presses, artificially lower the value of the dollar.” In other words, two wrongs don’t make a right.

In order for America to effectively maintain its traditional role as leader of the world’s economy, President Obama must rise to the task at hand. Shirking responsibility and blaming others, as the President is predisposed to do, is not the mark of a leader; passing the buck is a luxury reserved solely for those who follow. In lieu of stooping to the level of China, now is the time for America to rise above and strengthen the value of its currency. This can be accomplished through responsible spending and growth, reforming what is broken in our current system, and fostering the innate ingenuity and individual drive that, traditionally, are the hallmarks of America. These are the actions of a veritable leader, confident in his moral standing and proud of the nation he represents. Clearly, the American people have come to expect this brand of leadership from their presidents. Alas, just as my father has taught me that two wrongs cannot make a right, as the midterm elections have recently shown, nor can they make a left.