Steven Mnuchin has to be a smart and knowledgeable person. You don’t get to be US Treasury secretary by being a dumb guy, or at least most of us would assume that. But his latest criticism of the slide in the value of the yuan is completely bizarre, incoherent and makes no sense.
I am no economist but I did study elementary logic in secondary school. There is a fundamental rule of logic, dating back at least to Aristotle, called the law of non-contradiction: something can’t be A and not A at the same time.
This comes to mind while reading about Mnuchin’s latest gripe about the yuan. When you intervene to support a currency, it’s usually called currency manipulation. When you don’t intervene, well, you are not intervening or manipulating. Not so in the universe of discourse that Mnuchin happens to inhabit!
CHINA IS LETTING YUAN SLIDE TO OFFSET TRADE WAR TARIFFS, MNUCHIN SAYS
In response to the latest yuan slide, he said: “Intervening to support the currency’s exchange rate is not regarded as currency manipulation. The decision not to intervene after intervening for a very long period of time may lead the market to view that there is a desire to have the currency to weaken.”
So, intervening is not intervening, and not intervening is intervening. Lest we misunderstood, Mnuchin rephrased it: “When the market is expecting intervention because there have been interventions to support a currency for a very long time – whether by China or any other country – then when there is no intervention that could create a big market impact.”
Now I have no idea what currency manipulation is, other than that it is whatever the Americans say it is. This is the world of Alice in Wonderland that is Washington today. In the immortal words of Humpty Dumpty: “‘When I use a word, it means just what I choose it to mean – neither more nor less.’”
Manipulation or not, Mnuchin is accusing China of letting the yuan slide to offset trade war tariffs imposed by Washington. Now I get it. If the Americans start shooting at you, you shouldn’t try to dodge; instead, you must stand still. Get that, Beijing?
Mnuchin also complains that Chinese companies selling in America have been absorbing a significant part of the tariff rise to prevent price increases being passed on to US consumers. Hey, what is China’s game? American consumers are supposed to be hurt by the trade war!
Source: The South China Morning Post