Energy and Fair Trade - The Path to Recovery

I read an article in Newsweek the other day. The guy writing the article had a pretty good grasp of how currency works, and went into great detail about various currency wars over the past 50 years. His premise was that in hard economic times, most nations maneuver to weaken their currency to expand exports, and the United States is no exception. But as I have written several times over the past weeks, China has raised currency manipulation to an art form. That being said, in this cycle the United States has been successful in weakening its currency vis-a-vis the Euro and Yen.

The flip side of the equation is that as the dollar weakens, imports into the United States become more expensive. So…if China lets its currency rise, imported goods from China become more expensive, and goods exported from the United States to China become cheaper. The unintended consequence is that imported oil becomes much more expensive. Given the regulatory, environmental, and redistribution policies of Barack “no growth” Obama, that becomes problematic. Ex.: the oil drilling embargo in the Gulf of Mexico (lifted just this past week due to massive political pressure). We are between the rock and the hard place. Money flows out of the United States either to China with a strong dollar, or to OPEC with a weak dollar.

Any economic recovery has to be two pronged. 1) China has to let its currency float and rise; and 2) We have to increase domestic energy production to stave off the effects of increased imported oil prices. Sounds simple, doesn’t it? Two simple things to restore our nation’s economic prowess!! But it won’t happen, not under this ideologically pure President.

In fairness to Barack, he has addressed the trade imbalance with China more than his predecessors. Unfortunately, that’s not saying much. The United States has to be much more aggressive, but our leaders spew fear that the Chinese will stop buying our bonds. Bunk!!! The Chinese will make a lot of noise. And even if they act, more likely than not it would be an anemic reaction! And even if it was a strong reaction, I have read numerous articles saying that it would not be the financial Armageddon that the many people say it will be. The estimates I have read say it would only affect a small percentage of the debt.

As for the energy, Obama’s green policy is purely ideological, based on global warming. That is a problem. His policy is not one of expanding energy supplies, it is based on restricting your access to any kind of energy at all. An energy policy based on environment purity, and one based on economic growth are two different animals. He is foisting his environmental religion on us in the form of green energy jobs. Spain did the same thing. Any energy jobs produced pale in comparison to more traditional energy jobs lost. Just ask the thousands upon thousands of unemployed oil platform workers in Louisiana, Alabama, and Mississippi.

So…this is what we are facing. Currency and energy are the paths to economic recovery; and how to do it is not complicated. The main problem is finding a political leader that can articulate it, and use common sense action to get the desired result. If you know somebody like that…please let me know.