The following attempt at Facebook fun-poking is dedicated to Sarah -- which may or may not be her real name -- who still hasn't accepted my friend invitation:
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If money is the root of all evil, then China's manipulation of its currency, the yuan, is the tap root of everything wrong with the U.S. -China trade relationship. For more than a decade, chronic U.S. trade deficits with China have dramatically slowed America's economic growth rate and spiked our unemployment rate. Yet it would be impossible for China to keep sucking the lifeblood out of the American economy without its fangs of currency manipulation.
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By Todd G. Buchholz,
Author of Rush: Why You Need and Love the Rat Race
Rush: Why You Need and Love the Rat Race
As an economist, the best measure of time I can find is the prevailing interest rate. When interest rates are high, it tells us that tomorrow counts for less. It is not worth investing today. From a business point of view, very few financed projects will payoff if interest rates are high (the “hurdle rate”). However, when interest rates are low, it tells us that we should invest today because any return will be prized more in the future. During the German hyperinflation of the early 1920s, prices and interest rates jumped higher each hour. The price of a cup of coffee could go up as the waitress was pouring. Teachers got paid at ten a.m. and brought their banknotes to the playground so their relatives could pick them up and then buy things immediately. Likewise, the hyperinflation of Zimbabwe in recent years acted like a neutron bomb on the economy. Coincidentally, in 1919, when Yeats wrote “things fall apart; the centre cannot hold,” interest rates were jumping sharply, the British pound slid in value, and Europe was preparing for a terrible bout of post-World War I inflation. Elsewhere, I set out “the Buchholz Hypothesis,” arguing that the crime rate is importantly a function of interest rates. This solves the puzzle of the Great Depression. Most commentators on crime say that a lousy economy leads to crime. But during the Great Depression, crime rates fell, as they did in 2008 and 2009. Why? Because interest rates fell, too. People did not give up on tomorrow, even as they suffered economic distress.
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