Tuesday, May 17, 2005

Random Roger's Big Picture: Fading The Administration

Roger makes a good point about the unintended consequences of revaluing the Yuan. However, I do not believe the administration wants the Yuan to be revalued. In general, the trade with China has been good for the US and for China. The administration would like to extend the benefits to Central America by getting CAFTA passed. The administration is forced to pay lip service to "fixing" the "problem" with China.

The fact is that the pump priming of the FOMC (Federal Open Market Committee) has almost ended. US exports are soaring, tax revenues are soaring. The budget deficit is ready to fade. A trade deficit with a low cost producer like China is a good thing and the administration knows it--if it can defuse the political risk.