Sept. 20, 2014 SIGN IN | REGISTER

Benko: Monetary House Built by Nixon Should Go

While Republican presidential candidates were trading jabs on TV late last month, Sen. Charles Schumer (D-N.Y.) was stealing what should have been the Republicans’ fight plan.

Schumer, ever alert to the media possibilities, joined with three Senate colleagues to refocus attention on China’s currency manipulations and the resulting injury to American exports.

The Republican presidential aspirants have a short memory. In the last cycle, the most powerful independent political ad, one that went viral with more than a million YouTube views, was titled “The Chinese Professor.” A near-future Chinese professor asks, “Why do great nations fail?” and concludes, about America, with a smirk, “So now they work for us.”

Schumer and Sens. Olympia Snowe (R-Maine), Lindsey Graham (R-S.C.) and Sherrod Brown (D-Ohio) made headlines for introducing a variation on legislation they have long advocated to punish China for protecting its manufacturers behind a currency wall created by undervaluing the renminbi.

The ever-crafty Schumer gets the problem even though his approach — escalating to a currency war and flirting with trade war — is dead wrong. Unfortunately, Republicans have been slow to develop a legitimate game plan, just as they have been slow to understand that the solution to America’s economic woes cannot be achieved with fiscal policy — tax and spending — reforms alone.

Equally if not more critical is fundamental reform of America’s monetary structure, which has been mishandled with almost criminal negligence by our elected officials since President Richard Nixon infamously closed the gold window in August 1971.

My colleague Lewis Lehrman, chairman of the Lehrman Institute, also gets the problem. In a recent article in the American Spectator, Lehrman wrote that the monetary policies of China and the U.S. have made China into “a financial colony of the United States, a colony subsidized and sustained by the pegged, undervalued, yuan-dollar exchange rate. Neither the United States nor its economic colony seems to understand the long-term destructive consequences of the dollarization not only of the Chinese economy but also of the world monetary system.”

In a unique deconstruction of the paradox of the Chinese-American trade dilemma, Lehrman compared it to “the historic colonial financial arrangements imposed by the later British Empire on India before World War I — India actually remaining a financial colony of England long after its independence in 1947. ... Changing this relationship is vital for both the U.S. and China.”

For one thing, he noted, China’s accumulation of U.S. dollars is “a massive mortgage on the work and income of present and future American private citizens.” (The “Chinese Professor” problem.)

Lehrman’s article promptly went viral and was widely reprinted in Accra, Ghana; Tehran, Iran; Mumbai, India; London and even Moscow, in Pravda.ru.

But the threat posed by Chinese monetary and trade policies has still not made it to Washington, D.C., the center of the debate over the destiny of America’s future. Dollar policy is a critical, if neglected, issue, one that anyone who aspires to the presidency needs to master.

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