Peter Schiff: To Peg or Not to Peg?

April 23, 2010
 While I attended an economic conference last week in Shanghai, I found it notable - but not surprising - that two former Secretaries of the Treasury, John Snow and Hank Paulson, as well as current Treasury Secretary Tim Geither, and former President George W. Bush were then in the country at the same time. The fact that so many key American power brokers (myself not included) were in China simultaneously is no coincidence. In an overly indebted world, the $2.5 trillion that China holds in foreign reserves is acting as a center of economic gravity, inexorably pulling all market participants into its orbit . . .

At the risk of beating a dead horse, let me reiterate my central thesis with respect to currency valuation: just as it is always better to be rich than to be poor, it is always better to have a strong currency than a weak one. Although this simple maxim puts me into conflict with much of the economic establishment, I hold its truth to be...well...self-evident . . .

All of the Shanghainese with whom I spoke last week were unaware that a stronger yuan would be in their own best interest. The way most people see it, a stronger currency is a bullet that China must be prepared to take in order to save the rest of the world from further pain.

And so we watch the strange spectacle of China stubbornly resisting actions from which it will immediately and substantially benefit. In reality, an appreciating yuan is the bitter medicine Americans must swallow if our sick economy is every to regain its health . . .full text