“La sabiduría de la vida consiste en la eliminación de lo no esencial. En reducir los problemas de la filosofía a unos pocos solamente: el goce del hogar, de la vida, de la naturaleza, de la cultura”.
Lin Yutang
Cervantes
Hoy es el día más hermoso de nuestra vida, querido Sancho; los obstáculos más grandes, nuestras propias indecisiones; nuestro enemigo más fuerte, el miedo al poderoso y a nosotros mismos; la cosa más fácil, equivocarnos; la más destructiva, la mentira y el egoísmo; la peor derrota, el desaliento; los defectos más peligrosos, la soberbia y el rencor; las sensaciones más gratas, la buena conciencia, el esfuerzo para ser mejores sin ser perfectos, y sobretodo, la disposición para hacer el bien y combatir la injusticia dondequiera que esté.
MIGUEL DE CERVANTES Don Quijote de la Mancha.
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China's shock move to trigger the biggest one-day decline in its
currency for more than 20 years is evidence that the currency wars are
still live. It's also a timely reminder that the Federal Reserve's
seeming determination to raise interest rates next month risks
propelling the dollar even higher, to the dismay of U.S. companies
already struggling to maintain exports.
Here's what Fed officials
will see when they get to their desks this morning and check out what's
been happening in the currency markets while they were sleeping:
By cutting its daily reference rate for the yuan by a record 1.9
percent, the Chinese central bank is taking big risks, both politically
and economically. The Chinese authorities know that Chinese
companies owe the rest of the world more than half a trillion dollars in
bonds and loans denominated in dollars and euros; Bloomberg reporters
Lianting Tu and Christopher Langner calculate that today's move could
add $10 billion to that cumulative corporate debt burden. But the
overseers of China's monetary policy, who are charged by the government
with delivering economic growth of 7 percent this year, are clearly more
concerned by the 8.3 percent drop in Chinese exports in July. Currency Wars
Today's
decision "raises the distinct possibility of a new and increasingly
destabilizing skirmish in the ever-widening global currency
war," according to Stephen Roach, the former non-executive chairman for
Morgan Stanley in Asia who's now a senior fellow at Yale University.
Economists at JPMorgan called the move a "Pandora's box" which China's
neighbors will view as a "competitive devaluation."
It's the U.S.,
though, that might take the most offense at the devaluation. U.S.
companies have bemoaned the strength of their domestic currency. Walt
Disney Co. was the latest to report that currency-market shifts dented
revenue, saying last week that it suffered a $100 million shortfall at
Disneyland Paris.
The dollar has been on a rampage for four years, as this chart shows:
I've written before that every country can't simultaneously have a
declining export-boosting currency, any more than you can mix
heavy-metal music by making everything louder than everything else. The
dollar has gained against its peers partly because other countries have
engineered weaker currencies for themselves, but also because its
economy is perceived to be improving and the Fed is one of the few
central banks in the world contemplating pushing up borrowing costs and
deposit rates.
Officials in the U.S. would be forgiven for wanted
to avoid a further surge in the dollar that would signal the country is
surrendering to its opponents in the currency wars. If other nations'
plans for participating in the global economic recovery is yet more
currency-market manipulation, the governors of the Fed might reconsider
that September rate increase after all.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
