Americans should be hoping that the Chinese will be kinder to us than we were to the Brits after World War II. Readers of a certain age will remember, and the few younger ones who study history will have learned what creditor Uncle Sam did to debtor John Bull when Britain sent John Maynard Keynes to Washington to negotiate borrow the odd billion from us. Britain had spent blood and treasure to beat the Nazis, and was hoping or a gift of $3 billion, a credit line of $5 billion, and other generosities. As Robert Skidelsky points out in his magnificent biography of Keynes, “The Americans had never accepted that they owed Britain a moral debt” for its disproportionately large sacrifices. Instead, President Truman, advised by communist spies such as Harry Dexter White, insisted on terms so onerous that the Britain was, in some views, permanently expelled from the first rank of economic powers for decades, until Margaret Thatcher decided that her government’s job was definitely not merely to manage decline.
Fast forward to today, and the plunging dollar. The Obama administration may mouth support for a strong dollar, but markets aren’t easily fooled, or if fooled, are not fooled for long. They know that administration policy is relying heavily on a depreciating currency. In the short run, the White House hopes that a combination of protectionism and a cheap dollar will reduce the flow of imports and increase the volume of exports. That, the theory is, will create jobs “right here in America” as the Wal-Marts of the country switch to domestic suppliers.
