Maybe, but Jay Gould got what was coming to him, for being too greedy. He was ripping off both sides and putting the gains in off-shore banks.

He eventually died poor as dirt.

>^^<

http://www.professorfekete.com/default.asp

position papers of professorfekete #7, September 27, 2010

THE DONKEY IN THE CHINA SHOP
Obama and Congressional Democrats Trying to Blackmail China
President Obama has just issued a blackmail to Prime Minister Wen Jiabao of
China: “You immediately revalue the yuan or else…” According to an article of
David E. Senger in The New York Times dated September 23, 2010, the two
leaders met at the United Nations in New York and spent most of their two-hour
session in a spare conference room, usually used by members of the Security
Council, to discuss the currency issue. The session ended by Obama’s issuing an
ultimatum that is bound to be followed by trade war. Surely, this is a most
unseemly use to which the sacred grounds of the Security Council, dedicated as
it is to the maintenance of peace and prevention of war, have ever been put.
It is most undiplomatic, not to say arrogant, for a head of government to
engage another in a in a tête-à-tête confrontation, to discuss technical currency
problems that should first properly be sorted out at a lower level by experts. In a
total lack of courtesy to be shown to a guest, Obama is threatening him with
action on the part of Congressional Democrats, to railroad legislation through
before the midterm elections that would put huge punitive tariffs on Chinese
goods, thus plunging the world into trade war. Every one of those Congressional
Democrats is a complete ignoramus where complex currency issues are
concerned. The only thing they can do is parrot Keynesian and Friedmanite
bunk.
The reason given for Obama’s most unusual procedure is that he and his
Congressional cohorts are “protecting U.S. interests: American jobs and
American competitiveness”. Of course, Obama would never pay the blackmail if
China wanted to force upon the U.S. an unpalatable dollar-policy, e.g., demand
that the dollar be immediately put back on a gold standard on the theory that the
present dispute would not have arisen if the dollar were gold redeemable as it
had been before Nixon’s default. Obama has grossly overplayed a very weak
hand. The U.S. has never been in a weaker bargaining position. All the trump
cards are in the Chinese hand.
None of the arguments used by Obama in his impolite and immodest
lecturing of the Chinese Prime Minister holds water. Exactly the same stratagem
was applied against Japan in the 1980’s. At that time the U.S. wanted Japan to
let the yen float upwards “in order to help restore America’s competitiveness”.
Japan meekly obliged, and the result was: bankrupting the Japanese financial
system while America became even more uncompetitive.
That episode has been completely misrepresented by the American media
and mainstream economists. To restore balance, here is the other side of the
argument. Japan had a huge pile of U.S. Treasury paper as a result of several
2
decades of trade surpluses — fruits of Japanese thrift and good husbandry. As
the yen was floating upwards, Japan took enormous losses on its holdings of
U.S. paper, since its gold value was no longer guaranteed after Nixon’s default
of 1971. For an American eye these losses were invisible, because Americans
blithely assumed that everybody would carry his books in dollar units. But the
Japanese carry them in yen units. As the yen was floating upwards from a little
over 25 cents to over $1 per 100 yen, the Japanese were forced to take a loss on
their savings to the tune of over 75 cents on every dollar of American debt held.
The whole maneuver of floating the yen upwards was designed to avoid the
shame attached to an exercise in default of sovereign debt, in order to save
American face at Japan’s expense. Such a drastic and open-ended loss of wealth
would bankrupt even the strongest country financially. Japan today is in the
throes of a depression, thanks to the U.S.’ slapping its debt abatement on her
economy. Thrift and industry were penalized, prodigality and financial
irresponsibility rewarded.
But the worst was still to come. When the Japanese wanted to pay some of
their overseas accounts by drawing on the remnants of their savings held in
dollars, they were shocked. The money wasn’t there. American money-doctors
rushed in and talked Japan into embracing deficit-spending. Up to that point
Japan had practically no government debt. Why should they? They could afford
to pay cash. By contrast, today, Japan is one of the worst cases of government
over-indebtedness, a result of “good” advice dispensed by the American money
doctors.
The Chinese government is not in the habit of running its business on the
basis of unbalanced budgets and deficit spending. Looking at the Japanese
experience, no wonder that China does not want to be sucked into the black hole
of bottomless government debts in which the U.S. and the Japanese
governments are drowning.
Obama’s argument, concocted for domestic consumption, is that upwardfloating
of the yuan would help restore American competitiveness and would
put Americans back to work. However, the saga of the Japanese yen does not
confirm this optimistic prediction. A side-effect of letting the yen float upwards
under American duress was the devaluation of the dollar vis-à-vis the yen.