Arlen Specter, democratic and formerly republican senator from Pennsylvania, gave an interview on Fox News Sunday that won the award for venal stupidity on the part of a person who ought to know better.  I mean it is one thing to say ridiculous things when a person spends their days doing their job unrelated to politics and economics and therefore makes statements that are mistaken, but quite another when a person spends 24 hours a day immersed in policy detail and is just either too stupid or too ambitious to talk sense. 

Specter said in an interview about the economy that China is essentially the big enemy that manipulates its currency "out maneuvering us, taking our jobs and our dollars and then lending it back to us and owning large parts of our country".  What a moron.  Now, to get some context, he said this drivel while responding to a question as to why the stimulus passed last year, for about a trillion dollars, has not only not met projections but the results have been worse than what the administration predicted if we had not passed it at all.  First he claimed that without the stimulus bill we would have had a Depression worse than the 1930s, another patently false statement in light of the bill being passed after TARP had already stalled the big meltdown.  Not that I love TARP, I don't as I think it just kicked the can down the road, but it was a Bush program that saved the day not an Obama one, just for the record.  The Stimulus Bill was passed after the immediate danger of collapse was long passed, but I digress. 

This fool, Specter, was trying to create a scapegoat in the Chinese and from what I see it is an increasingly popular view among the political elite.  So what they are saying is that the Chinese are falsely manipulating their currency to keep Chinese goods cheap here and sell a lot to create Chinese jobs that would otherwise go to Americans. Then, they have the temerity to lend us back our own money and therefore be our largest creditor.  So, the illogic goes, we should force them to allow their currency to float on international markets, which would make it go  higher and therefore make Chinese goods more expensive and therefore more American goods will be sold and therefore more American jobs saved or created.  Stupid, stupid, stupid.

Here is what would be the absolutely predictable result if we go down this road:  The Chinese currency, the Yuan, would indeed go up and make Chinese goods more expensive - but not by much as the Chinese would just reduce their prices commensurately to offset the drop.  So we would either keep buying their goods and the ones whose prices could not be raised for economic reasons, would result in every day Americans just paying more for the same thing.  In other words, to save a few jobs, we would make everyone pay a tax in the form of higher prices.  That's right, more people benefit from cheaper goods than a few jobs lost to their manufacture.  Then, the HUGE Chinese holdings in US government debt would be immediately worth a lot less, as the dollar  devalues against the Yuan - with the result being the Chinese would either stop buying our debt at all, or far more likely, start demanding much higher interest rates.  3% won't cut it, so rates will soar thereby making our huge deficits and debt enormous.  The predictable result of this would be an immediate plunge back into recession, or in my view, even depression that we are desperately trying to avoid in the first place.

Only an idiot politician would think you can screw your banker and still borrow money at the same rate - and as easily as before.  All this healthcare, stimulus, and entitlement spending is costing trillions of dollars we don't have.  We have to borrow to sustain it, as there is no will on the part of anyone but a ragged few, like me, who really would cut spending in a meaningful way.  Therefore, we cannot do what in fact we certainly will, as nothing is quite as stupid as a politician in an election year.  Arlen Specter is the poster child for unbridled ambition leading to a total loss of reason.  He would, I believe, sell his mother if it furthered his career - which he is in danger of losing.  If he were the only one I wouldn't be worried, but trade protectionism is the usual remedy of choice to politicians in trouble.  We are in for it as a result.