Kyler Murray Exposes the Stupidity of America's China/Currency Paranoia

In December Kyler Murray won the Heisman Trophy for the Oklahoma Sooners. Though he was drafted in the 1st round by Major League Baseball’s Oakland As last June, and was paid a multi-million dollar signing bonus by the notoriously parsimonious AL West team, he’s now decided to play professional football. Some in the know think he could be drafted as high as #1 overall.

According to people who are paid very well to understand the most complicated position in sports, Murray’s quarterbacking skills are otherworldly. If there’s a concern, it’s with his height and weight. It’s said that he doesn’t weigh enough, but the bigger fear is that he’s too short. The OU media guide lists his height as 5’10”.  

Funny about all this is that if economists and policymakers were advising him, they would simply tell him to shrink the length of the inch. You see, it’s speculated by some that Murray is actually closer to 5’8”. The previous number is problematic simply because the list of successful NFL qbs who were 5’8” is small. Assuming there’s a list at all. Quarterbacks at the highest level generally need to stand 6’2” or more, according to conventional wisdom. Ok, so why not devalue? If the definition of the inch can be shrunk a bit, then Murray’s height will no longer factor into his draft stock.

Except that it would. Any partially awake person in possession of the most average of intelligence would understand that redefining the inch wouldn’t redefine reality. To make what’s basic more than basic, devaluing the foot to six inches may make me 12 feet tall, but it won’t change my real height one iota. Neither will shrinking the inch recreate a new, and much taller Murray.

Which brings us to the desire among some within the Trump administration for China to cease “manipulating” its currency. Presently the yuan is pegged to the dollar, this is true for countless currencies around the world vis-à-vis the dollar, but Treasury secretary Steven Mnuchin wants the Chinese to cease and desist. He thinks the yuan’s dollar peg makes Chinese goods artificially cheap for it allegedly keeping the value of the Chinese currency down. Mnuchin is supported in what’s ridiculous by Brad Setser, a senior fellow at the Council on Foreign Relations. In an interview with the New York Times, Setser laughably claimed that “A weaker yuan encourages U.S. firms to import more from China, it makes U.S. exports to China more expensive, and this would work against the administration’s goal of a more balanced trading relationship.”

Murray must wish either Mnuchin or Setser were the one pulling the trigger for the Arizona Cardinals, the owners of the NFL draft’s top pick this year. Judging by Setser’s commentary, and the confused insinuations of Mnuchin, Murray could solve his height problem by simply devaluing the inch so that he’s 6’5”.

Back to reality, shrinkage of the inch to make Murray “taller” wouldn’t change anything. Assuming permanency of the “devaluation,” NFL GMs would instantaneously restate what’s an ideal height for quarterbacks. 6’5” would become the new 5’8”, and the old 6’5” would become 7’2”. The alteration of what is a measure is just that. The on-the-ground reality doesn’t change. Somehow Setser and Mnuchin don't grasp this.

Explicit in their expressed desire for China’s monetary authorities to boost the value of the yuan versus the dollar is that real prices of American and Chinese goods will be transformed by a change in the value of the unit of account. Such a belief is as confused as the one that says Murray can add height and heft through a debased inch and pound. Except that he couldn’t.

Neither can producers of goods and services. Missed by Mnuchin and Setser is that with trade it’s always and everywhere products for products. Money was created long ago by producers as a way to facilitate exchange. I have bread, I want your wine, but you only want the butcher’s meat. Money is an agreement about value that enables people with varying wants to effortlessly exchange with one another. Nothing more, nothing less.

Implicit in Setser’s comically obtuse assertion that Chinese producers gain from a “weak” yuan is that actual market players are as divorced from market realities as are the academics that Setser pals around with. Or jaw-droppingly dumb in the way that an NFL GM would be if he were to believe Murray 6'5" solely because the qb redefined the inch. Oh well, no GM would fall for something so absurd. An inch is merely a settled on agreement about length. If you alter it, so changes the agreement about the meaning of the inch.

Dollars and yuan are no different. If you devalue them, your costs of production logically rise. To believe otherwise is to believe that market participants would blithely exchange tangible goods and services for paper money that is exchangeable for fewer goods and services. Except that market participants, like NFL GMs, and like people with the most basic of knowledge, aren’t so dense as to not factor in changes to an inch, foot, square foot, dollar, euro, yen or yuan in making commercial decisions.

To state the obvious, money is a veil. Changing its exchangeable value won’t alter reality. A $20,000 Toyota Camry won’t take on the appearance of a Ferrari if the dollar is shrunk to 1/10th of its former value. Prices will adjust much as NFL GMs would adjust ideal height requirements if prospective NFL players were as hopelessly obtuse as economists.

So Mnuchin wants the Chinese to stop manipulating their currency? Missed by him is that the Chinese are the responsible ones here. They recognize that the sole purpose of “money” is to facilitate the exchange that improves everyone. Since the dollar factors into so much international trade, it’s wise to have one’s currency pegged to it. Too bad the U.S. Treasury doesn’t take currency stability as seriously as do the Chinese.

Crucial here is that nothing will change assuming a cessation of the yuan’s peg to the dollar such that the former rises or falls against the greenback. Just the same, nothing will change assuming Murray redefines the inch in order to be “tall.” Of course Murray and his reps would never be so foolish as to think they could trick NFL teams with the alteration of what is a measure. Sad here is that economists are actually that foolish, and worse, they persist in the belief that economic gain can be had for nothing through shrinkage of the dollar unit.