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Chapter 10: Trade & Currency Wars

the advances China has made in improving the
infrastructure of its financial markets.

A flexible international exchange-rate system with
selective intervention, a managed float system, can
solve some currency problems in the short run, but only
stable economies will stabilize currencies over the long-
run. Despite what a nation does to influence its
exchange rate, instability will cause foreigners to flee
that country’s currency over the long-run.

THE EXPORT-IMPORT BANK

The Export-Import Bank helps U.S. companies
sell products to foreign customers, mostly by providing
or guaranteeing loans when private banks will not. The
top beneficiaries have been big business, like Boeing,
General Electric, and Caterpillar. Boeing Aircraft has
been the bank’s biggest beneficiary.

Many other countries have similar banks,
including China, Japan, South Korea, and most
European countries. Some economists believe the bank
is a prime example of crony capitalism and distorts the
free market to benefit a few connected corporations.
Think rent seeking—those who pay can play. The bank
also poses a risk to taxpayers.

Despite these objections, Congress has always
reauthorized the Export-Import Bank. The bank is
authorized to approve transactions up to $135 billion
per year. When Donald Trump took office, the agency
had been operating with just two board members, one
board member shy of the three needed to approve

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