Will the U.S. accuse China of currency manipulation?

[not.your.average.joe]

http://news.yahoo.com/s/ap/20090123/ap_on_bi_ge/geithner_china


"Treasury Secretary-designate Timothy Geithner says President Barack Obama believes China is "manipulating" its currency, a declaration that American manufacturers have long sought in their efforts to combat America's soaring trade deficit with China."

 

[theoakman]

http://news.yahoo.com/s/ap/20090123/ap_on_bi_ge/geithner_china


"Treasury Secretary-designate Timothy Geithner says President Barack Obama believes China is "manipulating" its currency, a declaration that American manufacturers have long sought in their efforts to combat America's soaring trade deficit with China."

Why would they need to accuse them? China has been openly manipulating their currency for decades now. I can see it now.

Obama: "You manipulated your currency"
China: "I know, isn't it cool? Now we are going to actually let it increase."

 

[JordanL]

I think a lot of people don't realize that China engages in MORE currency manipulation than the US does, we just do it on a larger scale.

China has been funding it's 9% growth rate by effectively stealing/leaching the growth rate of other countries through currency manipulation.

 

[danberkeley]

What central bank doesnt manipulate its currency?

 

[hugolp]

China has been funding it's 9% growth rate by effectively stealing/leaching the growth rate of other countries through currency manipulation.

China has not steal grothw from nobody. China has offered cheap credit and the other countries have taken it voluntarely. USA got into this mess on its own.

What central bank doesnt manipulate its currency?

Indeed. If the Obama administration tries this strategy, its going to end up like the crybaby of the world. Its ridiculous.

 

[Zippyjuan]

China has used currency manipulations for a very long time. That is how they peg the value of their currency to the dollar making their goods cheaper than they would be with a freely floating currency. If it was allowed to rise against the dollar the cost of their goods to us would go up and we would buy less from them. It would efffectively rasie their cost of producing goods relative to our cost.

But we benefit from that too. We get cheaper goods (but at the expense of losing jobs which might have produced those goods here) and cheap credit. To keep the exchange rate they have to buy dollars- so what do they do with those dollars? We don't sell them that many goods so they buy Treasury bills which raises the demand for them and allows the Treasury to raise the money they need to fund the government at lower rates than if the Chinese were not buying them. (the higher the demand for Treasuries, the higher the price they sell at which means a lower yield in terms of interest on each one).

 

[jy006m]

What exactly is meant by manipulating currency? Making it appear stronger than it does (and in China's case making it appear weaker than it does)? How does a government do that?

 

[Zippyjuan]

Buying or selling their currency in the open market. In the case of China, they are using their currrency to buy US dollars- increasing the demand for dollars relative to the yuan- which keeps the value of the dollar relatively high. Unless you have a lot of currency reserves, this can be hard to maintian over a long period of time. Our trade deficit with China gives them a lot of currency to use.

 

[JordanL]

China has not steal grothw from nobody. China has offered cheap credit and the other countries have taken it voluntarely. USA got into this mess on its own.



Indeed. If the Obama administration tries this strategy, its going to end up like the crybaby of the world. Its ridiculous.

You really don't understand the difference, do you?

 

[matthalifax]

and the us hasn't been manipulating it's currency??? cmon what about the plunge protection team the the fact the banks that have been bailed out have 20 percent of the world's silver supply shorted on comex and thousands and thousand's of gold ounces shorted

check out the Gold Anti Trust Action Committee

 

[hugolp]

You really don't understand the difference, do you?

Dont get all smart on me, and explain what you think is this difference.

Hugo

 

[NolanLawson]

I'm no expert in monetary policy, but by reading between the lines I think I can figure out what this article REALLY means.

During this process, China did allow the value of its currency to rise by 21 percente

So China hasn't been printing as much money as us? How is this currency manipulation? If anything, it's currency non-interventionism.

"Therefore, the immediate goal should be for us to convince China to adopt a more aggressive stimulus package as we do our part to try to pass a stimulus package here at home."

Aha! Now I see what the real point is. We want China to inflate as much as we are. This has echoes of what Britain did after WWI - convince America to inflate in order to keep pace with her own wartime inflation. (See Rothbard's America's Great Depression.)

I guess this is just the nature of fiat and fractional currency. In order for individual banks not to collapse, they have to convince every other bank to inflate just as much as they do. And since each country has a central bank, if one country inflates too much, it has to try to convince other countries to inflate as well. It's hilarious, though, that sources like Yahoo try to paint China as some kind of aggressor for having a conservative monetary policy.