The entire premise of the post-Bretton Woods neoliberal world US currency is based on an agreement with the Saudis to sell oil in US dollars for military support and on threats to bomb countries who sell oil in non-US denominations. And China is the currency manipulator.
U.S. Designates China as Currency Manipulator
131–140 of 356 posts
Re: U.S. Designates China as Currency Manipulator
#132China have been manipulating their currency before this week's drop. They use USD to buy CNY to prop up CNY exchange rate. If they stop buying CNY using USD, the value of CNY would fall (happening now). So China is technically no longer manipulating their currency.
Why are they doing this? My guess is to respond to trade war tariff. The US is manipulating USD through Fed interest rate. The Fed lowers interest rate to prop up borrowing and economic growth. I think China has figured out a way to deal with the situation. They will adjust the USD-CNY exchange to prop up their own economy.
This trade war is turning into a silly cat and mouse game. China is not making a deal. They have ways to get around tariff and TPP. War is about deception. The US needs some sneaky attack if it wants to win.
Re: U.S. Designates China as Currency Manipulator
#133The long story to this is that the Chinese dont like what Trump is doing, he is the first to stand up to their tactics. The thing is, if Trump doesn't get reelected, a democratic candidate will most likely not continue the trade war. China has every incentive to place pressure on the us stock market in the hope that it ruins Trumps chances at reelection. So they play this long waiting game, in the chance that Trump d…
Hmm
At first that sounds like a weird theory to me, but on second thought it’s quite reasonable. China has some long term goals, for which a more divided and more poorly controlled US would benefit them. But Trump is a strong immediate threat to their economy so it’s probably better to have him removed for China.
However the more ammo Trump has to vilify China, the more virtuous he appears. If this were really china’s aim, they should be playing the victim. So I think the us presidential race is not their top concern.
Re: U.S. Designates China as Currency Manipulator
#134Earlier quoted context omitted.
Not the OP but I personally do think that, yes. I personally do not find that much of a difference between Draghi's 2012 "whatever it takes" message (and ECB's subsequent actions) and currency moves like the ones carried out lately by the Chinese. Granted, the Fed has not yet hired any helicopter for its boss to throw money out of but some of its post-2009 actions (like the well-known QE) were pretty much the same th…
QE was a response to deflationary pressures related to massive deleveraging after the financial crisis. Inflation has barely touched 2% since then, and there was no devaluation of the dollar against foreign currencies. In fact the dollar has been appreciating against most other major currencies.
>and there was no devaluation of the dollar against foreign currencies.
There was certainly a strong over-valuation of the economic entities whose bonds the ECB bought (I think the Fed did a similar thing, not 100% sure as I live in Europe and I follow ECB's policies more closely). Had the ECB not bought those bonds then maybe the Chinese companies would have been able to buy even more stuff in Europe, as things stood they were only able to purchase the Piraeus port (because the Greeks were basically in default) and some other lesser assets. That's still economic protectionism.
Re: U.S. Designates China as Currency Manipulator
#135Earlier quoted context omitted.
The chances are not close to zero, they are much higher. The trade war with China is one of the very few topics where many Democrats support the administration. If the US caves now China will have won an enormous victory and will be able to dictate any further terms of trade with the US, which is a really bad outcome. There is very little chance that the current administration will accept a loss here on a fight they…
US can barely put sanctions on Iran as of now and the rest of the world is hesitant to follow. It took ~8 years to get the sanctions on Iran to that point. Even if US wanted to go nuclear and push for China being cut from SWIFT: 1. It will be suicide. Cutting China from SWIFT will have very very big impact in the US. 2. US corporations have too much interest to lose in here. No way corporate America allows that to ha…
> US can barely put sanctions on Iran as of now and the rest of the world is hesitant to follow.
The US has crushed the Iranian economy. What are you talking about? Have you seen the collapse of their economy since the US left the nuclear deal and began pursuing sanctions? Have you seen the extreme inflation rate, the plunge in their currency, the plunge in their oil exports, and their increasingly wild behavior?
If entirely crushing their economy equates to barely, what would be a successful version of sanctioning Iran?
Apr 2019 "Iran inflation could reach 40 percent this year as economy shrinks further"
https://www.reuters.com/article/us-iran-economy-imf/iran-inf...
Apr 2019 "Trump's maximum pressure campaign hammers Iranian economy"
"The World Bank predicted in an April report that the Iranian economy would "contract sharply," and it expects GDP to shrink by 3.8% in 2019 on the back of U.S. sanctions."
"Iran's currency, the rial, lost more than 60% of its value compared to the U.S. dollar last year, and inflation surged fourfold to an estimated rate of more than 40% by the end of 2018. (In 2019, the Central Bank of Iran has stopped publishing inflation data, leading some analysts to believe that the rate has kept rising beyond 40%.)"
https://www.axios.com/iran-economy-trump-sanctions-irgcc-0a8...
Apr 2019 "Iran's Latest Inflation Figure Tops 50 Percent - Food Prices Jump 85 Percent"
https://en.radiofarda.com/a/iran-s-latest-monthly-inflation-...
Re: U.S. Designates China as Currency Manipulator
#136Isn't being able to manipulate their currencies exactly the reason countries maintain currencies of their own? Don't other countries like Japan and the USA manipulate their currencies routinely?
Re: U.S. Designates China as Currency Manipulator
#137Yes considering the US prints hand over fists amounts of money to deal with its economic woes, it's sort of a joke where the emperor wears no clothes, but no one says anything because he's the emperor. https://www.investopedia.com/articles/investing/090915/quant... > "In theory, currency manipulation and a monetary policy like quantitative easing aren't the same thing. One is interest rate policy based and the other…
The USD has risen against pretty much every major currency in the past several years. Its status as the world reserve currency keeps its value artificially high despite running the printing press. Whether this is good or bad for the US economy is debatable (and unclear), but it's not really a recipe for currency manipulation at all. I have no idea what you're talking about.
> The USD has risen against pretty much every major currency in the past several years.
And would have risen more without QE.
Re: U.S. Designates China as Currency Manipulator
#138Earlier quoted context omitted.
Nope because the Federal Reserve can issue new Federal Reserve notes (aka money) to the US Government to buy their bonds at any price point. As the other commenter pointed out this would cause inflation (as it increases the money supply)
I see. Printing money to buy new financial assets would also cause greater wealth inequality and populism, although maybe those are seen as benefits to the current administration.
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Re: U.S. Designates China as Currency Manipulator
#139Earlier quoted context omitted.
I think the trade balance is too skewed in favor of the US. It will be painful for both sides, but we have a lot more goods we can tariff than they can. Of course, they could also dump their US treasuries, but it would be a pyrrhic victory for China. They would hurt themselves too much in the process.
The US Fed would simply buy the dumped treasuries as an emergency measure. The Fed already owns twice as many treasuries as does China, so it could also just pause the balance sheet reduction program. It wouldn't dramatically hurt the US long term.
But what happens to all that cash they would use to buy the treasuries with? Where is that $1.1 trillion going to flow into?
Re: U.S. Designates China as Currency Manipulator
#140Earlier quoted context omitted.
The fed has unlimited control over the rates. They could literally just buy out every bond in existence.
Products don't grow on trees. If the fed buys every USD bond in existence ( aka monetize the debt ) - it would lead to a good amount of inflation.
Inflation isn't global, it can easily happen in economic sectors that exclude the vast majority of the population.