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U.S. Designates China as Currency Manipulator

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Re: U.S. Designates China as Currency Manipulator

#241

Post by JPKab »

chiefalchemist wrote: post #148
tenpies wrote: post #104

Earlier quoted context omitted.

> China is also a huge foreign debt holder, and if presumably no longer a buyer due to decoupling, will send US interest rates skyrocketing. Before that happens, the capital exodus demanding to liquidate their Yuan for USD would have burned through the country's USD reserves and they would be insolvent. This is quite similar to what happened in South Korea in 1997 and it took IMF intervention to stabilize the country…

> "...but only one of them would see its financial system collapse." Unless that is an absolute certainty then and this is a game of high stakes chicken, then I would say the USA has more to lose. While China has certainly developed in the last couple decades they are still relatively used to living with less. On the other hand, Ameicans lose their minds when Facebook goes down for an hour. That is, there would be be…

Really? Seems obvious to me that its the opposite.

The US can always find other countries that manufacture things for cheap. China can't find other customers. The domestic demand isn't remotely high enough to propel their mercantilist economy, ironically due to the fact that the currency manipulation of the yuan has suppressed the wealth of Chinese citizens by devaluing their savings.

The idea that Americans are too weak and whiny to tolerate inconveniences can be refuted by every natural disaster here. People band together, and grin and bear it. Just like every other nation.

How a nation where most of the older generation have only 1 child to support them will fare with an economic crash is uncertain, because the one-child policy was an experiment that's never been attempted before. I think it certainly boosted wealth, but I suspect it created a society that is less resilient.

Re: U.S. Designates China as Currency Manipulator

#242

Post by onlyrealcuzzo »

blunte wrote: post #223
onlyrealcuzzo wrote: post #72

Earlier quoted context omitted.

China sets the price of its currency directly. QE indirectly affects the price of your currency by manipulating the price of your bonds.

That doesn't answer the question. No reasonably advanced manipulator of any system is content to operate only on the most visible level of influence. So the question really is, how different is a direct manipulation from an ongoing secondary manipulation?

It's extremely different!

In a free market, no one truly knows how the market will respond to some signal (like the purchase of bonds). Although an unrestrained manipulator (The Fed) can get pretty close to setting the price of all bonds by buying huge quantities of certain bonds -- The Fed doesn't know with certainty how that will affect the price of the currency (USD). And they don't really care that much, to be honest. They don't measure inflation with respect to a basket of currencies. They measure inflation with respect only to the USD.

When China literally sets the price of the RMB, there's no question what will happen to the price of the RMB. It is whatever China says it is.

There's a huge difference between manipulating the price of your currency and your bonds. And it's because there's a huge difference between what bonds and currenies are, and how they're used.

Re: U.S. Designates China as Currency Manipulator

#244

Post by Synaesthesia »

datumy wrote: post #22

Isn't Chinese Yuan depreciation caused by Trump's relentless tariff, just like Mexican Peso's depreciation when Trump threatened tariff early this year? I'm confused who is manipulating the market & currency.

It should not be forgotten who initiated the tariff wars! It was Trump’s administration.

Re: U.S. Designates China as Currency Manipulator

#245

Post by jussij »

raincom wrote: post #195
wrong_variable wrote: post #106

Earlier quoted context omitted.

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.

Yes and no. Let me give you an example: if 70% of Americans get $40K bonus per annum from the fed, it will lead to inflation. However, if the same amount of money (70% of 300M times $40K =8.4T) is given to ten billionaires, it won't lead to inflation.

You are describing inflation caused by consumption (i.e. high demand driving up prices).

The inflation the OP was describing is the massive inflation caused by printing money.

The US bond is effectively an IOU representing US dollars the USA owes the bond holder.

For the USA to buy back those bonds they only have two choices:

1. Run an strong economy earning lots of US dollars (i.e. a trade surplus) and use that USD income to buy back those bonds.

2. Turn on the printing press and print lots of USD to buy back the bonds.

That later option would render the USD worthless and since most commodities are priced in USD that would also lead to hyper inflation.

Re: U.S. Designates China as Currency Manipulator

#247

Post by jussij »

tempsy wrote: post #21

Stock futures down another 2%. Amazing how much money one can lose in a matter of days. Stomach churning.

If an when things head south, it can get much worse than that.

In 1987 on Black Monday the DOW fell more than 20% in a single day:

https://en.wikipedia.org/wiki/Black_Monday_(1987)

Re: U.S. Designates China as Currency Manipulator

#248

Post by foldingmoney »

thrwayxyz wrote: post #171
empath75 wrote: post #114

Earlier quoted context omitted.

The us decoupling itself from China would be an unmitigated disaster for the us as China would align itself with Russia.

Russia has the population of Nigeria and the GDP of Italy. The cold war ended a while ago. Worrying about them today makes about as much sense as worrying about Autria in 1930 because Austrohungaria used to be a world power.

>Worrying about them today makes about as much sense as worrying about Autria in 1930 because Austrohungaria used to be a world power.

And nothing bad came out of Austria in the 1930s.

Re: U.S. Designates China as Currency Manipulator

#249

Post by weiser »

_ptgt wrote: post #160

One thing that I think is getting lost in this discussion is the role of intent on currency manipulation. Switzerland has the strongest currency in the world due to the country's reputation for governmental and financial stability. This makes Swiss labor extremely expensive for reasons mostly outside of their control, and the Swiss government has tried (and largely failed) to remedy this. Technically, this is devalua…

Symbolic moving, and possible stepping stone to other actions. Technicalities don't matter.

Re: U.S. Designates China as Currency Manipulator

#250

Post by rdtsc »

AnthonyMouse wrote: post #123
rdtsc wrote: post #32

I have no idea what all this means so tried to read https://en.wikipedia.org/wiki/Currency_manipulator . Found it interesting that "Switzerland have been manipulating their currency more than China since 2009 and Germany and South Korea since 2014" Still it is not clear what that means in terms next steps. Will there be more tariff increases or sanctions? And then China will devalue their currency even more. So where…

> Will there be more tariff increases or sanctions? And then China will devalue their currency even more. So where does it end? Currency devaluation is, among other things, effectively a subsidy for exports, a little bit like the opposite of a tariff. But it's not exactly the opposite, which makes doing it in response to tariffs a bit desperate. If you're selling something for $100 and someone sticks a $10 tariff on…

That's a great explanation. It makes more sense to me now.
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