Currency and Trade with China [ Edited ]

[chad]

O.K. maybe not everything boils down to the printing of money. But as the U.S. government attempts to solve the unemployment crisis, one solution considered was the reduction of the trading surplus with China, which has been consistently blamed for undervaluing its currency to bolster its own trade. China also has a significant foreign currency reserve which consists, in part, of U.S. Dollars. China also maintains we're too focused on currency. But is the solution to our unemployment just a matter of straightening out currencies? Or perhaps after the rise in unemployment began, a solution in our currencies was after-the-fact. That is, there may have been a quick solution soon after the crash, but now one is not possible.

http://www.washingtonpost.com/world/china-says-us-policy-not-its-currency-to-blame-for-economic-woes...

Chad

[patgolfneb]

Certainly to blame everything on currency manipulation is simplistic. China is able to hide lower per worker productivity and favor exporting using currency manipulation.  Outside of the USA companies are held to more requirements to do business in their countries.  For example USA could require  firms that do over a certain dollar volume to maintain customer support operations in the US.  Korea and China both have stronger protection measures in place and requirements of partnerships for foreign countries wishing to do business there.  It is frequently repeated that US has high taxes based on published rates.  But after adjustments, deductions and credits, US has lower actually imposedl tax rates than almost any other industrialized nation. Since p[oliticians and business leaders with agendas repeat this misinformation constantly evereyone believes it.

[chad]

---

patgolfneb wrote:

Certainly to blame everything on currency manipulation is simplistic. China is able to hide lower per worker productivity and favor exporting using currency manipulation.  Outside of the USA companies are held to more requirements to do business in their countries.  For example USA could require  firms that do over a certain dollar volume to maintain customer support operations in the US.  Korea and China both have stronger protection measures in place and requirements of partnerships for foreign countries wishing to do business there.  It is frequently repeated that US has high taxes based on published rates.  But after adjustments, deductions and credits, US has lower actually imposedl tax rates than almost any other industrialized nation. Since p[oliticians and business leaders with agendas repeat this misinformation constantly evereyone believes it.

---

Well, currency is never simplistic anyway.

There have been some reports that China's foreign currency reserves have hit a record high- most of the reserves were U.S. dollars. It was a report made at the beginning of the year, but I'm not sure how they fare now. I believe the interest rate on the yuan has been raised since then.  Should we impose a restriction on the amount of currency a foreign government can hold?- It may be a simplistic solution to an increasingly complicated trading system. And while we're at it, maybe we should restrict what foreign banks can do with our money overseas. The Southeast Asia economic meltdown was in part due to the loaning of U.S dollars by foreign banks overseas. And when the US started to raise interest rates on the dollar, the Thai Baht crumbled.

Historically, China seems to have incorporated currency into their business strategy. For example, trade with China literally drained the silver from the British pound- China then used some of the silver to sell tea sets back to England and the US. In spite of the havoc, the strategy seems to have paid off for them to some degree.

Chad

[chad]

Hewlett Packard is to lay off some 20,000 (?) employees in the U.S. ,while overseas operations in China remain unaltered. Trade with China, employment in China, etc. have always been issues which can be solvable by manipulating currencies (yes, its yet another no-brainer). There are obviously other ways to rectify trade imbalances, other than currency manipulation. China's economy is intricately tied to the world economy now, so, it is all self regulating to some degree. The bank of china had to raise interest rates on their currency for example to prevent inflation- they had been accused of undervaluing their own currency for years to help maintain a trade surplus, as you know.