Is the United States starting a trade war against the Chinese with the Currency Bill? Could the actions taken by the US government force the economy to double-dip rather than to recover? Who wins in this trade war, China or US? Is China really manipulating its currency?
Exports and Imports
China exports a flood of goods to the US and has for many years. The trade deficit has been in China’s favor since at least 1985 according to the US Census and has significantly increased over the years. Both countries need each other but who needs need whom more?
China Is The Largest Holder of Debt
China is the largest holder of US debt account for almost $900 billion in January. Not only are they making the products that the US buys, but they are also financing our government’s day-to-day activities. If China were to pull out of US treasuries and start investing elsewhere (which has begun), how does the US government finance it activities because they can only raise taxes so much on an already suffering consumer?
Who’s Manipulating Currencies?
Some of our elected officials claim that China is manipulating its currency and keeping it undervalued. The Chinese Yuan, which is pegged to the US Dollar, may be undervalued or could the US Dollar overvalued? What is in it for the US if the Yuan is undervalued? Yuan higher, US Dollar lower…China would have more money to buy discounted treasuries?
Unless the currency is undervalued to the point that it would revalue the currency at 300 times what it’s currently at, I really don’t see it bringing jobs back to the US but rather inflating the prices on most of the (made in China) products we buy (look around, your probably staring at one now).
If the US government is starting a trade war over currency manipulation then maybe we should rethink some of the roles of the Federal Reserves. Coincidentally, this same organization manipulates the US Dollar through interest rates and the print more button.
Tags: EconomyStumble it!
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