So why aren't we going after the biggest reasons? Let's assume China folds by reevaluating the peg to our liking and floods the market with more cheap earths, what does that do to our economy? Does it lead it towards a more sustainable path or does it make us vulnerable to another currency reevaluation or a trade imbalance in say Germany/EU and Japan or even another emerging market/region? What would be the consequences to the actions that caused China's capitulation? Was it voluntary through forceful means? If the latter, does that open up their consumer markets when it'll definitely pull on nationalistic strings? Worst case, if forceful means are unsuccessful, was "trying" worth it? Tell me what country other than US supports adding 600 billion to the money supply on top of the 1.2 trillion a couple of years ago. You're angry about China's government committing unilateral acts when you should be angry at gridlock in our political system that causes the Fed to commit unilateral and risky acts. “The Federal Reserve cannot solve all the economy’s problems on its own,” Mr Bernanke somewhat plaintively wrote. “That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators and the private sector.” China isn't a model nation by far. I don't think they're our good friends. They're more like business partners who share their own interests. Is Israel our good friend? Is Japan, who still maintains currency, market and trade imbalances? Outside of the UK, I don't think we have many allies that commit a sense of trust between us. We haven't been pursuing those areas in earnest in the past 15 years. Businesses have been capitalizing on their relaxed markets in that time and that has dominated discussion. Now that our economy and business relations has stalled, we want to go back to those talking points? Do you think they'll believe that we're honest when bringing it up?
I have been advocating for us to go after the bigger reasons...namely to have our gov't invest in research and support high tech industries. But that's a multi-year solution that's not going to happen in the short term. I am not angry at Chinese gov't, just saying we should do what we have to restore balance and prevent our economy from slugging along? I don't get why you say we shouldn't take action and just suck it up when it's clear the currency is being manipulated. It makes logical sense. Although I am angry at the Chinese posters here, they are quite disrespectful and perhaps some of my tone is a reaction to that. And the Fed had to act, it's waited way too long, and with the recovery stalling and no more stimulus as Congress is in gridlock, it was the only action to do. It would be riskier for the fed not to increase the money supply. China's human's right record is a shame. But you are right, we aren't really doing anything about that, and there really isn't anything we can do. But a gov't that does that to it's own people won't have any issues doing that to other people, don't forget that. If you think our foreign policy is bad, just wait a few more years.
If you want comprehensive argument on the Yuan issue, this book is probably one of the best. Economics and law ... http://www.voxeu.org/reports/currency_dispute.pdf Read it.
Not related but: <object style="height: 390px; width: 640px"><param name="movie" value="http://www.youtube.com/v/IGYAhiMwd5E?version=3"><param name="allowFullScreen" value="true"><param name="allowScriptAccess" value="always"><embed src="http://www.youtube.com/v/IGYAhiMwd5E?version=3" type="application/x-shockwave-flash" allowfullscreen="true" allowScriptAccess="always" width="640" height="390"></object>
http://blogs.ft.com/money-supply/2010/04/16/the-limited-benefits-of-a-yuan-appreciation/ The limited benefits of a yuan appreciation April 16, 2010 1:36pmby Emma Saunders | Share A 15 per cent appreciation of the renminbi would reduce the American trade deficit by just 5 per cent by the end of next year, and the effects would not significantly increase GDP. Some clever modelling from PwC - performed just for Money Supply - injects some numbers into the debate. A 15 per cent appreciation of the currency would increase the exports and decrease the imports of the three countries modelled: the US, UK and Japan. Trade deficits - or a surplus, in Japan’s case - would be improved. But the change in the deficit would be, first, small, and, second, short-lived. For the US, the deficit reduction would be 5 per cent; the UK would enjoy 9 per cent; and Japan would secure a 15 per cent surplus increase (see table). The economist behind the research observed the effects would be short-lived. “It’s quite a significant move,” said PwC economist Yael Selfin, who used the NiGEM model for the analysis. “The overall impact on the economy would be small, however, as more expensive imports from China would spur inflation and cause the Bank of England to raise interest rates more quickly. This would reduce investment and consumer spending – offsetting the positive economic impact of a fall in the trade deficit.” * 15 per cent was chosen as a feasible amount, based on a similar revaluation in Japan in 1971.
