Is China manipulating it's currency?

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Rob Z's picture
Rob Z
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Is China manipulating it's currency?

I don't know much about currencies but I wanted to ask if this makes any sense or what the strategy would be here:

I saw this report the other day on Bloomberg. Why would Geitner say such a thing about China? What is the strategy here???

Jan. 22 (Bloomberg) -- "Timothy Geithner, President Barack Obama’s nominee for Treasury secretary, said the new U.S. administration believes China is “manipulating” its currency."

http://www.bloomberg.com/apps/news?pid=20601087&sid=apOnQzszPvts&refer=home

 

Set's picture
Set
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Re: Is China manipulating it's currency?

I believe that every country manipulates its currency.  Tim seems to be throwing stones from a glass house.

Ray Hewitt's picture
Ray Hewitt
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Re: Is China manipulating it's currency?

I read Geitner as laying the groundwork for a trade war with China. Besides what Set acknowledges, the US  is the worst manipulator of all. Because the US is the world's base currency, something like 7-14 trillion dollars is in foreign hands. I hate to think of what will happen when foreigners cash in. Most likely at some point in time Washington wil declare their dollar assets null and void.

mainecooncat's picture
mainecooncat
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Re: Is China manipulating it's currency?
Set wrote:

I believe that every country manipulates its currency.  Tim seems to be throwing stones from a glass house.

Or as I said recently in another thread, Set, talk about biting the hand that feeds.

RussB's picture
RussB
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Re: Is China manipulating it's currency?

China's strategy is to generate full employment (thereby staving off social unrest in the interior) by maximizing exports. Like any exporter, it seeks to keep its currency weak relative to other currencies. So back in the 90s they pegged the yuan to the dollar, I forget at what rate, but at a rate which keeps it weak relative to the dollar.

 At the same time, they've financed America's cheap import binge by lending it the money to buy all this crap, which has generally served to weaken the dollar, which weakens the yuan further.

It's like a crack dealer lending his crackheads the mnoey to buy his wares, to keep them addicted.

Obviously this is mutually unsustainable, but it seems to be a terminal codependency, and both must eventually go down together.

Periodically China talks about trying to disentangle itself from this mess, maybe letting the currency float (which I think is what the Americans want, I'm not sure offhand), retooling the economy for manufacturing for domestic consumption, not relying so much on exports, perhaps importing more from the US....

But how they could do this without destroying alot of jobs and having to run the dire gauntlet of social unrest, or triggering a run on the dollar as they try to maneuver out of their grimly exposed dollar position, is a mystery which so far baffles them, and in practice, no matter what they say they'll try to do, they just continue with breakneck growth, floods of exports, and the weak currency.

machinehead's picture
machinehead
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Re: Is China manipulating it's currency?

Fiat currencies are, by definition, manipulated. If there were international rules setting upper and lower bounds on the rate of currency creation, then violators could be identified. But there aren't any rules. In the nihilistic world of sovereign currencies, the issuers can do any crazy thing that enters their diseased, megalomaniacal minds. And nobody can say 'boo' about it.

In the U.S., the M1 money supply has been rising at a 39.6% annualized rate over the past 3 months. Is that 'manipulation'? One would think that such reckless money printing -- the monetary base has doubled in the past 6 months -- would weaken the dollar. But no, the dollar has actually strengthened against the euro and the pound sterling. Is the dollar's defiance of gravity 'manipulation'?

Bottom line, there is no way to tell. Fiat currencies have no defined value. It is impossible to know what they are 'really' worth, if anything. Asserting that one is 'overvalued' or 'manipulated' in comparison to another is idle chatter. The issuers of these unbacked currencies do nothing but manipulate them, all day, all the time. If they stopped manipulating, these worthless pieces of paper would go 'poof' and become useless.

When Timmy Geithner babbles about 'manipulation,' he's probably referring to his own gonads. Laughing 

Set's picture
Set
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Re: Is China manipulating it's currency?
mainecooncat wrote:

Or as I said recently in another thread, Set, talk about biting the hand that feeds.

 

Exactly Maine... They (we) like it or not, just might realize that we're biting off more than we can chew and choke on it.

DrKrbyLuv's picture
DrKrbyLuv
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Re: Is China manipulating it's currency?

It is hard for me to believe that Geitner could keep a straight face in accusing anyone of currency manipulation. He has been doing it for years.

And what a joke, the US government - master manipulators - points a finger at any other nation for fraud and wrong doing.

Brainless's picture
Brainless
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Re: Is China manipulating it's currency?

It is just a soundbite to be remembered when the US$ collapses. It's China's fault this happened will be firmly in the minds of Americans. Maybe preparing them for a fight?

 

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