China says falling US Dollar is causing their inflation

lomiller

Penultimate Amazing
lomiller
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http://finance.yahoo.com/news/China...3.html?x=0&sec=topStories&pos=6&asset=&ccode=

Out-of-control printing of the U.S. dollar is forcing inflation on China, pushing up prices for commodities and labor, trade minister Chen Deming says in an escalation of rhetoric over currency and other tensions ahead of key international meetings.
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Never mind that the a falling USD would only impact the price of commodities in China if their currency is pinned to the USD...

(edit: to a first approximation, anyway)
 
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The Currency Wars: The Currency Strikes Back

And soon,... The Return of the Currency, coming summer 2015.
 
Funny comments:
Federal Reserve Notes are fiat currency - worthless paper - they only represent units of credit. You can't buy anything with them. It's simply a distribution of never-to-be-fulfilled promises to pay. Where there was once a substance based economy (gold and silver), we have had imposed upon us a monetary system founded in the negotiable instruments of a private bank, aka The Federal Reserve. You own nothing because the bank holds the paper. Pay attention in class next time.
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:D
 
The stimulus was unfunded. That means the US had to sell debt to fund it. I wonder who purchased that debt?
 
Hey, don't blame me, it's not my fault, I didn't do it, my hands are clean...
 
Germany and Brazil are among other prominent critics of the US's QE2 effort. In both cases they have floating currencies that are uncomfortably strong against the dollar. Germany can't do anything about that. Brazil has imposed foreign inflow taxes (a capital account measure) but that hasn't helped.

German's finance minister is actually correct to say that the US is pretty much doing what it accuses China of doing--just going about it another way. The state-owned China Daily is about as vitriolic in respect of US monetary policy as the most ardent protectionism-agitators in the US are about China's FX manipulation.

Bottom line is that every central bank in the world is goven a mandate to set policy for its country's domestic needs, and none of them have any obligation to help out the global (im)balance of payments, or to make things easy for foreign states. They would arguably be in violation of their respective charters if they did. So it falls to politicians . . .
 
China is the Wal-Mart of the world; most of its export economy is based on dumping cheap product in other countries, forcing their competitors' profit margins to tank. Let them eat cake and inflation for a while.
 
What are the solutions Francesca?

Puppycow said:
And. . .?
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You subsidize something you get more of it. If I loan my drunk nephew my car I'm not doing to condem him when he crashes it.

Checkmite said:
China is the Wal-Mart of the world; most of its export economy is based on dumping cheap product in other countries, forcing their competitors' profit margins to tank. Let them eat cake and inflation for a while.
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Nothing wrong with that. That's capitalism at work. The issue is cheating on currency. How can you determine what a fair exchange rate is?
 
Francesca R said:
Germany and Brazil are among other prominent critics of the US's QE2 effort. In both cases they have floating currencies that are uncomfortably strong against the dollar. Germany can't do anything about that. Brazil has imposed foreign inflow taxes (a capital account measure) but that hasn't helped.

German's finance minister is actually correct to say that the US is pretty much doing what it accuses China of doing--just going about it another way. The state-owned China Daily is about as vitriolic in respect of US monetary policy as the most ardent protectionism-agitators in the US are about China's FX manipulation.

Bottom line is that every central bank in the world is goven a mandate to set policy for its country's domestic needs, and none of them have any obligation to help out the global (im)balance of payments, or to make things easy for foreign states. They would arguably be in violation of their respective charters if they did. So it falls to politicians . . .
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Germany and Brazil may wish for a stronger US dollar, but the fact is the US needs to deal with deflation and problems in it’s banking system. The fact that dealing with these issues devalues the USD is incidental and probably indicates it was too strong for current economic conditions.
The difference between the US and China is that China is trying to push down the value of it’s currency in spite of domestic inflation and lending bubbles. IOW the US is dealing with domestic monetary issues, and this has the incidental effect of devaluing their currency, while China is trying to devalue its currency in spite of the domestic problems that is creating.
 
lomiller said:
The difference between the US and China is that China is trying to push down the value of it’s currency in spite of domestic inflation and lending bubbles. IOW the US is dealing with domestic monetary issues, and this has the incidental effect of devaluing their currency, while China is trying to devalue its currency in spite of the domestic problems that is creating.
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The argument that China is acting contrary to its own best interests is presumably not one China's policymakers agree with. In fact what it is doing is controlling domestic monetary conditions at the same time as fixing its exchange rate. According to the "impossible trinity" or "trilemma" of Mundell & Fleming it can't do that at the same time as operate an open capital account . . . to which the answer is that its capital account is substantially closed.

It likely does not want to keep it so closed forever since gradual openness to capital markets is the main route through which it grows richer, but China has good reason to want that process to happen gradually--indeed one of the World Bank Group's three managing directors lent some backing to such gradualism today.
 
ServiceSoon said:
What are the solutions Francesca?
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Short of "world government", not much. Perhaps (i) reduction in the role of the US dollar as a reserve/commodity currency, (ii) more dynamic fiscal policy worldwide (tighter in emerging economies vs loose in developed ones right now), (iii) more FX flexibility in emerging currencies at the same time as (ii).

I'm better at problems . . .
 
Thats the conomic cycle, If china otught that the US would supply their internal market for ever they were very mistaken.
 
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