Re Currency, the Chinese are Elastic

October 12th, 2011 at 3:37 pm

Longtime China currency watchers will tell you that the currency management function of the Chinese government is quite sensitive to outside pressure.  The figure below shows a fairly sharp strengthening of the RMB (or “yuan”) to the dollar in reaction to the Senate vote in support of legislation targeting the practice.

Source: Google Finance.

As the WSJ notes:

In recent days, the Chinese central bank has intervened in currency markets to drive up the value of the yuan against the dollar, a development in line with U.S. goals.

This gives the opposition here the chance to say, “why stoke a trade war?  They’re revaluing anyway.”

Well, if they’re revaluing anyway, we won’t need to use the new powers in the currency legislation to do something about this serious problem for American exporters.  But that doesn’t mean we don’t need that option.  Wouldn’t it make sense to have the ability to do something about it just in case they slip back into the old dollar peg??!!

Just because I stopped at the last red light doesn’t mean we don’t need a police force.

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7 comments in reply to "Re Currency, the Chinese are Elastic"

  1. D. C. Sessions says:

    I’m sure that the principled opposition to having that monetary management tool in our arsenal are consistent in opposing US development of similarly unnecessary military capability. For instance, air superiority fighter planes when our current aircraft are already vastly better (and more numerous) than any other country’s.

  2. the buckaroo says:

    …seems making nice with the enemy is just good sound business practice. Make no mistake, the Chinese see us as we are…a war mongering capitalist juggernaut. We should view them as communists with a solid plan to unseat the USA as the dominant economic power…and I believe they are familiar with the writings of Machiavelli.

    Did the Chinese, beside financing the debt of the war, earn the right to plunder the cooper interests of Afghanistan or the oil fields of Nigeria…there are numerous examples of us clearing the swamp of crocodiles so others may wade freely.

    It is time to stop walmart & their offshoring mentality…maybe it is time to return to the Wilson-Brandeis philosophy of once more becoming the nation of small proprietors, of corner grocers and smithies under spreading chestnut trees…stranger things have happened.

  3. davesnyd says:

    By how much is the Yuan undervalued?

  4. Daniel says:

    you might want to check the next data point on that variable.

  5. Donsig says:

    Just because I stopped at the last red light doesn’t mean we don’t need a police force.

    How about adding ” with a police officer right behind me reaching for his ticket book “, to truly describe the current situation. Compromise in the face of threats is no promise of future behaviour.