After all the noise and fluff about China letting its currency float, and the Obama administration deciding not to declare China a currency manipulator, is turning out to be just noise and fluff. And our trade deficit just grows, outsourcing our jobs and our economic growth.
Senator Schumer, on the trade deficit numbers,
“These numbers show just how little motive China has to end its currency manipulation unless it is pushed to do so,” Schumer said in a statement after new data showed China’s trade surplus widened in July to an 18-month high of $28.7 billion. “
The House Ways and Means Committee will hold a hearing on China’s currency practice for September 15.
Here are some reactions to the trade numbers and China’s currency manipulation from around the web:
Naked Capitalism: Widening Chinese Trade Surplus Increases Pressure to Intervene,
In the 1980s, when unemployment hit 8%, Ronald Reagan’s administration was concerned and took steps to address the problem.
[. . .] The announcement today, that China’s trade surplus reached a whopping $28.7 billion, 170% higher than its year-ago level and well above analysts’ estimates, is sure to increase pressure on China to Do Something about its currency.
Steelworks, the blog of the American Iron and Steel Institute (AISI): China’s Currency Manipulation Continues to Claim American Jobs,
Producing things competitively in America is not what is holding us back. … Jobs are flying out of our country in the blink of an eye as we allow China to continue to prosper from mercantilistic and market-distorting industrial practices. We know China is a major contributing factor to the massive job losses. The question is: do Congress and/or the Administration have the will to address this problem and ensure jobs born here in America remain resident here? …
[. . .] This currency undervaluation distorts trade by acting as a subsidy that artificially reduces prices on exports from the country undervaluing its currency, and as an added tariff on imports into that country. This undermines U.S. efforts to increase our exports to create jobs, and it causes large and chronic trade deficits that are unsustainable.
Tim Duy’s Fed Watch: Renminbi-Yen-Dollar Collision Course,
You see, currency manipulation is considered out of style for everyone but the Chinese authorities. Japan is expected to continue to play ball with the G-20 stance. Even if it makes little economic sense – a good case can be made that the best policy option for at least two nations, the US and Japan, is to easing quantitatively via the purchase of foreign currencies, just not each other’s. (As an aside, I find the obligatory line about the importance of “international coordination” just plain silly. It seems that China has managed to independently manipulate currency values quite effectively).
[. . .] One wonders, given the exploding US trade deficit, how much longer US officials will tolerate this farce? Have the imbalances already become too deep, too entrenched, that they can be resolved with nothing short of another financial crisis? Increasingly, I fear this is true.
It looks like it will be up to the Congress to pressure China to start trading fairly with the rest of the world. The House Ways and Means hearing will likely be a rallying point for this effort. Since the administration is not acting on this, for whatever reason (probably a good reason, but we need the jobs and the manufacturing to return to the US) Congress will need to pass a bill directing them to act.