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U.S. Designates China as Currency Manipulator

357 points by anilshanbhag 7y ago

lazyguy 7y ago
Kettle calling the pot black.
- SeanLuke 7y ago
  How so?
  - dmoy 7y ago
    Every country manipulates its own currency, to some degree. It is sort of the point of having a federal bank. It is useful for the prices of things to not change drastically day to day. That said - the degree to which the US Fed does things is different.
    - Mirioron 7y ago
      To clarify: by "federal bank" the parent means "central bank".
      - dmoy 7y ago
        Ah yes sorry, American centric term. The US fed is the equivalent of e.g. ecb or pbc The naming on pbc always confuses me because there's also a bc which is now spun off if you squint at it the right way
- Areading314 7y ago
  Do you really think that the US Federal Reserve System, which sets monetary policy based on very reasonable inflation and unemployment targets, is equivalent to a full-blown nationalist-controlled central bank, that is devaluing its currency to support a mercantilist agenda? I think it's pretty clear that China is able and willing to devalue far more than would be possible or palatable for the Fed.
  - paganel 7y ago
    Not the OP but I personally do think that, yes. I personally do not find that much of a difference between Draghi's 2012 "whatever it takes" message (and ECB's subsequent actions) and currency moves like the ones carried out lately by the Chinese. Granted, the Fed has not yet hired any helicopter for its boss to throw money out of but some of its post-2009 actions (like the well-known QE) were pretty much the same thing. I personally find no big difference between QEs involving trillions of dollars or euros and controlling one's currency like China just did.
    - Areading314 7y ago
      QE was a response to deflationary pressures related to massive deleveraging after the financial crisis. Inflation has barely touched 2% since then, and there was no devaluation of the dollar against foreign currencies. In fact the dollar has been appreciating against most other major currencies.
      - paganel 7y ago
        >and there was no devaluation of the dollar against foreign currencies. There was certainly a strong over-valuation of the economic entities whose bonds the ECB bought (I think the Fed did a similar thing, not 100% sure as I live in Europe and I follow ECB's policies more closely). Had the ECB not bought those bonds then maybe the Chinese companies would have been able to buy even more stuff in Europe, as things stood they were only able to purchase the Piraeus port (because the Greeks were basically in default) and some other lesser assets. That's still economic protectionism.
devoply 7y ago
Yeah you have manipulated a made up thing that we control and you are not playing by the rules where we put sanctions on you and then you become f*ed.
- SynthCann 7y ago
  learn how the world works kiddo
throwawayfoc 7y ago
I too am here to sing the praises of the Great People’s Republic of China.
kasey_junk 7y ago
The best part of this is that they are being called a manipulator for not shoring up their currency artificially.
- devoply 7y ago
  So that Trump's 10% sanctions may do the damage Trump wishes to do their economy... and they are like screw this we'll make our currency cheaper to offset it... And Trump is calling it no fair, which is childish, but expect no less from Trump.
  - lazyguy 7y ago
    The problem is that it's hurting the USA economy, too. In economics: if somebody is doing it cheaper then you can, especially if they are willing to lose money doing it (which is what subsidies accomplish), then you let them. You focus on what will make you money. Which means for the national economy I have zero doubt that Trump's actions will save and/or create a 10-30 thousand jobs. The problem is that he will be sacrificing many more thousands of jobs and hurting the standard of living for most of the 300 million people living in the USA to do it. Not to mention that USA debt from Trump/Congress's spending needs to be bought by somebody. The people that been doing that are the Chinese. So if he does manage to collapse their economy it's only shooting the Federal Government, and ultimately, the USA Dollar in the foot. So much grandstanding. So little sense.
  - resters 7y ago
    Comments critical of Trump are getting downvoted and the users throttled. Not sure what is going on.
    - hestipod 7y ago
      I think its a combination of a few things. First I think there are automod policies that use keywords in these conroversial topics to throttle. Second I think an ugly truth people don't want to admit is tech is heavily slanted to his supporters and those who find his values appealing due to the gender, class and age weighting in the industry, and nationality on this site being predominately American. Third there is a concentrated effort in every relatively neutral forum to downvote/argue/oppose, some of which is organic and some active measures. You often see an initial and rapid hit and downvoting of comments critical of him or the country in general, but then as the other hemisphere wakes up it balances out.
joezydeco 7y ago
China can outlast the US on this one. Next up, let's crash the price of oil and flip off the Iran sanctions: https://www.cnbc.com/2019/08/05/brent-and-wti-price-could-crash-if-china-buys-iranian-oil.html https://www.cnbc.com/2019/08/05/brent-and-wti-price-could-cr...
- sremani 7y ago
  Any day, I will take the bet on USA.
- lacampbell 7y ago
  China can outlast the US on this one. I'd take that bet!
- hugh4life 7y ago
  China would have a lot more room to move were the Hong Kong protests were not going on. The big problem they face is putting down the protests violently could lead towards pronouncements of them violating the agreement for it being held over. Which will lead toward countries people openly selling heavy weapons to Taiwan and maybe even building bases.
  - euroclydon 7y ago
    No one is going to build a base in Taiwan. This is not 1985. China is way too powerful and advanced militarily now for the US to provoke them so directly.
  - thefounder 7y ago
    I really doubt China cares a bit about the agreement signed with the UK. They are more concerned alienating HK people which is hard not to do unless they put the integration with the mainland on hold for a few good years.
  - gtirloni 7y ago
    How much impact have the Hong Kong protest had on trade? If I had to my guess, exactly zero. And more weapons to Taiwan because of that? What for? Maybe I'm being cynic but I don't see the needle moving here.
gopher2 7y ago
Now what? Is there a legal designation or meaning to currency-manipulator I'm unaware of, or is this basically like the Chinese designating Trump a "name-caller."
- internet_user 7y ago
  "The three assessment criteria are: “(1) a significant bilateral trade surplus with the United States is one that is at least $20 billion; (2) a material current account surplus is one that is at least 3 percent of gross domestic product (GDP); and (3) persistent, one-sided intervention occurs when net purchases of foreign currency are conducted repeatedly and total at least 2 percent of an economy’s GDP over a 12-month period.”[1] https://en.wikipedia.org/wiki/Currency_manipulator https://en.wikipedia.org/wiki/Currency_manipulator
  - gopher2 7y ago
    Thanks. TIL this is a real thing. Let the bilateral negotiations begin!
  - Bendingo 7y ago
    That seems pretty arbitrary to me.
    - internet_user 7y ago
      How so? It's just a way to ban competitive devaluations.
- deleted 7y ago
  [deleted]
tempsy 7y ago
Stock futures down another 2%. Amazing how much money one can lose in a matter of days. Stomach churning.
- xwdv 7y ago
  Not even days. I lost $24k today, and $60k since last week. The thing that keeps you calm though is that sometimes it’s amazing how much money you can actually make in a matter of days, or a single day.
  - eanzenberg 7y ago
    This means you have about a million dollars in stock investments alone, which you put you in a different class.
    - CamperBob2 7y ago
      Doesn't mean any such thing. Maybe s/he is into options? It hurts to watch that much money go away even when it's in the form of unrealized gains.
    - anonoholic 7y ago
      That would keep me calm! I'm pleased to report though that I lost nothing, since that's about how much I have.
      - damon_c 7y ago
        Get something started ASAP. I left a job when I was 28 with a depressing $21k in 401k. After sitting there for 16 years, it's now... big enough where it lost almost that much this last week. Compounding... really... works...
        deleted 7y ago
        [deleted]
    - 7y ago
datumy 7y ago
Isn't Chinese Yuan depreciation caused by Trump's relentless tariff, just like Mexican Peso's depreciation when Trump threatened tariff early this year? I'm confused who is manipulating the market & currency.
- internet_user 7y ago
  No. It's caused by China's central bank printing currency in response to tariffs, essentially using currency as a weapon.
  - seanmcdirmid 7y ago
    It’s caused by the Chinese not having enough dollars to prop up the yuan. There is no evidence that they are running the printing presses.
  - datumy 7y ago
    OK. tariffs => printing money, so tariff is the root cause, no?
    - aianus 7y ago
      There are plenty of good reasons why China deserves tariffs, why not start there as the root cause? Protectionism, IP theft, banning or heavily restricting US tech firms from operating in (aka exporting to) China, the list goes on.
      - simonh 7y ago
        And if that was the real reason, you’d expect the US to be coordinating with other countries that have the same beef with China. Instead, the US is antagonising them as well. Trump has been very clear the tariffs are mainly about boosting US manufacturing. It’s not going to work, but that’s what he keeps saying. If it really was about the issues you list, there are plenty of ways to address them in a much more coordinated and effective manner with like minded allies. Instead the US keeps their demands very vague and keeps changing the criteria, to avoid the chance of an actual agreement. Contrast with the renegotiation of NAFTA. Clear, specific demands in areas they knew would be open to negotiation. In the end, fairly minor updates and a workable deal.
rdtsc 7y ago
I have no idea what all this means so tried to read https://en.wikipedia.org/wiki/Currency_manipulator https://en.wikipedia.org/wiki/Currency_manipulator. Found it interesting that "Switzerland have been manipulating their currency more than China since 2009 and Germany and South Korea since 2014" Still it is not clear what that means in terms next steps. Will there be more tariff increases or sanctions? And then China will devalue their currency even more. So where does it end? This is US Treasury report from 2017 I started looking through: https://www.treasury.gov/resource-center/international/exchange-rate-policies/Documents/2017-04-14-Spring-2017-FX-Report-FINAL.PDF https://www.treasury.gov/resource-center/international/excha... The last paragraph explained the logic a bit more: > The United States cannot and will not bear the burden of an international trading system that unfairly disadvantages our exports and unfairly advantages the exports of our trading partners through artificially distorted exchange rates. Treasury is committed to aggressively and vigilantly monitoring and combatting unfair currency practices. Granted it's published by US Treasury. I imagine the Chinese government sees the picture very much differently.
- rolltiide 7y ago
  Okay, no, Germany can't manipulate its currency as they don't have their own, they use the Euro. Germany does have large influence over Brussels being the economic powerhouse of the Eurozone currency union, and the European Central Bank is in Frankfurt but really accountable to no-one, being led by an Italian man from Goldman Sachs. And yes, these 'currency manipulator' designations are a point of political convenience and are not evenly applied. Monetary policy for the last decade worldwide has been outright currency manipulation and market interventions using devalued currency. This excess currency has fueled bubbles in all markets: Rental, housing, stocks, venture capital, startups, art, crypto, government bonds, corporate bonds, junk bonds, collectibles, you name it.
  - bilbo0s 7y ago
    Well, I guess that's true. Nearly everyone is a currency manipulator. But also, as you yourself said, it's more of a point of political convenience right? If it serves our purposes to designate china as a manipulator, then who cares if everyone else manipulates too? Serious question. I mean, would it matter?
internet_user 7y ago
It ends with China being cut off from SWIFT and correspondent banking. That would probably make them re-think their approach to economic warfare.
- devoply 7y ago
  Considering how much stuff they produce I don't think that would end with them rethinking anything but rather establishing a different financial order with anyone who was willing to trade with them. And I think a lot of Europe and Asia would be on board for steep discounts.
  - internet_user 7y ago
    The US would just need to cut off a few banks to trigger a credit crisis in China, they are already bailing out banks. Who knows how this all will play out, won't be pretty either way. I bet this is all empty brinkmanship.
- simonh 7y ago
  That would also do crippling damage to US and other foreign companies doing business with China. Even the current tariffs and counter-tariffs have cost US companies many billions. Qualcomm alone is estimated to have lost about a billion dollars in sales.
  - internet_user 7y ago
    Boohoo, poor corps. Should we sell ourselves out entirely to China to satisfy the corporate profit motive? Personally, I rather Qualcomm goes bankrupt entirely than see Chinese global hegemony.
    - wahern 7y ago
      Abusing our current structural position in the international monetary system is the surest way to hasten the end of our own hegemony and the beginning of Chinese hegemony--if that ever comes.
devoply 7y ago
Yes considering the US prints hand over fists amounts of money to deal with its economic woes, it's sort of a joke where the emperor wears no clothes, but no one says anything because he's the emperor. https://www.investopedia.com/articles/investing/090915/quantitative-easing-vs-currency-manipulation.asp https://www.investopedia.com/articles/investing/090915/quant... > "In theory, currency manipulation and a monetary policy like quantitative easing aren't the same thing. One is interest rate policy based and the other currency focused. However, as central banks began their QE programs, one result was the weakening of its currency. > Intentional or not, it can be argued that QE is, in some way, a form of currency engineering. Whether its manipulation that will always be up for debate."
- deleted 7y ago
  [deleted]
- xxpor 7y ago
  That's the funny part to me. Currencies don't exist in a vacuum. There's no way NOT to manipulate your own currency. Even in countries that don't directly control monetary policy can still change the value of their currencies indirectly (via taxes for example).
  - RyanAF7 7y ago
    Currencies do exist in a vacuum. Which is why currency manipulation is international and national fraud; your laborers and trading partners lose. It's also why we have a purchasing power parity. Managing a currency through the control of interest rates, taxes, employment etc. are the legal ways of the game to manipulate your currency. Centralized clandestine devaluation of ones currency while government sponsored companies buy real estate worth trillions all over the world, as well as commodities and rare resources, not to mention the jobs it's created and among local populations and the access to foreign citizens data, is an outright slap in the face to any sort of partnership.
- internet_user 7y ago
  Printing alone is not manipulation. Now, if the US were to print a quadrillion USD, and then flood the Yuan-USD market with printed USDs...
NTDF9 7y ago
This is just nonsense. All central banks "manipulate" their currencies. The FED did that by printing trillions in QE. The FED did that in 1973 when they went off the gold standard. The FED did that in 1935 when they changed the value of the dollar. Funnily enough, the only way other major currencies can stop depreciation is by having more dollars. The way to do that would be more exports. But trade-warrer-in-chief just slapped 10% tariff on Chinese exports. If their exports go down, their currency will go down. So, in effect, Trump caused the Yuan to devalue? So Trump is the manipulator, not China?
- thephyber 7y ago
  > So Trump is the manipulator, not China? "currency manipulator" is a legal designation, not just an insult. It has 3 requirements (someone linked to the Wiki in another thread). I'm pretty sure Trump wants to weaken the USD to increase US manufacturing and make our exports more competitive with the world, but I don't see that he has a plan to do it. He seems to be grabbing for any kind of leverage he can get to bully other economies into making promises to increase their imports of US exports. It's just giving false hope to US industries which no longer have a competitive advantage in the world market... long enough to last through the next presidential election.
  - NTDF9 7y ago
    > It's just giving false hope to US industries which no longer have a competitive advantage in the world market... long enough to last through the next presidential election. I can see that. He doesn't care what really happens in the world as long as he can win the election.
coldtea 7y ago
Well, that's rich. Especially since dollars (which the US has "license to print", manipulate, change interest rates, subsidize whole industries, etc.) have been forced as the world's trade currency for close to a century...
- blunte 7y ago
  I was with you until the word "forced". Who forced anyone?
  - coldtea 7y ago
    Α 10000ft gorilla of a superpower, meddling in foreign countries, toppling governments, spying, downright invading to "bring democracy", blackmailing, buying foreign politicians and influence, maintaining bases all over the world, playing one neighbor country against another for support, forced them. It might not register that much on the giving end, but it's common knowledge on the receiving end...
    - blunte 7y ago
      All those actions you list are sadly true, but they don't really force anyone to use a specific currency. Now if a country was invaded, its government replaced, and its currency literally replaced, then that would be forcing.
      - llamaz 7y ago
        you can call it whatever you want as long as we're on the same page
thefounder 7y ago
How is Currency Manipulator different than quantitative easing which everyone does?
- onlyrealcuzzo 7y ago
  China sets the price of its currency directly. QE indirectly affects the price of your currency by manipulating the price of your bonds.
  - blunte 7y ago
    That doesn't answer the question. No reasonably advanced manipulator of any system is content to operate only on the most visible level of influence. So the question really is, how different is a direct manipulation from an ongoing secondary manipulation?
    - onlyrealcuzzo 7y ago
      It's extremely different! In a free market, no one truly knows how the market will respond to some signal (like the purchase of bonds). Although an unrestrained manipulator (The Fed) can get pretty close to setting the price of all bonds by buying huge quantities of certain bonds -- The Fed doesn't know with certainty how that will affect the price of the currency (USD). And they don't really care that much, to be honest. They don't measure inflation with respect to a basket of currencies. They measure inflation with respect only to the USD. When China literally sets the price of the RMB, there's no question what will happen to the price of the RMB. It is whatever China says it is. There's a huge difference between manipulating the price of your currency and your bonds. And it's because there's a huge difference between what bonds and currenies are, and how they're used.
peterwei87 7y ago
>Mnuchin had warned in June that China could be designated a currency manipulator if it stopped intervening to prop up its currency. https://www.bloomberg.com/amp/news/articles/2019-08-05/u-s-treasury-department-labels-china-a-currency-manipulator https://www.bloomberg.com/amp/news/articles/2019-08-05/u-s-t...
- 9nGQluzmnq3M 7y ago
  That statement bears repeating with italics for emphasis: "China could be designated a currency manipulator if it stopped intervening to prop up its currency." In other words, if China stops manipulating its currency to tilt the table in favor of the US, the US will designate China a manipulator to reflect the fact that they are no longer manipulating it!
nradov 7y ago
Every country would prefer to devalue their currency relative to others in order to increase their trade surplus (or cut their deficit). Mathematically they cannot all succeed, so it ends up being a slow motion race to the bottom.
- simonh 7y ago
  That’s really not true. Being able to buy up goods and assets abroad for cheap can also be highly desirable. The evils of foreigners despicably trying to sell you their goods at cut rate prices are often exaggerated.
- kasey_junk 7y ago
  But in this case China had been artificially propping up their currency against the dollar. What caused this manipulation was them stopping that.
- seanhunter 7y ago
  I don't think that's the case at all. 1)Trade surpluses and deficits are an accounting measure that give a sense of the balance of your economy but cutting your trade deficit (or increasing a surplus) is not good or bad in itself. In spite of a lot of focus on these measures by the current US administration, economists as a whole (and therefore most non-US economic policymakers) take the view of Adam Smith, who said in "Wealth of Nations" Book IV, Chapter 3, that “Nothing, however, can be more absurd than this whole doctrine of the balance of trade.” ...and therefore don't target the balance of trade in their decision-making. 2)These days most high-value products have complex supply chains and therefore exports are for the most part made up of components which are themselves imports. So even if you want to affect the balance of trade just devaluing the currency would not work the way you seem to think. 3) It seems to me you would want your currency to be cheap relative to others if you had assets in foreign currencies and debts in your sovereign currency. However typically most countries run a budget deficit and therefore have to issue new debt. If your currency is depreciating, on an on-going basis you can buy less and less hard assets with the currency that comes from issuing new debt because your currency is devaluing relative to other currencies which are also chasing those same assets.
rossdavidh 7y ago
So, really, is there any doubt that this is true? China's currency exchange rate has been abnormally stable for a long time, and the Obama, Bush, Clinton, Bush, and Reagan administrations all knew it was the result of currency manipuliation. They just found it politically unpalatable to admit it out loud. The real question would be, why is the U.S. finally admitting this out loud? 1) amping up a trade war 2) decoupling U.S. economy from China 3) trying to leverage China into doing something differently, perhaps regarding North Korea Some of these, of course, would interfere with others, for example you can't use it as leverage in #3 if China thinks you'll keep pursuing it anyway no matter what, due to #1 or #2.
- havetocharge 7y ago
  US decoupling itself from China would have an avalanche of effects, including huge inflation on most consumer goods, and outright product shortages. China is also a huge foreign debt holder, and if presumably no longer a buyer due to decoupling, will send US interest rates skyrocketing.
  - internet_user 7y ago
    The fed has unlimited control over the rates. They could literally just buy out every bond in existence.
    - tunesmith 7y ago
      I don't see how that works. If the US Government has to sell bonds to borrow money to finance the deficit, and buyers start disappearing, they have to raise interest rates to make the bonds more attractive to the remaining buyers, don't they?
      - opportune 7y ago
        Nope because the Federal Reserve can issue new Federal Reserve notes (aka money) to the US Government to buy their bonds at any price point. As the other commenter pointed out this would cause inflation (as it increases the money supply)
opportune 7y ago
I'm not an economist, but my impression is that if the Chinese currency is allowed to float, the major effect is that they would begin to import more goods from abroad and that their exports would be less competitive. But what would China import that they are not already importing? Personally I would rather see the rules about local ownership of businesses open up so that foreign people can actually freely do business in China. Now that China is not a super poor country anymore, it seems fair. And this way they can keep their currency devalued as there is still a way for trading partners to use it to their advantage, while the majority of the advantage remains with China
drawkbox 7y ago
As the reserve currency, the USD has some weight on it due to that position, can't just manipulate it like others can as easily except printing more [1]. Being the reserve currency, it was more fair when everyone was pegged to the dollar so at least manipulation was in check a bit. Both the unpegging and the free trade agreements put more pressure on the US for being a reserve currency. Ultimately, the USD is too high and it is the root of lots of the problems with jobs, exports/imports and the trade imbalance, national debt as the reserve currency is a safer investment due to it not being as easy to manipulate due to the sheer size of the supply. Now that we are a debtor nation rather than a creditor nation, the problems are more evident [1]. [1] https://www.forbes.com/sites/bobmcteer/2013/09/05/reserve-currency-status-a-mixed-blessing/#244e4bc14e59 https://www.forbes.com/sites/bobmcteer/2013/09/05/reserve-cu...
- blunte 7y ago
  What about quantitative easing via banking regulations?
codingslave 7y ago
The long story to this is that the Chinese dont like what Trump is doing, he is the first to stand up to their tactics. The thing is, if Trump doesn't get reelected, a democratic candidate will most likely not continue the trade war. China has every incentive to place pressure on the us stock market in the hope that it ruins Trumps chances at reelection. So they play this long waiting game, in the chance that Trump doesnt get elected.
- tunesmith 7y ago
  From that perspective, what is arguably good about this trade war continuing?
  - codingslave 7y ago
    Its a battle for who is the world economic power in 20 or 30 years. The american public doesn't understand what is at stake here. Unfortunately the media is calling Trump a buffoon, when the trade war, and possible subsequent economic hit to the USA, is vital to our long term economic future.
    - dragonwriter 7y ago
      > Unfortunately the media is calling Trump a buffoon, Trump is a buffoon. > when the trade war, and possible subsequent economic hit to the USA, is vital to our long term economic future. If by “vital” you meant, on both accounts, instead “extremely detrimental”, you'd be correct. Yes, there is an economic competition with China, but tariffs aren't the main weapon for fighting it productively, particularly not the tariffs Trump is using. We need to be organizing third party partners, not alienating traditional friends, and building newer, better trading relations with them.
    - tunesmith 7y ago
      Well, that's what I'm asking - game this out. How is the trade war and economic hit vital (I take your meaning to be a "long term benefit") to our economic future? What's the hoped-for sequence of events? I can infer a couple of predictions - maybe the thought is that since China has already been very active in monetary policy (printing money), that they will eventually hit upper limits in doing so and will start experiencing massive inflation and will have to slow down their growth considerably. And that this hit will hurt China far more than it will hurt the US, thereby serving as a net benefit to the US overall. Is that on the right track? (To make it really confusing you could point out how slower growth from both countries means less carbon emissions.)
faissaloo 7y ago
Pretty rich coming from the US, but I digress
- LegitShady 7y ago
  You provide very little of value to digress from
markvdb 7y ago
3% stock market movements set in motion by the US president alone. "Great" insider trading potential. Have someone set up the right derivatives strategy and bam: instant millions. I couldn't convince myself to immediately write that idea off as utter nonsense. Anyone with more relevant financial experience? Can you reassure me this would be difficult to pull off? Or would you have to confirm this would be difficult to catch? EDIT: Let me try put this in an even more neutral way. Let's say one knew down to the minute when the entire US and EU stock markets were going to sustain substantial losses. How much value one could siphon off without triggering too much suspicion? Surely market depth and trade volume must offer at least order of magnitude hints about that?
- busymom0 7y ago
  Even IF this were the case, Insider trading has been allowed in congress for a long time. There was the STOCK act passed in 2012 to prevent it, the very next year it was amended to get rid of strict disclosure requirements. Nancy Pelosi for example (speaker of the democrat majority house) is worth 140 million dollars. One has to wonder how a life time politician has managed to get that much wealth.
  - bodyfour 7y ago
    Speaker Pelosi married into money, so no need to "wonder" (or throw baseless allegations around)
    - Fjolsvith 7y ago
      She had some good book deals?
  - sumedh 7y ago
    Chris Collins would have been a better example instead of Pelosi.
    - busymom0 7y ago
      Why? Chris is listed at 23.83 million whereas Pelosi is at 140 million. https://www.msn.com/en-us/money/markets/the-25-richest-members-of-congress/ss-BBmDr23?fullscreen=true?i10c.ua=1#image=7 https://www.msn.com/en-us/money/markets/the-25-richest-membe...
systematical 7y ago
Wouldn't a more effective US strategy against China been to get the EU, Japan, and South Korea in on the tarrifs as well? Might as well throw in Canada and Mexico as well on account of being NAFTA partners. That would account for all of Chinas major trading partners. Japan and SK might have been difficult, but a combined North America + EU might have done the trick. Maybe the Trump Administration tried this, but I find it unlikely since this Administration opened up lambasting our traditional allies. This trade war as it stands is going nowhere. China won't budge.
- wrong_variable 7y ago
  What makes you think all those other countries have the same issues with China as the US ? Southern EU countries depend on Chinese investment, northern EU countries are addicted to cheap Chinese imports. Nobody in Sweden wants to make Nike shoes, they are more interested in robotics, IP, etc. EU also have bones to pick with the US regarding tech monopolies. Mexico also does a huge amount of trade with China. The only group's interest Trump is working for are mega rich US companies - at the expense of it's own consumers and other countries.
  - NicoJuicy 7y ago
    Europe has more issues with China than the US... :( But internal diplomacy...
    - onemoresoop 7y ago
      What are those? Simply curious
      - NicoJuicy 7y ago
        16+1 , look it up Or Tsjechie Or Germany closer ties with China since Trump
        onemoresoop 7y ago
xster 7y ago
The entire premise of the post-Bretton Woods neoliberal world US currency is based on an agreement with the Saudis to sell oil in US dollars for military support and on threats to bomb countries who sell oil in non-US denominations. And China is the currency manipulator.
- ideasRgood 7y ago
  And this is why we have Bitcoin. Or if you don't like that, pick a different non government asset.
  - xster 7y ago
    Well my point is essentially that unless Saudi Arabia is willing to sell you oil for Bitcoins or that Venezuela wouldn't get 'humanitarian regime changed' for selling oil in Bitcoins, it's all kinda moot.
dnprock 7y ago
China have been manipulating their currency before this week's drop. They use USD to buy CNY to prop up CNY exchange rate. If they stop buying CNY using USD, the value of CNY would fall (happening now). So China is technically no longer manipulating their currency. Why are they doing this? My guess is to respond to trade war tariff. The US is manipulating USD through Fed interest rate. The Fed lowers interest rate to prop up borrowing and economic growth. I think China has figured out a way to deal with the situation. They will adjust the USD-CNY exchange to prop up their own economy. This trade war is turning into a silly cat and mouse game. China is not making a deal. They have ways to get around tariff and TPP. War is about deception. The US needs some sneaky attack if it wants to win.
- zaroth 7y ago
  (Don’t reply to temp comments because then I can’t delete them!)
  - dnprock 7y ago
    Corrected.
qwerty456127 7y ago
Isn't being able to manipulate their currencies exactly the reason countries maintain currencies of their own? Don't other countries like Japan and the USA manipulate their currencies routinely?
- ElFitz 7y ago
  They also do it to have currencies better reflecting their economical state, with it's own advantages and disadvantages. I'd say a developing country with a small internal market typically wouldn't have a strong currency, which would be great for their exports, thus supposedly boosting their economic growth. Without any manipulation. But maybe I'm getting it wrong
- Symmetry 7y ago
  Generally by "currency manipulation" people don't mean manipulation of the value of the currency in general but manipulation of its value with respect to foreign currencies in particular. So if the US just prints money to combat deflation that isn't currency manipulation but if it used all the money it printed to buy Yuan that would be. But really the whole public discourse around the topic is pretty confused. In the long run trade balances are governed by savings rates and its hard to keep things out of equilibrium in the long run.
Spooky23 7y ago
It means the Trump family will make a bunch of money on the volatility, and the US will capitulate in a few months.
- rdtsc 7y ago
  > Trump family will make a bunch of money on the volatility, Why not just set up a foundation and request all the governments who want arm deals or other favors to donate it. Forcing China do devalue its currency seems like a very complicated way of going about it.
  - Spooky23 7y ago
    They do that too. https://www.propublica.org/article/trump-inc-podcast-donald-trump-jr-india-project https://www.propublica.org/article/trump-inc-podcast-donald-...
chibg10 7y ago
One thing that I think is getting lost in this discussion is the role of intent on currency manipulation. Switzerland has the strongest currency in the world due to the country's reputation for governmental and financial stability. This makes Swiss labor extremely expensive for reasons mostly outside of their control, and the Swiss government has tried (and largely failed) to remedy this. Technically, this is devaluation but given the circumstances and Switzerland's relatively small footprint in the labor market, it's understandable and fairly benign. The Fed cutting interest rates in 2009 had the effect of weakening the USD relative to what it would have been. But the intent of the policy was not to steal a share of the export market, but rather to provide stimulus during a deep recession. Japan has been in ultra-low growth and ultra-low inflation for decades. To fend off the threat of deflation and economic contraction, it ran the printing press and cut interest rates. Which, again, devalue the currency but stealing export share is not a major intent. I'm not sure what the appropriate definition of "currency manipulator" should be but, while China's currency policy history is a strange and variable beast, yesterday's devaluation was clearly a different case than those above. And depending on how far you want to go back in history, there's an argument that the intent of some previous Chinese devaluations were aimed primarily at increasing its relative attractiveness as an exporter. Its most recent history until yesterday was to prop up the RMB, so it may be fair to argue that now is a strange time to label them a currency manipulator. Given yesterday's events and their history in this area though, it's hard to make the claim that their currency policy is altogether ordinary either.
- zwkrt 7y ago
  Monetary policy has many, unrelated effects on the economy. Even if China were able to point to obvious, incontrovertible humanitarian reasons for its currency decision I’m sure the US would still be unkind. It seems that at the end of the day only realpolitik prevails.
- tempsy 7y ago
  Just saw from Bloomberg that China responded by strengthening the RMB to under 7. Futures seem to be responding positively...
  - 7y ago
NicoJuicy 7y ago
China has started invading Europe through Tsjechie also. Just read a disturbing dutch article and Europe should join the US. I wasn't sure before, but I'm sure now. Here's a small report of the EU : https://www.europarl.europa.eu/thinktank/en/document.html?reference=EPRS_BRI(2018)625173 https://www.europarl.europa.eu/thinktank/en/document.html?re... Yeah, it's disturbing and it doesn't even contain all the info...
- meesles 7y ago
  Seems like FUD without a credible source, can you link something? Plenty of dutch readers on HN. The article linked is referencing the unfavorable economic terms of China's Silk Road project towards developing nations' economies, which has been written about and is plenty concerning on its own.
  - Symmetry 7y ago
    Honestly the whole belt and road thing has mostly just been a boondoggle for China.
  - NicoJuicy 7y ago
    https://www.nrc.nl/nieuws/2018/07/05/china-krijgt-meer-grip-op-europa-a1609076 https://www.nrc.nl/nieuws/2018/07/05/china-krijgt-meer-grip-... This was the article I originally mentioned
  - d0100 7y ago
    When it comes to China, FUD is more akin to Fear of Unwarranted Death. hurdur
reaperducer 7y ago
Good news for the people of Hong Kong, since the Hong Kong Dollar is tied to the U.S. dollar, and not the Chinese currency.
OrgNet 7y ago
All Governments manipulate currencies...
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Synaesthesia 7y ago
Doesn’t China have the right to do whatever they want with their currency, as a sovereign country?
- mdorazio 7y ago
  Yes, and every other country has the right to respond to what China does as they see fit, which is exactly what the US is doing.
ptah 7y ago
so what? surely it is their freedom to do with their currency as they please
sabujp 7y ago
why don't all countries let their currencies float?
iyw 7y ago
US sad they can't set Fed rates like the People's Republic of China without incurring interest. Federalize the Federal reserve and we would be capable of doing similar.
ptah 7y ago
>Treasury uses three criteria to apply the designation: actively intervening in their currency markets, having large trade surpluses with the U.S., and having large overall current-account surpluses. Monday’s action by Treasury is mostly symbolic, requiring the U.S. administration to consult with the International Monetary Fund to try to eliminate the unfair advantage the currency measures have given a country. Does that mean it is only "unfair" if it negatively affects the US? such a definition of "fair" means that no country should be allowed to do better than US
- oblio 7y ago
  Is there a country of comparable heft that is allowed? Do you remember when Japan was rising? There was definitely a lot of anxiety on the American side.
joelbondurant 7y ago
Bitcoin time.
simula67 7y ago
China burned through almost $1 trillion in US treasuries defending the peg when the Yuan depreciated last time[1]. They were "manipulating" the currency to make it stronger. This time they did nothing, and they are being accused of being a currency manipulator. It is insane. [1] https://www.scmp.com/business/banking-finance/article/2071318/chinas-holdings-us-treasuries-sink-2016-prop-yuan https://www.scmp.com/business/banking-finance/article/207131...
eumoria 7y ago
Little outside of the topic but: “We expect a quick—and possibly intemperate—response from the White House, and consequently expect a more rapid escalation of trade tensions.” Haha, really? No one would expect a intemperate response out of this cool and collected admin.
kaonashi 7y ago
China has a peg to the USD - they can peg at any given multiplier, no particular multiplier is any more valid than another, so how can they (or any other country with a peg) not be manipulating their currency? It seems to me, the US gov't no longer cares much for the new multiplier, so this is just a cynical way to put negotiating pressure on them.

357 points by anilshanbhag 7y ago

lazyguy 7y ago

Kettle calling the pot black.

SeanLuke 7y ago
How so?
- dmoy 7y ago
  Every country manipulates its own currency, to some degree. It is sort of the point of having a federal bank. It is useful for the prices of things to not change drastically day to day. That said - the degree to which the US Fed does things is different.
  - Mirioron 7y ago
    To clarify: by "federal bank" the parent means "central bank".
    - dmoy 7y ago
      Ah yes sorry, American centric term. The US fed is the equivalent of e.g. ecb or pbc The naming on pbc always confuses me because there's also a bc which is now spun off if you squint at it the right way
Areading314 7y ago
Do you really think that the US Federal Reserve System, which sets monetary policy based on very reasonable inflation and unemployment targets, is equivalent to a full-blown nationalist-controlled central bank, that is devaluing its currency to support a mercantilist agenda? I think it's pretty clear that China is able and willing to devalue far more than would be possible or palatable for the Fed.
- paganel 7y ago
  Not the OP but I personally do think that, yes. I personally do not find that much of a difference between Draghi's 2012 "whatever it takes" message (and ECB's subsequent actions) and currency moves like the ones carried out lately by the Chinese. Granted, the Fed has not yet hired any helicopter for its boss to throw money out of but some of its post-2009 actions (like the well-known QE) were pretty much the same thing. I personally find no big difference between QEs involving trillions of dollars or euros and controlling one's currency like China just did.
  - Areading314 7y ago
    QE was a response to deflationary pressures related to massive deleveraging after the financial crisis. Inflation has barely touched 2% since then, and there was no devaluation of the dollar against foreign currencies. In fact the dollar has been appreciating against most other major currencies.
    - paganel 7y ago
      >and there was no devaluation of the dollar against foreign currencies. There was certainly a strong over-valuation of the economic entities whose bonds the ECB bought (I think the Fed did a similar thing, not 100% sure as I live in Europe and I follow ECB's policies more closely). Had the ECB not bought those bonds then maybe the Chinese companies would have been able to buy even more stuff in Europe, as things stood they were only able to purchase the Piraeus port (because the Greeks were basically in default) and some other lesser assets. That's still economic protectionism.

devoply 7y ago

Yeah you have manipulated a made up thing that we control and you are not playing by the rules where we put sanctions on you and then you become f*ed.

SynthCann 7y ago
learn how the world works kiddo

throwawayfoc 7y ago

I too am here to sing the praises of the Great People’s Republic of China.

kasey_junk 7y ago

The best part of this is that they are being called a manipulator for not shoring up their currency artificially.

devoply 7y ago
So that Trump's 10% sanctions may do the damage Trump wishes to do their economy... and they are like screw this we'll make our currency cheaper to offset it... And Trump is calling it no fair, which is childish, but expect no less from Trump.
- lazyguy 7y ago
  The problem is that it's hurting the USA economy, too. In economics: if somebody is doing it cheaper then you can, especially if they are willing to lose money doing it (which is what subsidies accomplish), then you let them. You focus on what will make you money. Which means for the national economy I have zero doubt that Trump's actions will save and/or create a 10-30 thousand jobs. The problem is that he will be sacrificing many more thousands of jobs and hurting the standard of living for most of the 300 million people living in the USA to do it. Not to mention that USA debt from Trump/Congress's spending needs to be bought by somebody. The people that been doing that are the Chinese. So if he does manage to collapse their economy it's only shooting the Federal Government, and ultimately, the USA Dollar in the foot. So much grandstanding. So little sense.
- resters 7y ago
  Comments critical of Trump are getting downvoted and the users throttled. Not sure what is going on.
  - hestipod 7y ago
    I think its a combination of a few things. First I think there are automod policies that use keywords in these conroversial topics to throttle. Second I think an ugly truth people don't want to admit is tech is heavily slanted to his supporters and those who find his values appealing due to the gender, class and age weighting in the industry, and nationality on this site being predominately American. Third there is a concentrated effort in every relatively neutral forum to downvote/argue/oppose, some of which is organic and some active measures. You often see an initial and rapid hit and downvoting of comments critical of him or the country in general, but then as the other hemisphere wakes up it balances out.

joezydeco 7y ago

China can outlast the US on this one. Next up, let's crash the price of oil and flip off the Iran sanctions: https://www.cnbc.com/2019/08/05/brent-and-wti-price-could-crash-if-china-buys-iranian-oil.html https://www.cnbc.com/2019/08/05/brent-and-wti-price-could-cr...

sremani 7y ago
Any day, I will take the bet on USA.
lacampbell 7y ago
China can outlast the US on this one. I'd take that bet!
hugh4life 7y ago
China would have a lot more room to move were the Hong Kong protests were not going on. The big problem they face is putting down the protests violently could lead towards pronouncements of them violating the agreement for it being held over. Which will lead toward countries people openly selling heavy weapons to Taiwan and maybe even building bases.
- euroclydon 7y ago
  No one is going to build a base in Taiwan. This is not 1985. China is way too powerful and advanced militarily now for the US to provoke them so directly.
- thefounder 7y ago
  I really doubt China cares a bit about the agreement signed with the UK. They are more concerned alienating HK people which is hard not to do unless they put the integration with the mainland on hold for a few good years.
- gtirloni 7y ago
  How much impact have the Hong Kong protest had on trade? If I had to my guess, exactly zero. And more weapons to Taiwan because of that? What for? Maybe I'm being cynic but I don't see the needle moving here.

gopher2 7y ago

Now what? Is there a legal designation or meaning to currency-manipulator I'm unaware of, or is this basically like the Chinese designating Trump a "name-caller."

internet_user 7y ago
"The three assessment criteria are: “(1) a significant bilateral trade surplus with the United States is one that is at least $20 billion; (2) a material current account surplus is one that is at least 3 percent of gross domestic product (GDP); and (3) persistent, one-sided intervention occurs when net purchases of foreign currency are conducted repeatedly and total at least 2 percent of an economy’s GDP over a 12-month period.”[1] https://en.wikipedia.org/wiki/Currency_manipulator https://en.wikipedia.org/wiki/Currency_manipulator
- gopher2 7y ago
  Thanks. TIL this is a real thing. Let the bilateral negotiations begin!
- Bendingo 7y ago
  That seems pretty arbitrary to me.
  - internet_user 7y ago
    How so? It's just a way to ban competitive devaluations.
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tempsy 7y ago

Stock futures down another 2%. Amazing how much money one can lose in a matter of days. Stomach churning.

xwdv 7y ago
Not even days. I lost $24k today, and $60k since last week. The thing that keeps you calm though is that sometimes it’s amazing how much money you can actually make in a matter of days, or a single day.
- eanzenberg 7y ago
  This means you have about a million dollars in stock investments alone, which you put you in a different class.
  - CamperBob2 7y ago
    Doesn't mean any such thing. Maybe s/he is into options? It hurts to watch that much money go away even when it's in the form of unrealized gains.
  - anonoholic 7y ago
    That would keep me calm! I'm pleased to report though that I lost nothing, since that's about how much I have.
    - damon_c 7y ago
      Get something started ASAP. I left a job when I was 28 with a depressing $21k in 401k. After sitting there for 16 years, it's now... big enough where it lost almost that much this last week. Compounding... really... works...
      - deleted 7y ago
        [deleted]
  - 7y ago

datumy 7y ago

Isn't Chinese Yuan depreciation caused by Trump's relentless tariff, just like Mexican Peso's depreciation when Trump threatened tariff early this year? I'm confused who is manipulating the market & currency.

internet_user 7y ago
No. It's caused by China's central bank printing currency in response to tariffs, essentially using currency as a weapon.
- seanmcdirmid 7y ago
  It’s caused by the Chinese not having enough dollars to prop up the yuan. There is no evidence that they are running the printing presses.
- datumy 7y ago
  OK. tariffs => printing money, so tariff is the root cause, no?
  - aianus 7y ago
    There are plenty of good reasons why China deserves tariffs, why not start there as the root cause? Protectionism, IP theft, banning or heavily restricting US tech firms from operating in (aka exporting to) China, the list goes on.
    - simonh 7y ago
      And if that was the real reason, you’d expect the US to be coordinating with other countries that have the same beef with China. Instead, the US is antagonising them as well. Trump has been very clear the tariffs are mainly about boosting US manufacturing. It’s not going to work, but that’s what he keeps saying. If it really was about the issues you list, there are plenty of ways to address them in a much more coordinated and effective manner with like minded allies. Instead the US keeps their demands very vague and keeps changing the criteria, to avoid the chance of an actual agreement. Contrast with the renegotiation of NAFTA. Clear, specific demands in areas they knew would be open to negotiation. In the end, fairly minor updates and a workable deal.

rdtsc 7y ago

I have no idea what all this means so tried to read https://en.wikipedia.org/wiki/Currency_manipulator https://en.wikipedia.org/wiki/Currency_manipulator. Found it interesting that "Switzerland have been manipulating their currency more than China since 2009 and Germany and South Korea since 2014" Still it is not clear what that means in terms next steps. Will there be more tariff increases or sanctions? And then China will devalue their currency even more. So where does it end? This is US Treasury report from 2017 I started looking through: https://www.treasury.gov/resource-center/international/exchange-rate-policies/Documents/2017-04-14-Spring-2017-FX-Report-FINAL.PDF https://www.treasury.gov/resource-center/international/excha... The last paragraph explained the logic a bit more: > The United States cannot and will not bear the burden of an international trading system that unfairly disadvantages our exports and unfairly advantages the exports of our trading partners through artificially distorted exchange rates. Treasury is committed to aggressively and vigilantly monitoring and combatting unfair currency practices. Granted it's published by US Treasury. I imagine the Chinese government sees the picture very much differently.

rolltiide 7y ago
Okay, no, Germany can't manipulate its currency as they don't have their own, they use the Euro. Germany does have large influence over Brussels being the economic powerhouse of the Eurozone currency union, and the European Central Bank is in Frankfurt but really accountable to no-one, being led by an Italian man from Goldman Sachs. And yes, these 'currency manipulator' designations are a point of political convenience and are not evenly applied. Monetary policy for the last decade worldwide has been outright currency manipulation and market interventions using devalued currency. This excess currency has fueled bubbles in all markets: Rental, housing, stocks, venture capital, startups, art, crypto, government bonds, corporate bonds, junk bonds, collectibles, you name it.
- bilbo0s 7y ago
  Well, I guess that's true. Nearly everyone is a currency manipulator. But also, as you yourself said, it's more of a point of political convenience right? If it serves our purposes to designate china as a manipulator, then who cares if everyone else manipulates too? Serious question. I mean, would it matter?

internet_user 7y ago

It ends with China being cut off from SWIFT and correspondent banking. That would probably make them re-think their approach to economic warfare.

devoply 7y ago
Considering how much stuff they produce I don't think that would end with them rethinking anything but rather establishing a different financial order with anyone who was willing to trade with them. And I think a lot of Europe and Asia would be on board for steep discounts.
- internet_user 7y ago
  The US would just need to cut off a few banks to trigger a credit crisis in China, they are already bailing out banks. Who knows how this all will play out, won't be pretty either way. I bet this is all empty brinkmanship.
simonh 7y ago
That would also do crippling damage to US and other foreign companies doing business with China. Even the current tariffs and counter-tariffs have cost US companies many billions. Qualcomm alone is estimated to have lost about a billion dollars in sales.
- internet_user 7y ago
  Boohoo, poor corps. Should we sell ourselves out entirely to China to satisfy the corporate profit motive? Personally, I rather Qualcomm goes bankrupt entirely than see Chinese global hegemony.
  - wahern 7y ago
    Abusing our current structural position in the international monetary system is the surest way to hasten the end of our own hegemony and the beginning of Chinese hegemony--if that ever comes.

devoply 7y ago

Yes considering the US prints hand over fists amounts of money to deal with its economic woes, it's sort of a joke where the emperor wears no clothes, but no one says anything because he's the emperor. https://www.investopedia.com/articles/investing/090915/quantitative-easing-vs-currency-manipulation.asp https://www.investopedia.com/articles/investing/090915/quant... > "In theory, currency manipulation and a monetary policy like quantitative easing aren't the same thing. One is interest rate policy based and the other currency focused. However, as central banks began their QE programs, one result was the weakening of its currency. > Intentional or not, it can be argued that QE is, in some way, a form of currency engineering. Whether its manipulation that will always be up for debate."

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xxpor 7y ago
That's the funny part to me. Currencies don't exist in a vacuum. There's no way NOT to manipulate your own currency. Even in countries that don't directly control monetary policy can still change the value of their currencies indirectly (via taxes for example).
- RyanAF7 7y ago
  Currencies do exist in a vacuum. Which is why currency manipulation is international and national fraud; your laborers and trading partners lose. It's also why we have a purchasing power parity. Managing a currency through the control of interest rates, taxes, employment etc. are the legal ways of the game to manipulate your currency. Centralized clandestine devaluation of ones currency while government sponsored companies buy real estate worth trillions all over the world, as well as commodities and rare resources, not to mention the jobs it's created and among local populations and the access to foreign citizens data, is an outright slap in the face to any sort of partnership.
internet_user 7y ago
Printing alone is not manipulation. Now, if the US were to print a quadrillion USD, and then flood the Yuan-USD market with printed USDs...

NTDF9 7y ago

This is just nonsense. All central banks "manipulate" their currencies. The FED did that by printing trillions in QE. The FED did that in 1973 when they went off the gold standard. The FED did that in 1935 when they changed the value of the dollar. Funnily enough, the only way other major currencies can stop depreciation is by having more dollars. The way to do that would be more exports. But trade-warrer-in-chief just slapped 10% tariff on Chinese exports. If their exports go down, their currency will go down. So, in effect, Trump caused the Yuan to devalue? So Trump is the manipulator, not China?

thephyber 7y ago
> So Trump is the manipulator, not China? "currency manipulator" is a legal designation, not just an insult. It has 3 requirements (someone linked to the Wiki in another thread). I'm pretty sure Trump wants to weaken the USD to increase US manufacturing and make our exports more competitive with the world, but I don't see that he has a plan to do it. He seems to be grabbing for any kind of leverage he can get to bully other economies into making promises to increase their imports of US exports. It's just giving false hope to US industries which no longer have a competitive advantage in the world market... long enough to last through the next presidential election.
- NTDF9 7y ago
  > It's just giving false hope to US industries which no longer have a competitive advantage in the world market... long enough to last through the next presidential election. I can see that. He doesn't care what really happens in the world as long as he can win the election.

coldtea 7y ago

Well, that's rich. Especially since dollars (which the US has "license to print", manipulate, change interest rates, subsidize whole industries, etc.) have been forced as the world's trade currency for close to a century...

blunte 7y ago
I was with you until the word "forced". Who forced anyone?
- coldtea 7y ago
  Α 10000ft gorilla of a superpower, meddling in foreign countries, toppling governments, spying, downright invading to "bring democracy", blackmailing, buying foreign politicians and influence, maintaining bases all over the world, playing one neighbor country against another for support, forced them. It might not register that much on the giving end, but it's common knowledge on the receiving end...
  - blunte 7y ago
    All those actions you list are sadly true, but they don't really force anyone to use a specific currency. Now if a country was invaded, its government replaced, and its currency literally replaced, then that would be forcing.
    - llamaz 7y ago
      you can call it whatever you want as long as we're on the same page

thefounder 7y ago

How is Currency Manipulator different than quantitative easing which everyone does?

onlyrealcuzzo 7y ago
China sets the price of its currency directly. QE indirectly affects the price of your currency by manipulating the price of your bonds.
- blunte 7y ago
  That doesn't answer the question. No reasonably advanced manipulator of any system is content to operate only on the most visible level of influence. So the question really is, how different is a direct manipulation from an ongoing secondary manipulation?
  - onlyrealcuzzo 7y ago
    It's extremely different! In a free market, no one truly knows how the market will respond to some signal (like the purchase of bonds). Although an unrestrained manipulator (The Fed) can get pretty close to setting the price of all bonds by buying huge quantities of certain bonds -- The Fed doesn't know with certainty how that will affect the price of the currency (USD). And they don't really care that much, to be honest. They don't measure inflation with respect to a basket of currencies. They measure inflation with respect only to the USD. When China literally sets the price of the RMB, there's no question what will happen to the price of the RMB. It is whatever China says it is. There's a huge difference between manipulating the price of your currency and your bonds. And it's because there's a huge difference between what bonds and currenies are, and how they're used.

peterwei87 7y ago

>Mnuchin had warned in June that China could be designated a currency manipulator if it stopped intervening to prop up its currency. https://www.bloomberg.com/amp/news/articles/2019-08-05/u-s-treasury-department-labels-china-a-currency-manipulator https://www.bloomberg.com/amp/news/articles/2019-08-05/u-s-t...

9nGQluzmnq3M 7y ago
That statement bears repeating with italics for emphasis: "China could be designated a currency manipulator if it stopped intervening to prop up its currency." In other words, if China stops manipulating its currency to tilt the table in favor of the US, the US will designate China a manipulator to reflect the fact that they are no longer manipulating it!

nradov 7y ago

Every country would prefer to devalue their currency relative to others in order to increase their trade surplus (or cut their deficit). Mathematically they cannot all succeed, so it ends up being a slow motion race to the bottom.

simonh 7y ago
That’s really not true. Being able to buy up goods and assets abroad for cheap can also be highly desirable. The evils of foreigners despicably trying to sell you their goods at cut rate prices are often exaggerated.
kasey_junk 7y ago
But in this case China had been artificially propping up their currency against the dollar. What caused this manipulation was them stopping that.
seanhunter 7y ago
I don't think that's the case at all. 1)Trade surpluses and deficits are an accounting measure that give a sense of the balance of your economy but cutting your trade deficit (or increasing a surplus) is not good or bad in itself. In spite of a lot of focus on these measures by the current US administration, economists as a whole (and therefore most non-US economic policymakers) take the view of Adam Smith, who said in "Wealth of Nations" Book IV, Chapter 3, that “Nothing, however, can be more absurd than this whole doctrine of the balance of trade.” ...and therefore don't target the balance of trade in their decision-making. 2)These days most high-value products have complex supply chains and therefore exports are for the most part made up of components which are themselves imports. So even if you want to affect the balance of trade just devaluing the currency would not work the way you seem to think. 3) It seems to me you would want your currency to be cheap relative to others if you had assets in foreign currencies and debts in your sovereign currency. However typically most countries run a budget deficit and therefore have to issue new debt. If your currency is depreciating, on an on-going basis you can buy less and less hard assets with the currency that comes from issuing new debt because your currency is devaluing relative to other currencies which are also chasing those same assets.

rossdavidh 7y ago

So, really, is there any doubt that this is true? China's currency exchange rate has been abnormally stable for a long time, and the Obama, Bush, Clinton, Bush, and Reagan administrations all knew it was the result of currency manipuliation. They just found it politically unpalatable to admit it out loud. The real question would be, why is the U.S. finally admitting this out loud? 1) amping up a trade war 2) decoupling U.S. economy from China 3) trying to leverage China into doing something differently, perhaps regarding North Korea Some of these, of course, would interfere with others, for example you can't use it as leverage in #3 if China thinks you'll keep pursuing it anyway no matter what, due to #1 or #2.

havetocharge 7y ago
US decoupling itself from China would have an avalanche of effects, including huge inflation on most consumer goods, and outright product shortages. China is also a huge foreign debt holder, and if presumably no longer a buyer due to decoupling, will send US interest rates skyrocketing.
- internet_user 7y ago
  The fed has unlimited control over the rates. They could literally just buy out every bond in existence.
  - tunesmith 7y ago
    I don't see how that works. If the US Government has to sell bonds to borrow money to finance the deficit, and buyers start disappearing, they have to raise interest rates to make the bonds more attractive to the remaining buyers, don't they?
    - opportune 7y ago
      Nope because the Federal Reserve can issue new Federal Reserve notes (aka money) to the US Government to buy their bonds at any price point. As the other commenter pointed out this would cause inflation (as it increases the money supply)

opportune 7y ago

I'm not an economist, but my impression is that if the Chinese currency is allowed to float, the major effect is that they would begin to import more goods from abroad and that their exports would be less competitive. But what would China import that they are not already importing? Personally I would rather see the rules about local ownership of businesses open up so that foreign people can actually freely do business in China. Now that China is not a super poor country anymore, it seems fair. And this way they can keep their currency devalued as there is still a way for trading partners to use it to their advantage, while the majority of the advantage remains with China

drawkbox 7y ago

As the reserve currency, the USD has some weight on it due to that position, can't just manipulate it like others can as easily except printing more [1]. Being the reserve currency, it was more fair when everyone was pegged to the dollar so at least manipulation was in check a bit. Both the unpegging and the free trade agreements put more pressure on the US for being a reserve currency. Ultimately, the USD is too high and it is the root of lots of the problems with jobs, exports/imports and the trade imbalance, national debt as the reserve currency is a safer investment due to it not being as easy to manipulate due to the sheer size of the supply. Now that we are a debtor nation rather than a creditor nation, the problems are more evident [1]. [1] https://www.forbes.com/sites/bobmcteer/2013/09/05/reserve-currency-status-a-mixed-blessing/#244e4bc14e59 https://www.forbes.com/sites/bobmcteer/2013/09/05/reserve-cu...

blunte 7y ago
What about quantitative easing via banking regulations?

codingslave 7y ago

The long story to this is that the Chinese dont like what Trump is doing, he is the first to stand up to their tactics. The thing is, if Trump doesn't get reelected, a democratic candidate will most likely not continue the trade war. China has every incentive to place pressure on the us stock market in the hope that it ruins Trumps chances at reelection. So they play this long waiting game, in the chance that Trump doesnt get elected.

tunesmith 7y ago
From that perspective, what is arguably good about this trade war continuing?
- codingslave 7y ago
  Its a battle for who is the world economic power in 20 or 30 years. The american public doesn't understand what is at stake here. Unfortunately the media is calling Trump a buffoon, when the trade war, and possible subsequent economic hit to the USA, is vital to our long term economic future.
  - dragonwriter 7y ago
    > Unfortunately the media is calling Trump a buffoon, Trump is a buffoon. > when the trade war, and possible subsequent economic hit to the USA, is vital to our long term economic future. If by “vital” you meant, on both accounts, instead “extremely detrimental”, you'd be correct. Yes, there is an economic competition with China, but tariffs aren't the main weapon for fighting it productively, particularly not the tariffs Trump is using. We need to be organizing third party partners, not alienating traditional friends, and building newer, better trading relations with them.
  - tunesmith 7y ago
    Well, that's what I'm asking - game this out. How is the trade war and economic hit vital (I take your meaning to be a "long term benefit") to our economic future? What's the hoped-for sequence of events? I can infer a couple of predictions - maybe the thought is that since China has already been very active in monetary policy (printing money), that they will eventually hit upper limits in doing so and will start experiencing massive inflation and will have to slow down their growth considerably. And that this hit will hurt China far more than it will hurt the US, thereby serving as a net benefit to the US overall. Is that on the right track? (To make it really confusing you could point out how slower growth from both countries means less carbon emissions.)

faissaloo 7y ago

Pretty rich coming from the US, but I digress

LegitShady 7y ago
You provide very little of value to digress from

markvdb 7y ago

3% stock market movements set in motion by the US president alone. "Great" insider trading potential. Have someone set up the right derivatives strategy and bam: instant millions. I couldn't convince myself to immediately write that idea off as utter nonsense. Anyone with more relevant financial experience? Can you reassure me this would be difficult to pull off? Or would you have to confirm this would be difficult to catch? EDIT: Let me try put this in an even more neutral way. Let's say one knew down to the minute when the entire US and EU stock markets were going to sustain substantial losses. How much value one could siphon off without triggering too much suspicion? Surely market depth and trade volume must offer at least order of magnitude hints about that?

busymom0 7y ago
Even IF this were the case, Insider trading has been allowed in congress for a long time. There was the STOCK act passed in 2012 to prevent it, the very next year it was amended to get rid of strict disclosure requirements. Nancy Pelosi for example (speaker of the democrat majority house) is worth 140 million dollars. One has to wonder how a life time politician has managed to get that much wealth.
- bodyfour 7y ago
  Speaker Pelosi married into money, so no need to "wonder" (or throw baseless allegations around)
  - Fjolsvith 7y ago
    She had some good book deals?
- sumedh 7y ago
  Chris Collins would have been a better example instead of Pelosi.
  - busymom0 7y ago
    Why? Chris is listed at 23.83 million whereas Pelosi is at 140 million. https://www.msn.com/en-us/money/markets/the-25-richest-members-of-congress/ss-BBmDr23?fullscreen=true?i10c.ua=1#image=7 https://www.msn.com/en-us/money/markets/the-25-richest-membe...

systematical 7y ago

Wouldn't a more effective US strategy against China been to get the EU, Japan, and South Korea in on the tarrifs as well? Might as well throw in Canada and Mexico as well on account of being NAFTA partners. That would account for all of Chinas major trading partners. Japan and SK might have been difficult, but a combined North America + EU might have done the trick. Maybe the Trump Administration tried this, but I find it unlikely since this Administration opened up lambasting our traditional allies. This trade war as it stands is going nowhere. China won't budge.

wrong_variable 7y ago
What makes you think all those other countries have the same issues with China as the US ? Southern EU countries depend on Chinese investment, northern EU countries are addicted to cheap Chinese imports. Nobody in Sweden wants to make Nike shoes, they are more interested in robotics, IP, etc. EU also have bones to pick with the US regarding tech monopolies. Mexico also does a huge amount of trade with China. The only group's interest Trump is working for are mega rich US companies - at the expense of it's own consumers and other countries.
- NicoJuicy 7y ago
  Europe has more issues with China than the US... :( But internal diplomacy...
  - onemoresoop 7y ago
    What are those? Simply curious
    - NicoJuicy 7y ago
      16+1 , look it up Or Tsjechie Or Germany closer ties with China since Trump
      - onemoresoop 7y ago

xster 7y ago

The entire premise of the post-Bretton Woods neoliberal world US currency is based on an agreement with the Saudis to sell oil in US dollars for military support and on threats to bomb countries who sell oil in non-US denominations. And China is the currency manipulator.

ideasRgood 7y ago
And this is why we have Bitcoin. Or if you don't like that, pick a different non government asset.
- xster 7y ago
  Well my point is essentially that unless Saudi Arabia is willing to sell you oil for Bitcoins or that Venezuela wouldn't get 'humanitarian regime changed' for selling oil in Bitcoins, it's all kinda moot.

dnprock 7y ago

China have been manipulating their currency before this week's drop. They use USD to buy CNY to prop up CNY exchange rate. If they stop buying CNY using USD, the value of CNY would fall (happening now). So China is technically no longer manipulating their currency. Why are they doing this? My guess is to respond to trade war tariff. The US is manipulating USD through Fed interest rate. The Fed lowers interest rate to prop up borrowing and economic growth. I think China has figured out a way to deal with the situation. They will adjust the USD-CNY exchange to prop up their own economy. This trade war is turning into a silly cat and mouse game. China is not making a deal. They have ways to get around tariff and TPP. War is about deception. The US needs some sneaky attack if it wants to win.

zaroth 7y ago
(Don’t reply to temp comments because then I can’t delete them!)
- dnprock 7y ago
  Corrected.

qwerty456127 7y ago

Isn't being able to manipulate their currencies exactly the reason countries maintain currencies of their own? Don't other countries like Japan and the USA manipulate their currencies routinely?

ElFitz 7y ago
They also do it to have currencies better reflecting their economical state, with it's own advantages and disadvantages. I'd say a developing country with a small internal market typically wouldn't have a strong currency, which would be great for their exports, thus supposedly boosting their economic growth. Without any manipulation. But maybe I'm getting it wrong
Symmetry 7y ago
Generally by "currency manipulation" people don't mean manipulation of the value of the currency in general but manipulation of its value with respect to foreign currencies in particular. So if the US just prints money to combat deflation that isn't currency manipulation but if it used all the money it printed to buy Yuan that would be. But really the whole public discourse around the topic is pretty confused. In the long run trade balances are governed by savings rates and its hard to keep things out of equilibrium in the long run.

Spooky23 7y ago

It means the Trump family will make a bunch of money on the volatility, and the US will capitulate in a few months.

rdtsc 7y ago
> Trump family will make a bunch of money on the volatility, Why not just set up a foundation and request all the governments who want arm deals or other favors to donate it. Forcing China do devalue its currency seems like a very complicated way of going about it.
- Spooky23 7y ago
  They do that too. https://www.propublica.org/article/trump-inc-podcast-donald-trump-jr-india-project https://www.propublica.org/article/trump-inc-podcast-donald-...

chibg10 7y ago

One thing that I think is getting lost in this discussion is the role of intent on currency manipulation. Switzerland has the strongest currency in the world due to the country's reputation for governmental and financial stability. This makes Swiss labor extremely expensive for reasons mostly outside of their control, and the Swiss government has tried (and largely failed) to remedy this. Technically, this is devaluation but given the circumstances and Switzerland's relatively small footprint in the labor market, it's understandable and fairly benign. The Fed cutting interest rates in 2009 had the effect of weakening the USD relative to what it would have been. But the intent of the policy was not to steal a share of the export market, but rather to provide stimulus during a deep recession. Japan has been in ultra-low growth and ultra-low inflation for decades. To fend off the threat of deflation and economic contraction, it ran the printing press and cut interest rates. Which, again, devalue the currency but stealing export share is not a major intent. I'm not sure what the appropriate definition of "currency manipulator" should be but, while China's currency policy history is a strange and variable beast, yesterday's devaluation was clearly a different case than those above. And depending on how far you want to go back in history, there's an argument that the intent of some previous Chinese devaluations were aimed primarily at increasing its relative attractiveness as an exporter. Its most recent history until yesterday was to prop up the RMB, so it may be fair to argue that now is a strange time to label them a currency manipulator. Given yesterday's events and their history in this area though, it's hard to make the claim that their currency policy is altogether ordinary either.

zwkrt 7y ago
Monetary policy has many, unrelated effects on the economy. Even if China were able to point to obvious, incontrovertible humanitarian reasons for its currency decision I’m sure the US would still be unkind. It seems that at the end of the day only realpolitik prevails.
tempsy 7y ago
Just saw from Bloomberg that China responded by strengthening the RMB to under 7. Futures seem to be responding positively...
- 7y ago

NicoJuicy 7y ago

China has started invading Europe through Tsjechie also. Just read a disturbing dutch article and Europe should join the US. I wasn't sure before, but I'm sure now. Here's a small report of the EU : https://www.europarl.europa.eu/thinktank/en/document.html?reference=EPRS_BRI(2018)625173 https://www.europarl.europa.eu/thinktank/en/document.html?re... Yeah, it's disturbing and it doesn't even contain all the info...

meesles 7y ago
Seems like FUD without a credible source, can you link something? Plenty of dutch readers on HN. The article linked is referencing the unfavorable economic terms of China's Silk Road project towards developing nations' economies, which has been written about and is plenty concerning on its own.
- Symmetry 7y ago
  Honestly the whole belt and road thing has mostly just been a boondoggle for China.
- NicoJuicy 7y ago
  https://www.nrc.nl/nieuws/2018/07/05/china-krijgt-meer-grip-op-europa-a1609076 https://www.nrc.nl/nieuws/2018/07/05/china-krijgt-meer-grip-... This was the article I originally mentioned
- d0100 7y ago
  When it comes to China, FUD is more akin to Fear of Unwarranted Death. hurdur

reaperducer 7y ago

Good news for the people of Hong Kong, since the Hong Kong Dollar is tied to the U.S. dollar, and not the Chinese currency.

OrgNet 7y ago

All Governments manipulate currencies...

deleted 7y ago

[deleted]

Synaesthesia 7y ago

Doesn’t China have the right to do whatever they want with their currency, as a sovereign country?

mdorazio 7y ago
Yes, and every other country has the right to respond to what China does as they see fit, which is exactly what the US is doing.

ptah 7y ago

so what? surely it is their freedom to do with their currency as they please

sabujp 7y ago

why don't all countries let their currencies float?

iyw 7y ago

US sad they can't set Fed rates like the People's Republic of China without incurring interest. Federalize the Federal reserve and we would be capable of doing similar.

ptah 7y ago

>Treasury uses three criteria to apply the designation: actively intervening in their currency markets, having large trade surpluses with the U.S., and having large overall current-account surpluses. Monday’s action by Treasury is mostly symbolic, requiring the U.S. administration to consult with the International Monetary Fund to try to eliminate the unfair advantage the currency measures have given a country. Does that mean it is only "unfair" if it negatively affects the US? such a definition of "fair" means that no country should be allowed to do better than US

oblio 7y ago
Is there a country of comparable heft that is allowed? Do you remember when Japan was rising? There was definitely a lot of anxiety on the American side.

joelbondurant 7y ago

Bitcoin time.

simula67 7y ago

China burned through almost $1 trillion in US treasuries defending the peg when the Yuan depreciated last time[1]. They were "manipulating" the currency to make it stronger. This time they did nothing, and they are being accused of being a currency manipulator. It is insane. [1] https://www.scmp.com/business/banking-finance/article/2071318/chinas-holdings-us-treasuries-sink-2016-prop-yuan https://www.scmp.com/business/banking-finance/article/207131...

eumoria 7y ago

Little outside of the topic but: “We expect a quick—and possibly intemperate—response from the White House, and consequently expect a more rapid escalation of trade tensions.” Haha, really? No one would expect a intemperate response out of this cool and collected admin.

kaonashi 7y ago

China has a peg to the USD - they can peg at any given multiplier, no particular multiplier is any more valid than another, so how can they (or any other country with a peg) not be manipulating their currency? It seems to me, the US gov't no longer cares much for the new multiplier, so this is just a cynical way to put negotiating pressure on them.