“On day one, I will label them a currency manipulator.” So spoke Mitt
Romney during Tuesday’s Presidential debate, threatening, as he has
innumerable times, to hit China with new tariffs if it doesn’t stop
using a cheap yuan to steal U.S. jobs. But does the label still fit?
We
all know the story by heart. Without intervention by China's central
bank, market forces would push the value of the yuan higher, making it
easier for U.S. producers to compete with Chinese goods. Instead, the
People’s Bank of China (PBoC) manipulates the exchange rate by making
massive purchases of U.S. dollars for its foreign exchange reserves. The
result: huge current account surpluses that enrich China’s politically
powerful exporters at the expense of American workers. If we just had a
president with the courage to tell them to stop, we could get America
moving again.
Unfortunately, although it still sounds great in a stump speech, the story may be out of date. Let’s look at it piece by piece. >>>Read more
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