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Currency War US Vs. China?

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  • Gary
    Currency Warfare US Vs. China? October 10th, 2010 International capital is unable to act to check the currency accumulation by China. This has led to what the
    Message 1 of 1 , Oct 10, 2010
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      Currency Warfare US Vs. China?
      October 10th, 2010

      International capital is unable to act to check the currency accumulation by China. This has led to what the USA claims is a serious undervaluation of the Chinese Yuan and thus helps drive the Chinese export economy. The IMF and World Bank were unable to come to an agreement on how to deal with the situation as members were unwilling to come to terms.

      Why would China want to give in the American demands while it is in such a good economic position? China may not be the worlds military giant, but at this time it is the worlds second economic powerhouse behind the USA. Japan is now in third place. China is set to overtake the USA as the worlds largest economy sometime after 2020.

      There will be another meeting of the G20 in Seoul where there will be another attempt by the USA to bring pressure to bear on China. What will the US do threaten to impose tariffs and quotas? The Chinese could threaten to stop buying US debt. Trade wars now could bring about another World War, although I doubt if it would happen, certainly the US Oil embargo on Japan led to their attack on Pearl Harbor.

      International capitalism is approaching another one of those crisis points where if things are not handled properly there will be war.

      "IMF, World Bank wrap up three days of talks
      AFP
      by Rob Lever Rob Lever – 22 mins ago

      WASHINGTON (AFP) – The world's top finance officials closed out three days of talks here Sunday after failing to reach a consensus on measures to head off what some see as a looming currency war.

      The International Monetary Fund steering committee, which has been struggling to address friction among key economies including China and the United States, said Saturday the organization should continue its study.

      "While the international monetary system has proved resilient, tensions and vulnerabilities remain as a result of widening global imbalances, continued volatile capital flows, exchange rate movements and issues related to the supply and accumulation of official reserves," the IMF panel said in a statement after its meeting.

      "We call on the Fund to deepen its work in these areas, including in-depth studies to help increase the effectiveness of policies to manage capital flows."

      The statement from the International Monetary and Financial Committee, the policy arm of the IMF, stopped short of any specific call on China or others to change policies of using a low currency and accumulation of reserves to boost exports.

      IMF managing director Dominique Strauss-Kahn, when asked about the lack of a stronger statement, said, "There is only one obstacle, and that is an agreement of the members."

      US Treasury Secretary Timothy Geithner said the IMF "must strengthen its surveillance of exchange rate policies and reserve accumulation practices," adding that "excess reserve accumulation on a global scale is leading to serious distortions in the international monetary and financial system."

      Recent IMF figures showed Beijing had currency reserves of 2.447 trillion dollars, the largest in the world and nearly 30 percent of the global total.

      Washington maintains that China purchases large amounts of dollars to keep the yuan artificially low, which distorts global trade by boosting Chinese exports.

      The final communique appeared to be a setback for the United States. It had urged the IMF to be a tougher cop on exchange rate policies, a position echoed by a number of Europeans and other officials.

      Japanese Finance Minister Yoshihiko Noda told the panel earlier that "it is not sustainable that certain countries achieve growth while imposing costs on other countries."

      But China's top central banker Zhou Xiaochuan Friday rejected demands for a quick yuan revaluation, declaring that the emerging giant would reform gradually rather than engage in "shock therapy."

      On Sunday, the governor of the Bank of Japan stressed the importance of stimulative measures amid a sluggish global recovery.

      Masaaki Shirakawa said the United States and Europe could learn from Japan's "lost decade" of deflation, as much of the rich world struggles to rebound from the economic crisis.

      "We need to continue with unprecedented easy monetary policy, given the current economic conditions," Shirakawa said, addressing the "major and common challenges for advanced economies.""

      This from ABC News Money

      "LONDON (Reuters) - Billionaire investor George Soros considers the global currency system "lop-sided" and "controlled" by China, and urged the Asian giant to allow its currency to appreciate.

      Soros' comments to BBC radio on Friday, broadcast on Saturday, come as global finance chiefs at a meeting in Washington seek to prevent tensions over currency valuations from derailing a fragile economic recovery.

      "One of the basic imbalances that was at the root of the financial crisis and which needs to be corrected is the chronic (trade) surplus in China and big deficit in the United States," Soros said, referring to the 2008 financial crash.

      China has kept its yuan currency undervalued in a managed float to keep its exports competitive.

      "Certainly a better alignment of those two currencies would help over time to correct that imbalance," he added."

      For more of this
      http://abcnews.go.com/Business/wireStory?id=11839147

      This from Commodity Online

      "IMF Managing Director Dominique Strauss-Kahn said some parts of the world are having high growth, while others have low growth and large capital is flowing to regions which have growth, which according to him, kept the recovery uneven.

      "There is no way to believe that global growth could be rebalanced without changing some currency value because it is clear that we are going to have high growth in one part of the world and low growth in another part of the world," he said.

      According to him, the rebalancing will go through revaluation of the part of the world where there is high growth."

      For more of this
      http://www.commodityonline.com/news/IMF-WB-meet-ends-Currency-imbalances-stays-32426-3-1.html

      This is from Dave Johnson

      "The world can't get to full recovery from this terrible recession without more balanced trade. That is a huge part of the equation. Our trade deficits started with Reagan when "free trade" was used to force concessions from labor by threatening to move the factories to non-democracies, away from the wage and environmental protections that We, the People fought so hard to achieve. The wage squeeze resulted in unprecedented concentration of wealth — and loss of buying power for the rest of the population.

      Under George W. Bush, Wall Street used China for short-term profits and bonuses and China used the power that brought to buy advantage around the world. So now the rest of us are living with the long-term consequences of race-to-the-bottom policies. Namely, the bottom.

      That loss of buying power — lack of demand — is holding back recovery. To lift the economy we need to lift wages. We can't get there without challenging current arrangements with China."

      For more of this
      http://www.huffingtonpost.com/dave-johnson/how-free-trade-led-to-cur_b_752854.html

      From Bloomberg

      "Japan's nominal gross domestic product for the second quarter totaled $1.288 trillion, less than China's $1.337 trillion, the Japanese Cabinet Office said today. Japan remained bigger in the first half of 2010, the government agency said. Japan's annual GDP is $5.07 trillion, while China's is more than $4.9 trillion.

      China overtook the U.S. last year as the biggest automobile market and Germany as the largest exporter. The nation is the world's No. 1 buyer of iron ore and copper and the second- biggest importer of crude oil, and has underpinned demand for exports by its Asian neighbors."

      For more on this see below
      http://www.bloomberg.com/news/2010-08-16/china-economy-passes-japan-s-in-second-quarter-capping-three

      This from China Military Power Mashup

      "Quite a few military experts have noted that Washington's latest proposed weapon deal with taiwan is the key part of a US strategic encirclement of China in the East Asian region, and that the missiles could soon have a footprint that extends from Japan to the Republic of Korea and taiwan.

      Air force colonel Dai Xu, a renowned military strategist, wrote in an article released this month that "China is in a crescent-shaped ring of encirclement. The ring begins in Japan, stretches through nations in the South China Sea to India, and ends in Afghanistan. Washington's deployment of anti-missile systems around China's periphery forms a crescent-shaped encirclement".

      Ni Lexiong, an expert on military affairs with the Shanghai Institute of Political Science and Law, told the Guanghzou Daily yesterday, "The US anti-missile system in China's neighborhood is a replica of its strategy in Eastern Europe against Russia. The Obama administration began to plan for such a system around China after its project in Eastern Europe got suspended".

      Tang Xiaosong, director of the Center of International Security and strategy Studies with Guangdong University of Foreign Studies noted that the ring encircling China can also be expanded at any time in other directions. He said that Washington is hoping to sell India and other Southeast Asian countries the Patriot Advanced Capability (PAC)-3 missile defense system.

      Analysts say that China is closely monitoring US-India missile defense cooperation since any integration of India into the US global missile defense system, would profoundly affect China's security."

      For more of this
      http://www.china-defense-mashup.com/?p=5821

      This from Asia Times Online

      "US's strike threat catches China off guard
      By Peter J Brown

      The United States plans to unveil later this decade a new conventional "Prompt Global Strike" (C-PGS) system. It will enable the US to instantly carry out a massive conventional attack anywhere in the world in an hour or less.

      Research and development work by the US Department of Defense (DoD) on C-PGS began almost two decades ago, and this shifted into high gear in 2003. Instead of delivering a nuclear warhead, a new US-based missile and/or some other unmanned delivery vehicle may carry a conventional warhead that is able to destroy a distant target in less than an hour.

      "It's an emerging realization. I don't think the Chinese have fully come to grips with it," said Dr Jeffrey Lewis, director of the Nuclear Strategy and Nonproliferation Initiative at the Washington DC-based New America Foundation. "At some level, the Chinese see the US as investing in precision conventional munitions and have made their own parallel investments. But the more interesting question - `Could conventional forces hold at risk China's nuclear forces?' - is something that seems to be just settling in."

      The Russians comprehend the inherent ambiguity in the US initiative, and they quickly became the most vocal and adamant opponents of C-PGS in general. It was the strong message from Russia that helped to cancel out the Trident in terms of any C-PGS role after the Russians argued successfully that it would be virtually impossible for them to discern quickly whether a long-range missile fired from a US submarine was carrying a nuclear or a conventional warhead.

      Russia may brand CSM as an unwelcome spin off of Trident in this regard.

      Now that China has terminated all military-to-military exchanges as a result of the US decision to proceed with arms sales to Taiwan, many important issues including C-PGS will probably not be addressed at all in the coming months. And strangely, China in past discussions with the US on nuclear weapons and nuclear disarmament has often alluded to the need for the US to be more mindful of the overall superiority of its conventional firepower."

      For more of this article
      http://www.atimes.com/atimes/China/LB04Ad01.html
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