Categorized | China, Currency

China to depreciate currency again: We need to pass the currency bill

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When a country’s starts performing badly, there is the well-know tool of currency devaluation to subsidize exports at the expense of others (like America).  China is not the first to use this strategic mercantilist tool, but it is the most egregious modern practitioner (cheater).

Tim Geithner and his gang of apologists have pointed to periodic appreciation of the yuan as an excuse for inaction. That was always a dumb argument, because we need a permanent solution. (Additionally, the yuan appreciation never came close to fair market value).

Now China is slowing, and the Washington Post reports that it will depreciate the yuan again to make their exports cheaper and U.S. shipments more expensive in China.

China is turning to policies that may benefit its economy at the expense of the United States’. This year, for instance, China has surprised a wide range of observers by allowing its currency to lose value relative to the dollar, which makes its exports cheaper than America’s. And there are prominent calls inside the country for the renminbi to fall further.

 The temptation to manipulate currency valuation is massively large.  We have to (1) take away the temptation; and (2) create an enforcement mechanism to permanently fix this problem.  That is why Speaker Boehner needs to quit listening to the U.S. Chamber of Commerce and the Club for Growth and stop blocking passage of HR 639, The Currency Reform for Fair Trade Act.

HR 639 would allow U.S. companies to file a trade case to achieve countervailing duties to neutralize the currency manipulation.

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