How China’s Currency Manipulation Affects Us Economy Essay example

829 Words 4 Pages
How China’s Currency Manipulation Affects US Economy

Howe School of Technology Management Principles of Economics

How China’s Currency Manipulation Affects US Economy

Currency intervention is the action of one or more governments, central banks, or speculators that increases or reduces the value of a particular currency against another currency – this is according to Wikipedia.
From January until October in 2010 imports from China to the United States this year were $299,026.0 million and only $72,276.2 million in exports to China, leaving a U.S. trade deficit of -226,749.8 million - this is according to the U.S Census Bureau U.S Foreign Trade Statistics. Here we can examine that Chinese
…show more content…
This move keeps their surplus of U.S. dollars out of the global currency exchange markets which will result in a correction in the exchange rates. This is how we can explain that the Chinese Central bank is manipulating the exchange rates by printing more Yuan and buying U.S. Treasuries. The bad consequence for China will be inflation if the Yuan is created quicker compare to what the country produces making prices go high. When money has a very low value that it is basically worthless, it can also create hyperinflation.
This is why on Nov. 3 the U.S. Federal Reserve stated a $600 billion program to buy treasuries in an effort to stimulate the economy. The Fed is employing a second round of quantitative easing, a move that refers to as "QEII." This is to further stimulate the U.S. economy. The plan simply means the central bank is buying still more government securities, focusing this time on those with medium and longer-term treasury bills which will increase the money supply and decrease interest rates. The Fed Quantitative easing believes that by creating more liquidity, banks can lend more with low interest rates which is expected to encourage investments. Some critics say that this “QEII” is a way of the U.S. to devalue their monetary currency the same way the Chinese did it – or

Related Documents