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Currency manipulation

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  1. #1

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    Currency manipulation

    How likely is it that this:

    BBC News - US Congress committee approves China sanctions bill

    will become reality?

    If so, seeing as it is not specifically about China but concerns currency manipulation, why would it not apply to Hong Kong? What is the difference between what China is doing and what Hong Kong is doing?


  2. #2

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    Because Congress has found a bogeyman instead of realising that a lot of the US economic structural weakness is due to their legislative incompetence.


  3. #3

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    Quote Originally Posted by hullexile:
    How likely is it that this:

    BBC News - US Congress committee approves China sanctions bill

    will become reality?

    If so, seeing as it is not specifically about China but concerns currency manipulation, why would it not apply to Hong Kong? What is the difference between what China is doing and what Hong Kong is doing?
    My understanding is that HK pegs their dollar to the US dollar. The Yuan is not similarly pegged but the rate controlled by their central bank.

    This proves the old adage that "all politics is local."

    This act by the US House of Representatives would need the Senate and with mid-term elections coming in November this is good local politics irrespective of any real worth or even if it becomes law.

    It enables those who craft the bill or just support it to go back home and campaign against a foreign entity over which they have no control so they can say what they want even if their party leadership doesn't much like it. That is the US system. They don't have to toe a party line quite like the Parliamentary systems in the west.

    The source of the US problems is not in China's currency value although a rising Yuan might feel good for them it is not a panacea for what ails America. They need China a new best friend and this sort of thing does little to endear the PRC government who are always very clear - they don't tell others what to do and they certainly don't want to be hectored and lectured by other foreign leaders or politicians. This will not work in Beijing. In fact in my view, it is exactly the wrong way to build relationships with the PRC.

  4. #4

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    Totally agree with your points Football. This would be against US interests in my view (note China has just slapped tariffs on US chicken imports). So is it safe to assume this will go away after the mid-term elections? Is there any chance that they would actually vote for this?

    I can't see the difference between "pegging" and "controlling the rate by the central bank".


  5. #5

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    And the US does not manipulate its own currency by overprinting a currency backed by nothing? Question: who has brought America to the brink of bankruptcy? The Chinese or the banking-elite? Bernanke has promised round 2 of QE. Why bother? Just call in the IMF.


  6. #6

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    And where would the US be if China hadn't bought massive amounts of its debts?


  7. #7

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    Quote Originally Posted by shilo507:
    And the US does not manipulate its own currency by overprinting a currency backed by nothing? Question: who has brought America to the brink of bankruptcy? The Chinese or the banking-elite? Bernanke has promised round 2 of QE. Why bother? Just call in the IMF.
    Either calling in the IMF or printing more $ both hsve the same impact do they not. It sends a bad signal that all is pretty much fvcked at the moment with the US "recovery".
    Posted via Mobile Device

  8. #8

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    Quote Originally Posted by Loz_2:
    Either calling in the IMF or printing more $ both hsve the same impact do they not. It sends a bad signal that all is pretty much fvcked at the moment with the US "recovery".
    Posted via Mobile Device
    There is no 'recovery'. We are in a Depression but few dare utter the word. Good article in yesterday's Telegraph about Gold being the final refuge:

    Gold is the final refuge against universal currency debasement - Telegraph

    Note Wen Jiabao's comments about re-evaluation of the Yuan and its implications for China. For those who don't want to read the whole article I'll repeat them here:

    Premier Wen Jiabao confesses that China’s ability to maintain social order depends on a suppressed currency. A 20pc revaluation would be unbearable. “I can’t imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs,” he said.

  9. #9

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    You all miss the point. The HK dollar is a convertible currency, acceptable world-wide. That means if the HK government wants to peg the HK dollar to the US dollar, if valuations change on the international currency markets, the HK government must buy or sell dollars/ HK dollars on the open market to keep it's value at the current level. Sometimes, that can cost the the domestic monetary authority a very substantial sum, but they carry out this policy because they believe its best for financial stability in HK.

    OTOH, IN China, where the Yuan is non-convertible outside of China, they do not have to worry about its international value, only its domestic value. Thus controlling the domestic value set by the PBOC only requires that the government raise reserve ratios for domestic banks or increase the issuance of domestic bonds to suck back all the currency that was printed to buy the foreign currency thats coming into China as FDI or as payment for exports. This process is known as sterilization. However, it is far easier to keep a non-convertible currency at a set value because you don't have outside sources having an influence on its value - -either though purchases caused by FDI or exported products, or speculation/investment.

    er2 and Skyhook like this.

  10. #10

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    Quote Originally Posted by hullexile:
    Totally agree with your points Football. This would be against US interests in my view (note China has just slapped tariffs on US chicken imports). So is it safe to assume this will go away after the mid-term elections? Is there any chance that they would actually vote for this?

    I can't see the difference between "pegging" and "controlling the rate by the central bank".
    On the latter "pegging" is far different than central bank control. Pegging means it will float and some currencies do but within a specified range.

    No one wins a trade war with tariffs when it is played between two big nations but it is how they do it, yes.

    This House bill has little chance to become law before the mid-term elections unless both the House and the Senate saw this as something critical and there are always forces at play who don't see this that way or in the Senate's case cooler heads prevail.

    If you want a quick read on how a bill in the USA becomes law, check out this site.

    It is a complex process. If the House first passes this and sends it to the Senate and they make changes and then pass a related bill, it must then go to back to the House for their review and if the bill is now altered it can end up at Conference at which managers from the House and Senate review the bills which can also bog down legislation.

    Constitutional Topic: How a Bill Becomes a Law - The U.S. Constitution Online - USConstitution.net

    These managers "work out the differences in the two versions of the bill" and "Managers are not allowed to substantially change the bill." Whatever they do the changes cannot alter the bill itself and this can be contentious and not lead to results.

    The changes if agreed on go back to both the House and Senate for a re-vote. It also might need to go to Conference again, etc. etc. Bills often die.

    House and Senate Leaders with their own agendas often don't like some things and this too can be an issue. So much depends on the timing of the bills and the legislative priorities.

    Oh then the President can veto it but that too is fraught with risks. The White House usually like to have their pit bulls on the Hill kill stuff so they don't have to do.
    Last edited by Football16; 27-09-2010 at 04:34 PM.

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