Undervalued Currency
Communist China’s trade surplus continues to soar amid growing pressure on China to stop unfair trade practices. China’s trade surplus is more than $136 billion so far this year. Chinese exports for the month of July increased almost 35 percent. The United States reported a trade deficit of $232.5 billion with China last year.
China’s ownership of massive amounts of U.S. debt is a threat to our economic stability. Communist China is hinting it has the power to trigger a dollar crash, in respond to the increasing pressure to become a fair trading partner.
Bush and his top economic advisers at the Treasury Department, are playing up our economy, at the same time his treasury secretary down plays China’s threat, to dump U.S. Treasuries. A communist party official wrote: “The Chinese central bank will be forced to sell U.S. dollars which might lead to a mass depreciation of the U.S. dollar.” The U.K. Telegraph notes another leader recently called U.S. reserves a “bargaining chip,” dollar sales China’s “nuclear option.”
U.S. Business and Industry Council warns that the Chinese do hold very significant leverage over the U.S. economy because they hold so much U.S. debt, and by holding that debt, they subsidize American consumption and help keep our living standards artificially high. However, China desperately needs the United States to serve as the market for its manufactured goods.
China holds $1.3 trillion worth of reserves, $407 billion in Treasuries and dumping them would be devastating to the U.S. economy, slamming the dollar and driving up interest rates.
The communist party think tanks have started to put out the message that selling of U.S. Treasuries would have negative consequences on America as a reminder to Congress. They are raising that possibility so that Congress won’t attempt to get China to change it’s currency exchange rate. Recently, China has let its currency rise 3.8 percent, which is nowhere near enough, because China’s currency is 40 to 50 percent undervalued and letting it rise four percentage points a year doesn’t do much good.
China’s ownership of massive amounts of U.S. debt is a threat to our economic stability. Communist China is hinting it has the power to trigger a dollar crash, in respond to the increasing pressure to become a fair trading partner.
Bush and his top economic advisers at the Treasury Department, are playing up our economy, at the same time his treasury secretary down plays China’s threat, to dump U.S. Treasuries. A communist party official wrote: “The Chinese central bank will be forced to sell U.S. dollars which might lead to a mass depreciation of the U.S. dollar.” The U.K. Telegraph notes another leader recently called U.S. reserves a “bargaining chip,” dollar sales China’s “nuclear option.”
U.S. Business and Industry Council warns that the Chinese do hold very significant leverage over the U.S. economy because they hold so much U.S. debt, and by holding that debt, they subsidize American consumption and help keep our living standards artificially high. However, China desperately needs the United States to serve as the market for its manufactured goods.
China holds $1.3 trillion worth of reserves, $407 billion in Treasuries and dumping them would be devastating to the U.S. economy, slamming the dollar and driving up interest rates.
The communist party think tanks have started to put out the message that selling of U.S. Treasuries would have negative consequences on America as a reminder to Congress. They are raising that possibility so that Congress won’t attempt to get China to change it’s currency exchange rate. Recently, China has let its currency rise 3.8 percent, which is nowhere near enough, because China’s currency is 40 to 50 percent undervalued and letting it rise four percentage points a year doesn’t do much good.
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