You've got it.
"China, Japan, and other Asian mercantilist regimes limit the appreciation of their currencies against the dollar by intervening in foreign exchange and credit markets. The governments of China and Korea, through their central banks, purchase however many dollars it takes to keep their currencies as cheap as they like to keep exports booming. Japan maintains rock bottom interest rates and encourages the carry trade to accomplish its currency objectives. Unable to adjust adequately against they yuan, yen, won, and other Asian currencies, the dollars falls more than it should against the euro, pound and other western currencies.
The Peoples Bank of China leads the pack, buying about $250 billion a year in U.S. and other Western securities and maintaining a trade surplus with the United States of equal size.
Together, China, Japan, and Korea account for 55 percent of the U.S. trade deficit, and their currency manipulation keeps the U.S. deficit with these countries from falling. Petroleum, which is priced in dollars and not much affected by exchange rates, is most of the rest of the U.S. trade gap.
Essentially, the dollar is overadjusting against the euro and other western currencies, because Beijing, Tokyo and Seoul won't let the dollar rise against the yuan, yen and won. That makes the euro and pound rocket when the dollar falls out of favor.
Beijing leads the pack, with the largest trade surplus with the United States and largest purchases of U.S. dollars.
European finance ministers should take their complaints to China, and stop blaming all their problems on Washington. |
