China’s manipulation of its currency is causing currency wars to break out worldwide as countries fight to boost exports. China has been on the receiving end of mounting U.S. pressure to force the communist government to open the yuan to free market forces. Many other countries, including Japan, Brazil, Switzerland and Israel are trying to drive down the value of their currencies to improve exports. As currency manipulation spreads. Resource for this article – Currency wars threaten to undermine global economic recovery by Personal Money Store.
Everybody loses with a currency war
In eight months, the against the euro is now at a high in competition with the U.S. dollar. Also, the U.S. is pressuring China into raising its yuan which is part of the currency war. The BBC reports that although countries manipulate currencies for economic advantage, the cumulative effect undermines the global economy. One central bank creates a lot of conflict across the world with unilateral action. For example, last month Japan took steps to weaken the yen to make Japanese goods cheaper in the U.S.. The U.S. currency dispute with China just got worse when this happened since the dollar got stronger and the exports rose.
Dispute between China and U.S. brings Europe into itpan>
Bringing out weapons is the plan Congress has come up with. All countries manipulating their currencies to get an edge on trade, like China, may have economic sanctions from the U.S., reports the Associated Press, as the House approved legislation. Hoping to create jobs, U.S. manufacturers want to make the dollar fall up to 40 percent against China’s yuan. Investors are expecting the Federal Reserve to try weakening the dollar by printing billions of dollars in new money. Because each country is connected in the global economy, that action has caused the Euro to rise, which is angering European governments.
Why we stay from manipulating currencies
In hopes of diffusing the currency wars, the International Monetary Fund is meeting in Washington this weekend. However, David Sterman at Investing Answers said the real solution is for the world to change its consumption habits. For the global economy to function, Sterman writes that countries such as China and Japan should boost domestic consumption to cut back trade surpluses. Countries like the U.S. should export more to cut back trade deficits. President Obama has the right plan. He wants to, within the next five years, double U.S. exports. To do that, he needs China, Japan and also the rest of the world to cooperate.
Information from
BBC
bbc.co.uk/news/business-11484532
CBS Denver
cbs4denver.com/wireappolitics/Tensions.over.currency.2.1951356.html
Investing Answers
investinganswers.com/a/currency-wars-why-these-four-countries-are-racing-bottom-1894
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