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Trend In Currency Manipulation Threatens Global Economy
Currency wars are flaring up around the world as countries compete against one an additional for a bigger slice of global trade. China has been drawing an increasing amount of criticism from the U.S. and other countries for holding down the value of the yuan so its exploding economy can flood the world with exports. To jump-start flagging economies with exports, an increasing number of nations are choosing to drain value from their currencies. Concerned policymakers call currency wars a risk to global economic recovery and are calling for a spirit of international cooperation.
Every person loses with a currency war
The prospect of a full-scale currency war seemed close Thursday when the dollar fell to an eight-month low against the euro and also the U.S. ratcheted the pressure up further on China to let its yuan rise. The BBC reports that although countries manipulate currencies for economic advantage, the cumulative effect undermines the global economy. Unilateral action by one central bank ignites conflict in other parts of the world. For example, last month Japan took steps to weaken the yen to make Japanese goods cheaper in the U.S.. This led to a stronger dollar, which hurts a recovery depending on increasing exports and magnified the U.S. currency dispute with China.
China/U.S. currency dispute brings in Europe
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, because 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. European governments are getting mad since the Euro is rising due to that action since the each country has a global economy to worry about.
Why we stay from manipulating currencies
The currency wars should be better off after this weekend. The International Monetary Fund could be meeting in Washington to discuss it. The world really just needs to change its consumption habits, says David Sterman at Investing Answers. The global economy will function better if countries like China and Japan increase domestic consumption in order to reduce trade supplies. This is what Sterman says. Countries like the U.S. should export more to lower trade deficits. President Obama has the right plan. He wants to, in the next five years, double U.S. exports. To do that, he needs China, Japan and the rest of the world to cooperate.
Details 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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