WSJ: Bernanke Takes Aim at China

[JMS]

Bernanke Takes Aim at China

http://online.wsj.com/article/SB10001424052748703374304575623144102357582.html?mod=WSJ_hp_LEFTTopStories

Federal Reserve Chairman Ben Bernanke fired back amid criticism at home and abroad of the Fed's easy-money policies, arguing that China and others are causing global problems by preventing their currencies from strengthening as their economies boom.

By keeping their currencies artificially weak, Mr. Bernanke argued in Frankfurt Friday, China and other emerging markets are allowing their economies to overheat, preventing trade imbalances from adjusting and worsening what he called a "two-speed" global recovery.

Their "strategy of currency undervaluation" is preventing more "balanced and sustainable" global growth, he warns, echoing a view expressed by Obama Administration officials.

Mr. Bernanke has come under attack for the Fed's decision to purchase $600 billion in U.S. Treasury bonds in an effort to drive down long-term interest rates. Critics in the U.S say it could cause inflation. Critics abroad say the flood of dollars that the Fed is effectively printing to finance its bond purchases is pouring into overseas markets and could cause asset bubbles.

Some also have accused the Fed of trying to weaken the dollar to spur U.S. exports.

Fed officials have denied that is their goal, though Mr. Bernanke effectively acknowledged the U.S. currency should weaken against currencies in emerging markets, because their economies are growing so much faster than economies in the developed world.

The Fed chairman's message, though scholarly in tone, was unusually blunt in laying blame for inflationary pressures in emerging markets and for tensions over currencies on countries like China. A chart accompanying his comments also pinpoints Taiwan, Singapore and Thailand as aggressively trying to hold their currencies down, while India, Chile and Turkey aren't.

"Why have officials in many emerging markets leaned against appreciation of their currencies toward levels more consistent with market fundamentals?" Mr. Bernanke asks. Mainly, he says, because they are sticking to a long-term strategy of pushing for export-led growth with cheap

[JMS]

About 30, 40 years too late....

http://www.breitbart.com/article.php?id=CNG.019256bfe6ccb3a315e27f0faf7bcd07.8b1&show_article=1

WTO chief warns against currency wars

The head of the World Trade Organization on Friday warned countries against keeping their currencies undervalued to create jobs, saying such policies could spark a return to 1930s-style protectionism.

Pascal Lamy, WTO director general, said the fight over currency values -- in a reference to the United States and China -- could upset global financial stability.

Generating employment "is at the heart of the strategy of some countries to keep their currencies undervalued," Lamy said in New Delhi. "Just as it is also at the heart of other countries' loose monetary policies."

Competitive devaluations, which have raised fears of a global currency war, could trigger "tit-for-tat protectionism", he told a business audience.

Lamy singled out "unsustainable and socially unacceptable unemployment" levels around the world as the most serious challenge facing the global economy.

But "uncoordinated 'beggar thy neighbour' policies will not result in increased employment," he said.

Washington has urged Beijing to allow its yuan to rise, saying the currency has been undervalued to create an unfair trade advantage and stoke China's economic boom.

The United States, where unemployment is nearly 10 percent, has been accused of doing the same with a 600-billion-dollar cash injection announced earlier this month as it seeks to jump start its sluggish economy.

[Larry]

The head of the World Trade Organization on Friday warned countries against keeping their currencies undervalued to create jobs, saying such policies could spark a return to 1930s-style protectionism.

Frankly, right now, I'm not so sure I'd object to that.

For one thing, frankly, it bothers me that America isn't known for making things any more, only for buying things.

For another, it also seems to me that this whole "free trade" thing is frankly an agenda that's being pushed by the big multinational corporations, because "free trade" makes the multinationals more powerful than national governments. To me, some old-fashioned protectionism would make it tougher for corporations to threaten nations with going elsewhere, by forcing them to produce things near to where the consumers are.

I think a good dose of protectionism might be a really good thing.

[JMS]

Frankly, right now, I'm not so sure I'd object to that.

For one thing, frankly, it bothers me that America isn't known for making things any more, only for buying things.

For another, it also seems to me that this whole "free trade" thing is frankly an agenda that's being pushed by the big multinational corporations, because "free trade" makes the multinationals more powerful than national governments. To me, some old-fashioned protectionism would make it tougher for corporations to threaten nations with going elsewhere, by forcing them to produce things near to where the consumers are.

I think a good dose of protectionism might be a really good thing.

Most young people today can't remember the days when America made everything.. Buy a TV, a Radio, anything you wanted, it was always made in the USA.

I remember when made in Japan was a running joke. It was synonomous with cheap stuff which broak easily.

I'm not for protectionism. I'm definitely in favor of balanced trade however. Makes no sense to have the Chinese economy growing at 10% while we are growing at 2% given our unemployment rate; knowing that china's entire economy is geared towards exporting to the US.

Every wiget we buy we should sell something. That's how every other country on earth does it including our "trade partners". We are the only ones who subscribe to openned trade policy.

[Hubbs]

You've gotta be ****ting me, Bernanke.

Checked out the Dollar Index lately? How far it's fallen? How far it's fallen over the past decade, coincidentally when the Fed has pursued a cornucopia of easy money policies and is now going so far as to print trillions?

Yeah, there's currency manipulation going on. You're part of it.

[mojobo]

Funny how he says this 2 weeks after he just implemented QE2 which will cause our currency to be heavily devalued.

[JMS]

You've gotta be ****ting me, Bernanke.

Checked out the Dollar Index lately? How far it's fallen? How far it's fallen over the past decade, coincidentally when the Fed has pursued a cornucopia of easy money policies and is now going so far as to print trillions?

Yeah, there's currency manipulation going on. You're part of it.

I'm dumbfounded. Of coarse the dollar has fallen. That's the entire point. If you are going to make adjustements for decades of artificialy high exchange rates the dollar is going to fall.

And yes the Fed has been manipulating the exchange rates for the last five or six weeks. We asked China to stop manipulating their currency now for what 5-6 years.. They've been doing so to the detriment of the US worker for what 2 decades... Japan did it since the 1970's. Get yourself a copy of Lee Iococa's book ( former president of Chrysler ) .... So yeah it's about time the US government took some action against them; especially wiht the Chinese economy growing at 5x that of the US economy largley due to surfing on our recovery packages.

[JMS]

Funny how he says this 2 weeks after he just implemented QE2 which will cause our currency to be heavily devalued.

Why is that funny.... He's hit china with a pie in the face and he's saying I've got another pie...

The danger is China doesn't react positively and allow their currency to float at a more realistic level. IF that doesn't happen it will mean turning away from GAT...

Which nobody wants but we won't really have a choice if the only trade relationship China will accept is one where they articially have massive deficits.

[mojobo]

We don't have the capital to produce what we need to compete with Chinese jobs, and all the manipulation, taxes, and regulation handcuffs businesses from efficiently acquiring and using the capital it needs to compete or meet our demands. Bernanke is basically saying that other countries aren't making our citizens poor enough so he's going to do it himself is insane. People are acting like China's currency has been dropping in value vs. ours when its been the opposite. If an economy starts to crash like ours did what naturally happens is that dollars rise in value, but we decided to counteract this with inflation. The fact that our dollar has dropped relative to China's, despite the fact that were in a recession still, means that we have been the ones manipulating our currency to a greater extent than China. This whole notion that were the U.S. is the victim of China's currency manipulation is just wrong.