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Monday, January 9, 2012

China: The Currency Manipulator

The Chinese are seeing a decline in their exports. They are also seeing a gain on the Yuan against the US dollar. In this article by Bloomberg, it discusses the issues surrounding this currency gain. The Euro crisis is central to this issue as people are not able purchase Chinese goods since the Euro is in the toilet. In other words, it will take more Euros to purchase Chinese goods, so the Euro will stay at home and look for cheaper goods. Thus, the Chinese export numbers will be down. The next move will be purchase of Chinese Government debt to depreciate the currency to make trade balance out. My next guess is the Chinese central bank will need to do some sort of expansionist policy to depreciate the Yuan. Its just a guess, but it is all one big shell game.

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