Article: The Truth about Trade Deficits and Currency Manipulation

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The Truth about Trade Deficits and Currency Manipulation

Michael Collins, 12 January 2021

The U.S. Treasury Department has finally determined that China is a currency manipulator, putting currency manipulation and trade deficits back in the news. Trade deficits, currency manipulation and the strong dollar are complicated economic forces that directly affect the future of American manufacturing. Let’s look at how they affect manufacturing and why we must face the truth and do something around these issues, regardless of the politics.

Trade Deficits: Let me begin by saying that, yes, trade deficits have and will continue to hurt American manufacturing, although many politicians, economists, and industry associations disagree.

Michael Froman, former trade representative: “Every legitimate economist said that measuring trade policy by the size of the goods deficit is probably not a passing grade in a basic economics class,”

Lawrence H. Summers, Harvard economist: “The trade deficit is a terrible metric for judging economic policy.” Continue reading “Article: The Truth about Trade Deficits and Currency Manipulation”

Article: Swiss central bank chief rejects ‘currency manipulator’ label from the U.S.

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Swiss central bank chief rejects ‘currency manipulator’ label from the U.S.

Elliot Smith, 17 December 2020

LONDON — Swiss National Bank President Thomas Jordan has rejected a U.S. decision to label Switzerland a “currency manipulator.”

The U.S. Treasury on Wednesday added Switzerland to a list of nations it suspects of deliberately devaluing their currencies against the dollar.

Jordan told CNBC on Thursday that neither the SNB nor Switzerland itself has artificially manipulated the value of the Swiss franc.

“Our monetary policy is necessary, it is legitimate, and we have a very low inflation rate — it is even negative at this moment — so we have to fight this deflation, and the Swiss franc is very strong, so it appreciated in nominal terms over the last 12 years enormously, both vis-a-vis the euro and vis-a-vis the U.S. dollar,” he said. Continue reading “Article: Swiss central bank chief rejects ‘currency manipulator’ label from the U.S.”

Article: Analysis: A currency manipulator tag for Switzerland may not deter FX approach

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Analysis: A currency manipulator tag for Switzerland may not deter FX approach

Saikat Chatterjee, John Revill and David Lawder, 16 December 2020

LONDON/ZURICH/WASHINGTON (Reuters) – The threat of being named a currency manipulator by the U.S. Treasury may be an embarrassment for Switzerland, but even if the country does get the tag, it likely will have little effect on the Swiss National Bank’s monetary policy.

Switzerland is expected to meet all three criteria for such designation in the long-overdue U.S. Treasury report on the foreign currency practices of major trading partners. The Treasury has some discretion on whether to issue such a label, and the coronavirus pandemic, which has thrown trade and capital flows into chaos this year, could be a factor.

There would be no automatic punishment with a label, though U.S. law requires Washington to demand negotiations with designated countries.

Vietnam, Thailand and Taiwan this year have also been in violation https://www.cfr.org/article/tracking-currency-manipulation of the Treasury’s three manipulation criteria: a $20 billion-plus bilateral trade surplus with the United States, foreign currency intervention exceeding 2% of GDP and a global current account surplus exceeding 2% of GDP.

Currency experts expect Treasury Secretary Steven Mnuchin to issue the report within days, just over a month before he leaves office.

“The subtle implication of being put on this list is that you eventually could come under sanctions, and that puts pressure on these countries not to weaken their currencies so much, or to allow strengthening,” said Win Thin, global head of Currency Strategy at BBH.

But he said that in Switzerland’s case, as the exchange rate is its main tool for fighting deflation, “they may say, ‘Well, tough’”.

The Swiss central bank is firmly under the Treasury’s focus after spending 90 billion Swiss francs ($101.50 billion) on foreign currency intervention in the first half of 2020 amid pandemic-driven safe-haven inflows.

The SNB has long argued it is not trying to weaken the franc to gain a trade advantage. Instead, it aims only to stem the appreciation of its currency to head off the threat of deflation, which runs contrary to its goal of price stability.

“Switzerland has always been treated as a special case when it comes to exchange rate policy and even the U.S. Treasury has conceded in the past that Switzerland’s economic situation is “distinctive” and that its monetary policy options are limited by its small stock of domestic assets,” said David Oxley, a senior European economist at Capital Economics.

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Article: How the COVID-19 Bailout Gave Wall Street a No-Lose Casino

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How the COVID-19 Bailout Gave Wall Street a No-Lose Casino

While ordinary Americans face record unemployment and loss, the COVID-19 bailout has saved the very rich

Matt Taibbi

Rolling Stone, 13 May 2020

This financial economy is a fantasy casino, where the winnings are real but free chips cover the losses. For a rarefied segment of society, failure is being written out of the capitalist bargain.

Continue reading “Article: How the COVID-19 Bailout Gave Wall Street a No-Lose Casino”

Article: China accuses US of ‘deliberately destroying’ world order

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China accuses US of ‘deliberately destroying’ world order

Dominic Rushe , Lily Kuo, 06 August 2019

China stepped up the trade war rhetoric on Tuesday, accusing the US of “deliberately destroying international order” with “unilateralism and protectionism”.

A day after Washington branded China a currency manipulator in a rapidly escalating trade dispute, China’s central bank said it “deeply regretted” the move by the US and said such behaviour “seriously undermined international rules” and damaged the global economy. Continue reading “Article: China accuses US of ‘deliberately destroying’ world order”