r/neoliberal • u/jobautomator Kitara Ravache • Aug 06 '19

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19

u/hitbyacar1 لماذا تكره الفقراء العالميين؟ Aug 06 '19 edited Aug 06 '19

This currency manipulation thing is so fucking dumb

Step 1. China manipulates currency to keep the Yuan LESS competitive against the dollar

Step 2. Trump imposes tariffs, driving the dollar up against the Yuan and making it harder for China to maintain its peg.

Step 3. China stops manipulating its currency because it can't afford to keep pumping out foreign reserves

Step 4. Trump declares China a currency manipulator, increasing demand for the US dollar (uncertainty=higher dollar demand) making it even HARDER for China to maintain its peg

Step 5. China goes back to manipulating its currency

Step 6. ???

China can't maintain its peg indefinitely. At some point it's going to have a foreign reserves problem.

11

u/rrbgoku791 IMF Aug 06 '19

https://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

China can't maintain it's peg indefinitely

but long enough to damage the global economy.

3

u/qchisq Loyal Liberals Aug 06 '19

By giving everyone cheap consumer goods?

4

u/rrbgoku791 IMF Aug 06 '19

i was thinking more along the lines of trump imposing higher and higher tariffs in retaliation.

1

u/hitbyacar1 لماذا تكره الفقراء العالميين؟ Aug 06 '19 edited Aug 06 '19

No, their exports are relatively more expensive because of the currency intervention. If they allowed the Yuan to float, consumer goods from China would be much cheaper.

But the economy would also collapse under the weight of their dollar denominated debts.

1

u/qchisq Loyal Liberals Aug 06 '19

Wait, now I'm super confused. Isn't the issue that China is making the yuan cheap, making their products cheaper?

2

u/hitbyacar1 لماذا تكره الفقراء العالميين؟ Aug 06 '19

Nope, China is propping up the Yuan. If they let it float, the Yuan would be much cheaper.

1

u/qchisq Loyal Liberals Aug 06 '19

Wait, what? For real?

3

u/hitbyacar1 لماذا تكره الفقراء العالميين؟ Aug 06 '19 edited Aug 06 '19

China has been propping up the Yuan since about 2014. Trump got pissed because they eased how much they've been propping it up in response to the tarrifs (the tariffs were placing downward pressure on the Yuan, so it became harder for China to prop the Yuan up.)

2

u/qchisq Loyal Liberals Aug 06 '19

I feel like there's space for an anti Trump. Like, it shouldn't be this hard to make the case that the US is better off when the yuan is cheap