Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Asian central banks step up currency manipulations
On November 15, while predicting the effects of QE2, I wrote:
The effect was temporary. the central banks of Asia's largest economies appear to be stepping up their currency manipulations. Bloomberg reports:
These central banks buy dollars in foreign exchange markets in order to drive down the exchange rate of their currencies relative to the dollar so that they get manufacturing investment and gain our industries while we stagnate and lose our industries.
Bernanke tried to reverse this with QE2, which caused the U.S. inflation rate to rise from about 1% to about 3.5%. QE3 would probably raise U.S. inflation to 5% or 6%.
Although QE2 was not sustainable due to inflation, Asian currency manipulations are sustainable. They have been going on for several decades already and will continue to work so long as the United States gives away its industries to the most aggressive currency manipulators.
The U.S. just has three alternatives: (1) continuing depression; (2) a high interest rate, high inflation dollar crash; or (3) a scaled tariff that would balance trade, help balance the U.S. federal budget, and revive U.S. manufacturing investment.
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