Let me begin by declaring myself not at all an expert in international finance. However, this article made so much sense to me that I have to pass it on. Last year, everyone was throwing a fit about QE2, when the treasury spent all this money to buy back bonds, both because it was thought to cause inflation and because it's spending money. However, the effect was to drive money out of the US into China, spurring real price inflation there (something the Chinese are deathly terrified of because of social unrest) and has now forced them to revalue their currency upwards significantly. This in turn decreases the price of US imports to China and increases the cost of Chinese exports to the US, significantly altering the trade imbalance and scoring a huge victory through financial manipulation that was never able to be had through direct political diplomacy. Huge win for Bernanke, though widely misunderstood and maligned in the press. And for obvious reasons, our government is NOT going to publicly take credit for so effectively duping the Chinese.
No comments:
Post a Comment