Thread: Prepare for Currency/Trade Wars; How Might China Respond to

Sunday, September 26, 2010

Prepare for Currency/Trade Wars; How Might China Respond to US Tariffs?

Patience of US legislators regarding the value of the Yuan has finally given out. Last Friday, Congress jumped into the fray after exceptionally harsh statements from Treasury Secretary Tim Geithner, who up until now had always preached diplomacy. Here is a brief sequence of events.

Patience Runs Out

MarketWatch reports Patience runs out on quiet diplomacy on China currency. http://www.marketwatch.com/story/patien ... ed_stories

Sept. 15, 2010
Patience appears to have run out in Washington for the standard White House approach that favors quiet diplomacy for dealing with China over the dispute over the value of its currency.

In testimony to the House Ways and Means Committee, a wide array of experts said that quiet diplomacy has essentially been a failure. The only debate at the hearing was what new approach should be tried.
Geithner Enters the Battle

One day later Geithner calls for faster yuan appreciation http://www.marketwatch.com/story/geithn ... 2010-09-16

Sept. 16, 2010
“China needs to allow significant, sustained appreciation over time to correct this undervaluation and allow the exchange rate to fully reflect market forces,â€

I maintain the first country that practices free trade regardless of what anyone else does will be a winner.

Mike "Mish" Shedlock

Free trade doesn't work, Mish, for anyone, anywhere. Not US or other countries. The closest semblance to "free trade" that might work is after the US passes the FairTax that taxes imports the same as domestic products, THEN, we might be on a road to a type of free enterprise that you free traders think you want.

Nothing is free but people, Mish. Products and services cost money and takes from the one who wants it to pay another for the work, investment and cost of production. With the FairTax in place, there would be little to no incentive for our producers to make their products to serve our market anywhere but here.