Chinese Peg to the Dollar

Discussion in 'Economics' started by harkm, Dec 9, 2008.

  1. harkm


    It seems to me that a huge problem with the US economy can be narrowed down to the US Dollar/Chinese Yuan exchange rate and other Asian countries that peg their currencies to the US Dollar. We are so addicted to cheap products that we have let China get away with this for years. So long in fact that US manufacturers can’t compete here and move out or quit all together. China lets its currency rise slightly from time to time just to appease us but they blatantly keep their exchange rates low so they will drive our domestic manufacturing out of business. And we just let them do it. Everybody pounds the table wanting free trade but shouldn’t the US impose some sort of tariff to help get its manufacturing back? I love Walmart and all that cheap stuff but what about a little pain so that we get our competitive edge back?
  2. I've been thinking a lot on this lately.

    Its not the peg, but rather the trade deficit itself that is causing the problem, because without other countries buying equal amounts worth of goods/services from us, it means the must either buy our companies, real estate, or lend the money back to us so we can buy yet more goods from them.

    That, is of course, what has led to the sky high amount of debt, and after the securitization disaster, they are afraid to lend without the Federal government backing the debt. Of course, adding trillions more onto it like we are doing, is going to quickly bring that to an ugly end, as well.

    I think we need to force a balance of trade. I think that it would be WTO legal to tax exports, and therefore we would charge exporters a fee for a "digital trade voucher" credit for each $100 dollar value of the goods they were exporting. The vouchers would expire in one year on a regular options expiration date, and could be traded on the exchanges. To import goods, the importer would need to cash in vouchers for the value of the incoming goods, which they would need to get either by exporting goods or buying on the open market, then when the goods arrive, and customs would charge the importers voucher account.

    The government would make a percentage selling the vouchers to exporters, and then because our import demand is so much higher than export demand, exporters would be able to sell them to importers at a high profit.

    Its a way to let the free market decide which goods are really worth importing, regulating the flow so that we aren't digging the debt grave any deeper, and at the same time using the fee to pay for some of the safety net.

    Maybe its time for balanced trade. Let them peg their currency if they like, and let companies bid amongst themselves for what imports we can afford. They would quickly realize that they would need to buy goods and services from us if they wanted to export very much to us.