The curious case of the Yuan and the Yen

Two curious pieces of news today:

Geithner Says U.S. Examining Ways to Push China on Yuan Rise

Treasury Secretary Timothy F. Geithner said the U.S. isn’t satisfied with the pace of yuan gains and is considering ways to urge China to let the currency rise faster.

And

Fed refused to comment on Japan weakening the Yen.

NEW YORK (Dow Jones)--The Federal Reserve Bank of New York declined to comment on Japan's intervention in currency markets that has pushed the dollar sharply higher against the yen.

So why are we perfectly happy, or at least neutral, with Japan, the #3 economy, weakening the Yen and are furious at China, the #2 economy, decreasing the value of the Yuan.

This is a good question for any would be political economist to ponder. The treasury is certainly in charge of the political aspects of the dollar's relationship to other currencies. The Fed's political objectives are somewhat murky but assumed to be largely the same as the treasury's.

Let's call this the Asian currency political paradox.

I have my thoughts, which I'll elaborate on in later posts.

Comments

What's Bernanke going to do during the housing crash?

A Recent NY Times article on the Japanese Housing Bubble got me thinking. Especially this quote: Japanese economists say the United States is not likely to suffer a decline that is as severe or long-lasting as Japan's, because they see a more skilled hand at the tiller of the American economy: the Federal Reserve. Japan's central bank, the Bank of Japan, failed to curb the stock and real estate bubbles until mid-1989, when it was too late and prices were sky-high, they said. Translation: It's different this time! Is it really? Let's listen to some words from Mr Bernanke : But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to...

Why there are fewer people in engineering in the U.S : Money

There have been all kinds of articles recently about how the United States is losing its scientific edge because fewer people are going into the sciences and engineering. There is a great deal of handwringing and people talking about the anti-intellectualism of our country, its poor schools, etc and all sorts of wild guesses as to why this is happening. Well India has plenty of anti-intellectualism, poor schools, etc but they are turning out a lot of engineers. The real reason is that being an engineer in the United States does not mean you're going to get rich relative to your real estate speculating condo flipping peers. Let's look at some facts: The International Herald Tribune says that the average wage for an experienced programmer in India is $11,423 a year. The average wage for an experienced programmer in the U.S is $83,000 a year. However the average per capita income in India is $3,100 and in the U.S it is $40,100 . Per capita income is a good indicator of t...

Why there will be no hyperinflation

I have been reading the inflation/deflation debate for some time now on various parts of the web. The inflationists insist that we will collapse like Wiemar. The deflationists insist that we will collapse like Japan. The memory of the 1970s inflation is strong in many an old gold curmudgeon, so the inflationists seem to be more prevalent. I will in this essay attempt to argue that hyperinflation will not happen if global commodity markets remain priced in dollars. The reason for this is that if inflation increases, the rest of the world will bid commodities up drastically, especially oil, and severely throttle U.S economic growth, leading to a more restrictive monetary policy. Hyperinflation always happens due to a foreign exchange crisis. The population, sensing a high level of inflation, rushes to change their earnings in for real goods or foreign currency. In the case of Wiemar, or Argentina, the rest of the world is largely unaffected. They see their currencies drastically...

Economic Mischief - Contrarian Political And Economic Analysis

Search This Blog