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China trying to counter Bernanke

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1 China trying to counter Bernanke on Sun Nov 21, 2010 8:29 pm

littlekracker




China trying to counter Bernanke

19 November 2010 by Michael Stumo.

Who is crying foul over the Feds monetary easing? China and Germany. Net exporters that use the broke U.S. consumer to pump up their economy.

China is scrambling to keep the renmimbi peg to the dollar.

Commercial banks were ordered to transfer an additional 0.5 percent of their assets by Nov. 29 to very low-yielding accounts at the central bank, the People’s Bank of China. The central bank relies mainly on these reserves for the renminbi it requires to buy about $1 billion a day worth of dollars, euros and other currencies — purchases that prevent the renminbi from appreciating.

While China’s strategy is a substantial net benefit to them, the cost side is substantial. Buying one billion dollars every day takes a lot of staying power by their government. It is a big bill. As Peter Morici said:

China’s purchases of dollars and foreign securities to maintain undervalued yuan come to 35 percent of exports.

Yet we still have people saying that there is no currency manipulation. Laughable. They think there is a free market or something.

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