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Source link: http://archive.mises.org/12544/a-closer-look-at-chinas-currency-manipulation/

A Closer Look at China’s Currency Manipulation

April 23, 2010 by

While the thought of engaging in trade wars — in the midst of a global depression — with the Chinese is unnerving, the worst part of it all is that the relevant economists have failed to see their mistaken premise. FULL ARTICLE by Jonahtan M. Finegold Catalan

{ 44 comments }

Hard Rain April 23, 2010 at 10:19 am

Excellent piece. America and China’s economic relationship was always confusing to me. I am enlightened now.

Joshua Fechter April 23, 2010 at 12:47 pm

I’ve been waiting for someone to adsress this issue for a while. Thank You.

Patrick Barron April 23, 2010 at 3:42 pm

Well done! I will have my Austrian econ students here at the U. of Iowa read your article. I have highlighted in red your main points that by undervaluing the yuan China hurts itself, subsidizes the American consumer, and–a point that had not occurred to me earlier–enables our government to spend more recklessly. Because it leads to damaging trade wars, currency manipulation may result in war.

Mr Economy April 23, 2010 at 4:38 pm

If Noble Prize economist F.A. Hayek were around today I think he would agree that outsourcing today is a monetary phenomenon. US multinational corporations outsource American technology to countries with weak currencies. If you notice all these countries that multinationals outsource to have some type of currency peg or managed currency regime were the foreign country keeps printing new money out of thin air faster then the US to keep the exchange rate pegged. If you look at China with 7.5 Yuan to the Dollar, Mexico with about 12 Pesos to the dollar and the Southeast Asian countries, they all have weak currencies with sometype of managed currency regime. Why would a company outsource knowing that once large quantities of goods were exported back to the US the currency of the country they outsourced to would appreciate thus narrowing the price advantage of outsourcing. Thats why if these trade agreements had provisions eliminating currency manipulation then alot of them would not be signed in the first place.

To prove that outsourcing is a monetary phenomenon, imagine first a world without credit creation out of thin air. If Americans were first producing TVs and consuming them and if the company outsourced to China for example what would happen? Well in a world without credit expansion, the TV company would be exchanging US customers for Chinese customers because China is now producing TVs so that they can consume. Just like you grow an apple and eat it. You have to produce to consume. Credit expansion out of thin air distorts this because with the outsourcing to countries with weak currencies, citizens of the country now producing TVs can consume and the citizens of the country not producing them have to use credit created out of thin air. Temporary there’ still confidence in the country consuming on credit but its legacy related to the past when it was a producer. So in essence the cow is being given away to get the milk. Yes the country manipulating their currency is hurting the purchasing power of the workers working in the newly created industries from foreign outsourcing but this policy of forced savings is allowing new technologies to be transferred and saving that country the time of having to develop the technologies on their own. One country’s industrial base like the US is hollowing out and may be the future Zimbabwe were money is just printed out of thin air to consume while the country manipulating their currency is becoming more production and capital oriented which is whats needed to raise real wages. So as a country, the US has been trading away their capital like the cow to consume the milk.

Jeremy April 24, 2010 at 12:47 am

Great article =0 It’s amazing how many people get Chinese currency manipulation wrong, thinking it hurts Americans and helps Chinese people when it’s the other way around

To understand how China’s currency manipulation hurts Chinese consumers and helps American consumers, all you really have to do is think about what would happen if Chinese exporters kept their dollars.

1) Since the central bank would no longer be printing RMB to accumulate dollars, there would be less inflation in China.
2) Since the only way for Chinese exporters to use dollars (or those in China who traded for them) would be to buy US stocks, bonds, import American made products, or travel/live abroad (including sending their kids to US schools, etc), prices of many things in America would increase.
Contrary to Keynsian assumptions, this increase in demand would not in any way increase the available capital and other resources available to American entrepreneurs and businesses – the average American would certainly be worse off.
3) Without the additional demand from automatically buying up dollars with RMB, the RMB would rise in value relative to the dollar, and many of the goods previously headed for American markets would make their way elsewhere (including to local buyers, although many factories would have to retool and change production, or get bought up by more efficient competitors if there was no real demand for what they were making).

Smiling Dave April 24, 2010 at 12:40 pm

Great post. Congrats on making it to the top of the charts.
Peter Schiff just came back from China. He says that not one Chinese official he spoke to has a clue. They think Krugman is right

Mr. Economy April 24, 2010 at 1:30 pm

Actually buying Chinese goods made with American technology that was outsourced hurts Americans too. These goods are being bought with credit which means an increase in the money supply thus causing even greater inflation in the US. Yes the Chinese products made with American technology are still cheap because they constantly keep printing money to keep the exchange rate pegged, but with Americans buying these goods on credit, Americans are further leveraging themselves going deeper into debt. This is bad because the malinvestments in the economy can never be liquidated easily when everyone is too leveraged. As participants in the economy become more leveraged it becomes almost imppssible for policy makers to allow a healthly liquidation which causes them to re-inflate bubbles which will cause even more pain down the road. Because of all the malinvestments that currently keep piling up; thats why it takes 5 dollars worth of debt to lead to a 1 dollar increase in GDP.

thelion April 24, 2010 at 8:52 pm

Great article to remind people that Chinese undervaluing of products is subsidy of our business, and mercantilism in response will hurt us, as it has always hurt every country that had tried it.

PirateRothbard April 24, 2010 at 8:53 pm

I’ll admit, I don’t read articles by these youngsters. Keep up the good work and lets see what you’ve accomplished in 10 years.

Zakhi April 25, 2010 at 7:42 am

I don’t understand something regarding the example with the Chinese exporter. If the yuan was inflated and now 8 yuan are worth a dollar (instead of 4), why can’t he raise the price for his widget to 16 yuan? The price for Americans stays the same, 2 dollars, so the American importer will not lose anything out of this. I understand that the Chinese exporter does not gain anything (due to inflation, 16 yuan are worth as much as 8 yuan were before it), but at least he is not losing. So where am I wrong here?

Havvy April 25, 2010 at 6:14 pm

The producer has to now follow the exchange rate, something not all producers are going to be able to do, either through time constraints, monetary constraints (it might cost an extra US penny per product to follow this for example!), legal constraints (which may or may not exist), or mere ignorance over what is becoming of them. The last one will be the one that has the biggest hit, for Americans think they are losing through this policy and Chinese think they are winning. They do not see the opposite occurring.

Jonathan Finegold Catalán April 25, 2010 at 11:04 pm

Zakhi,

I received a lot of emails with the same argument. It’s important to discard the mechanical theory of the quantity of money. When the yuan is inflated the price of all goods does not increase proportionally, nor simultaneously – this is the basis of the business cycle theory. The price of Chinese goods will not be increased until Chinese manufacturers realize that they are experiencing a greater shortage of goods, thereby raising prices – so, the original importers of Chinese manufactured goods are indeed subsidized.

Ben Ranson April 27, 2010 at 9:39 am

The situation is even clearer if you imagine the Chinese government printing yuan and using the new money to buy dollars directly from the American importer. In this situation, the manufacturer cannot avoid being the loser, short of refusing to accept yuan.

Bill Miller April 26, 2010 at 1:05 pm

This is what I’ve been saying for years. The Chinese have been harming themselves over for years with a policy of devaluation that basically subsidizes US importing. It’s ironic that Paul Krugman is bothered by their policy-it’s in part because of the Chinese subsidy to US imports that his beloved stimulus (both monetary and fiscal) hasn’t resulted in higher inflation than we’re already experiencing.

Bill Miller April 26, 2010 at 1:08 pm

Now, the downside to this is that when the Chinese finally stop devaluing the Yuan (which I think will probably take place when they get tired of shouldering the inflationary burden being created by the US government), lot’s of people are going to start dumping the dollar. Once that happens, it’s only a matter of time before all those portraits of dead presidents that were shipped overseas for years in exchange for goods and services come back to haunt us in an inflationary crisis.

Jonathan Finegold Catalán April 26, 2010 at 1:23 pm

Like I argue in the article, I’m not sure these dollars have left circulation. They return to the United States through the form of t-bill investments. What is not spent by the Chinese in directly buying American goods is now being invested, or spent by the U.S. government. Any additional inflationary effect “Chinese dollars” may have in the United States is not due to the trade deficit, but purely to the inflationary fiscal policy of the U.S. Federal Government.

billwald April 26, 2010 at 1:11 pm

Haven’t we been told that most of Chinese industry is actually owned by the Chinese military? Their bottom line goal is political/military, not economic.

How do we know how many yuan are in circulation? We don’t know how many US dollars are in circulation.

newson April 27, 2010 at 7:54 pm

“China’s central bank is not subsidizing the Chinese exporter but the American importer.”

this statement strikes me as debatable. given that cadres of the prc have equity in many exporting companies, and that the exporters are amongst the first to receive bank credit, it would seem that the exporters are indeed beneficiaries of the mercantilist policies.

chinese exporters and american importers both benefit. everyone else suffers.

Jonathan Finegold Catalán April 27, 2010 at 8:37 pm

In this case, the first to receive newly printed yuan are American importers (by exchanging dollars for yuan), not Chinese exporters. If Chinese manufacturers are the first to receive credit from elsewhere then that’s entirely another story, and largely unrelated to the effects of a continuously undervalued exchange rate.

newson April 27, 2010 at 9:09 pm

also, these days most inflation is created through the banking system and not the printing press, so i don’t believe that it’s an entirely different story from the inflation you describe being created by the central bank of china.

Jonathan Finegold Catalán April 27, 2010 at 9:18 pm

Newson,

I think you missed my point, in this case. Increasing the supply of yuan on the foreign exchange market, and increasing the supply of yuan on the domestic loanable funds market leads to two different effects. I am discussing the first, not the second. I recognize that credit lent directly to the Chinese manufacturer benefits the manufacturer first, but that’s not what is being discussed in the article.

newson April 27, 2010 at 9:48 pm

but why would the central bank increase the supply of yuan that if it weren’t with the intent of enriching some at the expense of others?

Jonathan Finegold Catalán April 27, 2010 at 9:52 pm

I answer this question below, but probably because of misguided economic theory.

newson April 27, 2010 at 9:58 pm

i feel that you’re cutting the authorities way too much slack. that the overall effect is impoverishment we can agree on. i don’t, however, believe that the those pursuing mercantilist policies are blind to this, just that it’s possible to get very rich even as the country becomes ever poorer. in this sense, “misguided” implies that general welfare is the actual objective. this is what i’m contesting.

newson April 27, 2010 at 9:03 pm

thanks for the prompt reply. the american importers might be the first to receive the yuan, but when the come to use that currency domestically it’s going first to the chinese exporters. so they are the first chinese to benefit. mercantilism would never be adopted if it only enriched the american importer. the cadres aren’t stupid. they are happy to impoverish all for the benefit of the privileged exporters, and therefore themselves.

exporters and importers are siamese twins. both must benefit, otherwise trade wouldn’t occur.

Jonathan Finegold Catalán April 27, 2010 at 9:16 pm

Newson,

I’m not sure I’m understanding your conclusions. You write,

the american importers might be the first to receive the yuan, but when the come to use that currency domestically it’s going first to the chinese exporters.

By the time the Chinese manufacturer has received yuan in return for his good he has already lost in the transaction, for two major reasons:

1. His yuan is now worth less on the international market, making it more expensive for him to purchase goods (including capital-goods) from outside of China.

2. The price of Chinese goods, whether capital-goods or consumer-goods, are bid up after the initial transactions between Chinese manufacturers and American importers. The Chinese manufacturers, therefore, still feel the effects of price inflation, even if the largest loser is whoever the yuan “trickles” down to last.

Further down you write,

mercantilism would never be adopted if it only enriched the american importer. the cadres aren’t stupid.

Stupid, I think not. Misguided is another story, altogether. The fallacy of currency devaluation to drive exports is not new, and has been practiced for at least the past three hundred years. But, the effects have never been to enrich the manufacturing sector. It’s just another case of failing to see the unseen consequences of political policy.

You also write,

exporters and importers are siamese twins. both must benefit, otherwise trade wouldn’t occur.

I think the concept of imperfect information applies. When the Chinese manufacturer accepts eight yuan he does not yet realize that those eight yuan will soon be worth less than they originally were.

newson April 27, 2010 at 9:40 pm

“The price of Chinese goods, whether capital-goods or consumer-goods, are bid up after the initial transactions between Chinese manufacturers and American importers.”

but the chinese exporters are the first to spend the money domestically, so they get to spend the money before prices are bid up at home. yes, the undervaluation affects the exporter, too, but he still benefits by being at the top of the queue, and suffers less than those at the end of the queue.

“misguided” i think is wrong. mercantilism does benefit particular interests, even though it impoverishes nationally. i think those engineering it know exactly what the effects are and revel in it.

Jonathan Finegold Catalán April 27, 2010 at 9:55 pm

Newson,

By bidding for Chinese consumer-goods and capital-goods, U.S. importers directly bid up the prices of these Chinese goods, and so to some effect the manufacturer who is paid the money does feel the consequences of inflation. I understand your point that the manufacturer is not as damaged as whoever receives the yuan last, but my argument is that the manufacturer is hurt nevertheless.

Mercantilism is designed to benefit some at the expense of others, yes, but that does not mean that the mercantilist policy is enacted with full knowledge on all consequences. The fact that manufacturers lose out is an unintended consequence of policy makers looking from an “aggregate perspective”, where they equate an increase in exports with an increase in revenue.

newson April 27, 2010 at 10:23 pm

there are plenty of billionaires along the chinese coastal strip whose fortunes are largely due to this mercantilism. the prc allows nothing to serendipity, and is either part-owner or gets kick-backs from the very same billionaire exporters. it doesn’t give a toss about the long-run impoverishment of the country, and since the constituencies harmed don’t have any political weight, it seems to me there are no unintended negative consequences for the chinese authorities.

newson April 27, 2010 at 10:31 pm

exporters are motivated by profit opportunities, not revenue gains. and i don’t think that chinese policy makers have confused the two. they have shared in the profits, however illegitimate they may be.

that the policies destroy national wealth is irrelevant from the despot’s point of view.

Jonathan Finegold Catalán April 27, 2010 at 10:50 pm

Newson,

Say what you will, but I don’t see a lapse in the logic I present in the piece. The fact stands that the American importer is being subsidized by the Chinese central bank, at the expense of the Chinese manufacturer. What behooves the Chinese central bank to follow this policy, and why Chinese manufacturers allow it to happen are related topics that regardless of the answer have no impact on the economic reality of devalued currency.

I think that the negative side-effects of Chinese currency manipulation are beginning to be noticed by Chinese manufacturers. It is becoming more difficult for them to afford raw materials, especially those imported from foreign countries; a weak yuan is simply precluding them from having as high of a purchasing power as they would have otherwise had. To a large degree, I think that a bubble in the capital-goods market is allowing the “exports illusion” to continue for longer than it would have otherwise had. With easy credit, Chinese manufacturers are probably not feeling the impoverishing effects of subsidizing the foreign consumer as much as they would have without credit expansion in the loanable funds market.

newson April 27, 2010 at 11:30 pm

sure they get hit with higher factor prices, but that doesn’t necessarily affect margins. they may just adjust their sales price. i don’t have any beef with your conclusion that the us importers are beneficiaries, only with your implication that exporters are net victims, whereas i believe that is not the case.

it seems to me as though you are missing the whole point of the exercise, and construing it as a policy accident of the prc, whereas i would maintain that the exercise is precisely one of national impoverishment, but targeted enrichment.

besides, importers always have the choice of not exporting, if margins are no longer satisfactory. that would cause mass unemployment, so the prc gives exporters a helping by keeping the currency low, stashing away us treasuries.

Jonathan Finegold Catalán April 29, 2010 at 1:02 pm

Newson,

You write,

sure they get hit with higher factor prices, but that doesn’t necessarily affect margins. they may just adjust their sales price.

Price adjustments to inflation are not immediate. The Chinese manufacturer still takes a hit. When the Chinese central bank creates yuan to devalue it in respect to foreign currencies, this causes an increase in demand for yuan (which is now cheaper). This does not suggest that manufacturers will immediately bid up prices; prices are bid up when new money is actually bid towards the product in question. What occurs is that there is an increase in demand for the product, due to an increase in income, and graphically (as in, looking at it from a supply and demand graph) there is a shortage. This shortage causes the manufacturer to bid up prices. Note, this occurs after the American importer made his purchases with that new money.

You later write,

it seems to me as though you are missing the whole point of the exercise, and construing it as a policy accident of the prc, whereas i would maintain that the exercise is precisely one of national impoverishment, but targeted enrichment.

Believe me, I understand that you’re arguing this, but you are arguing it from the perspective that the Chinese manufacturer is not losing out on the deal. Before you continue with “this is targeted enrichment” you first have to prove your case that the Chinese manufacturer is not losing. So far, you have not been able to do that.

Finally, you write,

besides, importers always have the choice of not exporting, if margins are no longer satisfactory. that would cause mass unemployment, so the prc gives exporters a helping by keeping the currency low, stashing away us treasuries.

I’m not sure what you mean by this. In any case, like I said before, the main reason why the Chinese economy has not been visibly harm so far by this policy of currency devaluation is because the Chinese have also been simultaneously pushing down interest rates, making investments far more lucrative than they would have been otherwise. China is forming a bubble in the capital-goods market.

curious April 29, 2010 at 8:01 am

Hello, it is good to see a fellow young person actually take an interest in issues that matter.If the Chinese devalued the Yuan by printing more notes then the dollar would now be able to buy more Yuan notes however won’t this supposed ‘gain’ be offset by the price increases that would accompany this inflation?If prices rise commensurately with the money supply how can increase in the quantity of Yuan have an effect on any party?My main premise is that creating money out of thin air cannot make society wealthier.

Jonathan Finegold Catalán April 29, 2010 at 1:06 pm

Curious,

Like I suggested in responses above, inflation does not occur proportionally or immediately. Money only affects prices when it is chasing goods. After the importer has made his purchases, thereby creating a shortage, the Chinese manufacturer will bid up the price of his goods. But, by this time he has already lost out on the original exchanges with the newly printed money.

What would occur now is a change in the exchange rate, as prices are bid up. The proportion of U.S. dollars to the necessary amount of yuan to buy whatever good will return to what it was before, and the demand for yuan will fall. The Chinese have to again inflate the supply of yuan being sold for dollars, thereby stimulating demand for yuan. The process of currency pegging is continuous, and does not happen just once.

Gu Si Fang May 3, 2010 at 1:54 am

I agree that the Chinese currency manipulation is not responsible for the current problems in the U.S. Yet, I wonder what exactly this is doing to their own (Chinese) population, and what impact it has – if any – on the commercial surplus.

Here is food for thought : http://www.voxeu.org/index.php?q=node/4985

1) According to the authors, the “real exhange rate” has remained flat for a decade
2) Bank lending and market financing to private entrepreneurs is anemic
3) Bank lending and market financing to public corporations is downsizing along with them

According to another source (in French, unfortunately), the households’ savings rate is low, and it is mainly private firms that are saving to compensate for the absence of bank lending and market financing.

Does this make any sense, and how would it relate to the Chinese current surplus?

Jonathan Finegold Catalán May 3, 2010 at 7:48 pm

I don’t have time to read it all right now, but here is some commentary. The author writes,

This argument has weak foundations. What matters is the real exchange rate, not the nominal one. While the Chinese surplus has persisted for almost two decades, the real exchange rate has remained as flat as a pancake (see McKinnon 2006, Figure 3). A misaligned real exchange rate should feed domestic inflation, e.g., by increasing the demand of non-traded goods and stimulating domestic wage pressure.

I’m not sure this analysis is correct for three reasons. First, even assuming that the ‘real’ exchange rate remained flat, the Chinese still have to inflate the yuan to match U.S. inflation of the dollar; this alone would ‘feed domestic inflation’. Second, the renminbi’s money supply has been growing at an accelerating pace (I can’t find reliable statistics, except for a graph that I found through Google – most other stats and graphs end at 2005 or 2006). Third, I don’t think it is possible for real exchange rates to remain flat and the yuan still be devalued.

To elucidate my third point, imagine that the Chinese devalue the yuan to half of its original value ($1 : ¥4 to $1 : ¥8) and then end expanding the money supply. American importers, given Chinese goods are now cheaper, buy from Chinese manufacturers. This is represented by an increase in demand for yuan. An increase in demand for yuan will ultimately cause the price of the yuan (relative to the dollar) to rise on the exchange market, and so to maintain an undervalued Yuan the People’s Bank of China must continue to expand the supply of yuan.

By the way, looking at the source used in the article, their tracing of the RMB-USD exchange rate ends at 2005. It’s interesting to note, however, that China officially ended its peg in 2005. The devaluation of the yuan may be related to the central bank’s attempt to stimulate investment.

JimmyJimmington May 5, 2010 at 5:42 pm

“American importers, given Chinese goods are now cheaper, buy from Chinese manufacturers. This is represented by an increase in demand for yuan.”

Lolwut? You’re confusing quantity demanded with demand.

Cincybeck June 16, 2010 at 6:59 pm

I’m no economist, never even taken taken economy class, so I may be completely off with my opinion, but this is how I look at it. China is manipulating it’s currency, to entice foreign businesses to use their cheap labor force. American companies outsource their manufacturing to China, not with the intent to increase their Chinese market, but with the intent to import those products back to America, and sell said products at a higher profit. The problem becomes apparent when not one or two businesses do this, but hundreds do, leaving millions of Americans without jobs because they’ve been outsourced. You now have millions of Americans who are no longer consumers, because they don’t have the income to consume, and in turn hurts all American businesses, and the livelihood of all Americans citizens. Businesses that chose or could not outsource are hurt, fighting for survival, and can not afford to give it employees raises to keep up with typical inflation, further decreasing the consuming power of the American people. The U.S. government then reacts to the economic crisis borrowing trillions of dollars to try, and boost the economy, much of which is loaned from the Chinese, putting more foreign money in their pockets. From there it’s an endless cycle, and the only identity that stands to benefit is the Chinese government, using it’s people as pawns to bring in foreign money threw taxes paid from the wages paid by foreign countries and the after effect of government to government loans. Like I said I am no economist and I may be way off with this theory of mine, but I consider myself an intelligent person, and view this as a rational explanation for the economic downturn we all have suffered from.

Jonathan Finegold Catalán June 16, 2010 at 7:21 pm

Cincybeck,

Chinese inflation doesn’t necessarily make Chinese labor cheaper, although I guess that having your exports subsidized by the government is another reason to open up shop in China. On the other hand, it’s also worth considering that devaluing currency has the negative side-effect of making foreign currencies more expensive in terms of yuan. This effectively increases the price of production when manufacturers have to import capital-goods into China.

I think that independent of inflation, American manufacturers would still begin to outsource their manufacturing to China, given that Chinese labor is cheaper. I don’t think this translates into greater aggregate unemployment in the United States, as those previously employed in manufacturing jobs are integrated into other industries. Despite outsourcing, unemployment in the United States managed to remain near 5% during the boom years. Instead, increasing unemployment has more to do with wage rigidity, due to government labor policy.

Adrian Johnson June 16, 2010 at 7:55 pm

There’s another reason as well – we’re not ENTITLED to a high standard of living anymore. The days of manufacturing jobs with a poor ratio of profit to pay are going the way of the buggy-whip. We to acknowledge that we need to get more skills in industries that have a future because our fixed costs as a country are higher than others competitively.

Tracy Miller August 18, 2010 at 3:28 pm

Excellent article on China’s currency manipulation, particularly the refutation of Krugman’s position. I am planning to assign article in my international economics class.

There are two relatively minor points that you make that I think are incorrect.
1. You say “the Chinese are not purchasing American goods because American public debt has shown itself to be a much more lucrative buy. This is not true for the individual Chinese resident or even for the Chinese government (apart from recent short run appreciation of govt securities). US public debt is likely to be a losing investment over the long run. Its main benefit to the Chinese government is that it enables them to keep employment high in manufacturing export goods thereby seeming to benefit the workers and maintain their political support.
2. Unlike Chinese mercantilism which benefits Americans at Chinese expense, retaliatory mercantilism by the United States does not benefit China and hurt Americans. By raising trade barriers against Chinese goods, it is likely to harm both Americans and Chinese. It does not undo the Chinese subsidies, it lowers returns to Chinese exporters further.

Jonathan M. F. Catalán August 19, 2010 at 2:00 am

Tracy,

Good comments, and I agree wholeheartedly with the second. On the first, government bonds are generally held to be nearly riskless, which is why they are thought to make good substitutes for money (and, in turn, this is one reason why Keynesians support deficit spending). So, I don’t think that anybody necessarily believes that government bills are a losing investment over the long-run. Besides, most Chinese investments are probably rolled over, where the terms of the treasury bills are not that long, relatively speaking.

I’m not exactly sure on the exact process on the purchase of American dollars, but most dollars are probably bought by the Chinese central bank at some point. It makes sense that they invest in government bonds (which are considered less risky than private bonds, for instance), since as a bureaucracy nobody is going to buy goods to satisfy specific desires.

Julia February 22, 2011 at 7:21 am

You know, speaking of undervalued dollars. I find it interesting that the Australian government has devalued the Australian dollar I think it’s three times in the last 25 years… yet now the Aussie dollar is almost dollar for dollar to the US dollar.

Of course, Australian hasn’t devalued the dollar in order to dominate markets as some believe China is doing.. it’s simply been a matter of stabilizing the Australian Economy

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