Surely all these stories are directly related?
Obama urged to act on China’s currency manipulation
Ok, so according to the US government, China is manipulating their currency, that is, devaluing it to make their exports cheaper than they should be. Now I’m not at all convinced that China is doing this, because they have an interest rate of 5.31% and an inflation rate of 3.5%. That is not at all high for a country with such large GDP growth. From what I understand, a devalued currency should push up exports, and hence impact inflation and interest rates rather strongly. But maybe something else is going on as well, in any event, the US is determined to accuse China of currency manipulation. Probably because of this next story…
US trade deficit with China balloons to new record
So, the US trade deficit reaches it’s highest ever at 46.3 billion for the month of August, due to a jump in imports and no change in exports. And 28 billion of that deficit, is trade with China! So the US has every motivation to encourage China to increase the value of their currency. And China has flatly refused saying the US should not blame China for the US’s economic problems. So what is the US to do now? Probably the next story is the answer.
Bernanke signals Fed poised to further boost economy