Posted Aug 6, 2019 by Martin Armstrong
We are clearly cascading toward the Monetary Crisis Cycle as the USA wrong accuses China of manipulating its currency for trade advantages. All one needs do is look at the trend of the dollar against other major world currencies and you will quickly see that the trend of the dollar against the yuan is in line with the global trend. This is the problem we face when politicians simply follow the academic view of currencies when they are still teaching Keynesianism based upon fixed exchange rates. About 80% of China’s trade is with the rest of the world other than the United States. One does not lower its currency to impact 20% of its trade at the expense of the rest of the world.
I have written before that I was asked if I would teach at one of the top 10 universities in the world. I was surprised, to say the least. When I asked why would they even ask me the response was even more shocking. They actually said to me over lunch that they “knew” what they were teaching was wrong!. They also said the problem they face is those who have real-world experience are NOT INTERESTED in teaching classes in school. I said I would be glad to do a guest lecture, but I too had no interest in teaching a class every day.
Cina has been doing the exact opposite of what the US is accusing it. They have been supporting their currency and if they stopped and allowed it to float freely, then the US would witness probable new record highs in the dollar which will bring about the crisis we see coming by 2021.
I do not know what it is going to take to get governments to stop this nonsense over currencies. If the dollar was declining against all major currencies and China devalued the yuan counter-global-trend, then there would be an argument. But that is just not the case.
The yuan has been under pressure also because the yuan is too expensive within Asia and manufacture has been migrating to South East Asia. China has become the world’s second-largest economy by GDP (Nominal) and largest by GDP (PPP). When we look at the trade between the USA and China, we must look at goods v services.
- The U.S. goods trade deficit with China was $419.2 billion in 2018, an 11.6% increase ($43.6 billion) over 2017.
- The United States has a services trade surplus of an estimated $41 billion with China in 2018, up 0.8% from 2017.
Yes, we are one of the few rare services who publish our forecasting in China. We fall into the Services Catagory. About 80% of China’s trade is with the rest of the world other than the United States.
- United States: US$479.7 billion (19.2% of total Chinese exports)
- Hong Kong: $303 billion (12.1%)
- Japan: $147.2 billion (5.9%)
- South Korea: $109 billion (4.4%)
- Vietnam: $84 billion (3.4%)
- Germany: $77.9 billion (3.1%)
- India: $76.9 billion (3.1%)
- Netherlands: $73.1 billion (2.9%)