The Yuan and the U.S. Government

The U.S. government has a lot to do with worldwide currency values. Most folks don’t see the influence, but it is unmistakable. For instance, look at the Chinese currency. The U.S. Senate currently has a bill up for vote that would impose a tariff on Chinese currency trades. This would ensure that the Chinese currency will stay undervalued. This is beneficial to the U.S. because it keeps Chinese goods and labor much cheaper than if it was allowed to grow naturally. Even if the market demands that the Chinese currency rise in value, there is little that China can do as far as growth if there is a steep tax on the currency when it is exchanged within the U.S.

This sounds manipulative, but it is one of the key features of the U.S. government in action. A while ago, the Chinese yuan was linked to the U.S. dollar in a direct manner. Since then, China’s government has loosened its rigidity in regards to marching in step with the dollar. Still, the yuan has been moving in a manner that is not beneficial to the U.S. economy. Senators have argued that the undervaluation of the yuan has given China an unfair advantage and has taken away American jobs. This makes U.S. government interference appropriate as the U.S. has a high unemployment rate tight now. If this proposed bill really will help the U.S. economy, it is a good idea as this will begin to shift the balance of trade back in the U.S.’s direction.

By: Tom’s EA