Global Crisis Blog

If You Were America, When Would You Have Sounded the Alarm?

By Shlomo Maital







China: Total Forex Reserve $ Holdings

Suppose you, Joe Citizen, were in charge of America,  USA Ltd.  You are trading with a growing emerging nation, China.  You become aware that the Chinese are manipulating their currency, by massive purchases of U.S. dollars, to keep their renminbi exchange rate undervalued, making their exports very cheap for Americans paying in dollars and your, America’s, exports, very expensive for them.   

   Now, the Chinese do this openly.  You cannot buy huge amounts of U.S. Treasury bonds in secret.  And unlike many other things, they openly disclose their holdings of U.S. dollar assets, every month.  The above graph shows  China’s U.S. dollar reserve holdings, dating back to 1994.

Now, here is the $64 trillion question.  Viewing this graph, which you Joe Citizen religiously track, monthly,  when would you become alarmed that China was screwing you, USA Ltd.?  When would you sense that they are manipulating the exchange rate?  In 2004?  2006?  2008, when reserves reached $1.5 trillion? 

   When did America itself raise the alarm?  Indeed, have they?   When would an ordinary person, seeing this graph, raise hell about currency manipulation?  And why indeed is Clyde Prestowitz absolutely correct, when he titled his latest book The Betrayal of American Prosperity?