Since 1994, the Treasury Department has not cited a single country for currency manipulation. Japan, however, was estimated in 2006 alone to have a current account surplus of $167 billion and a bilateral trade surplus with the U.S. that exceeded $88 billion. Strong evidence exists that Japan has manipulated its currency in order to facilitate an export-led growth strategy, to the detriment of the United States economy. Although Japan ceased direct currency interventions in 2004, its government has engaged in verbal interventions in order to keep the value of the yen artificially low. Additionally, it has encouraged banks and pension funds to buy great numbers of U.S. treasury bonds. This, in combination with historically low Japanese interest rates, and other practices artificially decreases the yen's value.Read the rest if you want, but I will spare you further agony if you too find fault with his arguments. Next, here are more details from Reuters on the "super-hearing" held to contemplate currency manipulation:
Senior Democrats in the U.S. House of Representatives vowed on Wednesday to pass legislation aimed at protecting American jobs by pressuring China and Japan to raise the value of their currencies.Lastly, here is a US Treasury official feigning "frustration" while remaining non-committal on declaring either of these countries as currency manipulators:"What we want to do is find the most effective way to not only send a message, but to bring about action," House Trade Subcommittee Chairman Sander Levin, a Michigan Democrat, told reporters. "We're looking at a variety of options."
Levin presided over an unusual joint hearing that brought together lawmakers from three separate House panels -- the Ways and Means subcommittee on Trade, the Financial Services subcommittee on Domestic and International Monetary Policy, Trade and Technology, and the Energy and Commerce subcommittee on Trade and Consumer Protection.
Senior lawmakers said it was the first such hearing they could recall and a sign of the widespread concern in Congress about the perceived unfair advantage that Chinese and Japanese currency practices give exporters in those countries.
The Bush administration is "totally frustrated" with the slow pace of China's currency reform, but still does not believe Beijing is controlling its currency to gain a competitive trade advantage, a U.S. Treasury official said Wednesday."We're totally frustrated with the pace of reform in China," Mark Sobel, deputy assistant Treasury secretary for international monetary and financial policy, said during a House of Representatives hearing on currency issues.
Sobel also told lawmakers the Treasury Department will issue its next semi-annual report on foreign currency practices after a high-level May 22-24 meeting with Chinese officials.
He declined to say whether the Bush administration would change past practice and formally label China as a currency manipulator in that report. However, he said the Treasury Department still does not believe China's currency policies are driven by a desire to gain a trade advantage.
I foresee matters coming to a head: Democrats will definitely push for more action--possibly the long-rumored veto-proof legislation against China--should Treasury again decline to label China a currency manipulator. By the way, did you notice the yuan break through 7.70 recently? Coincidence? I think not.
