“CHINA HAS NO RESPECT FOR OBAMA”
|| By FITSNEWS || GOP presidential frontrunner Donald Trump – who has mercilessly ripped U.S. president Barack Obama‘s crony capitalist Asian trade deal – is now slamming the vacationing chief executive in the aftermath of China’s latest currency devaluation.
“(China) continuously cuts their currency, they devalue their currency,” Trump said during a campaign speech in Michigan. “They’ve been doing this for years – this isn’t just starting.”
According to Trump, China’s monetary manipulation – which artificially lowers prices on its exports (and reduces profits for companies selling within its borders) – makes it “absolutely impossible for the United States to compete.”
“China has no respect for President Obama whatsoever – whatsoever,” Trump said. “They think we’re run by a bunch of idiots, and what’s going on with China, it’s unbelievable.”
The People’s Bank of China (PBOC) set its official guidance rate for the yuan – its official currency – at 6.2298 per U.S. dollar this week, the lowest level it’s been in three years. The two percent devaluation was also the largest single depreciation since 1994 – when China ostensibly pegged its currency to the market.
Its goal? To kickstart a sluggish economy by making its exports less expensive for foreign buyers. Oh, and if you believe the Chinese spin, to introduce a new system of exchange rate management which will allow the yuan to trade more freely in the global currency marketplace.
The problem? China’s move could kickstart a global “race to the bottom,” with countries like India and Russia devaluing their currencies in response.
“This is the start of something big, something ugly,” economist Albert Edwards told The (U.K.) Guardian, saying the Chinese devaluation would send “a tidal wave of deflation” breaking over the global economy.
The move also complicates the secretive U.S. central bank’s desire to raise interest rates – which have been set at zero since December 2008.
The Federal Reserve had hoped to raise interest rates in September – even though job and wage growth have fallen well short of their expectations. But China’s move makes it less likely this rate hike will happen. And if it does, it would only strengthen the existing headwinds against American manufacturers.