...How China’s Currency Manipulation Affects US Economy Howe School of Technology Management Principles of Economics How China’s Currency Manipulation Affects US Economy Currency intervention is the action of one or more governments, central banks, or speculators that increases or reduces the value of a particular currency against another currency – this is according to Wikipedia. From January until October in 2010 imports from China to the United States this year were $299,026.0 million and only $72,276.2 million in exports to China, leaving a U.S. trade deficit of -226,749.8 million - this is according to the U.S Census Bureau U.S Foreign Trade Statistics. Here we can examine that Chinese imports to the United States were too high which makes U.S. Gross Domestic Profit (GDP) shrink because imports are subtracted to the Gross Domestic Profit. This trade deficit causes damage to the United States manufacturers and destroys jobs. Chinese products are very attractive because their low labor cost. When U.S. people purchase Chinese manufacturing goods, their manufactures are compensated in dollars which are placed in a United States bank account. Then, the Chinese need to exchange the dollars to Yuan and as a result via their banks they sell the dollars to the Chinese Central Bank which is known as the People’s Bank of China. Given that the U.S trade with China does not balance, the result will be a shortage of the Yuan and a surplus...
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...product that allows users to trade with globally accepted mediums. The medium is fully independent of changes seen in the financial systems such as currency fluctuations and manipulations. | The currency is a globally accepted system and presents advantages over other currency systems. It is not subject to currency fluctuations and value manipulations. | 2. Do you consider it as necessary? | Yes. Bitcoin as an innovation does away with the traditional double-entry entry system of accounts. Instead, it uses a triplicated cryptographic digitally signed receipts as evidence that a sales contract existed. | The product is in the initial stages of development. Its adoption should be supported till it has been implemented. As the world is advancing in technology, bitcoin is bringing innovations in the accounting field. This will replace the traditional form of accounting. | 3. What problems has it addressed? | The system that have been in existence has been unreliable. The currencies used such as the dollar, euro and pound were affected by shifts in the financial influences. The innovation address this issue because it is a universally accepted and secure currency system. In addition, it is void of currency fluctuation and value manipulation. | Bitcoin has addressed several problems. One of them is currency fluctuations in currencies being used. It is a universally accepted and secure system. | 4. Does it have shortcomings? | The traditional accountant...
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...In this 21st century, we have already entered into the era of post modernity and post industrialism. Today’s World is witnessing the unprecedented and unforeseen changes in every walk of life, thereby presenting a scenario of chaotic and bizarre changes. Changes in different sectors of society ranging from economy, society, politics, family and culture are so multi-directional that at the surface level, it becomes very difficult to decipher a meaningful and coherent picture from this jungle of changes. Sometimes this scenario leads one to perceive World as a dehumanizing society. But such despair is unwarranted, for it is so more because of its lack of proper management and proper knowledge about it. In fact the present day post-industrial civilization of the world calls for a drastic paradigm-shift and a new insight to bring out a meaningful and articulate picture of today’s World. The present paper is an effort in this direction. Most people think of a cashless society as something that is way off in the distant future. Unfortunately, that is simply not the case. The truth is that a cashless society is much closer than most people would ever dare to imagine. To a large degree, the transition to a cashless society is being done voluntarily. Today, only 7 per cent of all transactions in the United States are done with cash, and most of those transactions involve very small amounts of money. Just think about it for a moment. Where do you still use cash these days? If you...
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...Canada. Wal-Mart’s non-Chinese owned suppliers operating in China number nearly 5,000 and all of them benefit from a low valued yuan compared to the dollar. The 176 million worldwide customers of Wal-Mart also benefit from the low valued yuan. With nearly 70% of Wal-Mart’s products coming from China a sharp increase in the value of the yuan against the dollar can be devastating for the company as the increased costs for Wal-Mart and would most likely passed on to customers. It could also hurt American customers whom Wal-Mart claims it saves the average household roughly $2,500 dollars every year. (Peng, 2011) If you were the CEO of Wal-Mart and were preparing for a meeting with the most vocal members of the US Congress on China’s currency “manipulation”, what would you say to them? I would point out that while it may be politically easy to blame China especially when it comes to an uniformed electorate, the rise in costs associated with policies aimed at encouraging China to lets its yuan to appreciate against the dollar will do harm in other ways. Average Americans (also known as voters) will feel an appreciated yuan in their wallets. China may be an easy target, but the higher costs American consumers pay due to policies pursued by members of congress is another hot topic that potential voters will respond to. Finally increased costs means Wal-Mart will have to take actions to keep profits up to keep shareholders happy. This may mean cutting workforce which in this current...
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...Exchange Rate Manipulation China’s stock market crashed on July 9th, 2015 within just a matter of minutes, now that it is nearly three months later, how is their attempts at recovery going to affect the rest of the world? As China’s economy declines, their attempts to stop their own economic bleeding is only putting a stop to the United States economic recovery through exchange rates. Current exchange rates are will hurt the U.S. economy due to China’s devalued currency against the U.S. dollar. China’s devalue in their currency and has now has their banks allowing is to set exchange rates in line with free market practices making them more market-oriented in terms of exchange rate which is something American officials want. In April, right before the crash of China’s stock market, the U.S. Treasury Department was praising China for their recent efforts in raising their value of their currency since it was undervalued (Swanson, 2015). However, this was short-lived since just after, China’s economy fell and they devalued their already low currency even lower. For many years U.S. Congress and American businesses have said China’s currency was far too weak and China’s set rates allowed their exporters to sell off their good at artificially low prices in the world market. Due to this market force, this allows the currency to depreciate instead of appreciating, allowing Chinese products cheaper compared to American products (Wei, 2015). The Chinese central bank devalued their...
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...large quantities and gradually displaced the bezant gold coin as the major international currency, circulating throughout the Muslim world and the Christian Europe as well. The creation of dirhams and dinars is one of the blessings of Allah. They are stones having no intrinsic usufruct or utility but all human being needs them because everybody needs large number of commodities. The needs to revisit the gold dinar as a monetary stability has been voiced out by many scholars and ulama’s since 1970s. The resistance towards the interest economy could be the major motivation for the comeback of gold dinar. The prohibition of interest is not only mentioned in the Quran but the Bible and Torah. The gold prices are indeed relatively stable compared to other commodity prices, exchange rate movement and the stock market index. Manipulation of currencies and the impact toward one economy could be reduced because of the fact that gold does not inflate in value as it is a commodity and, thus has an intrinsic value. The counterfeiting would be checked if gold coin were used. By sing dinar and elimination of interest, Islamic country would have a stable currency and monetary systems, money supply growth can be expected not to overshoot growth in the real sector, thus eliminating the inflationary pressure in the economy. If all these exchange rates are eliminated by means of a single currency like...
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...1. Comment on three unethical practices that china has been accused, do you think that these practices were necessary for china’s economic survival? China has been accused of various unethical practices in a host of industries. Overall, Chinese business ethics are built on the basis of "guanxi," a fundamental principle and practice underlying the whole of the Chinese social fabric. Guanxi places relationships and the moral obligations flowing from those relationships above other considerations, including written law. It not only is accepted in China, it is regarded as a moral obligation that people who have known each other for an extended period of time and have collaborated and helped each other are obligated to continue this relationship. Guanxi defines both how business is done in China at all levels and how the Chinese view ethics. Corruption and Bribery – In Transparency International’s (TI) Corruption Perception Index 2011, China is ranked 75th out of 185 countries. This has been a consistent score since 2008. The TI Global Corruption Barometer 2010/2011 found that 46% of the 1,000 Chinese respondents felt that the level of corruption in the Country had increased and just over a third considered the Government’s actions ineffective in combating corruption. When respondents were asked “To what extent do you perceive the following institutions in this country to be affected by corruption?”, business was seen as the most corrupt institution, closely followed by political...
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...1. The Euro appreciated about 15% against the U.S. dollar from January 2008 to November 2009. What impact did this have on consumers and businesses in the U.S. and in the Eurozone area of Europe? Is a falling dollar good or bad for the U.S.? Explain. This phenomenon caused a decrease of demand of Euro zone goods in the U.S. and the international market as well as increase in demand of U.S. goods as they became cheaper compared to those of the Euro zone. Therefore, this phenomenon was good for the U.S. 2. What are the forces that might cause a currency’s value to change relative to other currencies? These are: currency appreciation/depreciation, rate manipulation, if one currency is fixed (pegged) to the value of another currency, interest rates & inflation and speculation. 3. Identify factors that contributed to the recent global financial crisis. Explain the implications of this crisis for global political economy. Some of the contributing factors where: • Global economic imbalance • US economic regulatory regime that led to a mishandling of imprudent lending practices. • Myopic ideology that promoted globalization and the ¨magic of the market¨ without accounting for market failure and the impact of lax regulatory regimes. • Unethical and illegal behavior by some individuals and companies. • Week global governance Because of the bubble created by subprime mortgages from US and the downward spiral derived from it globally the necessity to review regulation...
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...International Business & Economics Research Journal Volume 3, Number 3 Effects of Exchange Rates On International Transfer Pricing Decisions Canri Chan (E-mail: canri.chan@miis.edu), Monterey Institute of International Studies Steven P. Landry (E-mail: steve.landry@miis.edu), Monterey Institute of International Studies Terrance Jalbert (E-mail: jalbert@hawaii.edu), University of Hawaii at Hilo Abstract Events leading to the passing of the Sarbanes-Oxley Act have led to increased concern with and scrutiny of potential management manipulation of financial statements. From an agency theory perspective, managers have incentives to manipulate organizational methods and choices in order to produce financial statements that those managers believe will maximize their incentive compensation. Transfer pricing represents one possible choice that managers can manipulate. This paper investigates whether exchange rates affect transfer pricing particularly as it relates to maximizing overall corporate profitability. The effects of taxes and government regulations have been explored in considerable depth in the transfer pricing literature. However, while transfer prices should also be affected by exchange rates in predictable ways, this variable has received comparably little attention in the literature. Inclusion of exchange rates in an analysis of transfer pricing and corporate profitability presents an opportunity to add to the literature. We conducted an experiment to examine how...
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...Commercial Banks in Bulgaria under Currency Board | | | | 1997 – a crucial year for the Bulgarian banking system The real reforms in the Bulgarian banking sector started in 1997, after the introduction of the currency board in the country. Bulgaria's macroeconomic performance between the fall of communism and early 1997 was especially poor. The decent economic performance in the beginning later deteriorated into hyperinflation and negative growth of GDP. Hyperinflation reached almost 500 % in January 1997 and more than 2,000 % in March 1997. An extremely severe economic crisis began in May 1996 and reached its zenith in February 1997. The Bulgarian currency started falling and finally collapsed in February 1997 when it reached unprecedented levels of about 3000 Leva per dollar in February 1997, while foreign exchange reserves dried out. The average monthly wage plunged from over $127 in 1995 to under $25 in 1997. Currency Board Adoption The IMF started to press the Bulgarian authorities to introduce a CBA. With the worsening of the crisis by the spring of 1997, this plan was finally accepted and CBA was implemented on the 1st of July 1997 and actually brought hyperinflation down to around 5%. The Bulgarian currency was fixed to the DeutscheMark, the volume of currency circulation was linked to the hard currency reserves, and the currency board undertook the monetary policy management. A new stage of banking sector reform started: entirely new laws on BNB and commercial...
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...Economics of Bitcoins An Article Analysis Money is a driving force that makes the world go round. From the purchases of homes, vehicles, and even to the way we make a living, we cannot escape the importance of currency. Without it every economy in this world may just fall apart. In this article analysis we will look at the various functions of money, the Federal Reserve and its role in the United States (U.S.) money supply, as well as the evolution of bitcoins and its future or nonexistent future in the U.S. Economy. Money serves as three functions: medium of exchange, a store of value, and a unit of account. The most important function of money is a medium of exchange to facilitate transactions. Without money, transactions would have to use the barter system. The Barter System is the act of obtaining a good or service of equal value in exchange for a desired good or service. A store of value is a medium of exchange that must hold its value for a period of time such as land or art for example. Money is more liquid than the average store of value, due to it being accepted everywhere, in various denominations. Lastly, as a unit of account, money provides a common measure of value of goods and services being exchanged. The supplier and the purchaser of goods make decisions on how much to supply and how much to purchase by knowing the value or price of a good. [1] The two objectives of the Federal Reserve in managing the U.S. Money supply are price stability and full employment...
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...Economics of Bitcoins An Article Analysis Money is a driving force that makes the world go round. From the purchases of homes, vehicles, and even to the way we make a living, we cannot escape the importance of currency. Without it every economy in this world may just fall apart. In this article analysis we will look at the various functions of money, the Federal Reserve and its role in the United States (U.S.) money supply, as well as the evolution of bitcoins and its future or nonexistent future in the U.S. Economy. Money serves as three functions: medium of exchange, a store of value, and a unit of account. The most important function of money is a medium of exchange to facilitate transactions. Without money, transactions would have to use the barter system. The Barter System is the act of obtaining a good or service of equal value in exchange for a desired good or service. A store of value is a medium of exchange that must hold its value for a period of time such as land or art for example. Money is more liquid than the average store of value, due to it being accepted everywhere, in various denominations. Lastly, as a unit of account, money provides a common measure of value of goods and services being exchanged. The supplier and the purchaser of goods make decisions on how much to supply and how much to purchase by knowing the value or price of a good. [1] The two objectives of the Federal Reserve in managing the U.S. Money supply are price stability and full employment...
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...3.0 STRUCTURE OF THE FOREIGN EXCHANGE MARKET 3.1 Overview of the Local Foreign Exchange Market In 1993 Trinidad and Tobago shifted from a fixed exchange rate regime to that which is referred to as Managed Floating Rate, whereby the par value of the Domestic Currency in terms of the Foreign Currency is based on the prevailing market rates. An emphasis is placed on defending the stability of TT/US Rate in order to promote exports and consumption. The dollar appreciates or depreciates in response to changes in demand and supply conditions in the foreign exchange market and intervention policy by the Central Bank seeks to manage these fluctuations by effecting a systematic approach to achieving a rate that is aligned to our country’s future economic goals. This System encompasses a Two Tier System as follows: • Tier 1: US Supply from Three Large Energy Companies Namely Petrotrin, NGC and PCS Nitrogen Allocated to commercial banks based on market share. • Tier 2: US Dollars from other energy companies and exporters would be allocated among commercial banks according to Market Share. • An Intervention System: In order to maintain stability and confidence and to prevent high exchange rate volatility in the market, the CBTT intervenes to meet the shortfall of Demand and Supply. Intervention system for Foreign Exchange is distributed to authorized dealers (see appendix 1) in the following ways: 1) Non-competitive Sale based on Market Share 2) Auction Sale with a price Cap In...
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...(iv) Your country is in a recession. You feel that a policy of exchange rate depreciation will stimulate aggregate demand and bring the country out of the recession. This essay examines the effectiveness of using exchange rate depreciation to stimulate aggregate demand in order to bring a fictional country, Australand, out of recession. It will explain how a policy of exchange rate depreciation can increase aggregate demand and how this will stimulate economic activity and bring Australand out of recession. The process of depreciating the currency will be explained as well as possible ramifications of this policy. Alternative options to increase aggregate demand will also be explored. A recession is technically when an economy has experienced two successive quarters of negative gross domestic product (GDP) growth. For this to happen the total amount of goods and services produced by a country must contract on a quarter by quarter basis for six months or more. (http://news.bbc.co.uk/2/hi/business/7495340.stm) It therefore stands to reason that by increasing the total amount of goods and services Australand produces, known as aggregate output, will bring Australand out of recession. Blanchard and Sheen (2009 p39) state that in the short run the main determinent of aggregate output is demand and that changes in demand can lead to an increase in output. Aggregate demand is the total quantity demanded for output at a given price level and it is therefore necessary to...
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... Exchange Rate Exchange rate between two currencies is the rate at which one currency will be exchanged for another. How to calculate exchange rate Each country manages the value of its currency through varying mechanisms. The currency can either be free-floating or fixed. 1. Movable or Adjusted Peg System A system of fixed exchange rates, but with a provision for the revaluation (usually devaluation) of a currency. E.g. Between 1994 and 2005, the Chinese Yuan renminbi (RMB) was pegged to the United States dollar at RMB 8.2768 to $1. 2. Free Floating System In this system the exchange rate is allowed to vary against that of other currencies. It is...
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