Lawrence Summers: By naming China a currency manipulator, Mnuchin has damaged his credibility

[Eugene]

Source: Washington Post

By naming China a currency manipulator, Mnuchin has damaged his credibility

By Lawrence H. Summers August 6 at 10:45 AM

Treasury Secretary Steven Mnuchin on Monday named China a currency manipulator — the first manipulation designation in a generation — and said he would ask the International Monetary Fund to intervene. Mnuchin made clear he was doing President Trump’s bidding after the Chinese central bank allowed its currency to decline by more than 2 percent below the psychologically important level of seven yuan, or renminbi, to the dollar.

Currency manipulation is an important issue and has been recognized as such by the international community. When a country intervenes in the foreign-exchange market to depress its currency so as to promote exports and discourage imports, something equivalent to imposing tariffs on imports and providing subsidies to exports is happening. This is especially of concern when, as in the case of countries previously deemed manipulators, a country is running a substantial trade surplus.

China does not come close to fitting this template. Over the past eight years, it has reduced its trade surplus from more than 8 percent of GDP to essentially zero in response to U.S. pressure. Its interventions in currency markets over the past several years have been to prop up its currency rather than to drive it down. And the move down in the yuan on Monday was not artificial — it was an entirely natural market response to newly imposed U.S. tariffs. Without some mercantile advantage, and with ongoing efforts to prop up the exchange rate and so raise export prices and reduce import prices, there is no credible manipulation claim here.

By labeling as Chinese currency manipulation an exchange-rate move that was obviously a natural response to his boss’s policies, the secretary has damaged his credibility and that of his office. It will be harder now in the next difficult financial moment for Treasury Department pronouncements to be credited by market participants. Having seen the United States label China a manipulator, the world will wonder whether and how the United States will get China to change its exchange-rate policies. If Chinese policies do not change, we will have only demonstrated our impotence to China and the world. Why is that desirable?

Further, the president’s flailing bluster, in which the treasury secretary is now a full participant, risks real economic damage as businesses and consumers become fearful and hold off on spending. ...

-snip-

Read more: https://www.washingtonpost.com/opinions/2019/08/06/by-naming-china-currency-manipulator-mnuchin-has-damaged-his-credibility/

[Skittles]

1. LOL, agreeing to pimp for Trump damages your credibility

[SamKnause]

2. Did he ever have credibility ???

[BigmanPigman]

3. No, never.

Likely never will either. People don't change.

[Wellstone ruled]

4. Watched Larry Summers interview

this AM. Interesting how he was extremely cautious in his descriptive phrases cutting to the chase about the Currency Manipulation false narrative.

He did in a round about way,say that Trump and Mnuchin have poisoned any and all possible trade issues. After this interview,a person with Knowledge of how this will play out said,Trump will have to cave to the demands of China. He has crossed a unwritten line when it comes to any Trade Deals or any Currency related issues.

And that same Lady said,those lost Markets are gone to never return until Trump is gone.

[dlk]

5. What Credibility?

[grumpyduck]

6. Yeah, like he ever had any.

He was just another commodity for the MSM to get ad time.