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PeakTrader said...

The U.S. hasn't been a currency manipulator, until recently. The depreciation of the dollar is a mechanism to help correct global imbalances.

However, Obama wants to double U.S. exports in five years, or provide the illusion of prosperity by making Americans work for foreigners:

Why Fed bond-buying plan is raising trade tensions
November 11, 2010

Joseph Gagnon, a former Fed official and now senior fellow at the Peterson Institute for International Economics, calls the charge that the U.S. is manipulating the dollar "outrageous." He notes that China and other exporting nations have been buying dollars and each other's currencies to keep their own artificially low - a tactic the U.S. hasn't taken.

The acrimony over currencies and trade reflects global pressures that might be hitting a breaking point. For too long, many economists say, China, Germany and other big exporters have depended on U.S. consumers, instead of their own, to buy their goods and power their economies.

A weaker dollar "topples their entire strategy of relying on exports rather than internal reforms to fix the problems that ail them," says Diane Swonk, chief economist at Mesirow Financial.

Economies like Germany and China, which have ridden a wave of exports out of the recession, complain that the Fed's main goal is to lower the dollar's value to give U.S. exporters an unfair price advantage.

In September, the U.S. trade deficit with China amounted to $27.8 billion. That's just short of August's record high. And it exceeds the U.S. trade gap with the rest of the world combined.

And the broadest measure of trade - the current account trade deficit - will reach 3.2 percent of U.S. gross domestic product in 2010, up from 2.7 percent in 2009, TD Economics forecasts. The current account gap includes not only goods and services but also investment flows between countries. By contrast, TD expects current account surpluses of 4.7 percent of economic output in China and 6.1 percent in Germany.