The Largest Currency Manipulation Country Is, in Fact, the US

The Federal Reserve held a monetary policy meeting on September 12 and 13 (GMT-8). The market has predicted that the Fed will announce its third-round quantitative easing (Q3) policies, which has resulted in the decline of the U.S. dollar exchange rate in the past two days. Up until today, in the last half month, the U.S. dollar exchange rate has been experiencing dramatic ups and downs, which has also caused price fluctuations in the global financial and raw materials market. All these market activities are merely results of some news released by the Fed.

Just three days ago, the U.S. dollar started to rebound from a four-month low. The U.S. dollar rebound was caused by the media saying that the Fed will release polices that are in favor of an economic rebound.

Ten days prior to the rebound, the U.S. dollar suffered a severe fall following the speech given by Ben Bernanke at the Global Central Bank Conference—he said that QE3 wouldn’t be easily used; however, the Fed “would never give it up” and “would use it at any moment.” His suspenseful speech gave the global market a shock. The exchange market, stock market, oil market, and gold market all started to make adjustments.

Before Bernanke’s speech, the U.S. announced a series of positive economic data, which signals that the U.S. just experienced a wave of significant economic rise.

In just a two-week period, market performance went through a roller-coaster ride that overwhelmed all passengers. This made people suspicious: not only because the U.S. dollar economic data seemed strange, which made American people unable to judge the situation of the American economy, but also because of the fact that the Fed would cry out loud to easy monetary policy when the dollar value is high and declare that the economy has a bright future when the dollar value is low—are these only coincidences?

If we look back to earlier times, it is not difficult to discover that such a technique has been continuously and consistently used for a long time. Especially after the 2008 financial crisis, the U.S. dollar exchange rate has been fluctuating around the two topics of “whether the U.S. economy will recover” and “whether QE3 will be released.” The dollars have been following a desired exchange rate that leads the U.S. economy to recover while global investors scratch their heads and try to figure out the directions of the market.

In fact, the U.S. government and the Fed are not using policies; rather they are using psychological effects through market prediction to realize their tight control over the U.S. dollar exchange rate.

Such control is inseparable from U.S. interests. On the one hand, after World War II, the U.S. dollar helped the U.S. to establish a solid foundation in the world economy, finance and politics. Any doubt against the U.S. dollar hits at America’s economic roots, which is intolerant for America; therefore, the U.S. dollar cannot depreciate. On the other hand, appreciation of a country’s currency can inevitably hit heavily on industries like manufacturing, export, tourism, etc. To achieve economic recovery, of course America does not want to see its dollar appreciate.

If the Fed does dramatic policy adjustments like easing monetary policies, the side effect that follows cannot be overlooked. Besides, the international credit concerns caused by printing money would shake the dollar’s sturdy position. Thus, the U.S. decided not to fight its exchange rate with a sword but with Tai Chi. This is the reason why Bernanke decided not to release the Fed’s QE3 polices even when the economic data was gloomy. When the economic data cheered up and the market cooled down for QE3, the Fed, however, ignited the market’s hope of QE3. The U.S. uses the release of dazzling economic indicators to make the world’s economists fail; it uses ambiguous policy predictions to disturb organizational analysts’ thoughts.

Behind the anti-RMB policies and the attempts to categorize China into “Currency Manipulation Countries” lies the U.S.’s own economic and political gains. Its vain attempts at currency control have the same goal of protecting its own interests. The largest currency manipulation country is not some other country, but the U.S. itself.

The author is chief economist of the China National Gold Group Corporation.