After years of speculation, China has finally dropped its peg to US dollar. The pegged value of the RMB or Yuan has been adjusted to 8.11 from 8.31. This humble revaluation of 2.5% will for the most part do little to ease the United States’ trade deficit. It does however have significant political and market implications. Most US Senators feel that the revaluation move was too small and that China needs to allow the currency to increase in value, especially since 2.5% pales in comparison to the RMB’s predicted undervaluation of 30-40%.
Moreover, China was still artificially devaluating its currency to sustain its trade surplus, and increasing unnecessary tax cut/incentives on a large number of goods to encourage the exports to be more competitive in pricing. China’s policies were the great indicators that it did not display enough effort to show its global leadership role. After the financial crisis, large countries, including China, faced a decline in foreign demand. China, as the world’s largest producer, faced dramatic production decrease during the 2008 recession. In addition to this, domestic slow down in construction, decline in real estate sales and investments, soaring prices and low domestic demand caused major trouble in China.
President Bush’s tax cut plan if done correctly will help greatly to get the US economy to increase its growth. So is the United States in a recession? The answer is no it isn’t. The US has had a period of sluggish growth, but still it has been positive. The economy will have to grow at a negative rate over the next two quarters in order for the US to be in a recession.
In the month of June, 2010, U.S. steel prices fell despite stable prices for several previous months. Steel producers are now responding to the price drop by cutting back on production. Matthews notes that U.S. steel mills had increased their production earlier in the year because they had anticipated an increase in demand during the economic recovery. U.S. steel mills were operating at about 72% capacity in June, which was an increase of eight percentage points from the beginning of the year. Consumers have not been quick to purchase expensive goods that are made from steel, such as automobiles and appliances.
As well as this, China has had historically low levels of unemployment, thus, a trend of increasing unemployment levels indicates a worsening situation. We can see the extent to which the impacts of globalisation have had on China, through historical unemployment statistics. In 2009, unemployment reached a 30 year high of 5.4% reflecting the impacts of the Global Financial Crisis and highlighting that China is now increasingly exposed to external shocks. The movement away from labour intensive industries (i.e. manufacturing and agriculture) and the effort towards service based industries, due to the process of
Franklin D. Roosevelt scorned and worked against the minority in the 1920’s that had such a powerful influence over the majority of the country at that time (Sachs). However the economic and political factors differ today from 1920’s. China and globalization add even more challenges to solving the economic crisis at hand (Sachs). In the present economy, “profits are being earned, and kept, abroad” (Sachs, 2011, p. 30). In the U. S. workers are losing jobs as more and more companies are moving operations off shore, these workers also must compete with higher educated individuals and oversea workers for jobs, while manufacturing and other low skill jobs continue to shrink (Sachs).
Job loss has risen as reforms are implemented; displaced workers usually lack the skills required for employment in other industries. This leads to a growth in the rate of structurally unemployed. Reforms will also increase inequalities in income distribution; workers relying on safety net wage rises will be disadvantaged to those who have formal agreements. The government is concerned about these factors but believe that MER was not designed to fix social issues. They believe its function is to improve productivity in key industries that will benefit the economy as a whole.
during the last financial crisis (here: economic growth numbers hit the decline stage in 2007), especially to be noticed in the year 2009 in the displayed graph, people feel more reluctant to invest their money and tend to hold on to their limited financial assets. Therefore the government increased China’s money supply drastically, which explains the money growth peak of 2009 (28.42%). By increasing and decreasing the money supply China’s government attempts to control the economy. If the growth of the money supply is slowed too much, the economy will slow as well. In times of economic troubles an increase of the money supply intends to stimulate the economy with additional liquid assets.
This is seen as a threat because inflation has the ability to impact price levels in the country, which could potentially slowdown economic growth. * Despite the massive growth of the third quarter of last year, capacity utilization in the U.S. barely nudged up, from 72.4 percent to 72.6 percent. Capitalists therefore have little reason to build new factories and expand the system for years, keeping job growth substandard for a long time. Throughout this cycle, there will be the continuing shift of high-wage jobs in manufacturing to China and in services to India and elsewhere.
This is basically saying that they are worried for the country on how it will handle the millions being laid off. Will it be like the great depression all over again? That’s what people are worried about. The bad part is the government doesn’t seem to be doing anything about the problem. They are the only way out of this mess, and they aren’... ... middle of paper ... ...try owes other countries like China so much money and it only just rising.