Thursday, October 6, 2011

China Currency Bill will Backfire.

A Senate bill that aims to restore American jobs by punishing China for its undervalued currency may resonate with a frustrated American public, but it won't work.

In fact, instead creating jobs, the bill is more likely to trigger a damaging trade war with China and increase retail prices for Americans - further hurting the consumer spending that has already been undermined by high unemployment.

"This move is idiotic on so many fronts, I don't know whether to laugh or cry," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. 

The Chinese have already threatened to retaliate, and Fitz-Gerald says there are three other reasons why China currency the bill will backfire:

  • Tariffs on Chinese goods will raise prices for consumers in the United States, particularly at such retailers as Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT).
  • China holds $3.2 trillion in foreign reserves, much of it in U.S. securities, while U.S. national debt is over $14.7 trillion.
  • And China's exports to the United States account for only 4.8% of the country's gross domestic product (GDP).

Courtesy:
http://moneymorning.com/2011/10/06/three-reasons-the-china-currency-bill-will-backfire/?moneymorning_subscribe=complete/

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