Cost of currency manipulation plain to see, says Finansium CEO Henrik Ekenberg
Henrik Ekenberg, CEO of Swedish foreign exchange portfolio manager Finansium, has said in the company’s latest monthly newsletter that the currency manipulation is threatening US recovery.
February was a month when Japan continued to manipulate the yen, to keep the value of the currency down, as they did on several occasions during 2012.
Historically, China has been a major currency manipulator, but over the past few years it has reduced its manipulation to a large extent. But, other countries have stepped up in their manipulation – Switzerland was the biggest currency manipulator in 2012.
The world is a closed system and one country’s trade surplus is another country’s trade deficit.
We estimate that excessive purchases of foreign currency by governments in recent years have widened the US trade deficit by $200bn to $500bn per year, with millions of jobs lost. Prior to the ‘Great Recession’, the Federal Reserve was able to offset the job losses by keeping interest rates low and thus encouraging employment in other sectors such as housing. But, the Fed is either unable or unwilling to offset the job losses fully now, and unemployment is expected to remain above normal for at least the next few years.
A significant narrowing of the US trade deficit is about the only option left to return the US economy to full employment in the near future. Put in this light, the cost of foreign currency manipulation is clear.