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Yes, we stumbled into it.

However, US apparently has a definition that since 2015 no longer demands intent. From Eurointelligence:

A currency manipulator is not what you think it is

A difficulty often encountered in policy discussions is that technical terms have precise meanings that don't necessarily agree with the ordinary language meanings of the words. A case in point is the current brouhaha about Donald Trump's chief trade adviser calling Germany a currency manipulator. The fact is that last year the US senate passed a "customs bill" (the Trade Enforcement and Facilitation Act of 2015), which required the US Treasury to draft criteria defining a country as a "currency manipulator". The criteria developed by the US Treasury under Barack Obama are that, over the previous 12 months, the country:

   * is a "major trading partner" of the US, meaning having at least $55bn of bilateral trade;
   * runs a "significant trade surplus" with the US, meaning more than $20bn;
   * runs a "material" global current account surplus, meaning more than 3 percent of the country's GDP;
   * intervenes in a "persistent and one-sided" way in the FX market, meaning making foreign exchange purchases of more than 2 percent of the country's GDP;

A requirement to act against trade partners that manipulate the currency has been on the books in the US since 1988, but the US treasury was able to wiggle out of it before by claiming - rightly - that it was impossible to ascertain the intentions of a foreign government. Defining the concept of manipulation by means of quantitative criteria gets around this. It also makes protestations against Peter Navarro's suggestion that Germany is manipulating the currency mostly moot, unless they address these quantitative criteria.

Assuming that the Trump administration follows through on this and determines that Germany does meet all of the above criteria, making it a currency manipulator, what actions can Germany look forward to on the part of the US? First, the US government should "engage" the trading partner labelled a currency manipulator, meaning the US would urge the country to implement policies to revalue its currency, reduce its bilateral trade surplus and its current account surplus. If a year after the start of this "engagement" the country is seen to have failed to adopt corrective policies, then the US government would be required to take the following actions:

   * halt new investment in the country by the US' Overseas Private Investment Corporation;
   * generally prevent the US government from procuring goods or services from the country;
   * ask the IMF to investigate the country's macroeconomic policies;
   * take into account the alleged currency manipulation when negotiating trade agreements.

While one could have expected the Obama administration or a successor administration led by a mainstream Democrat or Republican to use the discretion allowed under the customs bill to avoid what could potentially escalate into a trade war with a major trading partner, it is at least plausible if not likely that the Trump administration will rather use any available excuse to restrict trade and investment with Germany - or, for that matter, with China.

by fjallstrom on Fri Feb 3rd, 2017 at 08:27:52 AM EST
[ Parent ]
China? I thought they were selling foreign reserves these days, to preserve the Yuan.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Fri Feb 3rd, 2017 at 09:22:00 AM EST
[ Parent ]
I think China was mentioned as country for trade war, with any flimsy excuse, currency manipulation or other.

I must admit, I don't have a good grasp of what currencies countries are trading. I mean China is running a current account surplus. But I guess you mean that they are using their already established USD stockpiles to buy back Yuan, which of course they can do at the same time.

by fjallstrom on Fri Feb 3rd, 2017 at 10:32:33 AM EST
[ Parent ]
I was referring to that:
* intervenes in a "persistent and one-sided" way in the FX market, meaning making foreign exchange purchases of more than 2 percent of the country's GDP;

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Fri Feb 3rd, 2017 at 11:08:41 AM EST
[ Parent ]
Back to Germany. Does Germany fit that criteria?

(It fits the three others.)

by fjallstrom on Fri Feb 3rd, 2017 at 05:45:23 PM EST
[ Parent ]
I believe so

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sat Feb 4th, 2017 at 07:54:07 AM EST
[ Parent ]
Could you elaborate?
I don't see the mechanism for doing so, especially through the ECB who's sharply criticized for "endangering the saver's money".
by Bernard on Sat Feb 4th, 2017 at 09:57:38 AM EST
[ Parent ]
I did not mean through the ECB.
But Germany has to recycle its surplus. Investments abroad would involve foreign exchange transactions.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sat Feb 4th, 2017 at 11:00:10 AM EST
[ Parent ]
I don't read the definition to include FDI, only open market purchases of foreign currency by the foreign currency reserve.

If the definition is as broad as you read it, it's completely redundant because surpluses must be recycled by accounting identity. So anybody who fits the foreign surplus criterion would automatically, by accounting identity, fit that broader interpretation of the foreign currency purchasing criterion.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 4th, 2017 at 11:14:17 AM EST
[ Parent ]
I don't see how it can. "Germany" doesn't make FX purchases in the open market, so far as I know. The ECBuBa might, but you can't distinguish a particular German FX flow in that. Also, the ECBuBa has some very valid reasons to buy USD, after it got caught with its pants down during the last almost-collapse of the eurodollar funds and had to be bailed out by the Fed. It would be irresponsible not to maintain a much larger prudential dollar reserve than it was doing pre-crisis.

None of which is to say that Germany isn't a currency manipulator, just that the definition doesn't really parse for individual members of a currency union. I'd argue that Germany in fact is a currency manipulator, and the whole point of the €-Mark, as the Germans saw it, was to be able to do such manipulations without buying foreign currency in the open market to support it, something the Germans have a sentimental aversion to.

But I also have very little sympathy for the Americans' whining about other countries' currency policies. The Americans are free to discount the dollar at any time; they do not need permission from the ECBuBa or the PBC to do so. But they don't want to do that, because the tribute they collect from the colonies is settled in USD, so doing the obvious, easy thing to counter BuBa or PBC shenanigans (real or perceived) would reduce the value of incoming tribute flows. So instead they posture and try to browbeat other people into subordinating their currency policy to the US (even further than is already the case).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 4th, 2017 at 11:09:59 AM EST
[ Parent ]
We've been writing intent out of our criminal laws, especially at the federal level, for over 20 years now.  Makes it easier to feed the Prison Industrial Complex.
by rifek on Fri Feb 3rd, 2017 at 10:34:48 PM EST
[ Parent ]

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