Have you ever wondered how a corporation like General Motors is on the verge of closure or why Delphi has declared bankruptcy? Is it the competition from Japan or China that is leading to this state of affairs or is there is a hidden reason that does not meet the naked eye?
The auto industry in the US contributes nearly 4% to the GDP. The industry has lost over 200,000 jobs since 2000 and nearly 2.5 million other manufacturing jobs have been lost since 2001. In effect, these jobs are flying to other pats of the world, which have taken over the supply of these manufactured products.
If this had happened in a fairly and squarely, it is acceptable as the US has created more jobs in the services sector. However, these happenings can be linked to a phenomenon called currency manipulation and the two main culprits are the second and third largest economies in the world ie. Japan and China.
Japan and China have kept their currencies highly undervalued so that their exports are priced relatively cheaper as compared to domestic manufacturing products in the US. Japan has spent over $420 million in the last five years to keep the value of the Yen artificially low. It has been estimated that Japan’s currency is nearly 36% undervalued as compared to the US dollar. This implies that a car imported from Japan for $20,000 has a hidden subsidy of $2,400 to $7000, to the disadvantage of US auto manufacturers.
China on the other hand, has fixed the value of its currency through a governmental diktat. Its currency is undervalued at 15% to 40% giving its manufacturing sector a huge unfair advantage over America’s industry.
Thus currency manipulation by other nations is hurting theUS economy substantially and the government needs to take action and force these countries to revalue their currencies.
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