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Pages:
1 page/≈275 words
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APA
Subject:
Business & Marketing
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English (U.S.)
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MS Word
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Topic:

Stocks and Bonds

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Please write one page.
Please Write on a graduate level and give reasoning
Please use APA style.
Please use two references both can chosen from the reference on the background page that I will attach. References must have website URLs so they can be verified easily. 
Please discuss the following:
Stocks and Bonds
Prior to the financial crisis in 2007/2008, the U.S. Treasury Department as well as Congress had been asking China to revalue upwards the value of their Renminbi or Yuan. China responded to these repeated requests by allowing the Yuan to trade within a narrow band. The band itself was then shifted upwards or downwards by small increments from time to time. Still, the U.S. claimed that China had not done enough and should raise the value of the Yuan by at least a further 20%. The reasons given to justify this requested increase were as follows:
The artificially low value of the Yuan makes U.S. manufactured exports unattractively priced in China.
The undervalued Yuan leads to excessive U.S. imports of Chinese-made goods, which in turn, leads to an unwelcome trade balance in China's favor. For example, the trade deficit with China was roughly -$258,506.0 million in year 2007. These numbers shrunk further during 2009 as recession hit the global economy. In year 2011, the trade deficit with China was roughly -295,456.5 million (http://www(dot)census(dot)gov/foreign-trade/balance/c5700.html).
China chose to change their 'floating' arrangement and pegged the Yuan to the USD at a rate they selected. China holds such a large investment in U.S. Treasuries as a result of the continuing U.S. trade surpluses that the U.S. does not have a great deal of leverage. If China sold those Treasuries the U.S. dollar would fall significantly in value.
Discuss the issues involved with pegging or floating the Yuan to the US dollar.
Please give reasoning.

Other (Not Listed) Sample Content Preview:

Stocks and Bonds
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Stocks and Bonds
Since 1994, China has pegged its Yuan currency to the US dollar. The peg was removed in 2005, which allowed a revaluation. Nonetheless, the Yuan has had its influence on global export’s exchange rates (Frankel, 2005). This is the reason why China possess a huge surplus in trading and an accumulated foreign exchange of 4trillion US dollars as its reserve. It is notable that the central bank has a duty of printing more Yuans to counter the effect Yuans have on dollars. It follows that the number of dollars flowing in the economy will reduce if the printing is permitted. It is also critical that failing to handle the rates by printing more Yuan currency will devastate the strength of the US dollar because excess dollars will circulate in the economy, making exporters for China lose competitiveness (McKinnon, 2011). Thus, central bank has to curb the problem because of the liquidity arising from the Chinese economy.
The first step is sterilizing the Yuans using bonds and notes with varying maturities. The purpose for this move is to increase the reserve requirements for banks and the possibility of lend...
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