Exchange-rate manipulation by countries from China to Denmark has cost the U.S. as many as five million jobs in recent years, according to the Peterson Institute for International Economics.
More than 20 nations have increased reserves of currencies such as the dollar by an average of almost $1 trillion a year, economists C. Fred Bergsten and Joseph E. Gagnon said in a report published last month.
By buying foreign currencies, countries reduce the value of their own and make their products cheaper on international markets. That squeezes out foreign competitors and pushes up trade deficits elsewhere, prompting job losses. The biggest loser is the U.S., where the trade and current account deficits have been $200 billion to $500 billion larger each year as a result, costing between one million and five million jobs, the economists’ calculations show.
“Half or more of excess U.S. unemployment — the extent to which current joblessness exceeds the full employment level — is attributable to currency manipulation by foreign governments,” Bergsten and Gagnon wrote.
Among the 22 nations Bergsten and Gagnon deem currency manipulators, which they say account for almost a third of global output, are China, Denmark, Japan, Norway, Russia, Israel and Switzerland. Of these, China is the biggest intervener, amassing about $3.3 trillion of reserves by the end of 2011.