The trade deficit remains high because of surging prices for imported oil and refined products, continuously rising imports from China, and the shift to more fuel efficient imported vehicles. At the same time, higher prices for imported oil, surging imports of cars and consumer goods from China, and the credit crunch have pushed the economy into recession, and high unemployment has put the skids on inflation on non-energy and non-food products. If Bernanke wants to do something about both the recession and inflation, he should focus on Chinese purchases of dollars with yuan, which boost exports to the United States, and Chinese subsidies on oil imports with those dollars, which drive up global oil prices. China’s huge trade surplus creates an excess demand for yuan on global currency markets; however, to limit appreciation of the yuan against the dollar and drive its value down against the euro, the Peoples Bank of China sells yuan and buys dollars, euros and other currencies on foreign exchange markets. Read More