Interesting scenario, there is no question that the East Asians are bank rolling the American economy. It is true what is said in the article about the US being rather ungrateful to the Chinese, but can we honestly blame the US? Isn’t part of the reason why they are borrowing so much is because of Chinese imports? There is little question that Chinese goods are [bi]ubercompetitive[/i] largely due to the cheapness of the Yuan, but would it be in America’s best interest to see the Yuan appreciate, I think so for three main reasons: i) A raise in the Yuan would invariably cause a depreciation of the US dollar, and depreciations are hardly ever bad. ii) The result of this for the US is that their goods would be cheaper then it is now relative to Asian goods, and thus of course a raise in exports. iii) But more importantly it would (or rather…should) create more demand for American made goods, and less importations of Asian made goods. With the precipitous increase in FOREX in the hands of Chinese, Japanese, Taiwanese, even Russians, and Indians, they are essentially bankrolling the illogical American economy. America owes much to these state for being so frugal.
In one word: greed. Rather a blinding greed, I could point out........ Also, the Bush administration is very poor economically. Well... actually, in every way... :bugeye: The war is a waste of money, the decrease in taxes can be bad in the long run, and now that... Please Register or Log in to view the hidden image!
i) Yes, a depreciation of the dollar relative to the Yuan but not relative to other currencies. A depreciation of the dollar will be bad because the dollar and the American economy does not fit the expected model shown in textbooks. ii) Not cheaper relative to Asian goods, cheaper relative to Chinese goods. iii) I believe that American goods are for the most part not in competition with Chinese goods and therefore a increase in the value of the yuan will not increase American exports but will increase the cost of American imports. If China raised the value of the Yuan China's imports of oil would cost China less and China's imports of high tech services from America would cost China less but the biggest effect would be a loss in market share for China in the American merchandise import market. The market share would not be lost to American domestic producers but would rather be lost to India, Korea, Malaysia, Vietnam and many other nations. When an American buys five hundred dollars worth of Chinese merchandise at a place like Walmart, the vast majority of that five hundred dollars stays with American firms that designed, warehoused, marketed and retailed the products. Even if the cost of the Chinese manufacturing doubles American manufacturing competitors will still not be able compete with the Chinese costs. Lowered profits for all firms involved may help mask the price increase. If the dollar falls in value against all currencies the textbooks would predict that increased American exports and decreased imports would close the trade deficit, but reality will not work that way. A 100 percent decrease in the value of the dollar will not bring manufacturing back to America but would double the cost of our manufacured imports. Oil is priced in dollars but the price of oil to America would double within a few years of a 100 percent decrease in the value of the dollar. With a 100 percent decreases in the value of the America would be able to take some market share away from our first and second world competitors in the high tech and agricultural markets. This gain in market share for high tech and agriculture would not begin to compensate for the increased cost of imports and the trade deficit would grow larger which would eventually cause the dollar to collapse. Regardless of what the Chinese or Greenspan or Bush does, "things that can not last forever don't"; the trade deficits can not last forever, the dollar will eventually collapse, the world will not be able to adjust quickly to the destruction of the American consumer market, and there will be another global great depression. The question is will this happen two years from now or fourty years from now? With good leadership and a new and improved UN the post global depression world economy and lifestyle could become glorious.
Especially for the international fiat bankers and mass media who decide everything for us behind the scenes!
Plata or Plumbum, should it ever come to a us chinese war, the american IOU's will be worth nothing, if I was the chinese I would sell them back to the american for halve the price, and have them payed in oil/food/steel and not in paper$ wich are just other IOU's with questionable value nowadays (only halve joking here, cause this could actually be a win-win situation) .... This is a good reason for china not to start a war , but maybe would be a reason for some megalomanic u.s. president facing a desperate financial balance, well the president is there, now how far can this deficit bend before it breaks? The us-economy in some respects looks like a hot air balloon but since the whole world is in the basket nobody dears to pull the plug, we all crash hard, but still The way Bush overloads the deficit he himselve might pop the balloon? Admitted, America never has officially started a worldwar, but theres a first for everything...Alternaticely, more likely, neocolonisation in Africa ...
