[FoRK] Dollars for wallpaper ...
daniel at netgods.net
Fri Mar 12 10:52:27 PST 2004
>>From: Geege [mailto:geege4 at bellsouth.net]
>>bush, as our current leader, wants the chinese to re-value their money
>>how will he make that happen? that was my question.
> Clinton, as our former leader, wanted them to do so as well.
> Bush can't make them do it any more than Clinton could. The questions
> are: why are we asking and why are they refusing?
That's the part I don't get; why *are* they refusing? Sure, the first
order economic effects, especially as regards Chinese exports to the
United States, would seem to provide a reason for them to keep the currency
artificially undervalued. But a devaluation would also lead to a decrease
in the real price paid for oil by Chinese firms, individuals, and government
agencies. A 10% decline in the value of the Chinese currency would lead
to a 10% decline in the real cost of oil; I'd expect that to more than offset
any loss of exports to the US as cheaper energy would help to accelerate the
industrial buildout of the Chinese interior.
All I can guess is that the leaders of China don't believe they have
reached a point in their industrialization where internal growth and
demand can sustain the necessary investment flows. Were that to change,
we'd probably see significant changes in the exchange rate between
the US and China, with all that that implies for the US economy (higher interest
rates, lessening in demand for mortgages, a reduction in consumber spending, etc).
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