Quote:
Originally Posted by CaptainCrunch
So wouldn't that be almost preferable not to be the standard currency. Wouldn't that allow the states to devalue their currency, and even out the trade front?
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This is hardly the first time the USA dollar has devalued against other major economies.
The late 80's and early 90's had an epic devaluation against the Japanese yen that, at its peak in April 1995, made the Japanese economy roughly the same size as the USA economy.
Between 1985 and 1988, the Yen doubled in value against the USA dollar.
It was also a time of huge movement of other currencies against the dollar, including the German deuschmark.
The USA also had a lot of external debt then which was primarily priced in USA dollars and hence being rapidly devalued for the holder.
I am sure Chinese authorities are well aware of all of that and the implications and, like Japan in the 1970's and early 1980's, probably not too crazy about seeing their currency rise against the USA dollar.
It's great on one side - the Japanese were buying everything in New York in 1989 - but not so great ultimately if your primary customer is poorer on a relative basis. . . . . and all those things you bought in New York also come crashing down in relative value.
It's an unhealthy, unsustainable imbalance that will correct itself, as it did before.
China is being conquered by an economic system and the communists are trying to ride the wave. In fact, they're trying to create a new form of free enterprise to meld into their belief system.
Ultimately, they will likely be unsuccessful in maintaining the level of control they have now.
My two cents.
EDIT: The Economist last month published an interesting chart illustrating China's exchange rate has risen about 50% against America's since 2005 if you account for a 24% actual appreciation PLUS the fact China's unit labour costs are up 21% in the same time frame.
Bottom line, China's unit labour costs are rising significantly faster than America's.
Cowperson
