Opinion

The Great Debate

Be careful what you wish for on currencies

March 19, 2010

The rancorous argument about global payment imbalances and the yuan’s valuation is exposing a surprising and dangerous economic illiteracy among policymakers and commentators.

Before pressing China to allow a maxi-revaluation of the yuan, western commentators need to think through the consequences carefully. The idea that devaluing the dollar (and by extension euro and yen) will cause payment imbalances to disappear and boost employment in the West with little or no impact on inflation and living standards is a pipe dream.

MAXI-DEVALUATION
First some notes about terminology. Proponents generally phrase their argument in terms of an appreciation of the yuan (which keeps the focus on the alleged currency manipulators in China). But it could just as easily be recast as a depreciation of the dollar (which is a much more controversial formulation, highlighting the fact that the exchange rate problem reflects U.S. weakness as much as China’s strength).

Since most observers assume bilateral relationships between the dollar and other major currencies would not alter significantly, China is in fact being pressed to permit a balanced depreciation of the dollar, euro, yen and other major currencies.

Finally, we are not talking about small changes but very large ones. Observers have suggested the dollar might be overvalued as much as 25-50 percent. Devaluing it 5 percent is unlikely to cause a substantial adjustment in China’s trade surpluses with the United States and globally and will not remove the political tensions and the root of the crisis.
Only a very large reduction in the dollar’s value over a period of years, in effect a “maxi-devaluation”, could hope to adjust the relative trade performance of the two countries.

ADJUSTMENT WITHOUT INFLATION?
Within the United States and euro zone, the main impact would be to raise the price of tradable goods and services relative to their non-tradable counterparts. Exports would become more competitive while imports would become significantly more expensive. Demand would switch from domestic consumption and imports towards exports and import-competing firms.

Normally, such expenditure-switching adjustments would need to be accompanied by expenditure-reducing tax hikes, spending cuts and interest rate increases to shrink non-tradable industries to expand export and free up resources for import-competing sectors, allowing adjustment without triggering inflation. The combination of expenditure switching and reducing policies is the standard prescription at the heart of an IMF structural adjustment programme in developing countries.

However the recession has already created plenty of slack in U.S. and European manufacturing. Supporters think the United States could achieve a maxi-devaluation, a big rise in exports and a fall in imports without triggering significant inflation or driving the Fed to raise interest rates. Adjustment would be essentially painless.

THE DOLLAR IN YOUR POCKET
But this is much too sanguine. Improved competitiveness would eventually expand U.S. exports and import-competing businesses, creating jobs. But it would also boost the cost of imported items substantially, and cut living standards for almost all U.S. and European consumers.

It is important not to underestimate how big the impact could be. Cheap manufactured imports from China and the rest of Asia, combined with easy credit and rising debt, have been the main engine of rising living standards in the United States and some of the other advanced industrial economies over the last 20 years as real wages have stagnated. If imports become significantly more expensive, households will feel much poorer.

Devaluation supporters often suggest China’s manufacturers might absorb a proportion of the exchange rate change to protect market share, cushioning the blow. Apart from defeating the object of the devaluation, there is no way China’s manufacturers could absorb the full impact of the sort of 25-50 percent maxi-devaluation that would be needed to eliminate the payments imbalance, according to some U.S. economists.

While devaluation’s impact on the cost of manufactured imports might be (slightly) lessened, the biggest impact would be on the cost of raw materials such as crude oil and industrial supplies that trade in global markets.

By boosting the purchasing power of Chinese businesses and households, and their consumption of oil and other raw materials, a maxi-devaluation would drive oil and other commodity prices sharply higher in dollar terms, and cut deeply into real household incomes in the United States.

I have written elsewhere that there is no real, fundamental link between oil prices and changes in the dollar’s trade-weighted value. Correlations are mostly driven by self-fulfilling perceptions. Commodity price changes reflect the relative pricing power of producers and consumers; exchange rates add nothing to the analysis.

But that is only true for relatively moderate changes in the dollar’s value against the euro, yen and other major traded currencies of the sort seen almost continuously for the past 20 years.

In contrast, a maxi-devaluation would lead to a re-pricing of oil and other commodity prices, redistributing real income and consumption away from the United States and Europe to households and firms in China. The United States and Europe are simply too large to devalue their way out of trouble without triggering big shifts in commodity prices.

CENTRE OF GRAVITY SHIFTS
By revaluing the output of China’s businesses and households, maxi-devaluation would also massively increase China’s “weight” in the global economy, accelerating the rapid shift in the centre of gravity in the world economy from the economies of the North Atlantic to East Asia.

Proponents of devaluation (and they are numerous) often portray it as a simple panacea. But maxi-devaluation would trigger a series of wrenching structural shifts in the advanced economies and globally. It might create more jobs in the United States, but all U.S. households would feel noticeably poorer as their real purchasing power is slashed.

It would ram home the fact that U.S. and even European households have been living far beyond their means — enjoying a high standard of living only because of an overvalued currency and the hard work for limited rewards common in China and many other parts of emerging Asia.

Exchange rate realignments are a necessary and inevitable part of the global adjustments that will be necessary in the next few years. In some ways they will make explicit the huge shift that has already been occurring for the past decade, but masked by China’s reserve accumulation and cheap credit in the western world.

But let’s not pretend they will be painless for households and businesses across the United States and Europe. Extra jobs and more exports will be purchased by lower real consumption. Living standards will fall, reflecting the reduced external value of U.S. and European output.

Comments
38 comments so far | RSS Comments RSS

This article is spot on. The developing world has the same skill set as the developed world. This is especially true in The BRIC nations. What advantage these nations have over the US and EU is cost. Labor and material costs are much lower in these nations. As the headlines point out, the US and EU are intentionally working overtime to strangle their long-term ability to compete by putting up barriers to access of oil, gas, and raw materials for manufacturing. They are penalizing manufacturers and consumers for consumption when the BRIC nations are not.

Our grandchildren will wonder how our generation could have been so thoroughly stupid.

Posted by charliethompto | Report as abusive
 

I wouldn’t call exploding trade deficits, people going into debt buying cheap trinkets from china, and falling household incomes as a result of trying to compete with people making 80 cents an hours an improvement in our standard of living.
I get tired of journalists and economists writing articles on the internet that have never had a real job

Posted by jwws9999 | Report as abusive
 

It is funny how these highly educated and well paid “analysts” are experts at soooo much yet failed to predict a global recession that a lot of older but more experienced people, including my self saw coming…you need the wisdom that age brings not just education. Time and again the so called experts fail …sigh !

Posted by Wicki | Report as abusive
 

Despite the comments, anyone with an understanding of economics should recognize the validity of the argument. The world is much more entwined than past generations and as such, the impact of forced change will have unintended consequences.

Ultimately, if we are to extract ourselves from the mess we have created, we need to reduce consumption, especially of goods from China. We can not continue to buy our way out of economic problems.

Posted by vrod2003 | Report as abusive
 

You’re missing concepts that have enourmous ramifications for your arguement. How should America devalue its currency when interest rates are already 0? You should understand that interest rates are a fundemental determination of forex.

You should also understand that while Americans may not be able to purchase as much imports this would be offset increased employment caused by consumption of domestic goods. Americans would rather have lower unemployment and buy domestic goods than have 10% unemployment and be flooded with cheap Chinese goods.

Many beleive that the market should determine forex rates not a command economy. The world would be better off if competitive advantage determined forex flows rather than a communist goverment concerned they will be viewed as bowing to the west by taking the economically correct action.

Posted by Upstate184 | Report as abusive
 

And of course a sudden increase in the cost of imports will put hundreds of thousands out of work in the retail sector who mostly sell made in China products.

Posted by Kina | Report as abusive
 

the loss of low paying no benefits retail jobs would hardly be a loss to our economy

Posted by jwws9999 | Report as abusive
 

Uh, wow. Top two comments are off-target.

The developing world does NOT have the same skill set- go visit them once, they are held back by a mirror of the world view that restricts us, different, not better, and not always worse. This added with the idea that memorizing is more important that independent thinking -especially in the Orient- means that we actually have a leg up, at least for the moment. If you don’t believe me, you spend WAY too much time in the westernized side of these places. 3 hours outside of Beijing, I have seen fields being worked with oxen, as of last year.

Stop panicking. Just because someone can build something does not mean that they know how it can be utilized efficiently. Hell, even our side of the world needs to work on the efficiency side of the equation.

To the second post, cheap consumer goods lower expenses throughout the economy by easing household expenditures. I hate people who believe they are “experts” on economics because they can balance their checkbook harping on things they do not understand, and using the same talking points as the illiterate pundits do on T.V. I don’t care if you think you’re smart, your comment is uninformed.

My .02

Posted by dzoo35 | Report as abusive
 

The article hits the bull’s eye. Te US doesn’t just import “cheap trinkets” from China. Almost everything in the Target, Best Buy, Home Depot, Walmart, Toys R Us and other big box stores, has a made in China label. Many of the components for the computer you are looking at were made in China or the other Asian countries. And China won’t be the only major emerging economy. The is the rest of SE Asia, India and soon, Africa. The US has less than 5% of the global population.

Since oil is dollar denominated – The Yuan would be purchasing more oil while the US dollar would purchase less. This country is a slave to the private automobile – it cannot be written out as an option here. It would be far too difficult to provide public transportation in this country because for 50 years, that has been the dominant form of transportation and has influenced most land development. The suburbs are almost impenetrable to new railroad rights of way.

Europe would fare somewhat better because it has discouraged the automobile by imposing high taxes on the fuel. They never really allowed their rail networks to become obsolete as the US has. Even their more recent development has been situated near existing rail networks for the most part. But in the last 20 years it appears they were getting more diffuse. Anything moved by truck in this country would also become more expensive as well.

There is no arguing with this article. A dramatically revalued yuan will make a super sized China which is already one of the largest economies. It would become gigantic. Not only will it be super-sized – it will attract US capital like a magnet.

Anyone not underwater on their mortgages now will sink like a stone. Not a pretty picture.

For a long time the stock market has not been an accurate reflection of American enterprise. It tends to reflect the performance of global companies. It could still look healthy while the rest of the country starts to look like the old South.

I have an education and age and the better part of that is the age. I most likely won’t have to live through the “declining” years – of everything here.

Posted by paintcan | Report as abusive
 

the loss of low paying no benefits retail jobs would hardly be a loss to our economy
Posted by jwws9999—–

Wow, just prove me right some more.
Yeah, you’re right, we’d all be better off if their children were starving and they were rioting, or more on the welfare rolls.

Go watch Fox.

Posted by dzoo35 | Report as abusive
 

I see no mention here of the potential effects of the proposed u.s. health care bill in front of congress. It has become such an ideological document that it ignores a lot of the potential for some substantial negative impact on the u.s. economy. Case in point would be the luxury tax some years ago which sent the yacht construction out of this country and subsequent loss of nearly 400,000 jobs. seminole

Posted by seminole | Report as abusive
 

When will the experts and people commenting on here realize that companies have no true loyalty to the country they started in. All they care about now is maximizing profit for the benefit of the few shareholders who already have more money than they can possibly spend.

Our standard of living has been nosediving for the past 40 years, due to companies moving production overseas where cost is less than here and then holding down pay rises here even when their profits have grown exponentially. At one time our great-great grandparents got paid the same as those Chinese workers and endured just as tough conditions. However our ancestors organized and improved working conditions and wages to a livable level. Offshoring destroyed all those hard won victories by introducing a work force who do not enjoy the same protections as us, but who can be exploited in the same way early companies used to exploit us.

Posted by MagAodh | Report as abusive
 

Remember “that giant sucking sound”, those of you who claim age, in addition to wisdom? Now we so desperately want back what we sent away, all those jobs!
Who benefited from that mass export of American jobs?
Wasn’t it the same companies that traded on the exchanges that crashed, burned, and have turned the US into the government subsidized mess it is now?
I find ‘seminole’s’ comparison of health care to the luxury yacht industry really removed from reality, and hard to tie in with this discussion. Is he saying that if we have health care for all that the health care industry will pack up and leave the country?
Maybe we could all switch to Chinese Medicine.

Posted by 2pesos | Report as abusive
 

The author wants us to continue to be the consumers and continue putting our nations into further and further debt. He sounds like the same economists we have listened to before the economic crisis; you know, the ones who said that everything is fine. In fact, the US and china need to balance trade. The best way to do this is for China to support a domestic market, but most of the foreign exchange reserves in china are in the hands of the government. The businesses and the people do not have an easy way to invest overseas. Most chinese investments abroad are blocked by the chinese government: example, the Hummer deal. An average chinese engineer aslo gets paid roughly 5000 rmb a month, which is hardly enough to buy US imported goods. The author doesn’t really understand much about china. China is an economic imperialist nations using neo-mercantilist policies to create a massive export economy at the cost of everyone else. The Yuan rise will help china keep inflation down and advance its domestic economy, but the chinese do not want this. Therefore, the US should and will put up barriers to chinese goods. It isn’t any different from what china has been doing to us all along: China has been closed off to our goods for over 15 years while we opened our market to them so they can grew. Now, it is time for china to compete on a fair playing field or we counter attack their protectionism. There is a rising protectionism in the west, yes. It is in response to the protectionism that has been there for decades in the east. This author needs to do more research. Quit being the pre-crisis economist and start learning lessons from what happened. We are in serious need of post-crisis economists, and the old ones should take up a new trade.

Posted by blahhhhhh | Report as abusive
 

It has been said for thousands of years that lending money at interest (usury), is a BAD idea. And the economic melt down is a perfect example of this.

The melt down be attributed to any number of things. But all of them are the direct result of people taking more than their share. Interest and profit become the main goal while problem solving and honest work are ignored to the detriment of society as a whole. Banks should not be profit ventures. They produce NOTHING. Banks are supposed to exist to make business more effective. Instead banks are leaches that bleed businesses and force them to bleed the citizenry.

Banks are supposed to work as a system to facilitate the flow of money, for the purpose of making it possible for actual productive business to grow and thrive. The only thing banks do is shift money around from one place to the next and label the “pockets” the money is put into. Each pocket has it’s own set of rules as to how money can be deposited and/or withdrawn. But the lure of profit and interest gives bankers a huge incentive to steal from business and makes it impossible for the economy to remain stable.

I may not be an economist. But I’m not blind. A quick look at my wallet, my bills, my prospects for employment, and my prospects for keeping my home, are proof enough of the truth that usury is a poison to the economy. Banks are infrastructure and nothing more. They must be treated as such and not allowed to profit from their activities. Put the real money back in business and production again.

Posted by Benny_Acosta | Report as abusive
 

Too complicated for me. I prefer to think about productivity. So the capacity of 300M Americans to generate enough products and services to maintain a high standard of living. If we are in trouble is because we became less productive, by letting China do the work for US. The solution is to become more productive not to send work out. Remember that we are consumers and producers (both at the same time) you kill the producer you eventually kill the consumer.

Posted by axiom321 | Report as abusive
 

Certainly thought provoking comments here, perhaps underscoring more than ever that our USA economy and life style are in real jeopardy. A lot is wrong here — Derivative and hedge fund operators generate huge profits without employing anyone or producing any product. We demand massively expensive benefits from the government which pays for them by borrowing trillions which can never be repaid. Unqualified people are bidding up the price of homes, and then default. Big unions extract unreasonable wages and strangle productivity. Government is bloated, confrontational and unproductive. The military either directly or indirectly consumes 50% of all tax collected. In the meantime the Chinese have a massive surplus and no debt. Why? Because they are doing what we used to do decades ago — work hard, work smart, employ people and make products that are great value….. perhaps its time we re-assessed ourselves, and quit complaining about foreign competition.

Posted by JJWest | Report as abusive
 

First, this was a well written article. I am in complete agreement that we have been living beyond our means for years now on cheap labor. The problem is that societies evolve, so that when we reach the point that there is no longer any cheap labor, our living standards will drop. This will not have to happen for a while, however, as many economies can still provide that cheap labor. The focus will shift out of China eventually, and everything will renormalize. Once the cheap labor is exhausted worldwide, our living standards will plummet.

Back to China, yes, China has enjoyed great growth, but to watch the world economy shift to them is a fallacy. What do you think will happen once Americans and Europeans can no longer afford Chinese made goods? In an economy reliant on exports, when the exports stop, they fall just as hard, if not harder than we do. Until they can correct their massive trade imbalance and shift their demand internally, their fate is heavily dependent on ours.

Posted by dep82 | Report as abusive
 

The author is right. Bet the other option – to continue along the same path is simply a way of postponing the day of reckoning.

But there are some other, even more important, implications of China revaluing significantly. The West will lose their leadership in science as Chinese universities and firms will pay more to attract talent. That will inevitably bring about a relative decline in the military technologies, and consequently, power. And military power is the main factor behind the dollar being the principal currency… The impact of that change on the US economy will be devastating. Europe will actually not fare better.

The simple truth is: West is going down and that is inevitable. We chose that way a long time ago, probably in the 19th century and the first half of the 20th century. We were warned by many but we did not listen…

Posted by tk2 | Report as abusive
 

Worldwide tarrifs based on % production coming form one place.

The giant sucking sound was ment to allow developing countries actually develope and grow thier nations of consumers, not just China.

XX% of good produced in one country calls for XXX% import fees. Spread production out amongs differnet countries and waa-laa.

Posted by rallypoint7 | Report as abusive
 

The author may be right in the short term, but in the long-term, properly valued currency is necessary for sustainable global growth.

Posted by DanG | Report as abusive
 

This article is spot on. Yes, I have been to one of these BRIC nations, and yes they have the same skill set as Americans. In fact the most competitive/prestigious university in the world (The IIT University system) is in a BRIC nation. Americans need to buy things made in America. The trade imbalance is our own fault when everyone decided to buy cheap crap at places like Wal-Mart en masse (and no I don’t shop at Wal-Mart). What did people expect to happen? The current imbalance is called capitalism. This is what happens in a globalized world. If we want to keep jobs here, the number of college graduates needs to be higher than 25%. If one has a high school diploma and nothing else, in today’s economy the only job they are qualified for pays minimum wage. That is just reality. So unless you adjust you will be left behind. Perhaps if we could spent less time whining and screaming as a nation and actually worked together like adults we could fix the problems this country faces. Wait, that would interrupt valuable time spent watching reality TV and faux news. Can’t have that can we, since we are so awesome and all.

Posted by BB1978 | Report as abusive
 

I for one am very clear on what a devaluation of the dollar/upward valuation of the yuan would entail. Bring it on! The authors argument is basically that we should avoid the correction which is necessary because of the United States’ diminished manufacturing power and wealth. He is in effect arguing that we should continue to offshore jobs and destroy domestic manufacturing in order to avoid inflation.

The fallacy here is that the US can continue to become poorer and poorer (measured in private and public debt) and China can become richer and richer (measured in reserves forever) without inflation eventually resulting anyway. The choice is in fact between maxi-inflation now and 2X or 5X maxi-inflation later.

As far as “cutting living standards”, let’s be clear on whose living standards will be poorer if the cost of goods from China and other developing countries experience inflation. At first, the cost of goods manufactured abroad will rise, without a doubt. The wealthy will get less luxury for their dollar, and don’t expect me to weep about that. The merely affluent will have to get buy with the basics, which is fine with me. Everyone will have to drive much less as gas prices rise, which will be great. This will finally provide the incentive to urbanize achieved by European gas taxes, which is desperately needed in the States.

As for the standards of the working class and blue collar workers, who make up the majority of Americans and have seen their living standard plunge with the outsourcing and offshoring of labor, at first they will be hurt. Toothpaste that is $1 now may become $3. But soon after that a domestic toothpaste factory will open and give the blue collar worker a job so they can afford toothpaste again. I’m sure John Kemp hasn’t worked in a toothpaste factory anytime recently, and maybe a correction in the value of the dollar will affect his standard of living and those of the affluent class which he reports on, but clearly he has little perspective on what is going on with the middle class, or how the Chinese have devastated American manufacturing. If the working class was told that a trade war with China would bring their jobs back, they would vote for that.

So the main idea here is that those who have their standards of living affected will be the affluent and very rich who have prospered so much from the destruction of American manufacturing and Chinese mercantilism. These people have been enriched enough, so bring on the pain for them.

For the average American, there will be a difficult transition followed by a rebalancing of manufacturing. This will benefit those who buy the goods they really need and work in the factories that manufacture these goods.

Bring it on!

Posted by reconstructions | Report as abusive
 

I think pursuing a Yuan revaluation in order to correct trade imbalances is somewhat misguided as this column outlines but also because China is pursuing a whole host of other mercantilist policies that ought be addressed in our quest to level the playing field. We can start with industrial espionage, patent and copyright infringement and branch out to different rules for foreign companies operating in China.

Posted by Nomasobama | Report as abusive
 

Yuan is not the problem. Yuan appreciation is jut politics. Blame the fed for the cheap money policy and blowing up bubbles after bubbles. The fat Wall Street does not create anything for the real economy. More pains ahead.

Posted by chatpert | Report as abusive
 

“The author may be right in the short term, but in the long-term, properly valued currency is necessary for sustainable global growth”

Here, here…

I think this sums up the reality best. We can cowboy-up and take our medicine now or die later. The fact of the matter is that oil (based on the dollar) is the “herion” this country needs to get off of…why didn’t we move to a hydrogen based economy 40 years ago?

Because no politican wants to peal the band-aid…well, when it gets pulled for us, the pain will be unbelieveable.

It’s the 11th hour. If we’re going to make the right change we have to do it now.

Posted by Happy_McSlap | Report as abusive
 

Think about this – what part of ***your*** budget is spent on imported goods?

Our family of 4 spends most of our income on taxes – federal, state, and real-estate, ensurances (health, auto and home), education (private day-care and after school programs), financial (mortgage and fin. advise), medical services (out of pocket medical expences) and food (we strive not buy packaged food made in China out of safety concerns).

The imported goods we buy are fuel, clothing, and toys. Plus cookware and other household items.
I am not sure where the telecom fits in since they use lots of imported components to provide their services.
Not sure about pharmacy itmes either, but this is a very small portion of our budget.

So, if tomorrow the prices of Chinese goods double, my son will get ten toy cars a year instead of twenty – that is it.

How can anyone say that the cheap Chineese toys and shirts define our quality of life?! Our house is littered with cheap and unloved toys – mostly gifts. I wish they were more expensive and less ubiquous.

I think this whole issue is way over-rated.

Posted by ForeverSPb | Report as abusive
 

If the US dollar would be devalued in relation to the Chinese yuan how in the world would the US be able to service the interest on the US debt that China holds, let alone ever, ever, being able to pay the Chinese back the money we have borrowed from them?

Posted by 2pesos | Report as abusive
 

In the first place, all of the working age people of this country are now reaping the whirlwind created by the so-called “greatest” generation and the give-away policies they promoted at their children’s, and granchildren’s, cost. Any attempt to “blame” the victims of this boondogle is simply more deception, mostly from the same sources.

Our problems come from extending the Marshall Plan after WWII to the entire planet and for over a half-century beyond what was called for. Simply put, we gave away the farm and impoverished the American people. No amount of wishing we were still run by the people who sank the economy can change that. Now, the price must be paid.

Our people must produce goods and services of competitive quality and price with everyone else. Period. The only alternative is poverty and misery here. The voices desiring a strong dollar are from people and corporations that have structured themselves to profit from American economic decline. Those overseas factory investments and “out sourcing” look much less rewarding if the prices of the goods and services from overseas skyrocket. They will lose money. They do not care if Americans starve.

We work or we suffer. Taht is the choice. The only way we will work is if we greatly devalue the dollar and take the inflation hit. We already have too many McMansions.

Posted by txgadfly | Report as abusive
 

Great article! The economic consequences of a yuan appreciation is not well understood. What would the consequences be for China and the rest of the developing world? How could US and EU both post current account surpluses unless Asia also posts deficits? How likely is that? Not bloody likely.

Posted by IvonB | Report as abusive
 

2pesos: There are 2 ways to pay back the China’s T-bonds. One is printing more money and pay (this will devaluate the Dollar, helping US manufacturers and creating jobs). The second is paying the T-bonds with producs and services created in the US, this will create more jobs also. In any case China is in front of a collapse.

txgadfly: I agree with you. I think that this entire China fear factor is just hot air and it is about to end.

Posted by axiom321 | Report as abusive
 

Blah! Blah ! Blah! It’s time for the US to crank up the export machine. If China doesn’t want to let their currency float and open up their markets than the world has to charge them for their trade. Don’t listen to the naysayers and China backers. The US can force change and gain market share/jobs. There are plenty of tools to accomplish this. The US is getting it’s pocket picked right now.

Posted by Fixit101 | Report as abusive
 

China’s managed fix rate supporters want you to believe that rates won’t matter yet in realty they use them to their advantage. The dollar perma bull’s have caused the mess of the last 25 years in the US. The economay is being hollowed out under the current global trade system.

Posted by Fixit101 | Report as abusive
 

Speaking of killing the goose that laid the golden egg, the U.S. population is a big hen house of geese laying golden eggs. Their chicken feed is made of plastic emblazoned with holograms and magnetic strips. Once that feed starts to get moldy and the geese start dying, then it’s adios, muchachos! No more golden eggs.

Posted by DisgustedReader | Report as abusive
 

Can’t we just keep the party going with the low dollar? Companies are starting to hire again because of the low dollar, why mess with that?

Posted by Story_Burn | Report as abusive
 

Well so what is the real solution?
Send these politicians back to school or just watch US go down to stone ages by ever enlarging deficits.
Or default on debt start all over again, or go to war and than start all over again.
Let China buy us all out, or let the country go back to Indians, and we all run back to where we came from
There is no end to this discussion.
Bottom line some thing has to be done. The best solution I think will be, that comes from Chinese side.
They are compassionate people and can live with less. Whereas US, and in part Europeans are strictly money based societies, and will not settle for less. So keeping this in mind, Chinese need to think of a solution. That keeps them alive, and us kicking !
We purpose: Chinese restaurants all over the world serve free lunch and dinner, for all those, who are laid off because of China’s currency games.
Rest we will handle later !
Let’s see if the Chinese premier makes any such announcement.
Make sure food is fresh !

Posted by AJduggal | Report as abusive
 

Let me get this straight … the US is trying to pressure China into manipulating its own currency by increasing the value of the yuan or else the US will label China a currency manipulator. Short-sighted US lawmakers are looking for trouble. The last thing China and the world needs is to listen to emotionally-charged financially irresponsible countries on how to handle itself financially.

Posted by JRZ | Report as abusive
 

China has some acute and accelerating problems with its own economy. The inequities there and the numbers of people effected by those inequities is hurtling them towards a precarious situation.

The American economy and currency is a big concern for them, but not even close to their biggest concern.

We are going to have to manage our own economic affairs more effectively in ways that might minimize the impact of China’s policy.

Posted by breezinthru | Report as abusive
 

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