The Talking Dog

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April 10, 2005, More Red Ink (As it were)

Experts from China, according to this week's visit to our friends at Beijing's People's Daily, assert that even if China takes strong steps to adjust its currency (the yuan... or the RMB... or the renminbi... which I believe are all the same thing...) against the yankee dollar, the structure of the American economy (household debt off the chart, national savings non-existent, the federal government borrowing because actually taxing those with ability to pay taxes would be taxing the people's money) will still cause us to run massive trade and current account deficits with China... so instead, we'll just borrow the People's Republic's money...

In short, even if, as expected, Beijing makes some adjustment strengthening the yuan... or the RMB... whatever... against the dollar (in response to a bill passed in the senate threatening 27% tariffs on PRC imports unless Beijing makes currency adjustment)... Middle America will still borrow heavily from the Middle Kingdom... Chinese goods and services will be priced so preposterously competitively, that we'll still keep buying them... even as China (and the rest of the world) quietly shifts reserve holdings into euros...

China still spits out tons more engineers than we do, and lots of other professionals that are essential for a value added economy... even as we chose not to make certain... investments in such a future...

The piece notes, correctly, that we buy tchotchkes from China cheaper than we could get them from anywhere else (especially domestically), and because of these prices, profits (and ultimate wages) in China are well below where they could be, so we do derive quite a benefit from the relationship, especially where the currency makes it even more favorable for us...

For now...


Comments

Sorry to clog your comments. I just didn't see an email. Check out our law school humor blog at http://barelylegalblog.blogspot.com If you like it, give us a link or a post.

Thanks,

Russ

Posted by Russ at April 12, 2005 11:08 AM