But the value of the dollar hasn't weakened significantly against china. This is because of the chineese pegging their currency to ours so as to keep their currency low and promote exportation. Brentenwoods anybody?
If China let their Yuan rise against the dollar "naturally", we could see it appreciate 200% easily. If that happens, it would be really bad news for us. (think about ur wealth reduction to 1/3 in terms of purchasing power).
But then think of the economic responses: 1) trade balances would correct worldwide. consumption of Chinese goods would fall off in favor of more 'competitive' local goods. 2) The chinese economy would quickly slowdown. Their commodity demand would fall off, bring the price of many inputs down for the entire world. 3) Our exports would increase as we are more competitive vs. China. Also, the amount we spend on crude (one of our biggest imports) would drop assuming the falloff in Chinese consumption. Again, good for our trade balances. Short term response would be a price inflation; longer term would be strengthening of the domestic economy, replacement of consumption of Chinese goods with more competitive sources, and shoring of the dollar with respect to other currencies. Assuming things are already great for China and that they can endure a slowdown in US and Euro consumption of their goods (which I don't think is true) without hitting them too bad, they will also be compelled to buy more Euro and US goods with their new strong currency (which may then mean my cheaper commodities argument may not be valid). But regardless, trade balances should still somewhat improve. Its a matter of a few years before farmers overproduce grains to end this boom ... energy is another story, much more worrisome. There must be a global breaking point where demand will collapse.
"thesharpone" has to be the most ironic handle I have ever seen. What are you on about?! You just stated that you're no economist and yet gave us your "two cents" worth...well that is all your thoughts above are worth mate. Do you understand how inflation works and where it impacts? Do you understand that due to the inflation, substitution occurs...ie...homeowners or renters, will spend more money on fuel to get to work in their cars, spend more on food because that is an essential and due to both of those, take the risk of falling behind on home payments. Of course we know the worse this gets, we get two very different problems at the same time and we get the "Stag" word in front of "Inflation" Do you understand that while everyone does need somewhere to live, the risk of them defaulting on their rent payments are high in the economic environment we are in, so landlords have to drop prices for rent. They also have to do this to remain competitive in this environment, because as housing gets cheaper to buy, they run the risk of the rental market getting hammered. Even if your very odd theory did work out and home prices were brought back to their highs due to inflation (I can't stop laughing at this), their real price would still be low. I.e the inflation would outweigh that nominal growth in house prices...net result...no increase in house prices of any worth! So thanks for your 2 cents but I think I'll stick with simple economics.
I understand how that could sound bad to someone who doesn't have any idea what they are talking about. It would if you understood economic theory. The devaluation of the dollar v. Chineese currency ends up decreasing American imports. You don't actually think Americans would consume less do you? It would be a great thing for America to see the chineese currency increase by 200% but even better if it increased without being pegged to the dollar. If you don't beleive me that's fine but don't bother objecting cause its not really a question open to debate. Try reading something on the subject before you espouse a belief on the subject.
read this article. i brought this up a while ago. bgp http://www.nytimes.com/2008/02/17/b...8001262201&ex=1203829200&partner=MOREOVERNEWS