It is partly true that Chinese manipulate the currency. However, it has no effect on American export to China (explain later). As American culture (or all others too), it is easy to blame others than ourselves: it is nothing wrong with our government and our citizens (both are big spenders and fight the wars we cannot afford), but the ‘evil’ Chinese.
- Chinese currency and Hong Kong too were basically pegged with US’s, so it would not affect import/export with currency fluctuations. Now, it is pegged mainly with US and EU.
- Most countries would like to increase the value of its own currency. If you borrow from me with my country’s currency and it increases its value by 10%, you need to pay me 10% more with your own currency.
For the same scenario, I can buy your country’s assets (like land, factories…) 10% cheaper.
- The drawback. It discourages import from US to China in theory if Chinese currency is adjusted to the market.
It is not true as US and China are perfect trade partners. The majority of Chinese goods are of cheap, low-cost consumer products and US goods are of high-tech and agricultural products … In a sentence, they do not compete with each other in general.
China keeps the currency close to US, so it has to eat their profits by reducing jobs loss. The US consumers benefit by low cost consumer goods. It is not true if you argue the jobs would stay in US. With the US high salary, it would go to other developing countries if not go to China. So, it is a win-win situation for US.
- What happened if China cashed in the US debts. US economy would run further down. China living standard would be improved. However, there will be more folks out of work and hence cause social unrest. It is a trade off China has to make, but no one will finance US's reckless spending for ever.
- One way is go back to the gold standard that was removed by US. Basically your currency value is adjusted by the gold reserve in your central bank.
