China Impoverishes The World?

The last post on LUV got the Cowboy thinking about China’s internal focus.

As the Cowboy has stated:

“Given that the Chinese economy is already focused on exports anyway (like Germany and Japan), the currency manipulation just adds to the current account surplus, putting more foreign currency in the hands of the government.  This is money (or stored value) that is being saved by the country as a whole.  If the Chinese consumed more, there would be less production available for export, they would import more and, with a freely floating currency, you might eventually reach a current account balance.  As for a black market, the Chinese government has been pretty effective at keeping it to a minimum.  All of this begs the next question though.  Why would the Chinese government intentionally make its people worse off, allowing them to buy less and forcing them to save more, especially given how poor most of its population is?”

Go to the post (and the following parts) if you want the Cowboy’s answer to that question.

And as a wise friend reminded the Cowboy yesterday, it was Keynes who said:

“If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.”¹

Well, get a load of Arvind Subramanian‘s piece in yesterday’s FT.  I know, I know, that’s two consecutive posts linking to the FT, behind its pay-wall.  Sorry.  The article is entitled: “It Is The Poor Who Pay For The Weak Renminbi”.

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Published in: on February 5, 2010 at 22:02  Leave a Comment  
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