Sunday, October 17, 2010
currency battle
This article is very informative on the current exchange rate and currency battles going on in the world- especially China's undervaluing of the yuan. But economists have already shown that currency battles to increase demand are not long term solutions so what should we really be doing? Again I think Sweden has the right idea by increasing the total factor productivity through training of the low skilled population.
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I thought of China as a country is trying to help its people rather than a currency manipulator. The government is doing what best for its people. The U.S should find some other way to solve the problem than just blame on China for its current unemployment rate. In fact, the trade-weighted U.S. dollar index has depreciated by almost 40% over the last ten years vs. the world's major currencies:
http://2.bp.blogspot.com/_otfwl2zc6Qc/TK6E69_WJiI/AAAAAAAAOgw/1pRzVUGXR5c/s1600/dollar.jpg
Does it not make U.S pretty much a currency manipulator too? Fact remains that American industry can not face completion from Japan due to their work ethic and with China due to high labour costs.
America got used to printing dollars and consider it as an exportable commodity. This may no longer be possible and desirable. You can not always live by collecting rents.
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