[Investment Biker]

Two comments. First, if a foreign country prices their goods such that the products are essentially free then how is the country that imports the goods at a cheap price harmed?

Second, it may be that a free floating yuan will actually make china products cheaper. This is due to the fact that there is a lot of currency that is "locked up" in China. Once freely traded, industrialist will feel the need to diversify and trade out of the formerly restricted currency.

[oceanview]

if china floated, we would see a 40% appreciation in the value of their currency. it will not float lower, its impossible.

[Southack]

"Two comments. First, if a foreign country prices their goods such that the products are essentially free then how is the country that imports the goods at a cheap price harmed?"

Infrastructure. Business investments.

Right now, the under-valued Yuan makes China *appear* to be a better investment than the reality. This government currency intervention scheme has caused and is causing new business investments to go to China that would *not* ordinarily occur in a free market (e.g. one without massive government currency intervention).

Moreover, China's currency manipulation allows Chinese firms to get away with "dumping," that is, selling products below their real cost in order to drive competition out of business.

Thus, American jobs are directly lost due to unfair Chinese currency intervention.

In the short-term, this is *great* for the American consumer...for longer periods, however, this sort of Market Manipulation hammers American corporations, profits, hiring, firing, jobs, pensions, etc.

And it isn't sustainable. Eventually, China will be forced to re-value their Yuan...and the longer it takes to reach that point, the more damage to the global economy will occur. For 2004, China had a $120+ Billion trade surplus...but China spent $195 Billion on the global currency markets to keep their Yuan under-valued. That sort of game can't last forever.

In short, China's currency manipulation is a stealth subsidy of their own manufacturers...a currency manipulation that would be illegal if it was performed in any other way besides under valuing their Yuan.

[ninenot]

In response to your first comment, the devaluation of labor in Country One automatically devalues labor in Country Two, the importer.

THAT'S how harm is done to Country Two, as DOL stats will demonstrate.

[Paul Ross]

First, if a foreign country prices their goods such that the products are essentially free then how is the country that imports the goods at a cheap price harmed?

Fair question...but one that was already answered tellingly by Alexander Hamilton, one of our nation's greatest Founders, and the one who laid the basis for its industrial greatness:

"Not only the wealth, but the independence and security of a country, appear to be materially connected with the prosperity of manufactures. Every nation...ought to endeavor to possess within itself all the essentials of a national supply. These comprise the means of subsistence, habitation, clothing and defense."

If the subsidized export strategy of a foreign nation damages us in any particular such industry to the level of destruction therein...Alexander Hamilton would clearly have taken steps to neutralize those predatory actions.