I have to display my ignorance a bit and ask a question.
So China manipulated their own currency to devalue it against the dollar. I assume this is to hold a price point from it’s own manufacturers to offset the taxes and market price increase here in the USA. But I’m struggling to grasp how that doesn’t also hurt China’s economy.
If they artificially devalue their money, doesn’t it also increase the cost of international commodities (like energy) for their investors and citizens? It seems like that would do more damage to their economy than just losing sales in one industry. Hell they are creating inflation, right?
I’m sure I am missing something or am confused. A smarter FReeper is welcome to explain the China Strategy to me.
To the extent China has been manipulating its currency, it has been doing so to support it, not depress it. In past years China did try to keep the yuan low. But it has been supporting the yuan for most of the last 5-10 years. If China let its currency float freely it would drop by at least a third.
The Chinese may be sensing that the level of global debt is reaching a tipping point beyond which it will not be sustainable. That means we could start seeing a wave of defaults and/or a wave of money printing by central banks in an effort to prop up bond markets. Long term, money printing means inflation. Gold (and silver) is the only money that is impervious to the knavery of politicians and central bankers.
It helps the export businesses. But it means that a 10% devaluation means that the slave child needs to make 11 widgets to make the same money as 10 yesterday.