The USA has little to lose by confronting China's trade polices

http://www.nytimes.com/2010/01/01/opinion/01krugman.html?hp

by rodyancy • 17 years ago

3 1 17 years ago

If China were to start selling dollars, there’s no reason to think it would significantly raise U.S. interest rates. It would probably weaken the dollar against other currencies — but that would be good, not bad, for U.S. competitiveness and employment. So if the Chinese do dump dollars, we should send them a thank-you note.

I'm not so sure about this. It might be true, but I think there is a lot more back story. A weakening dollar is bad for people who don't have debt, and it's bad for people who want to buy any good produced in foreign countries who's currencies aren't depreciating as quickly as the dollar. However, for anyone awash in mortgage and credit card debt, the weakening dollar is welcoming news, as it lowers the cost of the debt. The caveat is that you have to be able to support yourself, despite the weakening dollar, while still not falling further into debt. If you're able to increase your pay to match real inflation then you're in a real good position, but most people's income will lag far behind the increasing cost of goods.

The USA has little to lose by confronting China's trade polices

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