China has been running a huge trade imbalance with the US. In English: We buy a lot more stuff from China than China buys from us. Economist Robert Samuelson writes about the imbalance in today's Washinton Post. It's interesting to a geek like me.
In case you don't read it I'll summarize: China purposefully kept their currency devalued. That made everything the US bought from them cheaper. They hoped that Americans would buy and buy... that would help employ tens of millions Chinese coming from the farms into the cities.
What did they do with all those dollars? They bought US Treasury bills (that's US debt.) That helped keep interest rates really low and is partly to blame for the mess we are now in.
China now has $2 Trillion in US dollars. If the dollar suddenly lost value China would be one of the biggest losers.
Dr. Samuelson points out that there are problems with the dollar being the world currency. But at this point there is no alternative. The Europeans thought the Euro might make a run but they, arguably, have more problems than we do.
No comments:
Post a Comment