I. TRADE WAR THREAD
1/ China has manipulated global markets for the past 3 decades with a cheap currency. This was how China was able to completely corner the world’s export market.
2/ Through dominating the export market, they have gone from irrelevant to the 2nd
largest economy on earth.
3/ America’s corporations relocated manufacturing jobs to take advantage of inexpensive labor so they could produce cheap goods.
So Americans buy their cheap stuff, which is good because our wages now require it (sarcasm).
China takes our dollars in exchange for cheap goods and buys up Treasuries, which supplies more credit to the broke US consumer to buy more of their cheap stuff.
4/ There is more to it than the cheap labor. It is more about the currency, the Yuan.
From the 1980s-90s the value of the Yuan declined precipitously; an 83% decline against the dollar. China debased their currency for economic advantage & it worked because the rest of the world stood by with no action.
5/ This enabled China to corner the world’s export
market, & extract jobs/foreign currency out of the developed world. Their economy went from $350 billion to $3.5 trillion through 2006, making it the third & now 2nd largest economy in the world.
6/ As China was able to undercut the world on price, they’ve become the
world’s main exporter & have accumulated massive amounts of foreign currency. China is the holder of the largest foreign currency reserves, over $3 trillion dollars (mostly U.S. dollars).
7/ What to do with the dollars:
Purchase Treasuries, keeping rates very low, so that American consumers can borrow very cheap & keep buying more of their cheap products, which adds more to their reserves, increasing their wealth and depleting America of wealth.
Tariffs increase the cost of their goods and make consumers look elsewhere, or domestically. This should stop dollar outflows and stop the multi decade wealth transfer.