An alternative to popular faith

Again, we are all a-Twitter about China’s money. Our leaders have been hoping, praying, pleading for China to increase the value of the yuan. An increase in its value presumably would increase our ability to export, while increasing our costs for the goods China exports.

Neither of which matters.

From the standpoint of the U.S. as a nation, exports are not beneficial. We trade scarce goods and services, requiring our time and our labor, for money that is not scarce to the U.S. government, requiring no time or labor to produce, and which it has the unlimited power to create in unlimited amounts.

Yes, individual industries benefit from exports, but a nation whose money is not tied to a scarce asset, does not benefit from exports. It creates money, from thin air, as needed.

Further, the U.S. inflation that would be caused by a revaluation of China’s money, easily is cured by our own interest rate control.

Soon, China will revalue its money a bit, and everyone will breathe a great sigh of relief, though you will see that nothing else will happen.

In short, it’s all much ado about nothing. There is a more complete discussion of this at: CHINA money

Rodger Malcolm Mitchell
http://www.rodgermitchell.com