Originally Posted by D J Kings
The long term effect, as the Asian economies mature, must mean increasing levels of unemployment in the US and rising inflation leading to stagnation. Yes you have lots of the green stuff but you print it don’t you and can continue to do so but unless it has a value in the world it becomes as unless as the mark between the wars
?? Why does a rising Asian economy equal a falling US economy. When are people going to realize that manufacturing jobs in the US are dead? Just because there are no manufacturing jobs does not mean that there must be unemployment; the economy can mature and form a new style in the absence of maufaturing, and that change is very obvious. When I look around, I see bankers, lawyers, doctors, builders, salespeople, cooks, but I see very few assembly line jobs. The US dollar will maintain its value as long as foreign investors demand US securities and the US remains stable (doesn't default on loans).
To repond to your second point
But is the dollar rising or falling, I think relatively it is falling. As you say “china gives it back” much like a parent might give pocket money, but if the parent did not give it back but moved it into rupees for instance where would the US economy be then. And I do agree that china keeps the dollar inflated but once again should it decide not to do so what then. Surely a great economic power like the US cannot place its future prosperity in the uncertain hands of a foreign power which is benign at the moment but may not be in the future.
Why would the Chinese worker want or need to buy foreign goods as like the US in years past they can buy high quality goods produced at home?
Why do you want or need a BMW? And what if China wanted missles? The US is the place to shop!
Anyway, yes the current situation is unsustainable, but it is stable nevertheless. Until China decides that they don't need US investment - that they can sustain themselves (which is another key to becoming an economic superpower) - until then the US can maintain a deficit and a low interest rate and low unemployment. But once the global market decides to not buy US securities, the value of the dollar will fall internationally and domestically we should see inflation. But we have time to adapt our economy before that happens.
*I think I am correct, but it is possible that I have made a mistake (like saying something will rise or fall when the opposite should happen). If you catch any mistakes, please let everyone know (as long as you can explain it economicly). I don't want to spread misinformation. My posts should be mostly correct though