China and inevitability from Jay Chen on BBR thread:
excerpt:
The current fuss concerning the RMB/Yuan is entirely born of the American political imagination, because there is no practical exchange rate at which US manufacturing can be ‘saved’ vis-à-vis China-based Japanese/Korea/Taiwan manufacturing in those areas where the two two countries actually compete, unless we are talking about a rate that allows the Hunan peasant live in a USD 220,000 mud hut with a detached garage for two BMWs.
There is a practically inexhaustible supply of obedient, trainable and inexpensive labour in inland China, and any exchange rate float (as opposed to a fiat-determined higher peg rate) will likely see RMB decline against the USD given the scale of China’s needs to fix things, institutions, social contracts, etc.
The observable facts are, once more, exactly that, namely observable. The guy in Chicago getting paid USD 150,000 for making molds is, in a few words, getting paid too much, and the guy getting costing USD 45,000 for inspecting women’s underwear at airport in Miami is costing too much.
Downward adjustment of nominal labour compensation is nearly impossible, and so I believe the USD will have to fall eventually, and fall deep, but, in the mean nasty time, the balance sheet of J6P will be mined, tapped, dissipated, evaporated and wasted by command of Maestro Greensputin and Professor BurnAndKaput. |
