There are many problems with that article, many assumptions which are questionable. Admittedly, some truths.
Since the yuan is pegged to the dollar, the US consumer is affected zero by a nuclear option. Assuming no tariffs or protectionism, the price of Chinese imports remain the same and thus the American market is unaffected. If protectionist measures are taken, the American market contracts at the same time the dollar becomes cheaper vis-a-vis all currencies. The Chinese would thus lose US markets and at the same time give a nice boost to American exports to the rest of the world. Thank you China.
If the Chinese unpeg the value of the yuan to the dollar, even better because the yuan revaluated upwards per market forces. It naturally goes up, and Chinese goods are more expensive on a world wide basis. The export of US goods is also promoted, and China exports to the US suffer. No need for the Congress to enact protectionist measures as the Chinese do the hard political work for them.
Question: Can the US consumer 'survive' without the heroin of cheap Chinese goods? Answer: He'll have to. There is nothing required. Much of Chinese production which is not subject to Smiley is at the margins, anyway.
The real problem is that American manufacturers who produce their goods in China will have Smiley curve turn into a grin, a less profitable grin. And since Smiley exports his presently fat profits to the US, there would be a problem. But brands do not disappear and the Chinese do not have any. Do they want to buy them with the cheapened dollars? Be my guest, the US stock markets will love the Chinese. And do not think for a minute that Congress might not intervene to prevent sale of brands if necessary. I think the more sophisticated know in their bones that this is the American ace in the hole.
And don't forget that Americans can churn out globally leading brands like machine work. Apple? You got it. Nike? You got it. Microsoft? You got it. We have an innate genius for it that no one can match. The Chinese are so far behind on that score that I doubt they will ever catch up. Why? Lack of freedom, Big Brother's watching, making sure you 'behave' according to norms. We have no norms and thus genius pops up freely. Admittedly a lot of trash is created but hugely profitable golden nuggets of genius like clockwork, too. We've got the ideas, the Chinese have the factories. You made me grin in one of your posts, as you said you were eating big scoops of Haagen Daz while watching market turmoil, Haagen D. being an American brand we have the world convinced is some sort of Swiss or Nordic thing.
There are dozens of kids - Indian/Mexican/AngloSaxo, you name it - working in garages in Santa Clara, Dallas, Kansas City, Seattle, etc., who are dreaming up ways to change the world as we speak. These kids are not bone-tired from factory shifts in China, Thailand, whatever. If they are tired, it is because they stayed up all night coding, inventing another marvel that will make them billionaires in 10 years. This story isn't happening in China. It happens routinely here.
Ideas are way more profitable, at the end of the day. But that is another discussion.
The suggestion that a nuclear option will somehow solely harm the US is full of holes and unintended consequences. The acrid, sour smoke of hubris emanates strongly.
Two bits of wisdom: (1) Be careful what you wish for, you might get it and (2) exploding nuclear bombs leave fallout whose consequences are impossible to predict without precise knowledge of prevailing winds. |
