Re: "Have you thought about what China does to do this and if they would be able to sustain this if the dollar goes low enough?"
Of course I've 'thought about it'.
But... you seem to be missing one of the basic facts: China's Yuan is 'PEGGED' to the dollar (actually, pegged in a narrow band to the dollar).
So, when the Dollar falls (say... against the Euro... or the Pound... or the Swissie... or any other currency that isn't manipulated to track the Dollar) --- it DOESN'T CHANGE vs. the Dollar.
(PS --- the VAST MAJORITY of the US's trade deficit is against Asia, mostly China and Japan.)
Re: "... Also, as far as I know, China is the only country that does this."
No. There are several.
Re: "...Why did you include Japan, who devalued their Yen years ago when their economy went south?"
Because --- although they abandoned their formal peg of the Yen to the Dollar many years ago --- the Japanese Central Bank (acting on behalf of the centralized political leadership of the country) is one of the most ACTIVE Central Banks in the world when it comes to intervening in the Yen/Dollar exchange rate (interest rates at or very near to ZERO for many years, for example) to manipulate the Yen's value downward to maintain the exporting advantage of their manufacturers.
You see, Japan's biggest market is the US, and in that regard, they are COMPETING for US marketshare with China --- so their national policy is to not allow the Yuan to go cheaper without the Yen following it down.
Much of the rest of South East Asia (Thailand, Taiwan, Vietnam, Malaysia, Indonesia, etc., etc.) takes their cues from China & Japan on relative currency exchange rates with the Dollar.
So, you see, with China & Japan accounting for near 90% of ALL OF THE US'S TRADE DEFICITS --- they remain the keys. |
