Monday, June 21, 2010

China turns table on developed nations

The Chinese government has acquiesced to demands of revaluating their yuan. Now the onus is on debtor nations to clean up their fiscal house.

Reading between the lines (as any astute investor should do), the not-so-subtle unintended consequence is the days of cheap Chinese imports will come to an end somewhere down the road. Inflation will be compounded by stagnant growth, lowered income and a reduced standard of living for US citizens. As Congressman scapegoat the Chinese for currency "manipulation", it'll be a case of "be careful what you wish for." A rising yuan means higher wages and a rising standard of living for Chinese citizens, but lower wages and a reduced standard of living for US citizens, relatively and in real terms.

Apparently, US lawmakers skipped the lectures on increased competitiveness and productivity.

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