Export is bread and butter for China so an artifically depressed currency means keeping those factories humming and helping put food on the tables of hundred of millions of low skilled laborors. And it is the fear that a revalued RMB will cost massive job losses that stop the Chinese gov from letting RMB appreciate too much too fast. There are already reports some savvy manufacturers are scouting places like Vietnam where labor cost is even cheaper than China and gradually moving the assembly lines over there.

Now the US is a different story. The US economy is driven mostly by consumption (approx 2/3s). And since the US don’t really make much anymore, it has to import just about everything (how often do you see a Made in the USA label in Walmart?). If the USD continues to decline, it’ll soon take more dollar for you to buy that nice set of wheels made by Toyota, playstation for your kids by Sony, etc etc. For now, companies have been able to resist raising prices by enhancing productivity, but sooner or later, it will have to pass on the increase to you and you’ll have to cut back because there just isn’t enough money to buy everything. Alternatively you speak to your banker about an equity loan and next thing you know you’re swimming in debt. The US savings rate is already negative. How much more negative could it get before the system crumbles ?

Now, how does one get a canadian citizenship ?

Does it stand to reason that being in manufacturing is a wise move for Americans as employees right now – vs services? If we will not be consuming as much – due to less spending money – then the service industries like the airlines (in addition to from high gas prices) will certainly take a hit. Same for hotels, restaurants, etc. Just writing off the top of my head here… My husband has been offered a job in aerospace manufacturing (he would have to leave service industry) and maybe it is a wise move. Any opinions?

A weak dollar is not that simple, nor is a strong RMB. Our economy is more complex than the chinese economy, but even so the repercussions of a strong and or weak currency aren’t so easily discerned. For instance the US is still the worlds largest manufacturer, just not of clothes or electronics. So a weak dollar seems like it helps us sell our end products, but those end products are in turn made up of constituent parts made in other places. Any gain in end sales tends to be offset by a rise in cost for imports.

Conversely the Chinese make lots of stuff, but have to import most of the basic commodities to produce those things. Therefore the weak currency adds to the cost of production. For example if you think oil is expensive for us, trying being a chinese business. All of your commodities are artificially expensive. In essence the chinese govt is attempting to subsizdize exports with imports.
Josh
Josh