No I disagree with that entirely. If I’m reading you right you’re suggesting that GIVING money to someone helps the economy. It does not as there is no productive drive behind the transaction. It creates no new good or service.
And wouldn’t it be better if we are going to be the reserve currency of those other nations allowed their currencies to float against the dollar?
On the devaluation of the yuan I don’t know how you can say it is over valued. We have no idea what it is worth because they set the price themselves.
If however you are right does it really make a difference? You must accept that they devalued it. At what point do you stand up and say enough!
Also, do you really think that massive trade deficit we’ve had for the last ten years has helped the economy?
I am not sure. I’ve read some of Ian Fletcher on this. He makes great sense, until I go back read (or listen) to Milton Freidman.
Does the consumer benefit? No, the reductions in prodution cost goes to the stock holders.
I agree with you on this. I'm just pointing out that if you're using an economic multiplier as the basis of your argument, then GIVING money to someone has its own multiplier effect. My point is that using the multiplier effect for economic analyses will often give results that may be the exact opposite of what you want.
And wouldn’t it be better if we are going to be the reserve currency of those other nations allowed their currencies to float against the dollar? On the devaluation of the yuan I don’t know how you can say it is over valued. We have no idea what it is worth because they set the price themselves.
You're just looking at these currencies in terms of trade transactions. There's a reason why China has to set the price of its own currency by itself: it's because it's a worthless currency outside of China. What you see at work here is something that nobody would ever allow here in the U.S.: By pegging its currency to the U.S. dollar and using the U.S. dollar for their own international trade, China has basically set itself up as a slave colony of the United States. Their slaves get paid in yuan, and the yuan has no value other than what the Chinese government says it has. The lesson here is that the currency of a nation with a closed economic system and government-run industries is completely worthless.
Do you really think that massive trade deficit we’ve had for the last ten years has helped the economy?
I don't think it has really helped or hurt our economy at all. I see a massive trade deficit as the natural course of events that unfolds when a country gets so large and advanced that it has the highest standard of living in the history of mankind. We can basically have one of two things here in the U.S.: a high standard of living or an unemployment rate (a real unemployment rate, that is) near 0%. We can't have both, because we can never afford to buy everything we take for granted if we have to pay American labor to produce these things.
I've always said that it comes down to this one very simple point:
1. Ask yourself how much you are willing to pay for [X] (whatever that may be: a car, a haircut, an iPhone, etc.).
2. Ask yourself how much you would want to get paid to produce that same [X].
The difference between these two numbers -- and it is probably very large, if you're really honest in your assessment -- explains why advanced countries with a very high standard of living usually import a lot of things from Third World countries.