China Thoughts
Courtesy of guest author Terry Doherty
Greece and many other economies are up a creek without a paddle, and that will become more apparent later.
The thing about currencies and exports has most relevance for countries that have economies that predominantly depend upon exports. They are the most vulnerable to a recession as well. And yes, that would be China.
And yes, things are much worse in China than people understand. Just have a look at this film. It is excellent, and very accurate. This is what Chinese cities REALLY look like. The nice pictures of the big buildings in Shanghai and Beijing and the fast trains and so forth have about as much to do with the real China as pictures of the glitz and glitter of Las Vegas has to do with your neighborhood. Chinese cities are pretty shabby and depressing, and look mostly like huge ghettos. And, people there live like they do in the ghetto. And that’s the cities. Once you get into the countryside, you would think you accidentally got transported back in time about a hundred years. You’ll see very few cars, but lots of bicycles that all seem to look like they were made 50 years ago, and broken down carts drawn by mules and horse. No joke. Naturally, they don’t publicize that much.
Video: http://www.hulu.com/watch/91553/vanguard-outsourcing-unemployment
Note: a weak currency allows a country to export goods more readily because that country’s goods are less expensive in the currency of the importing nation. But that also means that exporters get less for their exports when their currency is weak.
On the other hand, a weak currency makes it harder for a country to buy imports because they are relatively more expensive (i.e., from the perspective of the importing country). A weak currency also means that things denominated in that currency (e.g., stocks and commodities) are more expensive. So, as the dollar weakens, the price of stocks or dollar-denominated commodities tends to go up, even if the value is unchanged.
One thing for sure, prosperity cannot be attained by weakening your currency to death. That’s because one way a country’s wealth is measured is according to the goods and services it can purchase. And, the weaker the dollar, the less goods and services can be purchased from other countries.
Have a look at the REAL China, keeping in mind that these are the cities, which are FAR better off than the rural parts of China, where 75% of the population lives (or rather, survives).
See Also Terry’s previous article: China: Economic Catastrophe Unfolding
Terry Doherty is the Research Program Coordinator in the Depts of Biomedical Sciences and Academic Affairs at Cedar Sinai in Los Angeles, California. Terry spends considerable time in China and has frequently traveled through the country.
