- Through the quarter-century in which China has been opening to world trade, Chinese leaders have deliberately held down living standards for their own people and propped them up in the United States. This is the real meaning of the vast trade surplus—$1.4 trillion and counting, going up by about $1 billion per day—that the Chinese government has mostly parked in U.S. Treasury notes. In effect, every person in the (rich) United States has over the past 10 years or so borrowed about $4,000 from someone in the (poor) People’s Republic of China. Like so many imbalances in economics, this one can’t go on indefinitely, and therefore won’t. But the way it ends—suddenly versus gradually, for predictable reasons versus during a panic—will make an enormous difference to the U.S. and Chinese economies over the next few years, to say nothing of bystanders in Europe and elsewhere.
My favorite part is how is breaks down the process by which dollars go from the US, to China, and back-- personified in an Oral B toothbrush purchased at a CVS. The flow of currency is fascinating, and Fallows does a great job of keeping it that way.
While the article is long (4 web pages, so longer than Kiplinger's but shorter than the Sunday NY Times Magazine...), it is easy to understand. When it comes to currency policy and politics, easy to understand is good by me.
- 1881 US Silver Dollar photo by Lone Primate via flickr