Marc Chandler

Why China's New Colonialism Should Precipitate a Crisis

In the first 2 qrtrs of 2008, as the USD was going Down the Tube, says Freya: These are the facts: the euro fell 0.09% in H1 09, the Swiss franc fell 2.23% and the yen fell 5.8%. The dollar did sell off against the 4 currencies that were the hardest hit in H2 08, Australian dollar, New Zealand dollar, British pound and the Scandi-bloc.

An appreciation of the CNY iis not tantamount to a dollar devaluation because CNY appreciation says nothing about the euro-dollar exchange rate or the dollar-sterling or the dollar-yen rate.

That said, I tend to believe that the currency is not the key way China competes in the world economy, but rather by cheap labor. Asian Development Bank estimates that Chinese mfg wages are 1/33 of US. CNY doubles and their wages are 1/16 of America's.

It looks to me like the US is one of the few countries that as a declaratory policy says that a strong currency is in its interests. The Swiss don't say that. They intervene to sell their currency. The British, Canadians, Europeans do not say they want a strong currency. Geithner and Bernanke have recently repeated the US mantra. They do not say they want a strengthening dollar, simply a strong dollar. No straw man here please.