LilBob

Friday FX View: Japanese Support for Dollar Assets Trumps Chinese Data

The rise in Chinese standards of living is a Catch-22 for the Chinese government. One of the eventual side effects of globalization will be an evening out of incomes amongst working class people around the world. This will have disasterous long-term effects for developed nations such as the US and EU, as well as highly productive nations-like China-that encourage standards of living to increase too rapidly. Ironically, as the evening out hasn't completely taken effect yet, the increase in Chinese production costs will spell some temporary good news for American trade deficits as Chinese goods become more costly-ergo less attractive to those discount shoppers who regularly snap them up-and the US sees significant growth in "second-hand," (literally garage sales and thrift stores) commerce. We've all been buying tons of imported goods for years now and we have attics full of stuff that we can now sell back and forth to each other.