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bushier Post time: 2015-3-1 23:53
Year 1986 approx 3.75 Yuan to 1 dollar ==>1 bowl of noodle is 1 Yuan
Year 1994 approx 8.75 Yuan t ...
On the contrary, a weaker Yuan allows the price of wages to rise faster than the price of consumer items, and the standard of living rises, rather than falls. It also speeds up the velocity of money in the economy, generating more jobs, and higher paying ones. An overvalued Yuan makes it more expensive for consumers, for employers, and for manufacturers to make a living. An overvalued Yuan causes economic activity, and more fundamentally, manufacturing activity to come to a stand still, as China-manufactured products become too expensive abroad when priced in dollars, and too expensive domestically, when priced in Yuans. This pincer effect has resulted in the PMI Manufacturing Index of China to fall into recessionary territory for 3 consecutive months now. It has forced businesses to borrow in dollars while the exchange rate is high, parking these dollar-denominated loans abroad, using their failing factories as collaterals, denominated in Yuans. This is the only way they can free up their equity from inevitable bankruptcy, at the rate the PBOC is revaluing the Yuan far beyond the willingness of foreign and domestic buyers to buy Chinese products.
Using the 1 bowl of noodle 1 yuan analogy fails to capture the fact that at 8.75 yuans per bowl of noodle, each person in China was able to afford to eat 8 bowls of noodle for every one bowl that he used to be able to afford, because with the devaluation, wages increased even more, and jobs also became more plentiful, such that those who used to earn practically nothing, are now earning ten times more in purchasing power.
Bushier's "logic" needs to be paid attention to. This is precisely the kind of "Economic Hit Man's Advice" that seems to have hijacked China's stellar GDP growth rate to a "New Normal" of collapsing growth rate, and in the case of the PMI manufacturing index, to an overall trend of factory failures and insolvencies. All the while, the PBOC leaves hundreds of billions of dollars of forfeited export earnings on the table of international trade for Japan to pick up for free, as Japan devalues the Yen while China overvalues the Yuan. This is grand larceny on a historic scale.