Today China in essence suppresses the standard of living of it's productive sector. They do this by not allowing the exporters to keep the dollars they earn. Instead the exporters are forced to trade those dollars in for Chinese currency which is artificially pegged against the dollar. This means the exporters immediately lose value.
What the author completely fails to understand is that this is another possible outcome:
* China decides to increase the standard of living of it's citizen
* China slowly increases their currency peg to be closer to the value of the dollar
* The exporters slowly have a higher profit, and thus the people a higher standard of living
* The united states slowly lowers it's standard of living
Of course this is one possible outcome. However, the idea that the Chinese are forced to buy our bonds is ridiculous.
They could just buy 1T in oil, copper, or other dollar based commodities. There are plenty of options besides treasuries.
> China slowly increases their currency peg to be closer to the value of the dollar -- The exporters slowly have a higher profit, and thus the people a higher standard of living
Exporters can't export if the price of their goods increase. It's not that easy to unroll their current scheme.
> They could just buy 1T in oil, copper, or other dollar based commodities. There are plenty of options besides treasuries.
How does one transport and store trillions of dollars of commodities (someone has to store them even if they are ETFs)? Besides, these commodities have a lot more risk compared to t-bonds. If the were able to get the same security as t-bonds in something else, you know they'd be buying those as well.
No, the chinese workers have a lesser standard of living because the suppressed value of the currency takes away from the value they can purchase with their wages.
It will even out in the long run as wage inflation will be impossible to fight while keeping down the value of the currency.
I think the outcome you outline is very well understood by the author.
He clearly says:
> This is Chinese industrial policy and it is conducted for domestic Chinese political reasons and will end some day for domestic Chinese political reasons.
What the author completely fails to understand is that this is another possible outcome: * China decides to increase the standard of living of it's citizen * China slowly increases their currency peg to be closer to the value of the dollar * The exporters slowly have a higher profit, and thus the people a higher standard of living * The united states slowly lowers it's standard of living
Of course this is one possible outcome. However, the idea that the Chinese are forced to buy our bonds is ridiculous. They could just buy 1T in oil, copper, or other dollar based commodities. There are plenty of options besides treasuries.