The position the US has put itself into
China threatens the nuclear option
Will China shoot itself in the foot? Their threat is more threatening to them
Bush Slams ‘Foolhardy’ China Over Trillion Dollar US Currency Threat
China threatens to trigger US dollar crash
Uncle Sam, Your Banker Will See You Now By Paul Craig Roberts
In the Hole to China/the Dollar Under Siege…
China holds 40% of the US dept., while they are happy with the current status quo of having a lowered value of their currency to the US dollar; allowing them to build industry and sell product cheaply to the US — the value difference means their retail matches the US wholesale price - means Walmart sells imports not US made goods.
What they get from the current status quo, is not much profits but volume in their production. If they dump dollars the price of the US dollar will fall the price of imports in the US will go up. The lower dollar would make US products cheap for exporting, US labor would be cheap as viewed from other countries. But the bank s who hold dollars would increase interest rates in hopes of making the dollar attractive internationally IE if banks in Mexico gave a 50% interest rate I would consider opening a bank account in Mexico. But high interest rates would pull money away from companies — IE investors would choose between a stock which would bring a 10% return on investment or money with a guaranteed return.
The likely outcome would be a recession with interest rates and inflation being more important than cheap US labor. But the status quo is also putting pressure on US manufactures who can not compete against china on an unleveled playing field, causing them to not be able to make as much product and recess within those industries that China moves into.
If China presses the button, the imports to the US would stop. They would have a recession for manufacturing cheap cameras … their economy would see a drop in prices on imports and they would have to figure out a different use for their factories. Maybe they could go into the weapons business.
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