Is China stealing money from the United States through our trade deficit?
The biggest factor most American’s either don’t know or don’t remember is that the US dollar is the reserve currency of the world. That makes it the most valuable form of currency and the most valuable asset in the world.
We get to print money to create wealth for our country and our citizens. Sure, we have issues in the United States that are beyond the scope here. But, for every other country they need to produce $100 dollars’ worth of goods to get $100 US dollars. So, when someone like China floods the market with artificially low-cost goods that are either subsidized or with stolen intellectual property the result is stolen US money, the only current real valued currency, leaves the US. This works as long as we can keep printing money and China keeps buying our treasuries.
Here is how china’s economy works…
Government owned banks loan money to companies who then build industrial capacity and sell goods below their own debt service costs. Then get more loans or debt equity swaps to keep them in business.
The other aspect is our own multi-national companies producing their goods there and shipping them back home to sell to us. The only reason this works is because we can print money and our government can keep running deficits to finance their “profits”.
China is a predatory economic power. They are using the above-mentioned techniques to build industries, destroy international competition through flooding markets with cheap products and giving Chinese state-owned companies power over the rest of the developed world.
They are stealing our intellectual property and not honoring our patents. This theft allows them to produce goods at a lower price since they didn’t have the cost to develop the technologies. They then flood the market with a less expensive comparable product.
We do manipulate our currency and interest rates which also inflate or deflate investment. Every country does but the reason it has benefited us and them is we are the reserve currency for the world. But, when you’re not backed by a commodity such as gold this becomes a Ponzi scheme of sorts that leads to the manipulation we already chatted about.
You compound the manipulation of the money supply with slave labor wages, no health care costs, no environmental protections, at some point the music stops. At some point our companies are out of business and China won’t be able to keep subsidizing the low costs. This will create a monopoly and price inflation
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