On Low-Priced Currencies

by Don Boudreaux on January 6, 2010

in Balance of Payments, Myths and Fallacies, Seen and Unseen, Trade

Here’s my latest column in The Freeman.  In it, I assume (for the sake of argument) that the Beijing government does in fact keep the Chinese yuan undervalued.  I then ask if such a policy harms Americans and helps the Chinese people.

I answer “no”:

The real costs of the resources and outputs exported by the Chinese people are not lowered simply because Beijing keeps the price of the yuan artificially low. And the resources spent to supply the extra American demand that results from an artificially low price of yuan—even though they are unseen by the untrained eye—represent a huge cost that harms the Chinese economy.

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