… is from page 271 of economist Christopher Meissner’s 2024 book, One from the Many: The Global Economy Since 1850:
As it turns out, inflation in China was higher than in the United States in the early 2000s. Chinese inflation worked to erode any alleged competitive advantage of the exchange rate peg.
DBx: If a government attempts to stimulate its country’s exports (and diminish its country’s imports) by ‘artificially’ lowering the price of its currency in terms of other currencies, not only does it tax its own citizens in a manner that gives gifts to foreigners, it creates inflation throughout its economy. When the higher domestic prices emerge, these higher prices offset the lower exchange rate of that country’s currency against other currencies. That country’s exports are no longer the especially attractive bargain to foreigners that these were when the devaluation first occurred, and imports from other countries return to begin just as attractive as they were before the devaluation.
Although it flutters, money is a veil on the real economy.
