Lukey
Senator
Doesn't work. At first everything is cool as you devalue your way to competitiveness by exporting deflation, but eventually it creates the conditions for "virtuous cycle" to became a vicious one (as the Chinese are finding out now):
http://www.zerohedge.com/news/2015-...vicious-albert-edwards-remembers-1997-asian-c
The question they ask at the end is a good one. If the Chinese are forced to continue liquidating their US Treasury holdings (built up as they sold cheap goods to the US) to fund capital outflows, what effect will this have on the Fed's ability to control interest rates. If they lose that as our economy is slowing, it won't make any difference if they raise rates or not, we're going to see higher rates (unless they launch QE4).
http://www.zerohedge.com/news/2015-...vicious-albert-edwards-remembers-1997-asian-c
The question they ask at the end is a good one. If the Chinese are forced to continue liquidating their US Treasury holdings (built up as they sold cheap goods to the US) to fund capital outflows, what effect will this have on the Fed's ability to control interest rates. If they lose that as our economy is slowing, it won't make any difference if they raise rates or not, we're going to see higher rates (unless they launch QE4).
