Timothy Birdnow

China has gone on a tear, devaluating it's currency in order to spur exports. China saw a major drop in exports in July, and the Chinese are getting worried about the effectiveness of the Trump tariffs.

So China pulled an old trick, making her money worth less in order to make her products cheaper. This is a dangerous game, though, because it means a rise in inflation. In a Communist country you don't get big rises in inflation because prices are fixed, so instead what you get are shortages of consumer goods. By devaluing the Yuan the Chinese are putting pressure on their peasantry.

There are other aspects to this; South Korea and Japan and India are going to be unhappy with China trying to nose them out, and may well take retaliatory steps as well. It doesn't hurt America much; we'll get cheaper products, meaning inflation won't be a problem here, and while it can damage employment, we are in a period of zero unemployment anyway, so it really won't matter overmuch. In fact, it will help us as it will make it harder to claim we need illegal aliens to come here and steal jobs "Americans just won't do".

So where am I going with all this?  Well, China is signaling it may send the military into Hong Kong and there is every reason for them to make a display of killing protesters; if Hong Kong gets away with it protests could spread, as there is quite a bit of discontent with the government in China, especially in the rural areas. Jobs are scarce, and with rising inflation the peasantry will be even less happy. I fear the Chinese government is going to need an object lesson, and Hong Kong provides the perfect example.

When a tyrant's economy unravels he usually looks to foreign adventurism. China may go that route, too, although I suspect first they will get their own house in order by a massacre of dissidents. Then we may have to worry about them seizing disputed islands, or maybe even attacking a U.S. naval vessel.

As the old Chinese proverb says, "we live in interesting times".

Posted by: Timothy Birdnow at 08:09 AM | No Comments | Add Comment
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