Yes it is disputable because the U.S. intentionally undervalues its currency by increasing the money supply.
The combination is that the US is nagging China to change the value of their currency, because its clearly undervalued, and it is, clearly.
Because its not foreign trade that is responsible for the value of currency it is the size of the GDP and the amount of money in circulation. The U.S. economy is heavily serviced based which is why we have such a large GDP yet import more than we export. The trade deficit signals how strong our economy and dollar really are in that we trade paper money for made goods.
Loads of economies are servicebased, so I dont understand your point.
Chinas economy is in a complete change, not like you think that they are where the US was in the start of the industrial revolution. They clearly arent, their economy is now roughly the total size of the US. The Chinese economy is maturing faster than any economy in the world.
One statistics says that Norway is the richest country in the world, when the fact is quite different.. Another statistic show the scandinavian/nordic country of who have the least money left after paying their housing and groceries every month is the Norwegians.
In China this also means something, because the Chinese they get lots of things for far less, so their purchasing power is bigger inland, but abroad its still expensive. In Europe its relatively alright inlands, but anywhere you go in the world, everything is cheap. You will probably notice a huge difference if you take a trips across the atlantic or pacific on the prices and just how little the dollar is worth. Now, we all know the dollar is overvalued, because the US is buying much more abroad than they are selling.
This is damaging, because if it continues the only way the dollar can go is down. If on the other hand the exports was bigger than imports, the dollar could only go up.
You're right my bad I thought the U.S. had a higher GDP than the EU.
Good to see that the confusion is over. The EU economy is just getting bigger and bigger in dollar terms. The Chinese economy like the Chinese currency is valued now is only worth 2 trillion $. If the Chinese currency were to strengthen against the dollar.
This doesn't take into account that the U.S. is a well diversified economy the fact that a dollar can buy much more in China than it can in the U.S. is proof of how strong the dollar actually is and how inefficient and undiversified the Chinese market is. Their market is where the U.S.'s was at the beginning of the industrial revolution.
Did I ever say the US economy was not a well and diversified economy?
What you say there is not a strenght, its the fact that the Chinese have a "locked" currency which is set by the government and its far undervalued.. Just recently this is starting to change, The Chinese currency is slowly rising in value, and is estimated it should be 1 dollar for 2 Chinese currency. This would triple the "market value" of the Chinese economy.
There is no market value on the Chinese economy, thats the whole point, thats why the dollar will fall to the Chinese currency.
The Euro on the other hand is just the most stable and trustable currency there is, it will be used as a marker for both the US and China when they adjust their currency. Its going to be exciting to see the swings to get the currencies completely revalued.
No the reason why the dollar is loosing value is because we have increased the money supply so that we can trade more paper for made goods. That is not a signal that the $ is weak it is a sign of how efficient and diversified the U.S. economy is.
The Money supply? Lol, the money drain you mean? US assets abroad will be far less worth and in the US they will also be far less worth, it will be cheaper for Europe and China to buy American companies.
Why would we have to do that? Our GDP is still going to be huge no matter what, we don't have to manufacture made goods, the U.S. economy has evolved to the point that we can purchase those goods in exchange for services.
No its not, if the Euro is valued at 1.65$ = 1€, and the 1 Chinese currency = 2 dollar.
If that is the case, the US economy relative to the Chinese and the Euro economy is worth far less, a money drain has taken place, and the US economy is greatly devalued. As a result you interest rates will rise to high levels. Then you will save more and spend less, the imports will fall, the exports will hopefully increase.
Our dollar value has fallen because we increased the money supply.
Money drain you mean..?