Cue the theme music from the "Twilight Zone".
You have found a car to meet your budget. Offered with zero percent financing, you are able to purchase this new vehicle with 36 monthly payments of $100. You sign the contract. You have entered the Chinese currency manipulation zone.
In the Detroit Free Press:
AUTOS IN CHINA: Chery gears up for the U.S.No one is saying that China's currency does not reflect its real value... okay, they are saying that. No one is saying that China is using slave labor to build those cars... but, gee, if their currency really reflects reality, then this must be slave labor:
Maker of the $3,600 QQ aims to load its cars with deluxe features, low prices
China is able to produce cars at such prices because its labor costs are far below those of the rest of the automaking world. Its autoworkers make barely $2 a day, even as auto plants adopt modern technology.That's $60 per month. Obviously, they can't afford clothes or homes or food with those wages. Wait, there is the official valuation used for world trade and then there is the real valuation which lets these workers have homes and clothes and conveniences.
In a totally unrelated article, Reuters reported that:
The U.S. stock market's upbeat reaction to the heated rhetoric between Washington and Beijing over China's currency has puzzled some strategists who say a revaluation of the yuan is ultimately negative for equities.These analysts see that any upward valuation of the yuan would simply increase our Current Account (Trade) deficit because we would keep buying from China anyway.
Maybe. But if the yuan were realistically valued... if that $2 per day became even $40 per day... the cost of that Chery Chevy would definitely not be $3,600 on the world market. The cost of the steel and plastic and rubber and electronics would reflect the fact that the workers could actually afford decent homes and food and clothes and amenities.
And the U.S. manufacturers who are presently competing with $2 per day labor might actually have a real chance to compete for sales. Yes, there would be a period of adjustment. "Inflation" ... as measured by our government ... would have a period of growth. We might even have some layoffs as Wal-Mart finds it tough to compete with the corner hardware store. But, in the end, we might actually save our U.S. based industries.
In the U.S., if you have two sets of books when you run your business... one public and one private... you tend to be viewed as a criminal. Someone ought to mention that to China.