Death by Renminbi
In a normal world, the dollar’s weakening would be welcome, as it would help the US come to grips with its unsustainable trade deficit. But, in a world where China links its currency to the dollar at an under-valued parity, the dollar’s depreciation risks major global economic damage that would further complicate recovery from the current worldwide recession.
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WASHINGTON, DC – Over the last several weeks, the dollar’s depreciation against the euro and yen has grabbed global attention. In a normal world, the dollar’s weakening would be welcome, as it would help the United States come to grips with its unsustainable trade deficit. But, in a world where China links its currency to the dollar at an under-valued parity, the dollar’s depreciation risks major global economic damage that will further complicate recovery from the current worldwide recession.