Since we have such a large debt with china, wouldn't their devaluing of currency actually make it easier?
Since we have such a large debt with china, wouldn't their devaluing of currency actually make it easier for us to pay them back? I'm confused as to the exchange rate logic behind all of this. When US borrows Chinese money, it essentially sells china US bonds. Thus it receives Yen. Which must be converted into dollars? Correct? If you could get more dollars for your yen, then this makes bond selling prospects better no?
Economics - 1 Answers
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They are devaluing their currency all the time by pegging it to the dollar. To maintain the peg the Chinese central bank buys dollars from Chinese exporters with newly printed Yuan. Then they use these dollars to buy - among others - US bonds. If the U.S. wanted to pay back their debt it would have to cut 1,6 trillion in government spending. Yuan devaluation makes it easier for the U.S. to go into more debt, and not to pay the debt back.
