RealClearMarkets - Gold Isn't Expensive, Instead the Dollar Is Cheap

RealClearMarkets - Gold Isn't Expensive, Instead the Dollar Is Cheap: This is a really good article about gold and international monetary exchange.

As for China, for Geithner et al to suggest that a stronger yuan will make Chinese goods less competitive on the world stage (thus supposedly making ours more desirable) is the equivalent of a restaurant chef arguing that a shorter minute would reduce the amount of time necessary to cook a soufflé. In truth, money is only a veil, and if the yuan rises even more against the dollar, Chinese goods will continue to arrive here (thankfully) en masse much as Japanese goods did after 1971 when the yen began a 20-year climb against the dollar.

The above is the case because while goods priced in yuan will be more expensive in dollar terms, the costs of goods necessary to manufacture Chinese products will by definition decline. In yuan terms everything will become cheaper for Chinese manufacturers, which means any yuan strength will be mitigated by reduced costs of production.

Even better for China, a revaluation upward would be dynamite for an economy suffering from a devaluation authored in the U.S. The seen here is China's growing economic clout, but the unseen is how much greater China's growth would be if its currency weren't pegged to an inflationary dollar which, on the margin, is making investment in China more of a challenge too.