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All the US need do is to discount back, and the originally discounted exchange rate nation will be under proportionally more imported inflationary pressure than the originally overvalued exchange rate nation.


And doesn't that depend on the relative mix of structural imports from third parties? If the US has to import more, say, oil than China does, then the US would be the first to have to back out of a competitive devaluation in the face of cost-push inflation, no? (Yes, I know that oil is priced in dollars, but presumably the oil producing states would not keep doing that in the face of a serious competitive devaluation. Or maybe they would because the US has more control over them than commonly imagined, in which case they would count as domestic production for the purpose of this analysis.)

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jun 8th, 2010 at 07:52:25 PM EST
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