Funnily enough, Sal Khan (Khan Academy) explains it here:
https://www.khanacademy.org/economics-f ... -debt-loop - move manufacturing where it's cheap
- benefits the rich (and politicians)
- benefits some consumers (cheaper prices)
- hurts manufacturing jobs and associated service jobs
- but those politicians look at the above equation and choose to benefit themselves
- China prints yuan
- Buys up US currency for reserves
- Uses reserves to buy US treasuries (loans money to the US) at low interest rates
- this keeps interest rates low in general
- that helps consumers and businesses borrow to invest or spend
- keeps Chinese products cheap and affordable
- people keep buying those and manufacturing there.
- China gets export led growth
- USA has many incentives to lose manufacturing base
- many US consumers, some US workers and the rich benefit
- when you stop this artificial financing to unwind, drops the value of US dollars and US currencies,
- drops the value of the Chinese holdings. long-term US interest rates would go up a lot
- borrowing gets harder, hurts consumers and businesses, causes recession
- so USA and China are locked in this cycle.
- long term it's quite bad for the US Manufacturing
- for politicians, (with VERY STUPID VOTER BASE - VERY VERY VERY STUPID), they look good with low interest rates, "healthy economy".
of course, that all makes sense (esp how Khan explains it), but even if voters were not so stupid, and politicians not so corrupt and benefitting, it doesn't seem possible to stop altogether as too many people benefit, and unwinding the cycle causes a lot of pain.
Posted: Thu Nov 03, 2022 4:38 pm
) is the the same US political party who promoted, advanced and signed the agreements for multinationals to go into China to seek 'cheap', "low paid" and otherwise use the citizenry as fodder for US corporations are now the same ones who now refuse to work with China. They now blame China for suceeding and even going beyond US infrastructure paradigms!