Akkam’s Razor

Via Stirling Newberry of BopNews:

The reality is that China is allowing the Yuan to appreciate because the view of its policy makers is that China’s major problem is access to raw materials. This means that they must first increase economic force projection - that is, raising the value of their currency - and secondarily military force projection. This second will take some time, but 20 years is a good estimate before China will be able to assert that the Pacific Rim is in their sphere of influence.
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The important question is the long term distortions in trade patterns caused by having some parts of the world economy liberalized, and others highly protected. This is creating incentives for individuals to engage in actions which they would not do otherwise. These distortions produce trade imbalances, and the trade imbalances are producing a growing pressure for a significant realignment in the underlying currencies and economies.

This realignment will be so large that many nations will decide to use military force rather than accept the outcome. Unfortunately the US is one of those nations.

I would expect that (currently) the economies of the US and China are interdependent enough to ensure that nothing like Newberry is predicting will happen. However, China is certainly flexing it’s muscles (PDF), and the overwhelming bulk of their imports are raw materials.

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