How much will taxpayers shoulder?

[Jester]

You will need to explain that one. Robin Hood was being beneficial to the poor, but still by a criminal act of violence. It might also have been considered fair if the Normans were wrongly over taxing and abusive to the Saxons. Here is a case where lawful, fair and just have different meanings depending on which side of the equation you stand.

The question is "Should the US surrender its manufacturing capacity for a short term increase in GDP?" I'm sure what was meant was "mutually beneficial". Why would the US and China engage in trade that was not mutually beneficial? You and Zenda might appreciate the siphoning of money and power from the US to China, but the attitude on this side of the Atlantic is that we should preserve our standard of living, and economic power.

The big picture of the argument in McKinnon is correct, though. Revaluation would reduce the trade deficit *with China*, and would increase US manufacturing power in those areas currently dominated by China, but it wouldn't help the trade balance in the long run. Savings vs. consumption is what is going to change that overall picture, and so long as the model is "don't save in private, don't save in public, and spend as much credit as you can get your hands on", the US trade deficit will continue even if you shut off 100% of trade with China. You'll just import from Mexico, Canada, Indonesia, wherever.

The big differences would be that your standard of living, especially at the poorest end, would drop with the end of the cheapo-Wal-Mart era, and China would be forced to sell to someone else. The geopolitical situation might dictate fighting back with protectionism (if you're the kind of person who believes in US power, which of course I don't) but the economic situation doesn't.

-Jester