I posted this graph on the blog for the first time in August of 2004. I thought it was worth revisiting in the context of the China-bashing that is now going on, led by Sen. Schumer et al. Notice that with gold now in the $560s we are well down the devaluation path against real goods, and Schumer now wants to break the yuan peg so that the dollar can be devalued against the yuan. That’s competitive devaluation. He is threatening a 27.5% tariff on imported Chinese goods. That’s on the chart too.

Soon as the housing bubble bursts, consumtion declines and we get to the part about plant closings and debt defaults. It is a long way down from here.