The Importance of Currency Manipulation

The way it works is if you depreciate your currency, all households are net importers. And as the household share of GDP goes down, the consumption share typically goes down. If there's been no change in investment, then savings has risen relative to investment. This is the same thing that happened by the way in Japan after the Plaza Accords. Both the Japanese yen and the Deutschmark went up. They were forced to appreciate. And the Japanese current account surplus grew. It didn't shrink. Germany's shrink. But both Japan and China did something else. The point there is it's not true that the currency doesn't matter. The currency matters a great deal, but