After reading Peter Schiff's wonderful book explaining so simply Austrian economics, and the economic history of America... uh, Usonia, I have two questions about the economics of the current US-China economic imbalance. I don't believe the first question is answered in the book. The long second question will be a new thread.
FIRST QUESTION. With fiat money it's possible to manipulate exchange rates, right? But I've always assumed that there must be something wrong with the explanation that exchange rate manipulation by the Chinese (or anyone) is the reason for trade imbalance. Such manipulation must eventually fail of its own contradictions, right? But I'm not clear. What are the contradictions? Why would people/companies accept manipulated money?