An older post that I had marked to read, I finally have. A few weeks back there was a debate among the Econ blogs about comments by Clinton/Obama on Chinese revaluation. Tim Duy made some great additions and wanted to highlight it here:

I don’t think that any economist really believes that relative prices do not affect demand. The issue of demand itself, however, is not truly the end game of those pushing for RMB revaluation.  What is the end game?

The end game is a boost to US job growth via an improvement in the US trade deficit. On this point, however, you need to make three additional assumptions.  One is that if the Chinese lessen support for the RMB, their decreased demand for dollar denominated assets is not offset by an increased demand from some other source.  In other words, there is a substantial drop in US capital inflows. The second is that the change in import prices results in a substitution effect to US produced goods and only a minor income effect – because the mix of prices we face is higher, we reduce overall consumption. Decreasing demand for foreign goods does not necessarily imply an increasing demand for equivalent domestic goods. Maybe we just don’t buy the flat screen tv at all. Finally, that there is excess capacity in the US to satisfy the increased demand from the substitution effect. 

This is a much more complex subject than just “if Chinese prices go up, US gets more jobs”,” and it would behoove us to remember that. His whole post is here.