Talk about taking a nuclear weapon to a knife fight.
I don't link to Krugman very often* but thought there might be some comment over his most recent post. In this morning's "Is China's Politburo spoiling for a showdown with America?" and "Taking On China" I said:
Ambrose Evans-Pritchard is the International Business Editor for the Telegraph. He has sources that most financial journalists would kill for.Here's the Economist:
Paul Krugman is a pundit for the New York Times. He won the 2008 Nobel Prize in Economics.
I think Ambrose is smarter although I once wrote that his writing "ran the gamut from despondent to suicidal".
The return of the "get tough" approach to China
Paul Krugman continues to be very upset with the Chinese government over its currency policy. He has written another column declaring that China's dollar peg is damaging to the global economy, and that America should get tough with the leadership in Beijing. This still makes no sense to me.
As our Leader points out this week, it is probably in everyone's interest for China to allow the renminbi to appreciate at this point, though I'm sympathetic to Scott Sumner's argument that during the depths of the global recession, China's peg was highly stimulative to the Chinese economy and helped to end the global economic freefall. But while appreciation of the RMB would be good for mostly everyone:
[I]t would not be a magic bullet, either within China or outside. Rebalancing China’s economy will require big structural reforms, from tax to corporate governance, as well as a stronger currency. A stronger yuan would not suddenly bring back millions of jobs to America. Since America no longer makes most of the products it imports from China, a stronger yuan would initially act more like a tax on consumers.
Rebalancing America's economy will also require major structural reforms. As I have been pointing out, America's trade deficit with China has been steadily shrinking, and recent growth in the deficit has primarily reflected an increase in America's petroleum deficit. Mr Krugman tries to illustrate the scope of the problem by comparing current data to 2003 numbers, saying, "The International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion — 10 times the 2003 figure." But from 2003 to 2009, America's exports to China grew by more (245%) than America's imports from China (195%). For "the most distortionary exchange rate policy any major nation has ever followed", it sure doesn't seem to be preventing the very shift Mr Krugman would like to see.
His view of what ought to be done is perplexing. First, he calls on the Treasury department to label China an official currency manipulator. I'm not sure why he believes that anyone in China or America is confused about what the Obama adminstration thinks of the dollar peg. They've been quite clear. I'm also not sure what effect this is supposed to have.But that's just the warm-up....MORE
*The last time he was mentioned was in "Largest Group Of Nobel Laureates To Remove A Sword From Someone's Throat""when he was one of eight Nobelists (three Laureates in Physics) to assist a sword swallower.
Previous to that he was straying onto my turf and saying silly stuff:
...Oh, and the argument that if you create a market, you’re opening the door for Wall Street evildoers, is bizarre. Emissions permits aren’t subprime mortgages, let alone complex derivatives based on subprime; they’re straightforward rights to do a specific thing. It will truly be a tragedy if people generalize from the financial crisis to block crucially needed environmental policy....Silly stuff, that's my turf!!
From his Dec. 7 post: -Unhelpful Hansen
Within minutes this popped up in the feed-readers: "Europol: $7.4 Billion Lost from Carbon Trading Fraud in Europe" from Mr. K's very own New York Times.
Followed a couple hours later by "Woman Who Invented Credit Default Swaps is One of the Key Architects of Carbon Derivatives, Which Would Be at the Very CENTER of Cap and Trade".
Hey you stay off my cloud.