Krugman takes a realistic look at what might happen should the US government give in to the strong business lobby of manufacturers and force the Chinese to revalue their currency. (NY Times.) The people running the President's Economic Council are either misguided or (fill in the blank). Forcing the Chinese to revalue their currency may just nudge the Chinese to stop their massive purchases of US Treasurys. With one less buyer of US T-bills, the US government may need to raise its interest rates to attract a new group of buyers. And what about the Chinese dumping the dollar? Could it happen? Maybe. Would the Chinese do it? Probably ... one day.
I hope that GW, with his Harvard MBA, would understand the macroeconomic implications to the USA should he continue to follow the advice of the 'Misguided Economic Council' in DC. Stop the trade saber-rattling and sit down with the Chinese. You win, they win. The American public wins.
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