March 15, 2010

Krugman's Last Stand

Columnist Paul Krugman of the New York Times says the US government needs to "take a stand" against China by declaring that Beijing "manipulates" its currency (Renminbi) and slap big extra tariffs on Chinese imports. Krugman began the year with the same message and seems willing to stake his reputation on his quixotic quest. Frankly the US has already taken a stand on the issue of the Yuan/Dollar exchange rate and been stood down. Further Krugman's simplistic explanation of alleged Chinese "mercantilism" is surprising from a Nobel Prize winning economist. To blame global economic imbalance on imports of Chinese goods is absurd.

To declare China a currency manipulator while ignoring Tokyo's support of the Yen and other currencies pegged to the US dollar including oil exporting nations and whole regions (the Caribbean, etc.) is a selective and hostile act. And if the Yuan is so undervalued why are the EU, Brazil, Australia, and other countries with important China trade not joining the USA in a stand against China?

Millions of Americans are already cutting back on what they buy and trying to make do with less. Do we need the cost of everything to go up because of additional tariffs on Chinese goods? Does Krugman think stagflation will help the American economy recover?

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