As if Krugman couldn't be any more of a self-serving arsehole in providing Nobel Laureate cover for people who think that extra state spending somehow stimulates and economy, people who call themselves 'Keynsians' but who would never advocate running a surplus during the good times as Keynes thought necessary for a stimulus to work during recession; now he's giving ammunition to the people who are advocating the policy that caused the Great Depression: Protectionist trade war.
China is following a policy that is, in effect, one of imposing high tariffs and providing large export subsidies — because that’s what an undervalued currency does.Of course what this also does is deny Chinese labourers the benefits of their labour. They are kept poor, so that Americans can have cheap TVs.
That should be a violation of trade rules; it might in fact be a violation, but the language of the law is vague on the subject. But leave aside the fine print of the law for a moment: what China is doing amounts to a seriously predatory trade policy, the kind of thing that is supposed to be prevented by the threat of sanctions.That's only a problem if you think a trade deficit is a major problem.
Yet the Chinese have taken our measure, and decided that we won’t act. Until or unless that changes, we’re just whistling in the wind.Again, the losers of this policy are the Chinese people, not Americans.
I say confront the issue head on — and if it leads to trade conflict, bear in mind that in a depressed world economy, surplus countries have a lot to lose from such a conflict, while deficit countries may well end up gaining.It wasn't the Wall St. crash of 1929 which caused the depression, it was protectionism. It wasn't stimulus that pulled the world out of it, countries which kept budget deficits under control fared better than the USA during the 30's. Krugman has that special form of leftist idiocy which imagines that the economy is able to be controlled and steered by the state. Idiocy here being defined as doing the same thing over and over again, and expecting a different result. Deficit spending stimulating the economy may be OK in theory, but in practice it just hasn't worked. Ever.
A trade deficit is not in and of itself a bad thing, because the buyer benefits from imports. Sure there might be a few people who used to hammer TVs together who are out of a job because they're more expensive than a Chinese worker, but the US economy until it started running stupid deficits (yes under republicans I know) used to be pretty good at generating jobs elsewhere. A trade deficit might upset some dick-waving Government officials who measure themselves by statistics, but the American people as a whole are better off for the Chinese "unfair trade practices".
There's a chap, Paul, called Adam Smith, you might have heard of him? Didn't he point out that the buyer AND seller benefit from trade? Americans getting goods cheap, not only keeps things cheap, and therefore Americans richer, it also depresses inflation, meaning interest rates can be kept lower. Hoarding gold - what mediaeval kings thought riches were - leads to inflation. I believe it was called the "mercantilist fallacy" or something.
Or to put it differently, right now we’re in a world in which mercantilism works.Oh. I see. So the insights of Adam Smith are worth spit are they, Paul? Now that's hubris, Nobel Prize for economics or not.
In the long run we’ll emerge from this kind of world; but in the long run …It will be the long run if anyone listens to Paul Krugman, Nobel Laureate, rent-a-gob for the profligate big state, tractor production statistics-spouting left.