He says, "And it’s a policy that seriously damages the rest of the world. Most of the world’s large economies are stuck in a liquidity trap — deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can’t offset."
So what can the US do? He wants Washington to get serious about it. But China has rebuffed a lot of the currency accusations and scolded the US about trying to lecture Beijing on economic policy. Interestingly, Krugman points out that China doesn't really have an incentive to dump a lot of its dollars because that would force China to take losses on its investment and also it would help US exports.
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