Saturday, October 2, 2010

Wonk, Wonk, Wonk

There's been an awful lot of talk lately about China as a currency manipulator. To sum up, they're unfairly propping up their export industry by keeping their currency undervalued.

For the record, I am most decisively NOT an economist. I probably shouldn't even be weighing in on this. But this makes some pretty serious arguments against the fairly aggressive stance the US has taken.

If we undertake this exercise honestly, it becomes clear that there is a set of very bad potential outcomes. They may not be the most likely outcomes. But because we can't be certain that they won't follow from the suggested course of action, they must figure into the calculation of costs and benefits.

What are these potential outcomes? Retaliation. A trade war. A significant shift in the nature of the Sino-American relationship, from workable to explicitly hostile. An end to hopes for a real solution to climate change. An end to a potential partnership for collective security in Asia. War. None of this is out of the question.

That seems a bit overblown to me frankly. But still. Should we (or anyone), dictate currency valuations for anybody? I'm going to pretend that an economist reads this thing and can give me the answer. It makes me feel special.

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