Monday, March 15, 2010

Correspondence

In response to a couple of emails questioning my approving reference to Paul Krugman's column today:

No, I don't agree with the main point of Krugman's column about how the supposed undervaluing of the Chinese currency is the root of all our economic problems. My point is that I think he is correct that the Chinese owning trillions in US Treasuries is not something to lose a ton of sleep over.

3 comments:

Anonymous said...

Conrad Black last December 26th...

"The flip-side of this controversy is the emerging U.S. economic miracle, which at this point officially promises increased taxes, faster economic growth, 50% to 100% annual increases in money supply without inflation, for a decade of trillion dollar annual federal budget deficits without seriously raising interest rates, or devaluing the dollar. All 18 wheels will come off this impossible contraption, in all directions of the compass. And all numerate people, including, presumably, the unfathomable Timothy Geithner and the fabulist President whom he serves, know it.

"I predict that in a decent interval after his confirmation as Federal Reserve chairman next month or February, Ben Bernanke will announce that the central bank will no longer buy the treasury notes that finance this orgy. The United States cannot drink itself sober. China has now passed on the pleasure of continuing to buy low yield instruments of a country that is doing the necessary to convert its currency into wall paper, if not toilet paper. The Federal Reserve is buying the treasury issues that finance the federal government’s deficit-straight additions to the money supply — the most familiar form of currency debasement and rampaging inflation, from the times of Caligula to Juan Peron and Robert Mugabe.

"Obama and Geithner will scream like wounded banshees that Bernanke has betrayed them on how to deal with what they will portray as George W.’s messy leavings, while Bernanke devalues the dollar by about 15%, raises interest rates to about 6% and requires federal government spending cuts of about $500-billion annually, largely from a revisitation of entitlements and some sales and transaction taxes that the Congress will have to agree to in conference as an emergency compromise between the parties. The health care charade of buying individual senators with from $100-million (Christopher Dodd,), to $3-billion (Bill Nelson of Florida — not Ben Nelson of Nebraska who folded at $100 million) can’t slice this Gordian Knot. There will be fewer lawyers and investment bankers in the U.S., and more savers and investors, and if the politicians don’t ruin it again, market forces will shape up the U.S. to meet the Chinese challenge. But both job creation and economic growth will be slow in a transitional period."

Mrs. P

Anonymous said...

FYI:

http://www.themoneyillusion.com/?p=4422&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Themoneyillusion+%28TheMoneyIllusion%29

FLG said...

Anonymous:

I read that link. Krugman got pissed at Ryan Avent for making a similar response.

 
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