Friday, May 20, 2005

Yuan Revaluation: Krugman Says Economists Are Confused, Proves With His Confusion

Paul Krugman - The Chinese Connection - New York Times: "Stories about the new Treasury report condemning China's currency policy probably had most readers going, 'Huh?' Frankly, this is an issue that confuses professional economists, too."

And Krugman proves it with his own confused ineptness and hopes for American/Bush economic decline:
"Here's what I think will happen if and when China changes its currency policy, and those cheap loans are no longer available. U.S. interest rates will rise; the housing bubble will probably burst; construction employment and consumer spending will both fall; falling home prices may lead to a wave of bankruptcies. And we'll suddenly wonder why anyone thought financing the budget deficit was easy.In other words, we've developed an addiction to Chinese dollar purchases, and will suffer painful withdrawal symptoms when they come to an end. "

Stay calm, Krugman is confused and his forecast is nonsense. I agree with the editorial in The Economist I cited in a post yesterday: " Don't expect too much." A movement triggered by politics in economics moves slowly, e.g. allowing the yuan to float 2-6% won't cause upheaval in markets nor change employment, balance of payemnts, interest rates very much at all. Events out of policy makers control these days do have the potential for dramatic changes, e.g. 9-11-01.

In all economic situations, Krugman always looks for, predicts, and earnestly hopes for a depression caused by Republicans who are too foolish to just raise income taxes, sales taxes, payroll taxes, corporate taxes and use any tool to grab any assets in the hands of any entity not in poverty.

Come September the NYT wants us to pay $50 per year for access to columns like this? That new business model may need more work.

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