If I'd been thinking clearly--and certainly not through the filter of self-interest--whenBeijing Review recently asked me to do a piece on RMB revaluation, perhaps the hottest story going in journalism of late, I would've said, "Let's wait to see what Paul Krugman does. Anything I do could very well be superfluous." And I damn sure would've been right. Albeit without an assignment.
In a column titled The Chinese Connection, Mr. Krugman nails the complex issue--and the political truths behind it--of revaluing the Chinese yuan upon the demand of certain Western interests better than anyone I came across in my research, and surely better than what I in the end wrote in my piece, Free Floating RMB.
The lead graffs and a link follows:
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. But let me try to explain what's going on.
Over the last few years China, for its own reasons, has acted as an enabler both of U.S. fiscal irresponsibility and of a return to Nasdaq-style speculative mania, this time in the housing market. Now the U.S. government is finally admitting that there's a problem - but it's asserting that the problem is China's, not ours.
And there's no sign that anyone in the administration has faced up to an unpleasant reality: the U.S. economy has become dependent on low-interest loans from China and other foreign governments, and it's likely to have major problems when those loans are no longer forthcoming.
Here's how the U.S.-China economic relationship currently works:
