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Opinion
I was quite surprised to find myself agreeing with part of Robert Reich's recent opinion piece ( Wall Street Journal 2009 Nov 17 page ? ). The Obama/Geithner team is carrying forward the mis-guided Bush/Paulson policy of hectoring China about its exchange rate regime. Over the long run, FX policy makes little difference. In the short run, if China wants to sell goods below cost, well, that's GOOD for Americans, not bad. But wait, it is not good for U.S. trade unions - the guys who helped bring down the US auto industry, and who brought the Obama team into the White House.
That Obama makes a special trip to China in order to further this ridiculous policy is evidence for the ever-surprising hold these groups have over the current administration's policy.
However, I was disappointed as I continued reading Mr. Reich's article as he quickly revealed his very shaky and ill-conceived economic Weltanschauung.
What to make of this statement by Robert Reich? :
"Both America and China are capable of producing far more than their own consumers are capable of buying."
Mr. Reich, the price moves to clear markets. We may disagree about the time needed for markets to clear, but certainly it occurs.
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Policy and Theory
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