Krugman: Rob Portman lying about China financing our deficit

[pampango]

Ah. Let’s give thanks to Rob Portman, who offered a nice break from all the lies in Tampa, and instead offered us some good old-fashioned bad macroeconomics. Obama won’t take on China, Portman said, because

Obama could not run up his record trillion dollar deficits if the Chinese did not buy our bonds to finance them

How is it possible that we’re borrowing much less from foreigners when the government deficit has gone up so much? The answer is that the private sector is deleveraging, having moved into massive surplus as consumers try to pay down debt and corporations hold back on investment in the face of weak consumer demand. All those government deficits have only partly offset this move, so that overall national borrowing from overseas is down, not up.

So who’s actually financing the US budget deficit? The US private sector. We don’t need Chinese bond purchases, and if anything we’re the ones with the power, since we don’t need their money and they have a lot to lose. In fact, we don’t want them to buy our bonds; better to have a weaker dollar (a point that the Japanese actually get.)

http://krugman.blogs.nytimes.com/2012/08/30/fear-of-china-syndrome/

Thanks to Mr. Krugman for calling out another republican liar playing the be-very-afraid-of-China (one of the right's favorite 'thems') card.

[Jim__]

1. That is great, and hard-to-get, information. Thanks for posting.

[Zalatix]

2. Okay, if the dollar devalues against the Yuan... how can offshoring survive?

This makes an excellent case for devaluing the dollar against the Yuan. Unless there's some magical way that they can still get imports over here despite import costs skyrocketing.

Shit, it's better than tariffs. Take that, free traders!

[Bernardo de La Paz]

3. Wow. Straight up clear talk based on facts, not myth. Perfect. nt