Krugman<...>
Let’s step back and look at the current state of the world.
Major advanced economies are still reeling from the effects of a burst housing bubble and the financial crisis that followed. Consumer spending is depressed, and firms see no point in expanding when they aren’t selling enough to use the capacity they have. The recession may be officially over, but unemployment is extremely high and shows no sign of returning to normal levels.
<...>
Meanwhile, about diplomacy: China’s government has shown no hint of helpfulness and seems to go out of its way to flaunt its contempt for U.S. negotiators. In June, the Chinese supposedly agreed to allow their currency to move toward a market-determined rate — which, if the example of economies like Brazil is any indication, would have meant a sharp rise in the renminbi’s value. But, as of Thursday, China’s currency had risen about only 2 percent against the dollar — with most of that rise taking place in just the past few weeks, clearly in anticipation of the vote on the Levin bill.
So what will the bill accomplish? It empowers U.S. officials to impose tariffs against Chinese exports subsidized by the artificially low renminbi, but it doesn’t require these officials to take action. And judging from past experience, U.S. officials will not, in fact, take action — they’ll continue to make excuses, to tout imaginary diplomatic progress, and, in general, to confirm China’s belief that they are paper tigers.
The Levin bill is, then, a signal at best — and it’s at least as much a shot across the bow of U.S. officials as it is a signal to the Chinese. But it’s a step in the right direction.
For the truth is that U.S. policy makers have been incredibly, infuriatingly passive in the face of China’s bad behavior — especially because taking on China is one of the few policy options for tackling unemployment available to the Obama administration, given Republican obstructionism on everything else. The Levin bill probably won’t change that passivity. But it will, at least, start to build a fire under policy makers, bringing us closer to the day when, at long last, they are ready to act.
Simon Johnson Conventional wisdom has it that Barack Obama’s administration is on the economic ropes.
<...>
What this conventional wisdom misses is that we experienced a severe credit crisis of the kind more typically seen in recent decades in middle-income emerging-market countries. The U.S. can recover quickly -- and jobs can come back much faster than expected -- but only if the dollar now depreciates.
Like it or not, significant dollar depreciation is more probable than most now suppose. The depth of the crisis in late 2008 stunned many U.S. observers, but its features were fairly obvious to people who have worked in Russia, Mexico, Argentina, or South Korea. Similarly, the recovery can share some characteristics with what those countries have experienced.
Korean Rebound
We shouldn’t anticipate any kind of immediate growth miracle in the U.S., but just keep in mind that after its economic collapse in 1997-98, South Korea grew almost 11 percent in 1999, while Russia -- written off in economic terms after its currency, public finances and banking system effectively collapsed in the fall of 1998 -- still managed a 6.4 percent expansion in 1999 and 10 percent in 2000.
Wouldn't that be something?
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
