Stephen Roach, Chairman of Morgan Stanley (MS) Asia, said a baseball bat should be taken to economist Paul Krugman for suggesting that if China doesn’t move with sweet words to allow a stronger yuan then a 25% surcharge should be applied on Chinese goods.
Bloomberg: “We should take out the baseball bat on Paul Krugman ; I mean I think that the advice is completely wrong”, Roach said in an Bloomberg Television interview in Beijing.
When asked to respond to Steve’s comments, Krugman said he was “a little surprised at [Roach] for saying that. “What I said is actually based on pretty careful economic analysis”, said Krugman. “We have a world economy which is depressed by China artificially keeping its currency undervalued.”
According to Krugman, the global growth would be about 1.5 percentage points higher if China would let its currency appreciate.
Meanwhile, Roach maintains his opinion that Krugman is “giving Washington very, very bad advice” and believes that America doesn’t have a China problem. It really has a savings problem.
“America has the biggest savings shortfall of national savings of any leading country in modern history, and when you don’t have savings you have to run current account deficits to import surplus savings from abroad and run massive trade deficits to attract the capital”, said Roach. “Last year America ran trade deficits with over 90…countries. The U.S. has had a conscious policy on maintaining “a strong and stable dollar”. China is basically saying the same thing in terms of its stable currency. Isn’t it the height of hypocrisy that America can articulate a particular position of its currency but Chinese are not allowed to do that”.
http://www.youtube.com/watch?v=11WlFlO_mDg
Dollar, Paul Krugman
Krugman is a moron.
What Krugman is saying is that China would lose out in a game of chicken as she is in a no-win situation. As in real life, what the populist economist doesn’t realize is that one or both of the “drivers” might not be as good or as fast as they reckon. Accidents can and do happen. It also might be the case that there won’t be any emergency services capable enough to handle the resultant carnage. Think about it.