Let's see, here we have
Exhibit A. US Treasury John Snow caves into whining from US manufacturers and accuses China outright (something he hasn't put in so many words before) of currency manipulation. Three days later, China tries to appease by
raising its textile export tariffs. It's less messy than messing around with currency pegs, I reckon. And easier to
threaten to withdraw.
Which then, brings us
Exhibit B, the NYT's resident Rabid Economist Paul Krugman warning the US government about getting exactly what it asks for.
Paul Krugman wrote:
In other words, the US has developed an addiction to Chinese dollar purchases and will suffer painful withdrawal symptoms when they come to an end.
Like, interest rates would soar, the housing bubble burst, and consumer spending take a dive.
Normally that's where the story would end. Only this morning I look in the local paper and find Exhibit C, our local financial columnist all resentful of doozy ignorant Americans muscling in on his territory. And I quote, because it's a pay only paper:
Jake Van Der Kamp wrote:
Yes, these pundits from New York do not come to us one at a time. If we had barter trade - goods exports from China to the US against hot air exports at $1 per breath from the US to China - it would be the US that runs a big trade surplus with China, not the other way round....
Mr Krugman, do me a favour. Look at the second chart*. It shows that the big buyer of US government debt paper in recent years has been Japan, not China.
Your own government's figures show that China's net purchases of Treasury bills, bonds and notes since that warmonger in the White House took office in 2001 amounts to less than 5 per cent of his blow-out in federal debt securities.
It was Japan that almost single-handedly took care of his growing fiscal deficit for more than two years until the end of last year. But notice also that Japan has now grown tired of the game. It is buying no more. It wants out. If you now start to feel those painful withdrawal symptoms, Mr Krugman, look a little east of China for the reason.
So why
isn't anybody blaming Japan? Duh, because America doesn't lose jobs to Japan. But is anybody even talking about Japan? Or have we seen the Japan "withdrawal effects" already and should we conclude that more of the same from China really wouldn't be that bad?
*Graphs
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