Krugman in actions of practice

Comments on Yiping Huang “Krugman’s Chinese renminbi fallacy”, 15/03/2010, http://www.eastasiaforum.org/2010/03/15/krugmans-chinese-renminbi-fallacy/

Krugman is good and famous at the so called strategic trade. Now he has found an occasion to apply his theories at the world scale.

When I heard or read about Krugman's talking about the Chinese currency versus the $US, I have always been reminded by a remark by Frank Milne (hope it is correct) once at his lecture of microeconomics at the graduate/masters level: economic policies can kill at a mass scale - look at what happened in China during the great leap forward and how many people died as a consequence!

Now Krugman, a winner of the Nobel Prize in Economics, is making his prescriptions to real economic problems and doing his economic advices to the US and possibly to some others.

It will be interesting to anticipate what his advices will result in, even for the Americans whom he tries or intends or has said or is said to help.

A few points to consider in teh context of US external deficits:

1. The US external deficit, is the US having external trade deficit with China? Or is China the largest and for how long it has been as the largest?

2. If China is currency manipulator then it must have devalued its currency against the $US which its currency pegs into. Has China devalued its currency in recent years? Against the $US?

3. Isn't the US a currency manipulator? Haven’t we often heard the US authorities say or have said that they want or wanted strong or weak $US? What do they mean or have they meant? Not a currency manipulator?

4. PPP and currency valuation: it is a general knowledge that most developing countries' GDP is higher in PPP, as opposed to their market currency. Does it mean their currency is undervalued in market terms?

5. The US has been blaming others for its external deficits, that is because they trade with others. Who should it blame for its out of control budget deficits?

6. Why balances, as opposed to imbalances should be the norm? Just think about savings and borrowings, consumptions and investments, why should any unit except the world as a whole be always balanced at all time? Is that good or bad for the living standards and welfares of the world?

7. Why does the US argues for free trade sometimes and say a different thing some other times? Isn't it political economy at the world scale?

8. Why has the US had the lowest and sometimes negative saving rate? Did any other countries force it to do that? Whose fault is it?