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WSJ: China Criticizes U.S. Hyper-Keynesianism: “Puts Global Recovery at Risk”

November 16th, 2009 · 2 Comments · Uncategorized

According to the Wall Street Journal, Liu Mingkang, China’s top banking regulator has “issued a sharp critique of U.S. financial management only hours before President Barack Obama commenced his first visit…”

Other than the standard concerns over protectionism, the deficit is a huge issue for the leaders in Beijing. They echo a fear shared by many American investors:

China is the largest creditor to the U.S. It frets that huge U.S. budget deficits will weaken the dollar and slash the value of China’s massive foreign-currency holdings, which hit $2.273 trillion at the end of September, the latest figure available.

I am certain our legislators, the administration, and labor have a straightforward response to this: “Worried about deficits? We agree — time for some non-trivial tax increases.”

At least all this spending is doing wonders to reduce unemployment. Harvard economist Greg Mankiw presents a compelling analysis here.

A dollar decline and/or inflation slams American holders of capital (also occasionally known as Capitalists,) as well as our notoriously union-unfriendly Asian partners. For many legislators this is a perfectly acceptable alternative if higher taxes can’t be put into place .


2 responses so far ↓

  • 1 Steve Roth // Nov 16, 2009 at 7:32 am

    “One can view the short-run effects of these tax cuts from a classic Keynesian perspective. The tax cuts let people keep more of the money they earned. This supported consumption and thus helped maintain the aggregate demand for goods and services. There is nothing novel about this. It is very conventional short-run stabilization policy: You can find it in all of the leading textbooks. ”

    –Greg Mankiw, 2003

  • 2 Steve Broback // Nov 18, 2009 at 1:12 am

    “can” view, but not many do.

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