Bold Action On China Currency Would Help U.S. Economy

[Omaha Steve]

http://blog.aflcio.org/2010/09/14/bold-action-on-china-currency-would-help-u-s-economy/

by James Parks, Sep 14, 2010

In two days of hearings that begin tomorrow, the House Ways and Means Committee will take a close look at the impact of the Chinese government’s policy of manipulating its currency on our economy.

He’s not on the Ways and Means witness list, but the committee should check out what economist Paul Krugman has to say about the subject. Writing in the New York Times yesterday, Krugman says the Chinese government has intimidated U.S. policymakers and businesses into not acting in our best interests because they are afraid that the Chinese governmnet—our biggest bond holder—will call in our debt if we get in their face about their currency policies.

But Krugman says, in effect, “bring it on.” He says that in a world awash with excess savings, “we don’t need China’s money” especially because the Federal Reserve could and should buy up any bonds the Chinese sell.

It’s true that the dollar would fall if decided to dump some American holdings. But this would actually help the U.S. economy, making our exports more competitive.

The reason this is a critical issue is that the Chinese government’s currency manipulation creates a huge trade deficit that costs U.S. jobs. The Economic Policy Institute (EPI) estimates that the currency manipulation and the trade deficit it creates cost 2.4 million U.S. jobs between 2001 and 2008. Congress is expected to vote as early as this week on two bills, H.R. 2378 in the House and S. 3134 in the Senate, that would give the government broader powers to act against the Chinese government’s currency manipulation.

FULL story at link.