Okay, maybe someone else is preventing them from making sense in talking about the imbalances between China and the U.S. Incredibly, the WSJ suggests that the U.S. needs to save more to correct this imbalance. The WSJ probably has not been able to find out that the U.S. is in the middle of a recession, with 10 percent unemployment. The main result of an increase in savings right now would be a deeper recession with an even higher rate of unemployment. Isn't that a great idea? Those who took econ 101 know that lowering the value of the dollar will quickly correct the imbalances. If the dollar falls in value, then imports from China cost more, therefore we buy less. U.S. exports to China cost less for people in China, therefore they buy more. See, that is really easy --- unless you work for the WSJ. On other piece of silliness, the WSJ warns us that if the value of the Chinese currency rose against the dollar then we would just see our deficit with other countries increase. Those who pay attention to business and economics know that other currencies have followed the movements in the yuan. In the event the yuan rose against the dollar, most other Asian currencies would likely follow.
--Dean Baker
