Friday, 21 January 2011

Krugman thinks China on its way to economic crisis

To my great surprise, I have again started reading Paul Krugman´s columns in the New York Times. First he surprised me by a good critical assessment on the eurozone a few days ago; now he joins the ranks of those who think that China is heading for an economic crisis:

Could all of this really turn into a full-fledged crisis? If I didn’t know my economic history, I’d find the idea implausible. After all, the solution to China’s monetary muddle is both simple and obvious: just let the currency rise, already.
But I do know my economic history, which means that I know how often governments refuse, sometimes for many years, to do the obviously right thing — and especially when currency values are concerned. Usually they try to keep their currencies artificially strong rather than artificially weak; but it can be a big mess either way.
So our newest economic superpower may indeed be on its way to some kind of economic crisis, with collateral damage to the world as a whole. Did we need this?

Read the entire column here.

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