Paul Krugman. The Bush-hating former Enron consultant. Always talking down the economy. Writes op-eds for The New York Times. Loves Michael Moore.
Didn't The Times’ former public editor, Dan Okrant, have some things to say about Krugman in his final public editor column?
You bet. Here's part of what Okrant said:
One of those who picks up on Krugman’s “shaping, slicing and selectively citing numbers” is Donald Luskin, head of the Krugman Truth Squad and National Review contributer.Op-ed columnist Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults.
At National Review Online, Luskin responds today in fine Truth Squad fashion to Krugman’s July 22 op-ed. Luskin begins:
I think you'll appreciate Luskin's column unless you're Paul Krugman or one of his Bush-hating acolytes.China's announcement last week that it was abandoning its decade-old fixed exchange rate between the Chinese yuan and the U.S. dollar was world-shaking economic news. But for Paul Krugman — America's most dangerous liberal pundit — it's only an occasion for more of his usual left-wing economic doomsaying, leavened with crude humor based on ethnic stereotypes.
Krugman began his New York Times column Friday saying,
Thursday's statement from the People's Bank of China, announcing that the yuan is no longer pegged to the dollar, was terse and uninformative — you might say inscrutable.
One assumes that if the nation in question had been an African one, the guardians of politically correct speech at the Times would have been more alert. Surely they would never have allowed Krugman to say the announcement had, “you might say, natural rhythm”?
Krugman stoops to cheap attempts at humor because he has no grasp of what's really going on with China's currency. His characterization of China's currency policies is simply:
To keep China's currency from rising, the Chinese government has been buying up huge quantities of dollars and investing the proceeds in U.S. bonds.
Krugman offers no explanation for why China's currency should rise in the absence of their preventing it from doing so — he treats it as a foregone conclusion. And what he calls China's “buying up” dollars is exactly the opposite of what's been happening for the last decade — dollars have been raining in on China from foreign investors eager to set up business there and needing yuan to do so.
China has simply accepted those dollars and issued yuan in exchange for them — at a constant rate of exchange designed not to “keep China's currency from rising” but rather to guarantee its value. For a decade, China has pegged the yuan to the dollar at an official exchange rate of about 8.28 yuan per dollar. Pegging the currency to the dollar has set an objective standard of value for it — just as a peg to gold once set such a standard for the dollar itself.
3 comments:
I loved the bit about natural ....
Remember, PC is for us not them. Come on, did you miss that lecture?
Umm, no. First, let us dispense with the labels: I do like Michael Moore; I have shaken his hand and given him encouraging words. I also like Paul Krugman. As well as being the items noted above (which are, mostly, not terribly indicative of anything), Krugman is a professor of Economics at Princeton and has written or co-written several well-received undergraduate economics texts. Let's get to specifics instead.
First, China has been purchasing billions of dollars per year. This article from last December notes that China's holdings included $515 billion dollars and was increasing by about $15 billion per month. This is forex holdings, not private business investments. Luskin is just flat wrong.
Krugman advanced no argument why the yuan would rise in the absence of controls because it is well-known that it would do so. Indeed, one argument advanced by the Bush administration for floating the yuan was that it would move the exchange rate (yuan up, dollar down), which will help with the trade imbalance. Most currencies have strengthened by 30% against the dollar in the past five years. Notably, the yuan and the yen did not, specifically as a consequence of those nations' willingness to purchase T-notes to prop up the dollar. (The yuan was legislated against moving apart from the dollar, but market forces would have strained that effort if the Chinese government had not been willing to make large purchases of dollars, too.)
As is usual, time will tell. The current loosening by China is only a few percentage points, but eventually they'll open up the gates a bit more, and we'll see if Luskin was right or not.
As to the "inscrutable" reference, I guess I don't have the ethnic stereotypes handbook that Luskin does - I have never heard the word used in any context with regards to China or the Chinese. It is quite possible that Krugman was using the word with its original meaning; I know that's what I would have taken from it.
ficus,
While I don't agree with much of what you say, you say it well.
One of my hopes for JinC is that people will find it a place to disagree agreably. You did that.
Thank you for commenting.
I hope you continue to visit.
John
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