Wednesday, September 23, 2009

Dean Baker makes an error?

In this post he criticizes the NYT for getting wrong the trade rebalance problem. He says:

"Actually, the most important change for the United States would be a reduction in the value of the dollar, which would allow the country to reduce its trade deficit."

Actually, trying to debase the currency absent economic changes will have a worse effect. The United States needs to use oil more efficiently, and build and ship products which China needs. The result is that Chines dollar holding will become more valuable to them and less valuable to Congress.

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