Nobel Laureate Paul Krugman in his blog wrote, (hat tip: William Anderson)
“As I’ve written many times in various contexts since the crisis began, being in a liquidity trap reverses many of the usual rules of economic policy. Virtue becomes vice: attempts to save more actually make us poorer, in both the short and the long run. Prudence becomes folly: a stern determination to balance budgets and avoid any risk of inflation is the road to disaster. Mercantilism works: countries that subsidize exports and restrict imports actually do gain at their trading partners’ expense. For the moment — or more likely for the next several years — we’re living in a world in which none of what you learned in Econ 101 applies." (bold emphasis mine)
Well the Pope of Keynesianism believes [and prescribes policies] that by slapping protectionist measures on China, US jobs will return and the US economy will boom.
Even if such absurdity is deemed as a calculated gambit to 'coerce' China to reform her policies, Mr. Krugman apparently is playing the game of chicken or brinkmanship.
Mr. Krugman and his ilk forgets that once these fulminations become real, where actions will lead to counteractions, then protectionism is likely to spread outside the US-China sphere.
Now one can't help but notice that the US is presently heavily dependent on oil imports to sustain her economy.
According to wikipedia.org, ``American dependence on oil imports grew from 24% in 1970 to 65% by the end of 2005. At the current rate of unchecked import growth, the US would be 70% to 75% reliant on foreign oil by the middle of the next decade. Transportation has the highest consumption rates, accounting for approximately 68.9% of the oil used in the United States in 2006, and 55% of oil use worldwide as documented in the Hirsch report." (bold highlight mine)
This only means that the unforeseen consequences of a fallout from protectionism is so massive that it would defeat whatever "noble" goals (but ludicrous), it is set to accomplish. This also implies that the US is terribly dependent on global trade as to even harbor the notion of "protectionism" (which would be tantamount to national suicide)
One may argue that the US may resort to invading nations that refuses to provide her with oil, but that in essence would validate Frederic Bastiat who once said that "When goods don't cross borders, armies will" .
Since protectionism translates to a closing of borders to trade, finance, investments and possibly even migration, this also means the imposition of capital controls too.
Hence the US is likely to default on her debts while engaging massive inflation to fund her war interests.
Does this lead to anywhere to near an economic boom? Hardly. Instead, it points to a reverse: a global depression plagued by war, needless deaths and poverty, courtesy of deceitful mercantilists fanatics.
So we agree with Stephen Roach, who just harshly rebuked Mr. Krugman, as quoted in Bloomberg,
“We should take out the baseball bat on Paul Krugman -- I mean I think that the advice is completely wrong,” Roach said in an Bloomberg Television interview in Beijing when asked about Krugman’s call, characterized as akin to taking a baseball bat to China. “We’re lashing out at China rather than tending to our own business,” which is raising U.S. savings, Roach said."
Or perhaps, by taking on such seemingly reckless policy prescriptions, could Mr. Krugman be unwittingly be helping advance Osama Bin Ladin's cause of bankrupting America?
“As I’ve written many times in various contexts since the crisis began, being in a liquidity trap reverses many of the usual rules of economic policy. Virtue becomes vice: attempts to save more actually make us poorer, in both the short and the long run. Prudence becomes folly: a stern determination to balance budgets and avoid any risk of inflation is the road to disaster. Mercantilism works: countries that subsidize exports and restrict imports actually do gain at their trading partners’ expense. For the moment — or more likely for the next several years — we’re living in a world in which none of what you learned in Econ 101 applies." (bold emphasis mine)
Well the Pope of Keynesianism believes [and prescribes policies] that by slapping protectionist measures on China, US jobs will return and the US economy will boom.
Even if such absurdity is deemed as a calculated gambit to 'coerce' China to reform her policies, Mr. Krugman apparently is playing the game of chicken or brinkmanship.
Mr. Krugman and his ilk forgets that once these fulminations become real, where actions will lead to counteractions, then protectionism is likely to spread outside the US-China sphere.
Now one can't help but notice that the US is presently heavily dependent on oil imports to sustain her economy.
According to wikipedia.org, ``American dependence on oil imports grew from 24% in 1970 to 65% by the end of 2005. At the current rate of unchecked import growth, the US would be 70% to 75% reliant on foreign oil by the middle of the next decade. Transportation has the highest consumption rates, accounting for approximately 68.9% of the oil used in the United States in 2006, and 55% of oil use worldwide as documented in the Hirsch report." (bold highlight mine)
This only means that the unforeseen consequences of a fallout from protectionism is so massive that it would defeat whatever "noble" goals (but ludicrous), it is set to accomplish. This also implies that the US is terribly dependent on global trade as to even harbor the notion of "protectionism" (which would be tantamount to national suicide)
One may argue that the US may resort to invading nations that refuses to provide her with oil, but that in essence would validate Frederic Bastiat who once said that "When goods don't cross borders, armies will" .
Since protectionism translates to a closing of borders to trade, finance, investments and possibly even migration, this also means the imposition of capital controls too.
Hence the US is likely to default on her debts while engaging massive inflation to fund her war interests.
Does this lead to anywhere to near an economic boom? Hardly. Instead, it points to a reverse: a global depression plagued by war, needless deaths and poverty, courtesy of deceitful mercantilists fanatics.
So we agree with Stephen Roach, who just harshly rebuked Mr. Krugman, as quoted in Bloomberg,
“We should take out the baseball bat on Paul Krugman -- I mean I think that the advice is completely wrong,” Roach said in an Bloomberg Television interview in Beijing when asked about Krugman’s call, characterized as akin to taking a baseball bat to China. “We’re lashing out at China rather than tending to our own business,” which is raising U.S. savings, Roach said."
Or perhaps, by taking on such seemingly reckless policy prescriptions, could Mr. Krugman be unwittingly be helping advance Osama Bin Ladin's cause of bankrupting America?
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