Howard Richman

Is China’s Trade Surplus Sustainable?

Michael,

Excellent and thoughtful commentary! I am one of the balanced trade advocates who has been touting your commentaries lately. (You were even quoted again in my blog entry today!)

You almost understand the balanced trade argument, but are missing one of the key elements. Your paragraph beginning with "What was unsustainable" could have come right out of our 2008 book, "Trading Away Our Future." .

Here is the argument that you don't yet understand: When foreign central banks send their countries' savings to the United States, they drive up the dollar to an artificially high level, and thus take away investment opportunities in US production. In other words, it was no accident that the Chinese savings sent to the United States by the People's Bank of China during this decade have financed US consumption, not US fixed investment.

Howard Richman
tradeandtaxes.blogspot...