Pressure Mounts for China Trade Intervention

As the November election approaches, legislators are telegenically bristling at the prospect of forcing China to take “corrective action” regarding its currency peg to the dollar. They are preparing a number of measures to try to stick it to the Chinese, including anti-dumping tariffs, and complaints to the IMF and WTO. But mostly they’re just pandering. As the Washington Times points out, China alone isn’t to blame for America’s gaping deficits:

the U.S. current account deficit is not the result of China’s undervalued currency, although that may be a contributing factor. The major reason is that U.S. domestic private investment exceeds domestic saving, and a bloated federal government is absorbing domestic saving for redistribution rather than productive investment. Unless the savings-investment gap is closed and the U.S. budget deficit reduced — by constraining the growth of government and reforming the tax code — U.S. and global imbalances will persist.

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