Roach: “We Should Take Out The Baseball Bat On Paul Krugman"

Let’s just say that Stephen Roach doesn’t exactly agree with Paul Krugman’s call for a yuan-dollar hike:


“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, characterised 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.

“I’m a little surprised at Steve for saying that,” said Krugman, the Princeton University professor and Nobel laureate in economics, in a telephone interview when asked to respond to Roach. “What I said is actually based on pretty careful economic analysis. We have a world economy which is depressed by China artificially keeping its currency undervalued.”

Stephen Roach believes the U.S. should quit attacking China over its yuan-dollar peg, and rather, start trying to solve its problems at home first, such as America’s low savings rate, while trying to stimulate Chinese consumption of U.S. goods. Thing is, isn’t that what a yuan hike is supposed to help accomplish? Furthermore, if the yuan isn’t undervalued, then why don’t we just let the exchange rate float and see where the market believes its true value stands?

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