Thursday, February 9, 2012

Peter Morici addresses trade deficit as demand leakage


Read it Asia Times Online
Trade deficit hits US growth
By Peter Morici
Professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the US International Trade Commission
The United States should impose a tax on dollar-yuan conversions in an amount equal to China's currency market intervention. That would neutralize China's currency subsidies that steal US factories and jobs. That amount of the tax would be in Beijing's hands - if it reduced or eliminated currency market intervention, the tax would go down or disappear. The tax would not be protectionism; rather, in the face of virulent Chinese currency manipulation and mercantilism, it would be self defense.
Cutting the trade deficit in half, through domestic energy development and conservation, and offsetting Chinese exchange rate subsidies would increase GDP by about $525 billion a year and create at least 5 million jobs.

5 comments:

Broll The American said...
This comment has been removed by the author.
mike norman said...

How does his proposal boost GDP and create jobs? It merely shifts income from one group in our economy to another.

Broll The American said...

…and immediately make thousands of goods that Americans rely on more expensive.

Broll The American said...

…then watch as Vietnam, Thailand, Mexico, etc pick up all the business the Chinese lose to us.

Tom Hickey said...

Prof. Morici seems to think that China needs to get yuan by exchanging its dollar reserves. Someone tell him that China doesn't need to get yuan anywhere. It issues yuan, just as the US issues dollars.

Those reserves/tsys that foreigners hold are claims against dollar zone resources, which is what dollars are. China will either exercise those claims eventually or exchange them for claims on resources in another currency zone. It does not to bring the yuan back to China, where it has an infinite supply already.