Trade Wars Exacerbate Recessions

Imagine you own a department store.  I walk in one morning to purchase a new pair of shoes that cost $50 dollars.  My trade deficit with you has increased by $50.  To a consumer this is no big deal; to the shortsighted Keynesian however this is disastrous. Trash talking China for artificially devaluing the yuan has recently become vogue in Washington.  Front running presidential candidate Mitt Romney has been critical of China's money manipulation on the campaign trail.  The Senate is considering a bipartisan bill to "punish" China for keeping the yuan under priced.  Pennsylvania Senator Bob Casey says the bill will "let the officials in China know that there are consequences to cheating." Talk about the pot calling the kettle black. With gold at $1,600, gas averaging $3.50 a gallon across the nation, and U.S. money stock growth hitting  When Fed chairman Ben Bernanke launched his last massive Treasuries purchase known as QE2 last fall, he boasted...(Read Full Post)