Nobel economist Mundell Says U.S. Action on Yuan Rate Would Be a ‘Disaster’

Sept. 27 (Bloomberg) -- Nobel-Prize winning economist Robert Mundell said U.S. legislation to press China to raise the value of the yuan would be a “disaster” and fail to narrow the trade deficit between the two nations.

“This is not going to help Americans,” Mundell said in a Bloomberg Television interview in Hong Kong. “This is not going to create jobs for Americans. It’s just going to create a disaster.”

U.S. lawmakers will vote in two days on legislation that would let American companies petition for higher duties on imports from China to compensate for the effect of a weak currency. The yuan has appreciated about 2 percent against the dollar since June 19, when China’s central bank said it would pursue a more flexible exchange rate after keeping the currency at about 6.83 versus the U.S. currency for almost two years.

The bill “would create a very damaging thing to the world economy and the stability of Asia,” Mundell said. “This would have a wounding effect on the stability of international relations. There’s never been any precedent in economic history where a country through any legal system was forced to appreciate its currency relative to another country.”

http://noir.bloomberg.com/apps/news?pid=20601087&sid=aF_ocLndWcME&pos=5

Damage, damage, damage...

 

I would like to hear what he has to say about removing the trade imbalance.

 

Ah yes, the "father of the euro". His analyses are usually excellent, his policy prescriptions, not so much. Huge disconnect between the two for some reason.

 

+1