Thursday, March 5, 2009

RMB as a reserve currency, the size of China's stimulus and a comment on current account imbalances

Here's a link to my post below on the RMb as a reserve currency.
Also here's a link to Dani Rodrik's accurate statement of world stimulus packages.
China's stimulus is $586 billion, or 6.9% of GDP; the US stimulus is $787 billion, or 5.5% of GDP.

Here is a comment I made to one Rudiger von Arnhim at Brad Setser's blog:
@Rudiger von Arnhim: I noticed you have a Ph.D in economics from a US university, specializing in international economics. Is it possible for you to define “external imbalances” for me? e.g. if US consumers import 10 widgets from China, and China imports 1 widget from the US. If exchange rates adjust freely, will this result in an “external imblance”?When exchange rates DON’T adjust, who’s to blame; the petrodollar recycling scheme since 1971, the 1944-1971 Bretton Woods, or China’s ‘dollar peg’ since 2000? And where will exchange rates be if you remove China’s dollar peg?Who asked the Federal Reserve not to regulate on loan eligibility by monthly income? Was that the People’s Bank of China?When RMB strengthens against USD, how much will US exports increase to China, or elsewhere?There are 20 millions jobless and social-security-less workers in China as of today, by Government estimates. Has this led to even ONE more American job anywhere?
Update: I made some changes to this post and removed another one I made after this.


  1. indian investor -- $586b is clearly more than 6.9% of China's GDP. There are different ways of measuring the size of stimulus packages. I used the IMF's metrics. If your comment had been posted as a question -- why the IMF number rather than the number on Rodrik's blog -- it would have passed muster. It though was posted as an attack on me. that breaks the rules I have established for my blog.

    your rmb link was inserted into a rare post that didn't touch on exchange rates.

  2. Accusing someone of doing something wrong without being sure is the moral equivalent of doing that wrong thing yourself if it turns out later that they didn't do it. This is more of a cultural/religious belief, which can sometimes be very hard to follow.
    I've made some changes and I'll express my actual concerns here at my own blog without referring to your views on China.
    Apologize what I said in the post that I just deleted.