Credit Is Too Tight, Except When It's Too Loose

Don Boudreaux

Below (and here) is a letter that I sent this morning to the Washington Post. Can anyone tell me why more people don't pick up on this obvious inconsistency?

Treasury Secretary nominee Timothy Geithner sides with those who worry, as you put it, that "Beijing has kept its currency artificially low to keep the prices of its goods cheap and generate trade surpluses. That has led to a global capital imbalance, as American consumers borrowed and spent and China became the United States' largest foreign creditor" ("Geithner Says China Manipulates Its Currency," January 23). And he threatens to act "aggressively" to stop this alleged wrongdoing.

Overlook the reality that the only way Beijing can push the price of the yuan lower is through inflation or other policies that weaken the Chinese economy. Instead ask: why should the Obama administration be so upset by Beijing pumping easy credit into markets at a time when this same administration is deeply worried that credit has become too tight?

Sincerely,
Donald J. Boudreaux