Since Plaza Accord dollar-yen has sunk 70% without decreasing US deficit with Japan
In regards to Paul Krugman’s argument’s on China in the video in the last post, I think this quote from David Rosenberg’s latest daily market commentary is spot on:
Since 1985, dollar-yen has sunk nearly 70% and yet the US has the same bilateral deficit with Japan today as it had then. So why does everyone think that a Chinese revaluation will necessarily clear out any perceived imbalances? Maybe if U.S. policy encouraged thrift over asset-based consumption growth, these trade imbalances would dissipate more quickly.
It’s not all about currencies. The U.S. should focus on maintaining an adequate savings rate instead of trying to pump up asset prices to do its saving artificially.