Renmibi wars

Krugman posts an explanation of the renmibi-dollar issue that is one of his best.

Capital Export, Elasticity Pessimism, and the Renminbi

I think he is right on. China is pursuing a "beggar thy neighbor" policy against the world, and no one is willing to engage in what we all expect such policies to lead to: competitive devaluation.

If China insists on promoting capital exports, they cannot defend the point that they are not influencing the markets.

Krugman's tariff scenario is also a plausible one, but politically I don't see how Obama would get this done with the dysfuncional Senate. I can already hear the Republicans (and a good number of Democrats) accuse him of being anti-trade.

One thing is sure, though. This is not sustainable for the other large economies.