Monday, June 21, 2010

Monday items.

Nobel Laureate Robert Mundell strongly opposes China's decision to float the yuan.
Keeping the yuan pegged to the dollar has been “a great source of stability” for China and the world, the Columbia University professor told reporters in Hong Kong today. While U.S. President Barack Obama welcomed the move, “he is not an economist,” Mundell said....

“It’s wrong for the U.S. to force China to destabilize the renminbi, I myself don’t think it’s a good idea,” Mundell said. He called the Chinese move “political.”

The WSJ editorial page also thinks yuan appreciation is a bad idea.
Another illusion is that a revalued yuan will reduce global "imbalances" and especially the U.S. trade deficit. The 2005-2008 revaluation did little to move the trade numbers. And as Stanford economist Ron McKinnon has documented, the U.S. forced a similar revaluation on Japan in the 1990s, and the result was little long-term change in the trade deficit between the two countries.

David Goldman analyzes gold's low volatility.
...central banks appear to be accumulating gold, slowly and steady, buying on declines, and nudging the price up as gradually as they can in order to reduce their average cost. That might be why we observe so little volatility in the gold price. The prospective buyers, namely the central banks, are so much larger than the gold market that they avoid actions which might cause price spikes.

In Forbes, John Tamny says bad policy is why the Dow is at the same level it was 11 years ago.

Stephen Moore of The WSJ discusses spending and the economy on C-SPAN.

Russia's Medvedev sees a chance for Russia to become a major economic power through tax cuts and privatization.

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