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The problem with exports

Here's a partial list of the countries trying to export their way out of economic trouble: Germany. Japan. China. The United States of America. Malaysia. Thailand. The Philippines. South Korea. India, Brazil.

And that's really quite partial. On some level, everyone wants to export their way out of the woods. Sadly, as Simon Kennedy explains, there's a problem with this strategy: Everyone's exports are someone else's imports. One outcome here is that the strategy just doesn't work very well, and the current trade imbalances don't really change. Another, more worrying, outcome is that various countries resort to currency manipulation to get a leg up on the competition.

The good outcome, where countries that have big trade surpluses (think China) build up their domestic markets while countries with big trade deficits (like us) somehow multiply the size of our export markets, seems like the least likely of the three.

By Ezra Klein  |  September 17, 2010; 11:55 AM ET
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Ezra, currency manipulation is not just a possible outcome here, it's already happening in a very substantial. China is artificially holding down the value of the renminbi by something like 30% by buying up U.S. bonds and other assets. This has been well documented, and it's part of the reason China has such a persistently large trade surplus. Paul Krugman, among others, has written extensively about this. I think it's misleading to write that currency manipulation is somehow a potential threat than a current problem.

Posted by: robbiebruens | September 17, 2010 2:38 PM | Report abuse

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