Paul Krugman: We Have China Over a Barrel

It never ceases to amaze me that some economists advocate actions that appear to be insanity in action. Paul Krugman says that we—biggest debtor nation in the world—have China—biggest creditor nation in the world—over a barrel and that we can force China to bend to our will on the value of the yuan. Knowing little about economics does this seem rational to you? Me neither. In this commentary Brady Willet takes Krugman to task because his tune has changed (with the change of administrations maybe? with too much Jamaican rum? after all he does live on one of the Caribbean islands, no doubt he feels our pain).

Krugman's solution if China starts dumping treasuries (and thereby sends interest rates skyrocketing)? Fire up the printing presses (even more) Fed!

Insanity.