China is the leading scapegoat for America's economic ills. On May 20, New York Times columnist Paul Krugman blamed China for the U.S. housing bubble. If only China were not lending us so much money, mortgage rates would be higher, forestalling a housing bubble. Krugman says China is a poor country and should be investing its capital at home, not lending it to the U.S. Krugman could just as well have said, 'If only U.S. manufacturers produced in America instead of outsourcing to China, the Chinese would not have any money to lend us. Thus, no housing bubble.' Krugman is correct that if foreign lending to the U.S. slows, interest rates will rise, putting a speculative housing market in trouble. But the interest of the U.S.-China relationship goes far beyond the effect on the U.S. housing market. Economists set in traditional ways of thinking miss the really important aspects of the relationship"... (for publication 07/04/05)

http://www.amconmag.com/2005_07_04/article1.html

from The American Conservative, by Paul Craig Roberts


Informant: Thomas L. Knapp