The Paper Trade

I have several times made the point that whether it’s the Japanese, the Chinese or the Lilliputians, if they are willing to trade whatever goods they produce for the thing we produce best – high quality but still relatively cheap pieces of green paper or even digits in a computer representing a claim for pieces of paper – that’s not a bad thing. I suppose it would be different if we were facing a shortage of green ink, cotton (or whatever it is they make that particular paper out of) or printing presses, but we’re not. In fact, we can probably import all of the above pretty cheaply from China. (Hmmmm…if we outsourced the currency printing, maybe we could all just quit our jobs?) Niall Ferguson makes a similar case, claiming that in fact the Chinese and others are paying tribute to the American empire with essentially free goods. Either way, I’m happy with it.

Although neither side wants to admit it, today’s Sino-American economic relationship has an imperial character. Empires, remember, traditionally collect “tributes� from subject peoples. That is how their costs—in terms of blood and treasure—can best be justified to the populace back in the imperial capital. Today’s “tribute� is effectively paid to the American empire by China and other East Asian economies in the form of underpriced exports and low-interest, high-risk loans.

By way of Marginal Revolution

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