Why I Didn’t Write This Post (Wonky)

Re: our trade deficit with China, their undervalued currency, and their purchases of our treasuries.

I queried in comments on a couple of econoblogs a few months back (with no response): why don’t we just prevent China from buying our treasuries in retaliation for their currency policy? I was going to write up the idea as a post, but after thinking about it I realized:

We could prevent them from buying treasuries when they’re originally auctioned.

But: They could always buy them on the secondary market.

But: We could make that illegal.

But: They could still make their purchases through blinds — intermediaries.

We could probably put a dent in that money flow, but probably not much. But in any case the whole thing’s so far beyond my realm of expertise that I didn’t think it was worth a post.

Now I find that some who do know what they’re talking about are making the same proposal, and that Paul Krugman sees the same problems I came up with:

Mysterious Renminbi Proposals

He suggests that the intermediaries would be offshore hedge funds. Always nice to be validated…