Wednesday, February 10, 2010

Don't throw me into that briar patch*

If China stopped buying US Treasuries, their currency would appreciate against the dollar, and Chinese exports would become more expensive which would lead to domestic unemployment in China.  It is not clear that China's domestic labor market could absorb this kind of shock, or that the people would view it as reneging on the Faustian bargain they have struck with their government:  full employment in exchange for a totalitarian regime. 

*Brer Rabbit outfoxed Brer Fox by begging  him not to throw him into the briar patch (from which he easily escapted).

No comments:

Post a Comment