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Posted on April 24, 2013 by ColinTwiggs

Paul Krugman: Hot Money Blues | NYTimes.com

Paul Krugman argues for a return of capital controls:

In the last decade America, too, experienced a huge housing bubble fed by foreign money, followed by a nasty hangover after the bubble burst. The damage was mitigated by the fact that we borrowed in our own currency, but it’s still our worst crisis since the 1930s.

Japan and China amassed more than $2 trillion in US Treasuries in their attempt to halt, or at least slow, appreciation of their currencies against the Dollar. US manufacturers suffered, both in domestic and export markets, laboring at a huge competitive disadvantage because of the artificial exchange rate.

Trade agreements should cap capital flows between countries, setting a limit on the net capital in/outflow in any one year and offsetting measures to be taken if the cap is exceeded.

Read more at Hot Money Blues – NYTimes.com.

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CategoriesEconomy, US & Canada Tagscapital account, capital inflows

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