TOKYO – Few professions are better at making straw-horse arguments than the economics trade. The reason: it’s always easier to refute an unserious argument than tackle the biggest questions of the day.
The arguments US leading economists Lawrence Summers and Paul Krugman are making these days about the rivalry between the Chinese yuan and US dollar are Exhibit A.
Take Summers, the former US Treasury secretary, who made headlines this week detailing why the yuan isn’t a threat to the dollar’s dominance as reserve currency anytime soon. Trouble is, virtually everyone already knows a currency that isn’t fully convertible or backed by deep capital markets can’t acquire significant reserve status.
The reason top economic minds do this, of course, is to avoid the proverbial elephant in the room. In this case, that’s the US national debt racing toward US$32 trillion.