Tyler Cowen: evaluation

Transcript context

…A logical way to do it would be to do more expansionary fiscal policy, more expansionary monetary policy. We don’t try to deal with producer price inflation through the exchange rate. Exports and imports are important to China, but it’s also a very big economy. There’s a lot of stuff like the infrastructure investment and other investment that’s internal. Sure, but if they had higher price inflation, the value of the renminbi in real terms would fall somewhat, at least for a while, and that would be better, which means the current rate is somewhat higher than it ought to be. They’re running a massive surplus to the rest of the world. The total size of their trade balance surplus is only 2 percent of GDP. It’s not 10 percent, the way it was in 2010, but they’ve gotten a lot bigger. It’s still huge compared to the world. In crude measures, if their exchange rates is overvalued and undervalued, I don’t think you’d come to a simple answer. The dollar is very rich. In a sense, everybody seems cheap to the dollar right now. I’m sure you’ve experienced that with anyone coming from abroad, even from Japan or Switzerland. They’re, “Oh my gosh. It’s so expensive here.”…

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