Paul Krugman has a wise column about the havoc being wreaked by China’s refusal to let its currency get more expensive relative to the dollar. Krugman thinks we should be trying to do something about this. But as Dan Drezner observes, though China’s dollar-linkage policy is a problem for us, it’s a much bigger problem for Europe and other developing countries:
As a matter of direct economic interest, however, why haven’t the Europeans and East Asians been screaming bloody murder about this? China’s policies are forcing them to take actions they don’t want to take — so why aren’t they complaining more loudly about this?
Optimistically, it’s been my experience that members of other countries tend to have a better appreciation than America does that making loud public demands is often a counterproductive diplomatic approach. But one has to fear that the real culprit here may be the European Central Bank’s weird deflationary bias.